1. Clean Coal Technology Foundation of Texas 2010 Users Guide
to Texas Clean Carbon Incentives
2. Texas Clean Carbon Legislation To Date 2005-2006 HB 149
(Chisum/Averitt) State ownership of FutureGen-injected CO2 HB 2201
(Hughes/Estes) Established Texas FutureGen incentives 2007 HB 3732
(Hardcastle/Averitt) initial ACEP incentive package SB 1461
(Seliger/Cook) FutureGen Bill (contracting, indemnification, AG
representation,& CO2 monitoring) HB 2608 (Hughes/Eltife)
Research funding for CCT using lignite HB 2994 (Bonnen/Hegar) Tax
abatement eligibility for IGCC HB 1967 (Farabee/Averitt) - eminent
domain authority for pipelines carrying gasification feedstocks and
products 2009 HB 469 (King/Seliger) expanded ACEP incentives + CEP
franchise tax credit HB 1796 (Chisum/Watson) grant program and
offshore carbon repository SB 1387 (Seliger/Crownover) regulatory
framework for CCS; reports required regarding regulatory framework
and several technical issues HB 4586 (Pitts/Ogden) appropriation
authorization for Governors office to award emerging technology
funds to ACEPs
4. Outline of Incentives A. TWO CATEGORIES OF CLEAN ENERGY
PROJECTS B. TAX INCENTIVES 1. Local property tax abatements 2.
Sales & Gross Receipts tax exemptions 3. Severance tax
exemption for EOR using manmade CO2 4. Franchise tax credits C.
GRANT PROGRAM D. REGULATORY INCENTIVES & INITIATIVES
5. HB 3732 (2007)(Rep. Hardcastle/Sen. Averitt) HB 469
(2009)(Rep. King/Sen. Seliger) - Two Categories of Clean Carbon
Incentives: Advanced Clean Energy Projects (ACEPs) and Clean Energy
Projects (CEPs) Advanced Clean Energy Projects (ACEPs) New sites
and retrofits on existing sites (+slip streams) Eligible Fuels:
coal, petroleum coke, biomass, solid waste, or fuel cells using
hydrogen derived from such fuels Capture & sequester 50% of the
carbon dioxide emitted from the facility (or the slip stream)
Eligible for all incentives except franchise tax credit
6. Two Categories of Clean Carbon Incentives: ACEPs and CEPs
(cont.) Clean Energy Projects (CEPs) Eligible for franchise tax
credit (Must be an ACEP to qualify for other incentives)
Construction of new facility required Coal and petroleum coke
projects only 200 Megawatt minimum capacity Must capture &
geologically sequester 70% of CO2 Must be capable of supplying the
carbon dioxide for an enhanced oil recovery (EOR) project
7. Two Categories of Clean Carbon Incentives: ACEPs and CEPs
(cont.) Both categories of incentives are technology-neutral Pre-
and post-combustion technologies eligible E.g., gasification,
oxy-fuel, and post-combustion capture Both categories must meet the
following profile: NOX0.05 lb/MMbtu (0.034 lb/MMbtu for
gasification) SOX99% control (0.04 lb/MMbtu for sub-bituminous
coal) Mercury95% control Particulate Matter0.015 lb/MMBtu
(references filterable [front-half] fraction)(not the condensable
[back-half] fraction)
8. Periodic Review of Emissions Profile TCEQ to Issue Report to
Legislature in 2010, 2012, & 2016 regarding whether any element
of the profile should be adjusted (up or down) If TCEQ determines
that a commercially demonstrated electric generating facility
operating in the United States meets all the elements of the
emissions profile and is capturing and sequestering a greater
percentage of CO2, TCEQ is to recommend raising the CO2 capture
requirement to that level. Factors to be considered include: 1. The
technical and economic feasibility of meeting all of the elements
of the emissions profile in a commercially viable project and still
use a diverse range of fuels, including lignite; and 2. The
adequacy of the incentives to continue to attract investment in and
federal funding for advanced clean energy projects in TX
Adjustments to the profile do not apply to an application
considered administratively complete on or before the date the
adjustment takes effect.
