SB2062ham003 97TH GENERAL ASSEMBLY

Rep. John E. Bradley

Filed: 5/30/2011

09700SB2062ham003 LRB097 10263 ASK 56600 a

AMENDMENT TO SENATE BILL 2062

AMENDMENT NO. ______. Amend Senate Bill 2062, AS AMENDED, by replacing everything after the enacting clause with the following:

"Section 1. Short title. This Act may be cited as the Clean Coal FutureGen for Illinois Act of 2011.

Section 5. Purpose. Recognizing that the FutureGen Project is a first-of-a-kind research project to permanently sequester underground captured CO₂ emissions from: (1) a coal-fueled power plant that uses as its primary fuel source high volatile bituminous rank coal with greater than 1.7 pounds of sulfur per million btu content or (2) other approved and permitted captured CO₂ sources in the State of Illinois, and that such a project would have benefits to the economy and environment of Illinois, the purpose of this Act is to provide the non-profit FutureGen Alliance with adequate liability protection and permitting certainty to facilitate the siting of the FutureGen Project in the State of Illinois, to provide to the State of Illinois certain financial benefits from environmental attributes for the Project, and to help secure over $1 billion in federal funding for the Project.

Section 10. Legislative findings. The General Assembly finds and determines that:

(1) human-induced greenhouse gas emissions have been identified as contributing to global warming, the effects of which pose a threat to public health and safety and the economy of the State of Illinois;

(2) in order to meet the energy needs of the State of Illinois, keep its economy strong and protect the environment while reducing its contribution to human-induced greenhouse gas emissions, the State of Illinois must be a leader in developing new low-carbon technologies;

(3) carbon capture and storage is a low-carbon technology that involves capturing the captured CO₂ from fossil fuel energy electric generating units and other industrial facilities and injecting it into secure geologic strata for permanent storage;

(4) the FutureGen Project is a public-private partnership between the Federal Department of Energy, the FutureGen Alliance, and other partners that proposes to use this new technology as part of a plan to transport and store captured CO₂ from a coal-fueled power plant that uses as its primary fuel source high-volatile bituminous rank coal with greater than 1.7 pounds of sulfur per million btu content and other captured CO₂ sources that are approved by the appropriate State of Illinois agency and permitted in the State of Illinois;

(5) the FutureGen Project will help ensure the long-term viability of Illinois Basin coal as a major energy source in the State of Illinois and throughout the nation and represents a significant step in the State of Illinois' efforts to become a self-sufficient, clean energy producer;

(6) the FutureGen Project provides an opportunity for the State of Illinois to partner with the Federal Department of Energy, the FutureGen Alliance, and other partners in the development of these innovative clean-coal technologies;

(7) the FutureGen Project will make the State of Illinois a center for developing and refining clean coal technology and carbon capture and storage, and will result in the development of new technologies designed to improve the efficiency of the energy industry that will be replicated world wide;

(8) the FutureGen Project is an important coal development and conversion project that will create jobs in the State of Illinois during the construction and operations phases, contribute to the overall economy of the State of Illinois and help reinvigorate the Illinois Basin coal industry; and

(9) the FutureGen Project and the property necessary for the FutureGen Project serve a substantial public purpose as its advanced clean-coal electricity generation, advanced emissions control and carbon capture and storage technologies will benefit the citizens of the State of Illinois.

Section 15. Definitions. For the purposes of this Act:

"Agency" means the Illinois Environmental Protection Agency or the United States Environmental Protection Agency depending upon which agency has primacy for the CO₂ injection permit.

"Captured CO₂" means CO₂ and other trace chemical constituents approved by the Agency for injection into the Mount Simon Formation.

"Carbon capture and storage" means the process of collecting captured CO₂ from coal combustion by-products for the purpose of injecting and storing the captured CO₂ for permanent storage.

"Carbon dioxide" or "CO₂" means a colorless, odorless gas in the form of one carbon and 2 oxygen atoms that is the principal greenhouse gas.

"Department" means the Department of Commerce and Economic Opportunity.

"Director" means the Director of Commerce and Economic Opportunity.

"Federal Department" means the federal Department of Energy.

"FutureGen Alliance" is a 501(c)(3) non-profit consortium of coal and energy producers created to benefit the public interest and the interest of science through the research, development, and demonstration of near zero-emission coal technology, with the cooperation of the Federal Department.

"FutureGen Project" means the public-private partnership between the Federal Department, the FutureGen Alliance, and other partners that will control captured CO₂ and will construct and operate a pipeline and storage field for captured CO₂.

"Mount Simon Formation" means the deep sandstone reservoir into which the sequestered CO₂ is to be injected at a depth greater than 3,500 feet below ground surface and that is bounded by the granitic basement below and the Eau Claire Shale above.

