BILL REQ. #:  H-4674.2 

READ FIRST TIME 01/31/06.   

     AN ACT Relating to creation of the energy freedom program; amending RCW 43.135.035 and 43.135.035; adding a new chapter to Title 43 RCW; making appropriations; providing effective dates; and providing expiration dates.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The legislature finds that:
     (1) Washington's dependence on energy supplied from outside the state and volatile energy markets makes our economy and citizens vulnerable to unpredictable and high energy prices;
     (2) Washington's dependence on petroleum-based fuels increases energy costs for citizens and businesses;
     (3) Experts tell us that the global oil shortage will only worsen, making the three dollars per gallon gasoline of summer 2005 seem affordable;
     (4) Each year, citizens and businesses in Washington state spend nine billion dollars on gasoline and diesel, with those funds drained from the state economy;
     (5) Diesel soot from diesel engines ranks as the highest toxic air pollutant in Washington, leading to hundreds of premature deaths and increasing rates of asthma and other lung-related diseases;
     (6) The use of biodiesel results in significantly less air pollution than traditional diesel fuels and can help our citizens and businesses conserve energy;
     (7) Improper disposal and treatment of organic waste from farms and livestock operations can have a significant negative impact on water quality;
     (8) Washington has abundant supplies of organic wastes from farms that can be used for energy production and abundant farmland where crops could be grown to supplement or supplant petroleum-based fuels;
     (9) Instead of leaving our economy at the mercy of global events, and the policies of foreign nations, Washington state should adopt a policy of energy independence;
     (10) The energy freedom program is meant to lead Washington state towards energy independence;
     (11) Producing more energy here means cleaner, renewable energy that includes, but is not limited to, biofuels, solar power, and wind power;
     (12) The biofuels industry is a new and developing industry now limited by the availability of capital for construction of facilities for converting farm and forest products into energy and fuels; and
     (13) For biofuels to be economically viable in Washington, it will be necessary to grow dedicated crops, construct crushers near farms, and build refineries to create fuel.
     Therefore, the legislature finds it is in the public interest to reduce Washington's dependence on imported oil, expand renewable fuel production and use in Washington, conserve energy, improve use of renewable energy and energy efficiency measures, and promote sustainable rural economic development by creating new jobs and stimulating business and economic activity in local communities across Washington.
     To accomplish this, the energy freedom program is established to stimulate strategic investment in facilities, infrastructure, technologies, and research and development that will advance Washington's move toward energy independence.

NEW SECTION.  Sec. 2   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Board" means the energy freedom board.
     (2) "Department" means the department of community, trade, and economic development.
     (3) "Political subdivision" means any port district, county, city, town, special purpose district, and any other municipal corporations or quasi-municipal corporations in the state.

NEW SECTION.  Sec. 3   (1) The energy freedom board is created to exercise the powers granted under this chapter.
     (2) The board consists of thirteen members as follows:
     (a) One member shall be the director of the department of agriculture or the director's designated representative;
     (b) One member shall be the director of the department of community, trade, and economic development or the director's designated representative from the department's energy policy division;
     (c) Four of the members shall be appointed by the legislature: Two members from the house of representatives committee that has jurisdiction over energy issues, one from each of the two major caucuses, to be appointed by the speaker of the house of representatives; two members from the senate committee that has jurisdiction over energy issues, one from each of the two major caucuses, to be appointed by the president of the senate; and
     (d) The following members appointed by the governor: One recognized expert in renewable energy; one representative from Washington State University; one Washington state grower; one producer of alternative fuels; one public fleet manager; one public buildings manager; and one sustainable society advocate.
     (3) The members appointed under subsection (2)(c) and (d) of this section must initially be appointed to terms as follows: Three members for two-year terms, four members for three-year terms, and four members for four-year terms which includes the chair. Thereafter, each succeeding term is four years. Appointees may be reappointed to serve more than one term.
     (4) The governor must select the chair of the board. The members of the board shall elect one of their members to serve as vice chair.
     (5) The department must provide staff support to the board.
     (6) Members of the board receive no compensation but shall be reimbursed for travel expenses as provided in RCW 43.03.050 and 43.03.060.