9. Outline of Incentives A. TWO CATEGORIES OF CLEAN ENERGY
PROJECTS B. TAX INCENTIVES 1. Local property tax abatements 2.
Sales & Gross Receipts tax exemptions 3. Severance tax
exemption for EOR using manmade CO2 4. Franchise tax credits C.
GRANT PROGRAM D. REGULATORY INCENTIVES & INITIATIVES
10. Local property tax abatements Tax Code Chapter 312 HB 3896
(Rep. Rene Oliveira/Sen. Kel Seliger) Extends authority 10 years,
to September 1, 2019 Would have expired this September Clarifies
eligibility of property on leased land Clarifies that deferrals are
available to better fit the timelines of longer, more complex
projects like clean carbon facilities (similar to nuclear
provisions)
11. Local property tax abatements Tax Code Ch. 313 value cap
agreements HB 3732 (2007) & HB 2994 (2007) ACEPs and IGCC
eligible for value cap agreements HB 3676 (Rep. Joe Heflin/Sen. Kel
Seliger) Extends Texas Economic Development Act until December 31,
2014 Clarifies eligibility of property on leased land HB 469 &
HB 3676 Adjusts time periods for ACEPs to better fit the timelines
of more complex projects like clean coal facilities
12. Pollution Control Property (PCP) Property Tax Exemptions
TCEQ required to maintain a pre-determined equipment list (PEL) per
its Prop. 2 process that will result in automatic exemption from
local property taxation for specified equipment (TCEQ decides what
%) TCEQ specifically instructed to include on the PEL methods of
fuel preparation, refining, and utilization previously not
considered exempt Examples of the 20+ items on the list: fluidized
bed combustion systems; ultra-supercritical pulverized coal
boilers; syngas purification systems and gas-cleanup units; fuel
cells using hydrogen derived from coal and other feedstocks;
oxy-fuel combustion technology; and coal cleaning or refining
facilities.
13. Outline of Incentives A. TWO CATEGORIES OF CLEAN ENERGY
PROJECTS B. TAX INCENTIVES 1. Local property tax abatements 2.
Sales & Gross Receipts tax exemptions 3. Severance tax
exemption for EOR using manmade CO2 4. Franchise tax credits C.
GRANT PROGRAM D. REGULATORY INCENTIVES & INITIATIVES
14. Sales tax exemption for CCS equipment Clarifies sales
tax-exempt status of carbon capture, transportation & injection
equipment Applies only to CO2 captured from man-made emission
source Requires CO2 to be sequestered using permanence standard of
severance tax exemption Implements recommendation in Governors
Competitiveness Council / Energy Report
15. Gross Receipts tax exemption Sale of Electricity generated
from ACEPs exempt from gross receipts tax This will effect around a
2% discount in the price of power generated by these facilities
Texas utilities currently pay over $320 Million per year in gross
receipts tax
16. Outline of Incentives A. TWO CATEGORIES OF CLEAN ENERGY
PROJECTS B. TAX INCENTIVES 1. Local property tax abatements 2.
Sales & Gross Receipts tax exemptions 3. Severance tax
exemption for EOR using manmade CO2 4. Franchise tax credits C.
GRANT PROGRAM D. REGULATORY INCENTIVES & INITIATIVES
17. Severance Tax for oil recovered using CO2 captured from a
manmade source HB 3732 (2007) created a 75% tax exemption for oil
recovered using man-made CO2-EOR HB 469 (2009) extends the term
from 7 to 30 years for all projects Will help spur early-mover CCS
projects & establish No Oil Revenue transportation
infrastructure projects or Oil Revenue State Severance Tax Economy
Revenue 75% 25% Manmade State CO2 Recycled CO2 Treasury Severance
Tax Exemption Revenue Miscible Oil Oil CO2 Zone Bank Recovery
Enhanced Oil Recovery (EOR) Stranded Oil (Needs EOR)
18. Outline of Incentives A. TWO CATEGORIES OF CLEAN ENERGY
PROJECTS B. TAX INCENTIVES 1. Local property tax abatements 2.
