04 Feb 2023 Kansas Legislative Update – Week Four
2023 Legislative Session Continues
Legislative committees held many hearings on bills this week as new legislation continues to be introduced. A water bill was introduced and quickly scheduled for hearing. Utilities committees in the House and Senate have scheduled hearings on numerous bills concerning utility rates. Committees have also begun to review agency budgets, and the Senate held a hearing this week on a bill seeking to transfer another $1 billion into the budget stabilization fund. Next week, the House Committee on Agriculture will hold a hearing on a Senate Resolution pushing back on the US Fish and Wildlife’s listing of the Lesser Prairie Chicken as a threatened species in Kansas.
Carbon Dioxide Capture and Sequestration
Renew Kansas Biofuels Association introduced a bill that would allow Kansas industries to pursue carbon capture and sequestration (CCS) projects. The legislation seeks to amend the Kansas Carbon Dioxide Reduction Act to allow for the permanent underground storage of carbon dioxide (CO2) in UIC Class VI injection wells. By capturing and sequestering CO2, the biofuel industry is able to lower the carbon intensity score of their fuels, increasing its value and marketability. Most Midwest states have already adopted this type of legislation allowing long-term CO2 sequestration to be conducted more easily in their state. CO2 sequestration wells require an injection permit issued by USEPA. States can apply to EPA for “state primacy” of the permits, which means USEPA would delegate its authority to the state to regulate the storage facilities. The proposed legislation includes provisions from legislation passed in Indiana in 2022 (House Bill 1209), and Nebraska in 2021 (LB650.pdf). The bill directs the Kansas Department of Health and Environment (KDHE) to apply to USEPA for Kansas primacy. This bill also grants KHDE authority to adopt regulations to assess fees necessary to administer the injection program and for the costs of long-term monitoring of closed storage facilities. In addition, the bill allows the transfer of ownership and long-term liability of the stored CO2 to the state upon certified closure of the storage facility. Final revisions are still be made to the draft, but a hearing date has been set for Tuesday, February 21 in the House Committee on Agriculture and Natural Resources.
Electric Utility Rates
Kansas has the highest energy rates in our region. In recent years, legislation was introduced to reduce rates while ensuring reliable service. This year, multiple bills have been introduced which focus on various ways to address high electric utility rates in our state:
- House Bill 2227 would authorize solar power purchase agreements with renewable energy suppliers, exempt the sales of electricity pursuant to power purchase agreements from public utility regulation, and require electric public utilities to enter into parallel generation contracts with certain (non-industrial) customers of the utility. A hearing is scheduled for Feb. 7 in the House Utilities Committee.
- House Bill 2228 would increase the capacity limitation of the total amount of net-metered generation systems that may operate within the service territory of an investor-owned electric utility and remove the load-size limitations on certain customers’ net-metered systems. A hearing is scheduled for Feb. 7 in the House Utilities Committee.
- House Bill 2225 would limit cost recovery for electric public utility transmission-related costs. A hearing is scheduled for Feb. 9 in the House Utilities Committee.
- House Bill 2221 would allow for a 0 percent sales tax rate on utilities for commercial facilities. A hearing was held on a companion bill (SB 54) in the Senate.
- Senate Bill 88 in the Senate, and House Bill 2154 in the House would seek to reform the Kansas Corporation Commission by allowing for the election of KCC commissioners, and establishing a utilities regulation division in the office of the attorney general to represent and protect the collective interests of utility customers in utility rate-related proceedings.
- Senate Bill 78 and House Bill 2155 would require the state corporation commission to review the regional rate competitiveness of an electric utility’s rates in electric utility rate proceedings.
Right of First Refusal for Electric Transmission Line Build Out
Senate Bill 68 has been introduced by state energy producers to allow those companies a Right-of-First-Refusal to build out new electric transmission line assets in the state. The bill is likely to be heavily opposed by commercial and residential utility rate payers. Renew Kansas, Kansas Grain and Feed Association, and Kansas Agribusiness Retailers Association will stand opposed to this measure during multi-day hearings scheduled for next week.
EV Energy Equity Road Repair Tax
House Bill 2004 would establish the EV Energy Equity Road Repair Tax Act, which would impose a road repair tax equal to $0.03 per kilowatt-hour of electricity provided to an electric vehicle at a public charging station. The road repair tax would be imposed regardless of whether the public charging station charges for the electricity or provides the electricity for free. The owner of the public charging station would remit the tax to the Director of Taxation to be credited to the State Highway Fund. The public charging station owner would also be entitled to charge and collect an amount equal to the road repair tax as part of the selling price. The House Transportation Committee held a hearing on the bill on Tuesday, January 31.
Appropriations Bill Introduced
As the various budget committees in the House and Senate are busy reviewing each agency’s submitted budget, the House has introduced House Bill 2273 as its appropriations bill for state agencies for fiscal years 2024, 2025, and 2026. Greatly impacting the budget for 2023 will be the question of how much state general fund money the legislature decides to move into the Budget Stabilization Fund: Legislative leaders are asking for $1 billion, while Governor Laura Kelly is leaning toward a $500 million transfer. There is discussion around the capitol of concerns that state revenues could fall below state expenditures by as early as fiscal year 2025.
