Bill Summary – FastDemocracy

68th Legislature                                                                                                    SB 539.1
                                                 SENATE BILL NO. 539
                                             INTRODUCED BY B. MOLNAR
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   A BILL FOR AN ACT ENTITLED: “AN ACT GENERALLY REVISING HYDROELECTRIC GENERATION
   FACILITY FEES FOR THE USE OF MONTANA'S WATER; CREATING THE WATER SEVERANCE
   BENEFICIAL USE ACT; IMPOSING A PER MEGAWATT-HOUR WATER SEVERANCE BENEFICIAL USE
   FEE IN LIEU OF TAX ON THE TRANSMISSION OF CERTAIN ELECTRICITY; PROVIDING FOR THE
   CALCULATION OF THE FEE IN LIEU OF TAX FOR WATER USE BASED ON THE AMOUNT OF COAL
   GROSS PROCEEDS TAX IMPOSED ON COAL THAT GENERATES AN EQUAL AMOUNT OF
   ELECTRICITY; PROVIDING THE FEE IN LIEU OF TAX MAY BE IMPOSED ON ELECTRICITY GENERATED
   BY A FEDERAL HYDROELECTRIC FACILITY; PROVIDING EXEMPTIONS FOR ELECTRICITY PRODUCED
   BY CERTAIN FACILITIES OR DISTRIBUTED TO CERTAIN ENTITIES; PROVIDING FOR THE
   DISTRIBUTION OF FEE REVENUE TO PUBLIC SCHOOLS; PROVIDING FOR OFFSETTING MILL LEVY
   REDUCTIONS; PROVIDING RULEMAKING AUTHORITY; PROVIDING DEFINITIONS; AMENDING
   SECTIONS 20-9-331, 20-9-333, AND 20-9-360, MCA; AND PROVIDING AN APPLICABILITY DATE.”
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   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
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              NEW SECTION. Section 1.      Short title. [Sections 1 through 14] may be cited as the "Water
   Severance Beneficial Use Act".
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              NEW SECTION. Section 2.      Purpose. (1) The legislature finds that:
              (a)   Article IX, section 3, of the Montana constitution provides that the use of all water that is or may
   be appropriated for sale, rent, distribution, or other beneficial use, the right-of-way over the lands of others for
   all ditches, drains, flumes, canals, and aqueducts necessarily used in connection with the beneficial use, and
   the sites for reservoirs necessary for collecting and storing water are a public use;
              (b)   clearly, Montana waters belong to the state;
              (c)   water that is used to generate electricity is a public use;
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              (d)   the courts have always upheld the rights of the state and its people, including regarding all
   waters that stand, flow, are underground, or fall on the state;
              (e)   the state has a right to the economic value of the flows, falling, and storage of the water that
   belongs to the state;
              (f)   the United States environmental protection agency recognized the state's primacy over its
   water and under political and legal pressure withdrew a 2015 rule that impermissibly expanded the definition of
   waters of the United States under the federal Clean Water Act;
              (g)   Yosemite national park, a political subunit, is compensated for the fall of its water generating
   electricity for San Francisco;
              (h)   in 1989, the Montana supreme court, in its decision Pacific Power and Light Co. v. Department
   of Revenue, 237 MT 77, upheld that an enforceable contract right to use or enjoy property owned by a federal
   agency is subject to taxation;
              (i)   pursuant to Article X, section 1, of the Montana constitution, the legislature is required to
   provide a basic system of free, quality, public elementary and secondary schools throughout the state that will
   guarantee equality of educational opportunity to all; and
              (j)   the best way to compensate the people of the state is to benefit the public school system.
              (2)   Consistent with the policy established by the legislature, the purpose of [sections 1 through 14]
   is to reimburse the people of the state for the beneficial use of one of the state's most important resources by
   funding public elementary and secondary schools. The people of the state that receive electricity from
   hydroelectric generation in the state receive a corresponding benefit, and therefore a fee should not be
   imposed on this electricity. However, the people of the state do not receive a benefit for the use of the state's
   water that is used predominately to produce electricity used outside the state. The only way to equitably
   reimburse the people of the state is to impose a fee in lieu of tax on hydroelectric generation that does not
   provide a beneficial use to the people of the state. The fee in lieu of tax must be imposed as a beneficial use
   fee, regardless of whether the electricity is generated by an agency of the federal government or a private
   producer that does not sell significant electricity to Montanans. The fee in lieu of tax is imposed on the use of
   state water, and the only way to determine the amount of state water that is being used is through the amount
   of power generated.
