Comprehensive Energy Bill Adopted!
In a session criticized for lack of action on several critical issues, enactment of House Bill 2 represents a significant effort by the legislature to encourage investments in energy efficiency, high performance building design, and deployment of renewable energy.
Drafted by KRC and sponsored by House Majority Floor Leader Rocky Adkins, House Bill 2 is a comprehensive, forward-thinking bill containing an array of incentives, policy directions, and opportunities throughout the public and private sectors of our economy, to create a sustainable energy future for Kentucky, and to generate good jobs, increase disposable income by reducing energy costs, keep money circulating in the state, and make our industries and products more cost-competitive in the world market.
House Bill 2, which incorporated the provisions of HB 299, HB 312, and SB 165, provides new incentives and directives on energy efficiency and renewables:
* Leadership in the area of improving building performance by establishing high performance buildings standards and timeframes for state-funded construction, and requiring that by 2018, state-leased buildings meet those same standards;
* An opportunity for boards of education to conserve more of their funding for instructional and other purposes by requiring enrollment in the very-successful Kentucky Energy Efficiency Program that is offered by the Kentucky Pollution Prevention Center and which has demonstrated the ability to conserve energy and save money for its current enrollees through common-sense efforts and monitoring of energy usage;
* Residential Energy Efficiency Kentucky Income Tax Credits for a percentage of installed costs of upgraded insulation, energy-efficient windows and doors, and heating and cooling systems;
* Commercial Property Energy Efficiency State Income Tax Credits for a percentage of installed costs of energy-efficiency interior lighting systems and HVAC systems;
* Energy Star Home and Manufactured Home Credits for builders of ENERGY STAR homes and purchasers of ENERGY STAR manufactured homes.
* A directive to the Public Service Commission to consider next-generation residential utility meters when reviewing utility demand management plans. The first step to ratepayers being able to better control their energy bills, and to utilities being able to manage their load in order to avoid or defer costly investments in meeting peak power demands, is so-called “smart metering” that offers customers and utilities a way to work in partnership to manage electricity demand and utility bill costs.
* State Income Tax Credits for a percentage of installed costs of active and passive solar space heating systems, solar water heating systems, wind turbines, and solar photovoltaics systems.
House Bill 2 also makes changes in the statutory mandate of the Kentucky River Authority to authorize the authority to promote private investment in the installation of hydroelectric generating units on the existing and reconstructed Kentucky River dams. We have tapped only a small amount of the potential to capture and convert the kinetic energy of already-impounded rivers in and abutting our Commonwealth, and this measure will remove impediments to greater use of hydropower at existing dams on the Kentucky River.
Last but certainly not least, House Bill 2 calls on the Governor’s Office of Energy Policy to develop a report and recommendations on adoption of a requirement for a “renewable and energy efficiency portfolio standard” from the regulated electric utilities. Such portfolio standards provide targets for utilities to diversify their portfolio of energy strategies. In a carbon-constrained future, diversification of that portfolio with efficiency and renewable sources of power is an important hedge against rising costs for carbon-emitting power generation sources.
The study will also produce recommendations on whether and how to create a public or system benefit fund such as that adopted in many states that provides a nominal system charge on generated energy in order to produce funding for financing incentives for ratepayers in energy efficiency and use of renewables. Rebate programs offer opportunities for a greater number of citizens to benefit from adoption of such measures than tax credits, but require a durable source of funding.
The Senate Committee Substitute to HB 2 incorporated all of the House-passed measures and included an additional authority for issuance of bonds to create a 50 million dollar pool to fund public facility demand management improvements, and $30 million in low-interest loans to the private sector for demand management.
In total, the policies and incentives contained in House Bill 2 are a comprehensive, forward-looking investment in our economy, our energy future, our communities and our children. In combination with SB 83, HB 2 marks this as among the more significant in the area of energy policy in this Commonwealth’s recent history.