Chip Maker Expansion Project Announced in Kansas
Governor Laura Kelly announced that the state has agreed to invest about $304 million into a $1.8 billion expansion of Wichita-based Integra Technologies computer chip manufacturing plant which is estimated to bring 2,000 new jobs to the area. The computer chip plant, estimated to be operational in two or three years, will increase the nation’s participation in the rapidly growing semiconductor industry. This announcement follows the state’s $830 million investment last year toward a $4 billion construction project of a Panasonic electric vehicle battery plant in De Soto, Kansas. Both investment packages were made possible by the Attracting Powerful Economic Expansion (APEX) Act signed into law Feb. 22, 2022.
Flat Tax Discussions
A flat tax proposal, introduced by the Kansas Chamber of Commerce as House Bill 2061 and Senate Bill 61, would move the state from its current three bracket system to a single bracket taxed at 5 percent. The bill would further buy down that rate whenever the state had excess revenues. It has been estimated that the proposal would cost the state more than $3 billion in lost income tax revenues over a three-year period.
Water Bill Placing New Conservation and Reporting Requirements on GMDs
House Bill 2279 was introduced late in the week by the Ranking Member of the House Water Committee Representative Lindsay Vaughn (D-Overland Park). The bill would amend the Groundwater Management District act to place new annual reporting and conservation action plan requirements on the groundwater management districts. The bill is already scheduled for hearing in the House Water Committee on Thursday, February 9 at 9:00 am in room 218-N. The committee Chairman will be introducing separate legislation soon focusing on long-term funding of the state water plan fund and water conservation efforts.
State Water Plan Fund
House and Senate Budget committees have reviewed the Kansas Department of Agriculture’s proposed budget for fiscal years 2023 and 2024. The governor recommends $1.6 million in state general funds for water management, water appropriations, water structures, watershed dam construction, irrigation technology, and crop and livestock research. The governor recommended full statutory funding for the state water plan in 2023 and 2024. The 2023 budget includes $4.4m in funds from the state water plan that were not spent in 2022, and appropriation enhancements of $465,000 from the state water plan fund for landowners, watershed districts, conservation districts, and others for targeted conservation practices, including $100,000 for the watershed dam program, $200,000 for irrigation technology, and $100,000 for crop and livestock research.
Corporate Income Tax Apportionment
House Bill 2110 would allow certain taxpayers, based on NAICS codes included in the bill, to elect to use a single-factor apportionment formula based on sales in the state to determine corporate income tax liability. The bill is estimated to have a cost to the state of approximately $20 million. The House Tax Committee held a hearing on the bill on Tuesday. Kansas Grain and Feed Association joined the Kansas Chamber as the only proponents on the bill. There were no opponents.
Lesser Prairie Chicken Resolution
Both the House and the Senate are considering passage of Concurrent Resolution 1602 disapproving the designation of the lesser prairie chicken as a threatened species in Kansas by the United States Fish and Wildlife Service. It was also announced this week that US Fish and Wildlife Service would delay the threatened species listing for 60 days, until March 27. The House Committee on Agriculture and Natural Resources will hold a hearing on the bill on Monday, Feb. 6.
This week, House Bill 2168 was introduced which would amend the definition of grain to include industrial hemp seed. It is uncertain at this point what other impacts this designation might have, but the Kansas Department of Agriculture is currently reviewing the bill. Ag associations are likely to oppose the bill as no hemp ingredients are currently approved through the animal feed ingredient review pathways, and more data is needed to understand whether hemp ingredients are safe for animals and can be utilized as a source of nutrition when consumed for extended periods of time. These questions should be fully answered before hemp is used for commercial feed purposes to ensure the safety of the public, our animals and the agricultural industry.
Plastic Container Regulation, State Level Preemption
Senate Bill 47 would prohibit cities and counties from regulating plastic and other containers designed for the consumption, transportation or protection of merchandise, food, or beverages. The Senate Commerce Committee held a hearing on the bill on January 31.
Third-Party Funded Litigation
Senate Bill 74 concerns litigation funding by third parties. The bill provides for joint liability of costs and also allows for sanctions in third-party funded litigation. It would also require certain discovery disclosures and payment of certain costs for nonparty subpoenas. The Senate Judiciary Committee held a hearing on the bill on Thursday, February 2.
Other Bills We Are Monitoring:
SB 86 requiring local governmental officials to disclose substantial interest in renewable energy projects
HB 2159 providing revenue for water program management fund and creating new fees for various UIC injection wells
HB 2192 creating a Kansas Secretary of State website for grants, applications, and awards
HB 2222 prohibiting enforcement of federal regulations and enforcement of state regulations to carry them out
HB 2225 limiting cost recovery for electric public utility transmission-related costs
HB 2292 enacting the Kansas apprenticeship tax credit act