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AN ACT

RELATING TO TAXATION; ENCOURAGING THE DEVELOPMENT OF

ELECTRICAL GENERATION BY ADVANCED COAL ELECTRIC GENERATING OR

GASIFICATION FACILITIES, RECYCLED ENERGY FACILITIES,

RENEWABLE ENERGY STORAGE FACILITIES OR SOLAR THERMAL ELECTRIC

GENERATING FACILITIES; ENACTING A TAX CREDIT AGAINST THE

GROSS RECEIPTS TAX, COMPENSATING TAX AND WITHHOLDING TAX

LIABILITY OF A QUALIFIED TAXPAYER; PROVIDING FOR COST

RECOVERY FOR CLEAN ENERGY UTILITY PROJECTS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. ADVANCED ENERGY TAX CREDIT--GROSS RECEIPTS

TAX--COMPENSATING TAX--WITHHOLDING TAX.--

A. A taxpayer that holds an interest in a

qualified generating facility may claim a credit to be

computed pursuant to the provisions of this section. The

credit provided by this section may be referred to as the

"advanced energy tax credit".

B. As used in this section:

(1) "department" means the taxation and

revenue department;

(2) "eligible generation plant costs" means

expenditures for the development and construction of a

qualified generating facility, including permitting; site

characterization and assessment; engineering; design; carbon

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dioxide capture, treatment, compression, transportation and

sequestration; site and equipment acquisition; and fuel

supply development used directly and exclusively in a

qualified generating facility;

(3) "qualified generating facility" means a

new solar thermal electric generating facility that may

include an associated renewable energy storage facility or

recycled energy projects that begins construction no later

than December 31, 2015 or a new or re-powered coal-based

electric generating unit and an associated coal gasification

facility, if any, that begins construction no later than

December 31, 2015 that meets the following specifications:

(a) emits the lesser of: 1) what is

achievable with the best available control technology; or 2)

thirty-five thousandths pound per million British thermal

units of sulfur dioxide, twenty-five thousandths pound per

million British thermal units of oxides of nitrogen and one

hundredth pound per million British thermal units of total

particulates in the flue gas;

(b) removes the greater of: 1) what

is achievable with the best available control technology; or

2) ninety percent of the mercury from the input fuel;

controls carbon dioxide emissions so that by the later of

January 1, 2017 or eighteen months after the commercial

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operation date of the qualified generating facility, no more

than one thousand one hundred pounds per megawatt-hour of

carbon dioxide is emitted into the atmosphere;

(d) all infrastructure required for

sequestration is in place by the later of January 1, 2017, or

eighteen months after the commercial operation date of the

qualified generating facility;

(e) includes methods and procedures to

monitor the disposition of the carbon dioxide captured and

sequestered from the facility; and

(f) does not exceed seven hundred net

megawatts name-plate capacity;

(4) "recycled energy" means energy produced

by a generation unit with a name-plate capacity of not more

than fifteen megawatts that converts the otherwise lost

energy from the exhaust stacks or pipes to electricity

without combustion of additional fossil fuel; and

(5) "sequester" means to store, or

chemically convert, carbon dioxide in a manner that prevents

its release into the atmosphere and may include the use of

geologic formations and enhanced oil, coalbed methane or

natural gas recovery techniques.

C. Subject to the limit imposed in Subsection H

of this section, the advanced energy tax credit shall equal

no more than six percent of the eligible generation plant

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costs of a qualified generating facility.

D. A taxpayer may apply for the advanced energy

tax credit by submitting to the taxation and revenue

department a certificate issued by the department of

environment pursuant to Subsection I of this section,

documentation showing the taxpayer's interest in the

qualified generating facility identified in the certificate

and other information the taxation and revenue department

requests to determine the amount of tax credit due to the

taxpayer.

E. A taxpayer having applied for and been granted

approval for a credit by the department pursuant to this

section may claim an amount of available credit against the

taxpayer's gross receipts tax, compensating tax or

withholding tax due to the state.

F. A taxpayer that is liable for the payment of

gross receipts or compensating tax with respect to the

ownership, development, construction, maintenance or

operation of a new coal-based electric generating facility

that does not meet the criteria for a qualified generating

facility and that begins construction after January 1, 2007

shall not claim an advanced energy tax credit pursuant to

this section or a gross receipts tax credit, a compensating

tax credit or a withholding tax credit pursuant to any other

state law.

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G. If the amount of the tax credit claimed

exceeds the taxpayer's liability, the excess may be carried

forward for up to five years.

H. The aggregate amount of tax credit that may be

claimed with respect to each qualified generating facility

shall not exceed sixty million dollars ($60,000,000).

I. An entity that holds title to a qualified

generating facility may request a certificate of eligibility

from the department of environment to enable the requester to

apply for the advanced energy tax credit. The department of

environment:

(1) shall determine if the facility is a

qualified generating facility;

(2) shall require that the requester provide

the department of environment with the information necessary

to assess whether the requester's facility meets the criteria

to be a qualified generating facility;

(3) shall issue a certificate to the

requester stating that the facility is or is not a qualified

generating facility within one hundred eighty days after

receiving all information necessary to make a determination;

(4) shall:

(a) issue rules governing the procedure

for administering the provisions of this subsection and

Subsection J of this section;

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(b) issue a schedule of fees in which

no fee exceeds one hundred fifty thousand dollars ($150,000);

and

this paragraph in the state air quality permit fund created

pursuant to Section 74-2-15 NMSA 1978; and

(5) shall report annually to the appropriate

interim legislative committee information that will allow the

legislative committee to analyze the effectiveness of the

advanced energy tax credit, including the identity of

qualified generating facilities, the energy production means

used, the amount of emissions identified in this section

reduced and removed by those qualified generating facilities

and whether any requests for certificates of eligibility

could not be approved due to program limits.

