H.B. No. 469
AN ACT
relating to the establishment of incentives by this state for the
implementation of certain projects to capture and sequester carbon
dioxide that would otherwise be emitted into the atmosphere.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 490, Government Code, is amended by
adding Subchapter H to read as follows:
SUBCHAPTER H. FRANCHISE TAX CREDIT FOR CLEAN ENERGY PROJECT
Sec. 490.351. DEFINITION. In this subchapter, "clean
energy project" has the meaning assigned by Section 120.001,
Natural Resources Code.
Sec. 490.352. 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. A clean energy project is eligible for a
franchise tax credit only if the project is implemented in
connection with the construction of a new facility.
(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 electric generating facility associated with
the project is fully operational;
(4) the Bureau of Economic Geology of The University
of Texas at Austin verifies to the comptroller that the electric
generating facility associated with the project is sequestering at
least 70 percent of the carbon dioxide resulting from or associated
with the generation of electricity by the facility; and
(5) the owner or operator of the project has entered
into an interconnection agreement relating to the project with the
Electric Reliability Council of Texas.
(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 amount of the franchise tax credit for each report
year is calculated by determining the amount of franchise tax that
is due based on the taxable margin generated by a clean energy
project from the generation and sale of power and the sale of any
products that are produced by the electric generation facility.
The amount of the franchise tax credit claimed under this section
for a report year may not exceed the amount of franchise tax
attributable to the clean energy project for that report year.
(e) The comptroller may not issue a franchise tax credit
under this section before September 1, 2013. This subsection
expires September 2, 2013.
SECTION 2. Section 382.003(1-a), Health and Safety Code, is
amended 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:
(i) on an annual basis a 99 percent or
greater reduction of sulfur dioxide emissions or, if the project is
designed for the use of feedstock substantially all of which is
subbituminous coal, an emission rate of 0.04 pounds or less of
sulfur dioxide per million British thermal units as determined by a
30-day average;
(ii) on an annual basis [,] a 95 percent or
greater reduction of mercury emissions;
(iii) [, and] an annual average emission
rate for nitrogen oxides of:
(a) 0.05 pounds or less per million
British thermal units; or
(b) if the project uses gasification
technology, 0.034 pounds or less per million British thermal units;
and
(iv) an annual average emission rate for
filterable particulate matter of 0.015 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].
SECTION 3. 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 coal-fueled or petroleum coke-fueled electric
generating facility, including a facility in which the fuel is
gasified before combustion, that will:
(A) have a capacity of at least 200 megawatts;
(B) meet the emissions profile for an advanced
clean energy project under Section 382.003(1-a)(B), Health and
Safety Code;
(C) capture at least 70 percent of the carbon
dioxide resulting from or associated with 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 to inject 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 that applies to the commission under Section 120.002
for a certification that a project operated by the entity meets the
requirements for a clean energy project is responsible for
conducting a monitoring, measuring, and verification process that
demonstrates that the project complies with the requirements of
Section 490.352(b)(4), Government Code.
(b) The entity shall contract with the bureau for the bureau
to:
(1) design initial protocols and standards for the
process described by Subsection (a);
(2) review the conduct of the process described by
Subsection (a) in order to make any necessary changes in the design
of the protocols and standards;
(3) evaluate the results of the process described by
Subsection (a);
(4) provide an evaluation of the results of the
process described by Subsection (a) to the commission; and
(5) determine whether to transmit to the comptroller
the verification described by Section 490.352(b)(4), Government
Code.
(c) Unless otherwise agreed by the entity and the bureau, a
contract required by Subsection (b) must require the entity to
compensate the bureau by paying an annual fee in accordance with the
following schedule:
Year Amount
One $700,000
Two $1,300,000
Three $1,800,000
Four $1,500,000
Five $1,200,000
Six $900,000
Seven $500,000
Eight $200,000
(d) The first payment under Subsection (c) is due not later
than 24 months before the date the entity first supplies carbon
dioxide captured by the project to an enhanced oil recovery
project.
