BILL REQ. #:  S-2572.2 

READ FIRST TIME 03/05/07.   

     AN ACT Relating to providing for the means to encourage the use of cleaner energy thereby providing for healthier communities by reducing emissions; amending RCW 53.08.040, 70.94.017, 15.110.040, 15.110.020, 15.110.005, 15.110.010, and 15.110.060; adding a new section to chapter 28A.300 RCW; adding new sections to chapter 15.110 RCW; adding a new section to chapter 19.112 RCW; adding new sections to chapter 43.19 RCW; adding a new section to chapter 43.01 RCW; adding new sections to chapter 43.31 RCW; adding a new section to chapter 43.135 RCW; adding a new section to chapter 28B.30 RCW; adding a new section to chapter 82.16 RCW; creating new sections; and providing an expiration date.

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

NEW SECTION.  Sec. 1   (1) The legislature finds that excessive dependence on fossil fuels jeopardizes Washington's economic security, environmental integrity, and public health. Accelerated development and use of clean fuels and clean vehicle technologies will reduce the drain on Washington's economy from importing fossil fuels. As fossil fuel prices rise, clean fuels and vehicles can save money for consumers while promoting the development of a major, sustainable industry that provides good jobs and a new source of rural prosperity.
     (2) Clean fuels and vehicles will protect public health by reducing toxic air pollution and reduce our largest source of global warming pollution. The state must better understand and prepare for the effects of global warming and the challenges and opportunities associated with evolving climate policies and carbon markets.
     (3) To reduce fossil fuel dependence and build our clean energy economy, the state should develop policies and incentives that help businesses, consumers, and farmers gain greater access to affordable clean fuels and vehicles and to produce clean fuels in the state. These policies and incentives should include: Incentives for replacement of the most polluting diesel engines, especially in school buses; transitional incentives for development of the most promising in-state clean fuels and fuel feedstocks, including biodiesel crops and ethanol from plant waste; reduced fossil fuel consumption by state fleets; development of promising new technologies for displacing petroleum with electricity, such as "plug-in hybrids"; and impact analysis and emission accounting procedures that prepare Washington to respond and prosper as global warming impacts occur and as policies and markets to reduce global warming pollution are developed.

NEW SECTION.  Sec. 101   (1) The legislature finds that fine particle air pollution attributable to diesel fuel is a significant health hazard to school children and other residents in our state. Sources of diesel emissions include diesel-powered trucks, buses and cars, diesel-powered marine vessels, construction equipment, trains, aircraft support equipment, cargo handling equipment, and a variety of other on and off-road engines. Reducing fine particles and toxic emissions from diesel emissions and other sources of pollution reduces the adverse health impacts on children, reduces cancer risk, and reduces the incidence and severity of asthma attacks and chronic bronchitis. Reducing diesel emissions, in addition to strategies to reduce wood smoke, will also aid areas of the state facing potential nonattainment of new fine particle standards established by the United States environmental protection agency and help avoid the adverse health and economic impacts of nonattainment.
     (2) Under the current Washington state clean school bus program, approximately seven thousand five hundred diesel school buses, over three-quarters of the existing fleet statewide, will be retrofitted by 2008. Reduced exhaust emissions from these retrofitted buses provide cleaner air to breathe for the children riding the buses and the citizens in the communities served by the buses.
     (3) The legislature finds that it is not cost-effective to retrofit much older buses because of their mechanical condition and very high emissions. Replacement with new, ultra-low emission buses, beginning with the model year 2007, is the most effective means to nearly eliminate the toxic emissions generated by the use of these older buses. In addition, newer buses are safer, more reliable, provide significantly higher fuel economy, and have lower overall operating costs. An incentive program to accelerate purchase of newer buses and replacement of older buses will more quickly achieve these gains and result in a lower health risk to children.
     (4) Even with new federal diesel fuel and engine standards going into effect in 2006 and 2007, and due to the long life of diesel engines, diesel emissions will continue to be an air pollution concern for many years.
     (5) Many public and private fleets continue to use diesel equipment that has not been retrofitted to reduce emissions. Therefore, the legislature finds that it is important to continue to take measures to reduce diesel emissions in our state so we protect the health of our citizens and create healthier communities. Reducing diesel emissions will also allow continued growth in major ports in the state by maintaining air quality within federal standards.