"Operator" means the FutureGen Alliance and its member companies, including their parent companies, subsidiaries, affiliates, directors, officers, employees, and agents, or a not-for-profit successor-in-interest approved by the Department.

"Operations phase" means the period of time during which the Operator injects and simultaneously monitors CO₂ into the Mount Simon Formation in accordance with its permit approved by the Agency for the FutureGen Project.

"Post-injection" means after the captured CO₂ has been successfully injected into the wellhead at the point at which the captured CO₂ is transferred into the wellbore for carbon sequestration and storage into the Mount Simon Formation.

"Pre-injection" means all activities and occurrences prior to successful delivery into the wellhead at the point at which the captured CO₂ is transferred into the wellbore for carbon sequestration and storage into the Mount Simon Formation, including but not limited to, the operation of the FutureGen Project.

"Public liability" means any civil legal liability arising out of or resulting from the storage, escape, release, or migration of the sequestered CO₂ that was injected by the Operator. The term "public liability", however, does not include any legal liability arising out of or resulting from the construction, operation, or other pre-injection activity of the Operator or any other third party.

"Public liability action" or "action" means a written demand, lawsuit, or claim from any third party received by the Operator seeking a remedy or alleging liability on behalf of Operator resulting from any public liability and is limited to such written demands, claims, or lawsuits asserting claims for property damages, personal or bodily injury damages, environmental damages, or trespass.

"Sequestered CO₂" means the captured CO₂ from the FutureGen Project operations that is injected into the Mount Simon Formation by the Operator.

Section 20. Title to sequestered CO₂. If the FutureGen Alliance selects as its location for CO₂ storage a designated site or sites in the State of Illinois suitable for injection of captured CO₂ into the Mount Simon Formation, then the Operator shall retain all rights, title, and interest in and to and any liabilities associated with the pre-injection CO₂. The Operator shall retain all rights, title, and interest, including any environmental benefits or credits, in and to and any liabilities associated with the sequestered CO₂ during the operations phase of the FutureGen Project, plus an additional 10-year period. Following the operations phase of the FutureGen Project, plus an additional 10-year period, and upon compliance with all applicable permits, the Operator shall transfer and convey and the State of Illinois shall accept and receive, with no payment due from the State of Illinois, all rights, title, and interest, including any future environmental benefits or credits, in and to and any liabilities associated with the sequestered CO₂.

Section 25. Insurance against qualified losses.

(a) The Operator shall procure an insurance policy from a private insurance carrier or carriers, if and to the extent that such a policy is available at a reasonable cost, that insures the Operator against any qualified loss stemming from a public liability action. The coverage limits for such an insurance policy shall be at least $25,000,000. Within every 10-year period after operations begin for the Project, the Operator and Department shall mutually agree on an independent third party, with appropriate insurance expertise, to conduct a risk-weighted analysis of the project, assess the appropriate level of insurance to protect the project from the financial consequences of public liability actions, and make a recommendation as to whether a greater amount of insurance coverage than the Operator has at the time is commercially available at a reasonable cost to the Operator. This analysis shall incorporate, and not be inconsistent with, results from similar risk-based analyses that may be required of the Operator by the agency permitting CO₂ injection as part of its financial assurance process. The Operator and the Department shall have an opportunity to review the draft analysis and any recommendations for narrowed or expanded levels of insurance coverage prior to finalization of the analysis. If the independent third party recommends that a greater amount of insurance coverage is commercially available at a reasonable cost to the Operator, then the Operator shall procure the recommended level of insurance, to the extent the insurance is commercially available and is recognized as a recoverable cost under the terms of any CO₂ services agreement or power purchase agreement that may be in place for the project at the time of the analysis. The cost of the independent third party shall be borne by the Operator.

(b) The protections provided by the State under this Act and the obligations on the Operator shall only apply after the Operator establishes a CO₂ Storage Trust Fund consistent with the purposes of this Act and pays a $50,000,000 fee to the State, which is to be deposited into the CO₂ Storage Trust Fund. The fee shall be considered a non-refundable expenditure to the Operator for immediate protections and benefits provided by the State.

The purpose of the CO₂ Storage Trust Fund shall be to complement commercially-available insurance products and to support the Operator's ability to satisfy financial assurance obligations that may be required by law or the terms of the Operator's permit issued by the Agency.

The funds in the CO₂ Storage Trust Fund may used to satisfy any qualified loss stemming from a public liability action to the extent that such loss is not otherwise covered by an insurance policy. The funds may also be used to pay reasonable administrative costs associated with managing and resolving claims associated with the CO₂ Storage Trust Fund, except that during the operations phase, no payments from the CO2 Storage Trust Fund may be used to pay legal fees associated with defending claims resulting from a public liability action. The funds may also be used for post-operations phase activities, including monitoring, CO₂ storage site maintenance, storage site staffing, insurance, well and site closure, or other activities for which a law or permit requires financial assurance.