Sales & Gross Receipts tax exemptions 3. Severance tax
exemption for EOR using manmade CO2 4. Franchise tax credits C.
GRANT PROGRAM D. REGULATORY INCENTIVES & INITIATIVES
19. Franchise tax credits Up to 3 projects get $100 million
franchise tax credit Credit may not exceed in any year the amount
of franchise tax attributable to the CEP that year Railroad
Commission certifies eligibility to comptroller Bureau of Economic
Geology (BEG) verifies sequestration and must be paid fee for
services Interconnection agreement with the Electric Reliability
Council of Texas (ERCOT) required
20. Legislative objectives outline A. TWO CATEGORIES OF CLEAN
ENERGY PROJECTS B. TAX INCENTIVES 1. Local property tax abatements
2. Sales tax exemption for Carbon (CO2 equipment) 3. Severance tax
exemption for EOR 4. Franchise tax credits C. GRANT PROGRAM D.
REGULATORY INCENTIVES & INITIATIVES
21. New Technology Grant Program HB 1796 (Rep. Chisum/Sen.
Watson) As passed, contains New Technology Grant Program initially
proposed in SB 16 (Sen. Averitt/Rep. Cook) Grant program funded by
Texas Emission Reduction Program (TERP) Historically reserved for
mobile sources Advanced Clean Energy Projects specifically
referenced as eligible In addition to energy storage and large
emission reduction projects involving at least $500 MM capital
expense
22. Supplemental Appropriation Bill (HB 4586 Rep. Pitts)
SECTION 79. APPROPRIATIONS FOR ADVANCED CLEAN ENERGY PROJECT.
Amounts appropriated by Senate Bill 1, Acts of the 81st
Legislature, Regular Session, 2009 (the General Appropriations
Act), to the Trusteed Programs within the Office of the Governor
for transfer to the Texas Emerging Technology Fund may be used for
the two-year period beginning on the effective date of this Act for
expenditures related to clean energy programs or projects, as
authorized by general law.
23. Legislative objectives outline A. TWO CATEGORIES OF CLEAN
ENERGY PROJECTS B. TAX INCENTIVES 1. Local property tax abatements
2. Sales tax exemption for Carbon (CO2 equipment) 3. Severance tax
exemption for EOR 4. Franchise tax credits C. GRANT PROGRAM D.