NEW SECTION.  Sec. 102   A new section is added to chapter 28A.300 RCW to read as follows:
     (1) The office of the superintendent of public instruction shall implement a school bus replacement incentive program. As part of the program, the office shall fund up to ten percent of the cost of a new 2007 or later model year school bus purchased by a school district by no later than June 30, 2009, provided that the new bus is replacing a 1994 or older school bus in the school district's fleet. Replacement of the oldest buses must be given highest priority.
     (2) The office of the superintendent of public instruction shall ensure that buses being replaced through this program are surplused under RCW 28A.335.180. As part of the surplus process, school districts must provide written documentation to the office of the superintendent of public instruction demonstrating that buses being replaced are scrapped and not purchased for road use. The documentation must include bus make, model, year, vehicle identification number, engine make, engine serial number, and salvage yard receipts; and must demonstrate that the engine and body of the bus being replaced has been rendered unusable.

Sec. 103   RCW 53.08.040 and 1989 c 298 s 1 are each amended to read as follows:
     (1) A district may improve its lands by dredging, filling, bulkheading, providing waterways or otherwise developing such lands for industrial and commercial purposes. A district may also acquire, construct, install, improve, and operate sewer and water utilities to serve its own property and other property owners under terms, conditions, and rates to be fixed and approved by the port commission. A district may also acquire, by purchase, construction, lease, or in any other manner, and may maintain and operate other facilities for the control or elimination of air, water, or other pollution, including, but not limited to, facilities for the treatment and/or disposal of industrial wastes, and may make such facilities available to others under terms, conditions and rates to be fixed and approved by the port commission. Such conditions and rates shall be sufficient to reimburse the port for all costs, including reasonable amortization of capital outlays caused by or incidental to providing such other pollution control facilities((: PROVIDED, That)). However, no part of such costs of providing any pollution control facility to others shall be paid out of any tax revenues of the port((: AND PROVIDED FURTHER, That)) and no port shall enter into an agreement or contract to provide sewer and/or water utilities or pollution control facilities if substantially similar utilities or facilities are available from another source (or sources) which is able and willing to provide such utilities or facilities on a reasonable and nondiscriminatory basis unless such other source (or sources) consents thereto.
     (2) In the event that a port elects to make such other pollution control facilities available to others, it shall do so by lease, lease purchase agreement, or other agreement binding such user to pay for the use of said facilities for the full term of the revenue bonds issued by the port for the acquisition of said facilities, and said payments shall at least fully reimburse the port for all principal and interest paid by it on said bonds and for all operating or other costs, if any, incurred by the port in connection with said facilities((: PROVIDED,)). However, ((That)) where there is more than one user of any such facilities, each user shall be responsible for its pro rata share of such costs and payment of principal and interest. Any port intending to provide pollution control facilities to others shall first survey the port district to ascertain the potential users of such facilities and the extent of their needs. The port shall conduct a public hearing upon the proposal and shall give each potential user an opportunity to participate in the use of such facilities upon equal terms and conditions.
     (3) "Pollution control facility," as used in this section and RCW 53.08.041, does not include air quality improvement equipment that provides emission reductions for engines, vehicles, and vessels.

Sec. 104   RCW 70.94.017 and 2005 c 295 s 5 are each amended to read as follows:
     (1) Money deposited in the segregated subaccount of the air pollution control account under RCW 46.68.020(2) shall be distributed as follows:
     (a) Eighty-five percent shall be distributed to air pollution control authorities created under this chapter. The money must be distributed in direct proportion with the amount of fees imposed under RCW 46.12.080, 46.12.170, and 46.12.181 that are collected within the boundaries of each authority. However, an amount in direct proportion with those fees collected in counties for which no air pollution control authority exists must be distributed to the department.
     (b) The remaining fifteen percent shall be distributed to the department.
     (2) Money distributed to air pollution control authorities and the department under subsection (1) of this section must be used as follows:
     (a) Eighty-five percent of the money received by an air pollution control authority or the department is available on a priority basis to retrofit school buses with exhaust emission control devices or to provide funding for fueling infrastructure necessary to allow school bus fleets to use alternative, cleaner fuels. In addition, the director of ecology or the air pollution control officer may direct funding under this section for other publicly or privately owned diesel equipment if the director of ecology or the air pollution control officer finds that funding for other publicly or privately owned diesel equipment will provide public health benefits and further the purposes of this chapter.
     (b) The remaining fifteen percent may be used by the air pollution control authority or department to reduce transportation-related air contaminant emissions and clean up air pollution, or reduce and monitor toxic air contaminants.
     (3) Money in the air pollution control account may be spent by the department only after appropriation.
     (4) This section expires July 1, 2020.

