SENATE BILL 702
By Kyle
HOUSE BILL 716
By Jones J
HB0716
001954
- 1 -
AN ACT to amend Tennessee Code Annotated, Title 4,
Chapter 3, Part 5; Title 9; Title 60; Title 67 and
Title 68, relative to the "Climate Resiliency Fund
Act."
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Title 68, is amended by adding the following
as a new chapter:
68-218-101. Short title.
This chapter is known and may be cited as the "Climate Resiliency Fund Act."
68-218-102. Chapter definitions.
As used in this chapter:
(1) "Climate change adaptation project":
(A) Means a project designed to respond to, avoid, moderate,
repair, or adapt to negative impacts caused by climate change and to
assist human and natural communities, households, and businesses in
preparing for future climate-change-driven disruptions; and
(B) Includes implementing nature-based solutions and flood
protections; home buyouts; upgrading stormwater drainage systems;
making defensive upgrades to roads, bridges, railroads, and transit
systems; preparing for and recovering from extreme weather events;
undertaking preventive healthcare programs and providing medical care
to treat illness or injury caused by the effects of climate change;
relocating, elevating, or retrofitting sewage treatment plants and other
- 2 - 001954
infrastructure vulnerable to flooding; installing energy efficient cooling
systems and other weatherization and energy efficiency upgrades and
retrofits in public and private buildings, including schools and public
housing, designed to reduce the public health effects of more frequent
heat waves and forest fire smoke; upgrading parts of the electrical grid to
increase stability and resilience, including supporting the creation of self-
sufficient microgrids; and responding to toxic algae blooms, loss of
agricultural topsoil, crop loss, and other climate-driven ecosystem threats
to forests, farms, fisheries, and food systems;
(2) "Climate resiliency fund program" means the program established by
this chapter;
(3) "Coal" means bituminous coal, anthracite coal, and lignite;
(4)
(A) "Controlled group" means two (2) or more entities treated as a
single employer under:
(i) 26 U.S.C. § 52(a) or (b), without regard to 26 U.S.C. §
1563(b)(2)(C); or
(ii) 26 U.S.C. § 414(m) or (o);
(B) For purposes of this chapter, entities in a controlled group
must be treated as a single entity for purposes of meeting the definition of
responsible party and are jointly and severally liable for payment of any
cost recovery demand owed by any entity in the controlled group;
(5) "Cost recovery demand" means a charge asserted against a
responsible party for cost recovery payments under the program for payment to
the fund;
- 3 - 001954
(6) "Covered greenhouse gas emissions" means the total quantity of
greenhouse gases released into the atmosphere during the covered period,
expressed in metric tons of carbon dioxide equivalent, resulting from the use of
fossil fuels extracted or refined by an entity;
(7) "Covered period" means the period that began on January 1, 1995,
and ends on December 31, 2025;
(8) "Crude oil" means oil or petroleum of any kind and in any form,
including bitumen, oil sands, heavy oil, conventional and unconventional oil,
shale oil, natural gas liquids, condensates, and related fossil fuels;
(9) "Department" means the department of environment and
conservation;
(10) "Entity" means any individual, trustee, agent, partnership,
association, corporation, company, municipality, political subdivision, or other
legal organization, including a foreign nation, that holds or held an ownership
interest in a fossil fuel business during the covered period;
(11) "Environmental justice" means all individuals are afforded equitable
access to and distribution of environmental benefits; equitable distribution of
environmental burdens; and fair and equitable treatment and meaningful
participation in decision-making processes, including the development,
implementation, and enforcement of environmental laws, regulations, and
policies. Environmental justice recognizes the particular needs of individuals of
every race, color, income, class, ability status, gender identity, sexual orientation,
national origin, ethnicity or ancestry, religious belief, or English language
proficiency level. Environmental justice redresses structural and institutional
racism, colonialism, and other systems of oppression that result in the
- 4 - 001954
marginalization, degradation, disinvestment, and neglect of Black, indigenous,
and persons of color. Environmental justice requires providing a proportional
amount of resources for community revitalization, ecological restoration,
resilience planning, and a just recovery to communities most affected by
environmental burdens and natural disasters;
(12) "Environmental justice focus population" means any census block
group in which:
(A) The annual median household income is not more than eighty
percent (80%) of the state median household income;
(B) Persons of color and indigenous peoples comprise at least six
percent (6%) or more of the population; or
(C) At least one percent (1%) or more of households have limited
English proficiency;
