HB3115eng 102ND GENERAL ASSEMBLY

HB3115 Engrossed LRB102 14890 SPS 20243 b

AN ACT concerning regulation.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Renewable Gas and Low-Carbon Fuels Act.

Section 5. Findings. The General Assembly finds the following:

(1) Natural gas provides the citizens and businesses of the State a safe, reliable, and affordable source of energy.

(2) As Illinois transitions to a low-carbon energy economy, alternative low-carbon energy carriers that can support the needs of energy storage, resiliency, and emissions reductions are essential.

(3) Hydrogen, or its derivatives, has significant potential as a low-carbon energy carrier. Hydrogen is a storable gas with high energy density and zero CO₂

emissions at the point of use. Hydrogen can be produced in a variety of low-carbon or no-carbon methods.

(4) Methane emissions from organic waste are a powerful greenhouse gas with approximately 25 times the global warming potential of carbon dioxide.

(5) These methane emissions that would otherwise enter the Earth's atmosphere, or non-beneficially flared, can be captured and converted to renewable gas to create a fuel compatible with natural gas utility systems that is considered carbon-neutral and under certain circumstances can be carbon-negative.

(7) Constructing a renewable gas production facility to capture this methane from organic waste or other renewable resources for use by the utility or its customers has the added benefit of displacing geologic natural gas, thus integrating and beneficially using what would otherwise be waste methane and reducing the State's carbon footprint, among other environmental benefits.

(8) Encouraging the gas utility industry to undertake certain physical plant investments will promote the development of the renewable gas and other low-carbon fuels industry which, in turn, will create economic activity and jobs in this State while also improving the environment.

(9) Including renewable gas and other low-carbon fuels resources in a natural gas utility's supply portfolio is a cost effective way to provide beneficial environmental impacts utilizing the natural gas utility infrastructure.

(10) The development of renewable gas and other low-carbon fuels resources serves the public interest and should be encouraged to leverage the natural gas system to reduce greenhouse gas emissions and support a smooth transition to a low-carbon energy economy in Illinois.

Section 10. Definitions. As used in this Act:

"Biogas" means a mixture consisting of primarily methane and carbon dioxide that is released from the biological decomposition or conversion of organic materials, including, without limitation, biomass, manure, plant material, sewage, and landfill waste.

"Biomass" has the meaning given that term in subsection (d) of Section 16-127 of the Public Utilities Act.

"Commission" means the Illinois Commerce Commission.

"Environmental commodities" means non-tangible energy credits, and any and all current and future rights, credits, benefits, air quality credits, methane capture credits, renewable energy credits, emission reductions, offsets, and allowances, howsoever referred to, associated with the capture, production, generation, transportation, use, and environmental characteristics of biogas and low-carbon fuels, the displacement of fossil-based natural gas for any use (including, without limitation, thermal use, electricity generation, and use as a transportation fuel), the reduction of air pollutants or the avoidance of the emission of any gas, chemical or other substance, including, without limitation, any similar commodities, whether arising out of international, federal, State, or local laws or regulations.

"Facility" means a facility or any part of the equipment located at a facility that is used to create biogas, hydrogen, low-carbon fuels, methanate hydrogen, or other fuels, gather biogas, gather hydrogen, gather low-carbon fuels or other sources to make low-carbon fuels, process biogas or other sources into low-carbon fuels, inject low-carbon fuels into a natural gas pipeline or distribution system or determine the constituents of low-carbon fuels before the injection of the low-carbon Fuels into a natural gas pipeline or distribution system.

"Low-carbon fuels" means renewable gas and other low-carbon fuels, collectively or interchangeably.

"Natural gas utility" means a public utility that provides natural gas distribution services in Illinois.

