[House Report 108-375]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 108-375
======================================================================
ENERGY POLICY ACT OF 2003
_______
November 18 (legislative day, November 17), 2003.--Ordered to be
printed
_______
Mr. Tauzin, from the committee of conference, submitted the following
CONFERENCE REPORT
[To accompany H.R. 6]
The committee of conference on the disagreeing votes of
the two Houses on the amendment of the Senate to the bill (H.R.
6), to enhance energy conservation and research and
development, to provide for security and diversity in the
energy supply for the American people, and for other purposes,
having met, after full and free conference, have agreed to
recommend and do recommend to their respective Houses as
follows:
That the House recede from its disagreement to the
amendment of the Senate and agree to the same with an amendment
as follows:
In lieu of the matter proposed to be inserted by the
Senate amendment, insert the following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Energy
Policy Act of 2003''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
TITLE I--ENERGY EFFICIENCY
Subtitle A--Federal Programs
Sec. 101. Energy and water saving measures in congressional buildings.
Sec. 102. Energy management requirements.
Sec. 103. Energy use measurement and accountability.
Sec. 104. Procurement of energy efficient products.
Sec. 105. Energy savings performance contracts.
Sec. 106. Energy savings performance contracts pilot program for
nonbuilding applications.
Sec. 107. Voluntary commitments to reduce industrial energy intensity.
Sec. 108. Advanced Building Efficiency Testbed.
Sec. 109. Federal building performance standards.
Sec. 110. Increased use of recovered mineral component in federally
funded projects involving procurement of cement or concrete.
Subtitle B--Energy Assistance and State Programs
Sec. 121. Low Income Home Energy Assistance Program.
Sec. 122. Weatherization assistance.
Sec. 123. State energy programs.
Sec. 124. Energy efficient appliance rebate programs.
Sec. 125. Energy efficient public buildings.
Sec. 126. Low income community energy efficiency pilot program.
Subtitle C--Energy Efficient Products
Sec. 131. Energy Star program.
Sec. 132. HVAC maintenance consumer education program.
Sec. 133. Energy conservation standards for additional products.
Sec. 134. Energy labeling.
Subtitle D--Public Housing
Sec. 141. Capacity building for energy-efficient, affordable housing.
Sec. 142. Increase of CDBG public services cap for energy conservation
and efficiency activities.
Sec. 143. FHA mortgage insurance incentives for energy efficient
housing.
Sec. 144. Public Housing Capital Fund.
Sec. 145. Grants for energy-conserving improvements for assisted
housing.
Sec. 146. North American Development Bank.
Sec. 147. Energy-efficient appliances.
Sec. 148. Energy efficiency standards.
Sec. 149. Energy strategy for HUD.
TITLE II--RENEWABLE ENERGY
Subtitle A--General Provisions
Sec. 201. Assessment of renewable energy resources.
Sec. 202. Renewable energy production incentive.
Sec. 203. Federal purchase requirement.
Sec. 204. Insular areas energy security.
Sec. 205. Use of photovoltaic energy in public buildings.
Sec. 206. Grants to improve the commercial value of forest biomass for
electric energy, useful heat, transportation fuels, petroleum-
based product substitutes, and other commercial purposes.
Sec. 207. Biobased products.
Subtitle B--Geothermal Energy
Sec. 211. Short title.
Sec. 212. Competitive lease sale requirements.
Sec. 213. Direct use.
Sec. 214. Royalties and near-term production incentives.
Sec. 215. Geothermal leasing and permitting on Federal lands.
Sec. 216. Review and report to Congress.
Sec. 217. Reimbursement for costs of NEPA analyses, documentation, and
studies.
Sec. 218. Assessment of geothermal energy potential.
Sec. 219. Cooperative or unit plans.
Sec. 220. Royalty on byproducts.
Sec. 221. Repeal of authorities of Secretary to readjust terms,
conditions, rentals, and royalties.
Sec. 222. Crediting of rental toward royalty.
Sec. 223. Lease duration and work commitment requirements.
Sec. 224. Advanced royalties required for suspension of production.
Sec. 225. Annual rental.
Sec. 226. Leasing and permitting on Federal lands withdrawn for military
purposes.
Sec. 227. Technical amendments.
Subtitle C--Hydroelectric
Part I--Alternative Conditions
Sec. 231. Alternative conditions and fishways.
Part II--Additional Hydropower
Sec. 241. Hydroelectric production incentives.
Sec. 242. Hydroelectric efficiency improvement.
Sec. 243. Small hydroelectric power projects.
Sec. 244. Increased hydroelectric generation at existing Federal
facilities.
Sec. 245. Shift of project loads to off-peak periods.
Sec. 246. Corps of Engineers hydropower operation and maintenance
funding.
Sec. 247. Limitation on certain charges assessed to the Flint Creek
Project, Montana.
Sec. 248. Reinstatement and transfer.
TITLE III--OIL AND GAS
Subtitle A--Petroleum Reserve and Home Heating Oil
Sec. 301. Permanent authority to operate the Strategic Petroleum Reserve
and other energy programs.
Sec. 302. National Oilheat Research Alliance.
Subtitle B--Production Incentives
Sec. 311. Definition of Secretary.
Sec. 312. Program on oil and gas royalties in-kind.
Sec. 313. Marginal property production incentives.
Sec. 314. Incentives for natural gas production from deep wells in the
shallow waters of the Gulf of Mexico.
Sec. 315. Royalty relief for deep water production.
Sec. 316. Alaska offshore royalty suspension.
Sec. 317. Oil and gas leasing in the National Petroleum Reserve in
Alaska.
Sec. 318. Orphaned, abandoned, or idled wells on Federal land.
Sec. 319. Combined hydrocarbon leasing.
Sec. 320. Liquified natural gas.
Sec. 321. Alternate energy-related uses on the Outer Continental Shelf.
Sec. 322. Preservation of geological and geophysical data.
Sec. 323. Oil and gas lease acreage limitations.
Sec. 324. Assessment of dependence of State of Hawaii on oil.
Sec. 325. Deadline for decision on appeals of consistency determination
under the Coastal Zone Management Act of 1972.
Sec. 326. Reimbursement for costs of NEPA analyses, documentation, and
studies.
Sec. 327. Hydraulic fracturing.
Sec. 328. Oil and gas exploration and production defined.
Sec. 329. Outer Continental Shelf provisions.
Sec. 330. Appeals relating to pipeline construction or offshore mineral
development projects.
Sec. 331. Bilateral international oil supply agreements.
Sec. 332. Natural gas market reform.
Sec. 333. Natural gas market transparency.
Subtitle C--Access to Federal Land
Sec. 341. Office of Federal Energy Project Coordination.
Sec. 342. Federal onshore oil and gas leasing and permitting practices.
Sec. 343. Management of Federal oil and gas leasing programs.
Sec. 344. Consultation regarding oil and gas leasing on public land.
Sec. 345. Estimates of oil and gas resources underlying onshore Federal
land.
Sec. 346. Compliance with Executive Order 13211; actions concerning
regulations that significantly affect energy supply,
distribution, or use.
Sec. 347. Pilot project to improve Federal permit coordination.
Sec. 348. Deadline for consideration of applications for permits.
Sec. 349. Clarification of fair market rental value determinations for
public land and Forest Service rights-of-way.
Sec. 350. Energy facility rights-of-way and corridors on Federal land.
Sec. 351. Consultation regarding energy rights-of-way on public land.
Sec. 352. Renewable energy on Federal land.
Sec. 353. Electricity transmission line right-of-way, Cleveland National
Forest and adjacent public land, California.
Sec. 354. Sense of Congress regarding development of minerals under
Padre Island National Seashore.
Sec. 355. Encouraging prohibition of off-shore drilling in the Great
Lakes.
Sec. 356. Finger Lakes National Forest withdrawal.
Sec. 357. Study on lease exchanges in the Rocky Mountain Front.
Sec. 358. Federal coalbed methane regulation.
Sec. 359. Livingston Parish mineral rights transfer.
Subtitle D--Alaska Natural Gas Pipeline
Sec. 371. Short title.
Sec. 372. Definitions.
Sec. 373. Issuance of certificate of public convenience and necessity.
Sec. 374. Environmental reviews.
Sec. 375. Pipeline expansion.
Sec. 376. Federal Coordinator.
Sec. 377. Judicial review.
Sec. 378. State jurisdiction over in-State delivery of natural gas.
Sec. 379. Study of alternative means of construction.
Sec. 380. Clarification of ANGTA status and authorities.
Sec. 381. Sense of Congress concerning use of steel manufactured in
North America negotiation of a project labor agreement.
Sec. 382. Sense of Congress and study concerning participation by small
business concerns.
Sec. 383. Alaska pipeline construction training program.
Sec. 384. Sense of Congress concerning natural gas demand.
Sec. 385. Sense of Congress concerning Alaskan ownership.
Sec. 386. Loan guarantees.
TITLE IV--COAL
Subtitle A--Clean Coal Power Initiative
Sec. 401. Authorization of appropriations.
Sec. 402. Project criteria.
Sec. 403. Report.
Sec. 404. Clean coal Centers of Excellence.
Subtitle B--Clean Power Projects
Sec. 411. Coal technology loan.
Sec. 412. Coal gasification.
Sec. 413. Integrated gasification combined cycle technology.
Sec. 414. Petroleum coke gasification.
Sec. 415. Integrated coal/renewable energy system.
Sec. 416. Electron scrubbing demonstration.
Subtitle C--Federal Coal Leases
Sec. 421. Repeal of the 160-acre limitation for coal leases.
Sec. 422. Mining plans.
Sec. 423. Payment of advance royalties under coal leases.
Sec. 424. Elimination of deadline for submission of coal lease operation
and reclamation plan.
Sec. 425. Amendment relating to financial assurances with respect to
bonus bids.
Sec. 426. Inventory requirement.
Sec. 427. Application of amendments.
Subtitle D--Coal and Related Programs
Sec. 441. Clean air coal program.
TITLE V--INDIAN ENERGY
Sec. 501. Short title.
Sec. 502. Office of Indian Energy Policy and Programs.
Sec. 503. Indian energy.
Sec. 504. Four Corners transmission line project.
Sec. 505. Energy efficiency in federally assisted housing.
Sec. 506. Consultation with Indian tribes.
TITLE VI--NUCLEAR MATTERS
Subtitle A--Price-Anderson Act Amendments
Sec. 601. Short title.
Sec. 602. Extension of indemnification authority.
Sec. 603. Maximum assessment.
Sec. 604. Department of Energy liability limit.
Sec. 605. Incidents outside the United States.
Sec. 606. Reports.
Sec. 607. Inflation adjustment.
Sec. 608. Treatment of modular reactors.
Sec. 609. Applicability.
Sec. 610. Prohibition on assumption by United States Government of
liability for certain foreign incidents.
Sec. 611. Civil penalties.
Subtitle B--General Nuclear Matters
Sec. 621. Licenses.
Sec. 622. NRC training program.
Sec. 623. Cost recovery from Government agencies.
Sec. 624. Elimination of pension offset.
Sec. 625. Antitrust review.
Sec. 626. Decommissioning.
Sec. 627. Limitation on legal fee reimbursement.
Sec. 628. Decommissioning pilot program.
Sec. 629. Report on feasibility of developing commercial nuclear energy
generation facilities at existing Department of Energy sites.
Sec. 630. Uranium sales.
Sec. 631. Cooperative research and development and special demonstration
projects for the uranium mining industry.
Sec. 632. Whistleblower protection.
Sec. 633. Medical isotope production.
Sec. 634. Fernald byproduct material.
Sec. 635. Safe disposal of greater-than-class C radioactive waste.
Sec. 636. Prohibition on nuclear exports to countries that sponsor
terrorism.
Sec. 637. Uranium enrichment facilities.
Sec. 638. National uranium stockpile.
Subtitle C--Advanced Reactor Hydrogen Cogeneration Project
Sec. 651. Project establishment.
Sec. 652. Project definition.
Sec. 653. Project management.
Sec. 654. Project requirements.
Sec. 655. Authorization of appropriations.
Subtitle D--Nuclear Security
Sec. 661. Nuclear facility threats.
Sec. 662. Fingerprinting for criminal history record checks.
Sec. 663. Use of firearms by security personnel of licensees and
certificate holders of the Commission.
Sec. 664. Unauthorized introduction of dangerous weapons.
Sec. 665. Sabotage of nuclear facilities or fuel.
Sec. 666. Secure transfer of nuclear materials.
Sec. 667. Department of Homeland Security consultation.
Sec. 668. Authorization of appropriations.
TITLE VII--VEHICLES AND FUELS
Subtitle A--Existing Programs
Sec. 701. Use of alternative fuels by dual-fueled vehicles.
Sec. 702. Neighborhood electric vehicles.
Sec. 703. Credits for medium and heavy duty dedicated vehicles.
Sec. 704. Incremental cost allocation.
Sec. 705. Alternative compliance and flexibility.
Sec. 706. Review of Energy Policy Act of 1992 programs.
Sec. 707. Report concerning compliance with alternative fueled vehicle
purchasing requirements.
Subtitle B--Hybrid Vehicles, Advanced Vehicles, and Fuel Cell Buses
Part 1--Hybrid Vehicles
Sec. 711. Hybrid vehicles.
Part 2--Advanced Vehicles
Sec. 721. Definitions.
Sec. 722. Pilot program.
Sec. 723. Reports to Congress.
Sec. 724. Authorization of appropriations.
Part 3--Fuel Cell Buses
Sec. 731. Fuel cell transit bus demonstration.
Subtitle C--Clean School Buses
Sec. 741. Definitions.
Sec. 742. Program for replacement of certain school buses with clean
school buses.
Sec. 743. Diesel retrofit program.
Sec. 744. Fuel cell school buses.
Subtitle D--Miscellaneous
Sec. 751. Railroad efficiency.
Sec. 752. Mobile emission reductions trading and crediting.
Sec. 753. Aviation fuel conservation and emissions.
Sec. 754. Diesel fueled vehicles.
Sec. 755. Conserve by bicycling program.
Sec. 756. Reduction of engine idling of heavy-duty vehicles.
Sec. 757. Biodiesel engine testing program.
Sec. 758. High occupancy vehicle exception.
Subtitle E--Automobile Efficiency
Sec. 771. Authorization of appropriations for implementation and
enforcement of fuel economy standards.
Sec. 772. Revised considerations for decisions on maximum feasible
average fuel economy.
Sec. 773. Extension of maximum fuel economy increase for alternative
fueled vehicles.
Sec. 774. Study of feasibility and effects of reducing use of fuel for
automobiles.
TITLE VIII--HYDROGEN
Sec. 801. Definitions.
Sec. 802. Plan.
Sec. 803. Programs.
Sec. 804. Interagency task force.
Sec. 805. Advisory Committee.
Sec. 806. External review.
Sec. 807. Miscellaneous provisions.
Sec. 808. Savings clause.
Sec. 809. Authorization of appropriations.
TITLE IX--RESEARCH AND DEVELOPMENT
Sec. 901. Goals.
Sec. 902. Definitions.
Subtitle A--Energy Efficiency
Sec. 904. Energy efficiency.
Sec. 905. Next Generation Lighting Initiative.
Sec. 906. National Building Performance Initiative.
Sec. 907. Secondary electric vehicle battery use program.
Sec. 908. Energy Efficiency Science Initiative.
Sec. 909. Electric motor control technology.
Sec. 910. Advanced Energy Technology Transfer Centers.
Subtitle B--Distributed Energy and Electric Energy Systems
Sec. 911. Distributed energy and electric energy systems.
Sec. 912. Hybrid distributed power systems.
Sec. 913. High power density industry program.
Sec. 914. Micro-cogeneration energy technology.
Sec. 915. Distributed energy technology demonstration program.
Sec. 916. Reciprocating power.
Subtitle C--Renewable Energy
Sec. 918. Renewable energy.
Sec. 919. Bioenergy programs.
Sec. 920. Concentrating solar power research and development program.
Sec. 921. Miscellaneous projects.
Sec. 922. Renewable energy in public buildings.
Sec. 923. Study of marine renewable energy options.
Subtitle D--Nuclear Energy
Sec. 924. Nuclear energy.
Sec. 925. Nuclear energy research and development programs.
Sec. 926. Advanced fuel cycle initiative.
Sec. 927. University nuclear science and engineering support.
Sec. 928. Security of reactor designs.
Sec. 929. Alternatives to industrial radioactive sources.
Sec. 930. Geological isolation of spent fuel.
Subtitle E--Fossil Energy
Part I--Research Programs
Sec. 931. Fossil energy.
Sec. 932. Oil and gas research programs.
Sec. 933. Technology transfer.
Sec. 934. Research and development for coal mining technologies.
Sec. 935. Coal and related technologies program.
Sec. 936. Complex well technology testing facility.
Sec. 937. Fischer-Tropsch diesel fuel loan guarantee program.
Part II--Ultra-deepwater and Unconventional Natural Gas and Other
Petroleum Resources
Sec. 941. Program authority.
Sec. 942. Ultra-deepwater program.
Sec. 943. Unconventional natural gas and other petroleum resources
program.
Sec. 944. Additional requirements for awards.
Sec. 945. Advisory Committees.
Sec. 946. Limits on participation.
Sec. 947. Sunset.
Sec. 948. Definitions.
Sec. 949. Funding.
Subtitle F--Science
Sec. 951. Science.
Sec. 952. United States participation in ITER.
Sec. 953. Plan for fusion energy sciences program.
Sec. 954. Spallation Neutron Source.
Sec. 955. Support for science and energy facilities and infrastructure.
Sec. 956. Catalysis research and development program.
Sec. 957. Nanoscale science and engineering research, development,
demonstration, and commercial application.
Sec. 958. Advanced scientific computing for energy missions.
Sec. 959. Genomes to Life program.
Sec. 960. Fission and fusion energy materials research program.
Sec. 961. Energy-Water Supply Program.
Sec. 962. Nitrogen fixation.
Subtitle G--Energy and Environment
Sec. 964. United States-Mexico energy technology cooperation.
Sec. 965. Western Hemisphere energy cooperation.
Sec. 966. Waste reduction and use of alternatives.
Sec. 967. Report on fuel cell test center.
Sec. 968. Arctic Engineering Research Center.
Sec. 969. Barrow Geophysical Research Facility.
Sec. 970. Western Michigan demonstration project.
Subtitle H--Management
Sec. 971. Availability of funds.
Sec. 972. Cost sharing.
Sec. 973. Merit review of proposals.
Sec. 974. External technical review of departmental programs.
Sec. 975. Improved coordination of technology transfer activities.
Sec. 976. Federal laboratory educational partners.
Sec. 977. Interagency cooperation.
Sec. 978. Technology infrastructure program.
Sec. 979. Reprogramming.
Sec. 980. Construction with other laws.
Sec. 981. Report on research and development program evaluation
methodologies.
Sec. 982. Department of Energy Science and Technology Scholarship
Program.
Sec. 983. Report on equal employment opportunity practices.
Sec. 984. Small business advocacy and assistance.
Sec. 985. Report on mobility of scientific and technical personnel.
Sec. 986. National Academy of Sciences report.
Sec. 987. Outreach.
Sec. 988. Competitive award of management contracts.
Sec. 989. Educational programs in science and mathematics.
TITLE X--DEPARTMENT OF ENERGY MANAGEMENT
Sec. 1001. Additional Assistant Secretary position.
Sec. 1002. Other transactions authority.
TITLE XI--PERSONNEL AND TRAINING
Sec. 1101. Training guidelines for electric energy industry personnel.
Sec. 1102. Improved access to energy-related scientific and technical
careers.
Sec. 1103. National Power Plant Operations Technology and Education
Center.
Sec. 1104. International energy training.
TITLE XII--ELECTRICITY
Sec. 1201. Short title.
Subtitle A--Reliability Standards
Sec. 1211. Electric reliability standards.
Subtitle B--Transmission Infrastructure Modernization
Sec. 1221. Siting of interstate electric transmission facilities.
Sec. 1222. Third-party finance.
Sec. 1223. Transmission system monitoring.
Sec. 1224. Advanced transmission technologies.
Sec. 1225. Electric transmission and distribution programs.
Sec. 1226. Advanced Power System Technology Incentive Program.
Sec. 1227. Office of Electric Transmission and Distribution.
Subtitle C--Transmission Operation Improvements
Sec. 1231. Open nondiscriminatory access.
Sec. 1232. Sense of the Congress on Regional Transmission Organizations.
Sec. 1233. Regional Transmission Organization applications progress
report.
Sec. 1234. Federal utility participation in Regional Transmission
Organizations.
Sec. 1235. Standard market design.
Sec. 1236. Native load service obligation.
Sec. 1237. Study on the benefits of economic dispatch.
Subtitle D--Transmission Rate Reform
Sec. 1241. Transmission infrastructure investment.
Sec. 1242. Voluntary transmission pricing plans.
Subtitle E--Amendments to PURPA
Sec. 1251. Net metering and additional standards.
Sec. 1252. Smart metering.
Sec. 1253. Cogeneration and small power production purchase and sale
requirements.
Subtitle F--Repeal of PUHCA
Sec. 1261. Short title.
Sec. 1262. Definitions.
Sec. 1263. Repeal of the Public Utility Holding Company Act of 1935.
Sec. 1264. Federal access to books and records.
Sec. 1265. State access to books and records.
Sec. 1266. Exemption authority.
Sec. 1267. Affiliate transactions.
Sec. 1268. Applicability.
Sec. 1269. Effect on other regulations.
Sec. 1270. Enforcement.
Sec. 1271. Savings provisions.
Sec. 1272. Implementation.
Sec. 1273. Transfer of resources.
Sec. 1274. Effective date.
Sec. 1275. Service allocation.
Sec. 1276. Authorization of appropriations.
Sec. 1277. Conforming amendments to the Federal Power Act.
Subtitle G--Market Transparency, Enforcement, and Consumer Protection
Sec. 1281. Market transparency rules.
Sec. 1282. Market manipulation.
Sec. 1283. Enforcement.
Sec. 1284. Refund effective date.
Sec. 1285. Refund authority.
Sec. 1286. Sanctity of contract.
Sec. 1287. Consumer privacy and unfair trade practices.
Subtitle H--Merger Reform
Sec. 1291. Merger review reform and accountability.
Sec. 1292. Electric utility mergers.
Subtitle I--Definitions
Sec. 1295. Definitions.
Subtitle J--Technical and Conforming Amendments
Sec. 1297. Conforming amendments.
TITLE XIII--ENERGY TAX INCENTIVES
Sec. 1300. Short title; amendment of 1986 code.
Subtitle A--Conservation
Part I--Residential and Business Property
Sec. 1301. Credit for residential energy efficient property.
Sec. 1302. Extension and expansion of credit for electricity produced
from certain renewable resources.
Sec. 1303. Credit for business installation of qualified fuel cells.
Sec. 1304. Credit for energy efficiency improvements to existing homes.
Sec. 1305. Credit for construction of new energy efficient homes.
Sec. 1306. Energy credit for combined heat and power system property.
Sec. 1307. Credit for energy efficient appliances.
Sec. 1308. Energy efficient commercial buildings deduction.
Sec. 1309. Three-year applicable recovery period for depreciation of
qualified energy management devices.
Sec. 1310. Credit for production from advanced nuclear power facilities.
Part II--Fuels and Alternative Motor Vehicles
Sec. 1311. Repeal of 4.3-cent motor fuel excise taxes on railroads and
inland waterway transportation which remain in general fund.
Sec. 1312. Reduced motor fuel excise tax on certain mixtures of diesel
fuel.
Sec. 1313. Small ethanol producer credit.
Sec. 1314. Incentives for biodiesel.
Sec. 1315. Alcohol fuel and biodiesel mixtures excise tax credit.
Sec. 1316. Nonapplication of export exemption to delivery of fuel to
motor vehicles removed from United States.
Sec. 1317. Repeal of phaseouts for qualified electric vehicle credit and
deduction for clean fuel-vehicles.
Sec. 1318. Alternative motor vehicle credit.
Sec. 1319. Modifications of deduction for certain refueling property.
Subtitle B--Reliability
Sec. 1321. Natural gas gathering lines treated as 7-year property.
Sec. 1322. Natural gas distribution lines treated as 15-year property.
Sec. 1323. Electric transmission property treated as 15-year property.
Sec. 1324. Expensing of capital costs incurred in complying with
Environmental Protection Agency sulfur regulations.
Sec. 1325. Credit for production of low sulfur diesel fuel.
Sec. 1326. Determination of small refiner exception to oil depletion
deduction.
Sec. 1327. Sales or dispositions to implement Federal Energy Regulatory
Commission or State electric restructuring policy.
Sec. 1328. Modifications to special rules for nuclear decommissioning
costs.
Sec. 1329. Treatment of certain income of cooperatives.
Sec. 1330. Arbitrage rules not to apply to prepayments for natural gas.
Subtitle C--Production
Part I--Oil and Gas Provisions
Sec. 1341. Oil and gas from marginal wells.
Sec. 1342. Temporary suspension of limitation based on 65 percent of
taxable income and extension of suspension of taxable income
limit with respect to marginal production.
Sec. 1343. Amortization of delay rental payments.
Sec. 1344. Amortization of geological and geophysical expenditures.
Sec. 1345. Extension and modification of credit for producing fuel from
a nonconventional source.
Part II--Alternative Minimum Tax Provisions
Sec. 1346. New nonrefundable personal credits allowed against regular
and minimum taxes.
Sec. 1347. Business related energy credits allowed against regular and
minimum tax.
Sec. 1348. Temporary repeal of alternative minimum tax preference for
intangible drilling costs.
Part III--Clean Coal Incentives
Sec. 1351. Credit for clean coal technology units.
Sec. 1352. Expansion of amortization for certain pollution control
facilities.
Sec. 1353. 5-year recovery period for eligible integrated gasification
combined cycle technology unit eligible for credit.
Part IV--High Volume Natural Gas Provisions
Sec. 1355. High volume natural gas pipe treated as 7-year property.
Sec. 1356. Extension of enhanced oil recovery credit to high volume
natural gas facilities.
Subtitle D--Additional Provisions
Sec. 1361. Extension of accelerated depreciation benefit for energy-
related businesses on Indian reservations.
Sec. 1362. Payment of dividends on stock of cooperatives without
reducing patronage dividends.
Sec. 1363. Distributions from publicly traded partnerships treated as
qualifying income of regulated investment companies.
Sec. 1364. Ceiling fans.
Sec. 1365. Certain steam generators, and certain reactor vessel heads,
used in nuclear facilities.
Sec. 1366. Brownfields demonstration program for qualified green
building and sustainable design projects.
TITLE XIV--MISCELLANEOUS
Subtitle A--Rural and Remote Electricity Construction
Sec. 1401. Denali Commission programs.
Sec. 1402. Rural and remote community assistance.
Subtitle B--Coastal Programs
Sec. 1411. Royalty payments under leases under the Outer Continental
Shelf Lands Act.
Sec. 1412. Domestic offshore energy reinvestment.
Subtitle C--Reforms to the Board of Directors of the Tennessee Valley
Authority
Sec. 1431. Change in composition, operation, and duties of the board of
directors of the Tennessee Valley Authority.
Sec. 1432. Change in manner of appointment of staff.
Sec. 1433. Conforming amendments.
Sec. 1434. Appointments; effective date; transition.
Subtitle D--Other Provisions
Sec. 1441. Continuation of transmission security order.
Sec. 1442. Review of agency determinations.
Sec. 1443. Attainment dates for downwind ozone nonattainment areas.
Sec. 1444. Energy production incentives.
Sec. 1445. Use of granular mine tailings.
TITLE XV--ETHANOL AND MOTOR FUELS
Subtitle A--General Provisions
Sec. 1501. Renewable content of motor vehicle fuel.
Sec. 1502. Fuels safe harbor.
Sec. 1503. Findings and MTBE transition assistance.
Sec. 1504. Use of MTBE.
Sec. 1505. National Academy of Sciences review and presidential
determination.
Sec. 1506. Elimination of oxygen content requirement for reformulated
gasoline.
Sec. 1507. Analyses of motor vehicle fuel changes.
Sec. 1508. Data collection.
Sec. 1509. Reducing the proliferation of State fuel controls.
Sec. 1510. Fuel system requirements harmonization study.
Sec. 1511. Commercial byproducts from municipal solid waste and
cellulosic biomass loan guarantee program.
Sec. 1512. Resource center.
Sec. 1513. Cellulosic biomass and waste-derived ethanol conversion
assistance.
Sec. 1514. Blending of compliant reformulated gasolines.
Subtitle B--Underground Storage Tank Compliance
Sec. 1521. Short title.
Sec. 1522. Leaking underground storage tanks.
Sec. 1523. Inspection of underground storage tanks.
Sec. 1524. Operator training.
Sec. 1525. Remediation from oxygenated fuel additives.
Sec. 1526. Release prevention, compliance, and enforcement.
Sec. 1527. Delivery prohibition.
Sec. 1528. Federal facilities.
Sec. 1529. Tanks on tribal lands.
Sec. 1530. Future release containment technology.
Sec. 1531. Authorization of appropriations.
Sec. 1532. Conforming amendments.
Sec. 1533. Technical amendments.
TITLE XVI--STUDIES
Sec. 1601. Study on inventory of petroleum and natural gas storage.
Sec. 1602. Natural gas supply shortage report.
Sec. 1603. Split-estate Federal oil and gas leasing and development
practices.
Sec. 1604. Resolution of Federal resource development conflicts in the
Powder River Basin.
Sec. 1605. Study of energy efficiency standards.
Sec. 1606. Telecommuting study.
Sec. 1607. LIHEAP report.
Sec. 1608. Oil bypass filtration technology.
Sec. 1609. Total integrated thermal systems.
Sec. 1610. University collaboration.
Sec. 1611. Reliability and consumer protection assessment.
TITLE I--ENERGY EFFICIENCY
Subtitle A--Federal Programs
SEC. 101. ENERGY AND WATER SAVING MEASURES IN CONGRESSIONAL BUILDINGS.
(a) In General.--Part 3 of title V of the National Energy
Conservation Policy Act (42 U.S.C. 8251 et seq.) is amended by
adding at the end the following:
``SEC. 552. ENERGY AND WATER SAVINGS MEASURES IN CONGRESSIONAL
BUILDINGS.
``(a) In General.--The Architect of the Capitol--
``(1) shall develop, update, and implement a cost-
effective energy conservation and management plan
(referred to in this section as the `plan') for all
facilities administered by Congress (referred to in
this section as `congressional buildings') to meet the
energy performance requirements for Federal buildings
established under section 543(a)(1); and
``(2) shall submit the plan to Congress, not later
than 180 days after the date of enactment of this
section.
``(b) Plan Requirements.--The plan shall include--
``(1) a description of the life cycle cost analysis
used to determine the cost-effectiveness of proposed
energy efficiency projects;
``(2) a schedule of energy surveys to ensure
complete surveys of all congressional buildings every 5
years to determine the cost and payback period of
energy and water conservation measures;
``(3) a strategy for installation of life cycle
cost-effective energy and water conservation measures;
``(4) the results of a study of the costs and
benefits of installation of submetering in
congressional buildings; and
``(5) information packages and `how-to' guides for
each Member and employing authority of Congress that
detail simple, cost-effective methods to save energy
and taxpayer dollars in the workplace.
``(c) Annual Report.--The Architect of the Capitol shall
submit to Congress annually a report on congressional energy
management and conservation programs required under this
section that describes in detail--
``(1) energy expenditures and savings estimates for
each facility;
``(2) energy management and conservation projects;
and
``(3) future priorities to ensure compliance with
this section.''.
(b) Table of Contents Amendment.--The table of contents of
the National Energy Conservation Policy Act is amended by
adding at the end of the items relating to part 3 of title V
the following new item:
``Sec. 552. Energy and water savings measures in congressional
buildings.''.
(c) Repeal.--Section 310 of the Legislative Branch
Appropriations Act, 1999 (2 U.S.C. 1815), is repealed.
(d) Energy Infrastructure.--The Architect of the Capitol,
building on the Master Plan Study completed in July 2000, shall
commission a study to evaluate the energy infrastructure of the
Capital Complex to determine how the infrastructure could be
augmented to become more energy efficient, using unconventional
and renewable energy resources, in a way that would enable the
Complex to have reliable utility service in the event of power
fluctuations, shortages, or outages.
(e) Authorization of Appropriations.--There are authorized
to be appropriated to the Architect of the Capitol to carry out
subsection (d), $2,000,000 for each of fiscal years 2004
through 2008.
SEC. 102. ENERGY MANAGEMENT REQUIREMENTS.
(a) Energy Reduction Goals.--
(1) Amendment.--Section 543(a)(1) of the National
Energy Conservation Policy Act (42 U.S.C. 8253(a)(1))
is amended by striking ``its Federal buildings so
that'' and all that follows through the end and
inserting ``the Federal buildings of the agency
(including each industrial or laboratory facility) so
that the energy consumption per gross square foot of
the Federal buildings of the agency in fiscal years
2004 through 2013 is reduced, as compared with the
energy consumption per gross square foot of the Federal
buildings of the agency in fiscal year 2001, by the
percentage specified in the following table:
``Fiscal Year Percentage reduction
2004.................................................. 2
2005.................................................. 4
2006.................................................. 6
2007.................................................. 8
2008.................................................. 10
2009.................................................. 12
2010.................................................. 14
2011.................................................. 16
2012.................................................. 18
2013.................................................. 20.''.
(2) Reporting baseline.--The energy reduction goals
and baseline established in paragraph (1) of section
543(a) of the National Energy Conservation Policy Act
(42 U.S.C. 8253(a)(1)), as amended by this subsection,
supersede all previous goals and baselines under such
paragraph, and related reporting requirements.
(b) Review and Revision of Energy Performance
Requirement.--Section 543(a) of the National Energy
Conservation Policy Act (42 U.S.C. 8253(a)) is further amended
by adding at the end the following:
``(3) Not later than December 31, 2012, the Secretary shall
review the results of the implementation of the energy
performance requirement established under paragraph (1) and
submit to Congress recommendations concerning energy
performance requirements for fiscal years 2014 through 2023.''.
(c) Exclusions.--Section 543(c)(1) of the National Energy
Conservation Policy Act (42 U.S.C. 8253(c)(1)) is amended by
striking ``An agency may exclude'' and all that follows through
the end and inserting ``(A) An agency may exclude, from the
energy performance requirement for a fiscal year established
under subsection (a) and the energy management requirement
established under subsection (b), any Federal building or
collection of Federal buildings, if the head of the agency
finds that--
``(i) compliance with those requirements would be
impracticable;
``(ii) the agency has completed and submitted all
federally required energy management reports;
``(iii) the agency has achieved compliance with the
energy efficiency requirements of this Act, the Energy
Policy Act of 1992, Executive orders, and other Federal
law; and
``(iv) the agency has implemented all practicable,
life cycle cost-effective projects with respect to the
Federal building or collection of Federal buildings to
be excluded.
``(B) A finding of impracticability under subparagraph
(A)(i) shall be based on--
``(i) the energy intensiveness of activities
carried out in the Federal building or collection of
Federal buildings; or
``(ii) the fact that the Federal building or
collection of Federal buildings is used in the
performance of a national security function.''.
(d) Review by Secretary.--Section 543(c)(2) of the National
Energy Conservation Policy Act (42 U.S.C. 8253(c)(2)) is
amended--
(1) by striking ``impracticability standards'' and
inserting ``standards for exclusion'';
(2) by striking ``a finding of impracticability''
and inserting ``the exclusion''; and
(3) by striking ``energy consumption requirements''
and inserting ``requirements of subsections (a) and
(b)(1)''.
(e) Criteria.--Section 543(c) of the National Energy
Conservation Policy Act (42 U.S.C. 8253(c)) is further amended
by adding at the end the following:
``(3) Not later than 180 days after the date of enactment
of this paragraph, the Secretary shall issue guidelines that
establish criteria for exclusions under paragraph (1).''.
(f) Retention of Energy and Water Savings.--Section 546 of
the National Energy Conservation Policy Act (42 U.S.C. 8256) is
amended by adding at the end the following new subsection:
``(e) Retention of Energy and Water Savings.--An agency may
retain any funds appropriated to that agency for energy
expenditures, water expenditures, or wastewater treatment
expenditures, at buildings subject to the requirements of
section 543(a) and (b), that are not made because of energy
savings or water savings. Except as otherwise provided by law,
such funds may be used only for energy efficiency, water
conservation, or unconventional and renewable energy resources
projects.''.
(g) Reports.--Section 548(b) of the National Energy
Conservation Policy Act (42 U.S.C. 8258(b)) is amended--
(1) in the subsection heading, by inserting ``the
President and'' before ``Congress''; and
(2) by inserting ``President and'' before
``Congress''.
(h) Conforming Amendment.--Section 550(d) of the National
Energy Conservation Policy Act (42 U.S.C. 8258b(d)) is amended
in the second sentence by striking ``the 20 percent reduction
goal established under section 543(a) of the National Energy
Conservation Policy Act (42 U.S.C. 8253(a)).'' and inserting
``each of the energy reduction goals established under section
543(a).''.
SEC. 103. ENERGY USE MEASUREMENT AND ACCOUNTABILITY.
Section 543 of the National Energy Conservation Policy Act
(42 U.S.C. 8253 is further amended by adding at the end the
following:
``(e) Metering of Energy Use.--
``(1) Deadline.--By October 1, 2010, in accordance
with guidelines established by the Secretary under
paragraph (2), all Federal buildings shall, for the
purposes of efficient use of energy and reduction in
the cost of electricity used in such buildings, be
metered or submetered. Each agency shall use, to the
maximum extent practicable, advanced meters or advanced
metering devices that provide data at least daily and
that measure at least hourly consumption of electricity
in the Federal buildings of the agency. Such data shall
be incorporated into existing Federal energy tracking
systems and made available to Federal facility energy
managers.
``(2) Guidelines.--
``(A) In general.--Not later than 180 days
after the date of enactment of this subsection,
the Secretary, in consultation with the
Department of Defense, the General Services
Administration, representatives from the
metering industry, utility industry, energy
services industry, energy efficiency industry,
energy efficiency advocacy organizations,
national laboratories, universities, and
Federal facility energy managers, shall
establish guidelines for agencies to carry out
paragraph (1).
``(B) Requirements for guidelines.--The
guidelines shall--
``(i) take into consideration--
``(I) the cost of metering
and submetering and the reduced
cost of operation and
maintenance expected to result
from metering and submetering;
``(II) the extent to which
metering and submetering are
expected to result in increased
potential for energy
management, increased potential
for energy savings and energy
efficiency improvement, and
cost and energy savings due to
utility contract aggregation;
and
``(III) the measurement and
verification protocols of the
Department of Energy;
``(ii) include recommendations
concerning the amount of funds and the
number of trained personnel necessary
to gather and use the metering
information to track and reduce energy
use;
``(iii) establish priorities for
types and locations of buildings to be
metered and submetered based on cost-
effectiveness and a schedule of 1 or
more dates, not later than 1 year after
the date of issuance of the guidelines,
on which the requirements specified in
paragraph (1) shall take effect; and
``(iv) establish exclusions from
the requirements specified in paragraph
(1) based on the de minimis quantity of
energy use of a Federal building,
industrial process, or structure.
``(3) Plan.--Not later than 6 months after the date
guidelines are established under paragraph (2), in a
report submitted by the agency under section 548(a),
each agency shall submit to the Secretary a plan
describing how the agency will implement the
requirements of paragraph (1), including (A) how the
agency will designate personnel primarily responsible
for achieving the requirements and (B) demonstration by
the agency, complete with documentation, of any finding
that advanced meters or advanced metering devices, as
defined in paragraph (1), are not practicable.''.
SEC. 104. PROCUREMENT OF ENERGY EFFICIENT PRODUCTS.
(a) Requirements.--Part 3 of title V of the National Energy
Conservation Policy Act (42 U.S.C. 8251 et seq.), as amended by
section 101, is amended by adding at the end the following:
``SEC. 553. FEDERAL PROCUREMENT OF ENERGY EFFICIENT PRODUCTS.
``(a) Definitions.--In this section:
``(1) Energy star product.--The term `Energy Star
product' means a product that is rated for energy
efficiency under an Energy Star program.
``(2) Energy star program.--The term `Energy Star
program' means the program established by section 324A
of the Energy Policy and Conservation Act.
``(3) Executive agency.--The term `executive
agency' has the meaning given the term in section 4 of
the Office of Federal Procurement Policy Act (41 U.S.C.
403).
``(4) FEMP designated product.--The term `FEMP
designated product' means a product that is designated
under the Federal Energy Management Program of the
Department of Energy as being among the highest 25
percent of equivalent products for energy efficiency.
``(b) Procurement of Energy Efficient Products.--
``(1) Requirement.--To meet the requirements of an
executive agency for an energy consuming product, the
head of the executive agency shall, except as provided
in paragraph (2), procure--
``(A) an Energy Star product; or
``(B) a FEMP designated product.
``(2) Exceptions.--The head of an executive agency
is not required to procure an Energy Star product or
FEMP designated product under paragraph (1) if the head
of the executive agency finds in writing that--
``(A) an Energy Star product or FEMP
designated product is not cost-effective over
the life of the product taking energy cost
savings into account; or
``(B) no Energy Star product or FEMP
designated product is reasonably available that
meets the functional requirements of the
executive agency.
``(3) Procurement planning.--The head of an
executive agency shall incorporate into the
specifications for all procurements involving energy
consuming products and systems, including guide
specifications, project specifications, and
construction, renovation, and services contracts that
include provision of energy consuming products and
systems, and into the factors for the evaluation of
offers received for the procurement, criteria for
energy efficiency that are consistent with the criteria
used for rating Energy Star products and for rating
FEMP designated products.
``(c) Listing of Energy Efficient Products in Federal
Catalogs.--Energy Star products and FEMP designated products
shall be clearly identified and prominently displayed in any
inventory or listing of products by the General Services
Administration or the Defense Logistics Agency. The General
Services Administration or the Defense Logistics Agency shall
supply only Energy Star products or FEMP designated products
for all product categories covered by the Energy Star program
or the Federal Energy Management Program, except in cases where
the agency ordering a product specifies in writing that no
Energy Star product or FEMP designated product is available to
meet the buyer's functional requirements, or that no Energy
Star product or FEMP designated product is cost-effective for
the intended application over the life of the product, taking
energy cost savings into account.
``(d) Specific Products.--(1) In the case of electric
motors of 1 to 500 horsepower, agencies shall select only
premium efficient motors that meet a standard designated by the
Secretary. The Secretary shall designate such a standard not
later than 120 days after the date of the enactment of this
section, after considering the recommendations of associated
electric motor manufacturers and energy efficiency groups.
``(2) All Federal agencies are encouraged to take actions
to maximize the efficiency of air conditioning and
refrigeration equipment, including appropriate cleaning and
maintenance, including the use of any system treatment or
additive that will reduce the electricity consumed by air
conditioning and refrigeration equipment. Any such treatment or
additive must be--
``(A) determined by the Secretary to be effective
in increasing the efficiency of air conditioning and
refrigeration equipment without having an adverse
impact on air conditioning performance (including
cooling capacity) or equipment useful life;
``(B) determined by the Administrator of the
Environmental Protection Agency to be environmentally
safe; and
``(C) shown to increase seasonal energy efficiency
ratio (SEER) or energy efficiency ratio (EER) when
tested by the National Institute of Standards and
Technology according to Department of Energy test
procedures without causing any adverse impact on the
system, system components, the refrigerant or
lubricant, or other materials in the system.
Results of testing described in subparagraph (C) shall be
published in the Federal Register for public review and
comment. For purposes of this section, a hardware device or
primary refrigerant shall not be considered an additive.
``(e) Regulations.--Not later than 180 days after the date
of the enactment of this section, the Secretary shall issue
guidelines to carry out this section.''.
(b) Conforming Amendment.--The table of contents of the
National Energy Conservation Policy Act is further amended by
inserting after the item relating to section 552 the following
new item:
``Sec. 553. Federal procurement of energy efficient products.''.
SEC. 105. ENERGY SAVINGS PERFORMANCE CONTRACTS.
(a) Permanent Extension.--Effective September 30, 2003,
section 801(c) of the National Energy Conservation Policy Act
(42 U.S.C. 8287(c)) is repealed.
(b) Payment of Costs.--Section 802 of the National Energy
Conservation Policy Act (42 U.S.C. 8287a) is amended by
inserting ``, water, or wastewater treatment'' after ``payment
of energy''.
(c) Energy Savings.--Section 804(2) of the National Energy
Conservation Policy Act (42 U.S.C. 8287c(2)) is amended to read
as follows:
``(2) The term `energy savings' means a reduction
in the cost of energy, water, or wastewater treatment,
from a base cost established through a methodology set
forth in the contract, used in an existing federally
owned building or buildings or other federally owned
facilities as a result of--
``(A) the lease or purchase of operating
equipment, improvements, altered operation and
maintenance, or technical services;
``(B) the increased efficient use of
existing energy sources by cogeneration or heat
recovery, excluding any cogeneration process
for other than a federally owned building or
buildings or other federally owned facilities;
or
``(C) the increased efficient use of
existing water sources in either interior or
exterior applications.''.
(d) Energy Savings Contract.--Section 804(3) of the
National Energy Conservation Policy Act (42 U.S.C. 8287c(3)) is
amended to read as follows:
``(3) The terms `energy savings contract' and
`energy savings performance contract' mean a contract
that provides for the performance of services for the
design, acquisition, installation, testing, and, where
appropriate, operation, maintenance, and repair, of an
identified energy or water conservation measure or
series of measures at 1 or more locations. Such
contracts shall, with respect to an agency facility
that is a public building (as such term is defined in
section 3301 of title 40, United States Code), be in
compliance with the prospectus requirements and
procedures of section 3307 of title 40, United States
Code.''.
(e) Energy or Water Conservation Measure.--Section 804(4)
of the National Energy Conservation Policy Act (42 U.S.C.
8287c(4)) is amended to read as follows:
``(4) The term `energy or water conservation
measure' means--
``(A) an energy conservation measure, as
defined in section 551; or
``(B) a water conservation measure that
improves the efficiency of water use, is life-
cycle cost-effective,and involves water
conservation, water recycling or reuse, more efficient treatment of
wastewater or stormwater, improvements in operation or maintenance
efficiencies, retrofit activities, or other related activities, not at
a Federal hydroelectric facility.''.
(f) Review.--Not later than 180 days after the date of the
enactment of this Act, the Secretary of Energy shall complete a
review of the Energy Savings Performance Contract program to
identify statutory, regulatory, and administrative obstacles
that prevent Federal agencies from fully utilizing the program.
In addition, this review shall identify all areas for
increasing program flexibility and effectiveness, including
audit and measurement verification requirements, accounting for
energy use in determining savings, contracting requirements,
including the identification of additional qualified
contractors, and energy efficiency services covered. The
Secretary shall report these findings to Congress and shall
implement identified administrative and regulatory changes to
increase program flexibility and effectiveness to the extent
that such changes are consistent with statutory authority.
(g) Extension of Authority.--Any energy savings performance
contract entered into under section 801 of the National Energy
Conservation Policy Act (42 U.S.C. 8287) after October 1, 2003,
and before the date of enactment of this Act, shall be deemed
to have been entered into pursuant to such section 801 as
amended by subsection (a) of this section.
SEC. 106. ENERGY SAVINGS PERFORMANCE CONTRACTS PILOT PROGRAM FOR
NONBUILDING APPLICATIONS.
(a) In General.--The Secretary of Defense and the heads of
other interested Federal agencies are authorized to enter into
up to 10 energy savings performance contracts using procedures,
established under subsection (b), based on the procedures under
title VIII of the National Energy Conservation Policy Act (42
U.S.C. 8287 et seq.), for the purpose of achieving energy or
water savings, secondary savings, and benefits incidental to
those purposes, in nonbuilding applications. The payments to be
made by the Federal Government under such contracts shall not
exceed a total of $200,000,000 for all such contracts combined.
(b) Procedures.--The Secretary of Energy, in consultation
with the Administrator of General Services and the Secretary of
Defense, shall establish procedures based on the procedures
under title VIII of the National Energy Conservation Policy Act
(42 U.S.C. 8287 et seq.), for implementing this section.
(c) Definitions.--In this section:
(1) Nonbuilding application.--The term
``nonbuilding application'' means--
(A) any class of vehicles, devices, or
equipment that are transportable under their
own power by land, sea, or air that consume
energy from any fuel source for the purpose of
such transportability, or to maintain a
controlled environment within such vehicle,
device, or equipment; or
(B) any Federally owned equipment used to
generate electricity or transport water.
(2) Secondary savings.--The term ``secondary
savings'' means additional energy or cost savings that
are a direct consequence of the energy or water savings
that result from the financing and implementation of
the energy savings performance contract, including, but
not limited to, energy or cost savings that result from
a reduction in the need for fuel delivery and
logistical support, or the increased efficiency in the
production of electricity.
(d) Report.--Not later than 3 years after the date of
enactment of this section, the Secretary of Energy shall report
to Congress on the progress and results of the projects funded
pursuant to this section. Such report shall include a
description of projects undertaken; the energy, water, and cost
savings, secondary savings, and other benefits that resulted
from such projects; and recommendations on whether the pilot
program should be extended, expanded, or authorized permanently
as a part of the program authorized under title VIII of the
National Energy Conservation Policy Act (42 U.S.C. 8287 et
seq.).
SEC. 107. VOLUNTARY COMMITMENTS TO REDUCE INDUSTRIAL ENERGY INTENSITY.
(a) Voluntary Agreements.--The Secretary of Energy is
authorized to enter into voluntary agreements with 1 or more
persons in industrial sectors that consume significant amounts
of primary energy per unit of physical output to reduce the
energy intensity of their production activities by a
significant amount relative to improvements in each sector in
recent years.
(b) Recognition.--The Secretary of Energy, in cooperation
with the Administrator of the Environmental Protection Agency
and other appropriate Federal agencies, shall recognize and
publicize the achievements of participants in voluntary
agreements under this section.
(c) Definition.--In this section, the term ``energy
intensity'' means the primary energy consumed per unit of
physical output in an industrial process.
SEC. 108. ADVANCED BUILDING EFFICIENCY TESTBED.
(a) Establishment.--The Secretary of Energy, in
consultation with the Administrator of General Services, shall
establish an Advanced Building Efficiency Testbed program for
the development, testing, and demonstration of advanced
engineering systems, components, and materials to enable
innovations in building technologies. The program shall
evaluate efficiency concepts for government and industry
buildings, and demonstrate the ability of next generation
buildings to support individual and organizational productivity
and health (including by improving indoor air quality) as well
as flexibility and technological change to improve
environmental sustainability. Such program shall complement and
not duplicate existing national programs.
(b) Participants.--The program established under subsection
(a) shall be led by a university with the ability to combine
the expertise from numerous academic fields including, at a
minimum, intelligent workplaces and advanced building systems
and engineering, electrical and computer engineering, computer
science, architecture, urban design, and environmental and
mechanical engineering. Such university shall partner with
other universities and entities who have established programs
and the capability of advancing innovative building efficiency
technologies.