NEW SECTION.  Sec. 201   (1) The legislature finds that the development of a Washington-based feedstock agricultural and forest products market is highly desirable for producing biodiesel and ethanol. Research and incentive programs are needed to develop a market in Washington to produce cellulosic ethanol from wood waste and other organic materials. Cellulosic ethanol is a preferred biofuel because it provides much greater reductions in petroleum dependence and carbon emissions as compared to starch-based ethanol.
     (2) It is important for the state of Washington to develop a complete supply chain infrastructure that allows the state government, including its local government subdivisions, to supply its complete fuel needs with biofuels produced from feedstocks completely produced in Washington. The goal of suppling one hundred percent of state and local government's fuel needs with biofuels should be a reality by 2015.

NEW SECTION.  Sec. 202   A new section is added to chapter 15.110 RCW to read as follows:
     (1) Cellulosic ethanol production facilities are eligible for assistance under the energy freedom program.
     (2) For the purposes of this section, "cellulosic ethanol" means ethanol derived from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis, including dedicated energy crops and trees, wood and wood residues, plants, grasses, agricultural residues, fibers, animal wastes and other waste materials, and municipal solid waste.

NEW SECTION.  Sec. 203   A new section is added to chapter 19.112 RCW to read as follows:
     (1) In addition to any other authority provided by law, conservation districts and public development authorities are authorized to enter into crop purchase contracts for a dedicated energy crop for the purposes of producing, selling, and distributing biodiesel produced from Washington state feedstocks, cellulosic ethanol, and cellulosic ethanol blend fuels.
     (2) In addition to any other authority provided by law, electric utilities are authorized to produce and distribute biodiesel, ethanol, and ethanol blend fuels, including entering into crop purchase contracts for a dedicated energy crop for the purpose of generating electricity or producing biodiesel produced from Washington feedstocks, cellulosic ethanol, and cellulosic ethanol blend fuels for use in internal operations of the electric utility and for sale or distribution.

Sec. 204   RCW 15.110.040 and 2006 c 171 s 5 are each amended to read as follows:
     (1) If the total requested dollar amount of assistance awarded for projects under RCW 15.110.020(3) exceeds the amount available in the energy freedom account created in RCW 15.110.050, the applications must be prioritized based upon the following criteria:
     (((1))) (a) The extent to which the project will help reduce dependence on petroleum fuels and imported energy either directly or indirectly;
     (((2))) (b) The extent to which the project will reduce air and water pollution either directly or indirectly;
     (((3))) (c) The extent to which the project will establish a viable bioenergy production capacity in Washington;
     (((4))) (d) The benefits to Washington's agricultural producers; ((and
     (5))) (e) The benefits to the health of Washington's forests; and
     (f) The number and quality of jobs and economic benefits created by the project.
     (2) This section does not apply to assistance awarded for refueling projects under RCW 15.110.020(4).

