Representative Carl R. Albrecht proposes the following substitute bill:


1     
ENERGY INFRASTRUCTURE AMENDMENTS

2     
2024 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Carl R. Albrecht

5     
Senate Sponsor: Derrin R. Owens

6     

7     LONG TITLE
8     General Description:
9          This bill modifies provisions related to energy infrastructure.
10     Highlighted Provisions:
11          This bill:
12          ▸     modifies definitions and qualifications applicable to the high cost infrastructure
13     development tax credit (tax credit);
14          ▸     provides for the issuance of a tax credit for certain emissions reduction projects,
15     mineral processing projects, water purification projects, water resource forecasting
16     projects, and locomotive engine conversion projects;
17          ▸     modifies the membership of the Utah Energy Infrastructure Board; and
18          ▸     makes technical corrections.
19     Money Appropriated in this Bill:
20          None
21     Other Special Clauses:
22          This bill provides retrospective operation.
23     Utah Code Sections Affected:
24     AMENDS:
25          79-6-602, as last amended by Laws of Utah 2023, Chapter 473
26          79-6-603, as last amended by Laws of Utah 2023, Chapter 473
27          79-6-902, as renumbered and amended by Laws of Utah 2022, Chapter 44
28     

29     Be it enacted by the Legislature of the state of Utah:
30          Section 1. Section 79-6-602 is amended to read:
31          79-6-602. Definitions.
32          As used in this part:
33          (1) "Applicant" means a person that conducts business in the state and that applies for a
34     tax credit under this part.
35          (2) (a) "Energy delivery project" means a project that is designed to:
36          [(a)] (i) increase the capacity for the delivery of energy to a user of energy inside or
37     outside the state; [or]
38          [(b)] (ii) increase the capability of an existing energy delivery system or related facility
39     to deliver energy to a user of energy inside or outside the state[.]; or
40          (iii) increase the production and delivery of geothermal energy through horizontal
41     drilling to create injection and production wells.
42          (b) "Energy delivery project" includes:
43          (i) a hydroelectric energy storage system;
44          (ii) a utility-scale battery storage system; or
45          (iii) a nuclear power generation system.
46          (3) "Emissions reduction project" means a project that is designed to reduce the
47     emissions of an existing electrical generation facility, refinery, smelter, kiln, mineral processing
48     facility, manufacturing facility, oil or gas production facility, or other industrial facility, by
49     utilizing selective catalytic reduction technology, carbon capture utilization and sequestration
50     technology, or any other emissions reduction technology or equipment.
51          [(3)] (4) "Fuel standard compliance project" means a project designed to retrofit a fuel
52     refinery in order to make the refinery capable of producing fuel that complies with the United
53     States Environmental Protection Agency's Tier 3 gasoline sulfur standard described in 40
54     C.F.R. Sec. 79.54.
55          [(4)] (5) "High cost infrastructure project" means:
56          (a) [a project, including] for an energy delivery project [or a], fuel standard compliance
57     project, mineral processing project, or underground mine infrastructure project, a project:
58          [(a)] (i) [(i)] (A) that expands or creates new industrial, mining, manufacturing, or
59     agriculture activity in the state, not including a retail business;
60          [(ii)] (B) that involves new investment of at least $50,000,000 [in] made by an existing
61     industrial, mining, manufacturing, or agriculture entity[, by the entity; or] located within a
62     county of the first or second class;
63          (C) that involves new investment of at least $25,000,000 made by an existing
64     industrial, mining, manufacturing, or agriculture entity located within a county of the third,
65     fourth, fifth, or sixth class, or a municipality with a population of 10,000 or less located within
66     a county of the second class; or
67          [(iii)] (D) for the construction of a plant or other facility for the storage or production
68     of fuel used for transportation, electricity generation, or industrial use;
69          [(b)] (ii) that requires or is directly facilitated by infrastructure construction; and
70          [(c)] (iii) for which the cost of infrastructure construction to the entity creating the
71     project is greater than:
72          [(i)] (A) 10% of the total cost of the project; or
73          [(ii)] (B) $10,000,000[.];
74          (b) for an emissions reduction project, water purification project, or water resource
75     forecasting project, a project:
76          (i) that involves:
77          (A) new investment of at least $50,000,000 made by an existing industrial, mining,
78     manufacturing, or agriculture entity located within a county of the first or second class; or
79          (B) new investment of at least $25,000,000 made by an existing industrial, mining,
80     manufacturing, or agriculture entity located within a county of the third, fourth, fifth, or sixth
81     class, or a municipality with a population of 10,000 or less located within a county of the
82     second class; and
83          (ii) that requires or is directly facilitated by infrastructure construction; and
84          (c) for a locomotive engine conversion project, a project that requires or is directly
85     facilitated by infrastructure construction for which the cost to the entity creating the project is
86     at least $5,000,000.
