AN ACT CONCERNING ALTERNATIVE FUELS AND FLEXIBLE FUELED VEHICLES.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective July 1, 2007) For the purposes of sections 1 to 7, inclusive, of this act:

(1) "Biodiesel" means a fuel comprised of mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats, designated B100, and meeting the requirements of designation D 6751 of the American Society for Testing and Materials.

(2) "Qualified biodiesel producer" means a facility that produces biodiesel, is registered with the state of Connecticut, domiciled in Connecticut and actively engaged in the production of biodiesel in Connecticut for commercial purposes.

(3) "Qualified biodiesel distributor" means a facility that stores and distributes biodiesel, that is registered with the state of Connecticut, domiciled in Connecticut and actively engaged in the storage and distribution of biodiesel in Connecticut for commercial purposes.

Sec. 2. (NEW) (Effective July 1, 2007) (a) There is established an account to be known as the "Connecticut qualified biodiesel producer incentive account", which shall be a separate, nonlapsing account within the General Fund. The account shall contain any moneys required by law to be deposited in the account.

(b) The moneys in said account shall be expended by the Connecticut Center for Advanced Technology for the purpose of providing grants to qualified biodiesel producers and qualified biodiesel distributors pursuant to sections 3 to 7, inclusive, of this act.

Sec. 3. (NEW) (Effective July 1, 2007) (a) A qualified biodiesel producer shall be eligible for not more than sixty monthly grants from the account. The Connecticut Center for Advanced Technology shall determine monthly grant amounts by calculating the estimated gallons of qualified biodiesel produced during the preceding month, as certified by the Connecticut Center for Advanced Technology, and applying such figure to the per gallon incentive credit established in subsection (b) of this section.

(b) Each qualified biodiesel producer shall be eligible for a total grant in any fiscal year equal to the following amounts: (1) For the first five million gallons of qualified biodiesel produced, thirty cents per gallon; (2) for the second five million gallons of qualified biodiesel produced, twenty cents per gallon; and (3) for the third five million gallons of qualified biodiesel produced, ten cents per gallon.

(c) Qualified biodiesel produced by a qualified biodiesel producer in excess of fifteen million gallons shall not be eligible for a grant pursuant to this section.

Sec. 4. (NEW) (Effective July 1, 2007) (a) To receive a grant pursuant to section 3 of this act, a qualified biodiesel producer shall file an application for such funds not later than fifteen days after the last day of the month for which the grant is sought. The application shall include, but not be limited to, (1) the location of the qualified biodiesel producer; (2) the number of Connecticut citizens employed by the qualified biodiesel producer in the preceding month; (3) the number of gallons of qualified biodiesel produced during the month for which the grant is sought; (4) the actual costs of creating storage and distribution capacity for biodiesel during the month; (5) a copy of the qualified biodiesel producer's Connecticut registration; and (6) any other information deemed necessary by the Connecticut Center for Advanced Technology to ensure that such grants shall be made only to qualified biodiesel producers.

(b) The Connecticut Center for Advanced Technology shall pay all grants for a particular month by the fifteenth day after receipt and approval of the application filed pursuant to subsection (a) of this section.

Sec. 5. (NEW) (Effective July 1, 2007) A qualified biodiesel producer shall be eligible for a one-time grant pursuant to section 2 of this act to assist with purchasing equipment or constructing, modifying or retrofitting production facilities. Such grant shall not exceed three million dollars, regardless of the number of facilities owned by said qualified biodiesel producer.

Sec. 6. (NEW) (Effective July 1, 2007) A qualified biodiesel distributor shall be eligible for a grant pursuant to section 2 of this act for purposes other than to assist with purchasing equipment or constructing, modifying or retrofitting facilities. Such grants shall not exceed fifty thousand dollars for any one distributor at any one site. The Connecticut Center for Advanced Technology shall create an application process and adopt rules for the administration of this grant provision.

