SF 3013

2nd Engrossment - 91st Legislature (2019 - 2020) Posted on 05/13/2020 10:14am

A bill for an act
relating to energy; establishing the Natural Gas Innovation Act; encouraging natural
gas utilities to develop alternative resources; requiring a renewable gaseous fuel
inventory; proposing coding for new law in Minnesota Statutes, chapter 216B.

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

Section 1. new text begin TITLE.
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new text begin This bill may be referred to as the "Natural Gas Innovation Act."
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Sec. 2.

new text begin [216B.2427] NATURAL GAS UTILITY ALTERNATIVE RESOURCE
PLANS.
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new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the terms defined in this
subdivision have the meanings given.
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new text begin (b) "Alternative resource" means a utility service that could be used to meet energy
demands and achieve the goals under this section, through the use of nonfossil fuel resources
or innovative technologies. Alternative resource includes but is not limited to biogas,
power-to-hydrogen, renewable natural gas, nonpipeline solutions, and avoided energy usage
achieved through energy efficiency that is not included in the utility's approved conservation
improvement program. Alternative resource does not include renewable attributes or credits
purchased separately from the associated fuel or product.
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new text begin (c) "Biogas" means gas created by the anaerobic digestion of biomass, gasification of
biomass, or other effective conversion processes.
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new text begin (d) "Natural gas utility" means a public utility as defined in section 216B.02, subdivision
4, that provides natural gas sales or transportation services to customers in Minnesota.
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new text begin (e) "Power-to-hydrogen" means the use of electricity generated by an eligible energy
technology as defined in section 216B.1691, subdivision 1, paragraph (a), or 216B.2422,
subdivision 1, to create hydrogen for injection into a natural gas utility or interstate pipeline
system.
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new text begin (f) "Renewable natural gas" means biogas that has been processed to be interchangeable
with conventional natural gas and has lower lifecycle greenhouse gas intensity than
conventional fossil natural gas.
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new text begin (g) "Renewable gaseous fuel" means renewable natural gas or hydrogen produced via
power-to-hydrogen that has lower lifecycle greenhouse gas intensity than conventional
fossil natural gas.
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new text begin (h) "Total incremental cost" means the sum of revenue requirements allocated to regulated
services of:
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new text begin (1) capital investments in infrastructure for the production, processing, pipeline
interconnection, storage, and distribution of renewable natural gas or alternative resources
included in a utility alternative resource plan approved pursuant to subdivision 3, including
the cost of capital established by the commission in the natural gas utility's most recent
general rate case;
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new text begin (2) net operating costs associated with capital investments in infrastructure for the
production, processing, pipeline interconnection, storage, and distribution of renewable
natural gas or alternative resources included in a utility alternative resource plan approved
pursuant to subdivision 3;
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new text begin (3) the incremental cost to procure renewable natural gas from third parties; and
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new text begin (4) the incremental costs to administer programs included in a utility alternative resource
plan approved pursuant to subdivision 3. Less the sum of:
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new text begin (i) any value received by the natural gas utility upon the resale of renewable gaseous
fuels or the sale of its by-products not used for service to Minnesota customers, including
any environmental credits included with the resale of the renewable gaseous fuels; and
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new text begin (ii) any cost savings achieved through avoidance of conventional natural gas purchases,
including but not limited to any avoided commodity purchases or avoided pipeline costs.
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new text begin Subd. 2. new text end

new text begin Renewable natural gas and alternative resource goals. new text end

new text begin A natural gas utility
may assist the state in meeting its renewable energy and greenhouse gas reduction goals
under sections 216C.05, subdivision 2, clause (3), and 216H.02, subdivision 1, by using
alternative resources to meet customer energy demands. The natural gas utility's total
incremental cost to achieve greenhouse gas reductions under an approved alternative resource
plan must not exceed five percent of the natural gas utility's total annual revenue requirement
excluding gas costs, as determined in the natural gas utility's most recent general rate case.
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new text begin Subd. 3. new text end

