Bill Summary – FastDemocracy

ENGROSSED SUBSTITUTE HOUSE BILL 1789
     State of Washington         68th Legislature     2023 Regular Session
     By House Agriculture and Natural Resources (originally sponsored by
     Representatives Reeves, Fitzgibbon, Chapman, Kloba, Ramel, Pollet,
     and Fosse; by request of Department of Natural Resources)
     READ FIRST TIME 02/17/23.
     AN ACT Relating to expanding revenue generation and economic
 opportunities from natural climate solutions and ecosystem services;
 amending RCW 79.02.010, 79.105.150, and 79.15.010; reenacting and
 amending RCW 79.64.110 and 79.22.050; adding a new chapter to Title
 79 RCW; and providing an expiration date.
 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
     NEW SECTION.    Sec. 1.    The definitions in this section apply
 throughout   this  chapter   unless  the   context  clearly   requires
 otherwise.
     (1) "Ecosystem service credit" means a predetermined and
 standardized unit that represents a measurable ecosystem service
 provided in the context of a payment for an ecosystem service
 project.
     (2) "Ecosystem service marketplace" has the same meaning as
 "ecosystem services market" as defined in RCW 76.09.020.
     (3) "Ecosystem service project broker" means an entity that
 facilitates the process of matching ecosystem service providers and
 purchasers of ecosystem service project credits. An ecosystem service
 project broker may sell or procure credits on their clients' behalf
 and provide financing and marketing expertise. Ecosystem service
 project brokers may also act as ecosystem service project developers.
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     (4) "Ecosystem service project developer" means an entity that
 sources and initiates ecosystem service projects on behalf of the
 ecosystem service provider including, but not limited to, by working
 with ecosystem service project standards and verification bodies,
 bearing financial risks of projects, and working with a network of
 distributors and retailers to deliver auditable ecosystem service
 project credits to a marketplace. An ecosystem service project
 developer may also act as an ecosystem service project broker.
     (5)(a) "Ecosystem services" has the same meaning as defined in
 RCW 76.09.020.
     (b) Examples of ecosystem services include, but are not limited
 to, carbon sequestration and storage projects that are consistent
 with the policies outlined in RCW 70A.45.090, air and water
 filtration, climate stabilization, and disturbance mitigation.
     (6) "Payment for ecosystem service project" means a transaction
 within an ecosystem service marketplace that transfers financial
 incentives to ecosystem service providers that are conditional on the
 provision of the service. Project types include, but are not limited
 to, carbon offset projects.
     NEW SECTION. Sec. 2. (1) The department is authorized to enter
 into contracts for payment for ecosystem service projects on public
 lands, consistent with this chapter and other relevant laws, on terms
 and conditions acceptable to the department, after approval by the
 board of natural resources, only for the purpose of generating
 additional revenue by providing ecosystem services. Any ecosystem
 service project on public lands:
     (a) Must be limited to afforestation, reforestation, and aquatic
 projects;
     (b) Must be consistent with the policies outlined in RCW
 70A.45.090;
     (c) Must support the workforce development goals and investments
 made under RCW 76.04.521;
     (d) May not be inconsistent with ongoing forest health planning
 efforts and investments such as expenditures from the wildfire
 response, forest restoration, and community resilience account
 created in RCW 76.04.511;
     (e) Must result in an increase in revenue to beneficiaries as
 compared to expected revenue that may exist in absence of the
 underlying ecosystem service project; and
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     (f) May not limit or impair the exercise of tribal treaty and
 reserved rights, existing tribal access to lands managed by the
 department, or preexisting agreements between tribes and the
 department.
     (2) The contract term under this section may represent the sale
 or lease of ecosystem service credits and may not last for a period
 of longer than 125 years. Proceeds from contracts for ecosystem
 services must be deposited into the appropriate account in the state
 treasury.
     (3) The authority of the department to enter into a contract that
 results in payments for ecosystem service projects under subsection
 (1) of this section is conditional on any specific project being
 consistent with the department's management of the underlying public
 land for agriculture or commercial timber harvest and ensure the
 department meets its fiduciary responsibility to the state's trust
 beneficiaries. Any ecosystem service project, or the sum of all
 ecosystem service projects, may not prevent the department from
 managing state lands and state forestlands for sustained yield as
 required by RCW 79.10.310.
     (4) The department may:
     (a) Directly offer for sale ecosystem service credits, consistent
 with this section, with established compliance ecosystem service
 marketplaces or verifiable and established voluntary ecosystem
 service marketplace;
     (b)   Enter  into   contracts  with   ecosystem  service  project
 developers or brokers, through public auction or by direct
 negotiation, to bring ecosystem service credits to market. Contracts
 for ecosystem services are subject to approval by, and the rules
 adopted by, the board.
