HBA-SEP H.B. 788 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 788
By: Swinford
Agriculture & Livestock
2/18/2001
Introduced



BACKGROUND AND PURPOSE 

Methyl Tertiary Butyl Ether (MTBE) is a gasoline additive that has
contributed to lower ozone levels but constitutes a threat to water
supplies and public health causing several states to ban MTBE.   A viable
oxygenate alternative is ethanol.  The use of  nontoxic ethanol could help
to: preserve clean water, maintain clean air achievements in ozone
non-attainment areas, contribute to rural economic development, and provide
an additional market for feedgrain producers.   To promote ethanol use,
several states have instituted producer payments which range from $0.20 to
$0.40 per gallon.  While a payment of less than $0.20 could keep Texas
grain ethanol in production, a higher producer incentive encourages ethanol
production from alternative sources, and places Texas producers in a better
position in which to compete with out-of-state producers who also receive
payments.  House Bill 788 establishes producer incentives for the
production of ethanol and biodiesel. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the Department of Agriculture in
SECTION 1 (Section 16.002, Agriculture Code) in this bill. 

ANALYSIS

House Bill 788 amends the Agriculture Code to require the Department of
Agriculture (department) to provide by rule for the distribution, no less
often than quarterly, of grant funds to producers of fuel ethanol and
biodiesel as an incentive for the development of the fuel ethanol and
biodiesel industry.  The bill provides that to be eligible for a grant, a
producer must apply to the department for the registration of the plant.
The bill sets forth qualification requirements for the plant and requires
the department to register all qualified plants.  The bill provides that,
until the 10th anniversary of the date production of the plant begins, a
producer is entitled to receive 20 cents for each gallon of fuel ethanol or
biodiesel produced in the plant.  

 The bill establishes the fuel ethanol and biodiesel production account,
composed of money transferred by the legislature from the general revenue
fund.  The bill requires a producer to report monthly to the department and
prohibits a producer from receiving grants for more than 30 million gallons
of fuel at any one registered plant in each fiscal year beginning on or
after September 1, 2004.  A producer who fails to submit a report is
ineligible to receive a grant for the period in which the report was not
filed. 

EFFECTIVE DATE

On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001.