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 4. 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 SEQUESTRATION OF CARBON DIOXIDE. Components of
tangible personal property used in connection with an advanced
clean energy project, as defined by Section 382.003, Health and
Safety Code, or a clean energy project, as defined by Section
120.001, Natural Resources Code, are exempted from the taxes
imposed by this chapter if:
(1) the components are installed to capture carbon
dioxide from an anthropogenic emission 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 sequestered in this state:
(A) as part of an enhanced oil recovery project
that qualifies for a tax rate reduction under Section 202.0545, as
provided by Subsection (c) of that section; or
(B) in a manner and under conditions that create
a reasonable expectation that at least 99 percent of the carbon
dioxide will remain sequestered from the atmosphere for at least
1,000 years.
SECTION 5. Sections 202.0545(a) and (d), Tax Code, are
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.
(d) An agency to which an operator applies for a
certification under Subsection (c)(2) may issue the certification
only if the agency finds that, based on substantial evidence, there
is a reasonable expectation that:
(1) [the operator's planned sequestration program will
ensure that] at least 99 percent of the carbon dioxide sequestered
as required by Subsection (a)(4) will remain sequestered for at
least 1,000 years; and
(2) the operator's planned sequestration program will
include appropriately designed monitoring and verification
measures that will be employed for a period sufficient to
demonstrate whether the sequestration program is performing as
expected.
SECTION 6. Section 313.021(4), Tax Code, is amended to read
as follows:
(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 7. (a) Not later than September 1, 2010, September
1, 2012, and September 1, 2016, the Texas Commission on
Environmental Quality shall make recommendations to the
legislature on whether the emissions profile set out in Sections
120.001(2)(B) and (C), Natural Resources Code, as added by this
Act, and Sections 382.003(1-a)(B) and (C), Health and Safety Code,
as amended by this Act, should be adjusted to increase or decrease
elements of the emissions profile. Before making its
recommendations, the commission shall determine whether any
commercially demonstrated electric generating facility operating
in the United States that meets the criteria and emissions profile
specified by Section 120.001(2), Natural Resources Code, as added
by this Act, is capturing and sequestering a greater percentage of
the carbon dioxide in the emissions stream from the facility than
would be required to meet the emissions profile set out in that
subdivision and whether any commercially demonstrated electric
generating facility operating in the United States that meets the
criteria and emissions profile specified by Sections
382.003(1-a)(A), (B), and (C), Health and Safety Code, as amended
by this Act, is capturing and sequestering a greater percentage of
the carbon dioxide in the emissions stream from the facility than
would be required to meet the emissions profile set out in those
paragraphs. If at least one such facility exists, the commission
shall recommend raising the minimum percentage of carbon dioxide in
the emissions stream from a facility that is required to be captured
and sequestered for the facility to qualify as a clean energy
project or advanced clean energy project to the highest percentage
of carbon dioxide that is being captured and sequestered by such a
facility.
(b) Factors that must be considered in the assessment of the
emissions profile include:
(1) the technical and economic feasibility of meeting
all of the elements of the emissions profile set out in Sections
120.001(2)(B) and (C), Natural Resources Code, as added by this
Act, or Sections 382.003(1-a)(A), (B), and (C), Health and Safety
Code, as amended by this Act, 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, or similar legislation that becomes law, to continue to
attract investment in and federal funding for clean energy projects
and 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 do
not apply to an application considered administratively complete on
or before the date the adjustment takes effect.
SECTION 8. The comptroller shall adopt rules under Section
490.352, Government Code, as added by this Act, not later than
December 31, 2010.
SECTION 9. 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.
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. The Railroad Commission of Texas may adopt
rules as necessary to implement Section 202.0545, Tax Code, as
amended by this Act.
SECTION 12. The comptroller of public accounts may adopt
rules as necessary to implement Section 202.0545, Tax Code, as
amended by this Act.
SECTION 13. This Act takes effect September 1, 2009.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 469 was passed by the House on May 5,
2009, by the following vote: Yeas 140, Nays 3, 1 present, not
voting; that the House refused to concur in Senate amendments to
H.B. No. 469 on May 29, 2009, and requested the appointment of a
conference committee to consider the differences between the two
houses; and that the House adopted the conference committee report
on H.B. No. 469 on May 31, 2009, by the following vote: Yeas 141,
Nays 5, 1 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 469 was passed by the Senate, with
amendments, on May 27, 2009, by the following vote: Yeas 31, Nays
0; at the request of the House, the Senate appointed a conference
committee to consider the differences between the two houses; and
that the Senate adopted the conference committee report on H.B. No.
469 on May 31, 2009, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor