BILL NUMBER: AJR 30	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Salas
   (Coauthor: Assembly Member V. Manuel Perez)

                        FEBRUARY 2, 2010

   Relative to geothermal power projects and tax incentives.


	LEGISLATIVE COUNSEL'S DIGEST


   AJR 30, as introduced, Salas. Geothermal power projects: section
1603 grant.
   This measure would memorialize the President and the Congress of
the United States to request that the United States Treasury
Department clarify that, for purposes of eligibility for a grant
under Section 1603 of the American Recovery and Reinvestment Tax Act
of 2009 in lieu of tax credits, "exploring" with respect to
geothermal power projects does not constitute physical work for
determining when construction commences.
   Fiscal committee: no.



   WHEREAS, To be eligible for a grant under section 1603 of the
American Recovery and Reinvestment Tax Act of 2009 (Pub. L. 111-5)
(act) in lieu of tax credits, a project that is to be placed in
service after December 31, 2010, must commence construction after
January 1, 2009. Program guidance issued by the United States
Treasury Department specifies that construction is considered to have
commenced "when physical work of a significant nature begins" and
notes that "physical work does not include preliminary activities as
planning or design, securing financing, exploring, or researching;
and

   WHEREAS, Wells drilled as part of exploratory resource
verification for geothermal power projects should qualify as
"exploring" or "researching" activities and not trigger the
"commencement of construction" threshold. These test wells are not
considered a part of any construction of a facility, and many of
these wells are ultimately abandoned through proper closure
procedures. If, these wells are subsequently used as future
operational wells in instances where the resource is in fact verified
due to exploratory drilling as being worthy of full-scale
development, significant new construction permitting and construction
on the wells would be required; and
   WHEREAS, Imperial County is the second largest producer of
geothermal energy in the nation. Several new proposed geothermal
powerplants are under development in Imperial County. The proponents
of some of these projects have applied for federal tax incentives
that were enacted as part of the act; and
   WHEREAS, Imperial County has the highest unemployment rate in the
state, with an unemployment rate of 31.9 percent in October 2009,
29.2 percent in November 2009, and a high of 33.1 percent in August
2009, as reported by the Employment Development Department. The
development of new geothermal powerplants in Imperial County will
create new jobs for residents of Imperial County and will provide the
kind of economic stimulus that the act was designed to encourage;
and
   WHEREAS, The United States Treasury Department should issue
clarifying language to define eligible, drilling-related
preconstruction costs with respect to geothermal power projects as
follows:
   "Exploring is a preliminary activity and does not constitute
physical work in determining when construction commences. In a
geothermal project, exploring includes any drilling performed prior
to the date that a geothermal consultant or engineer would determine
that a geothermal resource exists in the quantity and quality
necessary to justify a commercially viable geothermal power
generation plant at the site of the taxpayer's facility. Drilling
prior to that date does not constitute physical work of a significant
nature"; now, therefore, be it
   Resolved by the Assembly and the Senate of the State of
California, jointly, That the Legislature respectfully memorializes
the President and the Congress of the United States to request that
the United States Treasury Department clarify that, for purposes of
eligibility for a grant under section 1603 of the American Recovery
and Reinvestment Act of 2009 in lieu of tax credits, "exploring" with
respect to geothermal power projects does not constitute physical
work for determining when construction commences; and be it further
   Resolved, That the Chief Clerk of the Assembly transmit copies of
this resolution to the President and Vice President of the United
States, the Speaker of the House of Representatives, the Majority
Leader of the Senate, and to each Senator and Representative from
California in the Congress of the United States.