Sec. 205   RCW 15.110.020 and 2006 c 171 s 3 are each amended to read as follows:
     (1) The energy freedom program is established within the department. The director may establish policies and procedures necessary for processing, reviewing, and approving applications made under this chapter.
     (2) When reviewing applications submitted under this program, the director shall consult with those agencies having expertise and knowledge to assess the technical and business feasibility of the project and probability of success. These agencies may include, but are not limited to, Washington State University, the University of Washington, the department of ecology, the department of community, trade, and economic development, the department of natural resources, and the Washington state conservation commission.
     (3) Except as provided in subsection (4) of this section, the director, in cooperation with the department of community, trade, and economic development, may approve an application only if the director finds:
     (a) The project will convert landfill methane gas, wastewater treatment gas, or farm products or wastes directly into electricity or into gaseous or liquid fuels or other coproducts associated with such conversion;
     (b) The project demonstrates technical feasibility and directly assists in moving a commercially viable project into the marketplace for use by Washington state citizens;
     (c) The facility will produce long-term economic benefits to the state, a region of the state, or a particular community in the state;
     (d) The project does not require continuing state support;
     (e) The assistance will result in new jobs, job retention, or higher incomes for citizens of the state;
     (f) The state is provided an option under the assistance agreement to purchase a portion of the fuel or feedstock to be produced by the project, exercisable by the department of general administration;
     (g) The project will increase energy independence or diversity for the state;
     (h) The project will use landfill methane gas, wastewater treatment gas, or feedstocks produced in the state, if feasible, except this criterion does not apply to the construction of facilities used to distribute and store fuels that are produced from landfill methane gas, wastewater treatment gas, or farm products or wastes;
     (i) Any product produced by the project will be suitable for its intended use, will meet accepted national or state standards, and will be stored and distributed in a safe and environmentally sound manner;
     (j) The application provides for adequate reporting or disclosure of financial and employment data to the director, and permits the director to require an annual or other periodic audit of the project books; and
     (k) For research and development projects, the application has been independently reviewed by a peer review committee as defined in RCW 15.110.010 and the findings delivered to the director.
     (4) When reviewing an application for a refueling project, the director may award assistance to an applicant if the director finds:
     (a) The project will offer biofuels or alternative fuels to the motoring public;
     (b) The project does not require continued state support;
     (c) The project is located within a green highway zone as defined in RCW 15.110.010;
     (d) The project will contribute towards an efficient and adequately spaced biofuel or alternative fuel refueling network along the green highways; and
     (e) The project will result in increased access to a biofueling infrastructure or an alternative fueling infrastructure for the motoring public along the green highways.
     (5) The director may approve ((an)) a project application for assistance under subsection (3) of this section up to five million dollars. In no circumstances shall this assistance constitute more than fifty percent of the total project cost.
     (((5))) (6) The director may approve a refueling project application for assistance under subsection (4) of this section up to fifty thousand dollars. In no circumstances shall assistance awarded constitute more than fifty percent of the total project cost.
     (7) The director shall enter into agreements with approved applicants to fix the terms and rates of the assistance to minimize the costs to the applicants, and to encourage establishment of a viable bioenergy industry. The agreement shall include provisions to protect the state's investment, including a requirement that a successful applicant enter into contracts with any partners that may be involved in the use of any assistance provided under this program, including services, facilities, infrastructure, or equipment. Contracts with any partners shall become part of the application record.
     (((6))) (8) The director may defer any payments for up to twenty-four months or until the project starts to receive revenue from operations, whichever is sooner.

NEW SECTION.  Sec. 301   The legislature finds that there is a compelling public interest in reducing fossil fuel dependence and emissions of global warming pollution. It is important for the state of Washington to demonstrate leadership in this regard and achieve reductions in the use of fossil fuels by state fleets.

NEW SECTION.  Sec. 302   A new section is added to chapter 43.19 RCW to read as follows:
     (1) By no later than January 1, 2020, the annual fossil fuel usage by the state's motor vehicle fleets must be at least twenty-five percent below the annual usage for the year 2006.
     (2) Except for cars owned or operated by the Washington state patrol, when tires on vehicles in the state's motor vehicle fleet are replaced, they must be replaced with tires that have the same or better rolling resistance as the original tires.
     (3) The governor shall report to the legislature at the beginning of each biennium until January 1, 2020, on progress towards meeting the goals in this section and any barriers to achieving the goals.

NEW SECTION.  Sec. 303   A new section is added to chapter 43.01 RCW to read as follows:
     It is in the state's interest and to the benefit of the people of the state to encourage the use of electrical vehicles in order to reduce emissions and provide the public with cleaner air. This section expressly authorizes the purchase of power at state expense to recharge privately and publicly owned plug-in electrical vehicles at state office locations where the vehicles are used for state business, are commute vehicles, or where the vehicles are at the state location for the purpose of conducting business with the state.

NEW SECTION.  Sec. 304   A new section is added to chapter 43.19 RCW to read as follows:
     (1) In order to allow the motor vehicle fuel needs of state and local government to be satisfied by Washington-produced biofuels, the department of general administration shall contract in advance and execute contracts with public or private producers, suppliers, or other parties, for the purchase of biofuels, including but not limited to biodiesel, ethanol, and ethanol blend fuels that are made from recycled products or Washington feedstocks. Contract provisions may address items including, but not limited to, fuel standards, price, and delivery date.
     (2) The department of general administration may combine the needs of local government agencies, including ports, special districts, school districts, and municipal corporations, for the purposes of executing biodiesel, ethanol, and ethanol blend fuels contracts and to secure a sufficient and stable supply of alternative fuels.