Sec. 7. (NEW) (Effective July 1, 2007) The management of the Connecticut Center for Advanced Technology, in consultation with the Department of Revenue Services, shall adopt rules and regulations necessary for the administration of the provisions of this section on the progress of the grant programs administered pursuant to sections 2 to 7, inclusive, of this act. The Connecticut Center for Advanced Technology, in consultation with the Department of Revenue Services, shall submit an annual report, in accordance with the provisions of section 11-4a of the general statutes, to the joint standing committees of the General Assembly having cognizance of matters relating to energy and technology and the environment.

Sec. 8. Subdivision (76) of section 12-81 of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage and applicable to assessment years commencing on and after October 1, 2007):

(76) [Effective for assessment years commencing on or after October 1, 2011, new machinery and equipment or newly-acquired machinery and equipment, including machinery] Machinery and equipment used in connection with biotechnology. For purposes of this subdivision, "machinery" and "equipment", and "biotechnology" shall have the same meaning as in subdivision (72) of this section. Any person claiming the exemption provided under this subdivision shall not be eligible to claim the exemption provided under subdivision (60) or (70) of this section for the same machinery and equipment.

Sec. 9. Section 22-26l of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2007):

(a) The Department of Agriculture shall establish and administer a Connecticut Farm Link program to establish a database of farmers and agricultural land owners who intend to sell their farm operations or agricultural land. The database shall be maintained by the Department of Agriculture and shall be made available to the public on the department's web site. Persons interested in starting an agricultural business or persons interested in expanding a current agricultural business may notify the department and have their names, contact information and intentions regarding such businesses placed on the web site. The department shall make reasonable efforts to facilitate contact between parties with similar interests, including, but not limited to, growing and processing crops as feedstock for biodiesel heating and transportation fuels.

(b) The Department of Agriculture shall post educational materials regarding the Connecticut Farm Link program on the department's web site, including, but not limited to, information regarding farm transfer and farm succession planning, family farm estate planning, farm transfer strategies, farm leasing, formation of farm partnerships, growing and processing crops as feedstock for biodiesel heating and transportation fuels and information regarding starting a farm business.

Sec. 10. (NEW) (Effective July 1, 2007) (a) There is established a biofuel crops grant program, which shall be administered by the Department of Agriculture. Matching grants shall be made to farmers, agricultural not-for-profit organizations and agricultural cooperatives for the cultivation and production of crops used to generate biofuels.

(b) The Commissioner of Agriculture shall adopt regulations, in accordance with the provisions of chapter 54 of the general statutes, for the administration of the program established by this section.

Sec. 11. (NEW) (Effective October 1, 2007) (a) The Office of the Business Advocate, in consultation with the Department of Economic and Community Development shall establish and administer a Connecticut biodiesel link program to establish a database of schools, restaurants, institutional cafeterias and other institutions and businesses in the state that produce waste vegetable oil or other comparable food product suitable for conversion to biodiesel. The database shall be maintained by the Office of the Business Advocate and shall be made available to the public on the Department of Economic and Community Development's Internet web site. Businesses interested in selling their waste vegetable oil or other comparable food product to producers of biodiesel heating and motor vehicle fuel may notify the Office of the Business Advocate and have their names, contact information and intentions regarding such businesses placed on said web site. The office shall make reasonable efforts to facilitate contact between parties with similar interests.

(b) The Office of the Business Advocate shall post educational materials regarding the Connecticut biofuel link program on the Department of Economic and Community Development's Internet web site, including, but not limited to, information regarding the starting of a waste vegetable oil business and strategies for conducting such business.

Sec. 12. (NEW) (Effective July 1, 2007) (a) There is established a grant program for service stations, which shall be administered by the Department of Economic and Community Development to reduce or eliminate the upfront costs of installing new alternative fuel pumps or converting gas or diesel pumps to dispense alternative fuels.

(b) The Commissioner of Economic and Community Development shall adopt regulations, in accordance with the provisions of chapter 54 of the general statutes, for the administration of the program established by this section.

