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The Utah Legislature Chooses “All of the Above” for a Reliable Electric Grid

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by Denise A. Dragoo

During the recent General Session, the Utah Legislature enacted several major energy bills which confirm the State’s continued investment in, and support of, both conventional and renewable energy sources. The Legislature consistently chose to promote “all of the above” as the energy mix for a more reliable electric grid. Following austerity measures taken in response to the COVID-19 pandemic during six special sessions in 2020, the Legislature found itself with a budget surplus in 2021. The surplus, invested largely in education, was also returned in part to the energy industry as tax incentives and in legislation broadening funding sources for infrastructure development. The Legislature also worked with newly elected Governor Spencer Cox to reorganize the Office of Energy Development and to provide the Office of Economic Development (“GOED”) with new regulatory and permit-approval authority.

Tax Incentives:

House Bill 356, sponsored by Representative Carl Albrecht, expands tax credits available for new capital investment in rural counties, and, for the first time, makes these credits available to oil, gas and mining operations. The current tax incentive is only available to a new commercial project with a $10 million threshold capital investment in a county of the 1st or 2nd class. The new bill reduces the threshold in 3rd and 4th class counties to $500,000 and to $250,000 in 5th and 6th class counties. The tax credit is limited to 50% of new state revenues generated over the life of the project or twenty years. The Governor signed the bill on March 22, 2021 and the program is currently being administered by GOED.

The Legislature also demonstrated support for “all of the above” energy sources in considering tax credits for hydrogen. House Bill 223, sponsored by Representative Melissa Ballard, adds hydrogen to the list of energy systems which qualify for income tax credits. Hydrogen production from conventional fuels such as coal and natural gas, as well as renewable sources both qualify for the tax incentive. The bill was signed by the Governor on March 22, 2021.

Energy Policy:

House Bill 388, also sponsored by Representative Albrecht, updates the State’s energy policy to promote both conventional and non-conventional energy development. In response to recent rolling blackouts in Texas and California, the bill requires Utah to ensure adequate supplies of dispatchable energy to meet electric grid demands. This policy will benefit coal and natural-gas suppliers as well as the residential and industrial users dependent on non-interrupted power supply. The bill also updates the state’s energy policy to promote unconventional energy technology including hydrogen (from all sources) and pumped storage. H.B. 388 was signed by the Governor on March 22, 2021. In a separate measure, the Legislature appropriated $100,000 for a study of the economic impact to the State of Utah’s from energy and natural resources industries.

Government Restructure, Financing and Regulatory Streamlining:

House Bill 346 sponsored by Representative Case Snider, places the Office of Energy Development under the Utah Department of Natural Resources, but maintains the Energy Advisor as a member of the Governor’s Cabinet. The bill was signed by the Governor on March 17, 2021. House Bill 217, sponsored by Representative Cory Maloy, creates the Utah Office of Regulatory Relief office within the Governor’s Office of Economic Development. The new office will field regulatory and permit disputes between industry and regulators. The Governor signed the bill on March 22, 2021.

The energy industry supported Senate Bill 133 sponsored by Senator David Hinkins to set aside funds from oil, gas and mining severance taxes to support of the Division of Oil, Gas and Mining, the Division of Air Quality, the Division of Water Quality and the Utah Geological Survey. The measure takes effect on May 5, 2021. Senate Bill 176, sponsored by Senator Ron Winterton, broadens the Community Impact Fund Act to provide greater discretion to the Board to grant loans. This fund receives money generated from federal oil, gas and coal leases subject to the Federal Mineral Leasing Act. This legislation will assist the CIB to make loans to facilities, including those located outside the State, which may facilitate the shipment and handling of Utah coal and other products. The bill was signed by the Governor on March 17, 2021.

In sum, during the 2021 General Session, the Utah Legislature provided strong support for an “all of the above energy mix in Utah. Both conventional and renewable energy infrastructure projects now qualify for high cost infrastructure tax incentives. The Legislature has provided funding to help industry and regulators expedite permitting and development. The Governor’s Office has been provided with additional authority to assist with regulatory relief.