NEW SECTION.  Sec. 4   In addition to other applicable provisions of law pertaining to conflicts of interest of public officials, no board member, appointive or otherwise, may participate in any decision on any board contract in which the board member has any interests, direct or indirect, with any entity that would be the recipient of any aid under this chapter.

NEW SECTION.  Sec. 5   The board may:
     (1) Accept from any federal agency loans or grants for the planning or financing of any project and enter into agreements with such an agency concerning the loans or grants;
     (2) Accept any gifts, grants, or loan of funds, property, or financial or other aid in any form from any other source on any terms and conditions that are not in conflict with this chapter;
     (3) Adopt rules under chapter 34.05 RCW as necessary to carry out the purposes of this chapter; and
     (4) Perform all acts and functions as necessary or convenient to carry out the powers expressly granted or implied under this chapter.

NEW SECTION.  Sec. 6   The board shall:
     (1) Establish a competitive process to solicit proposals for and prioritize project applications for potential funding;
     (2) Adopt rules governing project eligibility and evaluation criteria;
     (3) Establish a peer review committee to include board members, renewable energy specialists, energy conservation specialists, scientists, and individuals with specific recognized expertise. The peer review committee shall provide to the board an independent peer review of all proposals submitted that are determined to be competitive for a low-interest loan or grant award. The board shall review findings of the peer review committee when making final loan and grant allocation decisions;
     (4) Develop the prioritized list through open and public meetings;
     (5) Establish performance measures against which the program will be evaluated;
     (6) Aggressively seek federal and other grant moneys;
     (7) Report annually to the appropriate standing committees of the legislature on the implementation of this chapter. The report must include, but is not limited to: Information on the number of applications for financial assistance; the grant or loan amount awarded each project; a description of each project; the status of each funded project, including the agricultural and environmental benefits of each project, as well as the progress made by each project in creating jobs and moving towards energy independence; the documentation of nonstate funds to be used for each project; and progress against performance measures developed under this chapter. The first report must be submitted by December 31, 2006, to committees in the house of representatives and senate with jurisdiction over energy issues.

NEW SECTION.  Sec. 7   (1) The board is authorized to make low-interest loans and grants to political subdivisions of the state for the purposes of assisting political subdivisions in financing the cost of new and renewable energy and biofuel development projects and activities. Political subdivisions applying for loans and grants shall identify nonstate matching funds available for the project, and shall specify deliverables to be achieved by proposed projects and activities.
     (2) Applications for loans and grants must be made in the form and manner as the board may prescribe.
     (3) The board may provide financial assistance for the following types of projects and activities including, but not limited to:
     (a) Research and development of new and renewable energy and biofuel sources including but not limited to biomass and associated biofuel gases;
     (b) Renewable energy and biofuel development infrastructure and facilities; and
     (c) Research and development to develop markets for alternative fuel byproducts.
     (4) Applications must be prioritized based on the following criteria:
     (a) The extent to which the project will contribute to the establishment of a viable bioenergy production capacity in Washington;
     (b) The benefits to Washington's agricultural producers;
     (c) The extent to which the project will help conserve energy and reduce dependence on petroleum fuels and imported energy, either directly or indirectly;
     (d) The extent to which the project will reduce air and water pollution, either directly or indirectly;
     (e) The number and quality of jobs, as well as the economic benefits, created by the project;     
     (f) The extent to which the investment shows a direct link to commercialization either by indirectly supporting the commercialization of bioenergy intellectual property into a commercialized project, or by directly assisting in moving a commercially viable project into the marketplace for use by Washington state citizens; and
     (g) The extent to which private funds have been leveraged.
     (5) Financial assistance awarded to political subdivisions is one time only and may not be used for ongoing operational expenses.
     (6) Before any financial assistance application is approved, the political subdivision must demonstrate to the board that no other timely source of funding is available to it at costs reasonably similar to financing available from the board.
     (7) A responsible official of the political subdivision must be present during board deliberations and provide information that the board requests.
     (8) The board may defer loan repayment for up to twelve months or until the projects start to receive revenue from operations, whichever is sooner.
     (9) Upon receiving financial assistance, a political subdivision must enter into appropriate contracts with any industry partners that may be involved in the use of the loan or grant funds.