(c) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary of Energy to carry out this
section $6,000,000 for each of the fiscal years 2004 through
2006, to remain available until expended. For any fiscal year
in which funds are expended under this section, the Secretary
shall provide \1/3\ of the total amount to the lead university
described in subsection (b), and provide the remaining \2/3\ to
the other participants referred to in subsection (b) on an
equal basis.
SEC. 109. FEDERAL BUILDING PERFORMANCE STANDARDS.
Section 305(a) of the Energy Conservation and Production
Act (42 U.S.C. 6834(a)) is amended--
(1) in paragraph (2)(A), by striking ``CABO Model
Energy Code, 1992'' and inserting ``the 2003
International Energy Conservation Code''; and
(2) by adding at the end the following:
``(3) Revised federal building energy efficiency
performance standards.--
``(A) In general.--Not later than 1 year after the
date of enactment of this paragraph, the Secretary of
Energy shall establish, by rule, revised Federal
building energy efficiency performance standards that
require that--
``(i) if life-cycle cost-effective, for new
Federal buildings--
``(I) such buildings be designed so
as to achieve energy consumption levels
at least 30 percent below those of the
version current as of the date of
enactment of this paragraph of
theASHRAE Standard or the International Energy Conservation Code, as
appropriate; and
``(II) sustainable design
principles are applied to the siting,
design, and construction of all new and
replacement buildings; and
``(ii) where water is used to achieve
energy efficiency, water conservation
technologies shall be applied to the extent
they are life-cycle cost effective.
``(B) Additional revisions.--Not later than 1 year
after the date of approval of each subsequent revision
of the ASHRAE Standard or the International Energy
Conservation Code, as appropriate, the Secretary of
Energy shall determine, based on the cost-effectiveness
of the requirements under the amendments, whether the
revised standards established under this paragraph
should be updated to reflect the amendments.
``(C) Statement on compliance of new buildings.--In
the budget request of the Federal agency for each
fiscal year and each report submitted by the Federal
agency under section 548(a) of the National Energy
Conservation Policy Act (42 U.S.C. 8258(a)), the head
of each Federal agency shall include--
``(i) a list of all new Federal buildings
owned, operated, or controlled by the Federal
agency; and
``(ii) a statement concerning whether the
Federal buildings meet or exceed the revised
standards established under this paragraph.''.
SEC. 110. INCREASED USE OF RECOVERED MINERAL COMPONENT IN FEDERALLY
FUNDED PROJECTS INVOLVING PROCUREMENT OF CEMENT OR
CONCRETE.
(a) Amendment.--Subtitle F of the Solid Waste Disposal Act
(42 U.S.C. 6961 et seq.) is amended by adding at the end the
following new section:
``INCREASED USE OF RECOVERED MINERAL COMPONENT IN FEDERALLY FUNDED
PROJECTS INVOLVING PROCUREMENT OF CEMENT OR CONCRETE
``Sec. 6005. (a) Definitions.--In this section:
``(1) Agency head.--The term `agency head' means--
``(A) the Secretary of Transportation; and
``(B) the head of each other Federal agency
that on a regular basis procures, or provides
Federal funds to pay or assist in paying the
cost of procuring, material for cement or
concrete projects.
``(2) Cement or concrete project.--The term `cement
or concrete project' means a project for the
construction or maintenance of a highway or other
transportation facility or a Federal, State, or local
government building or other public facility that--
``(A) involves the procurement of cement or
concrete; and
``(B) is carried out in whole or in part
using Federal funds.
``(3) Recovered mineral component.--The term
`recovered mineral component' means--
``(A) ground granulated blast furnace slag;
``(B) coal combustion fly ash; and
``(C) any other waste material or byproduct
recovered or diverted from solid waste that the
Administrator, in consultation with an agency
head, determines should be treated as recovered
mineral component under this section for use in
cement or concrete projects paid for, in whole
or in part, by the agency head.
``(b) Implementation of Requirements.--
``(1) In general.--Not later than 1 year after the
date of enactment of this section, the Administrator
and each agency head shall take such actions as are
necessary to implement fully all procurement
requirements and incentives in effect as of the date of
enactment of this section (including guidelines under
section 6002) that provide for the use of cement and
concrete incorporating recovered mineral component in
cement or concrete projects.
``(2) Priority.--In carrying out paragraph (1) an
agency head shall give priority to achieving greater
use of recovered mineral component in cement or
concrete projects for which recovered mineral
components historically have not been used or have been
used only minimally.
``(3) Conformance.--The Administrator and each
agency head shall carry out this subsection in
accordance with section 6002.
``(c) Full Implementation Study.--
``(1) In general.--The Administrator, in
cooperation with the Secretary of Transportation and
the Secretary of Energy, shall conduct a study to
determine the extent to which current procurement
requirements, when fully implemented in accordance with
subsection (b), may realize energy savings and
environmental benefits attainable with substitution of
recovered mineral component in cement used in cement or
concrete projects.
``(2) Matters to be addressed.--The study shall--
``(A) quantify the extent to which
recovered mineral components are being
substituted for Portland cement, particularly
as a result of current procurement
requirements, and the energy savings and
environmental benefits associated with that
substitution;
``(B) identify all barriers in procurement
requirements to greater realization of energy
savings and environmental benefits, including
barriers resulting from exceptions from current
law; and
``(C)(i) identify potential mechanisms to
achieve greater substitution of recovered
mineral component in types of cement or
concrete projects for which recovered mineral
components historically have not been used or
have been used only minimally;
``(ii) evaluate the feasibility of
establishing guidelines or standards for
optimized substitution rates of recovered
mineral component in those cement or concrete
projects; and
``(iii) identify any potential
environmental or economic effects that may
result from greater substitution of recovered
mineral component in those cement or concrete
projects.
``(3) Report.--Not later than 30 months after the
date of enactment of this section, the Administrator
shall submit to Congress a report on the study.
``(d) Additional Procurement Requirements.--Unless the
study conducted under subsection (c) identifies any effects or
other problems described in subsection (c)(2)(C)(iii) that
warrant further review or delay, the Administrator and each
agency head shall, not later than 1 year after the release of
the report in accordance with subsection (c)(3), take
additional actions authorized under this Act to establish
procurement requirements and incentives that provide for the
use of cement and concrete with increased substitution of
recovered mineral component in the construction and maintenance
of cement or concrete projects, so as to--
``(1) realize more fully the energy savings and
environmental benefits associated with increased
substitution; and
``(2) eliminate barriers identified under
subsection (c).
``(e) Effect of Section.--Nothing in this section affects
the requirements of section 6002 (including the guidelines and
specifications for implementing those requirements).''.
(b) Table of Contents Amendment.--The table of contents of
the Solid Waste Disposal Act is amended by adding after the
item relating to section 6004 the following new item:
``Sec. 6005. Increased use of recovered mineral component in federally
funded projects involving procurement of cement or
concrete.''.
Subtitle B--Energy Assistance and State Programs
SEC. 121. LOW INCOME HOME ENERGY ASSISTANCE PROGRAM.
Section 2602(b) of the Low-Income Home Energy Assistance
Act of 1981 (42 U.S.C. 8621(b)) is amended by striking ``and
$2,000,000,000 for each of fiscal years 2002 through 2004'' and
inserting ``$2,000,000,000 for fiscal years 2002 and 2003, and
$3,400,000,000 for each of fiscal years 2004 through 2006''.
SEC. 122. WEATHERIZATION ASSISTANCE.
Section 422 of the Energy Conservation and Production Act
(42 U.S.C. 6872) is amended by striking ``for fiscal years 1999
through 2003 such sums as may be necessary'' and inserting
``$325,000,000 for fiscal year 2004, $400,000,000 for fiscal
year 2005, and $500,000,000 for fiscal year 2006''.
SEC. 123. STATE ENERGY PROGRAMS.
(a) State Energy Conservation Plans.--Section 362 of the
Energy Policy and Conservation Act (42 U.S.C. 6322) is amended
by inserting at the end the following new subsection:
``(g) The Secretary shall, at least once every 3 years,
invite the Governor of each State to review and, if necessary,
revise the energy conservation plan of such State submitted
under subsection (b) or (e). Such reviews should consider the
energy conservation plans of other States within the region,
and identify opportunities and actions carried out in pursuit
of common energy conservation goals.''.
(b) State Energy Efficiency Goals.--Section 364 of the
Energy Policy and Conservation Act (42 U.S.C. 6324) is amended
to read as follows:
``STATE ENERGY EFFICIENCY GOALS
``Sec. 364. Each State energy conservation plan with
respect to which assistance is made available under this part
on or after the date of enactment of the Energy Policy Act of
2003 shall contain a goal, consisting of an improvement of 25
percent or more in the efficiency of use of energy in the State
concerned in calendar year 2010 as compared to calendar year
1990, and may contain interim goals.''.
(c) Authorization of Appropriations.--Section 365(f) of the
Energy Policy and Conservation Act (42 U.S.C. 6325(f)) is
amended by striking ``for fiscal years 1999 through 2003 such
sums as may be necessary'' and inserting ``$100,000,000 for
each of the fiscal years 2004 and 2005 and $125,000,000 for
fiscal year 2006''.
SEC. 124. ENERGY EFFICIENT APPLIANCE REBATE PROGRAMS.
(a) Definitions.--In this section:
(1) Eligible state.--The term ``eligible State''
means a State that meets the requirements of subsection
(b).
(2) Energy star program.--The term ``Energy Star
program'' means the program established by section 324A
of the Energy Policy and Conservation Act.
(3) Residential energy star product.--The term
``residential Energy Star product'' means a product for
a residence that is rated for energy efficiency under
the Energy Star program.
(4) Secretary.--The term ``Secretary'' means the
Secretary of Energy.
(5) State energy office.--The term ``State energy
office'' means the State agency responsible for
developing State energy conservation plans under
section 362 of the Energy Policy and Conservation Act
(42 U.S.C. 6322).
(6) State program.--The term ``State program''
means a State energy efficient appliance rebate program
described in subsection (b)(1).
(b) Eligible States.--A State shall be eligible to receive
an allocation under subsection (c) if the State--
(1) establishes (or has established) a State energy
efficient appliance rebate program to provide rebates
to residential consumers for the purchase of
residential Energy Star products to replace used
appliances of the same type;
(2) submits an application for the allocation at
such time, in such form, and containing such
information as the Secretary may require; and
(3) provides assurances satisfactory to the
Secretary that the State will use the allocation to
supplement, but not supplant, funds made available to
carry out the State program.
(c) Amount of Allocations.--
(1) In general.--Subject to paragraph (2), for each
fiscal year, the Secretary shall allocate to the State
energy office of each eligible State to carry out
subsection (d) an amount equal to the product obtained
by multiplying the amount made available under
subsection (f) for the fiscal year by the ratio that
the population of the State in the most recent calendar
year for which data are available bears to the total
population of all eligible States in that calendar
year.
(2) Minimum allocations.--For each fiscal year, the
amounts allocated under this subsection shall be
adjusted proportionately so that no eligible State is
allocated a sum that is less than an amount determined
by the Secretary.
(d) Use of Allocated Funds.--The allocation to a State
energy office under subsection (c) may be used to pay up to 50
percent of the cost of establishing and carrying out a State
program.
(e) Issuance of Rebates.--Rebates may be provided to
residential consumers that meet the requirements of the State
program. The amount of a rebate shall be determined by the
State energy office, taking into consideration--
(1) the amount of the allocation to the State
energy office under subsection (c);
(2) the amount of any Federal or State tax
incentive available for the purchase of the residential
Energy Star product; and
(3) the difference between the cost of the
residential Energy Star product and the cost of an
appliance that is not a residential Energy Star
product, but is of the same type as, and is the nearest
capacity, performance, and other relevant
characteristics (as determined by the State energy
office) to, the residential Energy Star product.
(f) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary to carry out this section
$50,000,000 for each of the fiscal years 2004 through 2008.
SEC. 125. ENERGY EFFICIENT PUBLIC BUILDINGS.
(a) Grants.--The Secretary of Energy may make grants to the
State agency responsible for developing State energy
conservation plans under section 362 of the Energy Policy and
Conservation Act (42 U.S.C. 6322), or, if no such agency
exists, a State agency designated by the Governor of the State,
to assist units of local government in the State in improving
the energy efficiency of public buildings and facilities--
(1) through construction of new energy efficient
public buildings that use at least 30 percent less
energy than a comparable public building constructed in
compliance with standards prescribed in the most recent
version of the International Energy Conservation Code,
or a similar State code intended to achieve
substantially equivalent efficiency levels; or
(2) through renovation of existing public buildings
to achieve reductions in energy use of at least 30
percent as compared to the baseline energy use in such
buildings prior to renovation, assuming a 3-year,
weather-normalized average for calculating such
baseline.
(b) Administration.--State energy offices receiving grants
under this section shall--
(1) maintain such records and evidence of
compliance as the Secretary may require; and
(2) develop and distribute information and
materials and conduct programs to provide technical
services and assistance to encourage planning,
financing, and design of energy efficient public
buildings by units of local government.
(c) Authorization of Appropriations.--For the purposes of
this section, there are authorized to be appropriated to the
Secretary of Energy $30,000,000 for each of fiscal years 2004
through 2008. Not more than 10 percent of appropriated funds
shall be used for administration.
SEC. 126. LOW INCOME COMMUNITY ENERGY EFFICIENCY PILOT PROGRAM.
(a) Grants.--The Secretary of Energy is authorized to make
grants to units of local government, private, non-profit
community development organizations, and Indian tribe economic
development entities to improve energy efficiency; identify and
develop alternative, renewable, and distributed energy
supplies; and increase energy conservation in low income rural
and urban communities.
(b) Purpose of Grants.--The Secretary may make grants on a
competitive basis for--
(1) investments that develop alternative,
renewable, and distributed energy supplies;
(2) energy efficiency projects and energy
conservation programs;
(3) studies and other activities that improve
energy efficiency in low income rural and urban
communities;
(4) planning and development assistance for
increasing the energy efficiency of buildings and
facilities; and
(5) technical and financial assistance to local
government and private entities on developing new
renewable and distributed sources of power or combined
heat and power generation.
(c) Definition.--For purposes of this section, the term
``Indian tribe'' means any Indian tribe, band, nation, or other
organized group or community, including any Alaskan Native
village or regional or village corporation as defined in or
established pursuant to the Alaska Native Claims Settlement Act
(43 U.S.C. 1601 et seq.), that is recognized as eligible for
thespecial programs and services provided by the United States
to Indians because of their status as Indians.
(d) Authorization of Appropriations.--For the purposes of
this section there are authorized to be appropriated to the
Secretary of Energy $20,000,000 for each of fiscal years 2004
through 2006.
Subtitle C--Energy Efficient Products
SEC. 131. ENERGY STAR PROGRAM.
(a) Amendment.--The Energy Policy and Conservation Act (42
U.S.C. 6201 et seq.) is amended by inserting the following
after section 324:
``SEC. 324A. ENERGY STAR PROGRAM.
``There is established at the Department of Energy and the
Environmental Protection Agency a voluntary program to identify
and promote energy-efficient products and buildings in order to
reduce energy consumption, improve energy security, and reduce
pollution through voluntary labeling of or other forms of
communication about products and buildings that meet the
highest energy efficiency standards. Responsibilities under the
program shall be divided between the Department of Energy and
the Environmental Protection Agency consistent with the terms
of agreements between the 2 agencies. The Administrator and the
Secretary shall--
``(1) promote Energy Star compliant technologies as
the preferred technologies in the marketplace for
achieving energy efficiency and to reduce pollution;
``(2) work to enhance public awareness of the
Energy Star label, including special outreach to small
businesses;
``(3) preserve the integrity of the Energy Star
label;
``(4) solicit comments from interested parties
prior to establishing or revising an Energy Star
product category, specification, or criterion (or
effective dates for any of the foregoing);
``(5) upon adoption of a new or revised product
category, specification, or criterion, provide
reasonable notice to interested parties of any changes
(including effective dates) in product categories,
specifications, or criteria along with an explanation
of such changes and, where appropriate, responses to
comments submitted by interested parties; and
``(6) provide appropriate lead time (which shall be
9 months, unless the Agency or Department determines
otherwise) prior to the effective date for a new or a
significant revision to a product category,
specification, or criterion, taking into account the
timing requirements of the manufacturing, product
marketing, and distribution process for the specific
product addressed.''.
(b) Table of Contents Amendment.--The table of contents of
the Energy Policy and Conservation Act is amended by inserting
after the item relating to section 324 the following new item:
``Sec. 324A. Energy Star program.''.
SEC. 132. HVAC MAINTENANCE CONSUMER EDUCATION PROGRAM.
Section 337 of the Energy Policy and Conservation Act (42
U.S.C. 6307) is amended by adding at the end the following:
``(c) HVAC Maintenance.--For the purpose of ensuring that
installed air conditioning and heating systems operate at their
maximum rated efficiency levels, the Secretary shall, not later
than 180 days after the date of enactment of this subsection,
carry out a program to educate homeowners and small business
owners concerning the energy savings resulting from properly
conducted maintenance of air conditioning, heating, and
ventilating systems. The Secretary shall carry out the program
in a cost-shared manner in cooperation with the Administrator
of the Environmental Protection Agency and such other entities
as the Secretary considers appropriate, including industry
trade associations, industry members, and energy efficiency
organizations.
``(d) Small Business Education and Assistance.--The
Administrator of the Small Business Administration, in
consultation with the Secretary of Energy and the Administrator
of the Environmental Protection Agency, shall develop and
coordinate a Government-wide program, building on the existing
Energy Star for Small Business Program, to assist small
businesses to become more energy efficient, understand the cost
savings obtainable through efficiencies, and identify financing
options for energy efficiency upgrades. The Secretary and the
Administrator of the Small Business Administration shall make
the program information available directly to small businesses
and through other Federal agencies, including the Federal
Emergency Management Program and the Department of
Agriculture.''.
SEC. 133. ENERGY CONSERVATION STANDARDS FOR ADDITIONAL PRODUCTS.
(a) Definitions.--Section 321 of the Energy Policy and
Conservation Act (42 U.S.C. 6291) is amended--
(1) in paragraph (30)(S), by striking the period
and adding at the end the following: ``but does not
include any lamp specifically designed to be used for
special purpose applications and that is unlikely to be
used in general purpose applications such as those
described in subparagraph (D), and also does not
include any lamp not described in subparagraph (D) that
is excluded by the Secretary, by rule, because the lamp
is designed for special applications and is unlikely to
be used in general purpose applications.''; and
(2) by adding at the end the following:
``(32) The term `battery charger' means a device
that charges batteries for consumer products and
includes battery chargers embedded in other consumer
products.
``(33) The term `commercial refrigerators,
freezers, and refrigerator-freezers' means
refrigerators, freezers, or refrigerator-freezers
that--
``(A) are not consumer products regulated
under this Act; and
``(B) incorporate most components involved
in the vapor-compression cycle and the
refrigerated compartment in a single package.
``(34) The term `external power supply' means an
external power supply circuit that is used to convert
household electric current into either DC current or
lower-voltage AC current to operate a consumer product.
``(35) The term `illuminated exit sign' means a
sign that--
``(A) is designed to be permanently fixed
in place to identify an exit; and
``(B) consists of an electrically powered
integral light source that illuminates the
legend `EXIT' and any directional indicators
and provides contrast between the legend, any
directional indicators, and the background.
``(36)(A) Except as provided in subparagraph (B),
the term `distribution transformer' means a transformer
that--
``(i) has an input voltage of 34.5
kilovolts or less;
``(ii) has an output voltage of 600 volts
or less; and
``(iii) is rated for operation at a
frequency of 60 Hertz.
``(B) The term `distribution transformer' does not
include--
``(i) transformers with multiple voltage
taps, with the highest voltage tap equaling at
least 20 percent more than the lowest voltage
tap;
``(ii) transformers, such as those commonly
known as drive transformers, rectifier
transformers, auto-transformers,
Uninterruptible Power System transformers,
impedance transformers, harmonic transformers,
regulating transformers, sealed and
nonventilating transformers, machine tool
transformers, welding transformers, grounding
transformers, or testingtransformers, that are
designed to be used in a special purpose application and are unlikely
to be used in general purpose applications; or
``(iii) any transformer not listed in
clause (ii) that is excluded by the Secretary
by rule because--
``(I) the transformer is designed
for a special application;
``(II) the transformer is unlikely
to be used in general purpose
applications; and
``(III) the application of
standards to the transformer would not
result in significant energy savings.
``(37) The term `low-voltage dry-type distribution
transformer' means a distribution transformer that--
``(A) has an input voltage of 600 volts or
less;
``(B) is air-cooled; and
``(C) does not use oil as a coolant.
``(38) The term `standby mode' means the lowest
power consumption mode that--
``(A) cannot be switched off or influenced
by the user; and
``(B) may persist for an indefinite time
when an appliance is connected to the main
electricity supply and used in accordance with
the manufacturer's instructions,
as defined on an individual product basis by the
Secretary.
``(39) The term `torchiere' means a portable
electric lamp with a reflector bowl that directs light
upward so as to give indirect illumination.
``(40) The term `traffic signal module' means a
standard 8-inch (200mm) or 12-inch (300mm) traffic
signal indication, consisting of a light source, a
lens, and all other parts necessary for operation, that
communicates movement messages to drivers through red,
amber, and green colors.
``(41) The term `transformer' means a device
consisting of 2 or more coils of insulated wire that
transfers alternating current by electromagnetic
induction from 1 coil to another to change the original
voltage or current value.
``(42) The term `unit heater' means a self-
contained fan-type heater designed to be installed
within the heated space, except that such term does not
include a warm air furnace.''.
(b) Test Procedures.--Section 323 of the Energy Policy and
Conservation Act (42 U.S.C. 6293) is amended--
(1) in subsection (b), by adding at the end the
following:
``(9) Test procedures for illuminated exit signs
shall be based on the test method used under Version
2.0 of the Energy Star program of the Environmental
Protection Agency for illuminated exit signs.
``(10) Test procedures for distribution
transformers and low voltage dry-type distribution
transformers shall be based on the `Standard Test
Method for Measuring the Energy Consumption of
Distribution Transformers' prescribed by the National
Electrical Manufacturers Association (NEMA TP 2-1998).
The Secretary may review and revise this test
procedure. For purposes of section 346(a), this test
procedure shall be deemed to be testing requirements
prescribed by the Secretary under section 346(a)(1) for
distribution transformers for which the Secretary makes
a determination that energy conservation standards
would be technologically feasible and economically
justified, and would result in significant energy
savings.
``(11) Test procedures for traffic signal modules
shall be based on the test method used under the Energy
Star program of the Environmental Protection Agency for
traffic signal modules, as in effect on the date of
enactment of this paragraph.
``(12) Test procedures for medium base compact
fluorescent lamps shall be based on the test methods
used under the August 9, 2001, version of the Energy
Star program of the Environmental Protection Agency and
Department of Energy for compact fluorescent lamps.
Covered products shall meet all test requirements for
regulated parameters in section 325(bb). However,
covered products may be marketed prior to completion of
lamp life and lumen maintenance at 40 percent of rated
life testing provided manufacturers document
engineering predictions and analysis that support
expected attainment of lumen maintenance at 40 percent
rated life and lamp life time.''; and
(2) by adding at the end the following:
``(f) Additional Consumer and Commercial Products.--The
Secretary shall, not later than 24 months after the date of
enactment of this subsection, prescribe testing requirements
for suspended ceiling fans, refrigerated bottled or canned
beverage vending machines, and commercial refrigerators,
freezers, and refrigerator-freezers. Such testing requirements
shall be based on existing test procedures used in industry to
the extent practical and reasonable. In the case of suspended
ceiling fans, such test procedures shall include efficiency at
both maximum output and at an output no more than 50 percent of
the maximum output.''.
(c) New Standards.--Section 325 of the Energy Policy and
Conservation Act (42 U.S.C. 6295) is amended by adding at the
end the following:
``(u) Battery Charger and External Power Supply Electric
Energy Consumption.--
``(1) Initial rulemaking.--(A) The Secretary shall,
within 18 months after the date of enactment of this
subsection, prescribe by notice and comment,
definitions and test procedures for the power use of
battery chargers and external power supplies. In
establishing these test procedures, the Secretary shall
consider, among other factors, existing definitions and
test procedures used for measuring energy consumption
in standby mode and other modes and assess the current
and projected future market for battery chargers and
external power supplies. This assessment shall include
estimates of the significance of potential energy
savings from technical improvements to these products
and suggested product classes for standards. Prior to
the end of this time period, the Secretary shall hold a
scoping workshop to discuss and receive comments on
plans for developing energy conservation standards for
energy use for these products.
``(B) The Secretary shall, within 3 years after the
date of enactment of this subsection, issue a final
rule that determines whether energy conservation
standards shall be issued for battery chargers and
external power supplies or classes thereof. For each
product class, any such standards shall be set at the
lowest level of energy use that--
``(i) meets the criteria and procedures of
subsections (o), (p), (q), (r), (s), and (t);
and
``(ii) will result in significant overall
annual energy savings, considering both standby
mode and other operating modes.
``(2) Review of standby energy use in covered
products.--In determining pursuant to section 323
whether test procedures and energy conservation
standards pursuant to this section should be revised,
the Secretary shall consider, for covered products that
are major sources of standby mode energy consumption,
whether to incorporate standby mode into such test
procedures and energy conservation standards, taking
into account, among other relevant factors, standby
mode power consumption compared to overall product
energy consumption.
``(3) Rulemaking.--The Secretary shall not propose
a standard under this section unless the Secretary has
issued applicable test procedures for each product
pursuant to section 323.
``(4) Effective date.--Any standard issued under
this subsection shall be applicable to products
manufactured or imported 3 years after the date of
issuance.
``(5) Voluntary programs.--The Secretary and the
Administrator shall collaborate and develop programs,
including programs pursuant to section 324A (relating
to Energy Star Programs) and other voluntary industry
agreements or codes of conduct, that are designed to
reduce standby mode energy use.
``(v) Suspended Ceiling Fans, Vending Machines, and
Commercial Refrigerators, Freezers, and Refrigerator-
Freezers.--The Secretary shall not later than 36 months after
the date on which testing requirements are prescribed by the
Secretary pursuant to section 323(f), prescribe, by rule,
energy conservation standards for suspended ceiling fans,
refrigerated bottled or canned beverage vending machines, and
commercial refrigerators, freezers, and refrigerator-freezers.
In establishing standards under this subsection, the Secretary
shall use the criteria and procedures contained in subsections
(o) and (p). Any standard prescribed under this subsection
shall apply to products manufactured 3 years after the date of
publication of a final rule establishing such standard.
``(w) Illuminated Exit Signs.--Illuminated exit signs
manufactured on or after January 1, 2005, shall meet the
Version 2.0 Energy Star Program performance requirements for
illuminated exit signs prescribed by the Environmental
Protection Agency.
``(x) Torchieres.--Torchieres manufactured on or after
January 1, 2005--
``(1) shall consume not more than 190 watts of
power; and
``(2) shall not be capable of operating with lamps
that total more than 190 watts.
``(y) Low Voltage Dry-Type Distribution Transformers.--The
efficiency of low voltage dry-type distribution transformers
manufactured on or after January 1, 2005, shall be the Class I
Efficiency Levels for distribution transformers specified in
Table 4-2 of the `Guide for Determining Energy Efficiency for
Distribution Transformers' published by the National Electrical
Manufacturers Association (NEMA TP-1-2002).
``(z) Traffic Signal Modules.--Traffic signal modules
manufactured on or after January 1, 2006, shall meet the
performance requirements used under the Energy Star program of
the Environmental Protection Agency for traffic signals, as in
effect on the date of enactment of this subsection, and shall
be installed with compatible, electrically connected signal
control interface devices and conflict monitoring systems.
``(aa) Unit Heaters.--Unit heaters manufactured on or after
the date that is 3 years after the date of enactment of this
subsection shall be equipped with an intermittent ignition
device and shall have either power venting or an automatic flue
damper.
``(bb) Medium Base Compact Fluorescent Lamps.--Bare lamp
and covered lamp (no reflector) medium base compact fluorescent
lamps manufactured on or after January 1, 2005, shall meet the
following requirements prescribed by the August 9, 2001,
version of the Energy Star Program Requirements for Compact
Fluorescent Lamps, Energy Star Eligibility Criteria, Energy-
Efficiency Specification issued by the Environmental Protection
Agency and Department of Energy: minimum initial efficacy;
lumen maintenance at 1000 hours; lumen maintenance at 40
percent of rated life; rapid cycle stress test; and lamp life.
The Secretary may, by rule, establish requirements for color
quality (CRI); power factor; operating frequency; and maximum
allowable start time based on the requirements prescribed by
the August 9, 2001, version of the Energy Star Program
Requirements for Compact Fluorescent Lamps. The Secretary may,
by rule, revise these requirements or establish other
requirements considering energy savings, cost effectiveness,
and consumer satisfaction.
``(cc) Effective Date.--Section 327 shall apply--
``(1) to products for which standards are to be
established under subsections (u) and (v) on the date
on which a final rule is issued by the Department of
Energy, except that any State or local standards
prescribed or enacted for any such product prior to the
date on which such final rule is issued shall not be
preempted until the standard established under
subsection (u) or (v) for that product takes effect;
and
``(2) to products for which standards are
established under subsections (w) through (bb) on the
date of enactment of those subsections, except that any
State or local standards prescribed or enacted prior to
the date of enactment of those subsections shall not be
preempted until the standards established under
subsections (w) through (bb) take effect.''.
(d) Residential Furnace Fans.--Section 325(f)(3) of the
Energy Policy and Conservation Act (42 U.S.C. 6295(f)(3)) is
amended by adding the following new subparagraph at the end:
``(D) Notwithstanding any provision of this Act, the
Secretary may consider, and prescribe, if the requirements of
subsection (o) of this section are met, energy efficiency or
energy use standards for electricity used for purposes of
circulating air through duct work.''.
SEC. 134. ENERGY LABELING.
(a) Rulemaking on Effectiveness of Consumer Product
Labeling.--Section 324(a)(2) of the Energy Policy and
Conservation Act (42 U.S.C. 6294(a)(2)) is amended by adding at
the end the following:
``(F) Not later than 3 months after the date of enactment
of this subparagraph, the Commission shall initiate a
rulemaking to consider the effectiveness of the current
consumer products labeling program in assisting consumers in
making purchasing decisions and improving energy efficiency and
to consider changes to the labeling rules that would improve
the effectiveness of consumer product labels. Such rulemaking
shall be completed not later than 2 years after the date of
enactment of this subparagraph.''.
(b) Rulemaking on Labeling for Additional Products.--
Section 324(a) of the Energy Policy and Conservation Act (42
U.S.C. 6294(a)) is further amended by adding at the end the
following:
``(5) The Secretary or the Commission, as appropriate, may,
for covered products referred to in subsections (u) through
(aa) of section 325, prescribe, by rule, pursuant to this
section, labeling requirements for such products after a test
procedure has been set pursuant to section 323. In the case of
products to which TP-1 standards under section 325(y) apply,
labeling requirements shall be based on the `Standard for the
Labeling of Distribution Transformer Efficiency' prescribed by
the National Electrical Manufacturers Association (NEMA TP-3)
as in effect upon the date of enactment of this paragraph.''.
Subtitle D--Public Housing
SEC. 141. CAPACITY BUILDING FOR ENERGY-EFFICIENT, AFFORDABLE HOUSING.
Section 4(b) of the HUD Demonstration Act of 1993 (42
U.S.C. 9816 note) is amended--
(1) in paragraph (1), by inserting before the
semicolon at the end the following: ``, including
capabilities regarding the provision of energy
efficient, affordable housing and residential energy
conservation measures''; and
(2) in paragraph (2), by inserting before the
semicolon the following: ``, including such activities
relating to the provision of energy efficient,
affordable housing and residential energy conservation
measures that benefit low-income families''.
SEC. 142. INCREASE OF CDBG PUBLIC SERVICES CAP FOR ENERGY CONSERVATION
AND EFFICIENCY ACTIVITIES.
Section 105(a)(8) of the Housing and Community Development
Act of 1974 (42 U.S.C. 5305(a)(8)) is amended--
(1) by inserting ``or efficiency'' after ``energy
conservation'';
(2) by striking ``, and except that'' and inserting
``; except that''; and
(3) by inserting before the semicolon at the end
the following: ``; and except that each percentage
limitation under this paragraph on the amount of
assistance provided under this title that may be used
for the provision of public services is hereby
increased by 10 percent, but such percentage increase
may be used only for the provision of public services
concerning energy conservation or efficiency''.
SEC. 143. FHA MORTGAGE INSURANCE INCENTIVES FOR ENERGY EFFICIENT
HOUSING.
(a) Single Family Housing Mortgage Insurance.--Section
203(b)(2) of the National Housing Act (12 U.S.C. 1709(b)(2)) is
amended, in the first undesignated paragraph beginning after
subparagraph (B)(ii)(IV) (relating to solar energy systems), by
striking ``20 percent'' and inserting ``30 percent''.
(b) Multifamily Housing Mortgage Insurance.--Section 207(c)
of the National Housing Act (12 U.S.C. 1713(c)) is amended, in
the last undesignated paragraph beginning after paragraph (3)
(relating to solar energy systems and residential energy
conservation measures), by striking ``20 percent'' and
inserting ``30 percent''.
(c) Cooperative Housing Mortgage Insurance.--Section 213(p)
of the National Housing Act (12 U.S.C. 1715e(p)) is amended by
striking ``20 per centum'' and inserting ``30 percent''.
(d) Rehabilitation and Neighborhood Conservation Housing
Mortgage Insurance.--Section 220(d)(3)(B)(iii)(IV) of the
National Housing Act (12 U.S.C. 1715k(d)(3)(B)(iii)(IV)) is
amended--
(1) by striking ``with respect to rehabilitation
projects involving not more than five family units,'';
and
(2) by striking ``20 per centum'' and inserting
``30 percent''.
(e) Low-Income Multifamily Housing Mortgage Insurance.--
Section 221(k) of the National Housing Act (12 U.S.C. 1715l(k))
is amended by striking ``20 per centum'' and inserting ``30
percent''.
(f) Elderly Housing Mortgage Insurance.--Section
231(c)(2)(C) of the National Housing Act (12 U.S.C.
1715v(c)(2)(C)) is amended by striking ``20 per centum'' and
inserting ``30 percent''.
(g) Condominium Housing Mortgage Insurance.--Section 234(j)
of the National Housing Act (12 U.S.C. 1715y(j)) is amended by
striking ``20 per centum'' and inserting ``30 percent''.
SEC. 144. PUBLIC HOUSING CAPITAL FUND.
Section 9 of the United States Housing Act of 1937 (42
U.S.C. 1437g) is amended--
(1) in subsection (d)(1)--
(A) in subparagraph (I), by striking
``and'' at the end;
(B) in subparagraph (J), by striking the
period at the end and inserting a semicolon;
and
(C) by adding at the end the following new
subparagraphs:
``(K) improvement of energy and water-use
efficiency by installing fixtures and fittings
that conform to the American Society of
Mechanical Engineers/American National
Standards Institute standards A112.19.2-1998
and A112.18.1-2000, or any revision thereto,
applicable at the time of installation, and by
increasing energy efficiency and water
conservation by such other means as the
Secretary determines are appropriate; and
``(L) integrated utility management and
capital planning to maximize energy
conservation and efficiency measures.''; and
(2) in subsection (e)(2)(C)--
(A) by striking ``The'' and inserting the
following:
``(i) In general.--The''; and
(B) by adding at the end the following:
``(ii) Third party contracts.--
Contracts described in clause (i) may
include contracts for equipment
conversions to less costly utility
sources, projects with resident-paid
utilities, and adjustments to frozen
base year consumption, including
systems repaired to meet applicable
building and safety codes and
adjustments for occupancy rates
increased by rehabilitation.
``(iii) Term of contract.--The
total term of a contract described in
clause (i) shall not exceed 20 years to
allow longer payback periods for
retrofits, including windows, heating
system replacements, wall insulation,
site-based generation, advanced energy
savings technologies, including
renewable energy generation, and other
such retrofits.''.
SEC. 145. GRANTS FOR ENERGY-CONSERVING IMPROVEMENTS FOR ASSISTED
HOUSING.
Section 251(b)(1) of the National Energy Conservation
Policy Act (42 U.S.C. 8231(1)) is amended--
(1) by striking ``financed with loans'' and
inserting ``assisted'';
(2) by inserting after ``1959,'' the following:
``which are eligible multifamily housing projects (as
such term is defined in section 512 of the Multifamily
Assisted Housing Reform and Affordability Act of 1997
(42 U.S.C. 1437f note)) and are subject to mortgage
restructuring and rental assistance sufficiency plans
under such Act,''; and
(3) by inserting after the period at the end of the
first sentence the following new sentence: ``Such
improvements may also include the installation of
energy and water conserving fixtures and fittings that
conform to the American Society of Mechanical
Engineers/American National Standards Institute
standards A112.19.2-1998 and A112.18.1-2000, or any
revision thereto, applicable at the time of
installation.''.
SEC. 146. NORTH AMERICAN DEVELOPMENT BANK.
Part 2 of subtitle D of title V of the North American Free
Trade Agreement Implementation Act (22 U.S.C. 290m-290m-3) is
amended by adding at the end the following:
``SEC. 545. SUPPORT FOR CERTAIN ENERGY POLICIES.
``Consistent with the focus of the Bank's Charter on
environmental infrastructure projects, the Board members
representing the United States should use their voice and vote
to encourage the Bank to finance projects related to clean and
efficient energy, including energy conservation, that prevent,
control, or reduce environmental pollutants or contaminants.''.
SEC. 147. ENERGY-EFFICIENT APPLIANCES.
In purchasing appliances, a public housing agency shall
purchase energy-efficient appliances that are Energy Star
products or FEMP-designated products, as such terms are defined
in section 553 of the National Energy Conservation Policy Act
(as amended by this title), unless the purchase of energy-
efficient appliances is not cost-effective to the agency.
SEC. 148. ENERGY EFFICIENCY STANDARDS.
Section 109 of the Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. 12709) is amended--
(1) in subsection (a)--
(A) in paragraph (1)--
(i) by striking ``1 year after the
date of the enactment of the Energy
Policy Act of 1992'' and inserting
``September 30, 2004'';
(ii) in subparagraph (A), by
striking ``and'' at the end;
(iii) in subparagraph (B), by
striking the period at the end and
inserting ``; and''; and
(iv) by adding at the end the
following:
``(C) rehabilitation and new construction
of public and assisted housing funded by HOPE
VI revitalization grants under section 24 of
the United States Housing Act of 1937 (42
U.S.C. 1437v), where such standards are
determined to be cost effective by the
Secretary of Housing and Urban Development.'';
and
(B) in paragraph (2), by striking ``Council
of American'' and all that follows through
``90.1-1989')'' and inserting ``2003
International Energy Conservation Code'';
(2) in subsection (b)--
(A) by striking ``within 1 year after the
date of the enactment of the Energy Policy Act
of 1992'' and inserting ``by September 30,
2004''; and
(B) by striking ``CABO'' and all that
follows through ``1989'' and inserting ``the
2003 International Energy Conservation Code'';
and
(3) in subsection (c)--
(A) in the heading, by striking ``Model
Energy Code'' and inserting ``The International
Energy Conservation Code''; and
(B) by striking ``CABO'' and all that
follows through ``1989'' and inserting ``the
2003 International Energy Conservation Code''.
SEC. 149. ENERGY STRATEGY FOR HUD.
The Secretary of Housing and Urban Development shall
develop and implement an integrated strategy to reduce utility
expenses through cost-effective energy conservation and
efficiency measures and energy efficient design and
construction of public and assisted housing. The energy
strategy shall include the development of energy reduction
goals and incentives for public housing agencies. The Secretary
shall submit a report to Congress, not later than 1 year after
the date of the enactment of this Act, on the energy strategy
and the actions taken by the Department of Housing and Urban
Development to monitor the energy usage of public housing
agencies and shall submit an update every 2 years thereafter on
progress in implementing the strategy.
TITLE II--RENEWABLE ENERGY
Subtitle A--General Provisions
SEC. 201. ASSESSMENT OF RENEWABLE ENERGY RESOURCES.
(a) Resource Assessment.--Not later than 6 months after the
date of enactment of this Act, and each year thereafter, the
Secretary of Energy shall review the available assessments of
renewable energy resources within the United States, including
solar, wind, biomass, ocean (tidal, wave, current, and
thermal), geothermal, and hydroelectric energy resources, and
undertake new assessments as necessary, taking into account
changes in market conditions, available technologies, and other
relevant factors.
(b) Contents of Reports.--Not later than 1 year after the
date of enactment of this Act, and each year thereafter, the
Secretary shall publish a report based on the assessment under
subsection (a). The report shall contain--
(1) a detailed inventory describing the available
amount and characteristics of the renewable energy
resources; and
(2) such other information as the Secretary
believes would be useful in developing such renewable
energy resources, including descriptions of surrounding
terrain, population and load centers, nearby energy
infrastructure, location of energy and water resources,
and available estimates of the costs needed to develop
each resource, together with an identification of any
barriers to providing adequate transmission for remote
sources of renewable energy resources to current and
emerging markets, recommendations for removing or
addressing such barriers, and ways to provide access to
the grid that do not unfairly disadvantage renewable or
other energy producers.
(c) Authorization of Appropriations.--For the purposes of
this section, there are authorized to be appropriated to the
Secretary of Energy $10,000,000 for each of fiscal years 2004
through 2008.
SEC. 202. RENEWABLE ENERGY PRODUCTION INCENTIVE.
(a) Incentive Payments.--Section 1212(a) of the Energy
Policy Act of 1992 (42 U.S.C. 13317(a)) is amended by striking
``and which satisfies'' and all that follows through
``Secretary shall establish.'' and inserting ``. If there are
insufficient appropriations to make full payments for electric
production from all qualified renewable energy facilities in
any given year, the Secretary shall assign 60 percent of
appropriated funds for that year to facilities that use solar,
wind, geothermal, or closed-loop (dedicated energy crops)
biomass technologies to generate electricity, and assign the
remaining 40 percent to other projects. The Secretary may,
after transmitting to Congress an explanation of the reasons
therefor, alter the percentage requirements of the preceding
sentence.''.
(b) Qualified Renewable Energy Facility.--Section 1212(b)
of the Energy Policy Act of 1992 (42 U.S.C. 13317(b)) is
amended--
(1) by striking ``a State or any political'' and
all that follows through ``nonprofit electrical
cooperative'' and inserting ``a not-for-profit electric
cooperative, a public utility described in section 115
of the Internal Revenue Code of 1986, a State,
Commonwealth, territory, or possession of the United
States or the District of Columbia, or a political
subdivision thereof, or an Indian tribal government or
subdivision thereof,''; and
(2) by inserting ``landfill gas,'' after ``wind,
biomass,''.
(c) Eligibility Window.--Section 1212(c) of the Energy
Policy Act of 1992 (42 U.S.C. 13317(c)) is amended by striking
``during the 10-fiscal year period beginning with the first
full fiscal year occurring after the enactment of this
section'' and inserting ``after October 1, 2003, and before
October 1, 2013''.
(d) Amount of Payment.--Section 1212(e)(1) of the Energy
Policy Act of 1992 (42 U.S.C. 13317(e)(1)) is amended by
inserting ``landfill gas,'' after ``wind, biomass,''.
(e) Sunset.--Section 1212(f) of the Energy Policy Act of
1992 (42 U.S.C. 13317(f)) is amended by striking ``the
expiration of'' and all that follows through ``of this
section'' and inserting ``September 30, 2023''.
(f) Authorization of Appropriations.--Section 1212(g) of
the Energy Policy Act of 1992 (42 U.S.C. 13317(g)) is amended
to read as follows:
``(g) Authorization of Appropriations.--
``(1) In general.--Subject to paragraph (2), there
are authorized to be appropriated such sums as may be
necessary to carry out this section for fiscal years
2003 through 2023.
``(2) Availability of funds.--Funds made available
under paragraph (1) shall remain available until
expended.''.
SEC. 203. FEDERAL PURCHASE REQUIREMENT.
(a) Requirement.--The President, acting through the
Secretary of Energy, shall seek to ensure that, to the extent
economically feasible and technically practicable, of the total
amount of electric energy the Federal Government consumes
during any fiscal year, the following amounts shall be
renewable energy:
(1) Not less than 3 percent in fiscal years 2005
through 2007.
(2) Not less than 5 percent in fiscal years 2008
through 2010.
(3) Not less than 7.5 percent in fiscal year 2011
and each fiscal year thereafter.
(b) Definitions.--In this section:
(1) Biomass.--The term ``biomass'' means any solid,
nonhazardous, cellulosic material that is derived
from--
(A) any of the following forest-related
resources: mill residues, precommercial
thinnings, slash, and brush, or nonmerchantable
material;
(B) solid wood waste materials, including
waste pallets, crates, dunnage, manufacturing
and construction wood wastes (other than
pressure-treated, chemically-treated, or
painted wood wastes), and landscape or right-
of-way tree trimmings, but not including
municipal solid waste (garbage), gas derived
from the biodegradation of solid waste, or
paper that is commonly recycled;
(C) agriculture wastes, including orchard
tree crops, vineyard, grain, legumes, sugar,
and other crop by-products or residues, and
livestock waste nutrients; or
(D) a plant that is grown exclusively as a
fuel for the production of electricity.
(2) Renewable energy.--The term ``renewable
energy'' means electric energy generated from solar,
wind, biomass, landfill gas, geothermal, municipal
solid waste, or new hydroelectric generation capacity
achieved from increased efficiency or additions of new
capacity at an existing hydroelectric project.
(c) Calculation.--For purposes of determining compliance
with the requirement of this section, the amount of renewable
energy shall be doubled if--
(1) the renewable energy is produced and used on-
site at a Federal facility;
(2) the renewable energy is produced on Federal
lands and used at a Federal facility; or
(3) the renewable energy is produced on Indian land
as defined in title XXVI of the Energy Policy Act of
1992 (25 U.S.C. 3501 et. seq.) and used at a Federal
facility.
(d) Report.--Not later than April 15, 2005, and every 2
years thereafter, the Secretary of Energy shall provide a
report to Congress on the progress of the Federal Government in
meeting the goals established by this section.
SEC. 204. INSULAR AREAS ENERGY SECURITY.
Section 604 of the Act entitled ``An Act to authorize
appropriations for certain insular areas of the United States,
andfor other purposes'', approved December 24, 1980 (48 U.S.C.
1492), is amended--
(1) in subsection (a)(4) by striking the period and
inserting a semicolon;
(2) by adding at the end of subsection (a) the
following new paragraphs:
``(5) electric power transmission and distribution
lines in insular areas are inadequate to withstand
damage caused by the hurricanes and typhoons which
frequently occur in insular areas and such damage often
costs millions of dollars to repair; and
``(6) the refinement of renewable energy
technologies since the publication of the 1982
Territorial Energy Assessment prepared pursuant to
subsection (c) reveals the need to reassess the state
of energy production, consumption, infrastructure,
reliance on imported energy, opportunities for energy
conservation and increased energy efficiency, and
indigenous sources in regard to the insular areas.'';
(3) by amending subsection (e) to read as follows:
``(e)(1) The Secretary of the Interior, in consultation
with the Secretary of Energy and the head of government of each
insular area, shall update the plans required under subsection
(c) by--
``(A) updating the contents required by subsection
(c);
``(B) drafting long-term energy plans for such
insular areas with the objective of reducing, to the
extent feasible, their reliance on energy imports by
the year 2010, increasing energy conservation and
energy efficiency, and maximizing, to the extent
feasible, use of indigenous energy sources; and
``(C) drafting long-term energy transmission line
plans for such insular areas with the objective that
the maximum percentage feasible of electric power
transmission and distribution lines in each insular
area be protected from damage caused by hurricanes and
typhoons.
``(2) Not later than December 31, 2005, the Secretary of
the Interior shall submit to Congress the updated plans for
each insular area required by this subsection.''; and
(4) by amending subsection (g)(4) to read as
follows:
``(4) Power line grants for insular areas.--
``(A) In general.--The Secretary of the
Interior is authorized to make grants to
governments of insular areas of the United
States to carry out eligible projects to
protect electric power transmission and
distribution lines in such insular areas from
damage caused by hurricanes and typhoons.
``(B) Eligible projects.--The Secretary may
award grants under subparagraph (A) only to
governments of insular areas of the United
States that submit written project plans to the
Secretary for projects that meet the following
criteria:
``(i) The project is designed to
protect electric power transmission and
distribution lines located in 1 or more
of the insular areas of the United
States from damage caused by hurricanes
and typhoons.
``(ii) The project is likely to
substantially reduce the risk of future
damage, hardship, loss, or suffering.
``(iii) The project addresses 1 or
more problems that have been repetitive
or that pose a significant risk to
public health and safety.
``(iv) The project is not likely to
cost more than the value of the
reduction in direct damage and other
negative impacts that the project is
designed to prevent or mitigate. The
cost benefit analysis required by this
criterion shall be computed on a net
present value basis.
``(v) The project design has taken
into consideration long-term changes to
the areas and persons it is designed to
protect and has manageable future
maintenance and modification
requirements.
``(vi) The project plan includes an
analysis of a range of options to
address the problem it is designed to
prevent or mitigate and a justification
for the selection of the project in
light of that analysis.
``(vii) The applicant has
demonstrated to the Secretary that the
matching funds required by subparagraph
(D) are available.
``(C) Priority.--When making grants under
this paragraph, the Secretary shall give
priority to grants for projects which are
likely to--
``(i) have the greatest impact on
reducing future disaster losses; and
``(ii) best conform with plans that
have been approved by the Federal
Government or the government of the
insular area where the project is to be
carried out for development or hazard
mitigation for that insular area.
``(D) Matching requirement.--The Federal
share of the cost for a project for which a
grant is provided under this paragraph shall
not exceed 75 percent of the total cost of that
project. The non-Federal share of the cost may
be provided in the form of cash or services.
``(E) Treatment of funds for certain
purposes.--Grants provided under this paragraph
shall not be considered as income, a resource,
or a duplicative program when determining
eligibility or benefit levels for Federal major
disaster and emergency assistance.
``(F) Authorization of appropriations.--
There are authorized to be appropriated to
carry out this paragraph $5,000,000 for each
fiscal year beginning after the date of the
enactment of this paragraph.''.
SEC. 205. USE OF PHOTOVOLTAIC ENERGY IN PUBLIC BUILDINGS.
(a) In General.--Subchapter VI of chapter 31 of title 40,
United States Code, is amended by adding at the end the
following:
``Sec. 3177. Use of photovoltaic energy in public buildings
``(a) Photovoltaic Energy Commercialization Program.--
``(1) In general.--The Administrator of General
Services may establish a photovoltaic energy
commercialization program for the procurement and
installation of photovoltaic solar electric systems for
electric production in new and existing public
buildings.
