1.1                          A bill for an act
  1.2             relating to energy; expanding definition of farm-grown 
  1.3             closed-loop biomass; amending conditions for Public 
  1.4             Utilities Commission approval of a pending request for 
  1.5             a biomass project; amending Minnesota Statutes 2004, 
  1.6             section 216B.2424, subdivisions 1, 2, 5a, 6, 8, by 
  1.7             adding a subdivision. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 2004, section 216B.2424, 
  1.10  subdivision 1, is amended to read: 
  1.11     Subdivision 1.  [FARM-GROWN CLOSED-LOOP BIOMASS.] (a) For 
  1.12  the purposes of this section, "farm-grown closed-loop biomass" 
  1.13  means biomass, as defined in section 216C.051, subdivision 7, 
  1.14  that: 
  1.15     (1) is intentionally cultivated, harvested, and prepared 
  1.16  for use, in whole or in part, as a fuel for the generation of 
  1.17  electricity; 
  1.18     (2) when combusted, releases an amount of carbon dioxide 
  1.19  that is less than or approximately equal to the carbon dioxide 
  1.20  absorbed by the biomass fuel during its growing cycle; and 
  1.21     (3) is fired in a new or substantially retrofitted electric 
  1.22  generating facility that is: 
  1.23     (i) located within 400 miles of the site of the biomass 
  1.24  production; and 
  1.25     (ii) designed to use biomass to meet at least 75 percent of 
  1.26  its fuel requirements. 
  2.1      (b) The legislature finds that the negative environmental 
  2.2   impacts within 400 miles of the facility resulting from 
  2.3   transporting and combusting the biomass are offset in that 
  2.4   region by the environmental benefits to air, soil, and water of 
  2.5   the biomass production. 
  2.6      (c) Among the biomass fuel sources that meet the 
  2.7   requirements of paragraph (a), clause (2) are poplar, aspen, 
  2.8   willow, switch grass, sorghum, alfalfa, ~~and~~ cultivated prairie 
  2.9   grass and sustainably managed biomass.  
  2.10     (d) For the purpose of this section, "sustainably managed 
  2.11  woody biomass" means:  
  2.12     (1) brush, trees, and other biomass harvested from within 
  2.13  designated utility, railroad, and road rights-of-way; 
  2.14     (2) upland and lowland brush harvested from lands 
  2.15  incorporated into brushland habitat management activities of the 
  2.16  Minnesota Department of Natural Resources; 
  2.17     (3) upland and lowland brush harvested from lands managed 
  2.18  in accordance with Minnesota Department of Natural Resources 
  2.19  "Best Management Practices for Managing Brushlands"; and 
  2.20     (4) logging slash or waste wood that is created by harvest, 
  2.21  precommercial timber stand improvement to meet silvicultural 
  2.22  objectives, or by fire, disease, or insect control treatments, 
  2.23  and that is managed in compliance with the Minnesota Forest 
  2.24  Resources Council's "Sustaining Minnesota Forest Resources: 
  2.25  Voluntary Site-Level Forest Management Guidelines for 
  2.26  Landowners, Loggers and Resource Managers" as modified by the 
  2.27  requirement of this subdivision. 
  2.28     Sec. 2.  Minnesota Statutes 2004, section 216B.2424, is 
  2.29  amended by adding a subdivision to read:  
  2.30     Subd. 1a.  [MUNICIPAL WASTE-TO-ENERGY PROJECT.] (a) This 
  2.31  subdivision applies only to a biomass project owned or 
  2.32  controlled, directly or indirectly, by two municipal utilities 
  2.33  as described in subdivision 5a, paragraph (b). 
  2.34     (b) Woody biomass from state-owned land must be harvested 
  2.35  in compliance with an adopted management plan and a program of 
  2.36  ecologically based third-party certification.  
  3.1      (c) The project must prepare a fuel plan on an annual basis 
  3.2   after commercial operation of the project as described in the 
  3.3   power contract between the project and the public utility, and 
  3.4   must also prepare annually certificates reflecting the types of 
  3.5   fuel used in the preceding year by the project, as described in 
  3.6   the power contract.  The fuel plans and certificates shall also 
  3.7   be filed with the Minnesota Department of Natural Resources and 
  3.8   the Minnesota Department of Commerce within 30 days after being 
  3.9   provided to the public utility, as provided by the power 
  3.10  contract.  Any person who believes the fuel plans, as amended, 
  3.11  and certificates show that the project does not or will not 
  3.12  comply with the fuel requirements of this subdivision may file a 
  3.13  petition with the commission seeking such a determination.  