"Other low-carbon fuels" means any of the following products processed to meet pipeline quality standards or transportation fuel grade requirements:

(1) hydrogen or other fuels derived from zero-carbon or low-carbon energy sources or from other sources where the CO₂ produced is capture and stored; or

(2) methane gas derived from hydrogen or other fuels derived from zero-carbon or low-carbon energy sources or from other sources where the CO₂ produced is capture and stored.

"Renewable energy sources" means hydroelectric, geothermal, solar photovoltaic, wind, tidal, wave, biomass, or biogas energy sources.

"Renewable gas" means any of the following products processed to meet pipeline quality standards or transportation fuel grade requirements:

(1) biogas;

(2) hydrogen derived from renewable energy sources; or

(3) methane gas derived from any combination of:

(A) biogas;

(B) hydrogen derived from renewable energy sources; or

(C) carbon dioxide.

Section 15. Renewable gas and low-carbon fuels programs.

(a) A natural gas utility shall incorporate low-carbon fuels into its natural gas supply portfolio. The goals for the total amount of renewable gas and other low-carbon fuels incorporated by the natural gas utility shall be as follows:

(1) by January 1, 2030, not less than 2% of the natural gas utility's total gas supply portfolio (by volume);

(2) by January 1, 2035, not less than 3% of the natural gas utility's total gas supply portfolio (by volume).

The calculation of the share of the supply portfolio shall not include the volume of gas of any type delivered but not sold by the natural gas utility.

(b) The natural gas utility shall make progress towards the goals set forth in this Section prior to the first milestone set forth in paragraph (1) of subsection (a). Within 2 years after the effective date of this Act, the natural gas utility shall submit a plan setting forth, as of the date of the plan, how it expects to achieve the goals set forth in paragraphs (1) and (2) of subsection (a). This plan shall also include a description of the natural gas utility's progress towards the goals set forth in paragraphs (1) and (2) of subsection (a).

(c) For purposes of meeting the goals set forth in subsection (a), low-carbon fuels that are purchased by the natural gas utility must include environmental commodities associated with the gas. Nothing in this Section shall be interpreted as preventing the gas utility from purchasing low-carbon fuels without environmental commodities, although such purchases shall not be applicable to meeting the goals set forth in subsection (a) of this Section.

(d) A natural gas utility may seek authorization from the Commission under this Section to engage in low-carbon fuels activities, including, without limitation:

(1) making a financial investment in a low-carbon fuels facility, including, but not limited to, owning, in whole or in part, and operating a low-carbon fuels facility connected to its distribution system;

(2) contracting with a producer of low-carbon fuels to purchase gas supply from a low-carbon fuels facility;

(3) extending the transmission or distribution system of the natural gas utility to interconnect with a low-carbon fuels facility;

(4) purchasing gas produced from a low-carbon fuels facility, whether or not the gas has environmental commodities:

(A) to incorporate the gas produced from a low-carbon fuels facility into the supply portfolio of the natural gas utility; or

(B) to sell the gas produced from a low-carbon fuels facility directly to the customers of the natural gas utility;

(5) participating in a State or federal renewable energy program or project if participation in the program or project by the natural gas utility:

(A) consists of the purchase or sale of gas produced by a low-carbon fuels facility or environmental commodities by the natural gas utility; and

(B) results in a reduction of the cost of gas produced from a low-carbon fuels facility to the customers of the natural gas utility;

(6) providing customers of the natural gas utility with the option to purchase gas produced from a low-carbon fuels facility, with or without environmental commodities, directly from the natural gas utility;

(7) any other activity which develops sources of low-carbon fuels in this State for the purpose of providing the environmental benefits to this State noted in subsection (e), creating jobs through the construction and operation of low-carbon fuels facilities in this State or diversifying the supply of energy in this State; or

(8) any other prudently incurred investments made by a natural gas utility that contribute to the natural gas utility meeting the targets set forth in subsection (a).