Sec. 13. Subdivision (16) of section 12-412 of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage and applicable to sales occurring on or after July 1, 2007):

(16) (A) Sales of fuel used for heating purposes (i) in any residential dwelling or (ii) in any building, location or premise utilized directly in agricultural production, fabrication of a finished product to be sold or an industrial manufacturing plant, provided the exemption under this subdivision (ii) shall only be allowed with respect to a building, location or premise in which not less than seventy-five per cent of the fuel used in such building, location or premise is used for the purpose of such production, fabrication or manufacturing.

(B) This exemption also applies to (i) the renewable fuel content of fuel used for heating purposes, and (ii) the purchase of equipment and machinery used to store, distribute, manufacture and blend renewable fuels for heating purposes.

(C) "Renewable fuel content" means fuels that meet the specifications of the American Society of Testing and Materials designation D 396, D 975 or D 6751 of not less than five per cent.

Sec. 14. Subsection (a) of section 12-701 of the general statutes is amended by adding subdivisions (37) to (39), inclusive, as follows (Effective from passage and applicable to income years commencing on or after January 1, 2008):

(NEW) (37) "Bioheat" means a fuel comprised of biodiesel blended with conventional home heating oil, which meets the specifications of the American Society of Testing and Materials designation D 396 or D 975.

(NEW) (38) "Biodiesel" means a fuel comprised exclusively of mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats, designated B100 (pure biodiesel), which meets the specifications of the American Society of Testing and Materials designation D 6751.

(NEW) (39) "Residential purposes" means any structure, or part of a structure, in Connecticut used as a place of abode maintained by or for a person, whether or not owned by such person, on other than a temporary or transient basis. "Residential purposes" includes multifamily dwelling units, such as multifamily homes, apartment buildings, condominiums and cooperative apartments. "Residential purposes" does not include the part of a structure used as a hotel, motel or similar space, except for those units used by the same occupant for not less than ninety consecutive days.

Sec. 15. (NEW) (Effective from passage and applicable to income years commencing on or after January 1, 2008) (a) Any resident of this state, as defined in subdivision (1) of subsection (a) of section 12-701 of the general statutes, subject to the tax under chapter 229 of the general statutes for any taxable year shall be entitled to a credit in determining the amount of tax liability under chapter 229 of the general statutes equal to one cent per gallon for each per cent of biodiesel included in the bioheat purchased by the taxpayer on or after January 1, 2008, but before December 31, 2012. Said credit shall not exceed twenty cents per gallon. The bioheat shall be used for space heating or hot water production for residential purposes within the state. If a taxpayer makes more than one qualifying purchase of bioheat and the percentage of biodiesel included in the bioheat varies, said taxpayer shall calculate each purchase of bioheat separately. If two or more taxpayers share in the purchase of bioheat, the amount of the credit allowable to each taxpayer is to be prorated according to the percentage of the total bioheat purchased by each taxpayer.

(b) The credit allowed under this section shall not exceed five hundred dollars for each taxable year. In the case of two or more taxpayers sharing in the purchase of bioheat, the credit allowed, in the aggregate, shall not exceed five hundred dollars for each taxable year.

Sec. 16. (NEW) (Effective July 1, 2007) On or after July 1, 2007, and until June 30, 2012, fuel blends containing not less than five per cent of biodiesel shall not be subject to the tax imposed under section 12-458 of the general statutes. On or after July 1, 2012, and until June 30, 2017, fuel blends containing not less than ten per cent of biodiesel shall not be subject to the tax imposed under section 12-458 of the general statutes. On or after July 1, 2017, fuel blends containing not less than fifteen per cent of biodiesel shall not be subject to the tax imposed under section 12-458 of the general statutes. For the purposes of this section, "biodiesel" shall have the same meaning as in section 1 of this act.