NEW SECTION.  Sec. 401   (1) The legislature finds that it is in the state's interest and to the benefit of the people of the state to encourage the use of electrical vehicle technology that will reduce fossil fuel dependence and toxic air pollution. Displacing petroleum with electricity will keep more energy expenditures and jobs in Washington's economy instead of being lost to fossil fuel imports.
     (2) Motor vehicles produce more than half of the global warming pollution in the state of Washington. Reducing the use of fossil fuels through alternatives such as electrification is one of the most practical, beneficial climate solutions available to the state and its citizens.
     (3) The legislature finds that cleaner fuels and vehicles, including vehicles that use electricity, can help the state achieve better public health, increased energy security, and substantial economic benefits.

NEW SECTION.  Sec. 402   (1) The vehicle electrification work group is established. Members of the group must be appointed by the governor or the governor's designee and must include representatives of state and local government agencies, ports, private and public electrical power utilities, automobile manufacturers, trucking industry interests, environmental interests, regional air quality agencies, and other stakeholder groups. Staff for the work group must be provided by the department of community, trade, and economic development, with additional staff to be provided by other state agencies, as may be required or requested.
     (2) The vehicle electrification work group shall review, study, evaluate, and make recommendations on at least the following items:
     (a) Use by the state of plug-in hybrid vehicles and developing plug-in availability at state locations. The use of hybrid vehicles shall include an economic analysis of the total life-cycle cost to the state over the vehicle's estimated useful life, including energy inputs into the production of the vehicle, fuel usage, and all related costs of selection, acquisition, operation, maintenance, and disposal, as far as these costs can reasonably be determined, minus the salvage value at the end of the vehicle's estimated useful life;
     (b) Incentives to encourage the use of plug-in truck auxiliary power units and truck stop electrification;
     (c) Use of plug-in shore power for cargo and cruise ship terminals, shipside technology, and use of electric power alternatives for port-related operations and equipment such as switching locomotives, vessels and harborcraft, and cargo-handling equipment;
     (d) Potential uses for and availability of plug-in hybrid school buses;
     (e) Potential environmental and electrical grid impacts on electrical power consumption of the conversion of a meaningful portion of the state's private and public fleet to plug-in electrical power;
     (f) Tax and fee incentives to encourage individual and fleet purchases of plug-in hybrid vehicles;
     (g) State laws, rules, tariffs, and policies that impact transportation electrification and plug-in adoption, including pricing with incentives for off-peak charging;
     (h) Measures to encourage the use of plug-in vehicles by public fleets, and resulting cost savings, and whether state and local fleets should be required to purchase plug-in hybrid vehicles if it is determined that plug-in hybrid vehicles are commercially available at a reasonably comparable life-cycle cost;
     (i) Explore the potential for the use of electrification of fixed transit routes for magnetic levitation propulsion systems;
     (j) Actions by the state to help industries located in the state participate in developing and manufacturing plug-in vehicles and vehicle-to-grid technologies;
     (k) Additional ways the state can promote transportation electrification in the private and public sectors, including cars and light-duty vehicles, and truck stop and port electrification; and
     (l) Potential partners for vehicle-to-grid pilot projects that test the use of parked plug-in vehicles for power grid energy storage and support.
     (3) The vehicle electrification work group must complete its work by December 1, 2008. The work group must submit an interim report to the governor stating its findings, conclusions, and interim recommendations by December 1, 2007. The group must submit a final report to the governor stating its findings, conclusions, and final recommendations by December 1, 2008.
     (4) This section expires July 31, 2009.

NEW SECTION.  Sec. 501   (1) The legislature finds that climate change is expected to have significant impacts in the Pacific Northwest region in the near and long-term future. These impacts include, among other things, increased temperatures, declining snowpack, more frequent heavy rainfall and flooding, receding glaciers, rising sea levels, increased risks to public health due to insect and rodent-borne diseases, declining salmon populations, and increased drought and risk of forest fires.
     (2) The legislature recognizes the need at this time to continue to gather and analyze information related to climate protection. This will allow prudent steps to be taken to avoid, mitigate, or respond to climate impacts and protect our communities.
     (3) The analysis of the health impacts of climate protection is needed to help prepare the state for and avoid health impacts such as West Nile virus and respiratory disease. At the same time, this analysis will contribute to our strategic thinking and planning for the impacts of climate change.
     (4) The legislature finds that it is important for the state of Washington to participate in emerging regional, national, and international markets to mitigate climate change. The state has a strong interest in ensuring that climate policies and emission markets are designed to appropriately recognize our unique energy assets. Further, the legislature recognizes that any market system related to climate protection must be based on credible and durable accounting principles and have equally applicable rules across sectors in order to promote economically and environmentally effective trading.