87          [(5)] (6) "Infrastructure" means:
88          (a) an energy delivery project;
89          (b) a railroad as defined in Section 54-2-1;
90          (c) a fuel standard compliance project;
91          (d) a road improvement project;
92          (e) a water self-supply project;
93          (f) a water removal system project;
94          (g) a solution-mined subsurface salt cavern;
95          (h) a project that is designed to:
96          (i) increase the capacity for water delivery to a water user in the state; or
97          (ii) increase the capability of an existing water delivery system or related facility to
98     deliver water to a water user in the state; [or]
99          (i) an underground mine infrastructure project[.];
100          (j) an emissions reduction project;
101          (k) a mineral processing project;
102          (l) a water purification project;
103          (m) a water resource forecasting project; or
104          (n) a locomotive engine conversion project.
105          [(6)] (7) (a) "Infrastructure cost-burdened entity" means an applicant that enters into an
106     agreement with the office that qualifies the applicant to receive a tax credit as provided in this
107     part.
108          (b) "Infrastructure cost-burdened entity" includes a pass-through entity taxpayer, as
109     defined in Section 59-10-1402, of a person described in Subsection [(6)(a)] (7)(a).
110          [(7)] (8) "Infrastructure-related revenue" means an amount of tax revenue, for an entity
111     creating a high cost infrastructure project, in a taxable year, that is directly attributable to a high
112     cost infrastructure project, under:
113          (a) Title 59, Chapter 5, Part 1, Oil and Gas Severance Tax;
114          (b) Title 59, Chapter 5, Part 2, Mining Severance Tax;
115          (c) Title 59, Chapter 7, Corporate Franchise and Income Taxes;
116          (d) Title 59, Chapter 10, Individual Income Tax Act; and
117          (e) Title 59, Chapter 12, Sales and Use Tax Act.
118          (9) "Locomotive engine conversion project" means a project designed to convert,
119     retrofit, or replace one or more locomotive engines in order to meet the United States
120     Environmental Protection Agency's Tier 4 emission standards for switch locomotives as
121     described in 40 C.F.R. Part 1033, for a class I railroad or a class III railroad, as defined in 49
122     U.S.C. Sec. 20102, operating in a county of the first, second, or third class.
123          (10) "Mineral processing project" means a project that is designed to:
124          (a) process, smelt, refine, convert, separate, or otherwise beneficiate metalliferous
125     minerals as defined in Section 59-5-201 or a metalliferous compound as defined in Section
126     59-5-202;
127          (b) calcine limestone or manufacture cement;
128          (c) process, refine, or otherwise beneficiate chloride compounds, salts, potash, gypsum,
129     sulfur or sulfuric acid, ammonium nitrate, phosphate, or uintaite; or
130          (d) convert or gasify coal to recover chemical compounds, gases, or minerals.
131          [(8)] (11) "Office" means the Office of Energy Development created in Section
132     79-6-401.
133          [(9)] (12) "Tax credit" means a tax credit under Section 59-7-619 or 59-10-1034.
134          [(10)] (13) "Tax credit certificate" means a certificate issued by the office to an
135     infrastructure cost-burdened entity that:
136          (a) lists the name of the infrastructure cost-burdened entity;
137          (b) lists the infrastructure cost-burdened entity's taxpayer identification number;
138          (c) lists, for a taxable year, the amount of the tax credit authorized for the infrastructure
139     cost-burdened entity under this part; and
140          (d) includes other information as determined by the office.
141          [(11)] (14) (a) "Underground mine infrastructure project" means a project that:
142          (i) is designed to create permanent underground infrastructure to facilitate underground
143     mining operations; and
144          (ii) services multiple levels or areas of an underground mine or multiple underground
145     mines.
146          (b) "Underground mine infrastructure project" includes:
147          (i) an underground access or a haulage road, entry, ramp, or decline;
148          (ii) a vertical or incline mine shaft;
149          (iii) a ventilation shaft or an air course; or
150          (iv) a conveyor or a truck haulageway.
151          (15) "Water purification project" means a project that, in order to meet applicable
152     quality standards established under Title 19, Chapter 5, Water Quality Act, is designed to
153     reduce the existing total dissolved solids or other naturally existing impurities contained in
154     water sources:
155          (a) located at a distance of not less than 2,000 feet below the surface;
156          (b) associated with existing mineral operations; or
157          (c) associated with deep water mining operations designed primarily for the
158     revitalization of the Great Salt Lake.
159          (16) "Water resource forecasting project" means a project that includes a network of
160     permanent, physical data collection systems designed to improve forecasting for the availability
161     of seasonal water flows within the state, including flash flooding and other event-driven water
162     flows resulting from localized severe weather events.