(13) "Fossil fuel" means coal, petroleum products, and fuel gases;
(14) "Fossil fuel business" means a business engaging in the extraction
of fossil fuels or the refining of petroleum products;
(15) "Fuel gases" or "fuel gas" means:
(A) Methane;
(B) Natural gas;
(C) Liquified natural gas; and
(D) Manufactured fuel gases;
(16) "Fund" means the climate resiliency fund established pursuant to §
68-218-105;
(17) "Greenhouse gas":
- 5 - 001954
(A) Means any chemical or physical substance that is emitted into
the air that may be reasonably anticipated to cause or contribute to
climate change; and
(B) Includes carbon dioxide, methane, nitrous oxide,
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride;
(18) "Limited English proficiency" means that a household does not have
a member fourteen (14) years of age or older who speaks English "very well" as
defined by the United States census bureau;
(19) "Nature-based solutions":
(A) Means projects that utilize or mimic nature or natural
processes and functions and that may also offer environmental,
economic, and social benefits while increasing resilience; and
(B) Includes both green and natural infrastructure;
(20) "Notice of cost recovery demand" means the written communication
from the department informing a responsible party of the amount of the cost
recovery demand payable to the fund;
(21) "Petroleum product" means any product refined or re-refined from:
(A) Synthetic or crude oil; or
(B) Crude oil extracted from natural gas liquids or other sources;
(22) "Program" means the climate resiliency fund program established
under this chapter;
(23) "Qualifying expenditure" means an authorized payment from the
fund to pay reasonable expenses associated with the administration of the fund
and the program and to pay for a climate change adaptation project, including its
operation, monitoring, and maintenance;
- 6 - 001954
(24) "Responsible party":
(A) Means any entity or a successor in interest to an entity that
during any part of the covered period was engaged in the trade or
business of extracting fossil fuel or refining crude oil and is determined by
the department to be attributable for more than one billion
(1,000,000,000) metric tons of covered greenhouse gas emissions during
the covered period; and
(B) Does not include any person who lacks sufficient connection
with this state to satisfy the nexus requirements of the United States
Constitution; and
(25) "Strategy" means the resilience implementation strategy adopted by
the department.
68-218-103. Climate resiliency fund program.
There is hereby established the climate resiliency fund program to be
administered by the department of environment and conservation. The purposes of the
program are to:
(1) Secure compensatory payments from responsible parties based on a
standard of strict liability to provide a source of revenue for climate change
adaptation projects within this state;
(2) Determine proportional liability of responsible parties;
(3) Impose cost recovery demands on responsible parties and issue
notices of cost recovery demands;
(4) Accept and collect payment from responsible parties;
(5) Develop, adopt, implement, and update the strategy that will identify
and prioritize climate change adaptation projects; and
- 7 - 001954
(6) Disperse funds to implement climate change adaptation projects
identified in the strategy.
68-218-104. Liability of responsible parties.
(a)
(1) A responsible party is strictly liable for a share of the costs of climate
change adaptation projects and all qualifying expenditures supported by the fund.
(2) For purposes of this section, entities in a controlled group:
(A) Shall be treated by the department as a single entity for the
purposes of identifying responsible parties; and
(B) Are jointly and severally liable for payment of any cost
recovery demand owed by any entity in the controlled group.
(b) With respect to each responsible party, the cost recovery demand must be
equal to an amount that bears the same ratio to the cost to the state and its residents, as
calculated by the state treasurer pursuant to § 68-218-108, from the emission of covered
greenhouse gases during the covered period as the responsible party's applicable share
of covered greenhouse gas emissions bears to the aggregate applicable shares of
covered greenhouse gas emissions resulting from the use of fossil fuels extracted or
refined during the covered period.
(c) If a responsible party owns a minority interest of ten percent (10%) or more in
another entity, the responsible party's applicable share of covered greenhouse gas
emissions must be increased by the applicable share of covered greenhouse gas
emissions for the entity in which the responsible party holds a minority interest multiplied
by the percentage of the minority interest held by the responsible party.
(d) The department shall use the United States environmental protection
agency's Emissions Factors for Greenhouse Gas Inventories as applied to the fossil fuel
- 8 - 001954
volume data for the purpose of determining the amount of covered greenhouse gas
emissions attributable to any entity from the fossil fuels attributable to the entity.
