HF 1026

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to energy; expanding definition of farm-grown
closed-loop biomass; amending conditions for Public
Utilities Commission approval of a pending request for
a biomass project; amending Minnesota Statutes 2004,
section 216B.2424, subdivisions 1, 2, 5a, 6, 8.

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

Section 1.

Minnesota Statutes 2004, section 216B.2424,
subdivision 1, is amended to read:

Subdivision 1.

Farm-grown closed-loop biomass.

(a) For
the purposes of this section, "farm-grown closed-loop biomass"
means biomass, as defined in section 216C.051, subdivision 7,
that:

(1) is intentionally cultivated, harvested, and prepared
for use, in whole or in part, as a fuel for the generation of
electricity;

(2) when combusted, releases an amount of carbon dioxide
that is less than or approximately equal to the carbon dioxide
absorbed by the biomass fuel during its growing cycle; and

(3) is fired in a new or substantially retrofitted electric
generating facility that is:

(i) located within 400 miles of the site of the biomass
production; and

(ii) designed to use biomass to meet at least 75 percent of
its fuel requirements.

(b) The legislature finds that the negative environmental
impacts within 400 miles of the facility resulting from
transporting and combusting the biomass are offset in that
region by the environmental benefits to air, soil, and water of
the biomass production.

(c) Among the biomass fuel sources that meet the
requirements of paragraph (a), clause (2) are poplar, aspen,
willow, switch grass, sorghum, alfalfa, and cultivated prairie
grass new text begin ; brush, trees, and other biomass harvested from within
designated utility, railroad, and road rights-of-way; upland and
lowland brush harvested from lands managed in accord with
Minnesota Department of Natural Resources "Best Management
Practices for Managing Brushlands"; slash and timber harvest
residuals harvested in compliance with the Minnesota Forest
Resources Council "Site Level Timber Harvesting and Forest
Management Guidelines"; and trees and brush harvested for fire
prevention, disease, or insect control or timber stand
improvement purposes in compliance with the Minnesota Forest
Resources Council "Site Level Timber Harvesting and Forest
Management Guidelines." The Minnesota Forest Resources Council
must periodically review its "Site Level Timber Harvesting and
Forest Management Guidelines" to ensure that it incorporates the
most recent available scientific information regarding biomass
removal from forest lands, including, but not limited to,
information pertaining to wildlife, soil nutrients, and forest
productivity new text end .

Sec. 2.

Minnesota Statutes 2004, section 216B.2424,
subdivision 2, is amended to read:

Subd. 2.

Interim exemption.

(a) A biomass project
proposing to use, as its primary fuel over the life of the
project, short-rotation woody crops, may use as an interim fuel
agricultural waste and other biomass which is not farm-grown
closed-loop biomass for up to six years after the project's
electric generating facility becomes operational; provided, the
project developer demonstrates the project will use the
designated short-rotation woody crops as its primary fuel after
the interim period and provided the location of the interim fuel
production meets the requirements of subdivision 1, paragraph
(a), clause (3).

(b) A biomass project proposing to use, as its primary fuel
over the life of the project, short-rotation woody crops, may
use as an interim fuel agricultural waste and other biomass
which is not farm-grown closed-loop biomass for up to three
years after the project's electric generating facility becomes
operational; provided, the project developer demonstrates the
project will use the designated short-rotation woody crops as
its primary fuel after the interim period.

(c) A biomass project that uses an interim fuel under the
terms of paragraph (b) may, in addition, use an interim fuel
under the terms of paragraph (a) for six years less the number
of years that an interim fuel was used under paragraph (b).

(d) A project developer proposing to use an exempt interim
fuel under paragraphs (a) and (b) must demonstrate to the public
utility that the project will have an adequate supply of
short-rotation woody crops which meet the requirements of
subdivision 1 to fuel the project after the interim period.

new text begin (e) If a biomass project using an interim fuel under this
subdivision is or becomes owned or controlled, directly or
indirectly, by two municipal utilities as described in
subdivision 5a, paragraph (b), the project is deemed to comply
with the requirement under this subdivision to use short
rotation woody crops as its primary fuel if short rotation woody
crops comprise no less than 25 percent of the fuel used over the
life of the project. For purposes of this subdivision, "life of
the project" means 20 years from the date the project becomes
operational or the term of the applicable power purchase
agreement between the project owner and the public utility,
whichever is longer.
new text end

Sec. 3.

Minnesota Statutes 2004, section 216B.2424,
subdivision 5a, is amended to read:

Subd. 5a.

Reduction of biomass mandate.

(a)
Notwithstanding subdivision 5, the biomass electric energy
mandate deleted text begin shall deleted text end new text begin must new text end be reduced from 125 megawatts to 110
megawatts.

(b) The Public Utilities Commission shall approve a request
pending before the deleted text begin Public Utilities deleted text end commission as of May 15,
2003, for deleted text begin an amendment deleted text end new text begin amendments to new text end and assignment of a
deleted text begin contract for power from deleted text end new text begin power purchase agreement with the owner
of new text end a facility that uses short-rotation, woody crops as its
primary fuel previously approved to satisfy a portion of the
biomass mandate if the deleted text begin developer deleted text end new text begin owner new text end of the project agrees to
reduce the size of its project from 50 megawatts to 35
megawatts, while maintaining deleted text begin a deleted text end new text begin an average new text end price for energy deleted text begin at or
below the current contract price. deleted text end new text begin in nominal dollars measured
over the term of the power purchase agreement at or below $104
per megawatt-hour, exclusive of any price adjustments that may
take effect subsequent to commission approval of the power
purchase agreement, as amended. The commission shall also
approve, as necessary, any subsequent assignment or sale of the
power purchase agreement or ownership of the project to an
entity owned or controlled, directly or indirectly, by two
municipal utilities located north of Constitutional Route No. 8,
as described in section 161.114, which currently own electric
and steam generation facilities using coal as a fuel and which
propose to retrofit their existing municipal electrical
generating facilities to utilize biomass fuels in order to
perform the power purchase agreement.
new text end