Net Metering Law Expanded To Encourage Greater Use of Renewables
Senate Bill 83, sponsored by Crestwood Senator Ernie Harris, was blended with the more comprehensive House Bill 313, drafted by KRC and sponsored by Representative Tanya Pullin and others, to produce a significant expansion of the net metering program that allows utility customers to “net” the use of electricity from the grid with excess power generated from renewable sources and sold back onto the grid. Current law limits the program to 15 kW of power from solar energy, and caps the amount that a utility needs to allow to .1% of the load. The revised law adds power from wind, water and other renewable sources (including biomass and biogas), raises the maximum capacity of allowed systems from 15 kW to 30 kW, raises the cumulative cap to 1%, and requires development of standardized rules for interconnecting, as well as clarifying that credits carry forward for the life of the account.
Hazardous Waste Fund Reauthorized and Provided Durable Funding Levels
Senate Bill 69, as introduced, would cut by half the fee paid by hazardous waste generators that use hazwastes as fuels in boilers or industrial furnaces. The effect of the bill would have been a 21% loss to a fund that is used for hazardous material spill response and to fund the Kentucky Pollution Prevention Center.
Under a compromise crafted by KRC, the reduced fee was approved but in return the fund fee on hazardous waste generators was reauthorized for 8 years, and a mechanism was created to assure that any shortfall in fees below $1.8 million in adjusted dollars would be made whole through a transfer from the Petroleum Storage Tank Environmental Assurance Fund.
Collaborative Effort For Watershed Improvement Created In HB 717
House Bill 717, sponsored by Rep. Rocky Adkins, encourages the engagement of a broad cross-section of local community members in a collaborative effort to restore our streams, wetlands, lakes and rivers, providing a framework for communities to become more actively involved in the important goal of improving and restoring streams, rivers, and other waters.
At the request of the House Majority Floor Leader’s office, KRC negotiated the bill with representatives of Counties, Area Development Districts, the Kentucky League of Cities, the Farm Bureau, Kentucky Retail Federation, the Division of Water, and individuals involved in the Troublesome Creek project, and received input from the Kentucky Department for Fish and Wildlife Resources and from the Corps.
The bill expresses a preference that where a permittee pays funds “in lieu of” undertaking a mitigation and restoration project, that the funds be spent in the watershed where the damage occurred. This bill also recognizes that as part of a stream restoration and mitigation project, it may be appropriate to spend some of the funds on pre-existing pollution, such as straight-pipe sewage discharges, acid mine drainage, and other pre-existing pollution the existence of which would interfere with restoring the health and habitat of a stream. Any such use of funds would have to be approved by the Army Corps of Engineers, Division of Water, and the Mitigation Review Team.
The bill allows the creation of Stream Restoration and Mitigation Authorities for each watershed, and provides for a broad representation of water users, local government, industry and conservation interests. Authorities may
- create technical advisory committees drawing from academia and elsewhere,
- review existing state and federal plans that relate to watershed management and to comment on those plans, as well as recommend ways to better coordinate planning and projects of various agencies in order to create better outcomes for watershed improvement;
- initiate educational programs relating to watershed improvement;
- identify stream restoration and mitigation needs and prioritize areas for projects, and recommend those priorities to state and federal agencies.
HB 717 creates a framework for more active, broad-based local community involvement in restoring our water resources and mitigating the impacts of past and present activity on those water resources.
Kentucky Becomes Leader In Effort To Encourage Design of Packaging For Recyclability
HB 233, as originally drafted, would have allowed a plastic container with a barrier layer to be coded as a “1” rather than a “7” if the resin layer “is compatible with or removed from the recycling stream,” and as a “7” if it is “not compatible for the purposes of recycling.” KRC was concerned that the coding of a multi-layer bottle containing a nylon barrier layer as a "1" would have a negative effect on the plastics recycling industry.
KRC proposed alternative language that allows the coding of containers with barrier layers with the predominant resin if the manufacturer demonstrated that it had conducted the studies required by the Association for Postconsumer Plastic Recycling (APR) and had received a “compatibility letter” indicating that the container would not adversely affect the existing recycling stream. The parties approved the proposal and it was approved by the Committee as House Committee Substitute to the bill.
