BILL REQ. #:  H-2288.1 

Read first time 02/24/09.   Referred to Committee on Capital Budget.

     AN ACT Relating to expanding the energy freedom program; amending RCW 43.325.001, 43.325.005, 43.325.020, 43.325.030, 43.325.040, and 43.325.070; and providing an expiration date.

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

Sec. 1   RCW 43.325.001 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) 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;
     (7) The use of energy and fuel derived from these sources and other alternative, renewable, and efficient energy sources and technologies 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 farm wastes, create new markets for farm products, and provide new industries and jobs for Washington citizens;
     (8) 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 into energy and 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; and
     (10) 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. 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 into fuels.

Sec. 2   RCW 43.325.005 and 2007 c 348 s 1 are each amended to read as follows:
     (1) The legislature finds that excessive dependence on fossil fuels and conventional energy sources and technologies jeopardizes Washington's economic security, environmental integrity, and public health. Accelerated development and use of clean fuels ((and)), clean vehicle technologies, and alternative, renewable, and efficient energy sources and technologies will reduce the drain on Washington's economy ((from importing fossil fuels)). As fossil fuel prices rise, clean fuels ((and)), vehicles, and alternative, renewable, and efficient energy sources and technologies can save consumers money while promoting the development of a major, sustainable industry that provides good jobs and a new source of rural prosperity. In addition, clean fuels and vehicles protect public health by reducing toxic air and climate change emissions.
     (2) The legislature also 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: 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. The legislature recognizes the need at this time to continue to gather and analyze information related to climate protection. This analysis will allow prudent steps to be taken to avoid, mitigate, or respond to climate impacts and protect our communities.
     (3) Finally, the legislature finds that to reduce fossil fuel dependence, build our clean energy economy, and reduce climate impacts, 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, using alternative, renewable, and efficient energy sources and technologies. 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, ethanol from plant waste, and liquid natural gas from landfill or wastewater treatment gases; reduced fossil fuel consumption by state fleets; development of promising new technologies for displacing petroleum with electricity, such as "plug-in hybrids"; the use of alternative, renewable, and efficient energy sources for homes and businesses; and impact analysis and emission accounting procedures that prepare Washington to respond and prosper as climate change impacts occur, and as policies and markets to reduce climate pollution are developed.

Sec. 3   RCW 43.325.020 and 2007 c 348 s 302 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 and other public entities 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 natural resources, the department of agriculture, the department of general administration, local clean air authorities, and the Washington state conservation commission.
     (3) Except as provided in subsections (4) and (5) of this section, the director, in cooperation with the department of agriculture, may approve an application only if the director finds:
     (a) The project will convert farm products, wastes, cellulose, or biogas directly into electricity or biofuel or other coproducts associated with such conversion or lead to the availability of alternative, renewable, and efficient energy sources for homes and businesses;
     (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, and alternative, renewable, and efficient energy 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) For biofuel projects, the project will use 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 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 43.325.010 and the findings delivered to the director.
     (4) When reviewing an application for a refueling project, the coordinator may award a grant or a loan to an applicant if the director finds:
     (a) The project will offer 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 43.325.010;
     (d) The project will contribute towards an efficient and adequately spaced alternative fuel refueling network along the green highways designated in RCW 47.17.020, 47.17.135, and 47.17.140; and
     (e) The project will result in increased access to alternative fueling infrastructure for the motoring public along the green highways designated in RCW 47.17.020, 47.17.135, and 47.17.140.
     (5) When reviewing an application for an alternative, renewable, and efficient energy project, the coordinator may award a grant or a loan to an applicant if the director finds:
     (a) The project will offer alternative energy to the public;
     (b) The project does not require continued state support;
     (c) The project will result in increased access to alternative, renewable, and efficient energy infrastructure for the public; and
     (d) The federal government has provided funds with a limited time frame for use for energy independence and security, energy efficiency, renewable energy, and conservation.
     (6)(a) The director may approve a project application for assistance under subsections (3) and (4) of this section up to five million dollars. In no circumstances shall this assistance constitute more than fifty percent of the total project cost.
     (b) The director may approve a refueling project application for a grant or a loan under subsection (4) of this section up to fifty thousand dollars. In no circumstances shall a grant or a loan award constitute more than fifty percent of the total project cost.
     (((6))) (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 ((or)); biofuel ((industry)); or alternative, renewable, and efficient energy industries. 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.
     (((7))) (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.