  3.14     (d) The wood procurement process must utilize third-party 
  3.15  audit certification systems to verify that applicable best 
  3.16  management practices were utilized in the procurement of the 
  3.17  sustainably managed biomass.  If there is a failure to so verify 
  3.18  in any two consecutive years during the original contract term, 
  3.19  the short rotation woody crop requirements of subdivision 2 must 
  3.20  be increased to 50 percent for the remaining contract term 
  3.21  period; however, if in two consecutive subsequent years after 
  3.22  the increase has been implemented, it is verified that the 
  3.23  conditions in this subdivision have been met, then for the 
  3.24  remaining original contract term the closed-loop biomass mandate 
  3.25  reverts to 25 percent.  If there is a subsequent failure to 
  3.26  verify in a year after the first failure and implementation of 
  3.27  the 50 percent requirement, then the closed-loop percentage 
  3.28  shall remain at 50 percent for each remaining year of the 
  3.29  contract term.  
  3.30     (e) In the closed-loop plantation, no transgenic plants may 
  3.31  be used.  
  3.32     (f) No wood may be harvested off of any lands identified by 
  3.33  the final or preliminary Minnesota County Biological Survey as 
  3.34  having statewide significance as native plant communities, large 
  3.35  populations or concentrations of rare species, or critical 
  3.36  animal habitat.  
  4.1      (g) A wood procurement plan must be prepared every five 
  4.2   years and public meetings must be held and written comments 
  4.3   taken on the plan and documentation must be provided on why or 
  4.4   why not the public inputs were used.  
  4.5      (h) Guidelines or best management practices for sustainably 
  4.6   managed woody biomass must be adopted by:  
  4.7      (1) the Minnesota Department of Natural Resources for 
  4.8   managing and maintaining brushland and open land habitat on 
  4.9   public and private lands, including, but not limited to, 
  4.10  provisions of sections 84.941, 84.942, and 97A.125; and 
  4.11     (2) the Minnesota Forest Resources Council for logging 
  4.12  slash, using the most recent available scientific information 
  4.13  regarding the removal of woody biomass from forest lands, to 
  4.14  sustain the management of forest resources as defined by section 
  4.15  89.001, subdivisions 8 and 9, with particular attention to soil 
  4.16  productivity, biological diversity as defined by section 
  4.17  89A.001, subdivision 3, and wildlife habitat. 
  4.18     These guidelines must be completed by July 1, 2007, and the 
  4.19  process of developing them must incorporate public notification 
  4.20  and comment. 
  4.21     Sec. 3.  Minnesota Statutes 2004, section 216B.2424, 
  4.22  subdivision 2, is amended to read: 
  4.23     Subd. 2.  [INTERIM EXEMPTION.] (a) A biomass project 
  4.24  proposing to use, as its primary fuel over the life of the 
  4.25  project, short-rotation woody crops, may use as an interim fuel 
  4.26  agricultural waste and other biomass which is not farm-grown 
  4.27  closed-loop biomass for up to six years after the project's 
  4.28  electric generating facility becomes operational; provided, the 
  4.29  project developer demonstrates the project will use the 
  4.30  designated short-rotation woody crops as its primary fuel after 
  4.31  the interim period and provided the location of the interim fuel 
  4.32  production meets the requirements of subdivision 1, paragraph 
  4.33  (a), clause (3). 
  4.34     (b) A biomass project proposing to use, as its primary fuel 
  4.35  over the life of the project, short-rotation woody crops, may 
  4.36  use as an interim fuel agricultural waste and other biomass 
  5.1   which is not farm-grown closed-loop biomass for up to three 
  5.2   years after the project's electric generating facility becomes 
  5.3   operational; provided, the project developer demonstrates the 
  5.4   project will use the designated short-rotation woody crops as 
  5.5   its primary fuel after the interim period. 
  5.6      (c) A biomass project that uses an interim fuel under the 
  5.7   terms of paragraph (b) may, in addition, use an interim fuel 
  5.8   under the terms of paragraph (a) for six years less the number 
  5.9   of years that an interim fuel was used under paragraph (b). 
  5.10     (d) A project developer proposing to use an exempt interim 
  5.11  fuel under paragraphs (a) and (b) must demonstrate to the public 
  5.12  utility that the project will have an adequate supply of 
  5.13  short-rotation woody crops which meet the requirements of 
  5.14  subdivision 1 to fuel the project after the interim period. 
