HOUSE BILL 613
54th legislature - STATE OF NEW MEXICO - first session, 2019
Candy Spence Ezzell
RELATING TO AGRICULTURE; ENACTING THE AGRICULTURAL CARBON CREDIT ACT; PROVIDING PENALTIES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. [NEW MATERIAL] SHORT TITLE.--This act may be cited as the "Agricultural Carbon Credit Act".
SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Agricultural Carbon Credit Act:
A. "application" means the spraying, spreading or distribution of product as a foliar spray on plants contained within a designated area or applied to the surface or subsurface of the land within a designated area;
B. "best management practice" means a document created by a certified agronomist detailing the quantity, timing and location for the application of certified material within a designated area;
C. "business as usual" means the normal and usual operational practices performed by a registrant over a five- year period within the designated area prior to the use of certified material, which practices are substantiated by written or electronic records and attested to under penalty of perjury;
D. "carbon credit" means a credit granted for reducing emissions of carbon dioxide or other greenhouse gases by an equivalent of one metric ton of carbon dioxide;
E. "carbon credit certification" means proof that a registrant has complied with the requirements of the Agricultural Carbon Credit Act in generating carbon credits;
F. "certified material" means any fertilizer, soil conditioner, micronutrient or bio-nutrient certified for use on agricultural land by the United States department of agriculture or the New Mexico department of agriculture and that is environmentally benign, non-carcinogenic and nontoxic to humans or animals;
G. "chain of custody" means a record regarding a carbon credit, including its origination, manufacture, ownership and final disposition;
H. "department" means the New Mexico department of agriculture;
I. "designated area" means the specific geographical area designated by a registrant in its application for carbon credit certification with a defined start and end date between which the carbon credit is to be created;
J. "director" means the director of the department;
K. "emission" means any release of a pollutant into the atmosphere;
L. "humus" means the organic component of soil consisting of stover, stems, leaves, root mass or other plant material remaining on, or tilled into, the soil that is decomposed by microorganisms;
M. "pollutant" means a substance designated by the federal environmental protection agency as being harmful to the environment;
N. "reduction" means a demonstrable decrease in the quantity released of a pollutant relative to business as usual;
O. "registrant" means a person that has submitted the required documentation to, and has been accepted by, the director into the carbon credit program pursuant to the Agricultural Carbon Credit Act;
P. "soil conditioner" means a product that is added to soil to improve the soil's physical properties, usually to improve soil texture, nutrient retention, water retention, drainage or fertility; and
Q. "supplier" means a person providing certified material.
SECTION 3. [NEW MATERIAL] BEST MANAGEMENT PRACTICE APPLICATION.--
A. A designated area producing food for human or animal consumption or for any other use by humans, such as clothing, shall utilize and adhere to a best management practice.
B. The best management practice shall be developed by a certified agronomist with knowledge of the certified material proposed for the designated area.
C. The best management practice shall account for the environmental conditions at the designated area location, soil condition and soil sample analyses performed by a certified laboratory, fertilizers proposed, micronutrient requirements and the use of certified materials.
D. The best management practice on designated areas intended to grow crops shall incorporate the requirement to maintain or increase crop yields, accounting for seasonal environmental variations and growing conditions.
E. The following shall be included in the chain of title:
(1) the best management practice;
(2) any pre-planting and post-planting soil analyses;
(3) applications of fertilizer, micronutrient and certified material, including rates of application; and
(4) crop yields.
SECTION 4. [NEW MATERIAL] CARBON CREDIT CERTIFICATION.--
A. Carbon credit certification may be used to create carbon credits using one of the methods defined in this section.
B. Carbon credits shall be issued by the director upon presentation of documentation showing a reduction in nitrogen fertilizer applied to a designated area as follows:
(1) each carbon credit shall represent one metric ton equivalent of carbon dioxide; and
(2) the number of carbon credits issued shall be calculated as follows:
mTCO2e = 18.64(e0.0073R1 - e0.0073R2 )mTCO2/Ac,
(a) R1 = business as usual baseline nitrogen application rates in pounds per acre;
(b) R2 = reduced application rate of nitrogen in pounds per acre;
(c) mTCO2e = metric tons of carbon dioxide equivalent representing one carbon offset;
(d) mTCO2 = metric tons of carbon dioxide;
(e) e = Euler's number, which is approximately 2.71828; and
(f) Ac = acre of land.
C. Carbon credits shall be issued by the director upon presentation of documentation showing a measurable or scientifically inferred reduction in the emission of nitrous oxide from a designated area. Two hundred ninety-eight carbon credits shall be issued for each metric ton of nitrous oxide reduced.
D. Carbon credits shall not be issued for both a reduction in nitrogen fertilizer applied and a reduction in nitrous oxide emissions.
SECTION 5. [NEW MATERIAL] CARBON CREDIT CERTIFICATION REQUIREMENT.--
A. Carbon credit certification shall only be issued upon:
(1) the submission of documentation showing a reduction in one or more pollutants, which qualifies for carbon offsets pursuant to the Agricultural Carbon Credit Act; or
(2) a chain of title and any other supporting documentation, having been submitted showing compliance with the provisions of the Agricultural Carbon Credit Act.