(e) The department may adjust the cost recovery demand amount of a
responsible party who refined petroleum products or who is a successor in interest to an
entity that refines petroleum products if the responsible party establishes to the
satisfaction of the department that:
(1) A portion of the cost recovery demand amount was attributable to the
refining of crude oil extracted by another responsible party; and
(2) The crude oil extracted by the other responsible party was accounted
for when the department determined the cost recovery demand amount for the
other entity or a successor in interest of the other entity.
(f) The department shall issue the cost recovery demands required under this
section not later than six (6) months following the adoption of the rules required under §
68-218-106(b)(2).
(g)
(1) Except as provided in subdivision (g)(2), a responsible party shall pay
the cost recovery demand amount in full not later than six (6) months following
the department's issuance of the cost recovery demand.
(2)
(A) A responsible party may elect to pay the cost recovery
demand amount in nine (9) annual installments in accordance with this
subdivision (g)(2).
(B) The first installment must be paid not later than six (6) months
following the department's issuance of the cost recovery demand and
- 9 - 001954
must be equal to twenty percent (20%) of the total cost recovery demand
amount.
(C) Each subsequent installment must be paid one (1) year from
the initial payment each subsequent year and be equal to ten percent
(10%) of the total cost recovery demand amount. The department may
charge reasonable interest on each installment payment or a payment
delayed for any other reason and, at the commissioner of environment
and conservation's discretion, may adjust the amount of a subsequent
installment payment or a payment delayed for any other reason to reflect
increases or decreases in the consumer price index.
(D)
(i) The unpaid balance of all remaining installments
become due immediately if:
(a) The responsible party fails to pay any
installment in a timely manner, as specified in department
rules;
(b) Except as provided in subdivision (g)(2)(D)(ii),
there is a liquidation or sale of substantially all the assets
of the responsible party; or
(c) The responsible party ceases to do business.
(ii) In the case of a sale of substantially all the assets of a
responsible party, the remaining installments do not become due
immediately if the buyer enters into an agreement with the
department under which the buyer assumes liability for the
- 10 - 001954
remaining installments due under this subdivision (g)(2) in the
same manner as if the buyer were the responsible party.
(h) The department shall deposit cost recovery payments collected under this
chapter to the climate resiliency fund established under § 68-215-105.
(i) A responsible party aggrieved by the issuance of a notice of cost recovery
demand must exhaust administrative remedies by filing a request for reconsideration
with the department within thirty (30) days following issuance of the notice of cost
recovery demand. A request for reconsideration must state the grounds for the request
and include supporting documentation. The department shall notify the responsible
party of the final decision by issuing a subsequent notice of cost recovery demand. A
responsible party aggrieved by the issuance of a final notice of cost recovery demand
may bring an action in Davidson County chancery court.
(j) This section does not supersede or diminish in any way any other remedies
available to a person at common law or under statute.
68-218-105. Climate resiliency fund.
(a) There is created the climate resiliency fund to be administered by the
department to provide funding for climate change adaptation projects in this state. The
fund consists of:
(1) Cost recovery payments distributed to the fund under § 68-215-104;
(2) Monies from time to time appropriated to the fund by the general
assembly; and
(3) Other gifts, donations, or monies received from any source, public or
private, dedicated for deposit into the fund.
(b) The fund must be used only:
(1) To pay:
- 11 - 001954
(A) Qualified expenditures for climate change adaptation projects
identified by the department in the strategy; and
(B) Reasonable administrative expenses of the program,
including the cost to the comptroller of the treasury associated with hiring
technical expertise necessary to complete the audits required under § 68-
215-107;
(2) To implement climate adaptation action identified in the strategy; and
(3) To implement community resilience and disaster mitigation efforts.
(c) Unexpended balances of the fund must be retained in the fund and do not
revert to the general fund. Monies in the fund must be invested by the state treasurer
pursuant to title 9, chapter 4, part 6, for the sole benefit of the fund, and interest accruing
on investments of and deposits into the fund must be returned to the fund and remain
part of the fund.
68-218-106. Reports – rulemaking.
(a) On or before January 15, 2026, the department, in consultation with the state
treasurer, shall submit a report to the general assembly detailing the feasibility and
progress of carrying out the requirements of this chapter, including any
recommendations for improving the administration of the program.
