Bill Summary – FastDemocracy

67th Legislature                                                                                         HB 646.1
                                             HOUSE BILL NO. 646
                                        INTRODUCED BY M. DUNWELL
  3
   A BILL FOR AN ACT ENTITLED: “AN ACT GENERALLY REVISING TAX, LABOR, AND ENERGY LAWS
   RELATED TO DECLINING COAL PRODUCTION; ESTABLISHING THE "MONTANA AND TRIBAL
   GOVERNMENTS' COAL REVENUE REPLACEMENT ACT" AND THE "FOSSIL FUEL WORKER ECONOMIC
   SECURITY ACT" TO ADDRESS REDUCTION IN COAL-RELATED MINING, USE, TRANSPORTATION, AND
   EMPLOYMENT; FUNDING WORKER RETRAINING, PENSION SAFETY NETS, APPRENTICESHIPS, AND
   ASSISTANCE FOR COAL-IMPACTED COMMUNITIES; INCREASING THE ENERGY GENERATION TAX ON
   EACH KILOWATT HOUR OF ELECTRICITY PRODUCED TO REPLACE REDUCTIONS IN COAL
   SEVERANCE TAX, GROSS PROCEEDS TAX, AND ROYALTY REVENUE; ESTABLISHING A COAL
   ROYALTY REPLACEMENT ACCOUNT; REQUIRING THAT COAL SEVERANCE TAX REPLACEMENT TAX
   BE DEPOSITED AND ALLOCATED TO REPLACE COAL SEVERANCE FUNDS, COAL GROSS PROCEEDS
   REVENUE, MONTANA TRIBAL COAL RENT AND ROYALTIES, MONTANA NONTRIBAL COAL RENT AND
   ROYALTIES, FEDERAL EXCISE TAX ON MONTANA COAL, AND THE COAL PORTION OF THE
   RESOURCE INDEMNITY TRUST; PROVIDING FOR THE DISTRIBUTION OF THE COAL GROSS
   PROCEEDS AND ROYALTY REPLACEMENT TAXES; REQUIRING THE DEPARTMENT OF REVENUE TO
   COLLECT AND ADMINISTER THE TAX AND DISTRIBUTE THE PROCEEDS; REQUIRING THE
   DEPARTMENT OF REVENUE TO PROVIDE GRANTS TO TRIBAL GOVERNMENTS TO REPLACE COAL
   ROYALTIES; ESTABLISHING GUIDELINES FOR GRANTS; REQUIRING THE DEPARTMENT OF
   COMMERCE TO SEEK FEDERAL GRANTS; ALLOWING FOR MULTIPURPOSE GRANT PROGRAMS;
   REQUIRING A PUBLIC UTILITY TO PAY THE TAX FOR CERTAIN CUSTOMER-GENERATORS AND
   ENERGY PRODUCERS; GRANTING THE DEPARTMENTS OF REVENUE, COMMERCE, AND LABOR AND
   INDUSTRY RULEMAKING AUTHORITY; PROVIDING RULEMAKING AUTHORITY; PROVIDING
   DEFINITIONS; PROVIDING A STATUTORY APPROPRIATION; AMENDING SECTIONS 5-5-230, 15-23-703,
   15-35-108, 15-38-302, 15-51-101, 15-51-102, 15-51-103, 15-51-113, 17-3-240, 17-5-703, 17-5-709, 17-5-720,
   17-5-721, 17-6-203, 17-7-221, 17-7-502, 75-7-307, 77-3-318, 82-4-244, AND 85-1-603, MCA; AND
   PROVIDING AN IMMEDIATE EFFECTIVE DATE AND A RETROACTIVE APPLICABILITY DATE.”