REGULATORY INCENTIVES & INITIATIVES
24. TCEQ Regulatory Incentives (HB 3732) Time-Certain
Permitting Technical Review is capped at 9 months Hearing process
is capped at 9 months 3-month extension if TCEQ finds extraordinary
burden on docket from multiple applications BACT/LAER
Clarifications Emission levels achieved by ACEP are not considered
achievable for BACT or LAER review of other projects Technology
need not be proven to be commercially demonstrated for an applicant
to pass BACT/LAER
25. RCT/TCEQ Jurisdiction over CCS SB 1387 (Sen. Seliger/Rep.
Crownover) Railroad Commission of Texas Wells completed in
reservoirs (1) initially or currently productive of oil, gas, or
geothermal resources or (2) completed in reservoirs adjacent to
same (conversion allowed) Can charge fees & deposit in trust
fund to pay for program implementation, monitoring, inspection
& enforcement TCEQ Executive Director sign-off required Texas
Commission on Environmental Quality Water Code reverts jurisdiction
of all other injection wells back to TCEQ (e.g., storage projects
in brine/nonproductive reservoirs)
26. Ownership Clarification - SB 1387 Anthropogenic carbon
dioxide stored in a geologic storage facility is considered to be
the property of the storage operator Alternative ownership can be
designated by a contract, bill of sale, deed, mortgage, deed of
trust, or other legally binding document Absent a final judgment of
willful abandonment anthropogenic carbon dioxide stored in a
geologic storage facility is not considered owned by the surface or
mineral estate owner. Key unresolved issues remain (pore space
ownership, liability protection, unitization, and regulatory
jurisdiction)
27. SB 1387 Study Provisions Joint study by RCT and TCEQ
required so 82nd Legislature can determine long-term division of
labor on carbon storage projects. Study by GLO todevelop
recommendations for managing geologic storage of CO2 on state-owned
lands, including an assessment of storage capacity and new legal
and regulatory frameworks that could be necessary Joint study by
GLO and BEG regarding the proper regulation of geologic storage in
saline formations not productive of oil, gas or other geothermal
resources
28. Off-Shore Carbon Repository HB 1796 (Rep. Warren
Chisum/Sen. Kirk Watson) Map locating CO2 storage capacity in brine
reservoirs beneath State-owned submerged lands Courtesy BEG
29. Off-Shore Carbon Repository HB 1796 (Rep. Warren
Chisum/Sen. Kirk Watson) Sets in motion an offshore carbon
repository program to be managed by the General Land Office (GLO)
BEG to work with GLO to fully characterize the resource and
establish protocols for injection Once established, GLO allowed to
charge fees for injection (can be % of carbon sequestration
credits) State ownership addresses pore space ownership and
liability concerns that exist for other CCS projects Will improve
chances of major investment in CO2 capture facilities and pipelines
throughout Texas that can be tapped for enhanced oil recovery.
30. Texas Commission on Environmental Quality Procedures for
issuing letters in conjunction with Class Rule Published: April 16,
2010 IIB well applications (SB 1387): Public Comment Until: May 17,
2010 Development of rules by which Executive Director may submit
Public Hearing: May 12, 2010 letters to the RCT certifying that the
proposed Class IIB well will To Be Adopted: August 25, 2010 not
injure any freshwater strata and that the well will not be
injecting CO2 into any freshwater sands. Amendment to Memorandum of
Understanding Rule Published: April 16, 2010 Between TCEQ & RCT
(SB 1387): Public Comment Until: May 17, 2010 Amendment of
memorandum of understanding recorded at Public Hearing: None 16 TAC
3.30, relating to the division of jurisdiction between To Be
Adopted: September 2010 the two agencies over waste materials
related to the exploration, development, production, and refining
of oil and gas. Revisions to Pollution Control Property Tax
Abatement Advisory group Installed ( 4 meetings to date) Program
(HB 3206 / HB 3544): Public Comment: July 2, 2010 to August 2, 2010
Installation of a permanent advisory committee to provide Public
Hearing: July 27, 2010 input into the PCP program. Final Rule:
December 1, 2010 30
31. Texas Commission on Environmental Quality cont Joint
preliminary report (SB 1387): Inter-agency coordination ongoing The
TCEQ and RCT, in consultation with the BEG, must file a report to
the legislature recommending, among other things, a Deadline: Dec.
1, 2010 permitting process for and a division of jurisdiction over
CO2 injection wells into saline formations that are not productive
of oil, gas, or geothermal resources. New Technology Implementation
Grant program (HB Stakeholder group meetings: February 24, 2010 and
1796): March 29, 2010 TCEQ must establish and administer the new
technology implementation grant program under Texas Health &
Safety No statutory deadline but implementation language Code ch.