Sec. 4   RCW 43.325.030 and 2007 c 348 s 205 are each amended to read as follows:
     The director of the department shall appoint a coordinator that is responsible for:
     (1) Managing, directing, inventorying, and coordinating state efforts to promote, develop, and encourage ((a)) biofuel((s)) and alternative, renewable, and efficient energy markets in Washington;
     (2) Developing, coordinating, and overseeing the implementation of a plan, or series of plans, for the production, transport, distribution, and delivery of biofuels produced predominantly from recycled products or Washington feedstocks;
     (3) Working with the departments of transportation and general administration, and other applicable state and local governmental entities and the private sector, to ensure the development of biofuel fueling stations for use by state and local governmental motor vehicle fleets, and to provide greater availability of public biofuel fueling stations for use by state and local governmental motor vehicle fleets;
     (4) Coordinating 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;
     (5) Coordinating 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;
     (6) Coordinating with the department of agriculture and Washington State University for the identification of other barriers for future biofuels development and development of strategies for furthering the penetration of the Washington state fossil fuel market with Washington produced biofuels, particularly among public entities.

Sec. 5   RCW 43.325.040 and 2007 c 348 s 305 are each amended to read as follows:
     (1) The energy freedom account is created in the state treasury. All receipts from appropriations made to the account ((and)), any loan payments of principal and interest derived from loans made under this chapter, and moneys provided by the federal government for energy independence and security, energy efficiency, renewable energy, and conservation 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 assistance for projects consistent with this chapter or otherwise authorized by the legislature.
     (2) The green energy incentive account is created in the state treasury as a subaccount of the energy freedom account. All receipts from appropriations made to the green energy incentive account shall be deposited into the account, and may be spent only after appropriation. Expenditures from the account may be used only for:
     (a) Refueling projects awarded under this chapter;
     (b) Pilot projects for plug-in hybrids, including grants provided for the electrification program set forth in RCW 43.325.110; and
     (c) Demonstration projects developed with state universities as defined in RCW 28B.10.016 and local governments that result in the design and building of a hydrogen vehicle fueling station.
     (3) Any state agency receiving funding from the energy freedom account is prohibited from retaining greater than three percent of any funding provided from the energy freedom 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 unless this provision is waived in writing by the director.
     (4) Any university, institute, or other entity that is not a state agency receiving funding from the energy freedom account is prohibited from retaining greater than fifteen percent of any funding provided from the energy freedom 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.
     (5) Subsections (2) through (4) of this section do not apply to assistance awarded for projects under RCW 43.325.020(3).

Sec. 6   RCW 43.325.070 and 2007 c 348 s 303 are each amended to read as follows:
     (1) If the total requested dollar amount of assistance awarded for projects under RCW 43.325.020(3) exceeds the amount available in the energy freedom account created in RCW 43.325.040, 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, and alternative, renewable, and efficient 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 bioenergy ((or)), biofuel, or alternative, renewable, or efficient energy production capacity in Washington;
     (d) The benefits to Washington's agricultural producers;
     (e) The benefits to the health of Washington's forests;
     (f) The beneficial uses of biogas; ((and))
     (g) The benefits to Washington's alternative, renewable, and efficient energy industry; and
     (h) The number and quality of jobs and economic benefits created by the project.
     (2) This section does not apply to grants or loans awarded for refueling projects under RCW 43.325.020(4).

NEW SECTION.  Sec. 7   Sections 1, 3, 5, and 6 of this act expire June 30, 2016.