                                                           -1-                   Authorized Print Version – HB 646
67th Legislature                                                                                                  HB 646.1
  1
              WHEREAS, as society transitions to a new energy economy embracing renewable energy, the state
   must appropriately replace income lost because taxes, royalties, and rent on coal produce less revenue as coal
   use dwindles, and care for displaced fossil fuel workers, fossil fuel pensioners, their families, and supporting
   workers in surrounding communities as well as Montanans whose livelihoods in other economic sectors are
   adversely affected by fossil fuel use that is drying crop, forest, and rangeland, and impacting tourism, fishing,
   and winter sports; and
              WHEREAS, the energy tax to care for displaced workers and others of $0.0025 for each kilowatt hour
   provided in 15-51-101(2)(c) will cost an average consumer using 750 kilowatt hours of electricity a month about
   $1.88 a month or $22.50 a year, raising $955,185,000 by the time the tax sunsets at the end of 2034; and
              WHEREAS, the coal severance tax replacement tax to replenish lost coal revenue at the top rate of
   $0.005125 for each kilowatt hour provided in 15-51-101(2)(b) will cost an average consumer using 750 kilowatt
   hours of electricity a month about $3.29 a year in 2021 gradually up to about $46.13 a year in 2034, raising
   approximately $139,877,291 a year for a total of $1,049,079,686 through 2034; and
              WHEREAS, assuming unsubsidized renewable electricity is already at least $0.009 for each kilowatt
   hour cheaper than Montana’s coal-generated power, for each 750 kilowatt hours of clean electricity replacing
   coal-fired electrons under [sections 1 through 16], the 2021 combined minimum substitute tax and displaced
   worker tax rate of $0.0028661 or the 2034 combined maximum rate of $0.007625 for each kilowatt hour to
   recover lost coal revenue and worker benefits will, for consumers using 750 kilowatt hours of electricity a
   month, provide after tax a savings of $55.21 a year in 2021 and at least $12.37 a year in 2034; and
              WHEREAS, to explain the calculations regarding taxes and subsequent revenue allocations, it is noted
   that:
              (1)   The 2019 coal severance tax brought in $60,028,000, 42.9% of the total $139,852,652 in 15-51-
   101(2)(b)(ii)(A)(I) through (2)(b)(ii)(A)(VI) revenue categories.
              (2)   The 2019 annual coal gross proceeds revenue was $20,265,434, 14.5% of the total 15-51-
   101(2)(b)(ii)(A)(I) through (2)(b)(ii)(A)(VI) revenue categories.
              (3)   The 2019 Montana tribal coal rent and royalty revenue was $22,859,187, 16.3% of the total 15-51-
   101(2)(b)(ii)(A)(I) through (2)(b)(ii)(A)(VI) revenue categories.
                                                                 -2-                    Authorized Print Version – HB 646
67th Legislature                                                                                                      HB 646.1
              (4)   The 2019 federal excise tax on Montana coal brought in $22,804,993, 16.3% of the total 15-51-
   101(2)(b)(ii)(A)(I) through (2)(b)(ii)(A)(VI) revenue categories.
              (5)   The 2019 Montana nontribal coal rent and royalty revenue was $11,408,469, 8.2% of the total 15-
   51-101(2)(b)(ii)(A)(I) through (2)(b)(ii)(A)(VI) revenue categories.
              (6)   The 2019 coal revenue portion of the resource indemnity trust was $2,486,569, 1.8% of the total
   2019 15-51-101(2)(b)(ii)(A)(I) through (2)(b)(ii)(A)(VI) revenue categories.
              (7)   The sum of 15-51-101(2)(b)(ii)(A)(I) through (2)(b)(ii)(A)(VI) revenue was $139,852,652 in total
   2019 coal. To raise that amount, it would require a 2034 tax of $0.005125 for each kilowatt hour on Montana’s
   annual 227,291,000,000 kilowatt hours of electricity production.
              (8)   Since the loss of total coal revenue will be gradual over the years between 2021 and 2034, the
   electricity production tax to replace it can be phased in.
              (9)   It will require a $0.0003661 for each kilowatt hour tax on electricity production to replace the
   $9,991,235 total coal revenue estimated to be lost in 2021 as the transition begins. Slightly higher rates up to
   $0.005125 for each kilowatt hour will be needed in subsequent years to cover increasing coal revenue loss.
              (10) To cover all estimated Montana coal revenue lost related to diminution in coal used to produce
   electricity for use anywhere, it is estimated the electric production tax used as a substitute would cost a
   consumer using 750 kilowatt hours of electricity a month $3.29 a year in 2021 up to $43.13 a year in 2034 and
   afterward. These $3.29 and $46.13 yearly amounts should be increased by $22.50 a year until 2035 for
   displaced worker and coal-impacted worker retraining and other benefits as explained in 15-51-101(2)(c)(ii).