B. The director shall be allowed to remove soil samples or foliage samples from designated areas for the purpose of verifying the application of certified material on designated areas.
C. The director shall be allowed to obtain samples of fertilizers, micronutrients and certified material being applied to a designated area to verify adherence to the best management practice.
D. Any additional records, such as electronic application records from farm equipment, may be obtained to prove application locations and rates as detailed in the best management practice.
SECTION 6. [NEW MATERIAL] CARBON CREDIT TRACKING.-- A. A carbon credit created pursuant to the Agricultural Carbon Credit Act shall be tracked utilizing a chain of custody.
B. The chain of custody shall include:
(1) the identity and physical location of a person obtaining certification of a carbon credit;
(2) the identity of an entity obtaining ownership of a carbon credit following the certification of a carbon credit;
(3) the identity and physical location of an entity retiring a carbon credit by applying a carbon credit to an emission, thereby reducing the effective quantity of a pollutant emitted; and
(4) a record of a carbon credit being retired.
C. Each chain of custody record shall have a time stamp.
D. The records in the chain of custody shall be immutable, auditable and publicly available.
E. Chain of custody records shall be maintained by the director or by a third party for a minimum of three years after the creation of a carbon credit.
SECTION 7. [NEW MATERIAL] CARBON CREDIT CERTIFICATION ADMINISTRATION.--
A. The department shall promulgate such rules as are necessary to implement the carbon credit certification program.
B. The director shall create the forms needed by registrants to request participation in the carbon credit certification program.
C. The director shall have the power to audit chain of custody and chain of title records, verify the documents in a chain of custody or chain of title, ensure compliance with the Agricultural Carbon Credit Act and issue verified carbon credit certifications.
D. The director may investigate suspected noncompliance or fraud and invalidate carbon credits not certified in compliance with the Agricultural Carbon Credit Act.
E. The director may contract with third parties to perform audits and investigations.
SECTION 8. [NEW MATERIAL] SOIL FERTILITY IMPROVEMENT.--Carbon credit certification may be used to create carbon credits upon presentation of documentation to the director showing a measurable increase in near-surface organic product in the form of humus over the previous year. The humus increase must be demonstrated by the analysis of a minimum of four random soil samples to a six-inch depth over each acre claimed. The average humus content in metric tons for each acre will be calculated. One carbon credit shall be issued for each metric ton of humus increased per acre.
SECTION 9. [NEW MATERIAL] AUDITS AND INVALIDATION.--
A. The director may randomly, or upon suspicion of fraud, audit the chain of custody and any records used to certify carbon credits. Upon finding inaccuracies or fraud, the director may require appropriate actions deemed necessary to correct the records.
B. A time frame of not less than fourteen days and not more than thirty days shall be allowed to correct the chain of custody, correct deficient documentation or produce other documentation to show compliance with the Agricultural Carbon Credit Act. After the allowed time, a carbon credit may be invalidated for noncompliance.
C. If intentional fraud is discovered during an investigation or audit, the carbon credit shall be invalidated.
SECTION 10. [NEW MATERIAL] CERTIFICATION FEES.--
A. The director shall promulgate rules to establish a fee schedule for the certification of carbon credits.
B. Carbon credit certification fees shall not exceed one hundred five percent of the actual cost of processing the documentation.
C. Fees may be set by the department for the certification of carbon credits as follows:
(1) the fees shall not exceed five percent of the market value of the carbon credit; and
(2) the fees shall be imposed on a person obtaining certification of carbon credits from the designated area.
D. The market value shall be determined using the previous day's closing value of any publicly traded financial instrument related to carbon credits certified by the director.
SECTION 11. [NEW MATERIAL] DEPARTMENT LIABILITY.--Neither the director nor the department shall be liable for costs or losses incurred due to an invalidation or loss of carbon credits.
SECTION 12. [NEW MATERIAL] RETIREMENT.--Any carbon credit shall be deemed invalid after its application toward the reduction in the net emissions of a greenhouse gas emitter.
SECTION 13. [NEW MATERIAL] PENALTIES.--Registrants, documentation providers or suppliers found to have caused the invalidation of a carbon credit due to fraud or other criminal intent shall be subject to a civil fine set by the department not to exceed five times the combined market value of the invalidated carbon credits.
SECTION 14. [NEW MATERIAL] PROPERTY RIGHTS.--Any carbon credits created pursuant to the Agricultural Carbon Credit Act and certified by the director shall be considered tangible property.
SECTION 15. [NEW MATERIAL] COMPLIANCE WITH OTHER REGULATIONS.--Compliance with the Agricultural Carbon Credit Act does not relieve a person from the responsibility to comply with any other applicable federal, state or local regulations.
SECTION 16. SEVERABILITY.--If any part or application of the Agricultural Carbon Credit Act is held invalid, the remainder or its application to other situations or persons shall not be affected.
SECTION 17. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2019.
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