SB3325 SD1

SECTION 1. The legislature finds that climate change has led to an increase in the frequency of extreme weather events that serve to only complicate increased risks associated with the Hawaiian islands, which are already the most isolated populated land mass. Such extreme weather events put greater stress on a vulnerable food supply chain as well as water supplies. The potential for shortages highlights the need for greater food and water security, which can be achieved through increased local food production.

The legislature further finds that Hawaii needs to reduce its contribution to climate change, increase local food production, improve soil health, and secure resilient water sources. Furthermore, in addition to cutting emissions from burning carbon, Hawaii needs to mitigate climate change by sequestering greenhouse gases through regenerative agriculture and forest preservation. Incentivizing nature-based actions that are soil health and carbon positive provides rich, diverse co-benefits such as restoring, maintaining, and improving landscape soil health and water security through payment for services programs. This would allow small farmers, ranchers, foresters, and landowners to be compensated for taking measures to help Hawaii reach its climate readiness goals.

The purpose of this Act is to establish a farmland and forest soil health carbon smart incentive program that will promote keeping forests and farmlands intact and sequester additional carbon on those lands.

SECTION 2. Section 225P-6, Hawaii Revised Statutes, is amended to read as follows:

"§225P-6 [~~Carbon offset program.~~ ~~(a) The office of planning and sustainable development in partnership with the greenhouse gas sequestration task force shall investigate and establish a carbon offset program that:~~

~~(1)~~ Provides expertise in carbon offsetting to public agencies and private entities and assists in coordinating carbon offset projects of public agencies, including but not limited to the generation, certification, and marketing of carbon credits;

~~(2)~~ Allows for proceeds and revenues generated by state departments from sales of offset credits to be deposited into suitable funds particularly for reinvestment to generate further carbon offset credits; provided that the funds are used in accordance with the purposes of the fund;

~~(3)~~ Allows for proceeds and revenues generated by state agencies from sales of carbon credits other than as described in paragraph (2) to be invested in projects enhancing the State's efforts to mitigate or adapt to climate change; and

~~(4)~~ ~~Is consistent with the State's sustainability goals and policies.~~

(b) The office of planning and sustainable development in partnership with the greenhouse gas sequestration task force shall submit a report of its findings and recommendations, including any proposed legislation, to the legislature and the climate change mitigation and adaptation commission no later than twenty days prior to the convening of the regular session of 2020.

~~(c) As used in this section:~~

"Carbon credit" means a tradable certificate or permit issued by a carbon registry that represents a greenhouse gas reduction or greenhouse gas removal enhancement that is equivalent to one metric ton of carbon dioxide and meets the requirements of the carbon offset program.

~~"Carbon offset" means a compensatory measure made by an agency, business, or individual to reduce carbon dioxide emissions or to increase carbon dioxide sequestration.~~

"Carbon registry" means any established international, national, or regional carbon registry program that serves voluntary or compliance markets, provides an independent carbon standard to verify and certify carbon offsets, and issues carbon credits.] Hawaii farmland and forest soil health carbon smart incentive program. (a) There is established within the office of planning and sustainable development the Hawaii farmland and forest soil health carbon smart incentive program to incentivize carbon sequestration activities through incentives contracts that provide for compensation for eligible practices by program participants.

(b) The office shall administer the program and shall:

(1) Administer or enter into an agreement or agreements for the administration of the program;

(2) Coordinate with relevant agencies to provide owners and lessees of eligible land financial incentive payments for eligible practices over a designated period, with appropriate crediting for soil health and carbon benefits as specified through an incentives contract;

(3) Establish and implement protocols that provide monitoring and verification of compliance with the term of incentives contracts;

(4) Make available to the public any modeling, methodology, or protocol resources developed to estimate sequestration rates of potential projects;

(5) Identify, evaluate, and distribute dedicated funds to accomplish the purposes of the program;

(6) Coordinate collaborations for soil health and carbon sequestration modeling, methods, and inventory improvements; and

(7) Directionally correct movement: heading in the right direction for climate, focusing on multiple co‑benefits, and overcoming barriers to entrance into implementation of practices of interest.

(c) The office, with assistance from relevant agencies, shall establish compensation rates and incentives contract terms for phase I activities within one year of the date of receipt of a program application. An incentives contract shall be for a term of no less than one year and no more than thirty years as determined by the owner or lessee; provided that the length of the contract term shall directly correlate with the rate of compensation paid pursuant to the contract.

(d) The office shall coordinate with relevant agencies to assist the office in carrying out the purposes of the program, including:

(1) Estimating sequestration rates for phase I and phase II activities;

(2) Conducting research to develop technical underpinning of compensation rates for phase II activities; and

(3) Conducting community and landowner outreach activities.

