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  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