  5.15     (e) If a biomass project using an interim fuel under this 
  5.16  subdivision is or becomes owned or controlled, directly or 
  5.17  indirectly, by two municipal utilities as described in 
  5.18  subdivision 5a, paragraph (b), the project is deemed to comply 
  5.19  with the requirement under this subdivision to use short 
  5.20  rotation woody crops as its primary fuel if short rotation woody 
  5.21  crops comprise no less than 25 percent of the fuel used over the 
  5.22  life of the project.  For purposes of this subdivision, "life of 
  5.23  the project" means 20 years from the date the project becomes 
  5.24  operational or the term of the applicable power purchase 
  5.25  agreement between the project owner and the public utility, 
  5.26  whichever is longer. 
  5.27     Sec. 4.  Minnesota Statutes 2004, section 216B.2424, 
  5.28  subdivision 5a, is amended to read: 
  5.29     Subd. 5a.  [REDUCTION OF BIOMASS MANDATE.] (a) 
  5.30  Notwithstanding subdivision 5, the biomass electric energy 
  5.31  mandate ~~shall~~ must be reduced from 125 megawatts to 110 
  5.32  megawatts.  
  5.33     (b) The Public Utilities Commission shall approve a request 
  5.34  pending before the ~~Public Utilities~~ commission as of May 15, 
  5.35  2003, for ~~an amendment~~ amendments to and assignment of a 
  5.36  ~~contract for power from~~ power purchase agreement with the owner 
  6.1   of a facility that uses short-rotation, woody crops as its 
  6.2   primary fuel previously approved to satisfy a portion of the 
  6.3   biomass mandate if the ~~developer~~ owner of the project agrees to 
  6.4   reduce the size of its project from 50 megawatts to 35 
  6.5   megawatts, while maintaining ~~a~~ an average price for energy ~~at or~~ 
  6.6   ~~below the current contract price.~~ in nominal dollars measured 
  6.7   over the term of the power purchase agreement at or below $104 
  6.8   per megawatt-hour, exclusive of any price adjustments that may 
  6.9   take effect subsequent to commission approval of the power 
  6.10  purchase agreement, as amended.  The commission shall also 
  6.11  approve, as necessary, any subsequent assignment or sale of the 
  6.12  power purchase agreement or ownership of the project to an 
  6.13  entity owned or controlled, directly or indirectly, by two 
  6.14  municipal utilities located north of Constitutional Route No. 8, 
  6.15  as described in section 161.114, which currently own electric 
  6.16  and steam generation facilities using coal as a fuel and which 
  6.17  propose to retrofit their existing municipal electrical 
  6.18  generating facilities to utilize biomass fuels in order to 
  6.19  perform the power purchase agreement. 
  6.20     (c) If the power purchase agreement described in paragraph 
  6.21  (b) is assigned to an entity that is, or becomes, owned or 
  6.22  controlled, directly or indirectly, by two municipal entities as 
  6.23  described in paragraph (b), and the power purchase agreement 
  6.24  meets the price requirements of paragraph (b), the commission 
  6.25  shall approve any amendments to the power purchase agreement 
  6.26  necessary to reflect the changes in project location and 
  6.27  ownership and any other amendments made necessary by those 
  6.28  changes.  The commission shall also specifically find that: 
  6.29     (1) the power purchase agreement complies with and fully 
  6.30  satisfies the provisions of this section to the full extent of 
  6.31  its 35-megawatt capacity; 
  6.32     (2) all costs incurred by the public utility and all 
  6.33  amounts to be paid by the public utility to the project owner 
  6.34  under the terms of the power purchase agreement are fully 
  6.35  recoverable pursuant to section 216B.1645; 
  6.36     (3) subject to prudency review by the commission, the 
  7.1   public utility may recover from its Minnesota retail customers 
  7.2   the Minnesota jurisdictional portion of the amounts that may be 
  7.3   incurred and paid by the public utility during the full term of 
  7.4   the power purchase agreement; and 
  7.5      (4) if the purchase power agreement meets the requirements 
  7.6   of this subdivision, it is reasonable and in the public interest.
  7.7      (d) The commission shall specifically approve recovery by 
  7.8   the public utility of any and all Minnesota jurisdictional costs 
  7.9   incurred by the public utility to improve, construct, install, 
  7.10  or upgrade transmission, distribution, or other electrical 
  7.11  facilities owned by the public utility or other persons in order 
  7.12  to permit interconnection of the retrofitted biomass-fueled 
  7.13  generating facilities or to obtain transmission service for the 
  7.14  energy provided by the facilities to the public utility pursuant 
  7.15  to section 216B.1645, and shall disapprove any provision in the 
  7.16  power purchase agreement that requires the developer or owner of 
  7.17  the project to pay the jurisdictional costs or that permit the 
  7.18  public utility to terminate the power purchase agreement as a 
  7.19  result of the existence of those costs or the public utility's 
  7.20  obligation to pay any or all of those costs. 