J. If the department of environment issues a

certificate of eligibility to a taxpayer stating that the

taxpayer is a qualified generating facility and the taxpayer

does not sequester or control carbon dioxide emissions to the

extent required by this section by the later of January 1, 2017

or eighteen months after the commercial operation date of the

qualified generating facility, the taxpayer's certification as

a qualified generating facility shall be revoked by the

department of environment and the taxpayer shall refund to the

state tax credits granted pursuant to this section; provided

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that if the taxpayer demonstrates to the department of

environment that the taxpayer made every effort to sequester or

control carbon dioxide emissions to the extent feasible and the

facility's inability to meet the sequestration requirements of

a qualified generating facility was beyond the facility's

control, in which case the department of environment shall

determine, after a public hearing, the amount of the tax credit

that should be refunded. The department of environment, in its

determination, shall consider the environmental performance of

the facility and the extent to which the inability to meet the

sequestration requirements of a qualified generating facility

was in the control of the taxpayer. The refund as determined

by the department of environment shall be paid within one

hundred eighty days following a final order by the department

of environment.

K. Expenditures for which a taxpayer claims a

credit pursuant to this section are ineligible for credits

pursuant to the provisions of the Investment Credit Act or any

other credit against compensating tax, gross receipts tax or

withholding tax.

L. A taxpayer shall apply for approval for a credit

within one year following the end of the calendar year in which

the eligible generation plant costs are incurred.

Section 2. A new section of Chapter 62, Article 6 NMSA

1978 is enacted to read:

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"CLEAN ENERGY INVESTMENTS--AUTHORIZATION--DEPARTMENT OF

ENVIRONMENT CERTIFICATION.--

A. The commission shall adopt rules to allow public

utilities a reasonable opportunity to recover costs incurred by

a public utility for the development and ongoing construction

of a clean energy project. Such costs must not exceed the

level authorized by the commission in a proceeding to establish

a reasonable level of expenditure that the public utility may

undertake to develop and construct a clean energy project. The

public utility shall recover approved costs reasonably incurred

up to the time it files a general rate case whether or not the

project is in service. This section does not relieve a public

utility of its duty to act reasonably and prudently as

circumstances indicate once development and construction of a

clean energy project begins.

B. A public utility that incurs costs to reduce

harmful air emissions at new or existing power plants may seek

recovery of those costs in a general rate case, regardless of

whether the technology or method used qualifies as a clean

energy project or advanced coal technology. If a public

utility seeks cost recovery for expenditures to reduce harmful

air emissions beyond levels required by law or rule, the

commission may find that such expenditures are reasonable.

C. The commission, upon petition or its own motion,

shall open a docket to consider appropriate performance-based

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financial or other incentives to encourage public utilities to

develop and construct clean energy projects.

D. As used in this section:

(1) "advanced coal technology" means new

coal-based generation, coal gasification or other technology

using coal as a fuel source that is certified by the department

of environment to meet the following specifications:

(a) emits the lesser of: 1) what is

achievable with the best available control technology; or 2)

thirty-five thousandths pound per million British thermal units

of sulfur dioxide, twenty-five thousandths pound per million

British thermal units of oxides of nitrogen and one hundredth

pound per million British thermal units of total particulates

in the flue gas;

(b) removes the greater of: 1) what is

achievable with the best available control technology; or 2)

ninety percent or more of the mercury from the input fuel;

carbon dioxide emissions such that by the later of January 1,

2017, or eighteen months after the commercial operation date,

no more than one thousand one hundred pounds per megawatt-hour

of carbon dioxide is emitted into the atmosphere;

(d) all infrastructure required for

sequestration is in place by the later of January 1, 2017, or

eighteen months after the commercial operation date of the

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qualified generating facility;

(e) includes methods and procedures to

monitor the disposition of the carbon dioxide captured and

sequestered from the facility; and

(f) does not exceed seven hundred net

megawatts nameplate capacity;

(2) "clean energy project" means the

construction or modification of a new or existing electric

generation facility in a manner that employs a technology that

has additional financial risk because it is not commercially

established or because it employs an established technology

that is not commercially proven under the altitude, geographic

or resource availability conditions under which it is proposed

to operate and may include associated renewable energy storage

facilities, recycled energy and, for the limited purposes of

this section, advanced coal technology, or other technology as

deemed appropriate by the commission; a "clean energy project"

shall achieve emission levels no greater than those specified

for advanced coal technology and shall not include nuclear

power;

(3) "development" means the study, plan,

design, site, permit, engineering, assessment and determination

of the economic and operational feasibility at one or more

locations and may include small-scale demonstration projects,

if approved by the commission, as a reasonable expenditure;

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(4) "recycled energy" means energy produced

by a generation unit with a name-plate capacity of not more

than fifteen megawatts that converts the otherwise lost energy

from exhaust stacks or pipes to electricity without combustion

of additional fossil fuel; and

(5) "sequester" means to store, or chemically

convert, carbon dioxide in a manner that prevents its release

into the atmosphere and may include the use of geologic

formations and enhanced oil, coalbed methane or natural gas

recovery techniques.

E. The department of environment may issue rules

governing the procedure for administering the certification

provisions of this section."

Section 3. EFFECTIVE DATE.--The effective date of the

provisions of this act is July 1, 2007.