391. This involves rulemakings for application review implies
expedited schedule because emergency rule and funding procedures.
granted by statute. Reporting requirement on clean energy project
In process emissions profile (HB 469): TCEQ must submit a
recommendation to the legislature on Reports due: whether emissions
profiles should be adjusted to increase or September 1, 2010,
September 1, 2012, 31 decrease elements of the profile. September
1, 2016
32. Texas Commission on Environmental Quality cont New
technology research and development program Pending (HB 1796): TCEQ
must make revisions to the new technology research and development
program under Texas Health & Safety Code ch. 387. TCEQ may
contract with one or more nonprofit organizations or institutions
to administer this program. Offshore carbon repository rules (HB
1796): Not yet docketed TCEQ may by rule adopt standards for the
(1) location; (2) construction; (3) maintenance; (4) monitoring;
and (5) operation, of the offshore carbon repository. These rules
must be consistent with any regulations promulgated by EPA.
Measurement, monitoring, & verification standards (HB Not yet
docketed 1796): TCEQ may by rule establish measurement, monitoring,
and verification (MMV) standards for the Offshore Carbon 32
Repository.
33. Railroad Commission of Texas Regulations for injection of
anthropogenic carbon Published: March 26, 2010 dioxide (SB 1387):
Public Comment Ended: April 26, 2010 RCT is required to adopt rules
to regulate the injection and storage of anthropogenic carbon
dioxide or the operation of Anticipated Completion Date: June/July,
2010 a carbon dioxide storage facility. These rules do not cover
Class II wells; these rules will cover Class IIB wells. Amendment
to Memorandum of Understanding Published: April 9, 2010 Between
TCEQ & RCT (SB 1387): Public Comment Until: May 17, 2010
Amendment of memorandum of understanding recorded at 16 Public
Hearing: May 11, 2010 TAC 3.30, relating to the division of
jurisdiction between the two agencies over waste materials related
to the exploration, development, production, and refining of oil
and gas. Joint preliminary report (SB 1387): Inter-agency
coordination ongoing The TCEQ and RCT, in consultation with the
BEG, must file a report to the legislature recommending, among
other things, a Deadline: Dec. 1, 2010 permitting process for and a
division of jurisdiction over CO2 injection wells into saline
formations that are not productive of 33 oil, gas, or geothermal
resources.
34. Texas Comptroller of Public Accounts Revision to Texas Tax
Code Chapter 313 (HB 469): Published: March 19, 2010 Comptroller
must implement changes and revise the expiration date of Texas
Public Comment Until: April 18, 2010 Tax Code Chapter 313.
Comptroller is planning to finalize the rule by June 15, 2010
Extension of severance tax exemption for oil recovered using Rule
language under development EOR (HB 469): Comptroller and RCT
certification program for EOR wells must be amended to reflect the
extension of the severance tax exemption for oil recovered using
EOR. Establishment of program for certifying clean energy projects
Not yet docketed (HB 469): Comptroller is charged with developing a
program for issuing franchise tax Deadline: Dec. 31, 2010 credits
to entities that operate clean energy projects. Develop sales tax
exemption for components of personal Rule language under
development property used to capture, transport, & store
man-made CO2 (HB 469): Comptroller must change its rules and
regulations to reflect this statutory change. 34
35. Texas General Land Office GLO report (SB 1387): Ongoing
(may be joined with RCT/TCEQ report) GLO is charged with developing
a report on a Deadline: Dec. 1, 2010. recommended framework for
managing activities related to geologic storage on state-owned
land. Development of site of Texas offshore carbon Not yet
initiated repository (HB 1796): The BEG, by contract with the Land
Commissioner, shall conduct a study of state-owned offshore
submerged lands to determine where the Texas Offshore Carbon
Repository should be situated. Fees for acceptance of carbon
dioxide into the Not yet docketed Offshore Carbon Repository (HB
1796): The School Land Board is given the authority to establish
fees for acceptance of CO2 into the Offshore Carbon Repository.
35
36. Other Key State Carbon Capture & Storage Legislation
State Bill No. Summary / Status Kansas HB 2419 Substantive
regulations and performance standards for CO2 injection. (2007)
Louisiana HB 1117 & 1220 Suite of incentives for CCS; State
Mineral Board regulates; Operator owns CO2 and liable during (2008)
operation; State assumes liability 10 years after CO2 injection is
completed; Condemnation authority provided for geologic
sequestration (similar to natural gas storage program). HB 661
& SB 1906 (2009) Montana SB 498 Board of O&G Cons.