  7.21     Sec. 5.  Minnesota Statutes 2004, section 216B.2424, 
  7.22  subdivision 6, is amended to read: 
  7.23     Subd. 6.  [REMAINING MEGAWATT COMPLIANCE PROCESS.] (a) If 
  7.24  there remain megawatts of biomass power generating capacity to 
  7.25  fulfill the mandate in subdivision 5 after the commission has 
  7.26  taken final action on all contracts filed by September 1, 2000, 
  7.27  by a public utility, as amended and assigned, this subdivision 
  7.28  governs final compliance with the biomass energy mandate in 
  7.29  subdivision 5 subject to the requirements of subdivisions 7 and 
  7.30  8.  
  7.31     (b) To the extent not inconsistent with this subdivision, 
  7.32  the provisions of subdivisions 2, 3, 4, and 5 apply to proposals 
  7.33  subject to this subdivision. 
  7.34     (c) A public utility must submit proposals to the 
  7.35  commission to complete the biomass mandate.  The commission 
  7.36  shall require a public utility subject to this section to issue 
  8.1   a request for competitive proposals for projects for electric 
  8.2   generation utilizing biomass as defined in paragraph (f) of this 
  8.3   subdivision to provide the remaining megawatts of the mandate.  
  8.4   The commission shall set an expedited schedule for submission of 
  8.5   proposals to the utility, selection by the utility of proposals 
  8.6   or projects, negotiation of contracts, and review by the 
  8.7   commission of the contracts or projects submitted by the utility 
  8.8   to the commission. 
  8.9      (d) Notwithstanding the provisions of subdivisions 1 to 5 
  8.10  but subject to the provisions of subdivisions 7 and 8, a new or 
  8.11  existing facility proposed under this subdivision that is fueled 
  8.12  either by biomass or by co-firing biomass with nonbiomass may 
  8.13  satisfy the mandate in this section.  Such a facility need not 
  8.14  use biomass that complies with the definition in subdivision 1 
  8.15  if it uses biomass as defined in paragraph (f) of this 
  8.16  subdivision.  Generating capacity produced by co-firing of 
  8.17  biomass that is operational as of April 25, 2000, does not meet 
  8.18  the requirements of the mandate, except that additional 
  8.19  co-firing capacity added at an existing facility after April 25, 
  8.20  2000, may be used to satisfy this mandate.  Only the number of 
  8.21  megawatts of capacity at a facility which co-fires biomass that 
  8.22  are directly attributable to the biomass and that become 
  8.23  operational after April 25, 2000, count toward meeting the 
  8.24  biomass mandate in this section. 
  8.25     (e) Nothing in this subdivision precludes a facility 
  8.26  proposed and approved under this subdivision from using fuel 
  8.27  sources that are not biomass in compliance with subdivision 3. 
  8.28     (f) Notwithstanding the provisions of subdivision 1, for 
  8.29  proposals subject to this subdivision, "biomass" includes 
  8.30  farm-grown closed-loop biomass; agricultural wastes, including 
  8.31  animal, poultry, and plant wastes; and waste wood, including 
  8.32  chipped wood, bark, brush, residue wood, and sawdust. 
  8.33     (g) Nothing in this subdivision affects in any way 
  8.34  contracts entered into as of April 25, 2000, to satisfy the 
  8.35  mandate in subdivision 5.  
  8.36     (h) Nothing in this subdivision requires a public utility 
  9.1   to retrofit its own power plants for the purpose of co-firing 
  9.2   biomass fuel, nor is a utility prohibited from retrofitting its 
  9.3   own power plants for the purpose of co-firing biomass fuel to 
  9.4   meet the requirements of this subdivision. 
  9.5      Sec. 6.  Minnesota Statutes 2004, section 216B.2424, 
  9.6   subdivision 8, is amended to read: 
  9.7      Subd. 8.  [AGRICULTURAL BIOMASS REQUIREMENT.] Of the 125 
  9.8   megawatts mandated in subdivision 5, or 110 megawatts mandated 
  9.9   in subdivision 5a, at least 75 megawatts of the generating 
  9.10  capacity must be generated by facilities that use agricultural 
  9.11  biomass as the principal fuel source.  For purposes of this 
  9.12  subdivision, agricultural biomass includes only farm-grown 
  9.13  closed-loop biomass and agricultural waste, including animal, 
  9.14  poultry, and plant wastes.  For purposes of this subdivision, 
  9.15  "principal fuel source" means a fuel source that satisfies at 
  9.16  least 75 percent of the fuel requirements of an electric power 
  9.17  generating facility.  Nothing in this subdivision is intended to 
  9.18  expand the fuel source requirements of subdivision 5.