The CO₂ Storage Trust Fund shall be funded in the following manner, toward a maximum amount of $250,000,000 per 100 million metric tons of CO₂ storage site design capacity, unless the permit approved by the Agency requires a higher maximum amount:

(1) Subsequent future annual payments to the CO₂

Storage Trust Fund shall be made during the operations phase of the project at an initial rate of $950,000 per million metric tons of CO₂ injected, with the rate for subsequent annual payments adjusted up or down in order to meet the financial requirements of the Agency's permit and to fulfill the requirements of the Act.

(2) The Operator shall deliver annually to the Department an audited financial report that includes CO₂

Storage Trust Fund balances, liabilities, projected balances, projected liabilities, and evidence that the financial health of the CO₂ Storage Trust Fund is sufficient for the purposes of this Act.

(3) The Operator shall select, subject to the approval of the Agency, an independent third-party trustee to administer the CO₂ Storage Trust Fund.

(4) The trustee shall administer the CO₂ Storage Trust Fund on behalf of the Operator during the operations phase of the Project plus an additional 10-year period, and on behalf of both the Operator and the State of Illinois after title to the CO₂ has been transferred to the State of Illinois, to ensure compliance with the Operator's permits and this Act

(5) Once the permitting agency has issued a certificate of completion, or a comparable instrument indicating the site is safely closed, any surplus balance in the CO₂

Storage Trust Fund shall be distributed to the State. If the Federal Government provides liability protections that obviates, in part or in full, the purpose of the CO₂

Storage Trust Fund, then any surplus balance shall be distributed in accordance with this paragraph (5).

(c) The Operator shall maintain an absolute minimum level of financial assurances in the amount of $100,000,000 against potential losses stemming from a public liability action, in the combination of insurance, CO₂ Storage Trust Fund balance, project assets, or cash or cash equivalents during the operations phase of the FutureGen Project, plus an additional 10-year period.

(d) Pursuant to Section 30 of this Act, the State shall indemnify and hold harmless the Operator against any qualified loss stemming from a public liability action to the extent that the qualified loss is greater than $100,000,000 and is not covered by the combination of an insurance policy under subsection (a) of this Section, funds in the CO₂ Storage Trust Fund, project assets, and cash or cash equivalents.

(e) If the FutureGen Alliance identifies a designated site or sites in Illinois suitable for injection of captured CO₂

into the Mount Simon Formation, then the Department shall be authorized to contract with the FutureGen Alliance, under terms not inconsistent with this Act, in order to define the rights and obligations of the FutureGen Alliance and the Department, including but not limited to, the insurance and indemnification obligations under Sections 25 and 30 of this Act.

(f) If federal indemnification covers all or a portion of the obligations assumed by the State under Section 25 of this Act, such State obligations shall be reduced in proportion to the federal indemnification and be considered subordinated to any federal indemnification.

(g) For the purpose of this Section, "qualified loss" means a loss by the Operator stemming from a public liability action other than those losses arising out of or relating to:

(1) the intentional or willful misconduct of the Operator;

(2) the failure of the Operator to comply with any applicable law, rule, regulation, or other requirement established by the Federal Department, Agency, or State of Illinois for the carbon capture and storage of the sequestered CO₂, including any limitations on the chemical composition of any sequestered CO₂; or

(3) any pre-injection activities of the Operator.

Section 30. Indemnification. Notwithstanding any law to the contrary, subject to and consistent with the conditions provided in Section 25 of this Act, the State of Illinois shall indemnify, hold harmless, defend, and release the Operator from and against any public liability action asserted against the Operator, subject to the following terms and conditions:

(a) The obligation of the State of Illinois to indemnify the Operator does not extend to any public liability arising out of or relating to:

(1) the intentional or willful misconduct of the Operator;

(2) the failure of the Operator to materially comply with any applicable law, rule, regulation, or other requirement established by the Federal Department, Agency, or State of Illinois for the carbon capture and storage of the sequestered CO₂, including any limitations on the chemical composition of any sequestered CO₂;

(3) any pre-injection activities of the Operator; or

(4) a qualified loss to the extent that it is equal to or less than $100,000,000 or is covered by the combination of funds in an insurance policy under subsection (a) of Section 25 of this Act, funds in the CO₂ Storage Trust Fund under subsection (b) of Section 25 of this Act, project assets, and cash or cash equivalents.