``(2) Purposes.--The purposes of the program shall
be to accomplish the following:
``(A) To accelerate the growth of a
commercially viable photovoltaic industry to
make this energy system available to the
general public as an option which can reduce
the national consumption of fossil fuel.
``(B) To reduce the fossil fuel consumption
and costs of the Federal Government.
``(C) To attain the goal of installing
solar energy systems in 20,000 Federal
buildings by 2010, as contained in the Federal
Government's Million Solar Roof Initiative of
1997.
``(D) To stimulate the general use within
the Federal Government of life-cycle costing
and innovative procurement methods.
``(E) To develop program performance data
to support policy decisions on future incentive
programs with respect to energy.
``(3) Acquisition of photovoltaic solar electric
systems.--
``(A) In general.--The program shall
provide for the acquisition of photovoltaic
solar electric systems and associated storage
capability for use in public buildings.
``(B) Acquisition levels.--The acquisition
of photovoltaic electric systems shall be at a
level substantial enough to allow use of low-
cost production techniques with at least 150
megawatts (peak) cumulative acquired during the
5 years of the program.
``(4) Administration.--The Administrator shall
administer the program and shall--
``(A) issue such rules and regulations as
may be appropriate to monitor and assess the
performance and operation of photovoltaic solar
electric systems installed pursuant to this
subsection;
``(B) develop innovative procurement
strategies for the acquisition of such systems;
and
``(C) transmit to Congress an annual report
on the results of the program.
``(b) Photovoltaic Systems Evaluation Program.--
``(1) In general.--Not later than 60 days after the
date of enactment of this section, the Administrator,
in consultation with the Secretary of Energy, shall
establish a photovoltaic solar energy systems
evaluation program to evaluate such photovoltaic solar
energy systems as are required in public buildings.
``(2) Program Requirement.--In evaluating
photovoltaic solar energy systems under the program,
the Administrator shall ensure that such systems
reflect the most advanced technology.
``(c) Authorization of Appropriations.--
``(1) Photovoltaic energy commercialization
program.--There are authorized to be appropriated to
carry out subsection (a) $50,000,000 for each of fiscal
years 2004 through 2008. Such sums shall remain
available until expended.
``(2) Photovoltaic systems evaluation program.--
There are authorized to be appropriated to carry out
subsection (b) $10,000,000 for each of fiscal years
2004 through 2008. Such sums shall remain available
until expended.''.
(b) Conforming Amendment.--The section analysis for such
chapter is amended by inserting after the item relating to
section 3176 the following:
``3177. Use of photovoltaic energy in public buildings.''.
SEC. 206. GRANTS TO IMPROVE THE COMMERCIAL VALUE OF FOREST BIOMASS FOR
ELECTRIC ENERGY, USEFUL HEAT, TRANSPORTATION FUELS,
PETROLEUM-BASED PRODUCT SUBSTITUTES, AND OTHER
COMMERCIAL PURPOSES.
(a) Findings.--Congress finds the following:
(1) Thousands of communities in the United States,
many located near Federal lands, are at risk to
wildfire. Approximately 190,000,000 acres of land
managed by the Secretary of Agriculture and the
Secretary of the Interior are at risk of catastrophic
fire in the near future. The accumulation of heavy
forest fuel loads continues to increase as a result of
disease, insect infestations, and drought, further
raising the risk of fire each year.
(2) In addition, more than 70,000,000 acres across
all land ownerships are at risk to higher than normal
mortality over the next 15 years from insect
infestation and disease. High levels of tree mortality
from insects and disease result in increased fire risk,
loss of old growth, degraded watershed conditions, and
changes in species diversity and productivity, as well
as diminished fish and wildlife habitat and decreased
timber values.
(3) Preventive treatments such as removing fuel
loading, ladder fuels, and hazard trees, planting
proper species mix and restoring and protecting early
successional habitat, and other specific restoration
treatments designed to reduce the susceptibility of
forest land, woodland, and rangeland to insect
outbreaks, disease, and catastrophic fire present the
greatest opportunity for long-term forest health by
creating a mosaic of species-mix and age distribution.
Such prevention treatments are widely acknowledged to
be more successful and cost effective than suppression
treatments in the case of insects, disease, and fire.
(4) The byproducts of preventive treatment (wood,
brush, thinnings, chips, slash, and other hazardous
fuels) removed from forest lands, woodlands and
rangelands represent an abundant supply of biomass for
biomass-to-energy facilities and raw material for
business. There are currently few markets for the
extraordinary volumes of byproducts being generated as
a result of the necessary large-scale preventive
treatment activities.
(5) The United States should--
(A) promote economic and entrepreneurial
opportunities in using byproducts removed
through preventive treatment activities related
to hazardous fuels reduction, disease, and
insect infestation; and
(B) develop and expand markets for
traditionally underused wood and biomass as an
outlet for byproducts of preventive treatment
activities.
(b) Definitions.--In this section:
(1) Biomass.--The term ``biomass'' means trees and
woody plants, including limbs, tops, needles, and other
woody parts, and byproducts of preventive treatment,
such as wood, brush, thinnings, chips, and slash, that
are removed--
(A) to reduce hazardous fuels; or
(B) to reduce the risk of or to contain
disease or insect infestation.
(2) Indian tribe.--The term ``Indian tribe'' has
the meaning given the term in section 4(e) of the
Indian Self-Determination and Education Assistance Act
(25 U.S.C. 450b(e)).
(3) Person.--The term ``person'' includes--
(A) an individual;
(B) a community (as determined by the
Secretary concerned);
(C) an Indian tribe;
(D) a small business, micro-business, or a
corporation that is incorporated in the United
States; and
(E) a nonprofit organization.
(4) Preferred community.--The term ``preferred
community'' means--
(A) any town, township, municipality, or
other similar unit of local government (as
determined by the Secretary concerned) that--
(i) has a population of not more
than 50,000 individuals; and
(ii) the Secretary concerned, in
the sole discretion of the Secretary
concerned, determines contains or is
located near land, the condition of
which is at significant risk of
catastrophic wildfire, disease, or
insect infestation or which suffers
from disease or insect infestation; or
(B) any county that--
(i) is not contained within a
metropolitan statistical area; and
(ii) the Secretary concerned, in
the sole discretion of the Secretary
concerned, determines contains or is
located near land, the condition of
which is at significant risk of
catastrophic wildfire, disease, or
insect infestation or which suffers
from disease or insect infestation.
(5) Secretary concerned.--The term ``Secretary
concerned'' means--
(A) the Secretary of Agriculture with
respect to National Forest System lands; and
(B) the Secretary of the Interior with
respect to Federal lands under the jurisdiction
of the Secretary of the Interior and Indian
lands.
(c) Biomass Commercial Use Grant Program.--
(1) In general.--The Secretary concerned may make
grants to any person that owns or operates a facility
that uses biomass as a raw material to produce electric
energy, sensible heat, transportation fuels, or
substitutes for petroleum-based products to offset the
costs incurred to purchase biomass for use by such
facility.
(2) Grant amounts.--A grant under this subsection
may not exceed $20 per green ton of biomass delivered.
(3) Monitoring of grant recipient activities.--As a
condition of a grant under this subsection, the grant
recipient shall keep such records as the Secretary
concerned may require to fully and correctly disclose
the use of the grant funds and all transactions
involved in the purchase of biomass. Upon notice by a
representative of the Secretary concerned, the grant
recipient shall afford the representative reasonable
access to the facility that purchases or uses biomass
and an opportunity to examine the inventory and records
of the facility.
(d) Improved Biomass Use Grant Program.--
(1) In general.--The Secretary concerned may make
grants to persons to offset the cost of projects to
develop or research opportunities to improve the use
of, or add value to, biomass. In making such grants,
the Secretary concerned shall give preference to
persons in preferred communities.
(2) Selection.--The Secretary concerned shall
select a grant recipient under paragraph (1) after
giving consideration to the anticipated public benefits
of the project, including the potential to develop
thermal or electric energy resources or affordable
energy, opportunities for the creation or expansion of
small businesses and micro-businesses, and the
potential for new job creation.
(3) Grant amount.--A grant under this subsection
may not exceed $500,000.
(e) Authorization of Appropriations.--There are authorized
to be appropriated $50,000,000 for each of the fiscal years
2004 through 2014 to carry out this section.
(f) Report.--Not later than October 1, 2010, the Secretary
of Agriculture, in consultation with the Secretary of the
Interior, shall submit to the Committee on Energy and Natural
Resources and the Committee on Agriculture, Nutrition, and
Forestry of the Senate and the Committee on Resources, the
Committee on Energy and Commerce, and the Committee on
Agriculture of the House of Representatives a report describing
the results of the grant programs authorized by this section.
The report shall include the following:
(1) An identification of the size, type, and the
use of biomass by persons that receive grants under
this section.
(2) The distance between the land from which the
biomass was removed and the facility that used the
biomass.
(3) The economic impacts, particularly new job
creation, resulting from the grants to and operation of
the eligible operations.
SEC. 207. BIOBASED PRODUCTS.
Section 9002(c)(1) of the Farm Security and Rural
Investment Act of 2002 (7 U.S.C. 8102(c)(1)) is amended by
inserting ``or such items that comply with the regulations
issued under section 103 of Public Law 100-556 (42 U.S.C.
6914b-1)'' after ``practicable''.
Subtitle B--Geothermal Energy
SEC. 211. SHORT TITLE.
This subtitle may be cited as the ``John Rishel Geothermal
Steam Act Amendments of 2003''.
SEC. 212. COMPETITIVE LEASE SALE REQUIREMENTS.
Section 4 of the Geothermal Steam Act of 1970 (30 U.S.C.
1003) is amended to read as follows:
``SEC. 4. LEASING PROCEDURES.
``(a) Nominations.--The Secretary shall accept nominations
of lands to be leased at any time from qualified companies and
individuals under this Act.
``(b) Competitive Lease Sale Required.--The Secretary shall
hold a competitive lease sale at least once every 2 years for
lands in a State which has nominations pending under subsection
(a) if such lands are otherwise available for leasing.
``(c) Noncompetitive Leasing.--The Secretary shall make
available for a period of 2 years for noncompetitive leasing
any tract for which a competitive lease sale is held, but for
which the Secretary does not receive any bids in a competitive
lease sale.
``(d) Leases Sold As a Block.--If information is available
to the Secretary indicating a geothermal resource that could be
produced as 1 unit can reasonably be expected to underlie more
than 1 parcel to be offered in a competitive lease sale, the
parcels for such a resource may be offered for bidding as a
block in the competitive lease sale.
``(e) Pending Lease Applications on April 1, 2003.--It
shall be a priority for the Secretary of the Interior, and for
the Secretary of Agriculture with respect to National Forest
Systems lands, to ensure timely completion of administrative
actions necessary to process applications for geothermal
leasing pending on April 1, 2003. Such an application, and any
lease issued pursuant to such an application--
``(1) except as provided in paragraph (2), shall be
subject to this section as in effect on April 1, 2003;
or
``(2) at the election of the applicant, shall be
subject to this section as in effect on the effective
date of this paragraph.''.
SEC. 213. DIRECT USE.
(a) Fees for Direct Use.--Section 5 of the Geothermal Steam
Act of 1970 (30 U.S.C. 1004) is amended--
(1) in paragraph (c) by redesignating subparagraphs
(1) and (2) as subparagraphs (A) and (B);
(2) by redesignating paragraphs (a) through (d) in
order as paragraphs (1) through (4);
(3) by inserting ``(a) In General.--'' after ``Sec.
5.''; and
(4) by adding at the end the following:
``(b) Direct Use.--Notwithstanding subsection (a)(1), with
respect to the direct use of geothermal resources for purposes
other than the commercial generation of electricity, the
Secretary of the Interior shall establish a schedule of fees
and collect fees pursuant to such a schedule in lieu of
royalties based upon the total amount of the geothermal
resources used. The schedule of fees shall ensure that there is
a fair return to the public for the use of a geothermal
resource based upon comparable fees charged for direct use of
geothermal resources by States or private persons. For direct
use by a State or local government for public purposes there
shall be no royalty and the fee charged shall be nominal.
Leases in existence on the date of enactment of the Energy
Policy Act of 2003 shall be modified in order to reflect the
provisions of this subsection.''.
(b) Leasing for Direct Use.--Section 4 of the Geothermal
Steam Act of 1970 (30 U.S.C. 1003) is further amended by adding
at the end the following:
``(f) Leasing for Direct Use of Geothermal Resources.--
Lands leased under this Act exclusively for direct use of
geothermal resources shall be leased to any qualified applicant
who first applies for such a lease under regulations issued by
the Secretary, if--
``(1) the Secretary publishes a notice of the lands
proposed for leasing 60 days before the date of the
issuance of the lease; and
``(2) the Secretary does not receive in the 60-day
period beginning on the date of such publication any
nomination to include the lands concerned in the next
competitive lease sale.
``(g) Area Subject to Lease for Direct Use.--A geothermal
lease for the direct use of geothermal resources shall embrace
not more than the amount of acreage determined by the Secretary
to be reasonably necessary for such proposed utilization.''.
(c) Existing Leases With a Direct Use Facility.--
(1) Application to convert.--Any lessee under a
lease under the Geothermal Steam Act of 1970 that was
issued before the date of the enactment of this Act may
apply to the Secretary of the Interior, by not later
than 18 months after the date of the enactment of this
Act, to convert such lease to a lease for direct
utilization of geothermal resources in accordance with
the amendments made by this section.
(2) Conversion.--The Secretary shall approve such
an application and convert such a lease to a lease in
accordance with the amendments by not later than 180
days after receipt of such application, unless the
Secretary determines that the applicant is not a
qualified applicant with respect to the lease.
(3) Application of new lease terms.--The amendment
made by subsection (a)(4) shall apply with respect to
payments under a lease converted under this subsection
that are due and owing to the United States on or after
July 16, 2003.
SEC. 214. ROYALTIES AND NEAR-TERM PRODUCTION INCENTIVES.
(a) Royalty.--Section 5 of the Geothermal Steam Act of 1970
(30 U.S.C. 1004) is further amended--
(1) in subsection (a) by striking paragraph (1) and
inserting the following:
``(1) a royalty on electricity produced using
geothermal steam and associated geothermal resources,
other than direct use of geothermal resources, that
shall be--
``(A) not less than 1 percent and not more
than 2.5 percent of the gross proceeds from the
sale of electricity produced from such
resources during the first 10 years of
production under the lease; and
``(B) not less than 2 and not more than 5
percent of the gross proceeds from the sale of
electricity produced from such resources during
each year after such 10-year period;''; and
(2) by adding at the end the following:
``(c) Final Regulation Establishing Royalty Rates.--In
issuing any final regulation establishing royalty rates under
this section, the Secretary shall seek--
``(1) to provide lessees a simplified
administrative system;
``(2) to encourage new development; and
``(3) to achieve the same long-term level of
royalty revenues to States and counties as the
regulation in effect on the date of enactment of this
subsection.
``(d) Credits for In-Kind Payments of Electricity.--The
Secretary may provide to a lessee a credit against royalties
owed under this Act, in an amount equal to the value of
electricity provided under contract to a State or county
government that is entitled to a portion of such royalties
under section 20 of this Act, section 35 of the Mineral Leasing
Act (30 U.S.C. 191), or section 6 of the Mineral Leasing Act
for Acquired Lands (30 U.S.C. 355), if--
``(1) the Secretary has approved in advance the
contract between the lessee and the State or county
government for such in-kind payments;
``(2) the contract establishes a specific
methodology to determine the value of such credits; and
``(3) the maximum credit will be equal to the
royalty value owed to the State or county that is a
party to the contract and the electricity received will
serve as the royalty payment from the Federal
Government to that entity.''.
(b) Disposal of Moneys From Sales, Bonuses, Royalties, and
Rentals.--Section 20 of the Geothermal Steam Act of 1970 (30
U.S.C. 1019) is amended to read as follows:
``SEC. 20. DISPOSAL OF MONEYS FROM SALES, BONUSES, RENTALS, AND
ROYALTIES.
``(a) In General.--Except with respect to lands in the
State of Alaska, all monies received by the United States from
sales, bonuses, rentals, and royalties under this Act shall be
paid into the Treasury of the United States. Of amounts
deposited under this subsection, subject to the provisions of
section 35 of the Mineral Leasing Act (30 U.S.C. 191(b)) and
section 5(a)(2) of this Act--
``(1) 50 percent shall be paid to the State within
the boundaries of which the leased lands or geothermal
resources are or were located; and
``(2) 25 percent shall be paid to the County within
the boundaries of which the leased lands or geothermal
resources are or were located.
``(b) Use of Payments.--Amounts paid to a State or county
under subsection (a) shall be used consistent with the terms of
section 35 of the Mineral Leasing Act (30 U.S.C. 191).''.
(c) Near-Term Production Incentive for Existing Leases.--
(1) In general.--Notwithstanding section 5(a) of
the Geothermal Steam Act of 1970, the royalty required
to be paid shall be 50 percent of the amount of the
royalty otherwise required, on any lease issued before
the date of enactment of this Act that does not convert
to new royalty terms under subsection (e)--
(A) with respect to commercial production
of energy from a facility that begins such
production in the 6-year period beginning on
the date of the enactment of this Act; or
(B) on qualified expansion geothermal
energy.
(2) 4-year application.--Paragraph (1) applies only
to new commercial production of energy from a facility
in the first 4 years of such production.
(d) Definition of Qualified Expansion Geothermal Energy.--
In this section, the term ``qualified expansion geothermal
energy'' means geothermal energy produced from a generation
facility for which--
(1) the production is increased by more than 10
percent as a result of expansion of the facility
carried out in the 6-year period beginning on the date
of the enactment of this Act; and
(2) such production increase is greater than 10
percent of the average production by the facility
during the 5-year period preceding the expansion of the
facility.
(e) Royalty Under Existing Leases.--
(1) In general.--Any lessee under a lease issued
under the Geothermal Steam Act of 1970 before the date
of the enactment of this Act may modify the terms of
the lease relating to payment of royalties to comply
with the amendment made by subsection (a), by applying
to the Secretary of the Interior by not later than 18
months after the date of the enactment of this Act.
(2) Application of modification.--Such modification
shall apply to any use of geothermal steam and any
associated geothermal resources to which the amendment
applies that occurs after the date of that application.
(3) Consultation.--The Secretary--
(A) shall consult with the State and local
governments affected by any proposed changes in
lease royalty terms under this subsection; and
(B) may establish a gross proceeds
percentage within the range specified in the
amendment made by subsection (a)(1) and with
the concurrence of the lessee and the State.
SEC. 215. GEOTHERMAL LEASING AND PERMITTING ON FEDERAL LANDS.
(a) In General.--Not later than 180 days after the date of
the enactment of this section, the Secretary of the Interior
and the Secretary of Agriculture shall enter into and submit to
Congress a memorandum of understanding in accordance with this
section regarding leasing and permitting for geothermal
development of public lands and National Forest System lands
under their respective jurisdictions.
(b) Lease and Permit Applications.--The memorandum of
understanding shall--
(1) identify areas with geothermal potential on
lands included in the National Forest System and, when
necessary, require review of management plans to
consider leasing under the Geothermal Steam Act of 1970
(30 U.S.C. 1001 et seq.) as a land use; and
(2) establish an administrative procedure for
processing geothermal lease applications, including
lines of authority, steps in application processing,
and time limits for application procession.
(c) Data Retrieval System.--The memorandum of understanding
shall establish a joint data retrieval system that is capable
of tracking lease and permit applications and providing to the
applicant information as to their status within the Departments
of the Interior and Agriculture, including an estimate of the
time required for administrative action.
SEC. 216. REVIEW AND REPORT TO CONGRESS.
The Secretary of the Interior shall promptly review and
report to Congress not later than 3 years after the date of the
enactment of this Act regarding the status of all withdrawals
from leasing under the Geothermal Steam Act of 1970 (30 U.S.C.
1001 et seq.) of Federal lands, specifying for each such area
whether the basis for such withdrawal still applies.
SEC. 217. REIMBURSEMENT FOR COSTS OF NEPA ANALYSES, DOCUMENTATION, AND
STUDIES.
(a) In General.--The Geothermal Steam Act of 1970 (30
U.S.C. 1001 et seq.) is amended by adding at the end the
following:
``SEC. 30. REIMBURSEMENT FOR COSTS OF CERTAIN ANALYSES, DOCUMENTATION,
AND STUDIES.
``(a) In General.--The Secretary of the Interior may
reimburse a person that is a lessee, operator, operating rights
owner, or applicant for any lease under this Act for reasonable
amounts paid by the person for preparation for the Secretary by
a contractor or other person selected by the Secretary of any
project-level analysis, documentation, or related study
required pursuant to the National Environmental Policy Act of
1969 (42 U.S.C. 4321 et seq.) with respect to the lease.
``(b) Conditions.--The Secretary may provide reimbursement
under subsection (a) only if--
``(1) adequate funding to enable the Secretary to
timely prepare the analysis, documentation, or related
study is not appropriated;
``(2) the person paid the costs voluntarily;
``(3) the person maintains records of its costs in
accordance with regulations issued by the Secretary;
``(4) the reimbursement is in the form of a
reduction in the Federal share of the royalty required
to be paid for the lease for which the analysis,
documentation, or related study is conducted, and is
agreed to by the Secretary and the person reimbursed
prior to commencing the analysis, documentation, or
related study; and
``(5) the agreement required under paragraph (4)
contains provisions--
``(A) reducing royalties owed on lease
production based on market prices;
``(B) stipulating an automatic termination
of the royalty reduction upon recovery of
documented costs; and
``(C) providing a process by which the
lessee may seek reimbursement for circumstances
in which production from the specified lease is
not possible.''.
(b) Application.--The amendment made by this section shall
apply with respect to an analysis, documentation, or a related
study conducted on or after the date of enactment of this Act
for any lease entered into before, on, or after the date of
enactment of this Act.
(c) Deadline for Regulations.--The Secretary shall issue
regulations implementing the amendment made by this section by
not later than 1 year after the date of enactment of this Act.
SEC. 218. ASSESSMENT OF GEOTHERMAL ENERGY POTENTIAL.
The Secretary of Interior, acting through the Director of
the United States Geological Survey and in cooperation with the
States, shall update the 1978 Assessment of Geothermal
Resources, and submit that updated assessment to Congress--
(1) not later than 3 years after the date of
enactment of this Act; and
(2) thereafter as the availability of data and
developments in technology warrant.
SEC. 219. COOPERATIVE OR UNIT PLANS.
Section 18 of the Geothermal Steam Act of 1970 (30 U.S.C.
1017) is amended to read as follows:
``SEC. 18. UNIT AND COMMUNITIZATION AGREEMENTS.
``(a) Adoption of Units by Lessees.--
``(1) In general.--For the purpose of more properly
conserving the natural resources of any geothermal
reservoir, field, or like area, or any part thereof
(whether or not any part of the geothermal field, or
like area, is then subject to any Unit Agreement
(cooperative plan of development or operation)),
lessees thereof and their representatives may unite
with each other, or jointly or separately with others,
in collectively adopting and operating under a Unit
Agreement for such field, or like area, or any part
thereof including direct use resources, if determined
and certified by the Secretary to be necessary or
advisable in the public interest. A majority interest
of owners of any single lease shall have the authority
to commit that lease to a Unit Agreement. The Secretary
of the Interior mayalso initiate the formation of a
Unit Agreement if in the public interest.
``(2) Modification of lease requirements by
secretary.--The Secretary may, in the discretion of the
Secretary, and with the consent of the holders of
leases involved, establish, alter, change, or revoke
rates of operations (including drilling, operations,
production, and other requirements) of such leases and
make conditions with reference to such leases, with the
consent of the lessees, in connection with the creation
and operation of any such Unit Agreement as the
Secretary may deem necessary or proper to secure the
proper protection of the public interest. Leases with
unlike lease terms or royalty rates do not need to be
modified to be in the same unit.
``(b) Requirement of Plans Under New Leases.--The
Secretary--
``(1) may provide that geothermal leases issued
under this Act shall contain a provision requiring the
lessee to operate under such a reasonable Unit
Agreement; and
``(2) may prescribe such an Agreement under which
such lessee shall operate, which shall adequately
protect the rights of all parties in interest,
including the United States.
``(c) Modification of Rate of Prospecting, Development, and
Production.--The Secretary may require that any Agreement
authorized by this section that applies to lands owned by the
United States contain a provision under which authority is
vested in the Secretary, or any person, committee, or State or
Federal officer or agency as may be designated in the Agreement
to alter or modify from time to time the rate of prospecting
and development and the quantity and rate of production under
such an Agreement.
``(d) Exclusion From Determination of Holding or Control.--
Any lands that are subject to any Agreement approved or
prescribed by the Secretary under this section shall not be
considered in determining holdings or control under any
provision of this Act.
``(e) Pooling of Certain Lands.--If separate tracts of
lands cannot be independently developed and operated to use
geothermal steam and associated geothermal resources pursuant
to any section of this Act--
``(1) such lands, or a portion thereof, may be
pooled with other lands, whether or not owned by the
United States, for purposes of development and
operation under a Communitization Agreement providing
for an apportionment of production or royalties among
the separate tracts of land comprising the production
unit, if such pooling is determined by the Secretary to
be in the public interest; and
``(2) operation or production pursuant to such an
Agreement shall be treated as operation or production
with respect to each tract of land that is subject to
the agreement.
``(f) Unit Agreement Review.--No more than 5 years after
approval of any cooperative or Unit Agreement and at least
every 5 years thereafter, the Secretary shall review each such
Agreement and, after notice and opportunity for comment,
eliminate from inclusion in such Agreement any lands that the
Secretary determines are not reasonably necessary for Unit
operations under the Agreement. Such elimination shall be based
on scientific evidence, and shall occur only if it is
determined by the Secretary to be for the purpose of conserving
and properly managing the geothermal resource. Any land so
eliminated shall be eligible for an extension under subsection
(g) of section 6 if it meets the requirements for such an
extension.
``(g) Drilling or Development Contracts.-- The Secretary
may, on such conditions as the Secretary may prescribe, approve
drilling or development contracts made by 1 or more lessees of
geothermal leases, with 1 or more persons, associations, or
corporations if, in the discretion of the Secretary, the
conservation of natural resources or the public convenience or
necessity may require or the interests of the United States may
be best served thereby. All leases operated under such approved
drilling or development contracts, and interests thereunder,
shall be excepted in determining holdings or control under
section 7.
``(h) Coordination With State Governments.--The Secretary
shall coordinate unitization and pooling activities with the
appropriate State agencies and shall ensure that State leases
included in any unitization or pooling arrangement are treated
equally with Federal leases.''.
SEC. 220. ROYALTY ON BYPRODUCTS.
Section 5 of the Geothermal Steam Act of 1970 (30 U.S.C.
1004) is further amended in subsection (a) by striking
paragraph (2) and inserting the following:
``(2) a royalty on any byproduct that is a mineral
named in the first section of the Mineral Leasing Act
(30 U.S.C. 181), and that is derived from production
under the lease, at the rate of the royalty that
applies under that Act to production of such mineral
under a lease under that Act;''.
SEC. 221. REPEAL OF AUTHORITIES OF SECRETARY TO READJUST TERMS,
CONDITIONS, RENTALS, AND ROYALTIES.
Section 8 of the Geothermal Steam Act of 1970 (30 U.S.C.
1007) is amended by repealing subsection (b), and by
redesignating subsection (c) as subsection (b).
SEC. 222. CREDITING OF RENTAL TOWARD ROYALTY.
Section 5 of the Geothermal Steam Act of 1970 (30 U.S.C.
1004) is further amended--
(1) in subsection (a)(2) by inserting ``and'' after
the semicolon at the end;
(2) in subsection (a)(3) by striking ``; and'' and
inserting a period;
(3) by striking paragraph (4) of subsection (a);
and
(4) by adding at the end the following:
``(e) Crediting of Rental Toward Royalty.--Any annual
rental under this section that is paid with respect to a lease
before the first day of the year for which the annual rental is
owed shall be credited to the amount of royalty that is
required to be paid under the lease for that year.''.
SEC. 223. LEASE DURATION AND WORK COMMITMENT REQUIREMENTS.
Section 6 of the Geothermal Steam Act of 1970 (30 U.S.C.
1005) is amended--
(1) by striking so much as precedes subsection (c),
and striking subsections (e), (g), (h), (i), and (j);
(2) by redesignating subsections (c), (d), and (f)
in order as subsections (g), (h), and (i); and
(3) by inserting before subsection (g), as so
redesignated, the following:
``SEC. 6. LEASE TERM AND WORK COMMITMENT REQUIREMENTS.
``(a) In General.--
``(1) Primary term.--A geothermal lease shall be
for a primary term of 10 years.
``(2) Initial extension.--The Secretary shall
extend the primary term of a geothermal lease for 5
years if, for each year after the fifth year of the
lease--
``(A) the Secretary determined under
subsection (c) that the lessee satisfied the
work commitment requirements that applied to
the lease for that year; or
``(B) the lessee paid in accordance with
subsection (d) the value of any work that was
not completed in accordance with those
requirements.
``(3) Additional extension.--The Secretary shall
extend the primary term of a geothermal lease (after an
initial extension under paragraph (2)) for an
additional 5 years if, for each year of the initial
extension under paragraph (2), the Secretary determined
under subsection (c) that the lessee satisfied the work
commitment requirements that applied to the lease for
that year.
``(b) Requirement to Satisfy Annual Work Commitment
Requirement.--
``(1) In general.--The lessee for a geothermal
lease shall, for each year after the fifth year of the
lease, satisfy work commitment requirements prescribed
by the Secretary that apply to the lease for that year.
``(2) Prescription of work commitment
requirements.--The Secretary shall issue regulations
prescribing minimum equivalent dollar value work
commitment requirements for geothermal leases, that--
``(A) require that a lessee, in each year
after the fifth year of the primary term of a
geothermal lease, diligently work to achieve
commercial production or utilization of steam
under the lease;
``(B) require that in each year to which
work commitment requirements under the
regulations apply, the lessee shall
significantly reduce the amount of work that
remains to be done to achieve such production
or utilization;
``(C) describe specific work that must be
completed by a lessee by the end of each year
to which the work commitment requirements apply
and factors, such as force majeure events, that
suspend or modify the work commitment
obligation;
``(D) carry forward and apply to work
commitment requirements for a year, work
completed in any year in the preceding 3-year
period that was in excess of the work required
to be performed in that preceding year;
``(E) establish transition rules for leases
issued before the date of the enactment of this
subsection, including terms under which a lease
that is near the end of its term on the date of
enactment of this subsection may be extended
for up to 2 years--
``(i) to allow achievement of
production under the lease; or
``(ii) to allow the lease to be
included in a producing unit; and
``(F) establish an annual payment that, at
the option of the lessee, may be exercised in
lieu of meeting any work requirement for a
limited number of years that the Secretary
determines will not impair achieving diligent
development of the geothermal resource.
``(3) Termination of application of requirements.--
Work commitment requirements prescribed under this
subsection shall not apply to a geothermal lease after
the date on which geothermal steam is produced or
utilized under the lease in commercial quantities.
``(c) Determination of Whether Requirements Satisfied.--The
Secretary shall, by not later than 90 days after the end of
each year for which work commitment requirements under
subsection (b) apply to a geothermal lease--
``(1) determine whether the lessee has satisfied
the requirements that apply for that year;
``(2) notify the lessee of that determination; and
``(3) in the case of a notification that the lessee
did not satisfy work commitment requirements for the
year, include in the notification--
``(A) a description of the specific work
that was not completed by the lessee in
accordance with the requirements; and
``(B) the amount of the dollar value of
such work that was not completed, reduced by
the amount of expenditures made for work
completed in a prior year that is carried
forward pursuant to subsection (b)(2)(D).
``(d) Payment of Value of Uncompleted Work.--
``(1) In general.--If the Secretary notifies a
lessee that the lessee failed to satisfy work
commitment requirements under subsection (b), the
lessee shall pay to the Secretary, by not later than
the end of the 60-day period beginning on the date of
the notification, the dollar value of work that was not
completed by the lessee, in the amount stated in the
notification (as reduced under subsection (c)(3)(B)).
``(2) Failure to pay value of uncompleted work.--If
a lessee fails to pay such amount to the Secretary
before the end of that period, the lease shall
terminate upon the expiration of the period.
``(e) Continuation After Commercial Production or
Utilization.--If geothermal steam is produced or utilized in
commercial quantities within the primary term of the lease
under subsection (a) (including any extension of the lease
under subsection (a)), such lease shall continue until the date
on which geothermal steam is no longer produced or utilized in
commercial quantities.
``(f) Conversion of Geothermal Lease to Mineral Lease.--The
lessee under a lease that has produced geothermal steam for
electrical generation, has been determined by the Secretary to
be incapable of any further commercial production or
utilization of geothermal steam, and that is producing any
valuable byproduct in payable quantities may, within 6 months
after such determination--
``(1) convert the lease to a mineral lease under
the Mineral Leasing Act (30 U.S.C. 181 et seq.) or
under the Mineral Leasing Act for Acquired Lands (30
U.S.C. 351 et seq.), if the lands that are subject to
the lease can be leased under that Act for the
production of such byproduct; or
``(2) convert the lease to a mining claim under the
general mining laws, if the byproduct is a locatable
mineral.''.
SEC. 224. ADVANCED ROYALTIES REQUIRED FOR SUSPENSION OF PRODUCTION.
Section 5 of the Geothermal Steam Act of 1970 (30 U.S.C.
1004) is further amended by adding at the end the following:
``(f) Advanced Royalties Required for Suspension of
Production.--
``(1) Continuation of lease following cessation of
production.--If, at any time after commercial
production under a lease is achieved, production ceases
for any cause the lease shall remain in full force and
effect--
``(A) during the 1-year period beginning on
the date production ceases; and
``(B) after such period if, and so long as,
the lessee commences and continues diligently
and in good faith until such production is
resumed the steps, operations, or procedures
necessary to cause a resumption of such
production.
``(2) If production of heat or energy under a
geothermal lease is suspended after the date of any
such production for which royalty is required under
subsection (a) and the terms of paragraph (1) are not
met, the Secretary shall require the lessee, until the
end of such suspension, to pay royalty in advance at
the monthly pro-rata rate of the average annual rate at
which such royalty was paid each year in the 5-year-
period preceding the date of suspension.
``(3) Paragraph (2) shall not apply if the
suspension is required or otherwise caused by the
Secretary, the Secretary of a military department, a
State or local government, or a force majeure.''.
SEC. 225. ANNUAL RENTAL.
(a) Annual Rental Rate.--Section 5 of the Geothermal Steam
Act of 1970 (30 U.S.C. 1004) is further amended in subsection
(a) in paragraph (3) by striking ``$1 per acre or fraction
thereof for each year of the lease'' and all that follows
through the end of the paragraph and inserting ``$1 per acre or
fraction thereof for each year of the lease through the tenth
year in the case of a lease awarded in a noncompetitive lease
sale; or $2 per acre or fraction thereof for the first year, $3
per acre or fraction thereof for each of the second through
tenth years, in the case of a lease awarded in a
competitivelease sale; and $5 per acre or fraction thereof for each
year after the 10th year thereof for all leases.''.
(b) Termination of Lease for Failure to Pay Rental.--
Section 5 of the Geothermal Steam Act of 1970 (30 U.S.C. 1004)
is further amended by adding at the end the following:
``(g) Termination of Lease for Failure to Pay Rental.---
``(1) In general.--The Secretary shall terminate
any lease with respect to which rental is not paid in
accordance with this Act and the terms of the lease
under which the rental is required, upon the expiration
of the 45-day period beginning on the date of the
failure to pay such rental.
``(2) Notification.--The Secretary shall promptly
notify a lessee that has not paid rental required under
the lease that the lease will be terminated at the end
of the period referred to in paragraph (1).
``(3) Reinstatement.--A lease that would otherwise
terminate under paragraph (1) shall not terminate under
that paragraph if the lessee pays to the Secretary,
before the end of the period referred to in paragraph
(1), the amount of rental due plus a late fee equal to
10 percent of such amount.''.
SEC. 226. LEASING AND PERMITTING ON FEDERAL LANDS WITHDRAWN FOR
MILITARY PURPOSES.
Not later than 2 years after the date of enactment of this
Act, the Secretary of the Interior and the Secretary of
Defense, in consultation with each military service and with
interested States, counties, representatives of the geothermal
industry, and other persons, shall submit to Congress a joint
report concerning leasing and permitting activities for
geothermal energy on Federal lands withdrawn for military
purposes. Such report shall include the following:
(1) A description of the Military Geothermal
Program, including any differences between it and the
non-Military Geothermal Program, including required
security procedures, and operational considerations,
and discussions as to the differences, and why they are
important. Further, the report shall describe revenues
or energy provided to the Department of Defense and its
facilities, royalty structures, where applicable, and
any revenue sharing with States and counties or other
benefits between--
(A) the implementation of the Geothermal
Steam Act of 1970 (30 U.S.C 1001 et seq.) and
other applicable Federal law by the Secretary
of the Interior; and
(B) the administration of geothermal
leasing under section 2689 of title 10, United
States Code, by the Secretary of Defense.
(2) If appropriate, a description of the current
methods and procedures used to ensure interagency
coordination, where needed, in developing renewable
energy sources on Federal lands withdrawn for military
purposes, and an identification of any new procedures
that might be required in the future for the
improvement of interagency coordination to ensure
efficient processing and administration of leases or
contracts for geothermal energy on Federal lands
withdrawn for military purposes, consistent with the
defense purposes of such withdrawals.
(3) Recommendations for any legislative or
administrative actions that might better achieve
increased geothermal production, including a common
royalty structure, leasing procedures, or other changes
that increase production, offset military operation
costs, or enhance the Federal agencies' ability to
develop geothermal resources.
Except as provided in this section, nothing in this subtitle
shall affect the legal status of the Department of the Interior
and the Department of the Defense with respect to each other
regarding geothermal leasing and development until such status
is changed by law.
SEC. 227. TECHNICAL AMENDMENTS.
The Geothermal Steam Act of 1970 (30 U.S.C. 1001 et seq.)
is further amended as follows:
(1) By striking ``geothermal steam and associated
geothermal resources'' each place it appears and
inserting ``geothermal resources''.
(2) Section 2(e) (30 U.S.C. 1001(e)) is amended to
read as follows:
``(e) `direct use' means utilization of geothermal
resources for commercial, residential, agricultural,
public facilities, or other energy needs other than the
commercial production of electricity; and''.
(3) Section 21 (30 U.S.C. 1020) is amended by
striking ``(a) Within one hundred'' and all that
follows through ``(b) Geothermal'' and inserting
``Geothermal''.
(4) The first section (30 U.S.C. 1001 note) is
amended by striking ``That this'' and inserting the
following:
``SECTION 1. SHORT TITLE.
``This''.
(5) Section 2 (30 U.S.C. 1001) is amended by
striking ``Sec. 2. As'' and inserting the following:
``SEC. 2. DEFINITIONS.
``As''.
(6) Section 3 (30 U.S.C. 1002) is amended by
striking ``Sec. 3. Subject'' and inserting the
following:
``SEC. 3 . LANDS SUBJECT TO GEOTHERMAL LEASING.
``Subject''.
(7) Section 5 (30 U.S.C. 1004) is further amended
by striking ``Sec. 5.'', and by inserting immediately
before and above subsection (a) the following:
``SEC. 5. RENTS AND ROYALTIES.''.
(8) Section 7 (30 U.S.C. 1006) is amended by
striking ``Sec. 7. A geothermal'' and inserting the
following:
``SEC. 7. ACREAGE OF GEOTHERMAL LEASE.
``A geothermal''.
(9) Section 8 (30 U.S.C. 1007) is amended by
striking ``Sec. 8. (a) The'' and inserting the
following:
``SEC. 8. READJUSTMENT OF LEASE TERMS AND CONDITIONS.
``(a) The''.
(10) Section 9 (30 U.S.C. 1008) is amended by
striking ``Sec. 9. If'' and inserting the following:
``SEC. 9. BYPRODUCTS.
``If''.
(11) Section 10 (30 U.S.C. 1009) is amended by
striking ``Sec. 10. The'' and inserting the following:
``SEC. 10. RELINQUISHMENT OF GEOTHERMAL RIGHTS.
``The''.
(12) Section 11 (30 U.S.C. 1010) is amended by
striking ``Sec. 11. The'' and inserting the following:
``SEC. 11. SUSPENSION OF OPERATIONS AND PRODUCTION.
``The''.
(13) Section 12 (30 U.S.C. 1011) is amended by
striking ``Sec. 12. Leases'' and inserting the
following:
``SEC. 12. TERMINATION OF LEASES.
``Leases''.
(14) Section 13 (30 U.S.C. 1012) is amended by
striking ``Sec. 13. The'' and inserting the following:
``SEC. 13. WAIVER, SUSPENSION, OR REDUCTION OF RENTAL OR ROYALTY.
``The''.
(15) Section 14 (30 U.S.C. 1013) is amended by
striking ``Sec. 14. Subject'' and inserting the
following:
``SEC. 14. SURFACE LAND USE.
``Subject''.
(16) Section 15 (30 U.S.C. 1014) is amended by
striking ``Sec. 15. (a) Geothermal'' and inserting the
following:
``SEC. 15. LANDS SUBJECT TO GEOTHERMAL LEASING.
``(a) Geothermal''.
(17) Section 16 (30 U.S.C. 1015) is amended by
striking ``Sec. 16. Leases'' and inserting the
following:
``SEC. 16. REQUIREMENT FOR LESSEES.
``Leases''.
(18) Section 17 (30 U.S.C. 1016) is amended by
striking ``Sec. 17. Administration'' and inserting the
following:
``SEC. 17. ADMINISTRATION.
``Administration''.
(19) Section 19 (30 U.S.C. 1018) is amended by
striking ``Sec. 19. Upon'' and inserting the following:
``SEC. 19. DATA FROM FEDERAL AGENCIES.
``Upon''.
(20) Section 21 (30 U.S.C. 1020) is further amended
by striking ``Sec. 21.'', and by inserting immediately
before and above the remainder of that section the
following:
``SEC. 21. PUBLICATION IN FEDERAL REGISTER; RESERVATION OF MINERAL
RIGHTS.''.
(21) Section 22 (30 U.S.C. 1021) is amended by
striking ``Sec. 22. Nothing'' and inserting the
following:
``SEC. 22. FEDERAL EXEMPTION FROM STATE WATER LAWS.
``Nothing''.
(22) Section 23 (30 U.S.C. 1022) is amended by
striking ``Sec. 23. (a) All'' and inserting the
following:
``SEC. 23. PREVENTION OF WASTE; EXCLUSIVITY.
``(a) All''.
(23) Section 24 (30 U.S.C. 1023) is amended by
striking ``Sec. 24. The'' and inserting the following:
``SEC. 24. RULES AND REGULATIONS.
``The''.
(24) Section 25 (30 U.S.C. 1024) is amended by
striking ``Sec. 25. As'' and inserting the following:
``SEC. 25. INCLUSION OF GEOTHERMAL LEASING UNDER CERTAIN OTHER LAWS.
``As''.
(25) Section 26 is amended by striking ``Sec. 26.
The'' and inserting the following:
``SEC. 26. AMENDMENT.
``The''.
(26) Section 27 (30 U.S.C. 1025) is amended by
striking ``Sec. 27. The'' and inserting the following:
``SEC. 27. FEDERAL RESERVATION OF CERTAIN MINERAL RIGHTS.
``The''.
(27) Section 28 (30 U.S.C. 1026) is amended by
striking ``Sec. 28. (a)(1) The'' and inserting the
following:
``SEC. 28. SIGNIFICANT THERMAL FEATURES.
``(a)(1) The''.
(28) Section 29 (30 U.S.C. 1027) is amended by
striking ``Sec. 29. The'' and inserting the following:
``SEC. 29. LAND SUBJECT TO PROHIBITION ON LEASING.
``The''.
Subtitle C--Hydroelectric
PART I--ALTERNATIVE CONDITIONS
SEC. 231. ALTERNATIVE CONDITIONS AND FISHWAYS.
(a) Federal Reservations.--Section 4(e) of the Federal
Power Act (16 U.S.C. 797(e)) is amended by inserting after
``adequate protection and utilization of such reservation.'' at
the end of the first proviso the following: ``The license
applicant shall be entitled to a determination on the record,
after opportunity for an expedited agency trial-type hearing of
any disputed issues of material fact, with respect to such
conditions. Such hearing may be conducted in accordance with
procedures established by agency regulation in consultation
with the Federal Energy Regulatory Commission.''.
(b) Fishways.--Section 18 of the Federal Power Act (16
U.S.C. 811) is amended by inserting after ``and such fishways
as may be prescribed by the Secretary of Commerce.'' the
following: ``The license applicant shall be entitled to a
determination on the record, after opportunity for an expedited
agency trial-type hearing of any disputed issues of material
fact, with respect to such fishways. Such hearing may be
conducted in accordance with procedures established by agency
regulation in consultation with the Federal Energy Regulatory
Commission.''.
(c) Alternative Conditions and Prescriptions.--Part I of
the Federal Power Act (16 U.S.C. 791a et seq.) is amended by
adding the following new section at the end thereof:
``SEC. 33. ALTERNATIVE CONDITIONS AND PRESCRIPTIONS.
``(a) Alternative Conditions.--(1) Whenever any person
applies for a license for any project works within any
reservation of the United States, and the Secretary of the
department under whose supervision such reservation falls
(referred to in this subsection as `the Secretary') deems a
condition to such license to be necessary under the first
proviso of section 4(e), the license applicant may propose an
alternative condition.
``(2) Notwithstanding the first proviso of section 4(e),
the Secretary shall accept the proposed alternative condition
referred to in paragraph (1), and the Commission shall include
in the license such alternative condition, if the Secretary
determines, based on substantial evidence provided by the
license applicant or otherwise available to the Secretary, that
such alternative condition--
``(A) provides for the adequate protection and
utilization of the reservation; and
``(B) will either--
``(i) cost less to implement; or
``(ii) result in improved operation of the
project works for electricity production,
as compared to the condition initially deemed necessary
by the Secretary.
``(3) The Secretary shall submit into the public record of
the Commission proceeding with any condition under section 4(e)
or alternative condition it accepts under this section, a
written statement explaining the basis for such condition, and
reason for not accepting any alternative condition under this
section. The written statement must demonstrate that the
Secretary gave equal consideration to the effects of the
condition adopted and alternatives not accepted on energy
supply, distribution, cost, and use; flood control; navigation;
water supply; and air quality (in addition to the preservation
of other aspects of environmental quality); based on such
information as may be available to the Secretary, including
information voluntarily provided in a timely manner by the
applicant and others. The Secretary shall also submit, together
with the aforementioned written statement, all studies, data,
and other factual information available to the Secretary and
relevant to the Secretary's decision.
``(4) Nothing in this section shall prohibit other
interested parties from proposing alternative conditions.
``(5) If the Secretary does not accept an applicant's
alternative condition under this section, and the Commission
finds that the Secretary's condition would be inconsistent with
the purposes of this part, or other applicable law, the
Commission may refer the dispute to the Commission's Dispute
Resolution Service. The Dispute Resolution Service shall
consult with the Secretary and the Commission and issue a non-
binding advisory within 90 days. The Secretary may accept the
Dispute Resolution Service advisory unless the Secretary finds
that the recommendation will not provide for the adequate
protection and utilization of the reservation. The Secretary
shall submit the advisory and the Secretary's final written
determination into the record of the Commission's proceeding.
``(b) Alternative Prescriptions.--(1) Whenever the
Secretary of the Interior or the Secretary of Commerce
prescribes a fishway under section 18, the license applicant or
licensee may propose an alternative to such prescription to
construct, maintain, or operate a fishway.
``(2) Notwithstanding section 18, the Secretary of the
Interior or the Secretary of Commerce, as appropriate, shall
accept and prescribe, and the Commission shall require, the
proposed alternative referred to in paragraph (1), if the
Secretary of the appropriate department determines, based on
substantial evidence provided by the licensee or otherwise
available to the Secretary, that such alternative--
``(A) will be no less protective than the fishway
initially prescribed by the Secretary; and
``(B) will either--
``(i) cost less to implement; or
``(ii) result in improved operation of the
project works for electricity production,
as compared to the fishway initially deemed necessary
by the Secretary.
``(3) The Secretary concerned shall submit into the public
record of the Commission proceeding with any prescription under
section 18 or alternative prescription it accepts under this
section, a written statement explaining the basis for such
prescription, and reason for not accepting any alternative
prescription under this section. The written statement must
demonstrate that the Secretary gave equal consideration to the
effects of the condition adopted and alternatives not accepted
on energy supply, distribution, cost, and use; flood control;
navigation; water supply; and air quality (in addition to the
preservation of other aspects of environmental quality); based
on such information as may be available to the Secretary,
including information voluntarily provided in a timely manner
by the applicant and others. The Secretary shall also submit,
together with the aforementioned written statement, all
studies, data, and other factual information available to the
Secretary and relevant to the Secretary's decision.
``(4) Nothing in this section shall prohibit other
interested parties from proposing alternative prescriptions.
``(5) If the Secretary concerned does not accept an
applicant's alternative prescription under this section, and
the Commission finds that the Secretary's prescription would be
inconsistent with the purposes of this part, or other
applicable law, the Commission may refer the dispute to the
Commission's Dispute Resolution Service. The Dispute Resolution
Service shall consult with the Secretary and the Commission and
issue a non-binding advisory within 90 days. The Secretary may
accept the Dispute Resolution Service advisory unless the
Secretary finds that the recommendation will be less protective
than the fishway initially prescribed by the Secretary. The
Secretary shall submit the advisory and the Secretary's final
written determination into the record of the Commission's
proceeding.''.
PART II--ADDITIONAL HYDROPOWER
SEC. 241. HYDROELECTRIC PRODUCTION INCENTIVES.
(a) Incentive Payments.--For electric energy generated and
sold by a qualified hydroelectric facility during the incentive
period, the Secretary of Energy (referred to in this section as
the ``Secretary'') shall make, subject to the availability of
appropriations, incentive payments to the owner or operator of
such facility. The amount of such payment made to any such
owner or operator shall be as determined under subsection (e)
of this section. Payments under this section may only be made
upon receipt by the Secretary of an incentive payment
application which establishes that the applicant is eligible to
receive such payment and which satisfies such other
requirements as the Secretary deems necessary. Such application
shall be in such form, and shall be submitted at such time, as
the Secretary shall establish.
(b) Definitions.--For purposes of this section:
(1) Qualified hydroelectric facility.--The term
``qualified hydroelectric facility'' means a turbine or
other generating device owned or solely operated by a
non-Federal entity which generates hydroelectric energy
for sale and which is added to an existing dam or
conduit.