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68th Legislature                                                                                                       SB 539.1
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              NEW SECTION. Section 3.         Definitions. As used in [sections 1 through 14], unless the context
   clearly indicates otherwise, the following definitions apply:
              (1)      "Customer" or "purchaser" means a person who acquires for consideration electricity for use or
   consumption and not for resale.
              (2)      (a) "Distribution services provider" means a person controlling or operating distribution facilities
   for the distribution of electricity to the public. The term includes a purchaser who takes electricity directly from a
   transmission line or substation and a purchaser who generates electricity for the purchaser's own use.
              (b)      The term does not include electricity generated by the purchaser for noncommercial use or for
   agricultural use.
              (3)      "Hydroelectric facility" means an operating facility located in the state that produces electricity
   using water power. The term includes a facility owned or operated by an agency of the United States
   government.
              (4)      "Person" means an individual, estate, trust, receiver, cooperative association, corporation,
   limited liability company, firm, partnership, joint venture, syndicate, or other entity, including any gas or electric
   utility owned or operated by a county, municipality, or other political subdivision of the state.
              (5)      "Transmission services provider" means a person or entity controlling or operating facilities
   used for the transmission of electricity.
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              NEW SECTION. Section 4.         Water power severance beneficial usage fee in lieu of tax --
   reimbursement for use of state resource. (1) (a) Except as provided in subsection (3), a water power
   severance beneficial usage fee in lieu of tax is imposed on state water use for electricity generated by a
   hydroelectric facility. The fee payer provided for in subsection (2) shall remit the usage fee in lieu of tax based
   on the number of megawatts of electricity delivered to the fee payer from the hydroelectric facility multiplied by
   the rate in subsection (1)(b).
              (b)      The department shall determine the rate of the usage fee in lieu of tax on an annual basis by
   calculating the average amount of coal severance tax that is imposed on the amount of coal mined in the state
   that it takes to generate 1 megawatt of electricity in the state. For the purpose of the calculation, the department
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   shall make the determination using the amount of severance tax for each megawatt generated in the prior
   calendar year. The department shall publish the rate of the prior calendar year on the department's website.
              (2)    (a) (i) For electricity produced by a hydroelectric facility for delivery outside the state, the fee
   payer is the transmission services provider. The transmission services provider shall remit the fee in lieu of tax
   based on the megawatt hours introduced onto transmission lines from the hydroelectric facility.
              (ii)   For electricity produced by a hydroelectric facility in the state for delivery within the state, the
   fee payer is the distribution services provider. The transmission services provider shall collect the fee in lieu of
   tax based on the amount of kilowatt hours of electricity delivered to the distribution services provider. The fee
   payer may apply for a refund for overpayment pursuant to [section 13].
              (b)    (i) If more than one transmission services provider transmits electricity, the last transmission
   services provider transmitting or delivering the electricity shall collect the fee in lieu of tax.
              (ii)   If the transmission services provider is an agency of the United States government, the
   distribution services provider receiving the electricity shall self-assess the fee in lieu of tax subject to the
   provisions of [sections 1 through 14].
              (3)    Electricity generated by a hydroelectric facility that satisfies one of the following characteristics
   is exempt from the fee in lieu of tax on the use of state water as provided in this section:
              (a)    all electricity generated by a hydroelectric facility that is rate-based by the public service
   commission provided for in 2-15-2602;
              (b)    electricity produced by a hydroelectric facility within the exterior boundaries of a Montana
   Indian reservation;
              (c)    electricity delivered to a distribution services provider that is a municipal electric utility
   described in 69-8-103(4)(b) or a rural electric cooperative organized under the provisions of Title 35, chapter
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              (d)    electricity delivered to a customer located in the state by a distribution services provider that is
   exempt from jurisdiction of the public service commission under 35-18-104; or
              (e)    electricity produced by a hydroelectric facility with a nameplate capacity of 10 megawatts or
   less.
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68th Legislature                                                                                                     SB 539.1
              NEW SECTION. Section 5.      Collection of fee in lieu of tax for state water use. (1) A transmission
   services provider shall collect the water power severance beneficial usage fee in lieu of tax imposed under
   [section 4] from the fee payer and pay the fee in lieu of tax collected to the department. If the transmission
   services provider collects a fee in lieu of tax in excess of the fee in lieu of tax imposed by [section 4] for using
   state water, both the fee in lieu of tax and the excess must be remitted to the department.
              (2)   A self-assessing distribution services provider is subject to the provisions of [sections 1 through
   14].