NEW SECTION.  Sec. 502   (1) The department of community, trade, and economic development shall develop and recommend a framework for the state of Washington to participate in emerging regional, national, and global markets to mitigate climate change, on a multisector basis, including the forest sector. This framework must include, but not be limited to, credible, verifiable, replicable inventory and accounting methodologies for each sector involved.
     (2) The department of community, trade, and economic development shall work closely with the department of natural resources on any elements of this section's administration that studies or makes recommendations on the role and opportunities of the forest sector.
     (3) The stakeholder process identified in Executive Order No. 07-02 shall be utilized for this section.

Sec. 601   RCW 15.110.005 and 2006 c 171 s 1 are each amended to read as follows:
     The legislature finds that:
     (1) Washington's dependence on energy supplied from outside the state and volatile global energy markets makes its 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) 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 diseases;
     (4) The use of biodiesel results in significantly less air pollution than traditional diesel fuels;
     (5) Improper disposal and treatment of organic waste from farms and livestock operations can have a significant negative impact on water quality;
     (6) Landfill gas and wastewater treatment gas, if vented into the atmosphere, poses a great risk to Washington's climate;
     (7) Washington has abundant supplies of landfill methane and wastewater treatment gas and organic wastes from farms ((that)), which can be used for energy production, and abundant farmland where crops could be grown to supplement or supplant petroleum-based fuels;
     (((7))) (8) The use of energy and fuel derived from these sources can help citizens and businesses conserve energy and reduce the use of petroleum-based fuels, would improve air and water quality in Washington, reduce environmental risks from landfills, wastewater treatment plants, and farm wastes, create new markets for farm products, and provide new industries and jobs for Washington citizens;
     (((8))) (9) The bioenergy industry is a new and developing industry that is, in part, limited by the availability of capital for the construction of facilities for converting farm and forest products and waste gases into energy and fuels and the availability of infrastructure necessary to allow motorists in Washington to refuel their biofueled or alternative fueled vehicles while traveling along major state highways;
     (((9))) (10) The 2010 Olympic and Paralympic Winter Games present an opportunity to further Washington's energy independence by working with Vancouver, British Columbia, Oregon, and California to develop a hydrogen highway to showcase sustainable transportation and all of Washington state's biofuels and alternative fuels, and to accelerate the commercialization of hydrogen and fuel cell technologies;
     (11) 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; and
     (((10))) (12) The energy freedom program is meant to lead Washington state towards energy independence.
     Therefore, the legislature finds that it is in the public interest to encourage the rapid adoption and use of bioenergy, to develop a viable bioenergy industry within Washington state, to promote public research and development in bioenergy sources and markets, ((and)) to support a viable agriculture industry to grow bioenergy crops, and to develop infrastructure for the use of alternative fuels and biofuels by the motorists of Washington state. To accomplish this, the energy freedom program is established to promote public research and development in bioenergy, ((and)) to stimulate the construction of facilities in Washington to generate energy from farm sources or convert organic matter, landfill gas, or wastewater treatment gas into fuels, and to develop refueling infrastructure in Washington state to ensure that alternative fuels and biofuels are readily accessible to the motorists of Washington state.