(2) Existing dam or conduit.--The term ``existing
dam or conduit'' means any dam or conduit the
construction of which was completed before the date of
the enactment of this section and which does not
require any construction or enlargement of impoundment
or diversion structures (other than repair or
reconstruction) in connection with the installation of
a turbine or other generating device.
(3) Conduit.--The term ``conduit'' has the same
meaning as when used in section 30(a)(2) of the Federal
Power Act (16 U.S.C. 823a(a)(2)).
The terms defined in this subsection shall apply without regard
to the hydroelectric kilowatt capacity of the facility
concerned, without regard to whether the facility uses a dam
owned by a governmental or nongovernmental entity, and without
regard to whether the facility begins operation on or after the
date of the enactment of this section.
(c) Eligibility Window.--Payments may be made under this
section only for electric energy generated from a qualified
hydroelectric facility which begins operation during the period
of 10 fiscal years beginning with the first full fiscal year
occurring after the date of enactment of this subtitle.
(d) Incentive Period.--A qualified hydroelectric facility
may receive payments under this section for a period of 10
fiscal years (referred to in this section as the ``incentive
period''). Such period shall begin with the fiscal year in
which electric energy generated from the facility is first
eligible for such payments.
(e) Amount of Payment.--
(1) In general.--Payments made by the Secretary
under this section to the owner or operator of a
qualified hydroelectric facility shall be based on the
number of kilowatt hours of hydroelectric energy
generated by the facility during the incentive period.
For any such facility, the amount of such payment shall
be 1.8 cents per kilowatt hour (adjusted as provided in
paragraph (2)), subject to the availability of
appropriations under subsection (g), except that no
facility may receive more than $750,000 in 1 calendar
year.
(2) Adjustments.--The amount of the payment made to
any person under this section as provided in paragraph
(1) shall be adjusted for inflation for each fiscal
year beginning after calendar year 2003 in the same
manner as provided in the provisions of section
29(d)(2)(B) of the Internal Revenue Code of 1986,
except that in applying such provisions the calendar
year 2003 shall be substituted for calendar year 1979.
(f) Sunset.--No payment may be made under this section to
any qualified hydroelectric facility after the expiration of
the period of 20 fiscal years beginning with the first full
fiscal year occurring after the date of enactment of this
subtitle, and no payment may be made under this section to any
such facility after a payment has been made with respect to
such facility for a period of 10 fiscal years.
(g) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary to carry out the purposes
of this section $10,000,000 for each of the fiscal years 2004
through 2013.
SEC. 242. HYDROELECTRIC EFFICIENCY IMPROVEMENT.
(a) Incentive Payments.--The Secretary of Energy shall make
incentive payments to the owners or operators of hydroelectric
facilities at existing dams to be used to make capital
improvements in the facilities that are directly related to
improving the efficiency of such facilities by at least 3
percent.
(b) Limitations.--Incentive payments under this section
shall not exceed 10 percent of the costs of the capital
improvement concerned and not more than 1 payment may be made
with respect to improvements at a single facility. No payment
in excess of $750,000 may be made with respect to improvements
at a single facility.
(c) Authorization of Appropriations.--There are authorized
to be appropriated to carry out this section not more than
$10,000,000 for each of the fiscal years 2004 through 2013.
SEC. 243. SMALL HYDROELECTRIC POWER PROJECTS.
Section 408(a)(6) of the Public Utility Regulatory Policies
Act of 1978 (16 U.S.C. 2708(a)(6)) is amended by striking
``April 20, 1977'' and inserting ``March 4, 2003''.
SEC. 244. INCREASED HYDROELECTRIC GENERATION AT EXISTING FEDERAL
FACILITIES.
(a) In General.--The Secretary of the Interior and the
Secretary of Energy, in consultation with the Secretary of the
Army, shall jointly conduct a study of the potential for
increasing electric power production capability at federally
owned or operated water regulation, storage, and conveyance
facilities.
(b) Content.--The study under this section shall include
identification and description in detail of each facility that
is capable, with or without modification, of producing
additional hydroelectric power, including estimation of the
existing potential for the facility to generate hydroelectric
power.
(c) Report.--The Secretaries shall submit to the Committees
on Energy and Commerce, Resources, and Transportation and
Infrastructure of the House of Representatives and the
Committee on Energy and Natural Resources of the Senate a
report on the findings, conclusions, and recommendations of the
study under this section by not later than 18 months after the
date of the enactment of this Act. The report shall include
each of the following:
(1) The identifications, descriptions, and
estimations referred to in subsection (b).
(2) A description of activities currently conducted
or considered, or that could be considered, to produce
additional hydroelectric power from each identified
facility.
(3) A summary of prior actions taken by the
Secretaries to produce additional hydroelectric power
from each identified facility.
(4) The costs to install, upgrade, or modify
equipment or take other actions to produce additional
hydroelectric power from each identified facility and
the level of Federal power customer involvement in the
determination of such costs.
(5) The benefits that would be achieved by such
installation, upgrade, modification, or other action,
including quantified estimates of any additional energy
or capacity from each facility identified under
subsection (b).
(6) A description of actions that are planned,
underway, or might reasonably be considered to increase
hydroelectric power production by replacing turbine
runners, by performing generator upgrades or rewinds,
or construction of pumped storage facilities.
(7) The impact of increased hydroelectric power
production on irrigation, fish, wildlife, Indian
tribes, river health, water quality, navigation,
recreation, fishing, and flood control.
(8) Any additional recommendations to increase
hydroelectric power production from, and reduce costs
and improve efficiency at, federally owned or operated
water regulation, storage, and conveyance facilities.
SEC. 245. SHIFT OF PROJECT LOADS TO OFF-PEAK PERIODS.
(a) In General.--The Secretary of the Interior shall--
(1) review electric power consumption by Bureau of
Reclamation facilities for water pumping purposes; and
(2) make such adjustments in such pumping as
possible to minimize the amount of electric power
consumed for such pumping during periods of peak
electric power consumption, including by performing as
much of such pumping as possible during off-peak hours
at night.
(b) Consent of Affected Irrigation Customers Required.--The
Secretary may not under this section make any adjustment in
pumping at a facility without the consent of each person that
has contracted with the United States for delivery of water
from the facility for use for irrigation and that would be
affected by such adjustment.
(c) Existing Obligations Not Affected.--This section shall
not be construed to affect any existing obligation of the
Secretary to provide electric power, water, or other benefits
from Bureau of Reclamation facilities, including recreational
releases.
SEC. 246. CORPS OF ENGINEERS HYDROPOWER OPERATION AND MAINTENANCE
FUNDING.
(a) In General.--Notwithstanding the last sentence of
section 5 of the Act of December 22, 1944 (commonly known as
the ``Flood Control Act of 1944'') (58 Stat. 890, chapter 665;
16 U.S.C. 825s), the 11th paragraph under the heading ``office
of the secretary'' in title I of the Act of October 12, 1949
(63 Stat. 767, chapter 680; 16 U.S.C. 825s-1), the matter under
the heading ``continuing fund, southeastern power
administration'' in title I of the Act of August 31, 1951 (65
Stat. 249, chapter 375; 16 U.S.C. 825s-2), section 3302 of
title 31, United States Code, or any other law, and without
further appropriation or fiscal year limitation, for fiscal
year 2004, the Administrator of the Southeastern Power
Administration, the Administrator of the Southwestern Power
Administration, and the Administrator of the Western Area Power
Administration may credit to the Secretary of the Army
(referred to in this section as the ``Secretary''), receipts,
in an amount determined under subsection (c), from the sale of
power and related services.
(b) Use of Funds.--
(1) In general.--The Secretary--
(A) shall, except as provided in paragraph
(2), use the amounts credited under subsection
(a) to fund only the Corps of Engineers annual
operation and maintenance activities that are
allocated exclusively to the power function and
assigned to the respective power marketing
administration and respective project system as
applicable for repayment; and
(B) shall not use the amounts for any costs
allocated to non-power functions of Corps of
Engineer operations.
(2) Exception.--The Secretary may use amounts
credited by the Southwestern Power Administration under
subsection (a) for capital and nonrecurring costs.
(c) Amount.--The amount of the receipts credited under
subsection (a) shall be equal to such amount as--
(1) the Secretary of the Army requests; and
(2) the appropriate Administrator, in consultation
with the power customers of the Administrator's power
marketing administration, determines to be appropriate
to apply to the costs referred to in subsection (b).
(d) Applicable Law.--The amounts credited under subsection
(a) are exempt from sequestration under the Balanced Budget and
Emergency Deficit Control Act of 1985 (2 U.S.C. 901 et seq.).
SEC. 247. LIMITATION ON CERTAIN CHARGES ASSESSED TO THE FLINT CREEK
PROJECT, MONTANA.
Notwithstanding section 10(e)(1) of the Federal Power Act
(16 U.S.C. 803(e)(1)) or any other provision of Federal law
providing for the payment to the United States of charges for
the use of Federal land for the purposes of operating and
maintaining a hydroelectric development licensed by the Federal
Energy Regulatory Commission (referred to in this section as
the ``Commission''), any political subdivision of the State of
Montana that holds a license for Commission Project No. 1473 in
Granite and Deer Lodge Counties, Montana, shall be required to
pay to the United States for the use of that land for each year
during which the political subdivision continues to hold the
license for the project, the lesser of--
(1) $25,000; or
(2) such annual charge as the Commission or any
other department or agency of the Federal Government
may assess.
SEC. 248. REINSTATEMENT AND TRANSFER.
(a) Reinstatement and Transfer of Federal License for
Project Numbered 2696.--Notwithstanding section 8 of the
Federal Power Act (16 U.S.C. 801) or any other provision of
such Act, the Federal Energy Regulatory Commission shall
reinstate the license for Project No. 2696 and transfer the
license, without delay or the institution of any proceedings,
to the Town of Stuyvesant, New York, holder of Federal Energy
Regulatory Commission Preliminary Permit No. 11787, within 30
days after the date of enactment of this Act.
(b) Hydroelectric Incentives.--Project No. 2696 shall be
entitled to the full benefit of any Federal legislation that
promotes hydroelectric development that is enacted within 2
years either before or after the date of enactment of this Act.
(c) Project Development and Financing.--The Federal Energy
Regulatory Commission shall permit the Town of Stuyvesant to
add as a colicensee any private or public entity or entities to
the reinstated license at any time, notwithstanding the
issuance of a preliminary permit to the Town of Stuyvesant and
any consideration of municipal preference. The town shall be
entitled, to the extent that funds are available or shall be
made available, to receive loans under sections 402 and 403 of
the Public Utility Regulatory Policies Act of 1978 (16 U.S.C.
2702 and 2703), or similar programs, for the reimbursement of
feasibility studies or development costs, or both, incurred
since January 1, 2001, through and including December 31, 2006.
All power produced by the project shall be deemed incremental
hydropower for purpose of qualifying for any energy credit or
similar benefits.
TITLE III--OIL AND GAS
Subtitle A--Petroleum Reserve and Home Heating Oil
SEC. 301. PERMANENT AUTHORITY TO OPERATE THE STRATEGIC PETROLEUM
RESERVE AND OTHER ENERGY PROGRAMS.
(a) Amendment to Title I of the Energy Policy and
Conservation Act.--Title I of the Energy Policy and
Conservation Act (42 U.S.C. 6211 et seq.) is amended--
(1) by striking section 166 (42 U.S.C. 6246) and
inserting the following:
``AUTHORIZATION OF APPROPRIATIONS
``Sec. 166. There are authorized to be appropriated to the
Secretary such sums as may be necessary to carry out this part
and part D, to remain available until expended.'';
(2) by striking section 186 (42 U.S.C. 6250e); and
(3) by striking part E (42 U.S.C. 6251; relating to
the expiration of title I of the Act).
(b) Amendment to Title II of the Energy Policy and
Conservation Act.--Title II of the Energy Policy and
Conservation Act (42 U.S.C. 6271 et seq.) is amended--
(1) by inserting before section 273 (42 U.S.C.
6283) the following:
``Part C--Summer Fill and Fuel Budgeting Programs'';
(2) by striking section 273(e) (42 U.S.C. 6283(e);
relating to the expiration of summer fill and fuel
budgeting programs); and
(3) by striking part D (42 U.S.C. 6285; relating to
the expiration of title II of the Act).
(c) Technical Amendments.--The table of contents for the
Energy Policy and Conservation Act is amended--
(1) by inserting after the items relating to part C
of title I the following:
``Part D--Northeast Home Heating Oil Reserve
``Sec. 181. Establishment.
``Sec. 182. Authority.
``Sec. 183. Conditions for release; plan.
``Sec. 184. Northeast Home Heating Oil Reserve Account.
``Sec. 185. Exemptions.'';
(2) by amending the items relating to part C of
title II to read as follows:
``Part C--Summer Fill and Fuel Budgeting Programs
``Sec. 273. Summer fill and fuel budgeting programs.'';
and
(3) by striking the items relating to part D of
title II.
(d) Amendment to the Energy Policy and Conservation Act.--
Section 183(b)(1) of the Energy Policy and Conservation Act (42
U.S.C. 6250(b)(1)) is amended by striking all after
``increases'' through to ``mid-October through March'' and
inserting ``by more than 60 percent over its 5-year rolling
average for the months of mid-October through March (considered
as a heating season average)''.
(e) Fill Strategic Petroleum Reserve to Capacity.--The
Secretary of Energy shall, as expeditiously as practicable,
acquire petroleum in amounts sufficient to fill the Strategic
Petroleum Reserve to the 1,000,000,000 barrel capacity
authorized under section 154(a) of the Energy Policy and
Conservation Act (42 U.S.C. 6234(a)), consistent with the
provisions of sections 159 and 160 of such Act (42 U.S.C. 6239,
6240).
SEC. 302. NATIONAL OILHEAT RESEARCH ALLIANCE.
Section 713 of the Energy Act of 2000 (42 U.S.C. 6201 note)
is amended by striking ``4'' and inserting ``9''.
Subtitle B--Production Incentives
SEC. 311. DEFINITION OF SECRETARY.
In this subtitle, the term ``Secretary'' means the
Secretary of the Interior.
SEC. 312. PROGRAM ON OIL AND GAS ROYALTIES IN-KIND.
(a) Applicability of Section.--Notwithstanding any other
provision of law, this section applies to all royalty in-kind
accepted by the Secretary on or after the date of enactment of
this Act under any Federal oil or gas lease or permit under
section 36 of the Mineral Leasing Act (30 U.S.C. 192), section
27 of the Outer Continental Shelf Lands Act (43 U.S.C. 1353),
or any other Federal law governing leasing of Federal land for
oil and gas development.
(b) Terms and Conditions.--All royalty accruing to the
United States shall, on the demand of the Secretary, be paid in
oil or gas. If the Secretary makes such a demand, the following
provisions apply to such payment:
(1) Satisfaction of royalty obligation.--Delivery
by, or on behalf of, the lessee of the royalty amount
and quality due under the lease satisfies the lessee's
royalty obligation for the amount delivered, except
that transportation and processing reimbursements paid
to, or deductions claimed by, the lessee shall be
subject to review and audit.
(2) Marketable condition.--
(A) In general.--Royalty production shall
be placed in marketable condition by the lessee
at no cost to the United States.
(B) Definition of marketable condition.--In
this paragraph, the term ``in marketable
condition'' means sufficiently free from
impurities and otherwise in a condition that
the royalty production will be accepted by a
purchaser under a sales contract typical of the
field or area in which the royalty production
was produced.
(3) Disposition by the secretary.--The Secretary
may--
(A) sell or otherwise dispose of any
royalty production taken in-kind (other than
oil or gas transferred under section 27(a)(3)
of the Outer Continental Shelf Lands Act (43
U.S.C. 1353(a)(3)) for not less than the market
price; and
(B) transport or process (or both) any
royalty production taken in-kind.
(4) Retention by the secretary.--The Secretary may,
notwithstanding section 3302 of title 31, United States
Code, retain and use a portion of the revenues from the
sale of oil and gas taken in-kind that otherwise would
be deposited to miscellaneous receipts, without regard
to fiscal year limitation, or may use oil or gas
received as royalty taken in-kind (in this paragraph
referred to as ``royalty production'') to pay the cost
of--
(A) transporting the royalty production;
(B) processing the royalty production;
(C) disposing of the royalty production; or
(D) any combination of transporting,
processing, and disposing of the royalty
production.
(5) Limitation.--
(A) In general.--Except as provided in
subparagraph (B), the Secretary may not use
revenues from the sale of oil and gas taken in-
kind to pay for personnel, travel, or other
administrative costs of the Federal Government.
(B) Exception.--Notwithstanding
subparagraph (A), the Secretary may use a
portion of the revenues from the sale of oil
taken in-kind, without fiscal year limitation,
to pay transportation costs, salaries, and
other administrative costs directly related to
filling the Strategic Petroleum Reserve.
(c) Reimbursement of Cost.--If the lessee, pursuant to an
agreement with the United States or as provided in the lease,
processes the royalty gas or delivers the royalty oil or gas at
a point not on or adjacent to the lease area, the Secretary
shall--
(1) reimburse the lessee for the reasonable costs
of transportation (not including gathering) from the
lease to the point of delivery or for processing costs;
or
(2) allow the lessee to deduct the transportation
or processing costs in reporting and paying royalties
in-value for other Federal oil and gas leases.
(d) Benefit to the United States Required.--The Secretary
may receive oil or gas royalties in-kind only if theSecretary
determines that receiving royalties in-kind provides benefits to the
United States that are greater than or equal to the benefits that are
likely to have been received had royalties been taken in-value.
(e) Reports.--
(1) In general.--Not later than September 30, 2005,
the Secretary shall submit to Congress a report that
addresses--
(A) actions taken to develop businesses
processes and automated systems to fully
support the royalty-in-kind capability to be
used in tandem with the royalty-in-value
approach in managing Federal oil and gas
revenue; and
(B) future royalty-in-kind businesses
operation plans and objectives.
(2) Reports on oil or gas royalties taken in-
kind.--For each of fiscal years 2004 through 2013 in
which the United States takes oil or gas royalties in-
kind from production in any State or from the outer
Continental Shelf, excluding royalties taken in-kind
and sold to refineries under subsection (h), the
Secretary shall submit to Congress a report that
describes--
(A) the methodology or methodologies used
by the Secretary to determine compliance with
subsection (d), including the performance
standard for comparing amounts received by the
United States derived from royalties in-kind to
amounts likely to have been received had
royalties been taken in-value;
(B) an explanation of the evaluation that
led the Secretary to take royalties in-kind
from a lease or group of leases, including the
expected revenue effect of taking royalties in-
kind;
(C) actual amounts received by the United
States derived from taking royalties in-kind
and costs and savings incurred by the United
States associated with taking royalties in-
kind, including, but not limited to,
administrative savings and any new or increased
administrative costs; and
(D) an evaluation of other relevant public
benefits or detriments associated with taking
royalties in-kind.
(f) Deduction of Expenses.--
(1) In general.--Before making payments under
section 35 of the Mineral Leasing Act (30 U.S.C. 191)
or section 8(g) of the Outer Continental Shelf Lands
Act (43 U.S.C. 1337(g)) of revenues derived from the
sale of royalty production taken in-kind from a lease,
the Secretary shall deduct amounts paid or deducted
under subsections (b)(4) and (c) and deposit the amount
of the deductions in the miscellaneous receipts of the
United States Treasury.
(2) Accounting for deductions.--When the Secretary
allows the lessee to deduct transportation or
processing costs under subsection (c), the Secretary
may not reduce any payments to recipients of revenues
derived from any other Federal oil and gas lease as a
consequence of that deduction.
(g) Consultation with States.--The Secretary--
(1) shall consult with a State before conducting a
royalty in-kind program under this subtitle within the
State, and may delegate management of any portion of
the Federal royalty in-kind program to the State except
as otherwise prohibited by Federal law; and
(2) shall consult annually with any State from
which Federal oil or gas royalty is being taken in-kind
to ensure, to the maximum extent practicable, that the
royalty in-kind program provides revenues to the State
greater than or equal to those likely to have been
received had royalties been taken in-value.
(h) Small Refineries.--
(1) Preference.--If the Secretary finds that
sufficient supplies of crude oil are not available in
the open market to refineries that do not have their
own source of supply for crude oil, the Secretary may
grant preference to such refineries in the sale of any
royalty oil accruing or reserved to the United States
under Federal oil and gas leases issued under any
mineral leasing law, for processing or use in such
refineries at private sale at not less than the market
price.
(2) Proration among refineries in production
area.--In disposing of oil under this subsection, the
Secretary of Energy may, at the discretion of the
Secretary, prorate the oil among refineries described
in paragraph (1) in the area in which the oil is
produced.
(i) Disposition to Federal Agencies.--
(1) Onshore royalty.--Any royalty oil or gas taken
by the Secretary in-kind from onshore oil and gas
leases may be sold at not less than the market price to
any Federal agency.
(2) Offshore royalty.--Any royalty oil or gas taken
in-kind from a Federal oil or gas lease on the outer
Continental Shelf may be disposed of only under section
27 of the Outer Continental Shelf Lands Act (43 U.S.C.
1353).
(j) Federal Low-income Energy Assistance Programs.--
(1) Preference.--In disposing of royalty oil or gas
taken in-kind under this section, the Secretary may
grant a preference to any person, including any Federal
or State agency, for the purpose of providing
additional resources to any Federal low-income energy
assistance program.
(2) Report.--Not later than 3 years after the date
of enactment of this Act, the Secretary shall transmit
a report to Congress, assessing the effectiveness of
granting preferences specified in paragraph (1) and
providing a specific recommendation on the continuation
of authority to grant preferences.
SEC. 313. MARGINAL PROPERTY PRODUCTION INCENTIVES.
(a) Definition of Marginal Property.--Until such time as
the Secretary issues regulations under subsection (e) that
prescribe a different definition, in this section the term
``marginal property'' means an onshore unit, communitization
agreement, or lease not within a unit or communitization
agreement, that produces on average the combined equivalent of
less than 15 barrels of oil per well per day or 90 million
British thermal units of gas per well per day calculated based
on the average over the 3 most recent production months,
including only wells that produce on more than half of the days
during those 3 production months.
(b) Conditions for Reduction of Royalty Rate.--Until such
time as the Secretary issues regulations under subsection (e)
that prescribe different thresholds or standards, the Secretary
shall reduce the royalty rate on--
(1) oil production from marginal properties as
prescribed in subsection (c) when the spot price of
West Texas Intermediate crude oil at Cushing, Oklahoma,
is, on average, less than $15 per barrel for 90
consecutive trading days; and
(2) gas production from marginal properties as
prescribed in subsection (c) when the spot price of
natural gas delivered at Henry Hub, Louisiana, is, on
average, less than $2.00 per million British thermal
units for 90 consecutive trading days.
(c) Reduced Royalty Rate.--
(1) In general.--When a marginal property meets the
conditions specified in subsection (b), the royalty
rate shall be the lesser of--
(A) 5 percent; or
(B) the applicable rate under any other
statutory or regulatory royalty relief
provision that applies to the affected
production.
(2) Period of effectiveness.--The reduced royalty
rate under this subsection shall be effective beginning
on the first day of the production month following the
date on which the applicable condition specified in
subsection (b) is met.
(d) Termination of Reduced Royalty Rate.--A royalty rate
prescribed in subsection (d)(1)(A) shall terminate--
(1) with respect to oil production from a marginal
property, on the first day of the production month
following the date on which--
(A) the spot price of West Texas
Intermediate crude oil at Cushing, Oklahoma, on
average, exceeds $15 per barrel for 90
consecutive trading days; or
(B) the property no longer qualifies as a
marginal property; and
(2) with respect to gas production from a marginal
property, on the first day of the production month
following the date on which--
(A) the spot price of natural gas delivered
at Henry Hub, Louisiana, on average, exceeds
$2.00 per million British thermal units for 90
consecutive trading days; or
(B) the property no longer qualifies as a
marginal property.
(e) Regulations Prescribing Different Relief.--
(1) Discretionary regulations.--The Secretary may
by regulation prescribe different parameters,
standards, and requirements for, and a different degree
or extent of, royalty relief for marginal properties in
lieu of those prescribed in subsections (a) through
(d).
(2) Mandatory regulations.--Not later than 18
months after the date of enactment of this Act, the
Secretary shall by regulation--
(A) prescribe standards and requirements
for, and the extent of royalty relief for,
marginal properties for oil and gas leases on
the outer Continental Shelf; and
(B) define what constitutes a marginal
property on the outer Continental Shelf for
purposes of this section.
(3) Considerations.--In promulgating regulations
under this subsection, the Secretary may consider--
(A) oil and gas prices and market trends;
(B) production costs;
(C) abandonment costs;
(D) Federal and State tax provisions and
the effects of those provisions on production
economics;
(E) other royalty relief programs;
(F) regional differences in average
wellhead prices;
(G) national energy security issues; and
(H) other relevant matters.
(f) Savings Provision.--Nothing in this section prevents a
lessee from receiving royalty relief or a royalty reduction
pursuant to any other law (including a regulation) that
provides more relief than the amounts provided by this section.
SEC. 314. INCENTIVES FOR NATURAL GAS PRODUCTION FROM DEEP WELLS IN THE
SHALLOW WATERS OF THE GULF OF MEXICO.
(a) Royalty Incentive Regulations.--The Secretary shall
publish a final regulation to complete the rulemaking begun by
the Notice of Proposed Rulemaking entitled ``Relief or
Reduction in Royalty Rates--Deep Gas Provisions'', published in
the Federal Register on March 26, 2003 (Federal Register,
volume 68, number 58, 14868-14886).
(b) Royalty Incentive Regulations for Ultra Deep Gas
Wells.--
(1) In general.--Not later than 180 days after the
date of enactment of this Act, in addition to any other
regulations that may provide royalty incentives for
natural gas produced from deep wells on oil and gas
leases issued pursuant to the Outer Continental Shelf
Lands Act (43 U.S.C. 1331 et seq.), the Secretary shall
issue regulations, in accordance with the regulations
published pursuant to subsection (a), granting royalty
relief suspension volumes of not less than
35,000,000,000 cubic feet with respect to the
production of natural gas from ultra deep wells on
leases issued before January 1, 2001, in shallow waters
less than 200 meters deep located in the Gulf of Mexico
wholly west of 87 degrees, 30 minutes West longitude.
Regulations issued under this subsection shall be
retroactive to the date that the Notice of Proposed
Rulemaking is published in the Federal Register.
(2) Definition of ultra deep well.--In this
subsection, the term ``ultra deep well'' means a well
drilled with a perforated interval, the top of which is
at least 20,000 feet true vertical depth below the
datum at mean sea level.
SEC. 315. ROYALTY RELIEF FOR DEEP WATER PRODUCTION.
(a) In General.--For all tracts located in water depths of
greater than 400 meters in the Western and Central Planning
Area of the Gulf of Mexico, including the portion of the
Eastern Planning Area of the Gulf of Mexico encompassing whole
lease blocks lying west of 87 degrees, 30 minutes West
longitude, any oil or gas lease sale under the Outer
Continental Shelf Lands Act (43 U.S.C. 1331 et seq.) occurring
within 5 years after the date of enactment of this Act shall
use the bidding system authorized in section 8(a)(1)(H) of the
Outer Continental Shelf Lands Act (43 U.S.C. 1337(a)(1)(H)),
except that the suspension of royalties shall be set at a
volume of not less than--
(1) 5,000,000 barrels of oil equivalent for each
lease in water depths of 400 to 800 meters;
(2) 9,000,000 barrels of oil equivalent for each
lease in water depths of 800 to 1,600 meters; and
(3) 12,000,000 barrels of oil equivalent for each
lease in water depths greater than 1,600 meters.
(b) Limitation.--The Secretary may place limitations on the
suspension of royalty relief granted based on market price.
SEC. 316. ALASKA OFFSHORE ROYALTY SUSPENSION.
Section 8(a)(3)(B) of the Outer Continental Shelf Lands Act
(43 U.S.C. 1337(a)(3)(B)) is amended by inserting ``and in the
Planning Areas offshore Alaska'' after ``West longitude''.
SEC. 317. OIL AND GAS LEASING IN THE NATIONAL PETROLEUM RESERVE IN
ALASKA.
(a) Transfer of Authority.--
(1) Redesignation.--The Naval Petroleum Reserves
Production Act of 1976 (42 U.S.C. 6501 et seq.) is
amended by redesignating section 107 (42 U.S.C. 6507)
as section 108.
(2) Transfer.--The matter under the heading
``exploration of national petroleum reserve in alaska''
under the heading ``ENERGY AND MINERALS'' of title I of
Public Law 96-514 (42 U.S.C. 6508) is--
(A) transferred to the Naval Petroleum
Reserves Production Act of 1976 (42 U.S.C. 6501
et seq.);
(B) redesignated as section 107 of that
Act; and
(C) moved so as to appear after section 106
of that Act (42 U.S.C. 6506).
(b) Competitive Leasing.--Section 107 of the Naval
Petroleum Reserves Production Act of 1976 (as amended by
subsection (a) of this section) is amended--
(1) by striking the heading and all that follows
through ``Provided, That (1) activities'' and inserting
the following:
``SEC. 107. COMPETITIVE LEASING OF OIL AND GAS.
``(a) In General.--Notwithstanding any other provision of
law and pursuant to regulations issued by the Secretary, the
Secretary shall conduct an expeditious program of competitive
leasing of oil and gas in the National Petroleum Reserve in
Alaska (referred to in this section as the `Reserve').
``(b) Mitigation of Adverse Effects.--Activities'';
(2) by striking ``Alaska (the Reserve); (2) the''
and inserting ``Alaska.
``(c) Land Use Planning; BLM Wilderness Study.--The'';
(3) by striking ``Reserve; (3) the'' and inserting
``Reserve.
``(d) First Lease Sale.--The'';
(4) by striking ``4332); (4) the'' and inserting
``4321 et seq.).
``(e) Withdrawals.--The'';
(5) by striking ``herein; (5) bidding'' and
inserting ``under this section.
``(f) Bidding Systems.--Bidding'';
(6) by striking ``629); (6) lease'' and inserting
``629).
``(g) Geological Structures.--Lease'';
(7) by striking ``structures; (7) the'' and
inserting ``structures.
``(h) Size of Lease Tracts.--The'';
(8) by striking ``Secretary; (8)'' and all that
follows through ``Drilling, production,'' and inserting
``Secretary.
``(i) Terms.--
``(1) In general.--Each lease shall be--
``(A) issued for an initial period of not
more than 10 years; and
``(B) renewed for successive 10-year terms
if--
``(i) oil or gas is produced from
the lease in paying quantities;
``(ii) oil or gas is capable of
being produced in paying quantities; or
``(iii) drilling or reworking
operations, as approved by the
Secretary, are conducted on the leased
land.
``(2) Renewal of nonproducing leases.--The
Secretary shall renew for an additional 10-year term a
lease that does not meet the requirements of paragraph
(1)(B) if the lessee submits to the Secretary an
application for renewal not later than 60 days before
the expiration of the primary lease and--
``(A) the lessee certifies, and the
Secretary agrees, that hydrocarbon resources
were discovered on 1 or more wells drilled on
the leased land in such quantities that a
prudent operator would hold the lease for
potential future development;
``(B) the lessee--
``(i) pays the Secretary a renewal
fee of $100 per acre of leased land;
and
``(ii) provides evidence, and the
Secretary agrees that, the lessee has
diligently pursued exploration that
warrants continuation with the intent
of continued exploration or future
development of the leased land; or
``(C) all or part of the lease--
``(i) is part of a unit agreement
covering a lease described in
subparagraph (A) or (B); and
``(ii) has not been previously
contracted out of the unit.
``(3) Applicability.--This subsection applies to a
lease that--
``(A) is entered into before, on, or after
the date of enactment of the Energy Policy Act
of 2003; and
``(B) is effective on or after the date of
enactment of that Act.
``(j) Unit Agreements.--
``(1) In general.--For the purpose of conservation
of the natural resources of all or part of any oil or
gas pool, field, reservoir, or like area, lessees
(including representatives) of the pool, field,
reservoir, or like area may unite with each other, or
jointly or separately with others, in collectively
adopting and operating under a unit agreement for all
or part of the pool, field, reservoir, or like area
(whether or not any other part of the oil or gas pool,
field, reservoir, or like area is already subject to
any cooperative or unit plan of development or
operation), if the Secretary determines the action to
be necessary or advisable in the public interest.
``(2) Participation by state of alaska.--The
Secretary shall ensure that the State of Alaska is
provided the opportunity for active participation
concerning creation and management of units formed or
expanded under this subsection that include acreage in
which the State of Alaska has an interest in the
mineral estate.
``(3) Participation by regional corporations.--The
Secretary shall ensure that any Regional Corporation
(as defined in section 3 of the Alaska Native Claims
Settlement Act (43 U.S.C. 1602)) is provided the
opportunity for active participation concerning
creation and management of units that include acreage
in which the Regional Corporation has an interest in
the mineral estate.
``(4) Production allocation methodology.--The
Secretary may use a production allocation methodology
for each participating area within a unit created for
land in the Reserve, State of Alaska land, or Regional
Corporation land shall, when appropriate, be based on
the characteristics of each specific oil or gas pool,
field, reservoir, or like area to take into account
reservoir heterogeneity and a real variation in
reservoir producibility across diverse leasehold
interests.
``(5) Benefit of operations.--Drilling,
production,'';
(9) by striking ``When separate'' and inserting the
following:
``(6) Pooling.--If separate'';
(10) by inserting ``(in consultation with the
owners of the other land)'' after ``determined by the
Secretary of the Interior'';
(11) by striking ``thereto; (10) to'' and all that
follows through ``the terms provided therein'' and
inserting ``to the agreement.
``(k) Exploration Incentives.--
``(1) In general.--
``(A) Waiver, suspension, or reduction.--To
encourage the greatest ultimate recovery of oil
or gas or in the interest of conservation, the
Secretary may waive, suspend, or reduce the
rental fees or minimum royalty, or reduce the
royalty on an entire leasehold (including on
any lease operated pursuant to a unit
agreement), if (after consultation with the
State of Alaska and the North Slope Borough of
Alaska and the concurrence of any Regional
Corporation for leases that include lands
available for acquisition by the Regional
Corporation under the provisions of section
1431(o) of the Alaska National Interest Lands
Conservation Act (16 U.S.C. 3101 et seq.)) the
Secretary determines that the waiver,
suspension, or reduction is in the public
interest.
``(B) Applicability.--This paragraph
applies to a lease that--
``(i) is entered into before, on,
or after the date of enactment of the
Energy Policy Act of 2003; and
``(ii) is effective on or after the
date of enactment of that Act.'';
(12) by striking ``The Secretary is authorized to''
and inserting the following:
``(2) Suspension of operations and production.--The
Secretary may'';
(13) by striking ``In the event'' and inserting the
following:
``(3) Suspension of payments.--If'';
(14) by striking ``thereto; and (11) all'' and
inserting ``to the lease.
``(l) Receipts.--All'';
(15) by redesignating clauses (A), (B), and (C) as
clauses (1), (2), and (3), respectively;
(16) by striking ``Any agency'' and inserting the
following:
``(m) Explorations.--Any agency'';
(17) by striking ``Any action'' and inserting the
following:
``(n) Environmental Impact Statements.--
``(1) Judicial review.--Any action'';
(18) by striking ``The detailed'' and inserting the
following:
``(2) Initial lease sales.--The detailed'';
(19) by striking ``of the Naval Petroleum Reserves
Production Act of 1976 (90 Stat. 304; 42 U.S.C.
6504)''; and
(20) by adding at the end the following:
``(o) Waiver of Administration for Conveyed Lands.--
Notwithstanding section 14(g) of the Alaska Native Claims
Settlement Act (43 U.S.C. 1613(g)) or any other provision of
law--
``(1) the Secretary of the Interior shall waive
administration of any oil and gas lease insofar as such
lease covers any land in the National Petroleum Reserve
in Alaska in which the subsurface estate is conveyed to
the Arctic Slope Regional Corporation; and
``(2) if any such conveyance of such subsurface
estate does not cover all the land embraced within any
such oil and gas lease--
``(A) the person who owns the subsurface
estate in any particular portion of the land
covered by such lease shall be entitled to all
of the revenues reserved under such lease as to
such portion, including, without limitation,
all the royalty payable with respect to oil or
gas produced from or allocated to such
particular portion of the land covered by such
lease; and
``(B) the Secretary of the Interior shall
segregate such lease into 2 leases, 1 of which
shall cover only the subsurface estate conveyed
to the Arctic Slope Regional Corporation, and
operations, production, or other circumstances
(other than payment of rentals or royalties)
that satisfy obligations of the lessee under,
or maintain, either of the segregated leases
shall likewise satisfy obligations of the
lessee under, or maintain, the other segregated
lease to the same extent as if such segregated
leases remained a part of the original
unsegregated lease.''.
SEC. 318. ORPHANED, ABANDONED, OR IDLED WELLS ON FEDERAL LAND.
(a) In General.--The Secretary, in cooperation with the
Secretary of Agriculture, shall establish a program not later
than 1 year after the date of enactment of this Act to
remediate, reclaim, and close orphaned, abandoned, or idled oil
and gas wells located on land administered by the land
management agencies within the Department of the Interior and
the Department of Agriculture.
(b) Activities.--The program under subsection (a) shall--
(1) include a means of ranking orphaned, abandoned,
or idled wells sites for priority in remediation,
reclamation, and closure, based on public health and
safety, potential environmental harm, and other land
use priorities;
(2) provide for identification and recovery of the
costs of remediation, reclamation, and closure from
persons or other entities currently providing a bond or
other financial assurance required under State or
Federal law for an oil or gas well that is orphaned,
abandoned, or idled; and
(3) provide for recovery from the persons or
entities identified under paragraph (2), or their
sureties or guarantors, of the costs of remediation,
reclamation, and closure of such wells.
(c) Cooperation and Consultations.--In carrying out the
program under subsection (a), the Secretary shall--
(1) work cooperatively with the Secretary of
Agriculture and the States within which Federal land is
located; and
(2) consult with the Secretary of Energy and the
Interstate Oil and Gas Compact Commission.
(d) Plan.--Not later than 1 year after the date of
enactment of this Act, the Secretary, in cooperation with the
Secretary of Agriculture, shall submit to Congress a plan for
carrying out the program under subsection (a).
(e) Idled Well.--For the purposes of this section, a well
is idled if--
(1) the well has been nonoperational for at least 7
years; and
(2) there is no anticipated beneficial use for the
well.
(f) Technical Assistance Program for Non-Federal Land.--
(1) In general.--The Secretary of Energy shall
establish a program to provide technical and financial
assistance to oil and gas producing States to
facilitate State efforts over a 10-year period to
ensure a practical and economical remedy for
environmental problems caused by orphaned or abandoned
oil and gas exploration or production well sites on
State or private land.
(2) Assistance.--The Secretary of Energy shall work
with the States, through the Interstate Oil and Gas
Compact Commission, to assist the States in quantifying
and mitigating environmental risks of onshore orphaned
or abandoned oil or gas wells on State and private
land.
(3) Activities.--The program under paragraph (1)
shall include--
(A) mechanisms to facilitate
identification, if feasible, of the persons
currently providing a bond or other form of
financial assurance required under State or
Federal law for an oil or gas well that is
orphaned or abandoned;
(B) criteria for ranking orphaned or
abandoned well sites based on factors such as
public health and safety, potential
environmental harm, and other land use
priorities;
(C) information and training programs on
best practices for remediation of different
types of sites; and
(D) funding of State mitigation efforts on
a cost-shared basis.
(g) Federal Reimbursement for Orphaned Well Reclamation
Pilot Program.--
(1) Reimbursement for remediating, reclaiming, and
closing wells on land subject to a new lease.--The
Secretary shall carry out a pilot program under which,
in issuing a new oil and gas lease on federally owned
land on which 1 or more orphaned wells are located, the
Secretary--
(A) may require, but not as a condition of
the lease, that the lessee remediate, reclaim,
and close in accordance with standards
established by the Secretary, all orphaned
wells on the land leased; and
(B) shall develop a program to reimburse a
lessee, through a royalty credit against the
Federal share of royalties owed or other means,
for the reasonable actual costs of remediating,
reclaiming, and closing the orphaned well
pursuant to that requirement.
(2) Reimbursement for reclaiming orphaned wells on
other land.--In carrying out this subsection, the
Secretary--
(A) may authorize any lessee under an oil
and gas lease on federally owned land to
reclaim in accordance with the Secretary's
standards--
(i) an orphaned well on unleased
federally owned land; or
(ii) an orphaned well located on an
existing lease on federally owned land
for the reclamation of which the lessee
is not legally responsible; and
(B) shall develop a program to provide
reimbursement of 115 percent of the reasonable
actual costs of remediating, reclaiming, and
closing the orphaned well, through credits
against the Federal share of royalties or other
means.
(3) Effect of remediation, reclamation, or closure
of well pursuant to an approved remediation plan.--
(A) Definition of remediating party.--In
this paragraph the term ``remediating party''
means a person who remediates, reclaims, or
closes an abandoned, orphaned, or idled well
pursuant to this subsection.
(B) General rule.--A remediating party who
remediates, reclaims, or closes an abandoned,
orphaned, or idled well in accordance with a
detailed written remediation plan approved by
the Secretary under this subsection, shall be
immune from civil liability under Federal
environmental laws, for--
(i) pre-existing environmental
conditions at or associated with the
well, unless the remediating party owns
or operates, in the past owned or
operated, or is related to a person
that owns or operates or in the past
owned or operated, the well or the land
on which the well is located; or
(ii) any remaining releases of
pollutants from the well during or
after completion of the remediation,
reclamation, or closure of the well,
unless the remediating party causes
increased pollution as a result of
activities that are not in accordance
with the approved remediation plan.
(C) Limitations.--Nothing in this section
shall limit in any way the liability of a
remediating party for injury, damage, or
pollution resulting from the remediating
party's acts or omissions that are not in
accordance with the approved remediation plan,
are reckless or willful, constitute gross
negligence or wanton misconduct, or are
unlawful.
(4) Regulations.--The Secretary may issue such
regulations as are appropriate to carry out this
subsection.
(h) Authorization of Appropriations.--
(1) In general.--There are authorized to be
appropriated to carry out this section $25,000,000 for
each of fiscal years 2005 through 2009.
(2) Use.--Of the amounts authorized under paragraph
(1), $5,000,000 are authorized for each fiscal year for
activities under subsection (f).
SEC. 319. COMBINED HYDROCARBON LEASING.
(a) Special Provisions Regarding Leasing.--Section 17(b)(2)
of the Mineral Leasing Act (30 U.S.C. 226(b)(2)) is amended--
(1) by inserting ``(A)'' after ``(2)''; and
(2) by adding at the end the following:
``(B) For any area that contains any combination of tar
sand and oil or gas (or both), the Secretary may issue under
this Act, separately--
``(i) a lease for exploration for and extraction of
tar sand; and
``(ii) a lease for exploration for and development
of oil and gas.
``(C) A lease issued for tar sand shall be issued using the
same bidding process, annual rental, and posting period as a
lease issued for oil and gas, except that the minimum
acceptable bid required for a lease issued for tar sand shall
be $2 per acre.
``(D) The Secretary may waive, suspend, or alter any
requirement under section 26 that a permittee under a permit
authorizing prospecting for tar sand must exercise due
diligence, to promote any resource covered by a combined
hydrocarbon lease.''.
(b) Conforming Amendment.--Section 17(b)(1)(B) of the
Mineral Leasing Act (30 U.S.C. 226(b)(1)(B)) is amended in the
second sentence by inserting ``, subject to paragraph (2)(B),''
after ``Secretary''.
(c) Regulations.--Not later than 45 days after the date of
enactment of this Act, the Secretary shall issue final
regulations to implement this section.
SEC. 320. LIQUIFIED NATURAL GAS.
Section 3 of the Natural Gas Act (15 U.S.C. 717b) is
amended by adding at the end the following:
``(d) Limitation on Commission Authority.--If an applicant
under this section proposes to construct or expand a liquified
natural gas terminal either onshore or in State waters for the
purpose of importing liquified natural gas into the United
States, the Commission shall not deny or condition the
application solely on the basis that the applicant proposes to
utilize the terminal exclusively or partially for gas that the
applicant or any affiliate thereof will supply thereto. In all
other respects, subsection (a) shall remain applicable to any
such proposal.''.
SEC. 321. ALTERNATE ENERGY-RELATED USES ON THE OUTER CONTINENTAL SHELF.
(a) Amendment to Outer Continental Shelf Lands Act.--
Section 8 of the Outer Continental Shelf Lands Act (43 U.S.C.
1337) is amended by adding at the end the following:
``(p) Leases, Easements, or Rights-Of-Way for Energy and
Related Purposes.--
``(1) In General.--The Secretary, in consultation
with the Secretary of the Department in which the Coast
Guard is operating and other relevant departments and
agencies of the Federal Government, may grant a lease,
easement, or right-of-way on the outer Continental
Shelf for activities not otherwise authorized in this
Act, the Deepwater Port Act of 1974 (33 U.S.C. 1501 et
seq.), or the Ocean Thermal Energy Conversion Act of
1980 (42 U.S.C. 9101 et seq.), or other applicable law,
if those activities--
``(A) support exploration, development,
production, transportation, or storage of oil,
natural gas, or other minerals;
``(B) produce or support production,
transportation, or transmission of energy from
sources other than oil and gas; or
``(C) use, for energy-related or marine-
related purposes, facilities currently or
previously used for activities authorized under
this Act.
``(2) Payments.--The Secretary shall establish
reasonable forms of payments for any easement or right-
of-way granted under this subsection. Such payments
shall not be assessed on the basis of throughput or
production. The Secretary may establish fees, rentals,
bonus, or other payments by rule or by agreement with
the party to which the lease, easement, or right-of-way
is granted.
``(3) Consultation.--Before exercising authority
under this subsection, the Secretary shall consult with
the Secretary of Defense and other appropriate agencies
concerning issues related to national security and
navigational obstruction.
``(4) Competitive or noncompetitive basis.--
``(A) In general.--The Secretary may issue
a lease, easement, or right-of-way for energy
and related purposes as described in paragraph
(1) on a competitive or noncompetitive basis.
``(B) Considerations.--In determining
whether a lease, easement, or right-of-way
shall be granted competitively or
noncompetitively, the Secretary shall consider
such factors as--
``(i) prevention of waste and
conservation of natural resources;
``(ii) the economic viability of an
energy project;
``(iii) protection of the
environment;
``(iv) the national interest and
national security;
``(v) human safety;
``(vi) protection of correlative
rights; and
``(vii) potential return for the
lease, easement, or right-of-way.
``(5) Regulations.--Not later than 270 days after
the date of enactment of the Energy Policy Act of 2003,
the Secretary, in consultation with the Secretary of
the Department in which the Coast Guard is operating
and other relevant agencies of the Federal Government
and affected States, shall issue any necessary
regulations to ensure safety, protection of the
environment, prevention of waste, and conservation of
the natural resources of the outer Continental Shelf,
protection of national security interests, and
protection of correlative rights in the outer
Continental Shelf.
``(6) Security.--The Secretary shall require the
holder of a lease, easement, or right-of-way granted
under this subsection to furnish a surety bond or other
form of security, as prescribed by the Secretary, and
to comply with such other requirements as the Secretary
considers necessary to protect the interests of the
United States.
``(7) Effect of subsection.--Nothing in this
subsection displaces, supersedes, limits, or modifies
the jurisdiction, responsibility, or authority of any
Federal or State agency under any other Federal law.
``(8) Applicability.--This subsection does not
apply to any area on the outer Continental Shelf
designated as a National Marine Sanctuary.''.
(b) Conforming Amendment.--Section 8 of the Outer
Continental Shelf Lands Act (43 U.S.C. 1337) is amended by
striking the section heading and inserting the following:
``Leases, Easements, and Rights-of-Way on the Outer Continental
Shelf.--''.
(c) Savings Provision.--Nothing in the amendment made by
subsection (a) requires, with respect to any project--
(1) for which offshore test facilities have been
constructed before the date of enactment of this Act;
or
(2) for which a request for proposals has been
issued by a public authority,
any resubmittal of documents previously submitted or any
reauthorization of actions previously authorized.
SEC. 322. PRESERVATION OF GEOLOGICAL AND GEOPHYSICAL DATA.
(a) Short Title.--This section may be cited as the
``National Geological and Geophysical Data Preservation Program
Act of 2003''.
(b) Program.--The Secretary shall carry out a National
Geological and Geophysical Data Preservation Program in
accordance with this section--
(1) to archive geologic, geophysical, and
engineering data, maps, well logs, and samples;
(2) to provide a national catalog of such archival
material; and
(3) to provide technical and financial assistance
related to the archival material.
(c) Plan.--Not later than 1 year after the date of
enactment of this Act, the Secretary shall submit to Congress a
plan for the implementation of the Program.
(d) Data Archive System.--
(1) Establishment.--The Secretary shall establish,
as a component of the Program, a data archive system to
provide for the storage, preservation, and archiving of
subsurface, surface, geological, geophysical, and
engineering data and samples. The Secretary, in
consultation with the Advisory Committee, shall develop
guidelines relating to the data archive system,
including the types of data and samples to be
preserved.
(2) System components.--The system shall be
comprised of State agencies that elect to be part of
the system and agencies within the Department of the
Interior that maintain geological and geophysical data
and samples that are designated by the Secretary in
accordance with this subsection. The Program shall
provide for the storage of data and samples through
data repositories operated by such agencies.
(3) Limitation of designation.--The Secretary may
not designate a State agency as a component of the data
archive system unless that agency is the agency that
acts as the geological survey in the State.
(4) Data from federal land.--The data archive
system shall provide for the archiving of relevant
subsurface data and samples obtained from Federal
land--
(A) in the most appropriate repository
designated under paragraph (2), with preference
being given to archiving data in the State in
which the data were collected; and
(B) consistent with all applicable law and
requirements relating to confidentiality and
proprietary data.
(e) National Catalog.--
(1) In general.--As soon as practicable after the
date of enactment of this Act, the Secretary shall
develop and maintain, as a component of the Program, a
national catalog that identifies--
(A) data and samples available in the data
archive system established under subsection
(d);
(B) the repository for particular material
in the system; and
(C) the means of accessing the material.
(2) Availability.--The Secretary shall make the
national catalog accessible to the public on the site
of the Survey on the Internet, consistent with all
applicable requirements related to confidentiality and
proprietary data.
(f) Advisory Committee.--
(1) In general.--The Advisory Committee shall
advise the Secretary on planning and implementation of
the Program.
(2) New duties.--In addition to its duties under
the National Geologic Mapping Act of 1992 (43 U.S.C.
31a et seq.), the Advisory Committee shall perform the
following duties:
(A) Advise the Secretary on developing
guidelines and procedures for providing
assistance for facilities under subsection
(g)(1).
(B) Review and critique the draft
implementation plan prepared by the Secretary
under subsection (c).