(b) The indemnification obligations of the State of Illinois assumed under Section 30 of this Act shall be reduced in proportion and be subordinated to any federal indemnification that covers all or a portion of the State's obligations.

Section 35. Representation. In furtherance of the State of Illinois' obligations set forth in subsection (b) of Section 25 and in Section 30 of this Act, the Attorney General has the following duties:

(a) In the event that any public liability action covered under Section 30 of this Act is commenced against the Operator, the Attorney General shall, upon timely and appropriate notice to the Attorney General by the Operator, appear on behalf of the Operator and defend the action. Any such notice must be in writing, must be mailed within 15 days after the date of receipt by the Operator of service of process, and must authorize the Attorney General to represent and defend the Operator in the action. The delivery of this notice to the Attorney General constitutes an agreement by the Operator to cooperate with the Attorney General in defense of the action and a consent that the Attorney General shall conduct the defense as the Attorney General deems advisable and in the best interests of the Operator and the State of Illinois, including settlement in the Attorney General's discretion. The Operator may appear in such action through private counsel to respond or object only to any aspect of a proposed settlement or proposed court order which would directly affect the day-to-day operations of the FutureGen Project. In any such action, the State of Illinois shall pay the court costs and litigation expenses of defending such action, to the extent approved by the Attorney General as reasonable, as they are incurred.

(b) In the event that the Attorney General determines either (i) that so appearing and defending the Operator involves an actual or potential conflict of interest or (ii) that the act or omission which gave rise to the claim was not within the scope of the indemnity as provided in Section 30 of this Act, the Attorney General shall decline in writing to appear or defend or shall promptly take appropriate action to withdraw as attorney for the Operator. Upon receipt of such declination or withdrawal by the Attorney General on the basis of an actual or potential conflict of interest, the Operator may employ its own attorney to appear and defend, in which event the State of Illinois shall pay the Operator's court costs, litigation expenses, and attorneys' fees, to the extent approved by the Attorney General as reasonable, as they are incurred.

(c) In any action asserted by the Operator or the State of Illinois to enforce the indemnification obligations of the State of Illinois as provided in Section 30 of the Act, the non-prevailing party is responsible for any reasonable court costs, litigation expenses, and attorneys fees incurred by the prevailing party.

(d) Court costs and litigation expenses and other costs of providing a defense, including attorneys' fees, paid or obligated under this Section, and the costs of indemnification, including the payment of any final judgment or final settlement under this Section, must be paid by warrant from appropriations to the Department pursuant to vouchers certified by the Attorney General.

(e) Nothing contained or implied in this Section shall operate, or be construed or applied, to deprive the State of Illinois, or the Operator, of any defense otherwise available.

(f) Any judgment subject to State of Illinois indemnification under this Section is not enforceable against the Operator, but shall be paid by the State of Illinois in the following manner: Upon receipt of a certified copy of the judgment, the Attorney General shall review it to determine if the judgment is (i) final, unreversed, and no longer subject to appeal and (ii) subject to indemnification under Section 30 of this Act. If the Attorney General determines that it is, then the Attorney General shall submit a voucher for the amount of the judgment and any interest thereon to the State of Illinois Comptroller and the amount must be paid by warrant from appropriation to the Department to the judgment creditor solely out of available appropriations.

Section 40. Permitting. The State of Illinois shall issue to the Operator all necessary and appropriate permits consistent with State and federal law and corresponding regulations. The State of Illinois must allow the Operator to combine applications when appropriate, and the State of Illinois must otherwise streamline the application process for timely permit issuance.

Section 43. Tax exemption. The State of Illinois has offered certain incentives to the FutureGen Alliance to make the State of Illinois the most attractive location for the FutureGen Project.

Section 45. Incentives. The State of Illinois has offered certain incentives to the FutureGen Alliance to make the State of Illinois the most attractive location for the FutureGen Project.

Section 900. The State Lawsuit Immunity Act is amended by changing Section 1 as follows:

(745 ILCS 5/1) (from Ch. 127, par. 801)

Sec. 1. Except as provided in the Illinois Public Labor Relations Act, the Court of Claims Act, the State Officials and Employees Ethics Act, and Section 1.5 of this Act, and, except as provided in and to the extent provided in the Clean Coal FutureGen for Illinois Act, the State of Illinois shall not be made a defendant or party in any court.

(Source: P.A. 95-18, eff. 7-30-07; 95-331, eff. 8-21-07; 95-876, eff. 8-21-08.)

(705 ILCS 505/8.5 rep.)

Section 910. The Court of Claims Act is amended by repealing Section 8.5.

Section 997. Severability. The provisions of this Act are severable under Section 1.31 of the Statute on Statutes.

Section 999. Effective date. This Act takes effect upon becoming law.".