KRC’s approach recognizes that innovation in packaging is occurring yet assures that the existing recycling framework is not disrupted by packaging that is not designed with recyclability in mind. NAPCOR has indicated that Kentucky is at the forefront in encouraging manufacturers to design with recyclability in mind, and has praised the bill.
Liability Provisions of Recreational Land Bill Clarified
Senate Bill 169 seeks to encourage private landowners to open lands for a range of public recreational opportunities, by limiting liability of the landowners for injuries suffered to willful or wanton failure to warn of dangerous conditions. The actual text of the bill, however, was internally inconsistent and appeared to blanketly immunize landowners from responsibility for injuries sustained, which would violate state constitutional assurances of a right of action for injuries sustained. KRC offered language clarifying the bill text and resolving several textual problems, which was incorporated into the enacted law.
Coal Gasification Wastes Can Be Categorized As “Special Wastes,” But Burden Is on Applicant
As introduced, SB 243 would have categorically declared coal gasification wastes to be “special wastes” for which the period of responsibility for land disposal is less than solid or hazardous wastes. A KRC-crafted alternative allows certain gasification wastes to be classified as “special wastes” based on case-by-case objective scientific test results provided by the applicant showing low hazard.
Tiered Permit For Small Gravel Operations Negotiated
KRC worked with the Kentucky Farm Bureau to strengthen regulatory controls on a proposed tiered permit for small gravel extraction operations in western Kentucky. The bill, Senate Bill 54, was opposed by the crushed stone industry and did not become law.
Billboard Bill Stopped…Again
HB 582, which would reverse current state policy against cutting trees in rights-of-way in order to assure visibility of billboards and would weaken existing prohibitions against extending the life of a nonconforming billboard, was again stopped by House leadership. As has been the case in past years, KRC worked with Scenic Kentucky to bring public attention to this bill and to mobilize opposition in the House membership. A last-minute effort to amend two Senate bills to include the billboard bill were rebuffed by Senator Brett Guthrie, who would not allow the billboard interests to jeopardize the House bills.
Bill To Eliminate Construction Ban On Nuclear Plants Stalls
Current state law prohibits construction of nuclear power plants in the Commonwealth until there is an approved disposal site for the power plant nuclear waste. This bill would have eliminated that ban. KRC opposed the bill in the Senate, and the House Committee heard testimony on but did not vote on lifting the ban.
Dilapidated Buildings Bill Clarified
HB 319 allows for voluntary agreements between property owners and local government for demolition of dilapidated buildings. The original bill would have allowed the property owner and county to agree on who would bear responsibility and liability for any potential environmental contamination. At KRC’s request, the bill was revised with language clarifying that the parties can contract as to who would bear responsibility for disposal of the demolition wastes, asbestos and other materials, and that the disposition would be consistent with state environmental protection laws.
Resolution Calling For Emergency Action Plans For High Hazard Dams Stalled In House Committee
SJR 72 would direct the Environmental and Public Protection Cabinet to require emergency action plans for all high hazard potential impoundments where failure could cause loss of human life. KRC appreciates the good faith work of both the Kentucky Coal Association and Farm Bureau in assisting in the development of this consensus bill. Despite agreement by the coal industry and agricultural interests and the Cabinet, and overwhelmingly support in the Senate vote, the bill was not voted on in the House Natural Resources and Environment Committee, which is chaired by Representative Jim Gooch.
Resolution Encouraging U.S. Army Corps of Engineers to Promote Installation of Hydro Units On Existing Dams Stalls in Senate.
HJR 54, a resolution encouraging U.S. Army Corps of Engineers to promote private investment in the installation of hydroelectric generating units on all existing dams within and abutting the Commonwealth of Kentucky under its jurisdiction, by developing a memorandum of agreement with other federal and state agencies for prioritization of review and action on applications to install hydroelectric generating units, died in the Senate Agriculture and Natural Resources Committee.