163          Section 2. Section 79-6-603 is amended to read:
164          79-6-603. Tax credit -- Amount -- Eligibility -- Reporting.
165          (1) (a) Before the office enters into an agreement described in Subsection (3) with an
166     applicant regarding a project, the office, in consultation with the Utah Energy Infrastructure
167     Board created in Section 79-6-902, and other state agencies as necessary, shall, in accordance
168     with the procedures described in Section 79-6-604, certify:
169          (i) that the project meets the definition of a high cost infrastructure project under this
170     part;
171          (ii) that the high cost infrastructure project will generate infrastructure-related revenue;
172          (iii) the economic life of the high cost infrastructure project; and
173          (iv) that the applicant has received a certificate of existence from the Division of
174     Corporations and Commercial Code.
175          (b) For purposes of determining whether a project meets the definition of a high cost
176     infrastructure project, the office shall consider a project to be a new project if the project began
177     no earlier than the taxable year before the year in which the applicant [applies] submits an
178     application or a preliminary application for a tax credit.
179          (2) (a) Before the office enters into an agreement described in Subsection (3) with an
180     applicant regarding a project, the Utah Energy Infrastructure Board shall evaluate the project's
181     net benefit to the state, including:
182          (i) whether the project is likely to increase the property tax revenue for the municipality
183     or county where the project will be located;
184          (ii) whether the project would contribute to the economy of the state and the
185     municipality, tribe, or county where the project will be located;
186          (iii) whether the project would provide new infrastructure for an area where the type of
187     infrastructure the project would create is underdeveloped;
188          (iv) whether the project is supported by a business case for providing the revenue
189     necessary to finance the construction and operation of the project;
190          (v) whether the project would have a positive environmental impact on the state;
191          (vi) whether the project promotes responsible energy development;
192          (vii) whether the project would upgrade or improve an existing entity in order to ensure
193     the entity's continued operation and economic viability;
194          (viii) whether the project is less likely to be completed without a tax credit issued to
195     the applicant under this part; and
196          (ix) other relevant factors that the board specifies in the board's evaluation.
197          (b) Before the office enters into an agreement described in Subsection (3) with an
198     applicant regarding an energy delivery project, in addition to the criteria described in
199     Subsection (2)(a) the Utah Energy Infrastructure Board shall determine that the project:
200          (i) is strategically situated to maximize connections to an energy source project located
201     in the state that is:
202          (A) existing;
203          (B) under construction;
204          (C) planned; or
205          (D) foreseeable;
206          (ii) is supported by a project plan related to:
207          (A) engineering;
208          (B) environmental issues;
209          (C) energy production;
210          (D) load or other capacity; and
211          (E) any other issue related to the building and operation of energy delivery
212     infrastructure; and
213          (iii) complies with the regulations of the following regarding the building of energy
214     delivery infrastructure:
215          (A) the Federal Energy Regulatory Commission;
216          (B) the North American Electric Reliability Council; and
217          (C) the Public Service Commission of Utah.
218          (c) The Utah Energy Infrastructure Board may recommend that the office deny an
219     applicant a tax credit if, as determined by the Utah Energy Infrastructure Board:
220          (i) the project does not sufficiently benefit the state based on the criteria described in
221     Subsection (2)(a); or
222          (ii) for an energy delivery project, the project does not satisfy the conditions described
223     in Subsection (2)(b).
224          (3) Subject to the procedures described in Section 79-6-604, if an applicant meets the
225     requirements of Subsection (1) to receive a tax credit, and the applicant's project receives a
226     favorable recommendation from the Utah Energy Infrastructure Board under Subsection (2),
227     the office shall enter into an agreement with the applicant to authorize the tax credit in
228     accordance with this part.
229          (4) The office shall grant a tax credit to an infrastructure cost-burdened entity, for a
230     high cost infrastructure project, under an agreement described in Subsection (3):
231          (a) for the lesser of:
232          (i) the economic life of the high cost infrastructure project;
233          (ii) 20 years; or
234          (iii) a time period, the first taxable year of which is the taxable year when the
235     construction of the high cost infrastructure project begins and the last taxable year of which is
236     the taxable year in which the infrastructure cost-burdened entity has recovered, through the tax
237     credit, an amount equal to:
238          (A) 50% of the cost of the infrastructure construction associated with the high cost
239     infrastructure project; or
240          (B) if the high cost infrastructure project is a fuel standard compliance project, 30% of
241     the cost of the infrastructure construction associated with the high cost infrastructure project;
242          (b) except as provided in Subsections (4)(a) [and], (d), and (e), in a total amount equal
243     to 30% of the high cost infrastructure project's total infrastructure-related revenue over the time
244     period described in Subsection (4)(a);
245          (c) for a taxable year, in an amount that does not exceed the high cost infrastructure
246     project's infrastructure-related revenue during that taxable year; [and]
247          (d) if the high cost infrastructure project is a fuel standard compliance project, in a total
248     amount that is:
249          (i) determined by the Utah Energy Infrastructure Board, based on:
250          (A) the applicant's likelihood of completing the high cost infrastructure project without
251     a tax credit; and
252          (B) how soon the applicant plans to complete the high cost infrastructure project; and
253          (ii) equal to or less than 30% of the high cost infrastructure project's total
254     infrastructure-related revenue over the time period described in Subsection (4)(a)[.]; and
255          (e) if the high cost infrastructure project is a locomotive engine conversion project, in a
256     total amount equal to 25% of the cost of the infrastructure construction associated with the high
257     cost infrastructure project.