              (11) Using twice the amount of electricity considered in subsection (10) will cost consumers of 1,500
   kilowatt hours of electricity a month twice the amounts listed in subsection (10).
              (12) If the unsubsidized cost of electrons generated using renewable energy sources remains at least
   $0.009 for each kilowatt hour cheaper than electrons generated with fossil fuel, savings from reduction in fossil
   fuel cost because there is no fuel or pollution control cost in the sun and wind are estimated to be more than
   electricity production taxes replacing coal taxes and royalties, and will provide worker protection revenue.
              (13) Fossil fuel-free electricity exported from Montana will carry an electricity production tax to recover
   revenue previously collected through coal severance taxes paid on that exported coal-fired electricity. Since the
   exported coal-fired electricity tax has been a collection practice that has been legal since 1934, and since the
                                                                   -3-                      Authorized Print Version – HB 646
67th Legislature                                                                                                      HB 646.1
   tax has recently been applied to exported fossil fuel-free electricity, it is anticipated the increase of that tax rate
   will continue to withstand any constitutional commerce clause or other legal challenge.
  3
   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
  5
              NEW SECTION. Section 1.         Short title. [Sections 1 through 7] may be cited as the "Montana and
   Tribal Governments' Coal Revenue Replacement Act".
  8
              NEW SECTION. Section 2.         Policy and intent. (1) [Sections 1 through 7] establishes a policy to
   replace coal royalties, the coal severance tax, the coal gross proceeds tax, tribal taxes in lieu of coal severance
   taxes, coal gross proceeds taxes, and other coal-related revenue that is reduced as society transitions to a new
   energy economy embracing less expensive, renewable energy.
              (2)   It is the intent of the legislature to generate replacement revenue from a rate increase on an
   existing, nondiscriminatory electrical production tax passed through to in-state and out-of-state energy
   consumers who will benefit from the transition to cleaner, lower-cost methods of producing electricity that do not
   have a fuel cost or pollution control cost included in the electricity price.
 17
              NEW SECTION. Section 3.         Definitions. As used in this part, unless the context clearly indicates
   otherwise, the following definitions apply:
              (1)   "Coal company" means an entity licensed to do business in the state and engaged in coal mining.
              (2)   "Coal-impacted community" means any Montana local or tribal government located within 85 miles
   from:
              (a)   an electric generating resource that after 2020 reduces or eliminates coal-fired or gas-fired electric
   generation resulting in job or financial loss within the community; or
              (b)   a Montana coal mine that after 2020 reduces or eliminates coal production resulting in job or
   financial loss within the community.
              (3)   "Cooperative utility" has the meaning provided in 69-3-2003.
              (4)   "Customer-generator" has the meaning provided in 69-8-103.
                                                                   -4-                     Authorized Print Version – HB 646
67th Legislature                                                                                                       HB 646.1
              (5)   "Displaced coal-impacted worker" means a person who:
              (a)   is not a displaced fossil fuel worker;
              (b)   lives in a county containing a coal-impacted community;
              (c)   has worked in the state for at least 24 months prior to losing a full-time job or a part-time job as
   defined in 39-11-103, whether year-round or for seasonal employment, for an employer who services a coal
   company, railroad company, or utility company, because the employer downsized its workforce because of:
              (i)   output reduction from or closing of a Montana coal mine;
              (ii) output reduction from or closing of a Montana electrical generating facility; or
              (iii) reduction of the amount of coal hauled in the state by rail;
              (d)   is unemployed or underemployed, earning less than 75% of what the worker was earning working
   the worker's full-time job or part-time job prior to becoming unemployed;
              (e)   is experiencing difficulty obtaining appropriate employment at the prevailing wage of the job the
   worker held when the worker became unemployed or underemployed; and
              (f)   does not qualify to take full benefits pursuant to a pension or retirement plan.
