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:
NOX—0.05 lb/MMbtu (0.034 lb/MMbtu for gasification)
SOX—99% control (0.04 lb/MMbtu for sub-bituminous coal)
Mercury—95% control
Particulate Matter—0.015 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 Governor’s
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