new text begin Alternative resource plans. new text end

new text begin (a) A natural gas utility may file an alternative
resource plan with the commission. An alternative resource plan must include the
recommended alternative resources the utility plans to implement to advance the state's
goals established in sections 216C.05 and 216H.02 within the requirements and limitations
set forth in this section. The utility's recommended plan must discuss:
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new text begin (1) any pilot program proposed by the natural gas utility related to the development or
provision of renewable natural gas or alternative resources, including an estimate of the
total incremental costs to implement the pilot program;
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new text begin (2) a third-party analysis of the lifecycle greenhouse gas intensity of any alternative
resources proposed to be included in the plan taking into account emissions associated with
the production, processing, transmission, and consumption of energy associated with the
resource;
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new text begin (3) a third-party analysis of the forecasted lifecycle greenhouse gas emissions reductions
achieved or the lifecycle greenhouse gas emissions avoided if the alternative resources are
implemented, including any:
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new text begin (i) avoided emissions attributable to utility operations;
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new text begin (ii) avoided emissions from the production, processing, and transmission of fuels prior
to receipt by the utility; and
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new text begin (iii) avoided emissions at the point of end use;
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new text begin (4) the process used to develop the lifecycle greenhouse gas accounting methodology
used consistently throughout the plan, including descriptions of how the utility engaged
interested stakeholders and ensured the plan reflects consistency with applicable current
scientific knowledge;
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new text begin (5) whether the recommended plan supports the development and use of alternative
agricultural products, waste reduction, reuse, or anaerobic digestion of organic waste, and
the recovery of energy from waste water, and, if so, the locations of such resources;
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new text begin (6) a description of third-party systems and processes the utility plans to use to:
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new text begin (i) track the proposed alternative resources included in the plan so that environmental
benefits are used only for this plan and not claimed for any other program; and
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new text begin (ii) verify the environmental attributes and greenhouse gas intensity of proposed
alternative resources included in the plan;
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new text begin (7) a description of known local job impacts and the steps the utility and its energy
suppliers and contractors are taking to maximize the availability of construction employment
opportunities for local workers; and
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new text begin (8) a report on the utility's progress toward implementing the approved proposals
contained in its previously filed alternative resource plan, if applicable.
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new text begin (b) The commission must approve, modify, or deny the plan within 12 months of filing.
A natural gas utility may propose an alternative resource plan no more frequently than every
24 months. In deciding whether to approve, modify, or deny a plan, the commission shall
consider whether the plan promotes the natural gas utility's ability to achieve the goals
established in sections 216C.05 and 216H.02 at a cost level consistent with this section.
The commission may not approve renewable natural gas as part of an alternative resource
plan unless it finds that the renewable natural gas included in the plan will have a lower
lifecycle greenhouse gas intensity than conventional fossil natural gas. The commission
may not approve any alternative resource for inclusion in an alternative resource plan unless
it finds that reasonable systems will be used to track and verify the environmental attributes
of the alternative resource, taking into account any third-party tracking or verification
systems available. As part of an alternative resource plan, the commission may not approve
the provision of renewable natural gas to, or the use of carbon capture technologies in,
residential homes or multifamily residential buildings.
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new text begin (c) For natural gas utilities serving more than 800,000 customers, the first alternative
resource plan submitted to the commission must include a pilot program that will provide
alternative resource options to industrial customers and a pilot program to facilitate deep
energy retrofits and installation of cold climate electric air-source heat pumps with natural
gas backups in residential homes. For purposes of this subdivision, "deep energy retrofit"
means the installation of any measure or combination of measures, including air sealing
and addressing thermal bridges, that, under normal weather and operating conditions, can
reasonably be expected to reduce the building's calculated design load to ten or fewer British
Thermal Units per hour per square foot of conditioned floor area. "Deep energy retrofit"
does not include the installation of photovoltaic electric generation equipment, but may
include the installation of a qualifying solar thermal project, as defined in section 216B.2411.
For natural gas utilities serving more than 800,000 customers, the first alternative resource
plan submitted to the commission may not propose, and the commission may not approve,
costs exceeding two and a half percent of the natural gas utility's total annual revenue
requirement excluding gas costs, as determined in the natural gas utility's most recent general
rate case.
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new text begin (d) Commission approval of a plan constitutes prima facie evidence of the reasonableness
of the investments and costs incurred pursuant to the plan. Prudently incurred costs incurred
pursuant to an approved plan and costs incurred by obtaining the third-party analysis required
in paragraph (a), clauses (2) and (3), are recoverable either:
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new text begin (1) under section 216B.16, subdivision 7, clause (2), via the utility's purchase gas
adjustment; or
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new text begin (2) in the natural gas utility's next general rate case. The utility bears the burden to prove
the actual incremental costs incurred to implement the approved alternative resource plan
were reasonable. A transportation customer of a natural gas utility shall not bear any costs
incurred to implement an approved alternative resource plan, except to the extent the
transportation customer elects to participate in a pilot program.
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new text begin (e) Without filing an alternative resource plan, a natural gas utility may propose, and