Sec. 17. Subdivision (2) of subsection (b) of section 12-587 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2007):

(2) Gross earnings derived from the first sale of the following petroleum products within this state shall be exempt from tax: (A) Any petroleum products sold for exportation from this state for sale or use outside this state; (B) the product designated by the American Society for Testing and Materials as "Specification for Heating Oil D396-69", commonly known as number 2 heating oil, to be used exclusively for heating purposes or to be used in a commercial fishing vessel, which vessel qualifies for an exemption pursuant to section 12-412, as amended by this act; (C) kerosene, commonly known as number 1 oil, to be used exclusively for heating purposes, provided delivery is of both number 1 and number 2 oil, and via a truck with a metered delivery ticket to a residential dwelling or to a centrally metered system serving a group of residential dwellings; (D) the product identified as propane gas, to be used exclusively for heating purposes; (E) bunker fuel oil, intermediate fuel, marine diesel oil and marine gas oil to be used in any vessel having a displacement exceeding four thousand dead weight tons; (F) for any first sale occurring prior to July 1, 2008, propane gas to be used as a fuel for a motor vehicle; (G) for any first sale occurring on or after July 1, 2002, grade number 6 fuel oil, as defined in regulations adopted pursuant to section 16a-22c, to be used exclusively by a company which, in accordance with census data contained in the Standard Industrial Classification Manual, United States Office of Management and Budget, 1987 edition, is included in code classifications 2000 to 3999, inclusive, or in Sector 31, 32 or 33 in the North American Industrial Classification System United States Manual, United States Office of Management and Budget, 1997 edition; (H) for any first sale occurring on or after July 1, 2002, number 2 heating oil to be used exclusively in a vessel primarily engaged in interstate commerce, which vessel qualifies for an exemption under section 12-412 ,as amended by this act; (I) for any first sale occurring on or after July 1, 2000, paraffin or microcrystalline waxes; (J) for any first sale occurring prior to July 1, 2008, petroleum products to be used as a fuel for a fuel cell, as defined in subdivision (113) of section 12-412; [or] (K) a commercial heating oil blend containing not less than ten per cent of alternative fuels derived from agricultural produce, food waste, waste vegetable oil or municipal solid waste, including, but not limited to, biodiesel or low sulfur dyed diesel fuel; (L) for any first sale occurring on or after July 1, 2009, biofuels or biodiesel that meet the specifications of the American Society of Testing and Materials designation D 396, D 975 or D 6751 containing a blend of no less than five per cent renewable content; or (M) for any first sale occurring on or after July 1, 2009, additives to heating oil used exclusively for heating purposes of any derivation used for the purposes of maintaining the stability or operational performance of petroleum products.

Sec. 18. (NEW) (Effective July 1, 2007) The Commissioner of Public Works, in consultation with the Office of Policy and Management, shall establish a program designed to encourage the use of biodiesel blended heating fuel mixed from not more than ninety per cent ultra low sulfur number 2 heating oil and not less than ten per cent biofuel in state buildings and facilities. On or before January 1, 2008, the commissioner shall prepare a plan for implementation of such program which shall include, but not be limited to, (1) identification of state buildings and facilities suitable for biodiesel blended heating fuel, (2) evaluation of energy efficiency and reliability of biodiesel blended heating fuel in such buildings and facilities, and (3) the availability and feasibility of exclusively using such fuels or fuel products, including agricultural products or waste yellow grease, produced in Connecticut.

Sec. 19. (NEW) (Effective July 1, 2007) (a) Notwithstanding section 10-266m of the general statutes, the Commissioner of Education shall, within available appropriations, award grants annually to local and regional boards of education to provide funds for the purchase of biodiesel fuel mixed from not less than five per cent B100 biofuel for school buses. For school years commencing on and after January 1, 2010, grants shall be awarded to provide funds for the purchase of biodiesel fuel mixed from not less than twenty per cent B100 biofuel.

(b) The commissioner shall adopt regulations, in accordance with the provisions of chapter 54 of the general statutes, to set the standards for the grant program established in subsection (a) of this section.