Streamsaver Bill Fails To Get Hearing In Natural Resources and Environment Committee But Is Heard In House A&R!
HB 164, the so-called “streamsaver bill” that would require mine-related earth and rock material to be disposed of in locations other than headwater streams, was drafted by KRC several years ago and revised this year, and has never received a hearing or vote from the Natural Resources and Environment Committee, which is chaired by Rep. Jim Gooch. This session, Representative Harry Moberly stripped the text from a bill in the House A&R Committee and held two days of hearings on the issue of management and disposal of mine related spoil material. The bill narrowly failed to pass out of committee.
Budget Bill Bleak For Environmental Protection Programs
HB 406 as enacted was a slight improvement over the Governor’s disastrous environmental protection budget proposal. The approximately $4M general fund cut proposed in the Governor’s budget will substantially impact DEP’s ability to administer and provide personnel resources, particularly for state mandated programs (the many programs that do not have a federal mandate or federal matching monies). With this proposed general fund budget cut it is projected that personnel cap levels could be reduced to levels not experienced since the mid- and early 1990’s despite the Department being given the responsibility for implementing numerous additional federal and state programs since that time. The short-term budget impacts in FY2009-2010 are significant enough, and may cause reductions in inspections and monitoring activity, increased permit review backlog and diminished customer service. Plus, there are substantial implications of reducing the general fund "base budget" for future budgets that could potentially create a structurally imbalanced and significantly under-funded budget long-term. In addition to reduced ability to administer a number of programs, recent gains accomplished through reduction of permit backlogs and improvements in several other environmental measures may be lost. Finally, in addition to the overall budget reduction concerns, a large projected number of staff retirements are expected over the course of the next 3 to 10 months resulting in both retirement payouts and loss of a large number of experienced staff in many critical areas. This creates an especially difficult and challenging situation for DEP to administer its programs over the course of the next two fiscal years.
KRC had recommended that in order to partially offset the restoration of the $4 million and the increased appropriations, and to end the subsidization of pollution by the public, include language in the EPPC budget requiring that the agency adopt a schedule of fees for all permits that would fully recover from the applicant the costs of agency review and processing of the license permit or authorization.
The enacted budget also reduced the amount of funds transferred from the supposedly dedicated Kentucky Pride Fund. The Governor had proposed to remove $2M in funds, and the enacted budget removes “only” $1.25M each year. This transfer could nevertheless result in a reduction of funding for the cleanup of open dumps as well as recycling grants and household hazardous waste collection grants.
The enacted budget authorizes the Kentucky Infrastructure Authority to leverage receipts of the state revolving loan accounts A and F in order to support a bond issue that will expand the ability of the KIA to support water and sewer projects across the state. The Governor’s budget failed to include that authorization, which would use no general fund monies and would have no external budgetary impacts.
The enacted budget restored full funding for the Kentucky Division of Forestry state tree seedling nurseries, which annually supply three to five million seedlings at a low cost to landowners across the state for replanting and restoration. An average of one million seedlings is used annually in strip mine reclamation and current permits will require over 26.5 million seedlings over the next ten years. The Governor vetoed this provision.
The enacted budget also slightly improved the funding for the Kentucky Nature Preserves Commission over the Governor’s budget. The impact of proportional budget cuts on the smaller agencies and commissions over recent years has had a disproportionately negative impact on their ability to perform statutory obligations. Charged with management of the state’s nature preserves and maintenance and development of data on state species that is essential to many permitting programs, the Commission’s funding had been inadequately provided for during the next biennium by the Governor. KRC had sought to increase their appropriations in both years of the budget by $300,000 over the Governor’s recommendations, and the enacted budget provides an additional $93,000 in general fund dollars in FY 09 and $99,600 in FY 10. KRC appreciates the work of Representative Moberly and the other Conferees in improving on the Governor’s budget proposal.