(e) The Commission shall approve a low-carbon fuels activity pursuant to subsection (d) if it determines the low-carbon fuels activity investment and expenses are: (1) consistent with the provisions of this Section; and (2) the natural gas utility has demonstrated that the low-carbon fuels activity provides one or more of the following environmental benefits to this State:

(1) the reduction or avoidance of emissions of any air pollutant or greenhouse gas in this State;

(2) the displacement of geologic natural gas with low-carbon fuels; or

(3) the reduction or avoidance of any pollutant that could have an adverse impact on the waters of this State.

Investments and costs incurred pursuant to this Section shall be deemed prudent and reasonable if the Commission determines that the natural gas utility's expenditures are consistent with the provisions of this Section. The Commission shall make determinations as to whether the execution of the investments and the costs incurred pursuant to this Section are reasonable and prudent in the natural gas utility's next rate proceeding.

(f) The Commission shall review and, by order, approve, or approve as modified, the natural gas utility's low-carbon fuels activity proposal within 180 days after the date on which it is filed. In the event the Commission approves the proposed natural gas activity with modifications, the Commission's order shall not become a final order subject to petitions for rehearing until 15 days after service of same by the Commission. The utility shall have 14 days following the date of service of the order to notify the Commission in writing whether it will accept any modifications so identified in the order or whether it has elected not to proceed with the proposal. If the utility notifies the Commission that it will accept such modifications, the Commission shall issue an amended order, without further hearing, within 14 days following such notification, approving the proposal as modified and such order shall be considered to be a final order of the Commission subject to petitions for rehearing and appellate procedures.

(g) All environmental commodities from low-carbon fuels resulting from the purchase of low-carbon fuels for gas supply or the ownership of a low-carbon fuels facility shall be applied to the benefit of gas customers by reducing greenhouse gas emissions in the State of Illinois through: (1) where possible given the nature of the applicable environmental commodities, by offsetting direct greenhouse gas emissions from gas utility operations, including methane emissions, and (2) replacing customer consumption of conventional natural gas with low-carbon fuels, or another application that will reduce greenhouse gas emissions in the State of Illinois.

(h) The cumulative amount of estimated rate impact of the low-carbon fuels activities, measured beginning with the date of the natural gas utility's most recent delivery service rate order, shall not exceed an annual average 2% per year of the utility's delivery base rate revenues. Each natural gas utility request for authorization from the Commission under subsection (d) shall include an estimate of the rate impacts associated with the proposed low-carbon fuels activities. If the natural gas utility estimates that the incremental rate impact of a proposed low-carbon fuels natural gas activity causes the natural gas utility to exceed the rate impact limits contained in this subsection, the natural gas utility's filing shall provide for a curtailment or delay the proposed implementation of the low-carbon fuels activity as required to maintain rate impacts below the limits set forth in this subsection.

(i) The Commission shall adopt rules governing filing requirements, reporting requirements, and the process for natural gas utilities to fully recover prudently incurred costs associated with low-carbon fuels activity described in subsection (d). Rules adopted by the Commission under this Section may not prohibit an affiliated interest of a natural gas utility from making a capital investment in a low-carbon fuels production project if the affiliated interest, as defined in Section 7-101 of the Public Utilities Act is not a public utility. The Commission shall adopt rules pursuant to this subsection not later than December 31, 2021.

Section 90. The Illinois Administrative Procedure Act is amended by adding Section 5-45.8 as follows:

(5 ILCS 100/5-45.8 new)

Sec. 5-45.8. Emergency rulemaking; Renewable Gas and Low-Carbon Fuels Act. To provide for the expeditious and timely implementation of the Renewable Gas and Low-Carbon Fuels Act, emergency rules implementing the Renewable Gas and Low-Carbon Fuels Act may be adopted in accordance with Section 5-45 by the Illinois Commerce Commission. The adoption of emergency rules authorized by Section 5-45 and this Section is deemed to be necessary for the public interest, safety, and welfare.

This Section is repealed on January 1, 2027.

Section 99. Effective date. This Act takes effect upon becoming law.