(e) The greenhouse gas sequestration task force shall establish a reviewing committee to review program applications and shall submit a report to the legislature no later than twenty days prior to the convening of the regular session of 2023 and each regular session thereafter that contains:

(1) An estimate of annual and cumulative reductions achieved as a result of the program, determined using standardized measures, including measures of economic efficiency;

(2) A summary of any changes to the program made as a result of program measurement, monitoring, and verification; and

(3) The total number of acres enrolled in the program.

(f) Landowners and lessees of eligible land shall be eligible to enter into an incentives contract upon submission of a program application prepared by the office. An owner of eligible land currently engaged in eligible practices shall not be barred from entering into an incentives contract under this part to continue carrying out eligible practices. An owner or lessee shall not be prohibited from participating in the program due to participation of the owner or lessee in other federal or state conservation assistance programs. Conservation easements shall not be required for eligibility in the program.

(g) Priority eligibility shall be given to phase I and phase II activities that:

(1) Are cost effective;

(2) Provide co-benefits to the State and owner or lessee of eligible land;

(3) Have the potential to create jobs in the forestry or agriculture sectors, and in rural communities; and

(4) Achieve community priorities including food security or watershed protection.

(h) On an annual basis, the department of land and natural resources shall:

(1) Identify and prioritize selected soil health and carbon positive activities;

(2) Recommend compensation rates and contract terms for eligible phase I activities;

(3) Assist in estimating sequestration rates for carbon positive practices;

(4) Serve on the reviewing committee for project applications and reports;

(5) Research and develop technical underpinning of compensation rates for phase II eligible practices; and

(6) Conduct community and landowner outreach activities.

(i) The department of land and natural resources shall also identify co-benefits that may include:

(1) Job creation;

(2) Food security and agriculture for local consumption;

(3) Water security;

(4) Increased biodiversity;

(5) Soil health; and

(6) Invasive species reduction and removal.

(j) As used in this section:

"Eligible land" means land in the State that is privately owned or public land that is leased to a private citizen at the time of initiation of an incentives contract.

"Eligible practices" means practices that increase soil health and reduce carbon emissions and carbon sequestration and storage over a designated period on eligible land.

"Incentives contract" means a contract that specifies the following:

(1) The eligible practices to be undertaken;

(2) The acreage of eligible land;

(3) The established rate of compensation;

(4) A schedule to verify that the terms of the contract have been fulfilled; and

(5) Other terms determined to be necessary by the authority.

"Office" means the office of planning and sustainable development.

"Phase I activities" means activities identified as having a high likelihood of effectively achieving durable sequestration benefits at reasonable compensation rates across eligible land types, including:

(1) One time establishment and yearly monitoring that include:

(A) Reforestation;

(B) Windbreaks;

(D) Improved forages; and

(E) Control of invasive species; and

(2) Yearly investments that include:

(A) Efficient nutrient management;

(B) Crop diversity through rotations and cover crops;

(D) Rotational grazing and improved forages;

(E) Waste-stream derived amendment application, such as compost, biochar, and anaerobic digest;

(F) Improved cropping and organic systems; and

(G) Feed management.

"Phase II activities" means activities identified as those that support significant sequestration potential but require additional technical work to estimate sequestration potential or identify appropriate eligible land types, including:

(1) Perennial biofuel feedstocks;

(2) Methane capture;

(3) Improved forest management;

(4) Conservation easements; and

(5) Other renewable energy options that involve blended food and energy systems.

"Program" means the Hawaii farmland and forest soil health carbon smart incentive program established by this part."

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2022-2023 for:

(1) Administration of the Hawaii farmland and forest soil health carbon smart incentive program; and

(2) Five full-time equivalent (5.0 FTE) permanent positions for the office of planning and sustainable development, as follows:

(A) One full-time equivalent (1.0 FTE) permanent position for administering the Hawaii farmland and forest soil health carbon smart incentive program established by this Act; and

(B) Four full-time equivalent (4.0) permanent positions to provide program expertise and technical assistance to each of the counties.

The sum appropriated shall be expended by the office of planning and sustainable development for the purposes of this Act.

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2022-2023 for one full-time equivalent (1.0 FTE) permanent position to support soil health and carbon sequestration actions on state lands and provide technical and research assistance to the Hawaii farmland and forest soil health carbon smart incentive program established by this Act.

The sum appropriated shall be expended by the department of agriculture for the purposes of this Act.

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2022-2023 for one full-time equivalent (1.0 FTE) permanent position to support soil health and carbon sequestration actions on state lands and provide technical and research assistance to the Hawaii farmland and forest soil health carbon smart incentive program established by this Act.

The sum appropriated shall be expended by the department of land and natural resources for the purposes of this Act.

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval; provided that sections 3, 4, and 5 shall take effect on July 1, 2022.

THE SENATE	S.B. NO.	3325
THIRTY-FIRST LEGISLATURE, 2022		S.D. 1
STATE OF HAWAII