the commission may approve cost recovery for:
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new text begin (1) alternative resources acquired to satisfy a commission-approved green tariff program
that allows customers to choose to meet a portion of the customers' energy needs through
alternative resources; or
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new text begin (2) utility expenditures for alternative resources within five percent of the average of
Ventura and Demarc index price for conventional natural gas at the time of the transaction.
Any approved green-tariff program must include provisions to ensure reasonable systems
are used to track and verify the environmental attributes of alternative resources included
in the program, taking into account any third-party tracking or verification systems available.
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new text begin (f) A natural gas utility with an approved plan must provide annual status reports to the
commission regarding the work completed pursuant to the plan, including the costs incurred
under the plan; the resulting progress toward meeting the state's goals in sections 216C.05
and 216H.02; a description of the processes used to track, verify, and retire the alternative
resources and associated environmental attributes; and an update on the lifecycle greenhouse
gas accounting methodology consistent with current science. As part of the annual status
report the natural gas utility may propose modifications to pilot programs in the plan. In
evaluating a utility's annual report the commission may:
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new text begin (1) approve the continuation of pilot programs, with or without modifications;
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new text begin (2) require the utility to file a new or modified plan to account for changed circumstances;
or
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new text begin (3) disapprove the continuation of pilot programs.
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new text begin (g) A utility may file an alternative resource plan at any time after this section becomes
effective.
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new text begin (h) For purposes of this section, whenever an analysis or estimate of lifecycle greenhouse
gas emissions reductions, lifecycle greenhouse gas avoidance, or lifecycle greenhouse gas
intensity is required, the analysis or estimate may rely on emissions factors, default values,
or engineering estimates from a publicly accessible source accepted by a federal or state
government agency, where direct measurement is not technically or economically feasible,
if such emissions factors, default values, or engineering estimates can be demonstrated to
produce a reasonable estimate of greenhouse gas emissions reductions, avoidance, or
intensity.
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Sec. 3. new text begin RENEWABLE GASEOUS FUEL INVENTORY.
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new text begin (a) By June 15, 2021, the Department of Commerce must develop an inventory of
renewable gaseous fuel resources as defined in Minnesota Statutes, section 216B.2427,
subdivision 1, paragraph (g), available to Minnesota. The inventory must include but is not
limited to:
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new text begin (1) a list of the potential renewable natural gas sources in Minnesota and the estimated
potential production quantities available at each source;
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new text begin (2) an estimate of the energy content of listed renewable natural gas sources;
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new text begin (3) a description of the technologies available to Minnesota for renewable gaseous fuel
production and an estimate of the potential energy production by technology, including:
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new text begin (i) an estimate of the renewable gaseous fuel production potential using
power-to-hydrogen;
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new text begin (ii) separate estimates for production from excess renewable electricity that would
otherwise be curtailed and for production from dedicated renewable generation facilities;
and
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new text begin (iii) an ideal site characterization that details the aspects of a power-to-hydrogen facility
that would contribute to the facility's technical and economic success;
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new text begin (4) a list of the existing biogas and renewable natural gas production sites in Minnesota
that includes:
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new text begin (i) the location of each site;
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new text begin (ii) an estimate of the lifecycle greenhouse gas emissions associated with the fuel
produced at each site including the production, processing, transmission, and consumption
of the biogas or renewable natural gas; and
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new text begin (iii) an assessment of the supply-chain infrastructure associated with the site;
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new text begin (5) an assessment of the market viability of Minnesota renewable natural gas production
taking into account renewable natural gas sales prices, the cost of infrastructure needed to
produce and transport renewable natural gas, the size of producers, and the availability of
renewable natural gas feedstocks in the state;
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new text begin (6) for the potential sources identified in clause (1), a discussion of the best use or uses
for each potential energy resource. The discussion shall take into account:
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new text begin (i) estimated lifecycle greenhouse gas emissions;
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new text begin (ii) cost, including all infrastructure costs associated with production and transportation
of the energy; and
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new text begin (iii) whether the energy source can be used to address local natural gas or electricity
constraints; and
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new text begin (7) a discussion of whether development of a system of tradable thermal credits would
be beneficial for the development of renewable thermal resources in the state. This discussion
should consider system designs that could best facilitate development of renewable thermal
resources while ensuring adequate tracking and verification of environmental attributes
associated with those resources.
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new text begin (b) The department may assess natural gas utilities serving more than 800,000 customers
within the state during the last calendar year for the costs necessary to carry out the purposes
of this section. Those assessments are not subject to the cap on assessments provided in
Minnesota Statutes, section 216B.62, or any other law.
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Sec. 4. new text begin EFFECTIVE DATE.
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new text begin Sections 1 to 3 are effective the day following final enactment.
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