Regulates with input from DEQ; Provides regulatory framework and
(2009) performance standards; Designates the surface owner as the
owner of the pore space; Operator owns CO2 and liable during
operation; State assumes liability after 30 years. North Dakota SB
2095 & 2139 Surface owner owns the pore space; Substantive
regulations for injection of CO2 into geologic (2009) formations;
Operator owns CO2 and liable during operation; State assumes
liability 10 years after CO2 injection is completed; Concept
similar to forced unitization is provided for aggregating storage
areas . Oklahoma SB 492 Regulatory framework for CO-2 injection and
CCS; CCN process created with right of condemnation; (2009)
Financial assurance addressed. Wyoming SB1, HB 89-90 Pore space
owned by surface owner and may be severed; Operator owns CO2 and
liable during (2008) operation (but not after); WDEQ regulates;
Provides new legal procedure for the unitization of geologic
sequestration facilities; mining/drilling rights given priority;
Permitting and performance HB 57, 58 & 80 standards, fee
program, state's immunity confirmed, requires bonding or other
financial assurances, (2009) provides penalties, provides for the
release of financial assurances, and requires land owner notice of
geological sequestration sites. HB 17 (2010)
37. DOE DOE and Summit Energy Dept. of Energy and UT-Dallas
Analysis of CO2 sorption at pore Texas Clean Energy Project
Development of a commercial Membranes for CO2 and Hydrogen Gas
scales in coal seams $300,000 scale coal gasification plant with
carbon capture for EOR Separation $225,000 $350 million DOE and
UTEP DOE DOE and Gasification Engineering Corp Super-High
Temperature Alloy Industrial CO2 sequestration and Testing $386,500
Evaluation of a cyclone and hot gas filter system EOR recovery
training $298,000 Total investment $900,000 NETL/Southwest Regional
Partnership DOE on Carbon Sequestration $563MM in Clean Carbon
Training for advanced 3D seismic methods for monitoring
verification and accounting of SACROC-EOR Sequestration Test $5.5
million Grants Comes to Texas CO2 storage $299,300 DOE and Pegasus
Technologies Richardson DOE, CEMEX USA and RTI Mercury Specie and
Multi-pollutant Control $15.56m Port Dry sorbent CO2 capture
technology Snyder Arthur at a cement plant $1.137 million El Paso
The DOE; WA Parish Plant Odessa Jewett DOE and UT Austin Woodlands
College 60 MW carbon capture demonstration Determining which saline
aquifers are facility $154 million suitable for CO2 sequestration,
$5.35 million Station Houston Monitoring, verification and
accounting Austin DOE and URS Group Of CO2 storage $2.5 million San
Antonio Sweeny Solid sorbents experiments for optimum DOE DOE &
Texas A&M CO2 capture, $2.684 million Industrial carbon capture
and Adsorbents for treatment of ash and scrubber Dept of Energy
& URS Group sequestration project $3.014m bonds, total
investment $200,000 Evaluation of MerCAP for power plants, $1.73
million DOE & Southwest Research Organization Demonstrate
membranes for hydrogen production $1.64 million DOE Full scale
testing of mercury oxidation catalysts, $4.08 million DOE &
Southwest Research Institute Novel concepts for compressing CO2
$218,000 DOE DOE & Denbury Onshore Testing of mercury oxidation
catalysts/phase II, $1.93 million Industrial carbon capture and
sequestration project $961,500 DOE DOE DOE Risk assessment of CO2
Monitoring, verification and accounting of CO2 37 Gulf of Mexico
Miocene CO2 site characterization storage, $2.63 million Site
characterization mega transect, $5.99 million mega transect, $5.99
million