Pub. 5 2015 Issue 3

11 MINING FOCUS the federal Clean Air Act preempts the ability of Utah to require them to retrofit sooner. Thus, S.B. 216 makes tax credits available for business - es that spend capital to build necessary infrastructure in the rural counties, or to retrofit Utah refineries to produce Tier 3 fuel. There are, however, significant thresholds for claiming these new tax credits. First, credits are only available to new or expanded industrial, mining, manufacturing and agricultural activities, and they are specifically unavailable to retail busi - nesses. Second, the new or expanded activities must require at least $50 million in capital. Third, the activities must require new infrastructure, which must cost at least $10 million, or at least 10 percent of the total capital costs, whichever is greater. Fourth, the new infrastructure must be “high cost infrastruc- ture,” defined as energy delivery projects, railroads, road improvements, water supply projects, water removal projects and water delivery systems. Finally, the new infrastructure must generate new revenue. If a project meets these five requirements, it may be eli - gible to receive the new “high cost infrastructure” tax credit. To do so, it must apply to the Utah Energy Infrastructure Authority Board (the Board), which will evaluate the project’s benefits to Utah as to whether (i) the project is likely to increase local property tax revenue; (ii) the project would provide new types of infrastructure in an underdeveloped area; (iii) the project would have a positive environmental impact; (iv) the project would help sustain the economic viability of existing opera - tions; and (v) the project is less likely to be completed without the tax credit. Some of the possible projects that might be eligible in- clude: expanded rail and pipeline services to the Uinta Basin, which would reduce the truck traffic and pollution associated with bringing Uinta crude oil to Utah’s refineries, while ex - panding the economic opportunities in our eastern counties; and, additional solar and wind farms in southern Utah, which would increase Utah’s generation of renewal energy sources while providing new power availability for other rural economic development. Additionally, EPM Mining Ventures, Inc. issued a press release, indicating that it anticipates its Sevier Lake Playa potash project will be eligible for the tax credit. Lance D’Ambrosio, CEO of EPM, stated, “The Infrastructure Tax Credit was tailor-made for companies like ours which are look- ing to develop Utah’s rich mineral resources and to expand Utah’s economic future.” If the Board approves a project for receipt of the tax credit, then the project is eligible to receive the tax credit for the shorter period of (i) 20 years; (ii) the economic life of the infrastructure; or (iii) the period to recover 50 percent of the cost of the infrastructure. But, for any given taxable year, the amount of the tax credit is limited to the “infrastructure-related revenue” generated by that infrastructure during that taxable year. How that “infrastructure-related revenue” will be defined remains an open question, and the Governor’s Office of En - ergy Development will draft regulations to implement S.B. 216, which regulations presumably will define that term. On the air quality front, S.B. 216 limits the tax credit to 30 percent of the cost of retrofitting to Tier 3 fuels. Additionally, in determining eligibility for the tax credit for retrofit projects, the Board will consider how soon the retrofit project will be complete. (There is little point in incentivizing activity after 2020 that would already be required by law; but, there would be great economic benefit to Utah to incentivizing retrofits as soon as possible.) Because these are important economic issues for Utah, a quick adoption of rules implementing S.B. 216 is advantageous to the state’s economic development. Furthermore, the regu- lations will provide more clarity interpreting eligibility for the tax credit and defining “infrastructure-related” revenue. With these clarifications, the infrastructure tax credits will help to grow the overall Utah economy while having a positive impact on the environment. Additionally, Utah may consider expanding S.B. 216. For instance, the Wyoming Infrastructure Authority has $1 billion in bonding authority to finance the construction of energy trans - mission and generation. Moreover, Wyoming has considered increasing the bonding authority to $3 billion, expanding the types of projects eligible for bonding, and expanding eligibility for the bonding to projects outside Wyoming so long as they benefit Wyoming economically. In this way, Wyoming has used its economic clout to finance projects that will further expand its economy. Utah might consider following suit. X Denise A. Dragoo and Stephen W. Smithson are attorneys with Snell & Wilmer in Salt Lake City. They have a combined 65 years’ experience prac- ticing law in the Mining, Environmental and Natural Resources industries. Dragoo serves on Utah’s Energy Advisory Council to the Governor’s Office of Energy Development. For the urban counties, the bill pro- vides incentives to reduce air pollution. While the economy in the urban counties is truly booming, air pollution serves as a significant restraint on future growth.