new text begin (c) If the power purchase agreement described in paragraph
(b) is assigned to an entity that is, or becomes, owned or
controlled, directly or indirectly, by two municipal entities as
described in paragraph (b), and the power purchase agreement
meets the price requirements of paragraph (b), the commission
shall approve any amendments to the power purchase agreement
necessary to reflect the changes in project location and
ownership and any other amendments made necessary by those
changes. The commission shall also specifically find that:
new text end

new text begin (1) the power purchase agreement complies with and fully
satisfies the provisions of this section to the full extent of
its 35-megawatt capacity;
new text end

new text begin (2) all costs incurred by the public utility and all
amounts to be paid by the public utility to the project owner
under the terms of the power purchase agreement are fully
recoverable pursuant to section 216B.1645;
new text end

new text begin (3) subject to prudency review by the commission, the
public utility may recover from its Minnesota retail customers
the Minnesota jurisdictional portion of the amounts that may be
incurred and paid by the public utility during the full term of
the power purchase agreement; and
new text end

new text begin (4) if the purchase power agreement meets the requirements
of this subdivision, it is reasonable and in the public interest.
new text end

new text begin (d) The commission shall specifically approve recovery by
the public utility of any and all Minnesota jurisdictional costs
incurred by the public utility to improve, construct, install,
or upgrade transmission, distribution, or other electrical
facilities owned by the public utility or other persons in order
to permit interconnection of the retrofitted biomass-fueled
generating facilities or to obtain transmission service for the
energy provided by the facilities to the public utility pursuant
to section 216B.1645, and shall disapprove any provision in the
power purchase agreement that requires the developer or owner of
the project to pay the jurisdictional costs or that permit the
public utility to terminate the power purchase agreement as a
result of the existence of those costs or the public utility's
obligation to pay any or all of those costs.
new text end

Sec. 4.

Minnesota Statutes 2004, section 216B.2424,
subdivision 6, is amended to read:

Subd. 6.

Remaining megawatt compliance process.

(a) If
there remain megawatts of biomass power generating capacity to
fulfill the mandate in subdivision 5 after the commission has
taken final action on all contracts filed by September 1, 2000,
by a public utility, new text begin as amended and assigned, new text end this subdivision
governs final compliance with the biomass energy mandate in
subdivision 5 subject to the requirements of subdivisions 7 and
8.

(b) To the extent not inconsistent with this subdivision,
the provisions of subdivisions 2, 3, 4, and 5 apply to proposals
subject to this subdivision.

(c) A public utility must submit proposals to the
commission to complete the biomass mandate. The commission
shall require a public utility subject to this section to issue
a request for competitive proposals for projects for electric
generation utilizing biomass as defined in paragraph (f) of this
subdivision to provide the remaining megawatts of the mandate.
The commission shall set an expedited schedule for submission of
proposals to the utility, selection by the utility of proposals
or projects, negotiation of contracts, and review by the
commission of the contracts or projects submitted by the utility
to the commission.

(d) Notwithstanding the provisions of subdivisions 1 to 5
but subject to the provisions of subdivisions 7 and 8, a new or
existing facility proposed under this subdivision that is fueled
either by biomass or by co-firing biomass with nonbiomass may
satisfy the mandate in this section. Such a facility need not
use biomass that complies with the definition in subdivision 1
if it uses biomass as defined in paragraph (f) of this
subdivision. Generating capacity produced by co-firing of
biomass that is operational as of April 25, 2000, does not meet
the requirements of the mandate, except that additional
co-firing capacity added at an existing facility after April 25,
2000, may be used to satisfy this mandate. Only the number of
megawatts of capacity at a facility which co-fires biomass that
are directly attributable to the biomass and that become
operational after April 25, 2000, count toward meeting the
biomass mandate in this section.

(e) Nothing in this subdivision precludes a facility
proposed and approved under this subdivision from using fuel
sources that are not biomass in compliance with subdivision 3.

(f) Notwithstanding the provisions of subdivision 1, for
proposals subject to this subdivision, "biomass" includes
farm-grown closed-loop biomass; agricultural wastes, including
animal, poultry, and plant wastes; and waste wood, including
chipped wood, bark, brush, residue wood, and sawdust.

(g) Nothing in this subdivision affects in any way
contracts entered into as of April 25, 2000, to satisfy the
mandate in subdivision 5.

(h) Nothing in this subdivision requires a public utility
to retrofit its own power plants for the purpose of co-firing
biomass fuel, nor is a utility prohibited from retrofitting its
own power plants for the purpose of co-firing biomass fuel to
meet the requirements of this subdivision.

Sec. 5.

Minnesota Statutes 2004, section 216B.2424,
subdivision 8, is amended to read:

Subd. 8.

Agricultural biomass requirement.

Of the 125
megawatts mandated in subdivision 5, new text begin or 110 megawatts mandated
in subdivision 5a, new text end at least 75 megawatts of the generating
capacity must be generated by facilities that use agricultural
biomass as the principal fuel source. For purposes of this
subdivision, agricultural biomass includes only farm-grown
closed-loop biomass and agricultural waste, including animal,
poultry, and plant wastes. For purposes of this subdivision,
"principal fuel source" means a fuel source that satisfies at
least 75 percent of the fuel requirements of an electric power
generating facility. Nothing in this subdivision is intended to
expand the fuel source requirements of subdivision 5.