Sec. 20. (NEW) (Effective July 1, 2007) (a) Within available appropriations, The University of Connecticut Cooperative Extension Service, in consultation with The University of Connecticut Biodiesel Consortium and other state universities, shall develop a program to enable The University of Connecticut and the other state universities to serve as testing centers for biodiesel and biodiesel fuels for heating and transportation and to develop quality monitoring standards that comply with the standards of the American Society of Testing and Materials.

(b) The University of Connecticut Cooperative Extension Service shall, on or before February first, annually, submit a report in accordance with the provisions of section 11-4a of the general statutes to the joint standing committees of the General Assembly having cognizance of matters relating to the environment and energy and technology.

Sec. 21. (NEW) (Effective July 1, 2007) Connecticut Innovations, Incorporated, shall establish a fuel diversification grant program to provide funding to institutions of higher education for (1) research to promote biofuel production from agricultural products, algae and waste grease, fuel cell technology development and commercialization and economic analysis; and (2) the development of education and outreach programs.

Sec. 22. (Effective July 1, 2007) The sum of ten million dollars is appropriated to the Department of Economic and Community Development, from the General Fund, for the fiscal year ending June 30, 2008, for research and educational outreach for the fuel diversification grant program administered by Connecticut Innovations, Incorporated, pursuant to section 21 of this act.

Sec. 23. (Effective July 1, 2008) The sum of ten million dollars is appropriated to the Department of Economic and Community Development, from the General Fund, for the fiscal year ending June 30, 2009, for research and educational outreach for the fuel diversification grant program administered by Connecticut Innovations, Incorporated, pursuant to section 21 of this act.

Sec. 24. (Effective from passage) (a) There is established a task force to promote the use of biodiesel fuel and explore its commercial and industrial applications. Such study shall include, but not be limited to, an examination of the necessary steps to: (1) Facilitate development of a regional network of alternative fueling stations and encourage broad public and private use of alternative fuels; (2) develop the infrastructure across the states of the northeast that furthers the ability of fleets and individuals to travel on alternative fuels; (3) identify regional areas for the development of publicly accessible biofuel stations; (4) establish working relationships with petroleum movers and suppliers across the northeast to gain their cooperation to work with regional fuel suppliers or retailers to turn existing access tanks or pumps into public biofuel supply points or to build new systems for dispensing biofuels; (5) identify necessary incentives to encourage public and private use of alternative fuels and alternative fuel vehicles and work to develop those incentives; and (6) maintain an information clearinghouse and education center to provide information in an effective manner to encourage participation by public and private fleets, vehicle manufacturers, fuel producers and suppliers, retail marketers and by private individuals.

(b) The task force shall consist of the following members:

(1) A representative of a motor transport association, who shall be appointed by the speaker of the House of Representatives;

(2) A representative of the Independent Petroleum Association of America, who shall be appointed by the president pro tempore of the Senate;

(3) A representative from the construction industry, who shall be appointed by the majority leader of the House of Representatives;

(4) A representative of the field of agriculture, who shall be appointed by the majority leader of the Senate;

(5) The Commissioner of Environmental Protection, or the commissioner's designee;

(6) The Commissioner of Transportation, or the commissioner's designee;

(7) The Commissioner of Revenue Services, or the commissioner's designee;

(8) A member of the joint standing committee of the General Assembly having cognizance of matters relating to transportation, who shall be appointed by the minority leader of the House of Representatives;

(9) A member of the joint standing committee of the General Assembly having cognizance of matters relating to the environment, who shall be appointed by the minority leader of the Senate;

(10) A member of the joint standing committee of the General Assembly having cognizance of matters relating to energy and technology, who shall be appointed by the majority leader of the House of Representatives;

(c) Any member of the task force appointed under subdivision (8), (9) or (10) of subsection (b) of this section may be a member of the General Assembly.

