BILL ANALYSIS
AJR 30
Page 1
Date of Hearing: March 22, 2010
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AJR 30 (Salas) - As Introduced: February 2, 2010
SUBJECT : Geothermal power plants: section 1603 grant.
SUMMARY : Memorializes the President and Congress to request
that the US Treasury Department (Department) clarify that
"exploring" with respect geothermal power projects does not
constitute "physical work" for determining when construction
commences for purposes of eligibility for a grant under Section
1603 of the American Recovery and Reinvestment Tax Act of 2009
(ARRA).
EXISTING LAW :
1)Establishes the Division of Oil, Gas, and Geothermal Resources
within the Department of Conservation (DOC).
2)Requires DOC to oversee the drilling, operation, maintenance
and abandonment of oil, gas, and geothermal wells. An owner or
operator of any well is required to obtain approval from DOC
prior to commencing the drilling of a well.
3)Authorizes DOC to deny proposed oil and gas well drilling
operations if an operator fails to comply with an order, pay a
civil penalty or other fee, or remedy a violation.
4)Authorizes DOC to order a well to be inspected, abandoned or
redrilled if the well is determined to be hazardous or
idle-deserted.
5)Imposes a civil penalty of $5,000 on any person who violates
policies or regulations governing the management of geothermal
resources.
FISCAL EFFECT : None
COMMENTS : According to the author, ARRA includes substantial
incentives for the development of renewable energy projects,
including major tax credits, or grants in lieu of tax credits,
for new projects if construction commences after January 1, 2009
and are in service by December 21, 2013. Geothermal facilities
AJR 30
Page 2
are unique in that exploratory wells must be drilled before
construction can begin on the project to determine the quality
of the resource. This resolution urges the Department to
clarify the definition of "commencement of construction" to
exclude drilling of exploratory wells.
Section 1603 ARRA program guidance states that construction is
considered to commence "when physical work of a significant
nature begins" and further clarifies that "physical work does
not include preliminary activities such as planning or
designing, securing financing, exploring, or researching."
Exploratory wells can be modified (with additional construction
and permitting) to become operational wells. Without further
clarification, stakeholders are concerned that the Department
may rule that these exploratory wells constitutes "commencement
of construction" and deny Section 1603 grants to geothermal
projects that would otherwise be eligible.
REGISTERED SUPPORT / OPPOSITION :
Support
El Centro Chamber of Commerce
Imperial County Board of Supervisors
Opposition
None on file
Analysis Prepared by : Elizabeth MacMillan / NAT. RES. / (916)
319-2092