     (5) Notice of intent to contract by negotiation must be published
 on the department's website. The notice must be published within the
 90 days preceding commencement of negotiations.
     (6) The department is authorized to conduct any additional
 advertising that it determines to be in the best interest of the
 state.
     (7) The department may enter into contracts or agreements with
 third-party ecosystem service project developers or brokers for
 purposes that include, but are not limited to, determining the
 feasibility of entering into a contract for a payment for an
 ecosystem service project, establishing a payment for an ecosystem
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 service project with an ecosystem service marketplace, and marketing
 and selling credits on an established ecosystem service marketplace.
     (8) The department must provide a report to the board upon
 execution of a contract for a payment for an ecosystem service
 project that includes the term of the contract and projected
 revenues.
     (9)(a) Before entering into the sale of ecosystem service credits
 under this section, the board must find that the conditions of this
 section are satisfied and approve contract terms and a minimum
 payment for ecosystem services that is valid for a period of 180
 days, or a longer period as may be established by resolution.
     (b) Where the board has set a minimum payment for ecosystem
 service credits, the department may set the final payment for
 ecosystem service credits, which must be based on current market
 prices. The board may reestablish the minimum payment at any time.
     NEW SECTION.   Sec. 3.   (1) By December 1, 2024, the department
 must submit a report to the office of financial management and the
 legislature, consistent with RCW 43.01.036, that includes information
 on payment for ecosystem service projects entered into or committed
 to by the department, including type of projects, number of acres
 involved, and projected revenues. The report must also include any
 challenges or barriers encountered by the department in the process
 of attempting to implement carbon offset or payment for ecosystem
 service projects and recommendations to address those challenges and
 barriers, including the operability of the carbon offset rules
 adopted under RCW 70A.65.170.
     (2) This section expires June 30, 2025.
     Sec. 4.   RCW 79.02.010 and 2018 c 258 s 1 are each amended to
 read as follows:
     The definitions in this section apply throughout this title
 unless the context clearly requires otherwise.
     (1) "Aquatic lands" means all state-owned tidelands, shorelands,
 harbor areas, and the beds of navigable waters as defined in RCW
 79.105.060 that are administered by the department.
     (2) "Board" means the board of natural resources.
     (3) "Commissioner" means the commissioner of public lands.
     (4) "Community and technical college forest reserve lands" means
 lands managed under RCW 79.02.420.
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     (5) "Community forest trust lands" means those lands acquired and
 managed under the provisions of chapter 79.155 RCW.
     (6) "Department" means the department of natural resources.
     (7)(a) "Forest biomass" means the by-products of: Current forest
 management    activities;   current    forest  protection   treatments
 prescribed or permitted under chapter 76.04 RCW; or the by-products
 of forest health treatment prescribed or permitted under chapter
 76.06 RCW.
     (b) "Forest biomass" does not include wood pieces that have been
 treated    with    chemical    preservatives   such    as:   Creosote,
 pentachlorophenol, or copper-chrome-arsenic; wood from existing old
 growth forests; wood required to be left on-site under chapter 76.09
 RCW, the state forest practices act; and implementing rules, and
 other legal and contractual requirements; or municipal solid waste.
     (8) "Good neighbor agreement" means an agreement entered into
 between the state and the United States forest service or United
 States bureau of land management to conduct forestland, watershed,
 and rangeland restoration activities on federal lands, as originally
 authorized by the 2014 farm bill (P.L. 113-79).
     (9) "Improvements" means anything considered a fixture in law
 placed upon or attached to lands administered by the department that
 has changed the value of the lands or any changes in the previous
 condition of the fixtures that changes the value of the lands.
     (10) "Land bank lands" means lands acquired under RCW 79.19.020.
     (11) "Person" means an individual, partnership, corporation,
 association,    organization,    cooperative,    public   or   municipal
 corporation, or agency of a federal, state, or local governmental
 unit, however designated.
     (12) "Public lands" means lands of the state of Washington
 administered by the department including but not limited to state
 lands, state forestlands, lands included in a state forestland pool,
 and aquatic lands.
     (13) "State forestland pool" or "land pool" means state
 forestlands acquired and managed under RCW 79.22.140.
     (14)   "State   forestlands"   means   lands   acquired  under   RCW
 79.22.010, 79.22.040, and 79.22.020.