(d) All appointments to the task force shall be made not later than thirty days after the effective date of this section. Any vacancy shall be filled by the appointing authority.

(e) The speaker of the House of Representatives and the president pro tempore of the Senate shall select the chairpersons of the task force from among the members of the task force. Such chairpersons shall schedule the first meeting of the task force, which shall be held not later than sixty days after the effective date of this section.

(f) The administrative staff of the joint standing committee of the General Assembly having cognizance of matters relating to the environment shall serve as administrative staff of the task force.

(g) Not later than January 1, 2009, the task force shall submit a report on its findings and recommendations to the joint standing committees of the General Assembly having cognizance of matters relating to the environment, transportation and energy and technology, in accordance with the provisions of section 11-4a of the general statutes. The task force shall terminate on the date that it submits such report or January 1, 2009, whichever is later.

Sec. 25. Section 12-458f of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage and applicable to assessment years commencing on and after October 1, 2007):

On and after July 1, 1994, and until July 1, 2008, compressed natural gas, liquefied petroleum gas and liquefied natural gas shall not be subject to the tax imposed under section 12-458. On and after July 1, 2007, any diesel fuel blend containing fifty per cent or more biodiesel fuel shall not be subject to the tax imposed under section 12-458.

Sec. 26. (NEW) (Effective October 1, 2007) On or after January 1, 2010, all of the following vehicles or equipment, when powered by diesel fuel in whole or in part, shall use a diesel fuel blend containing the following minimum percentages of biodiesel fuel: (1) Transit buses, twenty per cent; (2) each school bus, twenty per cent; (3) motor vehicles that are registered in this state, five per cent; (4) vehicles registered but not designed primarily for highway use, five per cent; (5) generators that are used for part-time or emergency power, five per cent; (6) railroad locomotives, five per cent; and (7) ferry boats, five per cent. For the purposes of this section, "biodiesel fuel" shall have the same meaning as in section 1 of this act, "motor vehicle" shall have the same meaning as in section 14-1 of the general statutes and "school bus" shall have the same meaning as in section 14-275 of the general statutes.

Sec. 27. (NEW) (Effective from passage) The operator of a hybrid passenger car, as defined in subdivision (115) of section 12-412 of the general statutes, or the operator of a motor vehicle which is exclusively powered by a clean alternative fuel, as defined in subdivision (67) of section 12-412 of the general statutes, may operate the passenger car or motor vehicle in a high occupancy vehicle lane when the operator is the only occupant of the passenger car or motor vehicle.

Sec. 28. Subdivision (115) of section 12-412 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2007):

(115) On and after October 1, 2004, and prior to October 1, 2008, the sale of any hybrid passenger car that has a United States Environmental Protection Agency estimated city or highway gasoline mileage rating of at least forty miles per gallon. For purposes of this subdivision, "hybrid passenger car" means a passenger car that draws acceleration energy from two onboard sources of stored energy, which are both an internal combustion or heat engine using combustible fuel and a rechargeable energy storage system and, for a passenger car or light truck with a model year of 2004 or later, is certified to meet or exceed the tier II bin 5 low emission vehicle classification.

Sec. 29. (NEW) (Effective July 1, 2007) Any municipality may by ordinance provide for the abatement in whole or in part of personal property taxes on a hybrid passenger car, as defined in subdivision (115) of section 12-412 of the general statutes, as amended by this act, or a motor vehicle which is exclusively powered by a clean alternative fuel, as defined in subdivision (67) of section 12-412 of the general statutes.

Statement of Purpose:

To implement the recommendations of the fuel diversification task force, to establish a biodiesel task force, to encourage the development of alternative fuel corridors along the interstate highway, to exempt certain biodiesel fuel from the motor vehicle fuels tax, to allow municipalities to abate property taxes on hybrid and alternative passenger vehicles, to expand the sales tax exemption on hybrid vehicles, and to require vehicles and equipment to use a certain percentage of biodiesel fuel.

[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]