(C) Identify useful studies of data
archived under the Program that will advance
understanding of the Nation's energy and
mineral resources, geologic hazards, and
engineering geology.
(D) Review the progress of the Program in
archiving significant data and preventing the
loss of such data, and the scientific progress
of the studies funded under the Program.
(E) Include in the annual report to the
Secretary required under section 5(b)(3) of the
National Geologic Mapping Act of 1992 (43
U.S.C. 31d(b)(3)) an evaluation of the progress
of the Program toward fulfilling the purposes
of the Program under subsection (b).
(g) Financial Assistance.--
(1) Archive facilities.--Subject to the
availability of appropriations, the Secretary shall
provide financial assistance to a State agency that is
designated under subsection (d)(2) for providing
facilities to archive energy material.
(2) Studies.--Subject to the availability of
appropriations, the Secretary shall provide financial
assistance to any State agency designated under
subsection (d)(2) for studies and technical assistance
activities that enhance understanding, interpretation,
and use of materials archived in the data archive
system established under subsection (d).
(3) Federal share.--The Federal share of the cost
of an activity carried out with assistance under this
subsection shall be not more than 50 percent of the
total cost of the activity.
(4) Private contributions.--The Secretary shall
apply to the non-Federal share of the cost of an
activity carried out with assistance under this
subsection the value of private contributions of
property and services used for that activity.
(h) Report.--The Secretary shall include in each report
under section 8 of the National Geologic Mapping Act of 1992
(43 U.S.C. 31g)--
(1) a description of the status of the Program;
(2) an evaluation of the progress achieved in
developing the Program during the period covered by the
report; and
(3) any recommendations for legislative or other
action the Secretary considers necessary and
appropriate to fulfill the purposes of the Program
under subsection (b).
(i) Maintenance of State Effort.--It is the intent of
Congress that the States not use this section as an opportunity
to reduce State resources applied to the activities that are
the subject of the Program.
(j) Definitions.--In this section:
(1) Advisory committee.--The term ``Advisory
Committee'' means the advisory committee established
under section 5 of the National Geologic Mapping Act of
1992 (43 U.S.C. 31d).
(2) Program.--The term ``Program'' means the
National Geological and Geophysical Data Preservation
Program carried out under this section.
(3) Secretary.--The term ``Secretary'' means the
Secretary of the Interior, acting through the Director
of the United States Geological Survey.
(4) Survey.--The term ``Survey'' means the United
States Geological Survey.
(k) Authorization of Appropriations.--There are authorized
to be appropriated to carry out this section $30,000,000 for
each of fiscal years 2004 through 2008.
SEC. 323. OIL AND GAS LEASE ACREAGE LIMITATIONS.
Section 27(d)(1) of the Mineral Leasing Act (30 U.S.C.
184(d)(1)) is amended by inserting after ``acreage held in
special tar sand areas'' the following: ``, and acreage under
any lease any portion of which has been committed to a
federally approved unit or cooperative plan or communitization
agreement or for which royalty (including compensatory royalty
or royalty in-kind) was paid in the preceding calendar year,''.
SEC. 324. ASSESSMENT OF DEPENDENCE OF STATE OF HAWAII ON OIL.
(a) Assessment.--The Secretary of Energy shall assess the
economic implication of the dependence of the State of Hawaii
on oil as the principal source of energy for the State,
including--
(1) the short- and long-term prospects for crude
oil supply disruption and price volatility and
potential impacts on the economy of Hawaii;
(2) the economic relationship between oil-fired
generation of electricity from residual fuel and
refined petroleum products consumed for ground, marine,
and air transportation;
(3) the technical and economic feasibility of
increasing the contribution of renewable energy
resources for generation of electricity, on an island-
by-island basis, including--
(A) siting and facility configuration;
(B) environmental, operational, and safety
considerations;
(C) the availability of technology;
(D) effects on the utility system including
reliability;
(E) infrastructure and transport
requirements;
(F) community support; and
(G) other factors affecting the economic
impact of such an increase and any effect on
the economic relationship described in
paragraph (2);
(4) the technical and economic feasibility of using
liquified natural gas to displace residual fuel oil for
electric generation, including neighbor island
opportunities, and the effect of the displacement on
the economic relationship described in paragraph (2),
including--
(A) the availability of supply;
(B) siting and facility configuration for
onshore and offshore liquified natural gas
receiving terminals;
(C) the factors described in subparagraphs
(B) through (F) of paragraph (3); and
(D) other economic factors;
(5) the technical and economic feasibility of using
renewable energy sources (including hydrogen) for
ground, marine, and air transportation energy
applications to displace the use of refined petroleum
products, on an island-by-island basis, and the
economic impact of the displacement on the relationship
described in (2); and
(6) an island-by-island approach to--
(A) the development of hydrogen from
renewable resources; and
(B) the application of hydrogen to the
energy needs of Hawaii
(b) Contracting Authority.--The Secretary of Energy may
carry out the assessment under subsection (a) directly or, in
whole or in part, through 1 or more contracts with qualified
public or private entities.
(c) Report.--Not later than 300 days after the date of
enactment of this Act, the Secretary of Energy shall prepare,
in consultation with agencies of the State of Hawaii and other
stakeholders, as appropriate, and submit to Congress, a report
detailing the findings, conclusions, and recommendations
resulting from the assessment.
(d) Authorization of Appropriations.--There are authorized
to be appropriated such sums as are necessary to carry out this
section.
SEC. 325. DEADLINE FOR DECISION ON APPEALS OF CONSISTENCY DETERMINATION
UNDER THE COASTAL ZONE MANAGEMENT ACT OF 1972.
(a) In General.--Section 319 of the Coastal Zone Management
Act of 1972 (16 U.S.C. 1465) is amended to read as follows:
``APPEALS TO THE SECRETARY
``Sec. 319. (a) Notice.--The Secretary shall publish an
initial notice in the Federal Register not later than 30 days
after the date of the filing of any appeal to the Secretary of
a consistency determination under section 307.
``(b) Closure of Record.--
``(1) In general.--Not later than the end of the
120-day period beginning on the date of publication of
an initial notice under subsection (a), the Secretary
shall receive no more filings on the appeal and the
administrative record regarding the appeal shall be
closed.
``(2) Notice.--Upon the closure of the
administrative record, the Secretary shall immediately
publish a notice that the administrative record has
been closed.
``(c) Deadline for Decision.--The Secretary shall issue a
decision in any appeal filed under section 307 not later than
120 days after the closure of the administrative record.
``(d) Application.--This section applies to appeals
initiated by the Secretary and appeals filed by an
applicant.''.
(b) Application.--
(1) In general.--Except as provided in paragraph
(2), the amendment made by subsection (a) shall apply
with respect to any appeal initiated or filed before,
on, or after the date of enactment of this Act.
(2) Limitation.--Subsection (a) of section 319 of
the Coastal Zone Management Act of 1972 (as amended by
subsection (a)) shall not apply with respect to an
appeal initiated or filed before the date of enactment
of this Act.
(c) Closure of Record for Appeal Filed Before Date of
Enactment.--Notwithstanding section 319(b)(1) of the Coastal
Zone Management Act of 1972 (as amended by this section), in
the case of an appeal of a consistency determination under
section 307 of that Act initiated or filed before the date of
enactment of this Act, the Secretary of Commerce shall receive
no more filings on the appeal and the administrative record
regarding the appeal shall be closed not later than 120 days
after the date of enactment of this Act.
SEC. 326. REIMBURSEMENT FOR COSTS OF NEPA ANALYSES, DOCUMENTATION, AND
STUDIES.
(a) In General.--The Mineral Leasing Act is amended by
inserting after section 37 (30 U.S.C. 193) the following:
``REIMBURSEMENT FOR COSTS OF CERTAIN ANALYSES, DOCUMENTATION, AND
STUDIES
``Sec. 38. (a) In General.--The Secretary of the Interior
may reimburse a person that is a lessee, operator, operating
rights owner, or applicant for any lease under this Act for
reasonable amounts paid by the person for preparation for the
Secretary by a contractor or other person selected by the
Secretary of any project-level analysis, documentation, or
related study required pursuant to the National Environmental
Policy Act of 1969 (42 U.S.C. 4321 et seq.) with respect to the
lease.
``(b) Conditions.--The Secretary may provide reimbursement
under subsection (a) only if--
``(1) adequate funding to enable the Secretary to
timely prepare the analysis, documentation, or related
study is not appropriated;
``(2) the person paid the costs voluntarily;
``(3) the person maintains records of its costs in
accordance with regulations issued by the Secretary;
``(4) the reimbursement is in the form of a
reduction in the Federal share of the royalty required
to be paid for the lease for which the analysis,
documentation, or related study is conducted, and is
agreed to by the Secretary and the person reimbursed
prior to commencing the analysis, documentation, or
related study; and
``(5) the agreement required under paragraph (4)
contains provisions--
``(A) reducing royalties owed on lease
production based on market prices;
``(B) stipulating an automatic termination
of the royalty reduction upon recovery of
documented costs; and
``(C) providing a process by which the
lessee may seek reimbursement for circumstances
in which production from the specified lease is
not possible.''.
(b) Application.--The amendment made by this section shall
apply with respect to an analysis, documentation, or a related
study conducted on or after the date of enactment of this Act
for any lease entered into before, on, or after the date of
enactment of this Act.
(c) Deadline for Regulations.--The Secretary shall issue
regulations implementing the amendment made by this section by
not later than 1 year after the date of enactment of this Act.
SEC. 327. HYDRAULIC FRACTURING.
Paragraph (1) of section 1421(d) of the Safe Drinking Water
Act (42 U.S.C. 300h(d)) is amended to read as follows:
``(1) Underground injection.--The term `underground
injection'--
``(A) means the subsurface emplacement of
fluids by well injection; and
``(B) excludes--
``(i) the underground injection of
natural gas for purposes of storage;
and
``(ii) the underground injection of
fluids or propping agents pursuant to
hydraulic fracturing operations related
to oil or gas production activities.''.
SEC. 328. OIL AND GAS EXPLORATION AND PRODUCTION DEFINED.
Section 502 of the Federal Water Pollution Control Act (33
U.S.C. 1362) is amended by adding at the end the following:
``(24) Oil and gas exploration and production.--The
term `oil and gas exploration, production, processing,
or treatment operations or transmission facilities'
means all field activities or operations associated
with exploration, production, processing, or treatment
operations, or transmission facilities, including
activities necessary to prepare a site for drilling and
for the movement and placement of drilling equipment,
whether or not such field activities or operations may
be considered to be construction activities.''.
SEC. 329. OUTER CONTINENTAL SHELF PROVISIONS.
(a) Storage on the Outer Continental Shelf.--Section
5(a)(5) of the Outer Continental Shelf Lands Act (43 U.S.C.
1334(a)(5)) is amended by inserting ``from any source'' after
``oil and gas''.
(b) Deepwater Projects.--Section 6 of the Deepwater Port
Act of 1974 (33 U.S.C. 1505) is amended by adding at the end
the following:
``(d) Reliance on Activities of Other Agencies.--In
fulfilling the requirements of section 5(f)--
``(1) to the extent that other Federal agencies
have prepared environmental impact statements, are
conducting studies, or are monitoring the affected
human, marine, or coastal environment, the Secretary
may use the information derived from those activities
in lieu of directly conducting such activities; and
``(2) the Secretary may use information obtained
from any State or local government or from any
person.''.
(c) Natural Gas Defined.--Section 3(13) of the Deepwater
Port Act of 1974 (33 U.S.C. 1502(13)) is amended to read as
follows:
``(13) natural gas means--
``(A) natural gas unmixed; or
``(B) any mixture of natural or artificial
gas, including compressed or liquefied natural
gas, natural gas liquids, liquefied petroleum
gas, and condensate recovered from natural
gas;''.
SEC. 330. APPEALS RELATING TO PIPELINE CONSTRUCTION OR OFFSHORE MINERAL
DEVELOPMENT PROJECTS.
(a) Agency of Record, Pipeline Construction Projects.--Any
Federal administrative agency proceeding that is an appeal or
review under section 319 of the Coastal Zone Management Act of
1972 (16 U.S.C. 1465), as amended by this Act, related to
Federal authority for an interstate natural gas pipeline
construction project, including construction of natural gas
storage and liquefied natural gas facilities, shall use as its
exclusive record for all purposes the record compiled by the
Federal Energy Regulatory Commission pursuant to the
Commission's proceeding under sections 3 and 7 of the Natural
Gas Act (15 U.S.C. 717b, 717f).
(b) Sense of Congress.--It is the sense of Congress that
all Federal and State agencies with jurisdiction over
interstate natural gas pipeline construction activities should
coordinate their proceedings within the timeframes established
by the Federal Energy Regulatory Commission when the Commission
is acting under sections 3 and 7 of the Natural Gas Act (15
U.S.C. 717b, 717f) to determine whether a certificate of public
convenience and necessity should be issued for a proposed
interstate natural gas pipeline.
(c) Agency of Record, Offshore Mineral Development
Projects.--Any Federal administrative agency proceeding that is
an appeal or review under section 319 of the Coastal Zone
Management Act of 1972 (16 U.S.C. 1465), as amended by this
Act, related to Federal authority for the permitting, approval,
or other authorization of energy projects, including projects
to explore, develop, or produce mineral resources in or
underlying the outer Continental Shelf shall use as its
exclusive record for all purposes (except for the filing of
pleadings) the record compiled by the relevant Federal
permitting agency.
SEC. 331. BILATERAL INTERNATIONAL OIL SUPPLY AGREEMENTS.
(a) In General.--Notwithstanding any other provision of
law, the President may export oil to, or secure oil for, any
country pursuant to a bilateral international oil supply
agreement entered into by the United States with the country
before June 25, 1979, or to any country pursuant to the
International Emergency Oil Sharing Plan of the International
Energy Agency.
(b) Memorandum of Agreement.--The following agreements are
deemed to have entered into force by operation of law and are
deemed to have no termination date:
(1) The agreement entitled ``Agreement amending and
extending the memorandum of agreement of June 22,
1979'', entered into force November 13, 1994 (TIAS
12580).
(2) The agreement entitled ``Agreement amending the
contingency implementing arrangements of October 17,
1980'', entered into force June 27, 1995 (TIAS 12670).
SEC. 332. NATURAL GAS MARKET REFORM.
(a) Clarification of Existing CFTC Authority.--
(1) False reporting.--Section 9(a)(2) of the
Commodity Exchange Act (7 U.S.C. 13(a)(2)) is amended
by striking ``false or misleading or knowingly
inaccurate reports'' and inserting ``knowingly false or
knowingly misleading or knowingly inaccurate reports''.
(2) Commission Administrative and Civil
Authority.--Section 9 of the Commodity Exchange Act (7
U.S.C. 13) is amended by redesignating subsection (f)
as subsection (e), and adding:
``(f) Commission Administrative and Civil Authority.--The
Commission may bring administrative or civil actions as
provided in this Act against any person for a violation of any
provision of this section including, but not limited to, false
reporting under subsection (a)(2).''.
(3) Effect of amendments.--The amendments made by
paragraphs (1) and (2) restate, without substantive
change, existing burden of proof provisions and
existing Commission civil enforcement authority,
respectively. These clarifying changes do not alter any
existing burden of proof or grant any new statutory
authority. The provisions of this section, as restated
herein, continue to apply to any action pending on or
commenced after the date of enactment of this Act for
any act, omission, or violation occurring before, on,
or after, such date of enactment.
(b) Fraud Authority.--Section 4b of the Commodity Exchange
Act (7 U.S.C. 6b) is amended--
(1) by redesignating subsections (b) and (c) as
subsections (c) and (d), respectively; and
(2) by striking subsection (a) and inserting the
following:
``(a) It shall be unlawful--
``(1) for any person, in or in connection with any
order to make, or the making of, any contract of sale
of any commodity for future delivery or in interstate
commerce, that is made, or to be made, on or subject to
the rules of a designated contract market, for or on
behalf of any other person; or
``(2) for any person, in or in connection with any
order to make, or the making of, any contract of sale
of any commodity for future delivery, or other
agreement, contract, or transaction subject to section
5a(g) (1) and (2) of this Act, that is made, or to be
made, for or on behalf of, or with, any other person,
other than on or subject to the rules of a designated
contract market--
``(A) to cheat or defraud or attempt to
cheat or defraud such other person;
``(B) willfully to make or cause to be made
to such other person any false report or
statement or willfully to enter or cause to be
entered for such other person any false record;
``(C) willfully to deceive or attempt to
deceive such other person by any means
whatsoever in regard to any order or contract
or the disposition or execution of any order or
contract, or in regard to any act of agency
performed, with respect to any order or
contract for or, in the case of subsection
(a)(2), with such other person; or
``(D)(i) to bucket an order if such order
is either represented by such person as an
order to be executed, or required to be
executed, on or subject to the rules of a
designated contract market; or
``(ii) to fill an order by offset against
the order or orders of any other person, or
willfully and knowingly and without the prior
consent of such other person to become the
buyer in respect to any selling order of such
other person, or become the seller in respect
to any buying order of such other person, if
such order is either represented by such person
as an order to be executed, or required to be
executed, on or subject to the rules of a
designated contract market.
``(b) Subsection (a)(2) shall not obligate any person, in
connection with a transaction in a contract of sale of a
commodity for future delivery, or other agreement, contract or
transaction subject to section 5a(g) (1) and (2) of this Act,
with another person, to disclose to such other person nonpublic
information that may be material to the market price of such
commodity or transaction, except as necessary to make any
statement made to such other person in connection with such
transaction, not misleading in any material respect.''.
(c) Jurisdiction of the CFTC.--The Natural Gas Act (15
U.S.C. 717 et seq.) is amended by adding at the end:
``SEC. 26. JURISDICTION.
``This Act shall not affect the exclusive jurisdiction of
the Commodity Futures Trading Commission with respect to
accounts, agreements, contracts, or transactions in commodities
under the Commodity Exchange Act (7 U.S.C. 1 et seq.). Any
request for information by the Commission to a designated
contract market, registered derivatives transaction execution
facility, board of trade, exchange, or market involving
accounts, agreements, contracts, or transactions in commodities
(including natural gas, electricity, and other energy
commodities) within the exclusive jurisdiction of the Commodity
Futures Trading Commission shall be directed to the Commodity
Futures Trading Commission, which shall cooperate in responding
to any information request by the Commission.''.
(d) Increased Penalties.--Section 21 of the Natural Gas Act
(15 U.S.C. 717t) is amended--
(1) in subsection (a)--
(A) by striking ``$5,000'' and inserting
``$1,000,000''; and
(B) by striking ``two years'' and inserting
``5 years''; and
(2) in subsection (b), by striking ``$500'' and
inserting ``$50,000''.
SEC. 333. NATURAL GAS MARKET TRANSPARENCY.
The Natural Gas Act (15 U.S.C 717 et seq.) is amended--
(1) by redesignating section 24 as section 25; and
(2) by inserting after section 23 the following:
``SEC. 24. NATURAL GAS MARKET TRANSPARENCY.
``(a) Authorization.--(1) Not later than 180 days after the
date of enactment of the Energy Policy Act of 2003, the Federal
Energy Regulatory Commission shall issue rules directing all
entities subject to the Commission's jurisdiction as provided
under this Act to timely report information about the
availability and prices of natural gas sold at wholesale in
interstate commerce to the Commission and price publishers.
``(2) The Commission shall evaluate the data for adequate
price transparency and accuracy.
``(3) Rules issued under this subsection requiring the
reporting of information to the Commission that may become
publicly available shall be limited to aggregate data and
transaction-specific data that are otherwise required by the
Commission to be made public.
``(4) In exercising its authority under this section, the
Commission shall not--
``(A) compete with, or displace from the market
place, any price publisher; or
``(B) regulate price publishers or impose any
requirements on the publication of information.
``(b) Timely Enforcement.--No person shall be subject to
any penalty under this section with respect to a violation
occurring more than 3 years before the date on which the
Federal Energy Regulatory Commission seeks to assess a penalty.
``(c) Limitation on Commission Authority.--(1) The
Commission shall not condition access to interstate pipeline
transportation upon the reporting requirements authorized under
this section.
``(2) Natural gas sales by a producer that are attributable
to volumes of natural gas produced by such producer shall not
be subject to the rules issued pursuant to this section.
``(3) The Commission shall not require natural gas
producers, processors, or users who have a de minimis market
presence to participate in the reporting requirements provided
in this section.''.
Subtitle C--Access to Federal Land
SEC. 341. OFFICE OF FEDERAL ENERGY PROJECT COORDINATION.
(a) Establishment.--The President shall establish the
Office of Federal Energy Project Coordination (referred to in
this section as the ``Office'') within the Executive Office of
the President in the same manner and with the same mission as
the White House Energy Projects Task Force established by
Executive Order No. 13212 (42 U.S.C. 13201 note).
(b) Staffing.--The Office shall be staffed by functional
experts from relevant Federal agencies on a nonreimbursable
basis to carry out the mission of the Office.
(c) Report.--The Office shall transmit an annual report to
Congress that describes the activities put in place to
coordinate and expedite Federal decisions on energy projects.
The report shall list accomplishments in improving the Federal
decisionmaking process and shall include any additional
recommendations or systemic changes needed to establish a more
effective and efficient Federal permitting process.
SEC. 342. FEDERAL ONSHORE OIL AND GAS LEASING AND PERMITTING PRACTICES.
(a) Review of Onshore Oil and Gas Leasing Practices.--
(1) In general.--The Secretary of the Interior, in
consultation with the Secretary of Agriculture with
respect to National Forest System lands under the
jurisdiction of the Department of Agriculture, shall
perform an internal review of current Federal onshore
oil and gas leasing and permitting practices.
(2) Inclusions.--The review shall include the
process for--
(A) accepting or rejecting offers to lease;
(B) administrative appeals of decisions or
orders of officers or employees of the Bureau
of Land Management with respect to a Federal
oil or gas lease;
(C) considering surface use plans of
operation, including the timeframes in which
the plans are considered, and any
recommendations for improving and expediting
the process; and
(D) identifying stipulations to address
site-specific concerns and conditions,
including those stipulations relating to the
environment and resource use conflicts.
(b) Report.--Not later than 180 days after the date of
enactment of this Act, the Secretary of the Interior and the
Secretary of Agriculture shall transmit a report to Congress
that describes--
(1) actions taken under section 3 of Executive
Order No. 13212 (42 U.S.C. 13201 note); and
(2) actions taken or any plans to improve the
Federal onshore oil and gas leasing program.
SEC. 343. MANAGEMENT OF FEDERAL OIL AND GAS LEASING PROGRAMS.
(a) Timely Action on Leases and Permits.--To ensure timely
action on oil and gas leases and applications for permits to
drill on land otherwise available for leasing, the Secretary of
the Interior (in this section referred to as the ``Secretary'')
shall--
(1) ensure expeditious compliance with section
102(2)(C) of the National Environmental Policy Act of
1969 (42 U.S.C. 4332(2)(C));
(2) improve consultation and coordination with the
States and the public; and
(3) improve the collection, storage, and retrieval
of information relating to the leasing activities.
(b) Best Management Practices.--
(1) In general.--Not later than 18 months after the
date of enactment of this Act, the Secretary shall
develop and implement best management practices to--
(A) improve the administration of the
onshore oil and gas leasing program under the
Mineral Leasing Act (30 U.S.C. 181 et seq.);
and
(B) ensure timely action on oil and gas
leases and applications for permits to drill on
lands otherwise available for leasing.
(2) Considerations.--In developing the best
management practices under paragraph (1), the Secretary
shall consider any recommendations from the review
under section 342.
(3) Regulations.--Not later than 180 days after the
development of best management practices under
paragraph (1), the Secretary shall publish, for public
comment, proposed regulations that set forth specific
timeframes for processing leases and applications in
accordance with the practices, including deadlines
for--
(A) approving or disapproving resource
management plans and related documents, lease
applications, and surface use plans; and
(B) related administrative appeals.
(c) Improved Enforcement.--The Secretary shall improve
inspection and enforcement of oil and gas activities, including
enforcement of terms and conditions in permits to drill.
(d) Authorization of Appropriations.--In addition to
amounts authorized to be appropriated to carry out section 17
of the Mineral Leasing Act (30 U.S.C. 226), there are
authorized to be appropriated to the Secretary for each of
fiscal years 2004 through 2007--
(1) $40,000,000 to carry out subsections (a) and
(b); and
(2) $20,000,000 to carry out subsection (c).
SEC. 344. CONSULTATION REGARDING OIL AND GAS LEASING ON PUBLIC LAND.
(a) In General.--Not later than 180 days after the date of
enactment of this Act, the Secretary of the Interior and the
Secretary of Agriculture shall enter into a memorandum of
understanding regarding oil and gas leasing on--
(1) public lands under the jurisdiction of the
Secretary of the Interior; and
(2) National Forest System lands under the
jurisdiction of the Secretary of Agriculture.
(b) Contents.--The memorandum of understanding shall
include provisions that--
(1) establish administrative procedures and lines
of authority that ensure timely processing of oil and
gas lease applications, surface use plans of operation,
and applications for permits to drill, including steps
for processing surface use plans and applications for
permits to drill consistent with the timelines
established by the amendment made by section 348;
(2) eliminate duplication of effort by providing
for coordination of planning and environmental
compliance efforts; and
(3) ensure that lease stipulations are--
(A) applied consistently;
(B) coordinated between agencies; and
(C) only as restrictive as necessary to
protect the resource for which the stipulations
are applied.
(c) Data Retrieval System.--
(1) In general.--Not later than 1 year after the
date of enactment of this Act, the Secretary of the
Interior and the Secretary of Agriculture shall
establish a joint data retrieval system that is capable
of--
(A) tracking applications and formal
requests made in accordance with procedures of
the Federal onshore oil and gas leasing
program; and
(B) providing information regarding the
status of the applications and requests within
the Department of the Interior and the
Department of Agriculture.
(2) Resource mapping.--Not later than 2 years after
the date of enactment of this Act, the Secretary of the
Interior and the Secretary of Agriculture shall
establish a joint Geographic Information System mapping
system for use in--
(A) tracking surface resource values to aid
in resource management; and
(B) processing surface use plans of
operation and applications for permits to
drill.
SEC. 345. ESTIMATES OF OIL AND GAS RESOURCES UNDERLYING ONSHORE FEDERAL
LAND.
(a) Assessment.--Section 604 of the Energy Act of 2000 (42
U.S.C. 6217) is amended--
(1) in subsection (a)--
(A) in paragraph (1)--
(i) by striking ``reserve''; and
(ii) by striking ``and'' after the
semicolon; and
(B) by striking paragraph (2) and inserting
the following:
``(2) the extent and nature of any restrictions or
impediments to the development of the resources,
including--
``(A) impediments to the timely granting of
leases;
``(B) post-lease restrictions, impediments,
or delays on development for conditions of
approval, applications for permits to drill, or
processing of environmental permits; and
``(C) permits or restrictions associated
with transporting the resources for entry into
commerce; and
``(3) the quantity of resources not produced or
introduced into commerce because of the
restrictions.'';
(2) in subsection (b)--
(A) by striking ``reserve'' and inserting
``resource''; and
(B) by striking ``publically'' and
inserting ``publicly''; and
(3) by striking subsection (d) and inserting the
following:
``(d) Assessments.--Using the inventory, the Secretary of
Energy shall make periodic assessments of economically
recoverable resources accounting for a range of parameters such
as current costs, commodity prices, technology, and
regulations.''.
(b) Methodology.--The Secretary of the Interior shall use
the same assessment methodology across all geological
provinces, areas, and regions in preparing and issuing national
geological assessments to ensure accurate comparisons of
geological resources.
SEC. 346. COMPLIANCE WITH EXECUTIVE ORDER 13211; ACTIONS CONCERNING
REGULATIONS THAT SIGNIFICANTLY AFFECT ENERGY
SUPPLY, DISTRIBUTION, OR USE.
(a) Requirement.--The head of each Federal agency shall
require that before the Federal agency takes any action that
could have a significant adverse effect on the supply of
domestic energy resources from Federal public land, the Federal
agency taking the action shall comply with Executive Order No.
13211 (42 U.S.C. 13201 note).
(b) Guidance.--Not later than 180 days after the date of
enactment of this Act, the Secretary of Energy shall publish
guidance for purposes of this section describing what
constitutes a significant adverse effect on the supply of
domestic energy resources under Executive Order No. 13211 (42
U.S.C. 13201 note).
(c) Memorandum of Understanding.--The Secretary of the
Interior and the Secretary of Agriculture shall include in the
memorandum of understanding under section 344 provisions for
implementing subsection (a) of this section.
SEC. 347. PILOT PROJECT TO IMPROVE FEDERAL PERMIT COORDINATION.
(a) Establishment.--The Secretary of the Interior (in this
section referred to as the ``Secretary'') shall establish a
Federal Permit Streamlining Pilot Project (in this section
referred to as the ``Pilot Project'').
(b) Memorandum of Understanding.--
(1) In general.--Not later than 90 days after the
date of enactment of this Act, the Secretary shall
enter into a memorandum of understanding with the
Secretary of Agriculture, the Administrator of the
Environmental Protection Agency, and the Chief of
Engineers of the Army Corps of Engineers for purposes
of this section.
(2) State participation.--The Secretary may request
that the Governors of Wyoming, Montana, Colorado, Utah,
and New Mexico be signatories to the memorandum of
understanding.
(c) Designation of Qualified Staff.--
(1) In general.--Not later than 30 days after the
date of the signing of the memorandum of understanding
under subsection (b), all Federal signatory parties
shall assign to each of the field offices identified in
subsection (d), on a nonreimbursable basis, an employee
who has expertise in the regulatory issues relating to
the office in which the employee is employed,
including, as applicable, particular expertise in--
(A) the consultations and the preparation
of biological opinions under section 7 of the
Endangered Species Act of 1973 (16 U.S.C.
1536);
(B) permits under section 404 of Federal
Water Pollution Control Act (33 U.S.C. 1344);
(C) regulatory matters under the Clean Air
Act (42 U.S.C. 7401 et seq.);
(D) planning under the National Forest
Management Act of 1976 (16 U.S.C. 472a et
seq.); and
(E) the preparation of analyses under the
National Environmental Policy Act of 1969 (42
U.S.C. 4321 et seq.).
(2) Duties.--Each employee assigned under paragraph
(1) shall--
(A) not later than 90 days after the date
of assignment, report to the Bureau of Land
Management Field Managers in the office to
which the employee is assigned;
(B) be responsible for all issues relating
to the jurisdiction of the home office or
agency of the employee; and
(C) participate as part of the team of
personnel working on proposed energy projects,
planning, and environmental analyses.
(d) Field Offices.--The following Bureau of Land Management
Field Offices shall serve as the Pilot Project offices:
(1) Rawlins, Wyoming.
(2) Buffalo, Wyoming.
(3) Miles City, Montana
(4) Farmington, New Mexico.
(5) Carlsbad, New Mexico.
(6) Glenwood Springs, Colorado.
(7) Vernal, Utah.
(e) Reports.--Not later than 3 years after the date of
enactment of this Act, the Secretary shall transmit to Congress
a report that--
(1) outlines the results of the Pilot Project to
date; and
(2) makes a recommendation to the President
regarding whether the Pilot Project should be
implemented throughout the United States.
(f) Additional Personnel.--The Secretary shall assign to
each field office identified in subsection (d) any additional
personnel that are necessary to ensure the effective
implementation of--
(1) the Pilot Project; and
(2) other programs administered by the field
offices, including inspection and enforcement relating
to energy development on Federal land, in accordance
with the multiple use mandate of the Federal Land
Policy and Management Act of 1976 (43 U.S.C. 1701 et
seq).
(g) Savings Provision.--Nothing in this section affects--
(1) the operation of any Federal or State law; or
(2) any delegation of authority made by the head of
a Federal agency whose employees are participating in
the Pilot Project.
SEC. 348. DEADLINE FOR CONSIDERATION OF APPLICATIONS FOR PERMITS.
Section 17 of the Mineral Leasing Act (30 U.S.C. 226) is
amended by adding at the end the following:
``(p) Deadlines for Consideration of Applications for
Permits.--
``(1) In general.--Not later than 10 days after the
date on which the Secretary receives an application for
any permit to drill, the Secretary shall--
``(A) notify the applicant that the
application is complete; or
``(B) notify the applicant that information
is missing and specify any information that is
required to be submitted for the application to
be complete.
``(2) Issuance or deferral.--Not later than 30 days
after the applicant for a permit has submitted a
complete application, the Secretary shall--
``(A) issue the permit; or
``(B)(i) defer decision on the permit; and
``(ii) provide to the applicant a notice
that specifies any steps that the applicant
could take for the permit to be issued.
``(3) Requirements for deferred applications.--
``(A) In general.--If the Secretary
provides notice under paragraph (2)(B)(ii), the
applicant shall have a period of 2 years from
the date of receipt of the notice in which to
complete all requirements specified by the
Secretary, including providing information
needed for compliance with the National
Environmental Policy Act of 1969 (42 U.S.C.
4321 et seq.).
``(B) Issuance of decision on permit.--If
the applicant completes the requirements within
the period specified in subparagraph (A), the
Secretary shall issue a decision on the permit
not later than 10 days after the date of
completion of the requirements described in
subparagraph (A).
``(C) Denial of permit.--If the applicant
does not complete the requirements within the
period specified in subparagraph (A), the
Secretary shall deny the permit.
``(q) Report.--On a quarterly basis, each field office of
the Bureau of Land Management and the Forest Service shall
transmit to the Secretary of the Interior or the Secretary of
Agriculture, respectively, a report that--
``(1) specifies the number of applications for
permits to drill received by the field office in the
period covered by the report; and
``(2) describes how each of the applications was
disposed of by the field office.''.
SEC. 349. CLARIFICATION OF FAIR MARKET RENTAL VALUE DETERMINATIONS FOR
PUBLIC LAND AND FOREST SERVICE RIGHTS-OF-WAY.
(a) Linear Rights-Of-Way Under Federal Land Policy and
Management Act of 1976.--Section 504 of the Federal Land Policy
and Management Act of 1976 (43 U.S.C. 1764) is amended by
adding at the end the following:
``(k) Determination of Fair Market Value of Linear Rights-
Of-Way.--
``(1) In general.--Effective beginning on the date
of the issuance of the rules required by paragraph (2),
for purposes of subsection (g), the Secretary concerned
shall determine the fair market value for the use of
land encumbered by a linear right-of-way granted,
issued, or renewed under this title using the valuation
method described in paragraphs (2), (3), and (4).
``(2) Revisions.--Not later than 1 year after the
date of enactment of this subsection--
``(A) the Secretary of the Interior shall
amend section 2803.1-2 of title 43, Code of
Federal Regulations, as in effect on the date
of enactment of this subsection, to revise the
per acre rental fee zone value schedule by
State, county, and type of linear right-of-way
use to reflect current values of land in each
zone; and
``(B) the Secretary of Agriculture shall
make the same revision for linear rights-of-way
granted, issued, or renewed under this title on
National Forest System land.
``(3) Updates.--The Secretary concerned shall
annually update the schedule revised under paragraph
(2) by multiplying the current year's rental per acre
by the annual change, second quarter to second quarter
(June 30 to June 30) in the Gross National Product
Implicit Price Deflator Index published in the Survey
of Current Business of the Department of Commerce,
Bureau of Economic Analysis.
``(4) Review.--If the cumulative change in the
index referred to in paragraph (3) exceeds 30 percent,
or the change in the 3-year average of the 1-year
Treasury interest rate used to determine per acre
rental fee zone values exceeds plus or minus 50
percent, the Secretary concerned shall conduct a review
of the zones and rental per acre figures to determine
whether the value of Federal land has differed
sufficiently from the index referred to in paragraph
(3) to warrant a revision in the base zones and rental
per acre figures. If, as a result of the review, the
Secretary concerned determines that such a revision is
warranted, the Secretary concerned shall revise the
base zones and rental per acre figures accordingly. Any
revision of base zones and rental per acre figure shall
only affect lease rental rates at inception or
renewal.''.
(b) Rights-Of-Way Under Mineral Leasing Act.--Section 28(l)
of the Mineral Leasing Act (30 U.S.C. 185(l)) is amended by
inserting before the period at the end the following: ``using
the valuation method described in section 2803.1-2 of title 43,
Code of Federal Regulations, as revised in accordance with
section 504(k) of the Federal Land Policy and Management Act of
1976 (43 U.S.C. 1764(k))''.
SEC. 350. ENERGY FACILITY RIGHTS-OF-WAY AND CORRIDORS ON FEDERAL LAND.
(a) Report to Congress.--
(1) In general.--Not later than 1 year after the
date of enactment of this Act, the Secretary of
Agriculture and the Secretary of the Interior, in
consultation with the Secretary of Commerce, the
Secretary of Defense, the Secretary of Energy, and the
Federal Energy Regulatory Commission, shall submit to
Congress a joint report--
(A) that addresses--
(i) the location of existing
rights-of-way and designated and de
facto corridors for oil and gas
pipelines and electric transmission and
distribution facilities on Federal
land; and
(ii) opportunities for additional
oil and gas pipeline and electric
transmission capacity within those
rights-of-way and corridors; and
(B) that includes a plan for making
available, on request, to the appropriate
Federal, State, and local agencies, tribal
governments, and other persons involved in the
siting of oil and gas pipelines and electricity
transmission facilities Geographic Information
System-based information regarding the location
of the existing rights-of-way and corridors and
any planned rights-of-way and corridors.
(2) Consultations and considerations.--In preparing
the report, the Secretary of the Interior and the
Secretary of Agriculture shall consult with--
(A) other agencies of Federal, State,
tribal, or local units of government, as
appropriate;
(B) persons involved in the siting of oil
and gas pipelines and electric transmission
facilities; and
(C) other interested members of the public.
(3) Limitation.--The Secretary of the Interior and
the Secretary of Agriculture shall limit the
distribution of the report and Geographic Information
System-based information referred to in paragraph (1)
as necessary for national and infrastructure security
reasons, if either Secretary determines that the
information may be withheld from public disclosure
under a national security or other exception under
section 552(b) of title 5, United States Code.
(b) Corridor Designations.--
(1) 11 contiguous western states.--Not later than 2
years after the date of enactment of this Act, the
Secretary of Agriculture, the Secretary of Commerce,
the Secretary of Defense, the Secretary of Energy, and
the Secretary of the Interior, in consultation with the
Federal Energy Regulatory Commission and the affected
utility industries, shall jointly--
(A) designate, under title V of the Federal
Land Policy and Management Act of 1976 (43
U.S.C. 1761 et seq.) and other applicable
Federal laws, corridors for oil and gas
pipelines and electricity transmission and
facilities on Federal land in the eleven
contiguous Western States (as defined in
section 103 of the Federal Land Policy and
Management Act of 1976 (43 U.S.C. 1702));
(B) perform any environmental reviews that
may be required to complete the designations of
corridors for the facilities on Federal land in
the eleven contiguous Western States; and
(C) incorporate the designated corridors
into--
(i) the relevant departmental and
agency land use and resource management
plans; or
(ii) equivalent plans.
(2) Other states.--Not later than 4 years after the
date of enactment of this Act, the Secretary of
Agriculture, the Secretary of Commerce, the Secretary
of Defense, the Secretary of Energy, and the Secretary
of the Interior, in consultation with the Federal
Energy Regulatory Commission and the affected utility
industries, shall jointly--
(A) identify corridors for oil and gas
pipelines and electricity transmission and
distribution facilities on Federal land in the
States other than those described in paragraph
(1); and
(B) schedule prompt action to identify,
designate, and incorporate the corridors into
the land use plan.
(3) Ongoing responsibilities.--After completing the
requirements under paragraphs (1) and (2), the
Secretary of Agriculture, the Secretary of Commerce,
the Secretary of Defense, the Secretary of Energy, and
the Secretary of the Interior, with respect to lands
under their respective jurisdictions, in consultation
with the Federal Energy Regulatory Commission and the
affected utility industries, shall establish procedures
that--
(A) ensure that additional corridors for
oil and gas pipelines and electricity
transmission and distribution facilities on
Federal land are promptly identified and
designated; and
(B) expedite applications to construct or
modify oil and gas pipelines and electricity
transmission and distribution facilities within
the corridors, taking into account prior
analyses and environmental reviews undertaken
during the designation of corridors.
(c) Considerations.--In carrying out this section, the
Secretaries shall take into account the need for upgraded and
new electricity transmission and distribution facilities to--
(1) improve reliability;
(2) relieve congestion; and
(3) enhance the capability of the national grid to
deliver electricity.
(d) Definition of Corridor.--
(1) In general.--In this section and title V of the
Federal Land Policy and Management Act of 1976 (43
U.S.C. 1761 et seq.), the term ``corridor'' means--
(A) a linear strip of land--
(i) with a width determined with
consideration given to technological,
environmental, and topographical
factors; and
(ii) that contains, or may in the
future contain, 1 or more utility,
communication, or transportation
facilities;
(B) a land use designation that is
established--
(i) by law;
(ii) by Secretarial Order;
(iii) through the land use planning
process; or
(iv) by other management decision;
and
(C) a designation made for the purpose of
establishing the preferred location of
compatible linear facilities and land uses.
(2) Specifications of corridor.--On designation of
a corridor under this section, the centerline, width,
and compatible uses of a corridor shall be specified.
SEC. 351. CONSULTATION REGARDING ENERGY RIGHTS-OF-WAY ON PUBLIC LAND.
(a) Memorandum of Understanding.--
(1) In general.--Not later than 6 months after the
date of enactment of this Act, the Secretary of Energy,
in consultation with the Secretary of the Interior, the
Secretary of Agriculture, and the Secretary of Defense
with respect to lands under their respective
jurisdictions, shall enter into a memorandum of
understanding to coordinate all applicable Federal
authorizations and environmental reviews relating to a
proposed or existing utility facility. To the maximum
extent practicable under applicable law, the Secretary
of Energy shall, to ensure timely review and permit
decisions, coordinate such authorizations and reviews
with any Indian tribes, multi-State entities, and State
agencies that are responsible for conducting any
separate permitting and environmental reviews of the
affected utility facility.
(2) Contents.--The memorandum of understanding
shall include provisions that--
(A) establish--
(i) a unified right-of-way
application form; and
(ii) an administrative procedure
for processing right-of-way
applications, including lines of
authority, steps in application
processing, and timeframes for
application processing;
(B) provide for coordination of planning
relating to the granting of the rights-of-way;
(C) provide for an agreement among the
affected Federal agencies to prepare a single
environmental review document to be used as the
basis for all Federal authorization decisions;
and
(D) provide for coordination of use of
right-of-way stipulations to achieve
consistency.
(b) Natural Gas Pipelines.--
(1) In general.--With respect to permitting
activities for interstate natural gas pipelines, the
May 2002 document entitled ``Interagency Agreement On
Early Coordination Of Required Environmental And
Historic Preservation Reviews Conducted In Conjunction
With The Issuance Of Authorizations To Construct And
Operate Interstate Natural Gas Pipelines Certificated
By The Federal Energy Regulatory Commission'' shall
constitute compliance with subsection (a).
(2) Report.--
(A) In general.--Not later than 1 year
after the date of enactment of this Act, and
every 2 years thereafter, agencies that are
signatories to the document referred to in
paragraph (1) shall transmit to Congress a
report on how the agencies under the
jurisdiction of the Secretaries are
incorporating and implementing the provisions
of the document referred to in paragraph (1).
(B) Contents.--The report shall address--
(i) efforts to implement the
provisions of the document referred to
in paragraph (1);
(ii) whether the efforts have had a
streamlining effect;
(iii) further improvements to the
permitting process of the agency; and
(iv) recommendations for inclusion
of State and tribal governments in a
coordinated permitting process.
(c) Definition of Utility Facility.--In this section, the
term ``utility facility'' means any privately, publicly, or
cooperatively owned line, facility, or system--
(1) for the transportation of--
(A) oil, natural gas, synthetic liquid
fuel, or gaseous fuel;
(B) any refined product produced from oil,
natural gas, synthetic liquid fuel, or gaseous
fuel; or
(C) products in support of the production
of material referred to in subparagraph (A) or
(B);
(2) for storage and terminal facilities in
connection with the production of material referred to
in paragraph (1); or
(3) for the generation, transmission, and
distribution of electric energy.
SEC. 352. RENEWABLE ENERGY ON FEDERAL LAND.
(a) Report.--
(1) In general.--Not later than 24 months after the
date of enactment of this Act, the Secretary of the
Interior, in cooperation with the Secretary of
Agriculture, shall develop and transmit to Congress a
report that includes recommendations on opportunities
to develop renewable energy on--
(A) public lands under the jurisdiction of
the Secretary of the Interior; and
(B) National Forest System lands under the
jurisdiction of the Secretary of Agriculture.
(2) Contents.--The report shall include--
(A) 5-year plans developed by the Secretary
of the Interior and the Secretary of
Agriculture, respectively, for encouraging the
development of renewable energy consistent with
applicable law and management plans;
(B) an analysis of--
(i) the use of rights-of-way,
leases, or other methods to develop
renewable energy on such lands;
(ii) the anticipated benefits of
grants, loans, tax credits, or other
provisions to promote renewable energy
development on such lands; and
(iii) any issues that the Secretary
of the Interior or the Secretary of
Agriculture have encountered in
managing renewable energy projects on
such lands, believe are likely to arise
in relation to the development of
renewable energy on such lands;
(C) a list, developed in consultation with
the Secretary of Energy and the Secretary of
Defense, of lands under the jurisdiction of the
Department of Energy or the Department of
Defense that would be suitable for development
for renewable energy, and any recommended
statutory and regulatory mechanisms for such
development; and
(D) any recommendations relating to the
issues addressed in the report.
(b) National Academy of Sciences Study.--
(1) In general.--Not later than 90 days after the
date of enactment of this Act, the Secretary of the
Interior shall contract with the National Academy of
Sciences to--
(A) study the potential for the development
of wind, solar, and ocean energy (including
tidal, wave, and thermal energy) on the outer
Continental Shelf;
(B) assess existing Federal authorities for
the development of such resources; and
(C) recommend statutory and regulatory
mechanisms for such development.
(2) Transmittal.--The results of the study shall be
transmitted to Congress not later than 2 years after
the date of enactment of this Act.
(c) Generation Capacity of Electricity From Renewable
Energy Resources on Public Land.--The Secretary of the Interior
shall, not later than 10 years after the date of enactment of
this Act, seek to approve renewable energy projects located (or
to be located) on public lands with a generation capacity of at
least 10,000 megawatts of electricity.
SEC. 353. ELECTRICITY TRANSMISSION LINE RIGHT-OF-WAY, CLEVELAND
NATIONAL FOREST AND ADJACENT PUBLIC LAND,
CALIFORNIA.
(a) Issuance.--
(1) In general.--Not later than 60 days after the
completion of the environmental reviews under
subsection (c), the Secretary of the Interior and the
Secretary of Agriculture shall issue all necessary
grants, easements, permits, plan amendments, and other
approvals to allow for the siting and construction of a
high-voltage electricity transmission line right-of-way
running approximately north to south through the
Trabuco Ranger District of the Cleveland National
Forest in the State of California and adjacent lands
under the jurisdiction of the Bureau of Land Management
and the Forest Service.
(2) Inclusions.--The right-of-way approvals under
paragraph (1) shall provide all necessary Federal
authorization from the Secretary of the Interior and
the Secretary of Agriculture for the routing,
construction, operation, and maintenance of a 500-
kilovolt transmission line capable of meeting the long-
term electricity transmission needs of the region
between the existing Valley-Serrano transmission line
to the north and the Telega-Escondido transmission line
to the south, and for connecting to future generating
capacity that may be developed in the region.
(b) Protection of Wilderness Areas.--The Secretary of the
Interior and the Secretary of Agriculture shall not allow any
portion of a transmission line right-of-way corridor identified
in subsection (a) to enter any identified wilderness area in
existence as of the date of enactment of this Act.
(c) Environmental and Administrative Reviews.--
(1) Department of interior or local agency.--The
Secretary of the Interior, acting through the Director
of the Bureau of Land Management, shall be the lead
Federal agency with overall responsibility to ensure
completion of required environmental and other reviews
of the approvals to be issued under subsection (a).
(2) National forest system land.--For the portions
of the corridor on National Forest System lands, the
Secretary of Agriculture shall complete all required
environmental reviews and administrative actions in
coordination with the Secretary of the Interior.
(3) Expeditious completion.--The reviews required
for issuance of the approvals under subsection (a)
shall be completed not later than 1 year after the date
of the enactment of this Act.
(d) Other Terms and Conditions.--The transmission line
right-of-way shall be subject to such terms and conditions as
the Secretary of the Interior and the Secretary of Agriculture
consider necessary, based on the environmental reviews under
subsection (c), to protect the value of historic, cultural, and
natural resources under the jurisdiction of the Secretary of
the Interior or the Secretary of Agriculture.
(e) Preference Among Proposals.--The Secretary of the
Interior and the Secretary of Agriculture shall give a
preference to any application or preapplication proposal for a
transmission line right-of-way referred to in subsection (a)
that was submitted before December 31, 2002, over all other
applications and proposals for the same or a similar right-of-
way submitted on or after that date.
SEC. 354. SENSE OF CONGRESS REGARDING DEVELOPMENT OF MINERALS UNDER
PADRE ISLAND NATIONAL SEASHORE.
(a) Findings.--Congress finds the following:
(1) Pursuant to Public Law 87-712 (16 U.S.C. 459d
et seq.; popularly known as the ``Federal Enabling
Act'') and various deeds and actions under that Act,
the United States is the owner of only the surface
estate of certain lands constituting the Padre Island
National Seashore.
(2) Ownership of the oil, gas, and other minerals
in the subsurface estate of the lands constituting the
Padre Island National Seashore was never acquired by
the United States, and ownership of those interests is
held by the State of Texas and private parties.
(3) Public Law 87-712 (16 U.S.C. 459d et seq.)--
(A) expressly contemplated that the United
States would recognize the ownership and future
development of the oil, gas, and other minerals
in the subsurface estate of the lands
constituting the Padre Island National Seashore
by the owners and their mineral lessees; and
(B) recognized that approval of the State
of Texas was required to create Padre Island
National Seashore.
(4) Approval was given for the creation of Padre
Island National Seashore by the State of Texas through
Tex. Rev. Civ. Stat. Ann. Art. 6077(t) (Vernon 1970),
which expressly recognized that development of the oil,
gas, and other minerals in the subsurface of the lands
constituting Padre Island National Seashore would be
conducted with full rights of ingress and egress under
the laws of the State of Texas.
(b) Sense of Congress.--It is the sense of Congress that
with regard to Federal law, any regulation of the development
of oil, gas, or other minerals in the subsurface of the lands
constituting Padre Island National Seashore should be made as
if those lands retained the status that the lands had on
September 27, 1962.
SEC. 355. ENCOURAGING PROHIBITION OF OFF-SHORE DRILLING IN THE GREAT
LAKES.