NEW SECTION.  Sec. 8   The energy freedom account is created in the state treasury. All receipts from appropriations made to the account, proceeds from other lawful sources, and loan payments of principal and interest derived from loans made under this chapter must be deposited into the account. Moneys in the account may be spent only after appropriation. Expenditures from the account may be used only for loans and grants to political subdivisions for renewable energy and biofuel development projects and activities authorized under this chapter. Not more than one percent of the available funds from the energy freedom account may be used for administrative costs of the program.

NEW SECTION.  Sec. 9   Beginning July 1, 2006, for four fiscal years through June 30, 2010, the state treasurer shall transfer the sum of twenty-five million dollars each fiscal year from the general fund--state to the energy freedom account established in section 8 of this act, for a total of one hundred million dollars.

NEW SECTION.  Sec. 10   Beginning July 1, 2006, and for four fiscal years through June 30, 2010, the sum of twenty-five million dollars for each fiscal year is appropriated from the energy freedom account to the department of community, trade, and economic development for the purposes of this act.

Sec. 11   RCW 43.135.035 and 2005 c 72 s 2 are each amended to read as follows:
     (1) After July 1, 1995, any action or combination of actions by the legislature that raises state revenue or requires revenue-neutral tax shifts may be taken only if approved by a two-thirds vote of each house, and then only if state expenditures in any fiscal year, including the new revenue, will not exceed the state expenditure limits established under this chapter. However, for legislation enacted between the effective date of this 2005 act and June 30, 2007, any action or combination of actions by the legislature that raises state revenue or requires revenue-neutral tax shifts may be taken with the approval of a majority of members elected to each house, so long as state expenditures in any fiscal year, including the new revenue, will not exceed the state expenditure limits established under this chapter.
     (2)(a) If the legislative action under subsection (1) of this section will result in expenditures in excess of the state expenditure limit, then the action of the legislature shall not take effect until approved by a vote of the people at a November general election. The state expenditure limit committee shall adjust the state expenditure limit by the amount of additional revenue approved by the voters under this section. This adjustment shall not exceed the amount of revenue generated by the legislative action during the first full fiscal year in which it is in effect. The state expenditure limit shall be adjusted downward upon expiration or repeal of the legislative action.
     (b) The ballot title for any vote of the people required under this section shall be substantially as follows:

     "Shall taxes be imposed on . . . . . . . in order to allow a spending increase above last year's authorized spending adjusted for inflation and population increases?"

     (3)(a) The state expenditure limit may be exceeded upon declaration of an emergency for a period not to exceed twenty-four months by a law approved by a two-thirds vote of each house of the legislature and signed by the governor. The law shall set forth the nature of the emergency, which is limited to natural disasters that require immediate government action to alleviate human suffering and provide humanitarian assistance. The state expenditure limit may be exceeded for no more than twenty-four months following the declaration of the emergency and only for the purposes contained in the emergency declaration.
     (b) Additional taxes required for an emergency under this section may be imposed only until thirty days following the next general election, unless an extension is approved at that general election. The additional taxes shall expire upon expiration of the declaration of emergency. The legislature shall not impose additional taxes for emergency purposes under this subsection unless funds in the education construction fund have been exhausted.
     (c) The state or any political subdivision of the state shall not impose any tax on intangible property listed in RCW 84.36.070 as that statute exists on January 1, 1993.
     (4) If the cost of any state program or function is shifted from the state general fund on or after January 1, 1993, to another source of funding, or if moneys are transferred from the state general fund to another fund or account, the state expenditure limit committee, acting pursuant to RCW 43.135.025(5), shall lower the state expenditure limit to reflect the shift. For the purposes of this section, a transfer of money from the state general fund to another fund or account includes any state legislative action taken that has the effect of reducing revenues from a particular source, where such revenues would otherwise be deposited into the state general fund, while increasing the revenues from that particular source to another state or local government account. This subsection does not apply to the dedication or use of lottery revenues under RCW 67.70.240(3) or property taxes under RCW 84.52.068, in support of education or education expenditures. This subsection does not apply to the transfer of general fund revenues under section 10 of this act, in support of energy freedom or energy freedom expenditures under chapter 43.-- RCW (sections 1 through 8 and 15 of this act).
     (5) If the cost of any state program or function is shifted to the state general fund on or after January 1, 2000, from another source of funding, or if moneys are transferred to the state general fund from another fund or account, the state expenditure limit committee, acting pursuant to RCW 43.135.025(5), shall increase the state expenditure limit to reflect the shift.