258          (5) An infrastructure cost-burdened entity shall, for each taxable year:
259          (a) file a report with the office showing the high cost infrastructure project's
260     infrastructure-related revenue during the taxable year;
261          (b) subject to Subsection (7), file a report with the office that is prepared by an
262     independent certified public accountant that verifies the infrastructure-related revenue
263     described in Subsection (5)(a); and
264          (c) provide the office with information required by the office to certify the economic
265     life of the high cost infrastructure project.
266          (6) An infrastructure cost-burdened entity shall retain records supporting a claim for a
267     tax credit for the same period of time during which a person is required to keep books and
268     records under Section 59-1-1406.
269          (7) An infrastructure cost-burdened entity for which a report is prepared under
270     Subsection (5)(b) shall pay the costs of preparing the report.
271          (8) The office shall certify, for each taxable year, the infrastructure-related revenue
272     generated by an infrastructure cost-burdened entity.
273          Section 3. Section 79-6-902 is amended to read:
274          79-6-902. Utah Energy Infrastructure Board.
275          (1) There is created within the office the Utah Energy Infrastructure Board that consists
276     of nine members as follows:
277          (a) subject to Subsection (2), members appointed by the governor:
278          (i) the energy advisor or the director of the Office of Energy Development, who shall
279     serve as chair of the board;
280          (ii) one member from the Governor's Office of Economic Opportunity;
281          (iii) one member from a public utility or electric interlocal entity that operates electric
282     transmission facilities within the state;
283          (iv) one member who resides within a county of the third, fourth, fifth, or sixth class,
284     as described in Section 17-50-501, with relevant experience in an energy or extraction industry;
285          [(iv) two members representing the economic development interests of rural
286     communities as follows:]
287          [(A)] (v) one member currently serving as county commissioner of a county of the
288     third, fourth, fifth, or sixth class, as described in Section 17-50-501; and
289          [(B) one member of a rural community with work experience in the energy industry;]
290          [(v)] (vi) two members of the general public with relevant industry [or community]
291     experience; [and]
292          [(vi) one member of the general public who has experience with public finance and
293     bonding; and]
294          (b) one member appointed jointly by the Utah Farm Bureau Federation, the Utah
295     Manufacturer's Association, the Utah Mining Association, and the Utah Petroleum
296     Association; and
297          [(b)] (c) the director of the School and Institutional Trust Lands Administration created
298     in Section 53C-1-201.
299          (2) The governor shall consult with the president of the Senate and the speaker of the
300     House of Representatives in appointing the members described in Subsections (1)(a)(iii)
301     through (vi).
302          [(2)] (3) (a) The term of an appointed board member is four years.
303          (b) Notwithstanding Subsection [(2)(a)] (3)(a), the governor shall, at the time of
304     appointment or reappointment, adjust the length of terms to ensure that the terms of board
305     members are staggered so that approximately half of the board is appointed every two years.
306          (c) The governor may remove a member of the board for cause.
307          (d) The governor shall fill a vacancy in the board in the same manner under this section
308     as the appointment of the member whose vacancy is being filled.
309          (e) An individual appointed to fill a vacancy shall serve the remaining unexpired term
310     of the member whose vacancy the individual is filling.
311          (f) A board member shall serve until a successor is appointed and qualified.
312          [(3)] (4) (a) Five members of the board constitute a quorum for conducting board
313     business.
314          (b) A majority vote of the quorum present is required for an action to be taken by the
315     board.
316          [(4)] (5) The board shall meet as needed to review an application.
317          [(5)] (6) A member may not receive compensation or benefits for the member's service,
318     but may receive per diem and travel expenses in accordance with:
319          (a) Section 63A-3-106;
320          (b) Section 63A-3-107; and
321          (c) rules made by the Division of Finance pursuant to Sections 63A-3-106 and
322     63A-3-107.
323          Section 4. Effective date.
324          This bill takes effect on May 1, 2024.
325          Section 5. Retrospective operation.
326          (1) The following sections have retrospective operation for a taxable year beginning on
327     or after January 1, 2024:
328          (a) Section 79-6-602; and
329          (b) Section 79-6-603.