Congress encourages--
(1) the States of Illinois, Michigan, New York,
Pennsylvania, and Wisconsin to continue to prohibit
offshore drilling in the Great Lakes for oil and gas;
and
(2) the States of Indiana, Minnesota, and Ohio to
enact a prohibition of such drilling.
SEC. 356. FINGER LAKES NATIONAL FOREST WITHDRAWAL.
All Federal land within the boundary of Finger Lakes
National Forest in the State of New York is withdrawn from--
(1) all forms of entry, appropriation, or disposal
under the public land laws; and
(2) disposition under all laws relating to oil and
gas leasing.
SEC. 357. STUDY ON LEASE EXCHANGES IN THE ROCKY MOUNTAIN FRONT.
(a) Definitions.--For the purposes of this section:
(1) Badger-two medicine area.--The term ``Badger-
Two Medicine Area'' means the Forest Service land
located in--
(A) T. 31 N., R. 12-13 W.;
(B) T. 30 N., R. 11-13 W.;
(C) T. 29 N., R. 10-16 W.; and
(D) T. 28 N., R. 10-14 W.
(2) Blackleaf area.--The term ``Blackleaf Area''
means the Federal land owned by the Forest Service and
Bureau of Land Management that is located in--
(A) T. 27 N., R. 9 W.;
(B) T. 26 N., R. 9-10 W.;
(C) T. 25 N., R. 8-10 W.; and
(D) T. 24 N., R. 8-9 W.
(3) Eligible lessee.--The term ``eligible lessee''
means a lessee under a nonproducing lease.
(4) Nonproducing lease.--The term ``nonproducing
lease'' means a Federal oil or gas lease--
(A) that is in existence and in good
standing on the date of enactment of this Act;
and
(B) that is located in the Badger-Two
Medicine Area or the Blackleaf Area.
(5) Secretary.--The term ``Secretary'' means the
Secretary of the Interior.
(6) State.--The term ``State'' means the State of
Montana.
(b) Evaluation.--
(1) In general.--The Secretary, in consultation
with the Governor of the State, and the eligible
lessees, shall evaluate opportunities for domestic oil
and gas production through the exchange of the
nonproducing leases.
(2) Requirements.--In carrying out the evaluation
under subsection (a), the Secretary shall--
(A) consider opportunities for domestic
production of oil and gas through--
(i) the exchange of the
nonproducing leases for oil and gas
lease tracts of comparable value in the
State; and
(ii) the issuance of bidding,
royalty, or rental credits for Federal
oil and gas leases in the State in
exchange for the cancellation of the
nonproducing leases;
(B) consider any other appropriate means to
exchange, or provide compensation for the
cancellation of, nonproducing leases, subject
to the consent of the eligible lessees;
(C) consider the views of any interested
persons, including the State;
(D) determine the level of interest of the
eligible lessees in exchanging the nonproducing
leases;
(E) assess the economic impact on the
lessees and the State of lease exchange, lease
cancellation, and final judicial or
administrative decisions related to the
nonproducing leases; and
(F) provide recommendations on--
(i) whether to pursue an exchange
of the nonproducing leases;
(ii) any changes in laws (including
regulations) that are necessary for the
Secretary to carry out the exchange;
and
(iii) any other appropriate means
to exchange or provide compensation for
the cancellation of a nonproducing
lease, subject to the consent of the
eligible lessee.
(c) Valuation of Nonproducing Leases.--For the purpose of
the evaluation under subsection (a), the value of a
nonproducing lease shall be an amount equal to the difference
between--
(1) the sum of--
(A) the amount paid by the eligible lessee
for the nonproducing lease;
(B) any direct expenditures made by the
eligible lessee before the transmittal of the
report in subsection (c) associated with the
exploration and development of the nonproducing
lease; and
(C) interest on any amounts under
subparagraphs (A) and (B) during the period
beginning on the date on which the amount was
paid and ending on the date on which credits
are issued under subsection (b)(2)(A)(ii); and
(2) the sum of the revenues from the nonproducing
lease.
(d) Report to Congress.--Not later than 2 years after the
date of the enactment of this Act, the Secretary shall initiate
the evaluation in subsection (b) and transmit to Congress a
report on the evaluation.
SEC. 358. FEDERAL COALBED METHANE REGULATION.
Any State currently on the list of Affected States
established under section 1339(b) of the Energy Policy Act of
1992 (42 U.S.C. 13368(b)) shall be removed from the list if,
not later than 3 years after the date of enactment of this Act,
the State takes, or prior to the date of enactment has taken,
any of the actions required for removal from the list under
such section 1339(b).
SEC. 359. LIVINGSTON PARISH MINERAL RIGHTS TRANSFER.
(a) Amendments.--Section 102 of Public Law 102-562 (106
Stat. 4234) is amended--
(1) by striking ``(a) In General.--
(2) by striking ``and subject to the reservation in
subsection (b),''; and
(3) by striking subsection (b).
(b) Implementation of Amendment.--The Secretary of the
Interior shall execute the legal instruments necessary to
effectuate the amendment made by subsection (a)(3).
Subtitle D--Alaska Natural Gas Pipeline
SEC. 371. SHORT TITLE.
This subtitle may be cited as the ``Alaska Natural Gas
Pipeline Act''.
SEC. 372. DEFINITIONS.
In this subtitle:
(1) Alaska natural gas.--The term ``Alaska natural
gas'' means natural gas derived from the area of the
State of Alaska lying north of 64 degrees north
latitude.
(2) Alaska natural gas transportation project.--The
term ``Alaska natural gas transportation project''
means any natural gas pipeline system that carries
Alaska natural gas to the border between Alaska and
Canada (including related facilities subject to the
jurisdiction of the Commission) that is authorized
under--
(A) the Alaska Natural Gas Transportation
Act of 1976 (15 U.S.C. 719 et seq.); or
(B) section 373.
(3) Alaska natural gas transportation system.--The
term ``Alaska natural gas transportation system'' means
the Alaska natural gas transportation project
authorized under the Alaska Natural Gas Transportation
Act of 1976 (15 U.S.C. 719 et seq.) and designated and
described in section 2 of the President's decision.
(4) Commission.--The term ``Commission'' means the
Federal Energy Regulatory Commission.
(5) Federal coordinator.--The term ``Federal
Coordinator'' means the head of the Office of the
Federal Coordinator for Alaska Natural Gas
Transportation Projects established by section 376(a).
(6) President's decision.--The term ``President's
decision'' means the decision and report to Congress on
the Alaska natural gas transportation system--
(A) issued by the President on September
22, 1977, in accordance with section 7 of the
Alaska Natural Gas Transportation Act of 1976
(15 U.S.C. 719e); and
(B) approved by Public Law 95-158 (15
U.S.C. 719f note; 91 Stat. 1268).
(7) Secretary.--The term ``Secretary'' means the
Secretary of Energy.
(8) State.--The term ``State'' means the State of
Alaska.
SEC. 373. ISSUANCE OF CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY.
(a) Authority of the Commission.--Notwithstanding the
Alaska Natural Gas Transportation Act of 1976 (15 U.S.C. 719 et
seq.), the Commission may, in accordance with section 7(c) of
the Natural Gas Act (15 U.S.C. 717f(c)), consider and act on an
application for the issuance of a certificate of public
convenience and necessity authorizing the construction and
operation of an Alaska natural gas transportation project other
than the Alaska natural gas transportation system.
(b) Issuance of Certificate.--
(1) In general.--The Commission shall issue a
certificate of public convenience and necessity
authorizing the construction and operation of an Alaska
natural gas transportation project under this section
if the applicant has satisfied the requirements of
section 7(e) of the Natural Gas Act (15 U.S.C.
717f(e)).
(2) Considerations.--In considering an application
under this section, the Commission shall presume that--
(A) a public need exists to construct and
operate the proposed Alaska natural gas
transportation project; and
(B) sufficient downstream capacity will
exist to transport the Alaska natural gas
moving through the project to markets in the
contiguous United States.
(c) Expedited Approval Process.--Not later than 60 days
after the date of issuance of the final environmental impact
statement under section 374 for an Alaska natural gas
transportation project, the Commission shall issue a final
order granting or denying any application for a certificate of
public convenience and necessity for the project under section
7(c) of the Natural Gas Act (15 U.S.C. 717f(c)) and this
section.
(d) Prohibition of Certain Pipeline Route.--No license,
permit, lease, right-of-way, authorization, or other approval
required under Federal law for the construction of any pipeline
to transport natural gas from land within the Prudhoe Bay oil
and gas lease area may be granted for any pipeline that follows
a route that--
(1) traverses land beneath navigable waters (as
defined in section 2 of the Submerged Lands Act (43
U.S.C. 1301)) beneath, or the adjacent shoreline of,
the Beaufort Sea; and
(2) enters Canada at any point north of 68 degrees
north latitude.
(e) Open Season.--
(1) In general.--Not later than 120 days after the
date of enactment of this Act, the Commission shall
issue regulations governing the conduct of open seasons
for Alaska natural gas transportation projects
(including procedures for the allocation of capacity).
(2) Regulations.--The regulations referred to in
paragraph (1) shall--
(A) include the criteria for and timing of
any open seasons;
(B) promote competition in the exploration,
development, and production of Alaska natural
gas; and
(C) for any open season for capacity
exceeding the initial capacity, provide the
opportunity for the transportation of natural
gas other than from the Prudhoe Bay and Point
Thomson units.
(3) Applicability.--Except in a case in which an
expansion is ordered in accordance with section 375,
initial or expansion capacity on any Alaska natural gas
transportation project shall be allocated in accordance
with procedures to be established by the Commission in
regulations issued under paragraph (1).
(f) Projects in the Contiguous United States.--
(1) In general.--An application for additional or
expanded pipeline facilities that may be required to
transport Alaska natural gas from Canada to markets in
the contiguous United States may be made in accordance
with the Natural Gas Act (15 U.S.C. 717a et seq.).
(2) Expansion.--To the extent that a pipeline
facility described in paragraph (1) includes the
expansion of any facility constructed in accordance
with the Alaska Natural Gas Transportation Act of 1976
(15 U.S.C. 719 et seq.), that Act shall continue to
apply.
(g) Study of In-State Needs.--The holder of the certificate
of public convenience and necessity issued, modified, or
amended by the Commission for an Alaska natural gas
transportation project shall demonstrate that the holder has
conducted a study of Alaska in-State needs, including tie-in
points along the Alaska natural gas transportation project for
in-State access.
(h) Alaska Royalty Gas.--
(1) In general.--Except as provided in paragraph
(2), the Commission, on a request by the State and
after a hearing, may provide for reasonable access to
the Alaska natural gas transportation project by the
State (or State designee) for the transportation of
royalty gas of the State for the purpose of meeting
local consumption needs within the State.
(2) Exception.--The rates of shippers of subscribed
capacity on an Alaska natural gas transportation
project described in paragraph (1), as in effect as of
the date on which access under that paragraph is
granted, shall not be increased as a result of such
access.
(i) Regulations.--The Commission may issue such regulations
as are necessary to carry out this section.
SEC. 374. ENVIRONMENTAL REVIEWS.
(a) Compliance With NEPA.--The issuance of a certificate of
public convenience and necessity authorizing the construction
and operation of any Alaska natural gas transportation project
under section 373 shall be treated as a major Federal action
significantly affecting the quality of the human environment
within the meaning of section 102(2)(C) of the National
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)).
(b) Designation of Lead Agency.--
(1) In general.--The Commission--
(A) shall be the lead agency for purposes
of complying with the National Environmental
Policy Act of 1969 (42 U.S.C. 4321 et seq.);
and
(B) shall be responsible for preparing the
environmental impact statement required by
section 102(2)(c) of that Act (42 U.S.C.
4332(2)(c)) with respect to an Alaska natural
gas transportation project under section 373.
(2) Consolidation of statements.--In carrying out
paragraph (1), the Commission shall prepare a single
environmental impact statement, which shall consolidate
the environmental reviews of all Federal agencies
considering any aspect of the Alaska natural gas
transportation project covered by the environmental
impact statement.
(c) Other Agencies.--
(1) In general.--Each Federal agency considering an
aspect of the construction and operation of an Alaska
natural gas transportation project under section 373
shall--
(A) cooperate with the Commission; and
(B) comply with deadlines established by
the Commission in the preparation of the
environmental impact statement under this
section.
(2) Satisfaction of nepa requirements.--The
environmental impact statement prepared under this
section shall be adopted by each Federal agency
described in paragraph (1) in satisfaction of the
responsibilities of the Federal agency under section
102(2)(C) of the National Environmental Policy Act of
1969 (42 U.S.C. 4332(2)(C)) with respect to the Alaska
natural gas transportation project covered by the
environmental impact statement.
(d) Expedited Process.--The Commission shall--
(1) not later than 1 year after the Commission
determines that the application under section 373 with
respect to an Alaska natural gas transportation project
is complete, issue a draft environmental impact
statement under this section; and
(2) not later than 180 days after the date of
issuance of the draft environmental impact statement,
issue a final environmental impact statement, unless
the Commission for good cause determines that
additional time is needed.
SEC. 375. PIPELINE EXPANSION.
(a) Authority.--With respect to any Alaska natural gas
transportation project, on a request by 1 or more persons and
after giving notice and an opportunity for a hearing, the
Commission may order the expansion of the Alaska natural gas
project if the Commission determines that such an expansion is
required by the present and future public convenience and
necessity.
(b) Responsibilities of Commission.--Before ordering an
expansion under subsection (a), the Commission shall--
(1) approve or establish rates for the expansion
service that are designed to ensure the recovery, on an
incremental or rolled-in basis, of the cost associated
with the expansion (including a reasonable rate of
return on investment);
(2) ensure that the rates do not require existing
shippers on the Alaska natural gas transportation
project to subsidize expansion shippers;
(3) find that a proposed shipper will comply with,
and the proposed expansion and the expansion of service
will be undertaken and implemented based on, terms and
conditions consistent with the tariff of the Alaska
natural gas transportation project in effect as of the
date of the expansion;
(4) find that the proposed facilities will not
adversely affect the financial or economic viability of
the Alaska natural gas transportation project;
(5) find that the proposed facilities will not
adversely affect the overall operations of the Alaska
natural gas transportation project;
(6) find that the proposed facilities will not
diminish the contract rights of existing shippers to
previously subscribed certificated capacity;
(7) ensure that all necessary environmental reviews
have been completed; and
(8) find that adequate downstream facilities exist
or are expected to exist to deliver incremental Alaska
natural gas to market.
(c) Requirement for a Firm Transportation Agreement.--Any
order of the Commission issued in accordance with this section
shall be void unless the person requesting the order executes a
firm transportation agreement with the Alaska natural gas
transportation project within such reasonable period of time as
the order may specify.
(d) Limitation.--Nothing in this section expands or
otherwise affects any authority of the Commission with respect
to any natural gas pipeline located outside the State.
(e) Regulations.--The Commission may issue such regulations
as are necessary to carry out this section.
SEC. 376. FEDERAL COORDINATOR.
(a) Establishment.--There is established, as an independent
office in the executive branch, the Office of the Federal
Coordinator for Alaska Natural Gas Transportation Projects.
(b) Federal Coordinator.--
(1) Appointment.--The Office shall be headed by a
Federal Coordinator for Alaska Natural Gas
Transportation Projects, who shall be appointed by the
President, by and with the advice and consent of the
Senate, to serve a term to last until 1 year following
the completion of the project referred to in section
373.
(2) Compensation.--The Federal Coordinator shall be
compensated at the rate prescribed for level III of the
Executive Schedule (5 U.S.C. 5314).
(c) Duties.--The Federal Coordinator shall be responsible
for--
(1) coordinating the expeditious discharge of all
activities by Federal agencies with respect to an
Alaska natural gas transportation project; and
(2) ensuring the compliance of Federal agencies
with the provisions of this subtitle.
(d) Reviews and Actions of Other Federal Agencies.--
(1) Expedited reviews and actions.--All reviews
conducted and actions taken by any Federal agency
relating to an Alaska natural gas transportation
project authorized under this section shall be
expedited, in a manner consistent with completion of
the necessary reviews and approvals by the deadlines
under this subtitle.
(2) Prohibition of certain terms and conditions.--
No Federal agency may include in any certificate,
right-of-way, permit, lease, or other authorization
issued to an Alaska natural gas transportation project
any term or condition that may be permitted, but is not
required, by any applicable law if the Federal
Coordinator determines that the term or condition would
prevent or impair in any significant respect the
expeditious construction and operation, or an
expansion, of the Alaska natural gas transportation
project.
(3) Prohibition of certain actions.--Unless
required by law, no Federal agency shall add to, amend,
or abrogate any certificate, right-of-way, permit,
lease, or other authorization issued to an Alaska
natural gas transportation project if the Federal
Coordinator determines that the action would prevent or
impair in any significant respect the expeditious
construction and operation, or an expansion, of the
Alaska natural gas transportation project.
(4) Limitation.--The Federal Coordinator shall not
have authority to--
(A) override--
(i) the implementation or
enforcement of regulations issued by
the Commission under section 373; or
(ii) an order by the Commission to
expand the project under section 375;
or
(B) impose any terms, conditions, or
requirements in addition to those imposed by
the Commission or any agency with respect to
construction and operation, or an expansion of,
the project.
(e) State Coordination.--
(1) In general.--The Federal Coordinator and the
State shall enter into a joint surveillance and
monitoring agreement similar to the agreement in effect
during construction of the Trans-Alaska Pipeline, to be
approved by the President and the Governor of the
State, for the purpose of monitoring the construction
of the Alaska natural gas transportation project.
(2) Primary responsibility.--With respect to an
Alaska natural gas transportation project--
(A) the Federal Government shall have
primary surveillance and monitoring
responsibility in areas where the Alaska
natural gas transportation project crosses
Federal land or private land; and
(B) the State government shall have primary
surveillance and monitoring responsibility in
areas where the Alaska natural gas
transportation project crosses State land.
(f) Transfer of Federal Inspector Functions and
Authority.--On appointment of the Federal Coordinator by the
President, all of the functions and authority of the Office of
Federal Inspector of Construction for the Alaska Natural Gas
Transportation System vested in the Secretary under section
3012(b) of the Energy Policy Act of 1992 (15 U.S.C. 719e note;
Public Law 102-486), including all functions and authority
described and enumerated in the Reorganization Plan No. 1 of
1979 (44 Fed. Reg. 33663), Executive Order No. 12142 of June
21, 1979 (44 Fed. Reg. 36927), and section 5 of the President's
decision, shall be transferred to the Federal Coordinator.
(g) Temporary Authority.--The functions, authorities,
duties, and responsibilities of the Federal Coordinator shall
be vested in the Secretary until the later of the appointment
of the Federal Coordinator by the President, or 18 months after
the date of enactment of this Act.
SEC. 377. JUDICIAL REVIEW.
(a) Exclusive Jurisdiction.--Except for review by the
Supreme Court on writ of certiorari, the United States Court of
Appeals for the District of Columbia Circuit shall have
original and exclusive jurisdiction to determine--
(1) the validity of any final order or action
(including a failure to act) of any Federal agency or
officer under this subtitle;
(2) the constitutionality of any provision of this
subtitle, or any decision made or action taken under
this subtitle; or
(3) the adequacy of any environmental impact
statement prepared under the National Environmental
Policy Act of 1969 (42 U.S.C. 4321 et seq.) with
respect to any action under this subtitle.
(b) Deadline for Filing Claim.--A claim arising under this
subtitle may be brought not later than 60 days after the date
of the decision or action giving rise to the claim.
(c) Expedited Consideration.--The United States Court of
Appeals for the District of Columbia Circuit shall set any
action brought under subsection (a) for expedited
consideration, taking into account the national interest of
enhancing national energy security by providing access to the
significant gas reserves in Alaska needed to meet the
anticipated demand for natural gas.
(d) Amendment of the Alaska Natural Gas Transportation Act
of 1976.--Section 10(c) of the Alaska Natural Gas
Transportation Act of 1976 (15 U.S.C. 719h) is amended--
(1) by striking ``(c)(1) A claim'' and inserting
the following:
``(c) Jurisdiction.--
``(1) Special courts.--
``(A) In general.--A claim'';
(2) by striking ``Such court shall have'' and
inserting the following:
``(B) Exclusive jurisdiction.--The Special
Court shall have'';
(3) by inserting after paragraph (1) the following:
``(2) Expedited consideration.--The Special Court
shall set any action brought under this section for
expedited consideration, taking into account the
national interest described in section 2.''; and
(4) in paragraph (3), by striking ``(3) The
enactment'' and inserting the following:
``(3) Environmental impact statements.--The
enactment''.
SEC. 378. STATE JURISDICTION OVER IN-STATE DELIVERY OF NATURAL GAS.
(a) Local Distribution.--Any facility receiving natural gas
from an Alaska natural gas transportation project for delivery
to consumers within the State--
(1) shall be deemed to be a local distribution
facility within the meaning of section 1(b) of the
Natural Gas Act (15 U.S.C. 717(b)); and
(2) shall not be subject to the jurisdiction of the
Commission.
(b) Additional Pipelines.--Except as provided in section
373(d), nothing in this subtitle shall preclude or otherwise
affect a future natural gas pipeline that may be constructed to
deliver natural gas to Fairbanks, Anchorage, Matanuska-Susitna
Valley, or the Kenai peninsula or Valdez or any other site in
the State for consumption within or distribution outside the
State.
(c) Rate Coordination.--
(1) In general.--In accordance with the Natural Gas
Act (15 U.S.C. 717a et seq.), the Commission shall
establish rates for the transportation of natural gas
on any Alaska natural gas transportation project.
(2) Consultation.--In carrying out paragraph (1),
the Commission, in accordance with section 17(b) of the
Natural Gas Act (15 U.S.C. 717p(b)), shall consult with
the State regarding rates (including rate settlements)
applicable to natural gas transported on and delivered
from the Alaska natural gas transportation project for
use within the State.
SEC. 379. STUDY OF ALTERNATIVE MEANS OF CONSTRUCTION.
(a) Requirement of Study.--If no application for the
issuance of a certificate or amended certificate of public
convenience and necessity authorizing the construction and
operation of an Alaska natural gas transportation project has
been filed with the Commission by the date that is 18 months
after the date of enactment of this Act, the Secretary shall
conduct a study of alternative approaches to the construction
and operation of such an Alaska natural gas transportation
project.
(b) Scope of Study.--The study under subsection (a) shall
take into consideration the feasibility of--
(1) establishing a Federal Government corporation
to construct an Alaska natural gas transportation
project; and
(2) securing alternative means of providing Federal
financing and ownership (including alternative
combinations of Government and private corporate
ownership) of the Alaska natural gas transportation
project.
(c) Consultation.--In conducting the study under subsection
(a), the Secretary shall consult with the Secretary of the
Treasury and the Secretary of the Army (acting through the
Chief of Engineers).
(d) Report.--On completion of any study under subsection
(a), the Secretary shall submit to Congress a report that
describes--
(1) the results of the study; and
(2) any recommendations of the Secretary (including
proposals for legislation to implement the
recommendations).
SEC. 380. CLARIFICATION OF ANGTA STATUS AND AUTHORITIES.
(a) Savings Clause.--Nothing in this subtitle affects--
(1) any decision, certificate, permit, right-of-
way, lease, or other authorization issued under section
9 of the Alaska Natural Gas Transportation Act of 1976
(15 U.S.C. 719g); or
(2) any Presidential finding or waiver issued in
accordance with that Act.
(b) Clarification of Authority to Amend Terms and
Conditions to Meet Current Project Requirements.--Any Federal
agency responsible for granting or issuing any certificate,
permit, right-of-way, lease, or other authorization under
section 9 of the Alaska Natural Gas Transportation Act of 1976
(15 U.S.C. 719g) may add to, amend, or rescind any term or
condition included in the certificate, permit, right-of-way,
lease, or other authorization to meet current project
requirements (including the physical design, facilities, and
tariff specifications), if the addition, amendment, or
rescission--
(1) would not compel any change in the basic nature
and general route of the Alaska natural gas
transportation system as designated and described in
section 2 of the President's decision; or
(2) would not otherwise prevent or impair in any
significant respect the expeditious construction and
initial operation of the Alaska natural gas
transportation system.
(c) Updated Environmental Reviews.--The Secretary shall
require the sponsor of the Alaska natural gas transportation
system to submit such updated environmental data, reports,
permits, and impact analyses as the Secretary determines are
necessary to develop detailed terms, conditions, and compliance
plans required by section 5 of the President's decision.
SEC. 381. SENSE OF CONGRESS CONCERNING USE OF STEEL MANUFACTURED IN
NORTH AMERICA NEGOTIATION OF A PROJECT LABOR
AGREEMENT.
It is the sense of Congress that--
(1) an Alaska natural gas transportation project
would provide significant economic benefits to the
United States and Canada; and
(2) to maximize those benefits, the sponsors of the
Alaska natural gas transportation project should make
every effort to--
(A) use steel that is manufactured in North
America; and
(B) negotiate a project labor agreement to
expedite construction of the pipeline.
SEC. 382. SENSE OF CONGRESS AND STUDY CONCERNING PARTICIPATION BY SMALL
BUSINESS CONCERNS.
(a) Definition of Small Business Concern.--In this section,
the term ``small business concern'' has the meaning given the
term in section 3(a) of the Small Business Act (15 U.S.C.
632(a)).
(b) Sense of Congress.--It is the sense of Congress that--
(1) an Alaska natural gas transportation project
would provide significant economic benefits to the
United States and Canada; and
(2) to maximize those benefits, the sponsors of the
Alaska natural gas transportation project should
maximize the participation of small business concerns
in contracts and subcontracts awarded in carrying out
the project.
(c) Study.--
(1) In general.--The Comptroller General of the
United States shall conduct a study to determine the
extent to which small business concerns participate in
the construction of oil and gas pipelines in the United
States.
(2) Report.--Not later than 1 year after the date
of enactment of this Act, the Comptroller General shall
submit to Congress a report that describes results of
the study under paragraph (1).
(3) Updates.--The Comptroller General shall--
(A) update the study at least once every 5
years until construction of an Alaska natural
gas transportation project is completed; and
(B) on completion of each update, submit to
Congress a report containing the results of the
update.
SEC. 383. ALASKA PIPELINE CONSTRUCTION TRAINING PROGRAM.
(a) Program.--
(1) Establishment.--The Secretary of Labor (in this
section referred to as the ``Secretary'') shall make
grants to the Alaska Workforce Investment Board--
(A) to recruit and train adult and
dislocated workers in Alaska, including Alaska
Natives, in the skills required to construct
and operate an Alaska gas pipeline system; and
(B) for the design and construction of a
training facility to be located in Fairbanks,
Alaska, to support an Alaska gas pipeline
training program.
(2) Coordination with existing programs.--The
training program established with the grants authorized
under paragraph (1) shall be consistent with the vision
and goals set forth in the State of Alaska Unified
Plan, as developed pursuant to the Workforce Investment
Act of 1998 (29 U.S.C. 2801 et seq.).
(b) Requirements for Grants.--The Secretary shall make a
grant under subsection (a) only if--
(1) the Governor of the State of Alaska requests
the grant funds and certifies in writing to the
Secretary that there is a reasonable expectation that
the construction of the Alaska natural gas pipeline
system will commence by the date that is 2 years after
the date of the certification; and
(2) the Secretary of Energy concurs in writing to
the Secretary with the certification made under
paragraph (1) after considering--
(A) the status of necessary Federal and
State permits;
(B) the availability of financing for the
Alaska natural gas pipeline project; and
(C) other relevant factors.
(c) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary to carry out this section
$20,000,000. Not more than 15 percent of the funds may be used
for the facility described in subsection (a)(1)(B).
SEC. 384. SENSE OF CONGRESS CONCERNING NATURAL GAS DEMAND.
It is the sense of Congress that--
(1) North American demand for natural gas will
increase dramatically over the course of the next
several decades;
(2) both the Alaska Natural Gas Pipeline and the
Mackenzie Delta Natural Gas project in Canada will be
necessary to help meet the increased demand for natural
gas in North America;
(3) Federal and State officials should work
together with officials in Canada to ensure both
projects can move forward in a mutually beneficial
fashion;
(4) Federal and State officials should acknowledge
that the smaller scope, fewer permitting requirements,
and lower cost of the Mackenzie Delta project means it
will most likely be completed before the Alaska Natural
Gas Pipeline;
(5) natural gas production in the 48 contiguous
States and Canada will not be able to meet all domestic
demand in the coming decades; and
(6) as a result, natural gas delivered from Alaskan
North Slope will not displace or reduce the commercial
viability of Canadian natural gas produced from the
Mackenzie Delta or production from the 48 contiguous
States.
SEC. 385. SENSE OF CONGRESS CONCERNING ALASKAN OWNERSHIP.
It is the sense of Congress that--
(1) Alaska Native Regional Corporations, companies
owned and operated by Alaskans, and individual Alaskans
should have the opportunity to own shares of the Alaska
natural gas pipeline in a way that promotes economic
development for the State; and
(2) to facilitate economic development in the
State, all project sponsors should negotiate in good
faith with any willing Alaskan person that desires to
be involved in the project.
SEC. 386. LOAN GUARANTEES.
(a) Authority.--(1) The Secretary may enter into agreements
with 1 or more holders of a certificate of public convenience
and necessity issued under section 373(b) of this Act or
section 9 of the Alaska Natural Gas Transportation Act of 1976
(15 U.S.C. 719g) to issue Federal guarantee instruments with
respect to loans and other debt obligations for a qualified
infrastructure project.
(2) Subject to the requirements of this section, the
Secretary may also enter into agreements with 1 or more owners
of the Canadian portion of a qualified infrastructure project
to issue Federal guarantee instruments with respect to loans
and other debt obligations for a qualified infrastructure
project as though such owner were a holder described in
paragraph (1).
(3) The authority of the Secretary to issue Federal
guarantee instruments under this section for a qualified
infrastructure project shall expire on the date that is 2 years
after the date on which the final certificate of public
convenience and necessity (including any Canadian certificates
of public convenience and necessity) is issued for the project.
A final certificate shall be considered to have been issued
when all certificates of public convenience and necessity have
been issued that are required for the initial transportation of
commercially economic quantities of natural gas from Alaska to
the continental United States.
(b) Conditions.--(1) The Secretary may issue a Federal
guarantee instrument for a qualified infrastructure project
only after a certificate of public convenience and necessity
under section 373(b) of this Act or an amended certificate
under section 9 of the Alaska Natural Gas Transportation Act of
1976 (15 U.S.C. 719g) has been issued for the project.
(2) The Secretary may issue a Federal guarantee instrument
under this section for a qualified infrastructure project only
if the loan or other debt obligation guaranteed by the
instrument has been issued by an eligible lender.
(3) The Secretary shall not require as a condition of
issuing a Federal guarantee instrument under this section any
contractual commitment or other form of credit support of the
sponsors (other than equity contribution commitments and
completion guarantees), or any throughput or other guarantee
from prospective shippers greater than such guarantees as shall
be required by the project owners.
(c) Limitations on Amounts.--(1) The amount of loans and
other debt obligations guaranteed under this section for a
qualified infrastructure project shall not exceed 80 percent of
the total capital costs of the project, including interest
during construction.
(2) The principal amount of loans and other debt
obligations guaranteed under this section shall not exceed, in
the aggregate, $18,000,000,000, which amount shall be indexed
for United States dollar inflation from the date of enactment
of this Act, as measured by the Consumer Price Index.
(d) Loan Terms and Fees.--(1) The Secretary may issue
Federal guarantee instruments under this section that take into
account repayment profiles and grace periods justified by
project cash flows and project-specific considerations. The
term of any loan guaranteed under this section shall not exceed
30 years.
(2) An eligible lender may assess and collect from the
borrower such other fees and costs associated with the
application and origination of the loan or other debt
obligation as are reasonable and customary for a project
finance transaction in the oil and gas sector.
(e) Regulations.--The Secretary may issue regulations to
carry out this section.
(f) Authorization of Appropriations.--There are authorized
to be appropriated such sums as may be necessary to cover the
cost of loan guarantees under this section, as defined by
section 502(5) of the Federal Credit Reform Act of 1990 (2
U.S.C. 661a(5)). Such sums shall remain available until
expended.
(g) Definitions.--In this section, the following
definitions apply:
(1) The term ``Consumer Price Index'' means the
Consumer Price Index for all-urban consumers, United
States city average, as published by the Bureau of
Labor Statistics, or if such index shall cease to be
published, any successor index or reasonable substitute
thereof.
(2) The term ``eligible lender'' means any non-
Federal qualified institutional buyer (as defined by
section 230.144A(a) of title 17, Code of Federal
Regulations (or any successor regulation), known as
Rule 144A(a) of the Securities and Exchange Commission
and issued under the Securities Act of 1933),
including--
(A) a qualified retirement plan (as defined
in section 4974(c) of the Internal Revenue Code
of 1986 (26 U.S.C. 4974(c)) that is a qualified
institutional buyer; and
(B) a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of
1986 (26 U.S.C. 414(d)) that is a qualified
institutional buyer.
(3) The term ``Federal guarantee instrument'' means
any guarantee or other pledge by the Secretary to
pledge the full faith and credit of the United States
to pay all of the principal and interest on any loan or
other debt obligation entered into by a holder of a
certificate of public convenience and necessity.
(4) The term ``qualified infrastructure project''
means an Alaskan natural gas transportation project
consisting of the design, engineering, finance,
construction, and completion of pipelines and related
transportation and production systems (including gas
treatment plants), and appurtenances thereto, that are
used to transport natural gas from the Alaska North
Slope to the continental United States.
TITLE IV--COAL
Subtitle A--Clean Coal Power Initiative
SEC. 401. AUTHORIZATION OF APPROPRIATIONS.
(a) Clean Coal Power Initiative.--There are authorized to
be appropriated to the Secretary of Energy (referred to in this
title as the ``Secretary'') to carry out the activities
authorized by this subtitle $200,000,000 for each of fiscal
years 2004 through 2012, to remain available until expended.
(b) Report.--The Secretary shall submit to Congress the
report required by this subsection not later than March 31,
2005. The report shall include, with respect to subsection (a),
a 10-year plan containing--
(1) a detailed assessment of whether the aggregate
funding levels provided under subsection (a) are the
appropriate funding levels for that program;
(2) a detailed description of how proposals will be
solicited and evaluated, including a list of all
activities expected to be undertaken;
(3) a detailed list of technical milestones for
each coal and related technology that will be pursued;
and
(4) a detailed description of how the program will
avoid problems enumerated in General Accounting Office
reports on the Clean Coal Technology Program, including
problems that have resulted in unspent funds and
projects that failed either financially or
scientifically.
SEC. 402. PROJECT CRITERIA.
(a) In General.--The Secretary shall not provide funding
under this subtitle for any project that does not advance
efficiency, environmental performance, and cost competitiveness
well beyond the level of technologies that are in commercial
service or have been demonstrated on a scale that the Secretary
determines is sufficient to demonstrate that commercial service
is viable as of the date of enactment of this Act.
(b) Technical Criteria for Clean Coal Power Initiative.--
(1) Gasification projects.--
(A) In general.--In allocating the funds
made available under section 401(a), the
Secretary shall ensure that at least 60 percent
of the funds are used only for projects on
coal-based gasification technologies, including
gasification combined cycle, gasification fuel
cells, gasification coproduction, and hybrid
gasification/combustion.
(B) Technical milestones.--The Secretary
shall periodically set technical milestones
specifying the emission and thermal efficiency
levels that coal gasification projects under
this subtitle shall be designed, and reasonably
expected, to achieve. The technical milestones
shall become more restrictive during the life
of the program. The Secretary shall set the
periodic milestones so as to achieve by 2020
coal gasification projects able--
(i) to remove 99 percent of sulfur
dioxide;
(ii) to emit not more than .05 lbs
of NOX per million Btu;
(iii) to achieve substantial
reductions in mercury emissions; and
(iv) to achieve a thermal
efficiency of--
(I) 60 percent for coal of
more than 9,000 Btu;
(II) 59 percent for coal of
7,000 to 9,000 Btu; and
(III) 50 percent for coal
of less than 7,000 Btu.
(2) Other projects.--The Secretary shall
periodically set technical milestones and ensure that
up to 40 percent of the funds appropriated pursuant to
section 401(a) are used for projects not described in
paragraph (1). The milestones shall specify the
emission and thermal efficiency levels that projects
funded under this paragraph shall be designed to and
reasonably expected to achieve. The technical
milestones shall become more restrictive during the
life of the program. The Secretary shall set the
periodic milestones so as to achieve by 2010 projects
able--
(A) to remove 97 percent of sulfur dioxide;
(B) to emit no more than .08 lbs of
NOX per million Btu;
(C) to achieve substantial reductions in
mercury emissions; and
(D) to achieve a thermal efficiency of--
(i) 45 percent for coal of more
than 9,000 Btu;
(ii) 44 percent for coal of 7,000
to 9,000 Btu; and
(iii) 40 percent for coal of less
than 7,000 Btu.
(3) Consultation.--Before setting the technical
milestones under paragraphs (1)(B) and (2), the
Secretary shall consult with the Administrator of the
Environmental Protection Agency and interested
entities, including coal producers, industries using
coal, organizations to promote coal or advanced coal
technologies, environmental organizations, and
organizations representing workers.
(4) Existing units.--In the case of projects at
units in existence on the date of enactment of this
Act, in lieu of the thermal efficiency requirements set
forth in paragraph (1)(B)(iv) and (2)(D), the
milestones shall be designed to achieve an overall
thermal design efficiency improvement, compared to the
efficiency of the unit as operated, of not less than--
(A) 7 percent for coal of more than 9,000
Btu;
(B) 6 percent for coal of 7,000 to 9,000
Btu; or
(C) 4 percent for coal of less than 7,000
Btu.
(5) Permitted uses.--In carrying out this subtitle,
the Secretary may fund projects that include, as part
of the project, the separation and capture of carbon
dioxide.
(c) Financial Criteria.--The Secretary shall not provide a
funding award under this subtitle unless the recipient
documents to the satisfaction of the Secretary that--
(1) the award recipient is financially viable
without the receipt of additional Federal funding;
(2) the recipient will provide sufficient
information to the Secretary to enable the Secretary to
ensure that the award funds are spent efficiently and
effectively; and
(3) a market exists for the technology being
demonstrated or applied, as evidenced by statements of
interest in writing from potential purchasers of the
technology.
(d) Financial Assistance.--The Secretary shall provide
financial assistance to projects that meet the requirements of
subsections (a), (b), and (c) and are likely to--
(1) achieve overall cost reductions in the
utilization of coal to generate useful forms of energy;
(2) improve the competitiveness of coal among
various forms of energy in order to maintain a
diversity of fuel choices in the United States to meet
electricity generation requirements; and
(3) demonstrate methods and equipment that are
applicable to 25 percent of the electricity generating
facilities, using various types of coal, that use coal
as the primary feedstock as of the date of enactment of
this Act.
(e) Federal Share.--The Federal share of the cost of a coal
or related technology project funded by the Secretary under
this subtitle shall not exceed 50 percent.
(f) Applicability.--No technology, or level of emission
reduction, shall be treated as adequately demonstrated for
purposes of section 111 of the Clean Air Act (42 U.S.C. 7411),
achievable for purposes of section 169 of that Act (42 U.S.C.
7479), or achievable in practice for purposes of section 171 of
that Act (42 U.S.C. 7501) solely by reason of the use of such
technology, or the achievement of such emission reduction, by 1
or more facilities receiving assistance under this subtitle.
SEC. 403. REPORT.
Not later than 1 year after the date of enactment of this
Act, and once every 2 years thereafter through 2012, the
Secretary, in consultation with other appropriate Federal
agencies, shall submit to Congress a report describing--
(1) the technical milestones set forth in section
402 and how those milestones ensure progress toward
meeting the requirements of subsections (b)(1)(B) and
(b)(2) of section 402; and
(2) the status of projects funded under this
subtitle.
SEC. 404. CLEAN COAL CENTERS OF EXCELLENCE.
As part of the program authorized in section 401, the
Secretary shall award competitive, merit-based grants to
universities for the establishment of Centers of Excellence for
Energy Systems of the Future. The Secretary shall provide
grants to universities that show the greatest potential for
advancing new clean coal technologies.
Subtitle B--Clean Power Projects
SEC. 411. COAL TECHNOLOGY LOAN.
There are authorized to be appropriated to the Secretary
$125,000,000 to provide a loan to the owner of the experimental
plant constructed under United States Department of Energy
cooperative agreement number DE-FC-22-91PC90544 on such terms
and conditions as the Secretary determines, including interest
rates and upfront payments.
SEC. 412. COAL GASIFICATION.
The Secretary is authorized to provide loan guarantees for
a project to produce energy from a plant using integrated
gasification combined cycle technology of at least 400
megawatts in capacity that produces power at competitive rates
in deregulated energy generation markets and that does not
receive any subsidy (direct or indirect) from ratepayers.
SEC. 413. INTEGRATED GASIFICATION COMBINED CYCLE TECHNOLOGY.
The Secretary is authorized to provide loan guarantees for
a project to produce energy from a plant using integrated
gasification combined cycle technology located in a taconite-
producing region of the United States that is entitled under
the law of the State in which the plant is located to enter
into a long-term contract approved by a State Public Utility
Commission to sell at least 450 megawatts of output to a
utility.
SEC. 414. PETROLEUM COKE GASIFICATION.
The Secretary is authorized to provide loan guarantees for
at least 1 petroleum coke gasification polygeneration project.
SEC. 415. INTEGRATED COAL/RENEWABLE ENERGY SYSTEM.
The Secretary is authorized, subject to the availability of
appropriations, to provide loan guarantees for a project to
produce energy from coal of less than 7,000 btu/lb using
appropriate advanced integrated gasification combined cycle
technology, including repowering of existing facilities, that
is combined with wind and other renewable sources, minimizes
and offers the potential to sequester carbon dioxide emissions,
and provides a ready source of hydrogen for near-site fuel cell
demonstrations. The facility may be built in stages, combined
output shall be at least 200 megawatts at successively more
competitive rates, and the facility shall be located in the
Upper Great Plains. Section 402(b) technical criteria apply,
and the Federal cost share shall not exceed 50 percent. The
loan guarantees provided under this section do not preclude the
facility from receiving an allocation for investment tax
credits under section 48A of the Internal Revenue Code of 1986.
Utilizing this investment tax credit does not prohibit the use
of other Clean Coal Program funding.
SEC. 416. ELECTRON SCRUBBING DEMONSTRATION.
The Secretary shall use $5,000,000 from amounts
appropriated to initiate, through the Chicago Operations
Office, a project to demonstrate the viability of high-energy
electron scrubbing technology on commercial-scale electrical
generation using high-sulfur coal.
Subtitle C--Federal Coal Leases
SEC. 421. REPEAL OF THE 160-ACRE LIMITATION FOR COAL LEASES.
Section 3 of the Mineral Leasing Act (30 U.S.C. 203) is
amended--
(1) in the first sentence--
(A) by striking ``Any person'' and
inserting ``(a) Any person'';
(B) by inserting a comma after ``may''; and
(C) by striking ``upon'' and all that
follows through the period and inserting the
following: ``upon a finding by the Secretary
that the lease--
``(1) would be in the interest of the United
States;
``(2) would not displace a competitive interest in
the land; and
``(3) would not include land or deposits that can
be developed as part of another potential or existing
operation;
secure modifications of the original coal lease by including
additional coal land or coal deposits contiguous or cornering
to those embraced in the lease, but in no event shall the total
area added by any modifications to an existing coal lease
exceed 1,280 acres, or add acreage larger than the acreage in
the original lease.'';
(2) in the second sentence, by striking ``The
Secretary'' and inserting the following:
``(b) The Secretary''; and
(3) in the third sentence, by striking ``The
minimum'' and inserting the following:
``(c) The minimum''.
SEC. 422. MINING PLANS.
Section 2(d)(2) of the Mineral Leasing Act (30 U.S.C.
202a(2)) is amended--
(1) by inserting ``(A)'' after ``(2)''; and
(2) by adding at the end the following:
``(B) The Secretary may establish a period of more than 40
years if the Secretary determines that the longer period--
``(i) will ensure the maximum economic recovery of
a coal deposit; or
``(ii) the longer period is in the interest of the
orderly, efficient, or economic development of a coal
resource.''.
SEC. 423. PAYMENT OF ADVANCE ROYALTIES UNDER COAL LEASES.
Section 7(b) of the Mineral Leasing Act (30 U.S.C. 207(b))
is amended to read as follows:
``(b)(1) Each lease shall be subjected to the condition of
diligent development and continued operation of the mine or
mines, except in a case in which operations under the lease are
interrupted by strikes, the elements, or casualties not
attributable to the lessee.
``(2)(A) The Secretary of the Interior may suspend the
condition of continued operation upon the payment of advance
royalties, if the Secretary determines that the public interest
will be served by the suspension.
``(B) Advance royalties required under subparagraph (A)
shall be computed based on--
``(i) the average price for coal sold in the spot
market from the same region during the last month of
each applicable continued operation year; or
``(ii) by using other methods established by the
Secretary of the Interior to capture the commercial
value of coal,
and based on commercial quantities, as defined by regulation by
the Secretary of the Interior.
``(C) The aggregate number of years during the initial and
any extended term of any lease for which advance royalties may
be accepted in lieu of the condition of continued operation
shall not exceed 20.
``(3) The amount of any production royalty paid for any
year shall be reduced (but not below 0) by the amount of any
advance royalties paid under the lease, to the extent that the
advance royalties have not been used to reduce production
royalties for a prior year.
``(4) The Secretary may, upon 6 months' notice to a lessee,
cease to accept advance royalties in lieu of the requirement of
continued operation.
``(5) Nothing in this subsection affects the requirement
contained in the second sentence of subsection (a) relating to
commencement of production at the end of 10 years.''.
SEC. 424. ELIMINATION OF DEADLINE FOR SUBMISSION OF COAL LEASE
OPERATION AND RECLAMATION PLAN.
Section 7(c) of the Mineral Leasing Act (30 U.S.C. 207(c))
is amended in the first sentence by striking ``and not later
than three years after a lease is issued,''.
SEC. 425. AMENDMENT RELATING TO FINANCIAL ASSURANCES WITH RESPECT TO
BONUS BIDS.
Section 2(a) of the Mineral Leasing Act (30 U.S.C. 201(a))
is amended by adding at the end the following:
``(4)(A) The Secretary shall not require a surety bond or
any other financial assurance to guarantee payment of deferred
bonus bid installments with respect to any coal lease issued on
a cash bonus bid to a lessee or successor in interest having a
history of a timely payment of noncontested coal royalties and
advanced coal royalties in lieu of production (where
applicable) and bonus bid installment payments.
``(B) The Secretary may waive any requirement that a lessee
provide a surety bond or other financial assurance for a coal
lease issued before the date of the enactment of the Energy
Policy Act of 2003 only if the Secretary determines that the
lessee has a history of making timely payments referred to in
subparagraph (A).
``(5) Notwithstanding any other provision of law, if the
lessee under a coal lease fails to pay any installment of a
deferred cash bonus bid within 10 days after the Secretary
provides written notice that payment of the installment is past
due--
``(A) the lease shall automatically terminate; and
``(B) any bonus payments already made to the United
States with respect to the lease shall not be returned
to the lessee or credited in any future lease sale.''.
SEC. 426. INVENTORY REQUIREMENT.
(a) Review of Assessments.--
(1) In general.--The Secretary of the Interior, in
consultation with the Secretary of Agriculture and the
Secretary, shall review coal assessments and other
available data to identify--
(A) public lands, other than National Park
lands, with coal resources;
(B) the extent and nature of any
restrictions or impediments to the development
of coal resources on public lands identified
under subparagraph (A); and
(C) with respect to areas of such lands for
which sufficient data exists, resources of
compliant coal and supercompliant coal.
(2) Definitions.--In this subsection:
(A) Compliant coal.--The term ``compliant
coal'' means coal that contains not less than
1.0 and not more than 1.2 pounds of sulfur
dioxide per million Btu.
(B) Supercompliant coal.--The term
``supercompliant coal'' means coal that
contains less than 1.0 pounds of sulfur dioxide
per million Btu.
(b) Completion and Updating of the Inventory.--The
Secretary of the Interior--
(1) shall complete the inventory under subsection
(a)(1) by not later than 2 years after the date of the
enactment of this Act; and
(2) shall update the inventory as the availability
of data and developments in technology warrant.
(c) Report.--The Secretary of the Interior shall submit to
Congress, and make publicly available--
(1) a report containing the inventory under this
section by not later than 2 years after the effective
date of this section; and
(2) each update of that inventory.
SEC. 427. APPLICATION OF AMENDMENTS.
The amendments made by this subtitle apply--
(1) with respect to any coal lease issued on or
after the date of enactment of this Act; and
(2) with respect to any coal lease issued before
the date of enactment of this Act, upon the earlier
of--
(A) the date of readjustment of the lease
as provided for by section 7(a) of the Mineral
Leasing Act (30 U.S.C. 207(a)); or
(B) the date the lessee requests such
application.
Subtitle D--Coal and Related Programs
SEC. 441. CLEAN AIR COAL PROGRAM.
(a) Amendment.--The Energy Policy Act of 1992 is amended by
adding the following new title at the end thereof:
``TITLE XXXI--CLEAN AIR COAL PROGRAM
``SEC. 3101. FINDINGS; PURPOSES; DEFINITIONS.
``(a) Findings.--The Congress finds that--
``(1) new environmental regulations present
additional challenges for coal-fired electrical
generation in the private marketplace; and
``(2) the Department of Energy, in cooperation with
industry, has already fully developed and
commercialized several new clean-coal technologies that
will allow the clean use of coal.
``(b) Purposes.--The purposes of this title are to--
``(1) promote national energy policy and energy
security, diversity, and economic competitiveness
benefits that result from the increased use of coal;
``(2) mitigate financial risks, reduce the cost,
and increase the marketplace acceptance of the new
clean coal technologies; and
``(3) advance the deployment of pollution control
equipment to meet the current and future obligations of
coal-fired generation units regulated under the Clean
Air Act (42 U.S.C. 7402 and following).
``SEC. 3102. AUTHORIZATION OF PROGRAM.
``The Secretary shall carry out a program to facilitate
production and generation of coal-based power and the
installation of pollution control equipment.
``SEC. 3103. AUTHORIZATION OF APPROPRIATIONS.
``(a) Pollution Control Projects.--There are authorized to
be appropriated to the Secretary $300,000,000 for fiscal year
2005, $100,000,000 for fiscal year 2006, $40,000,000 for fiscal
year 2007, $30,000,000 for fiscal year 2008, and $30,000,000
for fiscal year 2009, to remain available until expended, for
carrying out the program for pollution control projects, which
may include--
``(1) pollution control equipment and processes for
the control of mercury air emissions;
``(2) pollution control equipment and processes for
the control of nitrogen dioxide air emissions or sulfur
dioxide emissions;
``(3) pollution control equipment and processes for
the mitigation or collection of more than one
pollutant;
``(4) advanced combustion technology for the
control of at least two pollutants, including mercury,
particulate matter, nitrogen oxides, and sulfur
dioxide, which may also be designed to improve the
energy efficiency of the unit; and
``(5) advanced pollution control equipment and
processes designed to allow use of the waste byproducts
or other byproducts of the equipment or an electrical
generation unit designed to allow the use of
byproducts.