     (15) "State lands" includes:
     (a) School lands, that is, lands held in trust for the support of
 the common schools;
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     (b) University lands, that is, lands held in trust for university
 purposes;
     (c) Agricultural college lands, that is, lands held in trust for
 the use and support of agricultural colleges;
     (d) Scientific school lands, that is, lands held in trust for the
 establishment and maintenance of a scientific school;
     (e) Normal school lands, that is, lands held in trust for state
 normal schools;
     (f) Capitol building lands, that is, lands held in trust for the
 purpose of erecting public buildings at the state capital for
 legislative, executive, and judicial purposes;
     (g) Institutional lands, that is, lands held in trust for state
 charitable, educational, penal, and reformatory institutions; and
     (h) Land bank, escheat, donations, and all other lands, except
 aquatic lands, administered by the department that are not devoted to
 or reserved for a particular use by law.
     (16) "Valuable materials" means any product or material on the
 lands, such as forest products, forage or agricultural crops, stone,
 gravel, sand, peat, and all other materials of value except: (a)
 Mineral, coal, petroleum, and gas as provided for under chapter 79.14
 RCW; ((and)) (b) forest biomass as provided for under chapter 79.150
 RCW; and (c) ecosystem services as provided for under chapter 79.---
 RCW (the new chapter created in section 9 of this act).
     (17) "Ecosystem services" has the same meaning as defined in RCW
 76.09.020.
     Sec. 5. RCW 79.64.110 and 2021 c 334 s 995 and 2021 c 145 s 3
 are each reenacted and amended to read as follows:
     (1) Any moneys derived from the lease of state forestlands or
 from the sale of valuable materials, oils, gases, coal, minerals,
 ((or)) fossils, or contracts for payments for ecosystem service
 projects under chapter 79.--- RCW (the new chapter created in section
 9 of this act) from those lands, except as provided in RCW 79.64.130,
 or the appraised value of these resources when transferred to a
 public agency under RCW 79.22.060, except as provided in RCW
 79.22.060(4), must be distributed as follows:
     (a) For state forestlands acquired through RCW 79.22.040 or by
 exchange for lands acquired through RCW 79.22.040:
     (i) The expense incurred by the state for administration,
 reforestation, and protection, not to exceed ((twenty-five)) 25
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 percent, which rate of percentage shall be determined by the board,
 must be returned to the forest development account created in RCW
 79.64.100. During the 2017-2019, 2019-2021, and 2021-2023 fiscal
 biennia, the board may increase the ((twenty-five)) 25 percent
 limitation up to ((twenty-seven)) 27 percent.
     (ii) Any balance remaining must be paid to the county in which
 the land is located or, for counties participating in a land pool
 created   under   RCW   79.22.140,  to   each  participating  county
 proportionate to its contribution of asset value to the land pool as
 determined by the board. Payments made under this subsection are to
 be paid, distributed, and prorated, except as otherwise provided in
 this section, to the various funds in the same manner as general
 taxes are paid and distributed during the year of payment. However,
 in order to test county flexibility in distributing state forestland
 revenue, a county may in its discretion pay, distribute, and prorate
 payments made under this subsection of moneys derived from state
 forestlands acquired by exchange between July 28, 2019, and June 30,
 2020, for lands acquired through RCW 79.22.040, within the same
 county, in the same manner as general taxes are paid and distributed
 during the year of payment for the former state forestlands that were
 subject to the exchange.
     (iii) Any balance remaining, paid to a county with a population
 of less than ((sixteen thousand)) 16,000, must first be applied to
 the reduction of any indebtedness existing in the current expense
 fund of the county during the year of payment.
     (iv) With regard to moneys remaining under this subsection
 (1)(a), within seven working days of receipt of these moneys, the
 department shall certify to the state treasurer the amounts to be
 distributed to the counties. The state treasurer shall distribute
 funds to the counties four times per month, with no more than ((ten))
 10 days between each payment date.
     (b) For state forestlands acquired through RCW 79.22.010 or by
 exchange for lands acquired through RCW 79.22.010, except as provided
 in RCW 79.64.120:
     (i) Fifty percent shall be placed in the forest development
 account.
     (ii) Fifty percent shall be prorated and distributed to the state
 general fund, to be dedicated for the benefit of the public schools,
 to the county in which the land is located or, for counties
 participating in a land pool created under RCW 79.22.140, to each
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 participating county proportionate to its contribution of asset value
 to the land pool as determined by the board, and according to the
 relative proportions of tax levies of all taxing districts in the
 county. The portion to be distributed to the state general fund shall
 be based on the regular school levy rate under RCW 84.52.065 (1) and
 (2) and the levy rate for any school district enrichment levies. With
 regard to the portion to be distributed to the counties, the
 department shall certify to the state treasurer the amounts to be
 distributed within seven working days of receipt of the money. The
 state treasurer shall distribute funds to the counties four times per
 month, with no more than ((ten)) 10 days between each payment date.
 The money distributed to the county must be paid, distributed, and
 prorated to the various other funds in the same manner as general
 taxes are paid and distributed during the year of paym