(b) The department shall adopt rules in accordance with the Uniform
Administrative Procedures Act, compiled in title 4, chapter 5, that are necessary to
implement the requirements of this chapter, including:
(1) Adopting methodologies using available science and publicly
available data to identify responsible parties and determine their applicable share
of covered greenhouse gas emissions;
- 12 - 001954
(2) Requirements for registering entities that are responsible parties and
issuing notices of cost recovery demands under the program; and
(3) Developing the resilience implementation strategy, which must
include:
(A) Practices utilizing nature-based solutions intended to stabilize
floodplains, riparian zones, lake shoreland, wetlands, and similar lands;
(B) Practices to adapt infrastructure to the impacts of climate
change;
(C) Practices needed to build out early warning mechanisms and
support fast, effective response to climate-related threats;
(D) Practices that support economic and environmental
sustainability in the face of changing climate conditions; and
(E) Criteria and procedures for prioritizing climate change
adaptation projects eligible to receive monies from the climate resiliency
fund program.
(c) In adopting the strategy, the department shall:
(1) In consultation with other state departments and agencies, including
the Tennessee emergency management agency, assess the adaptation needs
and vulnerabilities of various areas vital to the state's economy, normal
functioning, and the health and well-being of residents of this state;
(2) Identify major potential, proposed, and ongoing climate change
adaptation projects throughout this state;
(3) Identify opportunities for alignment with existing federal, state, and
local funding streams;
- 13 - 001954
(4) Consult with stakeholders, including local governments, businesses,
environmental advocates, relevant subject area experts, and representatives of
environmental justice focus populations;
(5) Consider components of climate action plans that are related to
adaptation or resilience; and
(6) Conduct public engagement in areas and communities that have the
most significant exposure to the impacts of climate change, including
disadvantaged, low-income, and rural communities and areas.
(d) This section does not limit the existing authority of a state department,
agency, or entity to regulate greenhouse gas emissions or establish strategies or adopt
rules to mitigate climate risk and build resilience to climate change.
68-218-107. Climate resiliency fund program audit.
Beginning on January 1, 2031, and every five (5) years thereafter, the
comptroller of the treasury shall evaluate the operation and effectiveness of the climate
resiliency fund program. The comptroller shall make recommendations to the
department on ways to increase program efficacy and cost-effectiveness. The
comptroller shall submit the results of the audit to the chief clerks of the senate and the
house of representatives, the chair of the senate energy, agriculture and natural
resources committee, the chair of the committee in the house of representatives with
jurisdiction over environmental-related matters, the office of legislative budget analysis,
and the legislative librarian. The comptroller must be reimbursed from the climate
resiliency fund for any costs associated with hiring persons who possess the technical
expertise necessary to complete the audits required under this section.
68-218-108. Report on the cost to Tennessee of covered greenhouse gas
emissions.
- 14 - 001954
On or before January 15, 2027, the state treasurer, after consultation with the
department and any other person or entity whom the state treasurer decides to consult
for the purpose of obtaining and utilizing credible data or methodologies that the state
treasurer determines may aid in making the assessments and estimates required by this
section, shall submit to the chief clerks of the senate and the house of representatives,
chair of the senate finance, ways and means committee, the chair of the committee in
the house of representatives with jurisdiction over budget-related matters, the chair of
the senate energy, agriculture and natural resources committee, the chair of the
committee in the house of representatives with jurisdiction over environmental-related
matters, the office of legislative budget analysis, and the legislative librarian an
assessment of the cost to the state and its residents of the emission of covered
greenhouse gases for the period that began on January 1, 1995, and ends on December
31, 2025. The assessment must include:
(1) A summary of the various cost-driving effects of covered greenhouse
gas emissions on this state, including effects on public health, natural resources,
biodiversity, agriculture, economic development, flood preparedness and safety,
housing, and any other effect that the state treasurer, in consultation with the
department, determines is relevant;
(2) A categorized calculation of the costs that have been incurred and
are projected to be incurred in the future within this state of each of the effects
identified under subdivision (1); and
(3) A categorized calculation of the costs that have been incurred and
are projected to be incurred in the future within this state to abate the effects of
covered greenhouse gas emissions between January 1, 1995, and December
31, 2025, on this state and its residents.
- 15 - 001954
SECTION 2. The headings in this act are for reference purposes only and do not
constitute a part of the law enacted by this act. However, the Tennessee Code Commission is
requested to include the headings in any compilation or publication containing this act.
SECTION 3. This act takes effect upon becoming a law, the public welfare requiring it.