Funds appropriated under this subsection which are not awarded
before fiscal year 2011 may be applied to projects under
subsection (b), in addition to amounts authorized under
subsection (b).
``(b) Generation Projects.--There are authorized to be
appropriated to the Secretary $150,000,000 for fiscal year
2006, $250,000,000 for each of the fiscal years 2007 through
2011, and $100,000,000 for fiscal year 2012, to remain
available until expended, for generation projects and air
pollution control projects. Such projects may include--
``(1) coal-based electrical generation equipment
and processes, including gasification combined cycle or
other coal-based generation equipment and processes;
``(2) associated environmental control equipment,
that will be cost-effective and that is designed to
meet anticipated regulatory requirements;
``(3) coal-based electrical generation equipment
and processes, including gasification fuel cells,
gasification coproduction, and hybrid gasification/
combustion projects; and
``(4) advanced coal-based electrical generation
equipment and processes, including oxidation combustion
techniques, ultra-supercritical boilers, and chemical
looping, which the Secretary determines will be cost-
effective and could substantially contribute to meeting
anticipated environmental or energy needs.
``(c) Limitation.--Funds placed at risk during any fiscal
year for Federal loans or loan guarantees pursuant to this
title may not exceed 30 percent of the total funds obligated
under this title.
``SEC. 3104. AIR POLLUTION CONTROL PROJECT CRITERIA.
``The Secretary shall pursuant to authorizations contained
in section 3103 provide funding for air pollution control
projects designed to facilitate compliance with Federal and
State environmental regulations, including any regulation that
may be established with respect to mercury.
``SEC. 3105. CRITERIA FOR GENERATION PROJECTS.
``(a) Criteria.--The Secretary shall establish criteria on
which selection of individual projects described in section
3103(b) should be based. The Secretary may modify the criteria
as appropriate to reflect improvements in equipment, except
that the criteria shall not be modified to be less stringent.
These selection criteria shall include--
``(1) prioritization of projects whose installation
is likely to result in significant air quality
improvements in nonattainment air quality areas;
``(2) prioritization of projects that result in the
repowering or replacement of older, less efficient
units;
``(3) documented broad interest in the procurement
of the equipment and utilization of the processes used
in the projects by electrical generator owners or
operators;
``(4) equipment and processes beginning in 2005
through 2010 that are projected to achieve an thermal
efficiency of--
``(A) 40 percent for coal of more than
9,000 Btu per pound based on higher heating
values;
``(B) 38 percent for coal of 7,000 to 9,000
Btu per pound based on higher heating values;
and
``(C) 36 percent for coal of less than
7,000 Btu per pound based on higher heating
values,
except that energy used for coproduction or
cogeneration shall not be counted in calculating the
thermal efficiency under this paragraph; and
``(5) equipment and processes beginning in 2011 and
2012 that are projected to achieve an thermal
efficiency of--
``(A) 45 percent for coal of more than
9,000 Btu per pound based on higher heating
values;
``(B) 44 percent for coal of 7,000 to 9,000
Btu per pound based on higher heating values;
and
``(C) 40 percent for coal of less than
7,000 Btu per pound based on higher heating
values,
except that energy used for coproduction or
cogeneration shall not be counted in calculating the
thermal efficiency under this paragraph.
``(b) Selection.--(1) In selecting the projects, up to 25
percent of the projects selected may be either coproduction or
cogeneration or other gasification projects, but at least 25
percent of the projects shall be for the sole purpose of
electrical generation, and priority should be given to
equipment and projects less than 600 MW to foster and promote
standard designs.
``(2) The Secretary shall give priority to projects that
have been developed and demonstrated that are not yet cost
competitive, and for coal energy generation projects that
advance efficiency, environmental performance, or cost
competitiveness significantly beyond the level of pollution
control equipment that is in operation on a full scale.
``SEC. 3106. FINANCIAL CRITERIA.
``(a) In General.--The Secretary shall only provide
financial assistance to projects that meet the requirements of
sections 3103 and 3104 and are likely to--
``(1) achieve overall cost reductions in the
utilization of coal to generate useful forms of energy;
and
``(2) improve the competitiveness of coal in order
to maintain a diversity of domestic fuel choices in the
United States to meet electricity generation
requirements.
``(b) Conditions.--The Secretary shall not provide a
funding award under this title unless--
``(1) the award recipient is financially viable
without the receipt of additional Federal funding; and
``(2) the recipient provides sufficient information
to the Secretary for the Secretary to ensure that the
award funds are spent efficiently and effectively.
``(c) Equal Access.--The Secretary shall, to the extent
practical, utilize cooperative agreement, loan guarantee, and
direct Federal loan mechanisms designed to ensure that all
electrical generation owners have equal access to these
technology deployment incentives. The Secretary shall develop
and direct a competitive solicitation process for the selection
of technologies and projects under this title.
``SEC. 3107. FEDERAL SHARE.
``The Federal share of the cost of a coal or related
technology project funded by the Secretary under this title
shall not exceed 50 percent. For purposes of this title,
Federal funding includes only appropriated funds.
``SEC. 3108. APPLICABILITY.
``No technology, or level of emission reduction, shall be
treated as adequately demonstrated for purposes of section 111
of the Clean Air Act (42 U.S.C. 7411), achievable for purposes
of section 169 of the Clean Air Act (42 U.S.C. 7479), or
achievable in practice for purposes of section 171 of the Clean
Air Act (42 U.S.C. 7501) solely by reason of the use of such
technology, or the achievement of such emission reduction, by
one or more facilities receiving assistance under this
title.''.
(b) Table of Contents Amendment.--The table of contents of
the Energy Policy Act of 1992 is amended by adding at the end
the following:
``TITLE XXXI--CLEAN AIR COAL PROGRAM
``Sec. 3101. Findings; purposes; definitions.
``Sec. 3102. Authorization of program.
``Sec. 3103. Authorization of appropriations.
``Sec. 3104. Air pollution control project criteria.
``Sec. 3105. Criteria for generation projects.
``Sec. 3106. Financial criteria.
``Sec. 3107. Federal share.
``Sec. 3108. Applicability.''.
TITLE V--INDIAN ENERGY
SEC. 501. SHORT TITLE.
This title may be cited as the ``Indian Tribal Energy
Development and Self-Determination Act of 2003''.
SEC. 502. OFFICE OF INDIAN ENERGY POLICY AND PROGRAMS.
(a) In General.--Title II of the Department of Energy
Organization Act (42 U.S.C. 7131 et seq.) is amended by adding
at the end the following:
``OFFICE OF INDIAN ENERGY POLICY AND PROGRAMS
``Sec. 217. (a) Establishment.--There is established within
the Department an Office of Indian Energy Policy and Programs
(referred to in this section as the `Office'). The Office shall
be headed by a Director, who shall be appointed by the
Secretary and compensated at a rate equal to that of level IV
of the Executive Schedule under section 5315 of title 5, United
States Code.
``(b) Duties of Director.--The Director, in accordance with
Federal policies promoting Indian self-determination and the
purposes of this Act, shall provide, direct, foster,
coordinate, and implement energy planning, education,
management, conservation, and delivery programs of the
Department that--
``(1) promote Indian tribal energy development,
efficiency, and use;
``(2) reduce or stabilize energy costs;
``(3) enhance and strengthen Indian tribal energy
and economic infrastructure relating to natural
resource development and electrification; and
``(4) bring electrical power and service to Indian
land and the homes of tribal members located on Indian
lands or acquired, constructed, or improved (in whole
or in part) with Federal funds.''.
(b) Conforming Amendments.--
(1) The table of contents of the Department of
Energy Organization Act (42 U.S.C. prec. 7101) is
amended--
(A) in the item relating to section 209, by
striking ``Section'' and inserting ``Sec.'';
and
(B) by striking the items relating to
sections 213 through 216 and inserting the
following:
``Sec. 213. Establishment of policy for National Nuclear Security
Administration.
``Sec. 214. Establishment of security, counterintelligence, and
intelligence policies.
``Sec. 215. Office of Counterintelligence.
``Sec. 216. Office of Intelligence.
``Sec. 217. Office of Indian Energy Policy and Programs.''.
(2) Section 5315 of title 5, United States Code, is
amended by inserting ``Director, Office of Indian
Energy Policy and Programs, Department of Energy.''
after ``Inspector General, Department of Energy.''.
SEC. 503. INDIAN ENERGY.
(a) In General.--Title XXVI of the Energy Policy Act of
1992 (25 U.S.C. 3501 et seq.) is amended to read as follows:
``TITLE XXVI--INDIAN ENERGY
``SEC. 2601. DEFINITIONS.
``For purposes of this title:
``(1) The term `Director' means the Director of the
Office of Indian Energy Policy and Programs, Department
of Energy.
``(2) The term `Indian land' means--
``(A) any land located within the
boundaries of an Indian reservation, pueblo, or
rancheria;
``(B) any land not located within the
boundaries of an Indian reservation, pueblo, or
rancheria, the title to which is held--
``(i) in trust by the United States
for the benefit of an Indian tribe or
an individual Indian;
``(ii) by an Indian tribe or an
individual Indian, subject to
restriction against alienation under
laws of the United States; or
``(iii) by a dependent Indian
community; and
``(C) land that is owned by an Indian tribe
and was conveyed by the United States to a
Native Corporation pursuant to the Alaska
Native Claims Settlement Act (43 U.S.C. 1601 et
seq.), or that was conveyed by the United
States to a Native Corporation in exchange for
such land.
``(3) The term `Indian reservation' includes--
``(A) an Indian reservation in existence in
any State or States as of the date of enactment
of this paragraph;
``(B) a public domain Indian allotment; and
``(C) a dependent Indian community located
within the borders of the United States,
regardless of whether the community is
located--
``(i) on original or acquired
territory of the community; or
``(ii) within or outside the
boundaries of any particular State.
``(4) The term `Indian tribe' has the meaning given
the term in section 4 of the Indian Self-Determination
and Education Assistance Act (25 U.S.C. 450b), except
that the term `Indian tribe', for the purpose of
paragraph (11) and sections 2603(b)(3) and 2604, shall
not include any Native Corporation.
``(5) The term `integration of energy resources'
means any project or activity that promotes the
location and operation of a facility (including any
pipeline, gathering system, transportation system or
facility, or electric transmission or distribution
facility) on or near Indian land to process, refine,
generate electricity from, or otherwise develop energy
resources on, Indian land.
``(6) The term `Native Corporation' has the meaning
given the term in section 3 of the Alaska Native Claims
Settlement Act (43 U.S.C. 1602).
``(7) The term `organization' means a partnership,
joint venture, limited liability company, or other
unincorporated association or entity that is
established to develop Indian energy resources.
``(8) The term `Program' means the Indian energy
resource development program established under section
2602(a).
``(9) The term `Secretary' means the Secretary of
the Interior.
``(10) The term `tribal energy resource development
organization' means an organization of 2 or more
entities, at least 1 of which is an Indian tribe, that
has the written consent of the governing bodies of all
Indian tribes participating in the organization to
apply for a grant, loan, or other assistance authorized
by section 2602.
``(11) The term `tribal land' means any land or
interests in land owned by any Indian tribe, title to
which is held in trust by the United States or which is
subject to a restriction against alienation under laws
of the United States.
``SEC. 2602. INDIAN TRIBAL ENERGY RESOURCE DEVELOPMENT.
``(a) Department of the Interior Program.--
``(1) To assist Indian tribes in the development of
energy resources and further the goal of Indian self-
determination, the Secretary shall establish and
implement an Indian energy resource development program
to assist consenting Indian tribes and tribal energy
resource development organizations in achieving the
purposes of this title.
``(2) In carrying out the Program, the Secretary
shall--
``(A) provide development grants to Indian
tribes and tribal energy resource development
organizations for use in developing or
obtaining the managerial and technical capacity
needed to develop energy resources on Indian
land, and to properly account for resulting
energy production and revenues;
``(B) provide grants to Indian tribes and
tribal energy resource development
organizations for use in carrying out projects
to promote the integration of energy resources,
and to process, use, or develop those energy
resources, on Indian land; and
``(C) provide low-interest loans to Indian
tribes and tribal energy resource development
organizations for use in the promotion of
energy resource development on Indian land and
integration of energy resources.
``(3) There are authorized to be appropriated to
carry out this subsection such sums as are necessary
for each of fiscal years 2004 through 2014.
``(b) Department of Energy Indian Energy Education Planning
and Management Assistance Program.--
``(1) The Director shall establish programs to
assist consenting Indian tribes in meeting energy
education, research and development, planning, and
management needs.
``(2) In carrying out this subsection, the Director
may provide grants, on a competitive basis, to an
Indian tribe or tribal energy resource development
organization for use in carrying out--
``(A) energy, energy efficiency, and energy
conservation programs;
``(B) studies and other activities
supporting tribal acquisitions of energy
supplies, services, and facilities;
``(C) planning, construction, development,
operation, maintenance, and improvement of
tribal electrical generation, transmission, and
distribution facilities located on Indian land;
and
``(D) development, construction, and
interconnection of electric power transmission
facilities located on Indian land with other
electric transmission facilities.
``(3)(A) The Director may develop, in consultation
with Indian tribes, a formula for providing grants
under this subsection.
``(B) In providing a grant under this subsection,
the Director shall give priority to an application
received from an Indian tribe with inadequate electric
service (as determined by the Director).
``(4) The Secretary of Energy may issue such
regulations as necessary to carry out this subsection.
``(5) There are authorized to be appropriated to
carry out this subsection $20,000,000 for each of
fiscal years 2004 through 2014.
``(c) Department of Energy Loan Guarantee Program.--
``(1) Subject to paragraph (3), the Secretary of
Energy may provide loan guarantees (as defined in
section 502 of the Federal Credit Reform Act of 1990 (2
U.S.C. 661a)) for not more than 90 percent of the
unpaid principal and interest due on any loan made to
any Indian tribe for energy development.
``(2) A loan guarantee under this subsection shall
be made by--
``(A) a financial institution subject to
examination by the Secretary of Energy; or
``(B) an Indian tribe, from funds of the
Indian tribe.
``(3) The aggregate outstanding amount guaranteed
by the Secretary of Energy at any time under this
subsection shall not exceed $2,000,000,000.
``(4) The Secretary of Energy may issue such
regulations as the Secretary of Energy determines are
necessary to carry out this subsection.
``(5) There are authorized to be appropriated such
sums as are necessary to carry out this subsection, to
remain available until expended.
``(6) Not later than 1 year from the date of
enactment of this section, the Secretary of Energy
shall report to Congress on the financing requirements
of Indian tribes for energy development on Indian land.
``(d) Federal Agencies-Indian Energy Preference.--
``(1) In purchasing electricity or any other energy
product or byproduct, a Federal agency or department
may give preference to an energy and resource
production enterprise, partnership, consortium,
corporation, or other type of business organization the
majority of the interest in which is owned and
controlled by 1 or more Indian tribes.
``(2) In carrying out this subsection, a Federal
agency or department shall not--
``(A) pay more than the prevailing market
price for an energy product or byproduct; or
``(B) obtain less than prevailing market
terms and conditions.
``SEC. 2603. INDIAN TRIBAL ENERGY RESOURCE REGULATION.
``(a) Grants.--The Secretary may provide to Indian tribes,
on an annual basis, grants for use in accordance with
subsection (b).
``(b) Use of Funds.--Funds from a grant provided under this
section may be used--
``(1) by an Indian tribe for the development of a
tribal energy resource inventory or tribal energy
resource on Indian land;
``(2) by an Indian tribe for the development of a
feasibility study or other report necessary to the
development of energy resources on Indian land;
``(3) by an Indian tribe (other than an Indian
Tribe in Alaska except the Metlakatla Indian Community)
for the development and enforcement of tribal laws
(including regulations) relating to tribal energy
resource development and the development of technical
infrastructure to protect the environment under
applicable law; or
``(4) by a Native Corporation for the development
and implementation of corporate policies and the
development of technical infrastructure to protect the
environment under applicable law; and
``(5) by an Indian tribe for the training of
employees that--
``(A) are engaged in the development of
energy resources on Indian land; or
``(B) are responsible for protecting the
environment.
``(c) Other Assistance.--In carrying out the obligations of
the United States under this title, the Secretary shall ensure,
to the maximum extent practicable and to the extent of
available resources, that upon the request of an Indian tribe,
the Indian tribe shall have available scientific and technical
information and expertise, for use in the Indian tribe's
regulation, development, and management of energy resources on
Indian land. The Secretary may fulfill this responsibility
either directly, through the use of Federal officials, or
indirectly, by providing financial assistance to the Indian
tribe to secure independent assistance.
``SEC. 2604. LEASES, BUSINESS AGREEMENTS, AND RIGHTS-OF-WAY INVOLVING
ENERGY DEVELOPMENT OR TRANSMISSION.
``(a) Leases and Business Agreements.--Subject to the
provisions of this section--
``(1) an Indian tribe may, at its discretion, enter
into a lease or business agreement for the purpose of
energy resource development on tribal land, including a
lease or business agreement for--
``(A) exploration for, extraction of,
processing of, or other development of the
Indian tribe's energy mineral resources located
on tribal land; and
``(B) construction or operation of an
electric generation, transmission, or
distribution facility located on tribal land or
a facility to process or refine energy
resources developed on tribal land; and
``(2) such lease or business agreement described in
paragraph (1) shall not require the approval of the
Secretary under section 2103 of the Revised Statutes
(25 U.S.C. 81) or any other provision of law, if--
``(A) the lease or business agreement is
executed pursuant to a tribal energy resource
agreement approved by the Secretary under
subsection (e);
``(B) the term of the lease or business
agreement does not exceed--
``(i) 30 years; or
``(ii) in the case of a lease for
the production of oil resources, gas
resources, or both, 10 years and as
long thereafter as oil or gas is
produced in paying quantities; and
``(C) the Indian tribe has entered into a
tribal energy resource agreement with the
Secretary, as described in subsection (e),
relating to the development of energy resources
on tribal land (including the periodic review
and evaluation of the activities of the Indian
tribe under the agreement, to be conducted
pursuant to the provisions required by
subsection (e)(2)(D)(i)).
``(b) Rights-of-Way for Pipelines or Electric Transmission
or Distribution Lines.--An Indian tribe may grant a right-of-
way over tribal land for a pipeline or an electric transmission
or distribution line without approval by the Secretary if--
``(1) the right-of-way is executed in accordance
with a tribal energy resource agreement approved by the
Secretary under subsection (e);
``(2) the term of the right-of-way does not exceed
30 years;
``(3) the pipeline or electric transmission or
distribution line serves--
``(A) an electric generation, transmission,
or distribution facility located on tribal
land; or
``(B) a facility located on tribal land
that processes or refines energy resources
developed on tribal land; and
``(4) the Indian tribe has entered into a tribal
energy resource agreement with the Secretary, as
described in subsection (e), relating to the
development of energy resources on tribal land
(including the periodic review and evaluation of the
Indian tribe's activities under such agreement
described in subparagraphs (D) and (E) of subsection
(e)(2)).
``(c) Renewals.--A lease or business agreement entered into
or a right-of-way granted by an Indian tribe under this section
may be renewed at the discretion of the Indian tribe in
accordance with this section.
``(d) Validity.--No lease, business agreement, or right-of-
way relating to the development of tribal energy resources
pursuant to the provisions of this section shall be valid
unless the lease, business agreement, or right-of-way is
authorized by the provisions of a tribal energy resource
agreement approved by the Secretary under subsection (e)(2).
``(e) Tribal Energy Resource Agreements.--
``(1) On issuance of regulations under paragraph
(8), an Indian tribe may submit to the Secretary for
approval a tribal energy resource agreement governing
leases, business agreements, and rights-of-way under
this section.
``(2)(A) Not later than 180 days after the date on
which the Secretary receives a tribal energy resource
agreement submitted by an Indian tribe under paragraph
(1), or not later than 60 days after the Secretary
receives a revised tribal energy resource agreement
submitted by an Indian tribe under paragraph (4)(C),
(or such later date as may be agreed to by the
Secretary and the Indian tribe), the Secretary shall
approve or disapprove the tribal energy resource
agreement.
``(B) The Secretary shall approve a tribal energy
resource agreement submitted under paragraph (1) if--
``(i) the Secretary determines that the
Indian tribe has demonstrated that the Indian
tribe has sufficient capacity to regulate the
development of energy resources of the Indian
tribe;
``(ii) the tribal energy resource agreement
includes provisions required under subparagraph
(D); and
``(iii) the tribal energy resource
agreement includes provisions that, with
respect to a lease, business agreement, or
right-of-way under this section--
``(I) ensure the acquisition of
necessary information from the
applicant for the lease, business
agreement, or right-of-way;
``(II) address the term of the
lease or business agreement or the term
of conveyance of the right-of-way;
``(III) address amendments and
renewals;
``(IV) address the economic return
to the Indian tribe under leases,
business agreements, and rights-of-way;
``(V) address technical or other
relevant requirements;
``(VI) establish requirements for
environmental review in accordance with
subparagraph (C);
``(VII) ensure compliance with all
applicable environmental laws;
``(VIII) identify final approval
authority;
``(IX) provide for public
notification of final approvals;
``(X) establish a process for
consultation with any affected States
concerning off-reservation impacts, if
any, identified pursuant to the
provisions required under subparagraph
(C)(i);
``(XI) describe the remedies for
breach of the lease, business
agreement, or right-of-way;
``(XII) require each lease,
business agreement, and right-of-way to
include a statement that, in the event
that any of its provisions violates an
express term or requirement set forth
in the tribal energy resource agreement
pursuant to which it was executed--
``(aa) such provision shall
be null and void; and
``(bb) if the Secretary
determines such provision to be
material, the Secretary shall
have the authority to suspend
or rescind the lease, business
agreement, or right-of-way or
take other appropriate action
that the Secretary determines
to be in the best interest of
the Indian tribe;
``(XIII) require each lease,
business agreement, and right-of-way to
provide that it will become effective
on the date on which a copy of the
executed lease, business agreement, or
right-of-way is delivered to the
Secretary in accordance with
regulations adopted pursuant to this
subsection; and
``(XIV) include citations to tribal
laws, regulations, or procedures, if
any, that set out tribal remedies that
must be exhausted before a petition may
be submitted to the Secretary pursuant
to paragraph (7)(B).
``(C) Tribal energy resource agreements submitted
under paragraph (1) shall establish, and include
provisions to ensure compliance with, an environmental
review process that, with respect to a lease, business
agreement, or right-of-way under this section, provides
for--
``(i) the identification and evaluation of
all significant environmental impacts (as
compared with a no-action alternative),
including effects on cultural resources;
``(ii) the identification of proposed
mitigation;
``(iii) a process for ensuring that the
public is informed of and has an opportunity to
comment on the environmental impacts of the
proposed action before tribal approval of the
lease, business agreement, or right-of-way; and
``(iv) sufficient administrative support
and technical capability to carry out the
environmental review process.
``(D) A tribal energy resource agreement negotiated
between the Secretary and an Indian tribe in accordance
with this subsection shall include--
``(i) provisions requiring the Secretary to
conduct a periodic review and evaluation to
monitor the performance of the Indian tribe's
activities associated with the development of
energy resources under the tribal energy
resource agreement; and
``(ii) when such review and evaluation
result in a finding by the Secretary of
imminent jeopardy to a physical trust asset
arising from a violation of the tribal energy
resource agreement or applicable Federal laws,
provisions authorizing the Secretary to take
appropriate actions determined by the Secretary
to be necessary to protect such asset, which
actions may include reassumption of
responsibility for activities associated with
the development of energy resources on tribal
land until the violation and conditions that
gave rise to such jeopardy have been corrected.
``(E) The periodic review and evaluation described
in subparagraph (D) shall be conducted on an annual
basis, except that, after the third such annual review
and evaluation, the Secretary and the Indian tribe may
mutually agree to amend the tribal energy resource
agreement to authorize the review and evaluation
required by subparagraph (D) to be conducted once every
2 years.
``(3) The Secretary shall provide notice and
opportunity for public comment on tribal energy
resource agreements submitted for approval under
paragraph (1). The Secretary's review of a tribal
energy resource agreement under the National
Environmental Policy Act of 1969 (42 U.S.C. 4321 et
seq.) shall be limited to the direct effects of that
approval.
``(4) If the Secretary disapproves a tribal energy
resource agreement submitted by an Indian tribe under
paragraph (1), the Secretary shall, not later than 10
days after the date of disapproval--
``(A) notify the Indian tribe in writing of
the basis for the disapproval;
``(B) identify what changes or other
actions are required to address the concerns of
the Secretary; and
``(C) provide the Indian tribe with an
opportunity to revise and resubmit the tribal
energy resource agreement.
``(5) If an Indian tribe executes a lease or
business agreement or grants a right-of-way in
accordance with a tribal energy resource agreement
approved under this subsection, the Indian tribe shall,
in accordance with the process and requirements set
forth in the Secretary's regulations adopted pursuant
to paragraph (8), provide to the Secretary--
``(A) a copy of the lease, business
agreement, or right-of-way document (including
all amendments to and renewals of the
document); and
``(B) in the case of a tribal energy
resource agreement or a lease, business
agreement, or right-of-way that permits
payments to be made directly to the Indian
tribe, information and documentation of those
payments sufficient to enable the Secretary to
discharge the trust responsibility of the
United States to enforce the terms of, and
protect the Indian tribe's rights under, the
lease, business agreement, or right-of-way.
``(6)(A) For purposes of the activities to be
undertaken by the Secretary pursuant to this section,
the Secretary shall--
``(i) carry out such activities in a manner
consistent with the trust responsibility of the
United States relating to mineral and other
trust resources; and
``(ii) act in good faith and in the best
interests of the Indian tribes.
``(B) Subject to the provisions of subsections
(a)(2), (b), and (c) waiving the requirement of
Secretarial approval of leases, business agreements,
and rights-of-way executed pursuant to tribal energy
resource agreements approved under this section, and
the provisions of subparagraph (D), nothing in this
section shall absolve the United States from any
responsibility to Indians or Indian tribes, including,
but not limited to, those which derive from the trust
relationship or from any treaties, statutes, and other
laws of the United States, Executive Orders, or
agreements between the United States and any Indian
tribe.
``(C) The Secretary shall continue to have a trust
obligation to ensure that the rights and interests of
an Indian tribe are protected in the event that--
``(i) any other party to any such lease,
business agreement, or right-of-way violates
any applicable provision of Federal law or the
terms of any lease, business agreement, or
right-of-way under this section; or
``(ii) any provision in such lease,
business agreement, or right-of-way violates
any express provision or requirement set forth
in the tribal energy resource agreement
pursuant to which the lease, business
agreement, or right-of-way was executed.
``(D) Notwithstanding subparagraph (B), the United
States shall not be liable to any party (including any
Indian tribe) for any of the negotiated terms of, or
any losses resulting from the negotiated terms of, a
lease, business agreement, or right-of-way executed
pursuant to and in accordance with a tribal energy
resource agreement approved by the Secretary under
paragraph (2). For the purpose of this subparagraph,
the term `negotiated terms' means any terms or
provisions that are negotiated by an Indian tribe and
any other party or parties to a lease, business
agreement, or right-of-way entered into pursuant to an
approved tribal energy resource agreement.
``(7)(A) In this paragraph, the term `interested
party' means any person or entity the interests of
which have sustained or will sustain a significant
adverse environmental impact as a result of the failure
of an Indian tribe to comply with a tribal energy
resource agreement of the Indian tribe approved by the
Secretary under paragraph (2).
``(B) After exhaustion of tribal remedies, and in
accordance with the process and requirements set forth
in regulations adopted by the Secretary pursuant to
paragraph (8), an interested party may submit to the
Secretary a petition to review compliance of an Indian
tribe with a tribal energy resource agreement of the
Indian tribe approved by the Secretary under paragraph
(2).
``(C)(i) Not later than 120 days after the date on
which the Secretary receives a petition under
subparagraph (B), the Secretary shall determine whether
the Indian tribe is not in compliance with the tribal
energy resource agreement, as alleged in the petition.
``(ii) The Secretary may adopt procedures under
paragraph (8) authorizing an extension of time, not to
exceed 120 days, for making the determination under
clause (i) in any case in which the Secretary
determines that additional time is necessary to
evaluate the allegations of the petition.
``(iii) Subject to subparagraph (D), if the
Secretary determines that the Indian tribe is not in
compliance with the tribal energy resource agreement as
alleged in the petition, the Secretary shall take such
action as is necessary to ensure compliance with the
provisions of the tribal energy resource agreement,
which action may include--
``(I) temporarily suspending some or all
activities under a lease, business agreement,
or right-of-way under this section until the
Indian tribe or such activities are in
compliance with the provisions of the approved
tribal energy resource agreement; or
``(II) rescinding approval of all or part
of the tribal energy resource agreement, and if
all of such agreement is rescinded, reassuming
the responsibility for approval of any future
leases, business agreements, or rights-of-way
described in subsections (a) and (b).
``(D) Prior to seeking to ensure compliance with
the provisions of the tribal energy resource agreement
of an Indian tribe under subparagraph (C)(iii), the
Secretary shall--
``(i) make a written determination that
describes the manner in which the tribal energy
resource agreement has been violated;
``(ii) provide the Indian tribe with a
written notice of the violations together with
the written determination; and
``(iii) before taking any action described
in subparagraph (C)(iii) or seeking any other
remedy, provide the Indian tribe with a hearing
and a reasonable opportunity to attain
compliance with the tribal energy resource
agreement.
``(E) An Indian tribe described in subparagraph (D)
shall retain all rights to appeal as provided in
regulations issued by the Secretary.
``(8) Not later than 1 year after the date of
enactment of the Indian Tribal Energy Development and
Self-Determination Act of 2003, the Secretary shall
issue regulations that implement the provisions of this
subsection, including--
``(A) criteria to be used in determining
the capacity of an Indian tribe described in
paragraph (2)(B)(i), including the experience
of the Indian tribe in managing natural
resources and financial and administrative
resources available for use by the Indian tribe
in implementing the approved tribal energy
resource agreement of the Indian tribe;
``(B) a process and requirements in
accordance with which an Indian tribe may--
``(i) voluntarily rescind a tribal
energy resource agreement approved by
the Secretary under this subsection;
and
``(ii) return to the Secretary the
responsibility to approve any future
leases, business agreements, and
rights-of-way described in this
subsection;
``(C) provisions setting forth the scope
of, and procedures for, the periodic review and
evaluation described in subparagraphs (D) and
(E) of paragraph (2), including provisions for
review of transactions, reports, site
inspections, and any other review activities
the Secretary determines to be appropriate; and
``(D) provisions defining final agency
actions after exhaustion of administrative
appeals from determinations of the Secretary
under paragraph (7).
``(f) No Effect on Other Law.--Nothing in this section
affects the application of--
``(1) any Federal environment law;
``(2) the Surface Mining Control and Reclamation
Act of 1977 (30 U.S.C. 1201 et seq.); or
``(3) except as otherwise provided in this title,
the Indian Mineral Development Act of 1982 (25 U.S.C.
2101 et seq.) and the National Environmental Policy Act
of 1969 (42 U.S.C. 4321 et seq.).
``(g) Authorization of Appropriations.--There are
authorized to be appropriated to the Secretary such sums as are
necessary for each of fiscal years 2004 through 2014 to
implement the provisions of this section and to make grants or
provide other appropriate assistance to Indian tribes to assist
the Indian tribes in developing and implementing tribal energy
resource agreements in accordance with the provisions of this
section.
``SEC. 2605. INDIAN MINERAL DEVELOPMENT REVIEW.
``(a) In General.--The Secretary shall conduct a review of
all activities being conducted under the Indian Mineral
Development Act of 1982 (25 U.S.C. 2101 et seq.) as of that
date.
``(b) Report.--Not later than 1 year after the date of
enactment of the Indian Tribal Energy Development and Self-
Determination Act of 2003, the Secretary shall submit to
Congress a report that includes--
``(1) the results of the review;
``(2) recommendations to ensure that Indian tribes
have the opportunity to develop Indian energy
resources; and
``(3) an analysis of the barriers to the
development of energy resources on Indian land
(including legal, fiscal, market, and other barriers),
along with recommendations for the removal of those
barriers.
``SEC. 2606. FEDERAL POWER MARKETING ADMINISTRATIONS.
``(a) Definitions.--In this section:
``(1) The term ``Administrator'' means the
Administrator of the Bonneville Power Administration
and the Administrator of the Western Area Power
Administration.
``(2) The term ``power marketing administration''
means--
``(A) the Bonneville Power Administration;
``(B) the Western Area Power
Administration; and
``(C) any other power administration the
power allocation of which is used by or for the
benefit of an Indian tribe located in the
service area of the administration.
``(b) Encouragement of Indian Tribal Energy Development.--
Each Administrator shall encourage Indian tribal energy
development by taking such actions as are appropriate,
including administration of programs of the Bonneville Power
Administration and the Western Area Power Administration, in
accordance with this section.
``(c) Action by the Administrator.--In carrying out this
section, and in accordance with existing law--
``(1) each Administrator shall consider the unique
relationship that exists between the United States and
Indian tribes;
``(2) power allocations from the Western Area Power
Administration to Indian tribes may be used to meet
firming and reserve needs of Indian-owned energy
projects on Indian land;
``(3) the Administrator of the Western Area Power
Administration may purchase non-federally generated
power from Indian tribes to meet the firming and
reserve requirements of the Western Area Power
Administration; and
``(4) each Administrator shall not pay more than
the prevailing market price for an energy product nor
obtain less than prevailing market terms and
conditions.
``(d) Assistance for Transmission System Use.--(1) An
Administrator may provide technical assistance to Indian tribes
seeking to use the high-voltage transmission system for
delivery of electric power.
``(2) The costs of technical assistance provided under
paragraph (1) shall be funded by the Secretary of Energy using
nonreimbursable funds appropriated for that purpose, or by the
applicable Indian tribes.
``(e) Power Allocation Study.--Not later than 2 years after
the date of enactment of the Indian Tribal Energy Development
and Self-Determination Act of 2003, the Secretary of Energy
shall submit to Congress a report that--
``(1) describes the use by Indian tribes of Federal
power allocations of the Western Area Power
Administration (or power sold by the Southwestern Power
Administration) and the Bonneville Power Administration
to or for the benefit of Indian tribes in service areas
of those administrations; and
``(2) identifies--
``(A) the quantity of power allocated to,
or used for the benefit of, Indian tribes by
the Western Area Power Administration;
``(B) the quantity of power sold to Indian
tribes by other power marketing
administrations; and
``(C) barriers that impede tribal access to
and use of Federal power, including an
assessment of opportunities to remove those
barriers and improve the ability of power
marketing administrations to deliver Federal
power.
``(f) Authorization of Appropriations.--There are
authorized to be appropriated to carry out this section
$750,000, which shall remain available until expended and shall
not be reimbursable.
``SEC. 2607. WIND AND HYDROPOWER FEASIBILITY STUDY.
``(a) Study.--The Secretary of Energy, in coordination with
the Secretary of the Army and the Secretary, shall conduct a
study of the cost and feasibility of developing a demonstration
project that would use wind energy generated by Indian tribes
and hydropower generated by the Army Corps of Engineers on the
Missouri River to supply firming power to the Western Area
Power Administration.
``(b) Scope of Study.--The study shall--
``(1) determine the feasibility of the blending of
wind energy and hydropower generated from the Missouri
River dams operated by the Army Corps of Engineers;
``(2) review historical and projected requirements
for firming power and the patterns of availability and
use of firming power;
``(3) assess the wind energy resource potential on
tribal land and projected cost savings through a blend
of wind and hydropower over a 30-year period;
``(4) determine seasonal capacity needs and
associated transmission upgrades for integration of
tribal wind generation; and
``(5) include an independent tribal engineer as a
study team member.
``(c) Report.--Not later than 1 year after the date of
enactment of the Energy Policy Act of 2003, the Secretary and
Secretary of the Army shall submit to Congress a report that
describes the results of the study, including--
``(1) an analysis of the potential energy cost or
benefits to the customers of the Western Area Power
Administration through the use of combined wind and
hydropower;
``(2) an evaluation of whether a combined wind and
hydropower system can reduce reservoir fluctuation,
enhance efficient and reliable energy production, and
provide Missouri River management flexibility;
``(3) recommendations for a demonstration project
that could be carried out by the Western Area Power
Administration in partnership with an Indian tribal
government or tribal energy resource development
organization to demonstrate the feasibility and
potential of using wind energy produced on Indian land
to supply firming energy to the Western Area Power
Administration or any other Federal power marketing
agency; and
``(4) an identification of--
``(A) the economic and environmental costs
or benefits to be realized through such a
Federal-tribal partnership; and
``(B) the manner in which such a
partnership could contribute to the energy
security of the United States.
``(d) Funding.--
``(1) Authorization of appropriations.--There are
authorized to be appropriated to carry out this section
$500,000, to remain available until expended.
``(2) Nonreimbursability.--Costs incurred by the Secretary
in carrying out this section shall be nonreimbursable.''.
(b) Conforming Amendments.--The table of contents for the
Energy Policy Act of 1992 is amended by striking the items
relating to title XXVI and inserting the following:
``Sec. 2601. Definitions.
``Sec. 2602. Indian tribal energy resource development.
``Sec. 2603. Indian tribal energy resource regulation.
``Sec. 2604. Leases, business agreements, and rights-of-way involving
energy development or transmission.
``Sec. 2605. Indian mineral development review.
``Sec. 2606. Federal Power Marketing Administrations.
``Sec. 2607. Wind and hydropower feasibility study.''.
SEC. 504. FOUR CORNERS TRANSMISSION LINE PROJECT.
The Dine Power Authority, an enterprise of the Navajo
Nation, shall be eligible to receive grants and other
assistance as authorized by section 217 of the Department of
Energy Organization Act, as added by section 502 of this title,
and section 2602 of the Energy Policy Act of 1992, as amended
by this title, for activities associated with the development
of a transmission line from the Four Corners Area to southern
Nevada, including related power generation opportunities.
SEC. 505. ENERGY EFFICIENCY IN FEDERALLY ASSISTED HOUSING.
(a) In General.--The Secretary of Housing and Urban
Development shall promote energy conservation in housing that
is located on Indian land and assisted with Federal resources
through--
(1) the use of energy-efficient technologies and
innovations (including the procurement of energy-
efficient refrigerators and other appliances);
(2) the promotion of shared savings contracts; and
(3) the use and implementation of such other
similar technologies and innovations as the Secretary
of Housing and Urban Development considers to be
appropriate.
(b) Amendment.--Section 202(2) of the Native American
Housing and Self-Determination Act of 1996 (25 U.S.C. 4132(2))
is amended by inserting ``improvement to achieve greater energy
efficiency,'' after ``planning,''.
SEC. 506. CONSULTATION WITH INDIAN TRIBES.
In carrying out this title and the amendments made by this
title, the Secretary of Energy and the Secretary shall, as
appropriate and to the maximum extent practicable, involve and
consult with Indian tribes in a manner that is consistent with
the Federal trust and the government-to-government
relationships between Indian tribes and the United States.
TITLE VI--NUCLEAR MATTERS
Subtitle A--Price-Anderson Act Amendments
SEC. 601. SHORT TITLE.
This subtitle may be cited as the ``Price-Anderson
Amendments Act of 2003''.
SEC. 602. EXTENSION OF INDEMNIFICATION AUTHORITY.
(a) Indemnification of Nuclear Regulatory Commission
Licensees.--Section 170 c. of the Atomic Energy Act of 1954 (42
U.S.C. 2210(c)) is amended--
(1) in the subsection heading, by striking
``Licenses'' and inserting ``Licensees''; and
(2) by striking ``December 31, 2003'' each place it
appears and inserting ``December 31, 2023''.
(b) Indemnification of Department of Energy Contractors.--
Section 170 d.(1)(A) of the Atomic Energy Act of 1954 (42
U.S.C. 2210(d)(1)(A)) is amended by striking ``December 31,
2004'' and inserting ``December 31, 2023''.
(c) Indemnification of Nonprofit Educational
Institutions.--Section 170 k. of the Atomic Energy Act of 1954
(42 U.S.C. 2210(k)) is amended by striking ``August 1, 2002''
each place it appears and inserting ``December 31, 2023''.
SEC. 603. MAXIMUM ASSESSMENT.
Section 170 of the Atomic Energy Act of 1954 (42 U.S.C.
2210) is amended--
(1) in the second proviso of the third sentence of
subsection b.(1)--
(A) by striking ``$63,000,000'' and
inserting ``$95,800,000''; and
(B) by striking ``$10,000,000 in any 1
year'' and inserting ``$15,000,000 in any 1
year (subject to adjustment for inflation under
subsection t.)''; and
(2) in subsection t.(1)--
(A) by inserting ``total and annual'' after
``amount of the maximum'';
(B) by striking ``the date of the enactment
of the Price-Anderson Amendments Act of 1988''
and inserting ``August 20, 2003''; and
(C) in subparagraph (A), by striking ``such
date of enactment'' and inserting ``August 20,
2003''.
SEC. 604. DEPARTMENT OF ENERGY LIABILITY LIMIT.
(a) Indemnification of Department of Energy Contractors.--
Section 170 d. of the Atomic Energy Act of 1954 (42 U.S.C.
2210(d)) is amended by striking paragraph (2) and inserting the
following:
``(2) In an agreement of indemnification entered into under
paragraph (1), the Secretary--
``(A) may require the contractor to provide and
maintain financial protection of such a type and in
such amounts as the Secretary shall determine to be
appropriate to cover public liability arising out of or
in connection with the contractual activity; and
``(B) shall indemnify the persons indemnified
against such liability above the amount of the
financial protection required, in the amount of
$10,000,000,000 (subject to adjustment for inflation
under subsection t.), in the aggregate, for all persons
indemnified in connection with the contract and for
each nuclear incident, including such legal costs of
the contractor as are approved by the Secretary.''.
(b) Contract Amendments.--Section 170 d. of the Atomic
Energy Act of 1954 (42 U.S.C. 2210(d)) is further amended by
striking paragraph (3) and inserting the following--
``(3) All agreements of indemnification under which the
Department of Energy (or its predecessor agencies) may be
required to indemnify any person under this section shall be
deemed to be amended, on the date of enactment of the Price-
Anderson Amendments Act of 2003, to reflect the amount of
indemnity for public liability and any applicable financial
protection required of the contractor under this subsection.''.
(c) Liability Limit.--Section 170 e.(1)(B) of the Atomic
Energy Act of 1954 (42 U.S.C. 2210(e)(1)(B)) is amended--
(1) by striking ``the maximum amount of financial
protection required under subsection b. or''; and
(2) by striking ``paragraph (3) of subsection d.,
whichever amount is more'' and inserting ``paragraph
(2) of subsection d.''.
SEC. 605. INCIDENTS OUTSIDE THE UNITED STATES.
(a) Amount of Indemnification.--Section 170 d.(5) of the
Atomic Energy Act of 1954 (42 U.S.C. 2210(d)(5)) is amended by
striking ``$100,000,000'' and inserting ``$500,000,000''.
(b) Liability Limit.--Section 170 e.(4) of the Atomic
Energy Act of 1954 (42 U.S.C. 2210(e)(4)) is amended by
striking ``$100,000,000'' and inserting ``$500,000,000''.
SEC. 606. REPORTS.
Section 170 p. of the Atomic Energy Act of 1954 (42 U.S.C.
2210(p)) is amended by striking ``August 1, 1998'' and
inserting ``December 31, 2019''.
SEC. 607. INFLATION ADJUSTMENT.
Section 170 t. of the Atomic Energy Act of 1954 (42 U.S.C.
2210(t)) is amended--
(1) by redesignating paragraph (2) as paragraph
(3); and
(2) by inserting after paragraph (1) the following:
``(2) The Secretary shall adjust the amount of
indemnification provided under an agreement of indemnification
under subsection d. not less than once during each 5-year
period following July 1, 2003, in accordance with the aggregate
percentage change in the Consumer Price Index since--
``(A) that date, in the case of the first
adjustment under this paragraph; or
``(B) the previous adjustment under this
paragraph.''.
SEC. 608. TREATMENT OF MODULAR REACTORS.
Section 170 b. of the Atomic Energy Act of 1954 (42 U.S.C.
2210(b)) is amended by adding at the end the following:
``(5)(A) For purposes of this section only, the Commission
shall consider a combination of facilities described in
subparagraph (B) to be a single facility having a rated
capacity of 100,000 electrical kilowatts or more.
``(B) A combination of facilities referred to in
subparagraph (A) is 2 or more facilities located at a single
site, each of which has a rated capacity of 100,000 electrical
kilowatts or more but not more than 300,000 electrical
kilowatts, with a combined rated capacity of not more than
1,300,000 electrical kilowatts.''.
SEC. 609. APPLICABILITY.
The amendments made by sections 603, 604, and 605 do not
apply to a nuclear incident that occurs before the date of the
enactment of this Act.
SEC. 610. PROHIBITION ON ASSUMPTION BY UNITED STATES GOVERNMENT OF
LIABILITY FOR CERTAIN FOREIGN INCIDENTS.
Section 170 of the Atomic Energy Act of 1954 (42 U.S.C.
2210) is amended by adding at the end the following new
subsection:
``u. Prohibition on Assumption of Liability for Certain
Foreign Incidents.--Notwithstanding this section or any other
provision of law, no officer of the United States or of any
department, agency, or instrumentality of the United States
Government may enter into any contract or other arrangement, or
into any amendment or modification of a contract or other
arrangement, the purpose or effect of which would be to
directly or indirectly impose liability on the United States
Government, or any department, agency, or instrumentality of
the United States Government, or to otherwise directly or
indirectly require an indemnity by the United States
Government, for nuclear incidents occurring in connection with
the design, construction, or operation of a production facility
or utilization facility in any country whose government has
been identified by the Secretary of State as engaged in state
sponsorship of terrorist activities (specifically including any
country the government of which, as of September 11, 2001, had
been determined by the Secretary of State under section 620A(a)
of the Foreign Assistance Act of 1961 (22 U.S.C. 2371(a)),
section 6(j)(1) of the Export Administration Act of 1979 (50
U.S.C. App. 2405(j)(1)), or section 40(d) of the Arms Export
Control Act (22 U.S.C. 2780(d)) to have repeatedly provided
support for acts of international terrorism). This subsection
shall not apply to nuclear incidents occurring as a result of
missions, carried out under the direction of the Secretary of
Energy, the Secretary of Defense, or the Secretary of State,
that are necessary to safely secure, store, transport, or
remove nuclear materials for nuclear safety or nonproliferation
purposes.''.
SEC. 611. CIVIL PENALTIES.
(a) Repeal of Automatic Remission.--Section 234A b.(2) of
the Atomic Energy Act of 1954 (42 U.S.C. 2282a(b)(2)) is
amended by striking the last sentence.
(b) Limitation for Not-for-Profit Institutions.--Subsection
d. of section 234A of the Atomic Energy Act of 1954 (42 U.S.C.
2282a(d)) is amended to read as follows:
``d.(1) Notwithstanding subsection a., in the case of any
not-for-profit contractor, subcontractor, or supplier, the
total amount of civil penalties paid under subsection a. may
not exceed the total amount of fees paid within any 1-year
period (as determined by the Secretary) under the contract
under which the violation occurs.
``(2) For purposes of this section, the term ``not-for-
profit'' means that no part of the net earnings of the
contractor, subcontractor, or supplier inures to the benefit of
any natural person or for-profit artificial person.''.
(c) Effective Date.--The amendments made by this section
shall not apply to any violation of the Atomic Energy Act of
1954 (42 U.S.C. 2011 et seq.) occurring under a contract
entered into before the date of enactment of this section.
Subtitle B--General Nuclear Matters
SEC. 621. LICENSES.
Section 103 c. of the Atomic Energy Act of 1954 (42 U.S.C.
2133(c)) is amended by inserting ``from the authorization to
commence operations'' after ``forty years''.
SEC. 622. NRC TRAINING PROGRAM.
(a) In General.--In order to maintain the human resource
investment and infrastructure of the United States in the
nuclear sciences, health physics, and engineering fields, in
accordance with the statutory authorities of the Nuclear
Regulatory Commission relating to the civilian nuclear energy
program, the Nuclear Regulatory Commission shall carry out a
training and fellowship program to address shortages of
individuals with critical nuclear safety regulatory skills.
(b) Authorization of Appropriations.--
(1) In general.--There are authorized to be
appropriated to the Nuclear Regulatory Commission to
carry out this section $1,000,000 for each of fiscal
years 2004 through 2008.
(2) Availability.--Funds made available under
paragraph (1) shall remain available until expended.
SEC. 623. COST RECOVERY FROM GOVERNMENT AGENCIES.
Section 161 w. of the Atomic Energy Act of 1954 (42 U.S.C.
2201(w)) is amended--
(1) by striking ``for or is issued'' and all that
follows through ``1702'' and inserting ``to the
Commission for, or is issued by the Commission, a
license or certificate'';
(2) by striking ``483a'' and inserting ``9701'';
and
(3) by striking ``, of applicants for, or holders
of, such licenses or certificates''.
SEC. 624. ELIMINATION OF PENSION OFFSET.
Section 161 of the Atomic Energy Act of 1954 (42 U.S.C.
2201) is amended by adding at the end the following:
``y. Exempt from the application of sections 8344 and 8468
of title 5, United States Code, an annuitant who was formerly
an employee of the Commission who is hired by the Commission as
a consultant, if the Commission finds that the annuitant has a
skill that is critical to the performance of the duties of the
Commission.''.
SEC. 625. ANTITRUST REVIEW.
Section 105 c. of the Atomic Energy Act of 1954 (42 U.S.C.
2135(c)) is amended by adding at the end the following:
``(9) Applicability.--This subsection does not apply to an
application for a license to construct or operate a utilization
facility or production facility under section 103 or 104 b.
that is filed on or after the date of enactment of this
paragraph.''.
SEC. 626. DECOMMISSIONING.
Section 161 i. of the Atomic Energy Act of 1954 (42 U.S.C.
2201(i)) is amended--
(1) by striking ``and (3)'' and inserting ``(3)'';
and
(2) by inserting before the semicolon at the end
the following: ``, and (4) to ensure that sufficient
funds will be available for the decommissioning of any
production or utilization facility licensed under
section 103 or 104 b., including standards and
restrictions governing the control, maintenance, use,
and disbursement by any former licensee under this Act
that has control over any fund for the decommissioning
of the facility''.
SEC. 627. LIMITATION ON LEGAL FEE REIMBURSEMENT.