Sec. 602   RCW 15.110.010 and 2006 c 171 s 2 are each amended to read as follows:
     The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Alternative fuel" means electricity, hydrogen, or liquid natural gas produced from landfill methane gas or wastewater treatment gas.
     (2) "Applicant" means any political subdivision of the state, including port districts, counties, cities, towns, special purpose districts, and other municipal corporations or quasi-municipal corporations. "Applicant" may also include federally recognized tribes and state institutions of higher education with appropriate research capabilities.
     (((2))) (3) "Assistance" includes loans, leases, product purchases, or other forms of financial or technical assistance.
     (((3))) (4) "Department" means the department of agriculture.
     (((4))) (5) "Director" means the director of the department of agriculture.
     (((5))) (6) "Green highway zone" means an area in the state designated by the department that is within reasonable proximity of state route number 5, state route number 90, and state route number 82.
     (7) "Peer review committee" means a board, appointed by the director, that includes bioenergy specialists, energy conservation specialists, scientists, and individuals with specific recognized expertise.
     (((6))) (8) "Project" means the construction of facilities, including the purchase of equipment, to convert landfill methane gas, wastewater treatment gas, or farm products or wastes into electricity or gaseous or liquid fuels or other coproducts associated with such conversion. These specifically include fixed or mobile facilities to generate electricity or methane from the anaerobic digestion of organic matter, and fixed or mobile facilities for extracting oils from canola, rape, mustard, and other oilseeds. "Project" may also include the construction of facilities associated with such conversion for the distribution and storage of such feedstocks and fuels.
     (((7))) (9) "Refueling project" means the construction of new biofuel and alternative fuel refueling facilities, as well as upgrades and expansion of existing refueling facilities, that will enable these facilities to offer alternative fuels to the motoring public.
     (10) "Research and development project" means research and development, by an institution of higher education as defined in subsection (((1))) (2) of this section, relating to:
     (a) Bioenergy sources including but not limited to biomass and associated gases, landfill gas, and wastewater treatment gas; or
     (b) The development of markets for bioenergy coproducts.

NEW SECTION.  Sec. 603   A new section is added to chapter 15.110 RCW to read as follows:
     (1) If the total requested dollar amount of funds for refueling projects under RCW 15.110.020(4) exceeds the amount available in the green energy incentive subaccount created in section 604 of this act, the applications must be prioritized based upon the following criteria:
     (a) The extent to which the project will help reduce dependence on petroleum fuels and imported energy either directly or indirectly;
     (b) The extent to which the project will reduce air and water pollution either directly or indirectly;
     (c) The extent to which the project will establish a viable biofuel or alternative fuel production capacity in Washington;
     (d) The extent to which the project will make biofuels and alternative fuels more accessible to the motoring public;
     (e) The benefits to Washington's agricultural or alternative fuel producers; and
     (f) The number and quality of jobs and economic benefits created by the project.
     (2) This section does not apply to assistance awarded for projects under RCW 15.110.020(3).

NEW SECTION.  Sec. 604   A new section is added to chapter 15.110 RCW to read as follows:
     The green energy incentive subaccount is created as a subaccount of the energy freedom account. All receipts from appropriations made to the green energy incentive subaccount shall be deposited into the subaccount and shall be appropriated only for:
     (1) Refueling projects awarded under this chapter;
     (2) Pilot projects for plug-in hybrids;
     (3) Programs to reduce truck stop idling;
     (4) Demonstration projects developed with a science museum for the purpose of bringing science education to children by way of a mobile learning vehicle; and
     (5) Demonstration projects developed with the University of Washington that result in the design and building of a hydrogen vehicle fueling station.

NEW SECTION.  Sec. 605   Moneys deposited in the green energy incentive subaccount created in section 604 of this act shall not exceed one million dollars.

Sec. 606   RCW 15.110.060 and 2006 c 171 s 7 are each amended to read as follows:
     The director shall report to the legislature and governor on the status of the energy freedom program created under this chapter, on or before December 1, 2006, and annually thereafter. This report must include information on the projects that have been funded, the status of these projects, and their environmental, energy savings, and job creation benefits, as well as an assessment of the availability of biofuels and alternative fuels in the state.

NEW SECTION.  Sec. 607   Sections 202, 204, 205, 601 through 604, and 606 of this act expire June 30, 2016.

NEW SECTION.  Sec. 701   A new section is added to chapter 43.31 RCW to read as follows:
     (1) The clean energy incentive account is created in the state treasury. All receipts from appropriations made to the account 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 the purposes of this act.
     (2) Any state agency receiving funding from the clean energy incentive account is prohibited from retaining greater than three percent of any funding provided from the clean energy incentive account for administrative overhead or other deductions not directly associated with conducting the research, projects, or other end products that the funding is designed to produce.
     (3) Any university, institute, or other entity that is not a state agency receiving funding from the clean energy incentive account is prohibited from retaining greater than three percent of any funding provided from the clean energy incentive account for administrative overhead or other deductions not directly associated with conducting the research, projects, or other end products that the funding is designed to produce.

NEW SECTION.  Sec. 702   A new section is added to chapter 43.135 RCW to read as follows:
     RCW 43.135.035(4) does not apply to the transfers established in this act.