              (6)   "Displaced fossil fuel worker" means a person who:
              (a)   has worked for a coal company, railroad company, or utility company in the state for at least 24
   months prior to losing a full-time job or a part-time job as defined in 39-11-103, whether year-round or for
   seasonal employment with the company, because the company downsized its workforce by:
              (i)   reducing output from or closing a Montana coal mine;
              (ii) reducing output from or closing a Montana electrical generating facility; or
              (iii) reducing the amount of coal hauled in the state by rail;
              (b)   is unemployed or underemployed, earning less than 75% of what the worker was earning working
   the worker's full-time job or part-time job prior to becoming unemployed;
              (c)   is experiencing difficulty obtaining appropriate employment at the prevailing wage of the job the
   worker held when the worker became unemployed or underemployed; and
              (d)   does not qualify to take full benefits pursuant to a pension or retirement plan.
              (7)   "Displaced fossil fuel worker subaccount", "displaced fossil fuel worker fund", "displaced coal-
   impacted worker subaccount", "displaced coal-impacted worker fund", "fossil fuel pensioner subaccount", "fossil
                                                                    -5-                     Authorized Print Version – HB 646
67th Legislature                                                                                                     HB 646.1
   fuel pensioner fund", "coal-impacted community economic development assistance subaccount", or "coal-
   impacted community economic development assistance fund" means the fund created in [section 5], which
   must be:
              (a)    a fund containing a dedicated revenue provision as defined in 17-1-502;
              (b)    a state special revenue fund as provided in 17-2-102; and
              (c)    administered in accordance with 17-8-101.
              (8)    "Electric generating resource" has the meaning provided in 69-3-2003.
              (9)    "Eligible renewable resource" has the meaning provided in 69-3-2003.
              (10)    "Fossil fuel pensioner" means a person who:
              (a)    has worked for a coal company or a utility company in the state, or worked hauling coal in the
   state for a railroad company; and
              (b)    is drawing a pension or other retirement benefit incurred by a coal company, utility company, or
   railroad company, or a designee or successor of a coal company, utility company, or railroad company, or is or
   was entitled to draw a pension or other retirement benefit because of that work.
              (11) "Producer" means a person or organization engaged in the generation, manufacture, or
   production of electricity and electrical energy in the state, including but not limited to through water power, wind,
   solar, coal, natural gas, geothermal, coalbed methane, storage, or by any other means of electricity generation
   for barter, sale, exchange, or commercial use. Electricity that is reasonably used to produce electricity is not
   included.
              (12) "Public utility" has the meaning provided in 69-3-2003.
              (13) "Railroad company" means a corporation licensed to do business in the state that currently
   transports or has transported coal mined in the state by rail to an electric generating resource either inside or
   outside the state.
              (14) "Utility company" means an investor-owned electric or gas utility, rural electric cooperative, electric
   generation or transmission company, or municipally owned electric or gas utility licensed to do business in the
   state that owns or operates a Montana coal-fired or natural gas-fired electric generating resource or a part of a
   resource.
 28
                                                                   -6-                     Authorized Print Version – HB 646
67th Legislature                                                                                                    HB 646.1
              NEW SECTION. Section 4.         Tribal coal revenue replacement account. (1) There is a tribal coal
   revenue replacement account within the state special revenue fund established in 17-2-102. There must be
   paid into the account:
              (a)   money from tribal coal royalty replacement taxes and money from tribal taxes in lieu of the
   Montana coal severance tax collected pursuant to 15-51-101(2)(b)(ii)(A)(III);
              (b)   interest income earned on the account; and
              (c)   any other funds, including grants, appropriations, or gifts for the purposes of administering 15-51-
   101(2)(b)(ii)(A)(III) and [sections 1 and 6 through 16] as the funds relate to tribes.
              (2)   (a) Funds in the tribal coal revenue replacement account are statutorily appropriated as provided
   in 17-7-502, with 15% to the department of revenue, 80% to the department of labor and industry, and 5% to
   the department of commerce.
              (b)   Funds in the tribal coal revenue replacement account must be administered in accordance with
   17-8-101, 15-51-101(2)(b)(ii)(A)(III), and [sections 1 and 6 through 16] as the programs relate to tribes.
 14
              NEW SECTION. Section 5.         Energy transition account -- displaced fossil fuel worker --<