              (3)   The fee in lieu of tax for using state water collected under [sections 1 through 14] must, in
   accordance with the provisions of 17-2-124, be deposited in the water severance account provided for in
   [section 6].
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              NEW SECTION. Section 6.      Water severance account -- school funding -- mill levy reduction --
   rulemaking. (1) There is a water severance account in the state special revenue fund provided for in 17-2-102.
   Money in the account and money appropriated from the account by the legislature must be used for the
   purposes provided in this section.
              (2)   The amount of 90% of revenue is allocated to school funding by offsetting the statewide mill
   levies in 20-9-331, 20-9-333, and 20-9-360.
              (a)   The allocation must be used to reduce the statewide property tax levies for the fiscal year in an
   amount equal to fee revenues allocated under this subsection (2) during the preceding fiscal year.
              (b)   The money must be used first to reduce the mill levy provided for in 20-9-360. If the amount of
   revenue allocated under this subsection (2) exceeds the amount of revenue that would have been collected
   under 20-9-360, the department shall reduce the mill levies provided for in 20-9-331, followed by the mill levies
   provided for in 20-9-333. If all three levies are reduced to 0%, the excess revenue must be deposited in the
   guarantee account provided for in 20-9-622.
              (c)   The department shall calculate the mill levy reductions and instruct the county commissioners
   of each county to reduce the number of mills levied based on this subsection (2). The mill levy calculation must
   be established in tenths of mills and must be the same for every taxing entity on a statewide basis. If the mill
   levy calculation does not result in an even tenth of a mill, then the calculation must be rounded up to the
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   nearest tenth of a mill. The department shall adopt rules that provide the amount of the reductions and the
   process for implementation of property tax relief by the county treasurer, the department, and the taxpayer,
   including the reasonable extension of any statutory deadlines.
              (3)    The amount of 10% of revenue is allocated to the department for administration and legal
   expenses associated with the implementation of [sections 1 through 14]. The department, the attorney general,
   and the public service commission may seek outside counsel and use existing appropriation authority or
   contingency appropriation authority for legal expenses associated with the implementation of [sections 1
   through 14].
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              NEW SECTION. Section 7.       Returns -- payment -- authority of department. (1) On or before the
   30th day of the month following the end of the calendar quarter in which the water power severance beneficial
   usage fee in lieu of tax imposed by [sections 1 through 14] is payable, a return, on a form provided by the
   department, and payment of the fee in lieu of tax for the preceding calendar quarter must be filed with the
   department.
              (2)    Each person engaged in transmitting electricity in this state that is subject to the fee in lieu of
   tax under [sections 1 through 14] shall file a return.
              (3)    (a) A person required to collect and pay to the department the fee in lieu of tax imposed by
   [sections 1 through 14] shall keep records, render statements, make returns, and comply with the provisions of
   [sections 1 through 14] and the rules prescribed by the department. Each return or statement must include the
   information required by the rules of the department.
              (b)    For the purpose of determining compliance with the provisions of [sections 1 through 14], the
   department is authorized to examine or cause to be examined any books, papers, records, or memoranda
   relevant to making a determination of the amount of the fee due, whether the books, papers, records, or
   memoranda are the property of or in the possession of the person filing the return or another person. In
   determining compliance, the department may use statistical sampling and other sampling techniques consistent
   with generally accepted auditing standards. The department may also:
              (i)    require the attendance of a person having knowledge or information relevant to a return;
              (ii)   compel the production of books, papers, records, or memoranda by the person required to
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   attend;
              (iii)   implement the provisions of 15-1-703 if the department determines that the collection of the fee
   is or may be jeopardized because of delay;
              (iv)    take testimony on matters material to the determination; and
              (v)     administer oaths or affirmations.
              (4)     Pursuant to rules established by the department, returns may be computer-generated and
   electronically filed.
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              NEW SECTION. Section 8.        Examination of return -- adjustments -- delivery of notices and
   demands. (1) If the department determines that the amount of the water power severance beneficial usage fee
   in lieu of tax due is different from the amount reported, the amount of the fee in lieu of tax computed on the
   basis of the examination conducted pursuant to [section 7] constitutes the fee in lieu of tax to be paid.
              (2)     If the fee in lieu of tax due exceeds the amount of fee in lieu of tax reported as due on the
   return, the excess must be paid to the department within 30 days after notice of the amount and demand for
   payment is mailed or delivered to the person making the return unless the fee payer files a timely objection as
   provided in 15-1-211. If the amou