NEW SECTION.  Sec. 703   A new section is added to chapter 43.19 RCW to read as follows:
     The department of general administration, in conjunction with private sector suppliers, shall develop a pilot program for providing E85 fueling capacity at appropriate intervals and locations along at least interstate routes 5, 82, and 90 throughout the state for the use of public and private vehicles.

NEW SECTION.  Sec. 704   A new section is added to chapter 28B.30 RCW to read as follows:
     Washington State University is directed to analyze and recommend models for possible implementation by the legislature or the executive office for at least the following potential biofuels incentive programs:
     (1) Market incentives to encourage instate production of brassica-based biodiesel, and cellulosic ethanol, including such market methods as direct grants, production tax credits, and the issuance by the state of advance guaranteed purchase contracts;
     (2) Possible preferred research programs, grants, or other forms of assistance for accelerating the development of instate production of cellulosic ethanol and in-state biodiesel crops and their coproducts;
     (3) Coordinate with the Western Washington University alternative automobile program for opportunities to support new Washington state technology for conversion of fossil fuel fleets to biofuel, hybrid, or alternative fuel propulsion;
     (4) Coordinate with the University of Washington's college of forest management and the Olympic natural resources center for the identification of barriers to using the state's forest resources for fuel production, including the economic and transportation barriers of physically bringing forest biomass to the market;
     (5) Developing, coordinating, and overseeing the implementation of a plan, or series of plans, for the development of a complete supply chain that allows for the production, transport, distribution, and delivery to public sector end-users of biofuels produced exclusively from recycled products or Washington feedstocks;
     (6) Coordinate with the department of agriculture for the identification of other barriers for future biofuels development; and
     (7) Strategies for furthering the penetration of the Washington state fossil fuel market with Washington produced biofuels, particularly among public entities.

NEW SECTION.  Sec. 705   A new section is added to chapter 43.31 RCW to read as follows:
     The following goals and criteria should be considered in evaluating potential biofuel incentives to be offered by the state in conjunction with this act: To assist Washington farmers and businesses in the development of economically viable, sustained instate biofuel and biofuel feedstock production; to leverage and encourage private investment in biofuel and biofuel feedstock production; and to assist in the development of biofuel feedstocks and production techniques that deliver the greatest net reductions in petroleum dependence and carbon emissions.

NEW SECTION.  Sec. 706   A new section is added to chapter 82.16 RCW to read as follows:
     (1) Subject to the limitations in this section, an eligible light and power business may claim a credit against the tax imposed under this chapter.
     (2) The amount of credit is equal to two percent annually, for a period of at least seven but not more than thirty years after the investment commences, of the cost of investments in distributed generation, and in measures that improve, as measured in kilowatt-hour savings, the overall efficiency of transmission, distribution, and end-use consumption of electricity through energy efficiency technologies, including any device, instrument, machine, appliance, or process related to the transmission, distribution, and consumption of electricity to increase energy efficiency, including but not limited to smart grid technology, smart meters, and demand response technologies.
     (3) Measures or projects encouraged under this section are those for which construction or installation is begun after July 1, 2007, and before January 1, 2017, and which, at the time they are placed in the rate base, are reasonably expected to save, produce, or generate energy at a total incremental system cost per unit of energy delivered to end use that is less than or equal to the incremental system cost per unit of energy delivered to end use from new baseload or peaking electric generation and that the eligible light and power business could acquire to meet energy demand in the same time period.
     (4) The amount of credit taken under this section may not exceed one million dollars in total for all light and power businesses in a calendar year. If the department receives applications for credit that exceed one million dollars prior to the end of the calendar year, the department shall apportion the credit on a method determined by the department.
     (5) For purposes of this section, "eligible light and power business" means a municipal utility formed under Title 35 RCW, a public utility district formed under Title 54 RCW, an irrigation district formed under chapter 87.03 RCW, a cooperative formed under chapter 23.86 RCW, a mutual corporation or association formed under chapter 24.06 RCW, or port district within which an industrial district has been established as authorized by Title 53 RCW, that is engaged in the business of distributing electricity to more than one retail electric customer in the state.

NEW SECTION.  Sec. 801   Part headings used in this act are not any part of the law.

NEW SECTION.  Sec. 802   The office of the superintendent of public instruction may adopt any rules necessary for the implementation of this act.

NEW SECTION.  Sec. 803   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.