Sec. 12   RCW 43.135.035 and 2005 c 72 s 5 are each amended to read as follows:
     (1) After July 1, 1995, any action or combination of actions by the legislature that raises state revenue or requires revenue-neutral tax shifts may be taken only if approved by a two-thirds vote of each house, and then only if state expenditures in any fiscal year, including the new revenue, will not exceed the state expenditure limits established under this chapter.
     (2)(a) If the legislative action under subsection (1) of this section will result in expenditures in excess of the state expenditure limit, then the action of the legislature shall not take effect until approved by a vote of the people at a November general election. The state expenditure limit committee shall adjust the state expenditure limit by the amount of additional revenue approved by the voters under this section. This adjustment shall not exceed the amount of revenue generated by the legislative action during the first full fiscal year in which it is in effect. The state expenditure limit shall be adjusted downward upon expiration or repeal of the legislative action.
     (b) The ballot title for any vote of the people required under this section shall be substantially as follows:

     "Shall taxes be imposed on . . . . . . . in order to allow a spending increase above last year's authorized spending adjusted for personal income growth?"

     (3)(a) The state expenditure limit may be exceeded upon declaration of an emergency for a period not to exceed twenty-four months by a law approved by a two-thirds vote of each house of the legislature and signed by the governor. The law shall set forth the nature of the emergency, which is limited to natural disasters that require immediate government action to alleviate human suffering and provide humanitarian assistance. The state expenditure limit may be exceeded for no more than twenty-four months following the declaration of the emergency and only for the purposes contained in the emergency declaration.
     (b) Additional taxes required for an emergency under this section may be imposed only until thirty days following the next general election, unless an extension is approved at that general election. The additional taxes shall expire upon expiration of the declaration of emergency. The legislature shall not impose additional taxes for emergency purposes under this subsection unless funds in the education construction fund have been exhausted.
     (c) The state or any political subdivision of the state shall not impose any tax on intangible property listed in RCW 84.36.070 as that statute exists on January 1, 1993.
     (4) If the cost of any state program or function is shifted from the state general fund or a related fund to another source of funding, or if moneys are transferred from the state general fund or a related fund to another fund or account, the state expenditure limit committee, acting pursuant to RCW 43.135.025(5), shall lower the state expenditure limit to reflect the shift. For the purposes of this section, a transfer of money from the state general fund or a related fund to another fund or account includes any state legislative action taken that has the effect of reducing revenues from a particular source, where such revenues would otherwise be deposited into the state general fund or a related fund, while increasing the revenues from that particular source to another state or local government account. This subsection does not apply to the dedication or use of lottery revenues under RCW 67.70.240(3) or property taxes under RCW 84.52.068, in support of education or education expenditures. This subsection does not apply to the transfer of general fund revenues under section 10 of this act, in support of energy freedom or energy freedom expenditures under chapter 43.-- RCW (sections 1 through 8 and 15 of this act).
     (5) If the cost of any state program or function and the ongoing revenue necessary to fund the program or function are shifted to the state general fund or a related fund on or after January 1, 2007, the state expenditure limit committee, acting pursuant to RCW 43.135.025(5), shall increase the state expenditure limit to reflect the shift.

NEW SECTION.  Sec. 13   (1) Sections 1 through 11 and 15 of this act take effect July 1, 2006.
     (2) Section 12 of this act takes effect July 1, 2007.

NEW SECTION.  Sec. 14   Section 11 of this act expires July 1, 2007.

NEW SECTION.  Sec. 15   Sections 1 through 10 and 12 of this act expire June 30, 2016, unless reauthorized by the legislature. Any moneys in the energy freedom account on that date and all payments received after that date must be deposited in the state general fund.

NEW SECTION.  Sec. 16   Sections 1 through 8 and 15 of this act constitute a new chapter in Title 43 RCW.