The Department of Energy shall not, except as required
under a contract entered into before the date of enactment of
this Act, reimburse any contractor or subcontractor of the
Department for any legal fees or expenses incurred with respect
to a complaint subsequent to--
(1) an adverse determination on the merits with
respect to such complaint against the contractor or
subcontractor by the Director of the Department of
Energy's Office of Hearings and Appeals pursuant to
part 708 of title 10, Code of Federal Regulations, or
by a Department of Labor Administrative Law Judge
pursuant to section 211 of the Energy Reorganization
Act of 1974 (42 U.S.C. 5851); or
(2) an adverse final judgment by any State or
Federal court with respect to such complaint against
the contractor or subcontractor for wrongful
termination or retaliation due to the making of
disclosures protected under chapter 12 of title 5,
United States Code, section 211 of the Energy
Reorganization Act of 1974 (42 U.S.C. 5851), or any
comparable State law,
unless the adverse determination or final judgment is reversed
upon further administrative or judicial review.
SEC. 628. DECOMMISSIONING PILOT PROGRAM.
(a) Pilot Program.--The Secretary of Energy shall establish
a decommissioning pilot program to decommission and
decontaminate the sodium-cooled fast breeder experimental test-
site reactor located in northwest Arkansas in accordance with
the decommissioning activities contained in the August 31,
1998, Department of Energy report on the reactor.
(b) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary of Energy to carry out this
section $16,000,000.
SEC. 629. REPORT ON FEASIBILITY OF DEVELOPING COMMERCIAL NUCLEAR ENERGY
GENERATION FACILITIES AT EXISTING DEPARTMENT OF
ENERGY SITES.
Not later than 1 year after the date of the enactment of
this Act, the Secretary of Energy shall submit to Congress a
report on the feasibility of developing commercial nuclear
energy generation facilities at Department of Energy sites in
existence on the date of enactment of this Act.
SEC. 630. URANIUM SALES.
(a) Sales, Transfers, and Services.--Section 3112 of the
USEC Privatization Act (42 U.S.C. 2297h-10) is amended by
striking subsections (d), (e), and (f) and inserting the
following:
``(3) The Secretary may transfer to the Corporation,
notwithstanding subsections (b)(2) and (d), natural uranium in
amounts sufficient to fulfill the Department of Energy's
commitments under Article 4(B) of the Agreement between the
Department and the Corporation dated June 17, 2002.
``(d) Inventory Sales.--(1) In addition to the transfers
and sales authorized under subsections (b) and (c) and under
paragraph (5) of this subsection, the United States Government
may transfer or sell uranium in any form subject to paragraphs
(2), (3), and (4).
``(2) Except as provided in subsections (b) and (c) and
paragraph (5) of this subsection, no sale or transfer of
uranium shall be made under this subsection by the United
States Government unless--
``(A) the President determines that the material is
not necessary for national security needs and the sale
or transfer has no adverse impact on implementation of
existing government-to-government agreements;
``(B) the price paid to the appropriate Federal
agency, if the transaction is a sale, will not be less
than the fair market value of the material; and
``(C) the sale or transfer to commercial nuclear
power end users is made pursuant to a contract of at
least 3 years' duration.
``(3) Except as provided in paragraph (5), the United
States Government shall not make any transfer or sale of
uranium in any form under this subsection that would cause the
total amount of uranium transferred or sold pursuant to this
subsection that is delivered for consumption by commercial
nuclear power end users to exceed--
``(A) 3,000,000 pounds of
U3O8 equivalent in fiscal year
2004, 2005, 2006, 2007, 2008, or 2009;
``(B) 5,000,000 pounds of
U3O8 equivalent in fiscal year
2010 or 2011;
``(C) 7,000,000 pounds of
U3O8 equivalent in fiscal year
2012; and
``(D) 10,000,000 pounds of
U3O8 equivalent in fiscal year
2013 or any fiscal year thereafter.
``(4) Except for sales or transfers under paragraph (5),
for the purposes of this subsection, the recovery of uranium
from uranium bearing materials transferred or sold by the
United States Government to the domestic uranium industry shall
be the preferred method of making uranium available. The
recovered uranium shall be counted against the annual maximum
deliveries set forth in this section, when such uranium is sold
to end users.
``(5) The United States Government may make the following
sales and transfers:
``(A) Sales or transfers to a Federal agency if the
material is transferred for the use of the receiving
agency without any resale or transfer to another entity
and the material does not meet commercial
specifications.
``(B) Sales or transfers to any person for national
security purposes, as determined by the Secretary.
``(C) Sales or transfers to any State or local
agency or nonprofit, charitable, or educational
institution for use other than the generation of
electricity for commercial use.
``(D) Sales or transfers to the Department of
Energy research reactor sales program.
``(E) Sales or transfers, at fair market value, for
emergency purposes in the event of a disruption in
supply to commercial nuclear power end users in the
United States.
``(F) Sales or transfers, at fair market value, for
use in a commercial reactor in the United States with
nonstandard fuel requirements.
``(G) Sales or transfers provided for under law for
use by the Tennessee Valley Authority in relation to
the Department of Energy's highly enriched uranium or
tritium programs.
``(6) For purposes of this subsection, the term ``United
States Government'' does not include the Tennessee Valley
Authority.
``(e) Savings Provision.--Nothing in this subchapter
modifies the terms of the Russian HEU Agreement.
``(f) Services.--Notwithstanding any other provision of
this section, if the Secretary determines that the Corporation
has failed, or may fail, to perform any obligation under the
Agreement between the Department of Energy and the Corporation
dated June 17, 2002, and as amended thereafter, which failure
could result in termination of the Agreement, the Secretary
shall notify Congress, in such a manner that affords Congress
an opportunity to comment, prior to a determination by the
Secretary whether termination, waiver, or modification of the
Agreement is required. The Secretary is authorized to take such
action as he determines necessary under the Agreement to
terminate, waive, or modify provisions of the Agreement to
achieve its purposes.''.
(b) Report.--Not later than 3 years after the date of
enactment of this Act, the Secretary of Energy shall report to
Congress on the implementation of this section. The report
shall include a discussion of available excess uranium
inventories; all sales or transfers made by the United States
Government; the impact of such sales or transfers on the
domestic uranium industry, the spot market uranium price, and
the national security interests of the United States; and any
steps taken to remediate any adverse impacts of such sales or
transfers.
SEC. 631. COOPERATIVE RESEARCH AND DEVELOPMENT AND SPECIAL
DEMONSTRATION PROJECTS FOR THE URANIUM MINING
INDUSTRY.
(a) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary of Energy $10,000,000 for
each of fiscal years 2004, 2005, and 2006 for--
(1) cooperative, cost-shared agreements between the
Department of Energy and domestic uranium producers to
identify, test, and develop improved in situ leaching
mining technologies, including low-cost environmental
restoration technologies that may be applied to sites
after completion of in situ leaching operations; and
(2) funding for competitively selected
demonstration projects with domestic uranium producers
relating to--
(A) enhanced production with minimal
environmental impacts;
(B) restoration of well fields; and
(C) decommissioning and decontamination
activities.
(b) Domestic Uranium Producer.--For purposes of this
section, the term ``domestic uranium producer'' has the meaning
given that term in section 1018(4) of the Energy Policy Act of
1992 (42 U.S.C. 2296b-7(4)), except that the term shall not
include any producer that has not produced uranium from
domestic reserves on or after July 30, 1998.
(c) Limitation.--No activities funded under this section
may be carried out in the State of New Mexico.
SEC. 632. WHISTLEBLOWER PROTECTION.
(a) Definition of Employer.--Section 211(a)(2) of the
Energy Reorganization Act of 1974 (42 U.S.C. 5851(a)(2)) is
amended--
(1) in subparagraph (C), by striking ``and'' at the
end;
(2) in subparagraph (D), by striking the period at
the end and inserting ``; and'' and
(3) by adding at the end the following:
``(E) a contractor or subcontractor of the
Commission.''.-
(b) De Novo Review.--Subsection (b) of such section 211 is
amended by adding at the end the following new paragraph:
``(4) If the Secretary has not issued a final
decision within 540 days after the filing of a
complaint under paragraph (1), and there is no showing
that such delay is due to the bad faith of the person
seeking relief under this paragraph, such person may
bring an action at law or equity for de novo review in
the appropriate district court of the United States,
which shall have jurisdiction over such an action
without regard to the amount in controversy.''.
SEC. 633. MEDICAL ISOTOPE PRODUCTION.
Section 134 of the Atomic Energy Act of 1954 (42 U.S.C.
2160d) is amended--
(1) in subsection a., by striking ``a. The
Commission'' and inserting ``a. In General.--Except as
provided in subsection b., the Commission'';
(2) by redesignating subsection b. as subsection
c.; and
(3) by inserting after subsection a. the following:
``b. Medical Isotope Production.--
``(1) Definitions.--In this subsection:
``(A) Highly enriched uranium.--The term
`highly enriched uranium' means uranium
enriched to include concentration of U-235
above 20 percent.
``(B) Medical isotope.--The term `medical
isotope' includes Molybdenum 99, Iodine 131,
Xenon 133, and other radioactive materials used
to produce a radiopharmaceutical for
diagnostic, therapeutic procedures or for
research and development.
``(C) Radiopharmaceutical.--The term
`radiopharmaceutical' means a radioactive
isotope that--
``(i) contains byproduct material
combined with chemical or biological
material; and
``(ii) is designed to accumulate
temporarily in a part of the body for
therapeutic purposes or for enabling
the production of a useful image for
use in a diagnosis of a medical
condition.
``(D) Recipient country.--The term
`recipient country' means Canada, Belgium,
France, Germany, and the Netherlands.
``(2) Licenses.--The Commission may issue a license
authorizing the export (including shipment to and use
at intermediate and ultimate consignees specified in
the license) to a recipient country of highly enriched
uranium for medical isotope production if, in addition
to any other requirements of this Act (except
subsection a.), the Commission determines that--
``(A) a recipient country that supplies an
assurance letter to the United States
Government in connection with the consideration
by the Commission of the export license
application has informed the United States
Government that any intermediate consignees and
the ultimate consignee specified in the
application are required to use the highly
enriched uranium solely to produce medical
isotopes; and
``(B) the highly enriched uranium for
medical isotope production will be irradiated
only in a reactor in a recipient country that--
``(i) uses an alternative nuclear
reactor fuel; or
``(ii) is the subject of an
agreement with the United States
Government to convert to an alternative
nuclear reactor fuel when alternative
nuclear reactor fuel can be used in the
reactor.
``(3) Review of physical protection requirements.--
``(A) In general.--The Commission shall
review the adequacy of physical protection
requirements that, as of the date of an
application under paragraph (2), are applicable
to the transportation and storage of highly
enriched uranium for medical isotope production
or control of residual material after
irradiation and extraction of medical isotopes.
``(B) Imposition of additional
requirements.--If the Commission determines
that additional physical protection
requirements are necessary (including a limit
on the quantity of highly enriched uranium that
may be contained in a single shipment), the
Commission shall impose such requirements as
license conditions or through other appropriate
means.
``(4) First report to congress.--
``(A) NAS study.--The Secretary shall enter
into an arrangement with the National Academy
of Sciences to conduct a study to determine--
``(i) the feasibility of procuring
supplies of medical isotopes from
commercial sources that do not use
highly enriched uranium;
``(ii) the current and projected
demand and availability of medical
isotopes in regular current domestic
use;
``(iii) the progress that is being
made by the Department of Energy and
others to eliminate all use of highly
enriched uranium in reactor fuel,
reactor targets, and medical isotope
production facilities; and
``(iv) the potential cost
differential in medical isotope
production in the reactors and target
processing facilities if the products
were derived from production systems
that do not involve fuels and targets
with highly enriched uranium.
``(B) Feasibility.--For the purpose of this
subsection, the use of low enriched uranium to
produce medical isotopes shall be determined to
be feasible if--
``(i) low enriched uranium targets
have been developed and demonstrated
for use in the reactors and target
processing facilities that produce
significant quantities of medical
isotopes to serve United States needs
for such isotopes;
``(ii) sufficient quantities of
medical isotopes are available from low
enriched uranium targets and fuel to
meet United States domestic needs; and
``(iii) the average anticipated
total cost increase from production of
medical isotopes in such facilities
without use of highly enriched uranium
is less than 10 percent.
``(C) Report by the secretary.--Not later
than 5 years after the date of enactment of the
Energy Policy Act of 2003, the Secretary shall
submit to Congress a report that--
``(i) contains the findings of the
National Academy of Sciences made in
the study under subparagraph (A); and
``(ii) discloses the existence of
any commitments from commercial
producers to provide domestic
requirements for medical isotopes
without use of highly enriched uranium
consistent with the feasibility
criteria described in subparagraph (B)
not later than the date that is 4 years
after the date of submission of the
report.
``(5) Second report to congress.--If the study of
the National Academy of Sciences determines under
paragraph (4)(A)(i) that the procurement of supplies of
medical isotopes from commercial sources that do not
use highly enriched uranium is feasible, but the
Secretary is unable to report the existence of
commitments under paragraph (4)(C)(ii), not later than
the date that is 6 years after the date of enactment of
the Energy Policy Act of 2003, the Secretary shall
submit to Congress a report that describes options for
developing domestic supplies of medical isotopes in
quantities that are adequate to meet domestic demand
without the use of highly enriched uranium consistent
with the cost increase described in paragraph
(4)(B)(iii).
``(6) Certification.--At such time as commercial
facilities that do not use highly enriched uranium are
capable of meeting domestic requirements for medical
isotopes, within the cost increase described in
paragraph (4)(B)(iii) and without impairing the
reliable supply of medical isotopes for domestic
utilization, the Secretary shall submit to Congress a
certification to that effect.
``(7) Sunset provision.--After the Secretary
submits a certification under paragraph (6), the
Commission shall, by rule, terminate its review of
export license applications under this subsection.''.
SEC. 634. FERNALD BYPRODUCT MATERIAL.
Notwithstanding any other law, the material in the concrete
silos at the Fernald uranium processing facility managed on the
date of enactment of this Act by the Department of Energy shall
be considered byproduct material (as defined by section 11
e.(2) of the Atomic Energy Act of 1954 (42 U.S.C. 2014(e)(2))).
The Department of Energy may dispose of the material in a
facility regulated by the Nuclear Regulatory Commission or by
an Agreement State. If the Department of Energy disposes of the
material in such a facility, the Nuclear Regulatory Commission
or the Agreement State shall regulate the material as byproduct
material under that Act. This material shall remain subject to
the jurisdiction of the Department of Energy until it is
received at a commercial, Nuclear Regulatory Commission-
licensed, or Agreement State-licensed facility, at which time
the material shall be subject to the health and safety
requirements of the Nuclear Regulatory Commission or the
Agreement State with jurisdiction over the disposal site.
SEC. 635. SAFE DISPOSAL OF GREATER-THAN-CLASS C RADIOACTIVE WASTE.
(a) Designation of Responsibility.--The Secretary of Energy
shall designate an Office within the Department of Energy to
have the responsibility for activities needed to develop a new,
or use an existing, facility for safely disposing of all low-
level radioactive waste with concentrations of radionuclides
that exceed the limits established by the Nuclear Regulatory
Commission for Class C radioactive waste (referred to in this
section as ``GTCC waste'').
(b) Comprehensive Plan.--The Secretary of Energy shall
develop a comprehensive plan for permanent disposal of GTCC
waste which includes plans for a disposal facility. This plan
shall be transmitted to Congress in a series of reports,
including the following:
(1) Report on short-term plan.--Not later than 180
days after the date of enactment of this Act, the
Secretary of Energy shall submit to Congress a plan
describing the Secretary's operational strategy for
continued recovery and storage of GTCC waste until a
permanent disposal facility is available.
(2) Update of 1987 report.--
(A) In general.--Not later than 1 year
after the date of enactment of this Act, the
Secretary of Energy shall submit to Congress an
update of the Secretary's February 1987 report
submitted to Congress that made comprehensive
recommendations for the disposal of GTCC waste.
(B) Contents.--The update under this
paragraph shall contain--
(i) a detailed description and
identification of the GTCC waste that
is to be disposed;
(ii) a description of current
domestic and international programs,
both Federal and commercial, for
management and disposition of GTCC
waste;
(iii) an identification of the
Federal and private options and costs
for the safe disposal of GTCC waste;
(iv) an identification of the
options for ensuring that, wherever
possible, generators and users of GTCC
waste bear all reasonable costs of
waste disposal;
(v) an identification of any new
statutory authority required for
disposal of GTCC waste; and
(vi) in coordination with the
Environmental Protection Agency and the
Nuclear Regulatory Commission, an
identification of any new regulatory
guidance needed for the disposal of
GTCC waste.
(3) Report on cost and schedule for completion of
environmental impact statement and record of
decision.--Not later than 180 days after the date of
submission of the update required under paragraph (2),
the Secretary of Energy shall submit to Congress a
report containing an estimate of the cost and schedule
to complete a draft and final environmental impact
statement and to issue a record of decision for a
permanent disposal facility, utilizing either a new or
existing facility, for GTCC waste.
SEC. 636. PROHIBITION ON NUCLEAR EXPORTS TO COUNTRIES THAT SPONSOR
TERRORISM.
(a) In General.--Section 129 of the Atomic Energy Act of
1954 (42 U.S.C. 2158) is amended--
(1) by inserting ``a.'' before ``No nuclear
materials and equipment''; and
(2) by adding at the end the following new
subsection:
``b.(1) Notwithstanding any other provision of law,
including specifically section 121 of this Act, and except as
provided in paragraphs (2) and (3), no nuclear materials and
equipment or sensitive nuclear technology, including items and
assistance authorized by section 57 b. of this Act and
regulated under part 810 of title 10, Code of Federal
Regulations, and nuclear-related items on the Commerce Control
List maintained under part 774 of title 15 of the Code of
Federal Regulations, shall be exported or reexported, or
transferred or retransferred whether directly or indirectly,
and no Federal agency shall issue any license, approval, or
authorization for the export or reexport, or transfer, or
retransfer, whether directly or indirectly, of these items or
assistance (as defined in this paragraph) to any country whose
government has been identified by the Secretary of State as
engaged in state sponsorship of terrorist activities
(specifically including any country the government of which has
been determined by the Secretary of State under section 620A(a)
of the Foreign Assistance Act of 1961 (22 U.S.C. 2371(a)),
section 6(j)(1) of the Export Administration Act of 1979 (50
U.S.C. App. 2405(j)(1)), or section 40(d) of the Arms Export
Control Act (22 U.S.C. 2780(d)) to have repeatedly provided
support for acts of international terrorism).
``(2) This subsection shall not apply to exports,
reexports, transfers, or retransfers of radiation monitoring
technologies, surveillance equipment, seals, cameras, tamper-
indication devices, nuclear detectors, monitoring systems, or
equipment necessary to safely store, transport, or remove
hazardous materials, whether such items, services, or
information are regulated by the Department of Energy, the
Department of Commerce, or the Nuclear Regulatory Commission,
except to the extent that such technologies, equipment, seals,
cameras, devices, detectors, or systems are available for use
in the design or construction of nuclear reactors or nuclear
weapons.
``(3) The President may waive the application of paragraph
(1) to a country if the President determines and certifies to
Congress that the waiver will not result in any increased risk
that the country receiving the waiver will acquire nuclear
weapons, nuclear reactors, or any materials or components of
nuclear weapons and--
``(A) the government of such country has not within
the preceding 12-month period willfully aided or
abetted the international proliferation of nuclear
explosive devices to individuals or groups or willfully
aided and abetted an individual or groups in acquiring
unsafeguarded nuclear materials;
``(B) in the judgment of the President, the
government of such country has provided adequate,
verifiable assurances that it will cease its support
for acts of international terrorism;
``(C) the waiver of that paragraph is in the vital
national security interest of the United States; or
``(D) such a waiver is essential to prevent or
respond to a serious radiological hazard in the country
receiving the waiver that may or does threaten public
health and safety.''.
(b) Applicability To Exports Approved for Transfer but Not
Transferred.--Subsection b. of section 129 of Atomic Energy Act
of 1954, as added by subsection (a) of this section, shall
apply with respect to exports that have been approved for
transfer as of the date of the enactment of this Act but have
not yet been transferred as of that date.
SEC. 637. URANIUM ENRICHMENT FACILITIES.
(a) Nuclear Regulatory Commission Review of Applications.--
(1) In general.--In order to facilitate a timely
review and approval of an application in a proceeding
for a license for the construction and operation of a
uranium enrichment facility under sections 53 and 63 of
the Atomic Energy Act of 1954 (42 U.S.C. 2073, 2093)
(referred to in this subsection as a ``covered
proceeding''), the Nuclear Regulatory Commission shall,
not later than 30 days after the receipt of the
application, establish, by order, the schedule for the
conduct of any hearing that may be requested by any
person whose interest may be affected by the covered
proceeding.
(2) Final agency decision.--The schedule shall
provide that a final decision by the Commission on the
application shall be made not later than the date that
is 2 years after the date of submission of the
application by the applicant.
(3) Compliance with schedule.--
(A) In general.--The Commission shall
establish a process to assess compliance with
the schedule established under paragraph (1) on
an ongoing basis during the course of the
review of the application, including ensuring
compliance with schedules and milestones that
are established for the conduct of any covered
proceeding by the Atomic Safety and Licensing
Board.
(B) Report.--The Commission shall submit to
Congress on a bimonthly basis a report
describing the status of compliance with the
schedule established under paragraph (1),
including a description of the status of
actions required to be completed pursuant to
the schedule by officers and employees of--
(i) the Commission in undertaking
the safety and environmental review of
applications; and
(ii) the Atomic Safety and
Licensing Board in the conduct of any
covered proceeding.
(4) Environmental review.--
(A) In general.--In evaluating an
application under the National Environmental
Policy Act of 1969 (42 U.S.C. 4321 et seq.) for
licensing of a facility in a covered
proceeding, the Commission shall limit the
consideration of need to whether the licensing
of the facility would advance the national
interest of encouraging in the United States--
(i) additional secure, reliable
uranium enrichment capacity;
(ii) diverse supplies and suppliers
of uranium enrichment capacity; and
(iii) the deployment of advanced
centrifuge enrichment technology.
(B) Comment.--In carrying out subparagraph
(A), the Commission shall consider and solicit
the views of other affected Federal agencies.
(C) Atomic safety and licensing board.--
(i) In general.--Except as provided
in clause (ii), in any covered
proceeding, the Commission shall allow
the litigation and resolution by the
Atomic Safety and Licensing Board of
issues arising under the National
Environmental Policy Act of 1969 (42
U.S.C. 4321 et seq.), on the basis of
information submitted by the applicant
in its environmental report, prior to
publication of any required
environmental impact statement.
(ii) Exceptions.--On the
publication of any required
environmental impact statement, issues
may be proffered for resolution by the
Atomic Safety and Licensing Board only
if information or conclusions in the
environmental impact statement differ
significantly from the information or
conclusions in the environmental report
submitted by the applicant.
(D) Environmental justice.--In a covered
proceeding, the Commission shall apply the
criteria in Appendix C of the final report
entitled ``Environmental Review Guidance for
Licensing Actions Associated with NMSS
Programs'' (NUREG-1748), published in August
2003, in any required review of environmental
justice.
(5) Low-level waste.--In any covered proceeding,
the Commission shall--
(A) deem the obligation of the Secretary of
Energy pursuant to section 3113 of the USEC
Privitization Act (42 U.S.C. 2297 h-11) to
constitute a plausible strategy with regard to
the disposition of depleted uranium generated
by such facility; and
(B) treat any residual material that
remains following the extraction of any usable
resource value from depleted uranium as low-
level radioactive waste under part 61 of title
10, Code of Federal Regulations.
(6) Adjudicatory hearing on licensing of uranium
enrichment facilities.--Section 193(b) of the Atomic
Energy Act of 1954 (42 U.S.C. 2243(b)) is amended by
striking paragraph (2) and inserting the following:
``(2) Timing.--On the issuance of a final decision
on the application by the Atomic Safety and Licensing
Board, the Commission shall issue and make immediately
effective any license for the construction and
operation of a uranium enrichment facility under
sections 53 and 63, on a determination by the
Commission that the issuance of the license would not
cause irreparable injury to the public health and
safety or the common defense and security,
notwithstanding the pendency before the Commission of
any appeal or petition for review of any decision of
the Atomic Safety and Licensing Board.''.
(b) Department of Energy Responsibilities.--
(1) In general.--Not later than 180 days after a
request is made to the Secretary of Energy by an
applicant for or recipient of a license for a uranium
enrichment facility under section 53, 63, or 193 of the
Atomic Energy Act of 1954 (42 U.S.C. 2073, 2093, 2243),
the Secretary shall enter into a memorandum of
agreement with the applicant or licensee that provides
a schedule for the transfer to the Secretary, not later
than 5 years after the generation of any depleted
uranium hexafluoride, of title and possession of the
depleted uranium hexafluoride to be generated by the
applicant or licensee.
(2) Cost.--
(A) In general.--Subject to subparagraphs
(B) and (C), the memorandum of agreement shall
specify the cost to be assessed by the
Secretary for the transfer to the Secretary of
the depleted uranium hexafluoride.
(B) Nondiscriminatory basis.--The cost
shall be determined by the Secretary on a
nondiscriminatory basis.
(C) Cost.--Taking into account the physical
and chemical characteristics of such depleted
uranium hexafluoride, the cost shall not exceed
the cost assessed by the Secretary for the
acceptance of depleted uranium hexafluoride
under--
(i) the memorandum of agreement
between the United States Department of
Energy and the United States Enrichment
Corporation Relating to Depleted
Uranium, dated June 30, 1998; and
(ii) the Agreement Between the U.S.
Department of Energy and USEC Inc.,
dated June 17, 2002.
SEC. 638. NATIONAL URANIUM STOCKPILE.
(a) Stockpile Creation.--The Secretary of Energy may create
a national low-enriched uranium stockpile with the goals to--
(1) enhance national energy security; and
(2) reduce global proliferation threats.
(b) Source of Material.--The Secretary shall obtain
material for the stockpile from--
(1) material derived from blend-down of Russian
highly enriched uranium derived from weapons materials;
and
(2) domestically mined and enriched uranium.
(c) Limitation on Sales or Transfers.--Sales or transfer of
materials in the stockpile shall occur pursuant to section 3112
of the USEC Privitization Act (42 U.S.C. 2297h-10), as amended
by section 630 of this Act.
Subtitle C--Advanced Reactor Hydrogen Cogeneration Project
SEC. 651. PROJECT ESTABLISHMENT.
The Secretary of Energy (in this subtitle referred to as
the ``Secretary'') is directed to establish an Advanced Reactor
Hydrogen Cogeneration Project.
SEC. 652. PROJECT DEFINITION.
The project shall consist of the research, development,
design, construction, and operation of a hydrogen production
cogeneration research facility that, relative to the current
commercial reactors, enhances safety features, reduces waste
production, enhances thermal efficiencies, increases
proliferation resistance, and has the potential for improved
economics and physical security in reactor siting. This
facility shall be constructed so as to enable research and
development on advanced reactors of the type selected and on
alternative approaches for reactor-based production of
hydrogen.
SEC. 653. PROJECT MANAGEMENT.
(a) Management.--The project shall be managed within the
Department by the Office of Nuclear Energy, Science, and
Technology.
(b) Lead Laboratory.--The lead laboratory for the project,
providing the site for the reactor construction, shall be the
Idaho National Engineering and Environmental Laboratory (in
this subtitle referred to as ``INEEL'').
(c) Steering Committee.--The Secretary shall establish a
national steering committee with membership from the national
laboratories, universities, and industry to provide advice to
the Secretary and the Director of the Office of Nuclear Energy,
Science, and Technology on technical and program management
aspects of the project.
(d) Collaboration.--Project activities shall be conducted
at INEEL, other national laboratories, universities, domestic
industry, and international partners.
SEC. 654. PROJECT REQUIREMENTS.
(a) Research and Development.--
(1) In general.--The project shall include
planning, research and development, design, and
construction of an advanced, next-generation, nuclear
energy system suitable for enabling further research
and development on advanced reactor technologies and
alternative approaches for reactor-based generation of
hydrogen.
(2) Reactor test capabilities at ineel.--The
project shall utilize, where appropriate, extensive
reactor test capabilities resident at INEEL.
(3) Alternatives.--The project shall be designed to
explore technical, environmental, and economic
feasibility of alternative approaches for reactor-based
hydrogen production.
(4) Industrial lead.--The industrial lead for the
project shall be a company incorporated in the United
States.
(b) International Collaboration.--
(1) In general.--The Secretary shall seek
international cooperation, participation, and financial
contribution in this project.
(2) Assistance from international partners.--The
Secretary may contract for assistance from specialists
or facilities from member countries of the Generation
IV International Forum, the Russian Federation, or
other international partners where such specialists or
facilities provide access to cost-effective and
relevant skills or test capabilities.
(3) Generation iv international forum.--
International activities shall be coordinated with the
Generation IV International Forum.
(4) Generation iv nuclear energy systems program.--
The Secretary may combine this project with the
Generation IV Nuclear Energy Systems Program.
(c) Demonstration.--The overall project, which may involve
demonstration of selected project objectives in a partner
nation, must demonstrate both electricity and hydrogen
production and may provide flexibility, where technically and
economically feasible in the design and construction, to enable
tests of alternative reactor core and cooling configurations.
(d) Partnerships.--The Secretary shall establish cost-
shared partnerships with domestic industry or international
participants for the research, development, design,
construction, and operation of the research facility, and
preference in determining the final project structure shall be
given to an overall project which retains United States
leadership while maximizing cost sharing opportunities and
minimizing Federal funding responsibilities.
(e) Target Date.--The Secretary shall select technologies
and develop the project to provide initial testing of either
hydrogen production or electricity generation by 2010, or
provide a report to Congress explaining why this date is not
feasible.
(f) Waiver of Construction Timelines.--The Secretary is
authorized to conduct the Advanced Reactor Hydrogen
Cogeneration Project without the constraints of DOE Order
413.3, relating to program and project management for the
acquisition of capital assets, as necessary to meet the
specified operational date.
(g) Competition.--The Secretary may fund up to 2 teams for
up to 1 year to develop detailed proposals for competitive
evaluation and selection of a single proposal and concept for
further progress. The Secretary shall define the format of the
competitive evaluation of proposals.
(h) Use of Facilities.--Research facilities in industry,
national laboratories, or universities either within the United
States or with cooperating international partners may be used
to develop the enabling technologies for the research facility.
Utilization of domestic university-based facilities shall be
encouraged to provide educational opportunities for student
development.
(i) Role of Nuclear Regulatory Commission.--
(1) In general.--The Nuclear Regulatory Commission
shall have licensing and regulatory authority for any
reactor authorized under this subtitle, pursuant to
section 202 of the Energy Reorganization Act of 1974
(42 U.S.C. 5842).
(2) Risk-based criteria.--The Secretary shall seek
active participation of the Nuclear Regulatory
Commission throughout the project to develop risk-based
criteria for any future commercial development of a
similar reactor architecture.
(j) Report--The Secretary shall develop and transmit to
Congress a comprehensive project plan not later than April 30,
2004. The project plan shall be updated annually with each
annual budget submission.
SEC. 655. AUTHORIZATION OF APPROPRIATIONS.
(a) Research, Development, and Design Programs.--The
following sums are authorized to be appropriated to the
Secretary for all activities under this subtitle except for
construction activities described in subsection (b):
(1) For fiscal year 2004, $35,000,000.
(2) For each of fiscal years 2005 through 2008,
$150,000,000.
(3) For fiscal years beyond 2008, such sums as are
necessary.
(b) Construction.--There are authorized to be appropriated
to the Secretary for all project-related construction
activities, to be available until expended, $500,000,000.
Subtitle D--Nuclear Security
SEC. 661. NUCLEAR FACILITY THREATS.
(a) Study.--The President, in consultation with the Nuclear
Regulatory Commission (referred to in this subtitle as the
``Commission'') and other appropriate Federal, State, and local
agencies and private entities, shall conduct a study to
identify the types of threats that pose an appreciable risk to
the security of the various classes of facilities licensed by
the Commission under the Atomic Energy Act of 1954 (42 U.S.C.
2011 et seq.). Such study shall take into account, but not be
limited to--
(1) the events of September 11, 2001;
(2) an assessment of physical, cyber, biochemical,
and other terrorist threats;
(3) the potential for attack on facilities by
multiple coordinated teams of a large number of
individuals;
(4) the potential for assistance in an attack from
several persons employed at the facility;
(5) the potential for suicide attacks;
(6) the potential for water-based and air-based
threats;
(7) the potential use of explosive devices of
considerable size and other modern weaponry;
(8) the potential for attacks by persons with a
sophisticated knowledge of facility operations;
(9) the potential for fires, especially fires of
long duration;
(10) the potential for attacks on spent fuel
shipments by multiple coordinated teams of a large
number of individuals;
(11) the adequacy of planning to protect the public
health and safety at and around nuclear facilities, as
appropriate, in the event of a terrorist attack against
a nuclear facility; and
(12) the potential for theft and diversion of
nuclear materials from such facilities.
(b) Summary and Classification Report.--Not later than 180
days after the date of the enactment of this Act, the President
shall transmit to Congress and the Commission a report--
(1) summarizing the types of threats identified
under subsection (a); and
(2) classifying each type of threat identified
under subsection (a), in accordance with existing laws
and regulations, as either--
(A) involving attacks and destructive acts,
including sabotage, directed against the
facility by an enemy of the United States,
whether a foreign government or other person,
or otherwise falling under the responsibilities
of the Federal Government; or
(B) involving the type of risks that
Commission licensees should be responsible for
guarding against.
(c) Federal Action Report.--Not later than 90 days after
the date on which a report is transmitted under subsection (b),
the President shall transmit to Congress a report on actions
taken, or to be taken, to address the types of threats
identified under subsection (b)(2)(A), including identification
of the Federal, State, and local agencies responsible for
carrying out the obligations and authorities of the United
States. Such report may include a classified annex, as
appropriate.
(d) Regulations.--Not later than 180 days after the date on
which a report is transmitted under subsection (b), the
Commission may revise, by rule, the design basis threats issued
before the date of enactment of this section as the Commission
considers appropriate based on the summary and classification
report.
(e) Physical Security Program.--The Commission shall
establish an operational safeguards response evaluation program
that ensures that the physical protection capability and
operational safeguards response for sensitive nuclear
facilities, as determined by the Commission consistent with the
protection of public health and the common defense and
security, shall be tested periodically through Commission
approved or designed, observed, and evaluated force-on-force
exercises to determine whether the ability to defeat the design
basis threat is being maintained. For purposes of this
subsection, the term ``sensitive nuclear facilities'' includes
at a minimum commercial nuclear power plants and category I
fuel cycle facilities.
(f) Control of Information.--Notwithstanding any other
provision of law, the Commission may undertake any rulemaking
under this subtitle in a manner that will fully protect
safeguards and classified national security information.
(g) Federal Security Coordinators.--
(1) Regional offices.--Not later than 18 months
after the date of enactment of this Act, the Commission
shall assign a Federal security coordinator, under the
employment of the Commission, to each region of the
Commission.
(2) Responsibilities.--The Federal security
coordinator shall be responsible for--
(A) communicating with the Commission and
other Federal, State, and local authorities
concerning threats, including threats against
such classes of facilities as the Commission
determines to be appropriate;
(B) ensuring that such classes of
facilities as the Commission determines to be
appropriate maintain security consistent with
the security plan in accordance with the
appropriate threat level; and
(C) assisting in the coordination of
security measures among the private security
forces at such classes of facilities as the
Commission determines to be appropriate and
Federal, State, and local authorities, as
appropriate.
(h) Training Program.--The President shall establish a
program to provide technical assistance and training to Federal
agencies, the National Guard, and State and local law
enforcement and emergency response agencies in responding to
threats against a designated nuclear facility.
SEC. 662. FINGERPRINTING FOR CRIMINAL HISTORY RECORD CHECKS.
(a) In General.--Subsection a. of section 149 of the Atomic
Energy Act of 1954 (42 U.S.C. 2169(a)) is amended--
(1) by striking ``a. The Nuclear'' and all that
follows through ``section 147.'' and inserting the
following:
``a. In General.--
``(1) Requirements.--
``(A) In general.-- The Commission shall
require each individual or entity--
``(i) that is licensed or certified
to engage in an activity subject to
regulation by the Commission;
``(ii) that has filed an
application for a license or
certificate to engage in an activity
subject to regulation by the
Commission; or
``(iii) that has notified the
Commission, in writing, of an intent to
file an application for licensing,
certification, permitting, or approval
of a product or activity subject to
regulation by the Commission,
to fingerprint each individual described in
subparagraph (B) before the individual is
permitted unescorted access or access,
whichever is applicable, as described in
subparagraph (B).
``(B) Individuals required to be
fingerprinted.--The Commission shall require to
be fingerprinted each individual who--
``(i) is permitted unescorted
access to--
``(I) a utilization
facility; or
``(II) radioactive material
or other property subject to
regulation by the Commission
that the Commission determines
to be of such significance to
the public health and safety or
the common defense and security
as to warrant fingerprinting
and background checks; or
``(ii) is permitted access to
safeguards information under section
147.'';
(2) by striking ``All fingerprints obtained by a
licensee or applicant as required in the preceding
sentence'' and inserting the following:
``(2) Submission to the attorney general.--All
fingerprints obtained by an individual or entity as
required in paragraph (1)'';
(3) by striking ``The costs of any identification
and records check conducted pursuant to the preceding
sentence shall be paid by the licensee or applicant.''
and inserting the following:
``(3) Costs.--The costs of any identification and
records check conducted pursuant to paragraph (1) shall
be paid by the individual or entity required to conduct
the fingerprinting under paragraph (1)(A).''; and
(4) by striking ``Notwithstanding any other
provision of law, the Attorney General may provide all
the results of the search to the Commission, and, in
accordance with regulations prescribed under this
section, the Commission may provide such results to
licensee or applicant submitting such fingerprints.''
and inserting the following:
``(4) Provision to individual or entity required to
conduct fingerprinting.--Notwithstanding any other
provision of law, the Attorney General may provide all
the results of the search to the Commission, and, in
accordance with regulations prescribed under this
section, the Commission may provide such results to the
individual or entity required to conduct the
fingerprinting under paragraph (1)(A).''.
(b) Administration.--Subsection c. of section 149 of the
Atomic Energy Act of 1954 (42 U.S.C. 2169(c)) is amended--
(1) by striking ``, subject to public notice and
comment, regulations--'' and inserting ``requirements--
''; and
(2) by striking, in paragraph (2)(B), ``unescorted
access to the facility of a licensee or applicant'' and
inserting ``unescorted access to a utilization
facility, radioactive material, or other property
described in subsection a.(1)(B)''.
(c) Biometric Methods.--Subsection d. of section 149 of the
Atomic Energy Act of 1954 (42 U.S.C. 2169(d)) is redesignated
as subsection e., and the following is inserted after
subsection c.:
``d. Use of Other Biometric Methods.--The Commission may
satisfy any requirement for a person to conduct fingerprinting
under this section using any other biometric method for
identification approved for use by the Attorney General, after
the Commission has approved the alternative method by rule.''.
SEC. 663. USE OF FIREARMS BY SECURITY PERSONNEL OF LICENSEES AND
CERTIFICATE HOLDERS OF THE COMMISSION.
Section 161 of the Atomic Energy Act of 1954 (42 U.S.C.
2201) is amended by adding at the end the following subsection:
``(z)(1) notwithstanding section 922(o), (v), and
(w) of title 18, United States Code, or any similar
provision of any State law or any similar rule or
regulation of a State or any political subdivision of a
State prohibiting the transfer or possession of a
handgun, a rifle or shotgun, a short-barreled shotgun,
a short-barreled rifle, a machinegun, a semiautomatic
assault weapon, ammunition for the foregoing, or a
large capacity ammunition feeding device, authorize
security personnel of licensees and certificate holders
of the Commission (including employees of contractors
of licensees and certificate holders) to receive,
possess, transport, import, and use 1 or more of those
weapons, ammunition, or devices, if the Commission
determines that--
``(A) such authorization is necessary to
the discharge of the security personnel's
official duties; and
``(B) the security personnel--
``(i) are not otherwise prohibited
from possessing or receiving a firearm
under Federal or State laws pertaining
to possession of firearms by certain
categories of persons;
``(ii) have successfully completed
requirements established through
guidelines implementing this subsection
for training in use of firearms and
tactical maneuvers;
``(iii) are engaged in the
protection of--
``(I) facilities owned or
operated by a Commission
licensee or certificate holder
that are designated by the
Commission; or
``(II) radioactive material
or other property owned or
possessed by a person that is a
licensee or certificate holder
of the Commission, or that is
being transported to or from a
facility owned or operated by
such a licensee or certificate
holder, and that has been
determined by the Commission to
be of significance to the
common defense and security or
public health and safety; and
``(iv) are discharging their
official duties.
``(2) Such receipt, possession, transportation,
importation, or use shall be subject to--
``(A) chapter 44 of title 18, United States
Code, except for section 922(a)(4), (o), (v),
and (w);
``(B) chapter 53 of title 26, United States
Code, except for section 5844; and
``(C) a background check by the Attorney
General, based on fingerprints and including a
check of the system established under section
103(b) of the Brady Handgun Violence Prevention
Act (18 U.S.C. 922 note) to determine whether
the person applying for the authority is
prohibited from possessing or receiving a
firearm under Federal or State law.
``(3) This subsection shall become effective upon
the issuance of guidelines by the Commission, with the
approval of the Attorney General, to govern the
implementation of this subsection.
``(4) In this subsection, the terms ``handgun'',
``rifle'', ``shotgun'', ``firearm'', ``ammunition'',
``machinegun'', ``semiautomatic assault weapon'',
``large capacity ammunition feeding device'', ``short-
barreled shotgun'', and ``short-barreled rifle'' shall
have the meanings given those terms in section 921(a)
of title 18, United States Code.''.
SEC. 664. UNAUTHORIZED INTRODUCTION OF DANGEROUS WEAPONS.
Section 229 a. of the Atomic Energy Act of 1954 (42 U.S.C.
2278a(a)) is amended in the first sentence by inserting ``or
subject to the licensing authority of the Commission or to
certification by the Commission under this Act or any other
Act'' before the period at the end.
SEC. 665. SABOTAGE OF NUCLEAR FACILITIES OR FUEL.
(a) In General.--Section 236 a. of the Atomic Energy Act of
1954 (42 U.S.C. 2284(a)) is amended--
(1) in paragraph (2), by striking ``storage
facility'' and inserting ``storage, treatment, or
disposal facility'';
(2) in paragraph (3)--
(A) by striking ``such a utilization
facility'' and inserting ``a utilization
facility licensed under this Act''; and
(B) by striking ``or'' at the end;
(3) in paragraph (4)--
(A) by striking ``facility licensed'' and
inserting ``, uranium conversion, or nuclear
fuel fabrication facility licensed or
certified''; and
(B) by striking the comma at the end and
inserting a semicolon; and
(4) by inserting after paragraph (4) the following:
``(5) any production, utilization, waste storage,
waste treatment, waste disposal, uranium enrichment,
uranium conversion, or nuclear fuel fabrication
facility subject to licensing or certification under
this Act during construction of the facility, if the
destruction or damage caused or attempted to be caused
could adversely affect public health and safety during
the operation of the facility;
``(6) any primary facility or backup facility from
which a radiological emergency preparedness alert and
warning system is activated; or
``(7) any radioactive material or other property
subject to regulation by the Nuclear Regulatory
Commission that, before the date of the offense, the
Nuclear Regulatory Commission determines, by order or
regulation published in the Federal Register, is of
significance to the public health and safety or to
common defense and security,''.
(b) Penalties.--Section 236 of the Atomic Energy Act of
1954 (42 U.S.C. 2284) is amended by striking ``$10,000 or
imprisoned for not more than 20 years, or both, and, if death
results to any person, shall be imprisoned for any term of
years or for life'' both places it appears and inserting
``$1,000,000 or imprisoned for up to life without parole''.
SEC. 666. SECURE TRANSFER OF NUCLEAR MATERIALS.
(a) Amendment.--Chapter 14 of the Atomic Energy Act of 1954
(42 U.S.C. 2201-2210b) is amended by adding at the end the
following new section:
``SEC. 170C. SECURE TRANSFER OF NUCLEAR MATERIALS.
``a. The Nuclear Regulatory Commission shall establish a
system to ensure that materials described in subsection b.,
when transferred or received in the United States by any party
pursuant to an import or export license issued pursuant to this
Act, are accompanied by a manifest describing the type and
amount of materials being transferred or received. Each
individual receiving or accompanying the transfer of such
materials shall be subject to a security background check
conducted by appropriate Federal entities.
``b. Except as otherwise provided by the Commission by
regulation, the materials referred to in subsection a. are
byproduct materials, source materials, special nuclear
materials, high-level radioactive waste, spent nuclear fuel,
transuranic waste, and low-level radioactive waste (as defined
in section 2(16) of the Nuclear Waste Policy Act of 1982 (42
U.S.C. 10101(16))).''.
(b) Regulations.--Not later than 1 year after the date of
the enactment of this Act, and from time to time thereafter as
it considers necessary, the Nuclear Regulatory Commission shall
issue regulations identifying radioactive materials or classes
of individuals that, consistent with the protection of public
health and safety and the common defense and security, are
appropriate exceptions to the requirements of section 170C of
the Atomic Energy Act of 1954, as added by subsection (a) of
this section.
(c) Effective Date.--The amendment made by subsection (a)
shall take effect upon the issuance of regulations under
subsection (b), except that the background check requirement
shall become effective on a date established by the Commission.
(d) Effect on Other Law.--Nothing in this section or the
amendment made by this section shall waive, modify, or affect
the application of chapter 51 of title 49, United States Code,
part A of subtitle V of title 49, United States Code, part B of
subtitle VI of title 49, United States Code, and title 23,
United States Code.
(e) Table of Sections Amendment.--The table of sections for
chapter 14 of the Atomic Energy Act of 1954 is amended by
adding at the end the following new item:
``Sec. 170C. Secure transfer of nuclear materials.''.
SEC. 667. DEPARTMENT OF HOMELAND SECURITY CONSULTATION.
Before issuing a license for a utilization facility, the
Nuclear Regulatory Commission shall consult with the Department
of Homeland Security concerning the potential vulnerabilities
of the location of the proposed facility to terrorist attack.
SEC. 668. AUTHORIZATION OF APPROPRIATIONS.
(a) In General.--There are authorized to be appropriated
such sums as are necessary to carry out this subtitle and the
amendments made by this subtitle.
(b) Aggregate Amount of Charges.--Section 6101(c)(2)(A) of
the Omnibus Budget Reconciliation Act of 1990 (42 U.S.C.
2214(c)(2)(A)) is amended--
(1) in clause (i), by striking ``and'' at the end;
(2) in clause (ii), by striking the period at the
end and inserting ``; and'' and
(3) by adding at the end the following:
``(iii) amounts appropriated to the
Commission for homeland security
activities of the Commission for the
fiscal year, except for the costs of
fingerprinting and background checks
required by section 149 of the Atomic
Energy Act of 1954 (42 U.S.C. 2169) and
the costs of conducting security
inspections.''.
TITLE VII--VEHICLES AND FUELS
Subtitle A--Existing Programs
SEC. 701. USE OF ALTERNATIVE FUELS BY DUAL-FUELED VEHICLES.
Section 400AA(a)(3)(E) of the Energy Policy and
Conservation Act (42 U.S.C. 6374(a)(3)(E)) is amended to read
as follows:
``(E)(i) Dual fueled vehicles acquired pursuant to this
section shall be operated on alternative fuels unless the
Secretary determines that an agency qualifies for a waiver of
such requirement for vehicles operated by the agency in a
particular geographic area in which--
``(I) the alternative fuel otherwise required to be
used in the vehicle is not reasonably available to
retail purchasers of the fuel, as certified to the
Secretary by the head of the agency; or
``(II) the cost of the alternative fuel otherwise
required to be used in the vehicle is unreasonably more
expensive compared to gasoline, as certified to the
Secretary by the head of the agency.
``(ii) The Secretary shall monitor compliance with this
subparagraph by all such fleets and shall report annually to
Congress on the extent to which the requirements of this
subparagraph are being achieved. The report shall include
information on annual reductions achieved from the use of
petroleum-based fuels and the problems, if any, encountered in
acquiring alternative fuels.''.
SEC. 702. NEIGHBORHOOD ELECTRIC VEHICLES.
(a) Amendments.--Section 301 of the Energy Policy Act of
1992 (42 U.S.C. 13211) is amended--
(1) in paragraph (3), by striking ``or a dual
fueled vehicle'' and inserting ``, a dual fueled
vehicle, or a neighborhood electric vehicle'';
(2) in paragraph (13), by striking ``and'' at the
end;
(3) in paragraph (14), by striking the period at
the end and inserting ``; and''; and
(4) by adding at the end the following:
``(15) the term `neighborhood electric vehicle'
means a motor vehicle that--
``(A) meets the definition of a low-speed
vehicle (as defined in part 571 of title 49,
Code of Federal Regulations);
``(B) meets the definition of a zero-
emission vehicle (as defined in section
86.1702-99 of title 40, Code of Federal
Regulations);
``(C) meets the requirements of Federal
Motor Vehicle Safety Standard No. 500; and
``(D) has a maximum speed of not greater
than 25 miles per hour.''.
(b) Credits.--Notwithstanding section 508 of the Energy
Policy Act of 1992 (42 U.S.C. 13258) or any other provision of
law, a neighborhood electric vehicle shall not be allocated
credit as more than 1 vehicle for purposes of determining
compliance with any requirement under title III or title V of
such Act.
SEC. 703. CREDITS FOR MEDIUM AND HEAVY DUTY DEDICATED VEHICLES.
Section 508 of the Energy Policy Act of 1992 (42 U.S.C.
13258) is amended by adding at the end the following:
``(e) Credit for Purchase of Medium and Heavy Duty
Dedicated Vehicles.--
``(1) Definitions.--In this subsection:
``(A) Heavy duty dedicated vehicle.--The
term `heavy duty dedicated vehicle' means a
dedicated vehicle that has a gross vehicle
weight rating of more than 14,000 pounds.
``(B) Medium duty dedicated vehicle.--The
term `medium duty dedicated vehicle' means a
dedicated vehicle that has a gross vehicle
weight rating of more than 8,500 pounds but not
more than 14,000 pounds.
``(2) Credits for medium duty vehicles.--The
Secretary shall issue 2 full credits to a fleet or
covered person under this title, if the fleet or
covered person acquires a medium duty dedicated
vehicle.
``(3) Credits for heavy duty vehicles.--The
Secretary shall issue 3 full credits to a fleet or
covered person under this title, if the fleet or
covered person acquires a heavy duty dedicated vehicle.
``(4) Use of credits.--At the request of a fleet or
covered person allocated a credit under this
subsection, the Secretary shall, for the year in which
the acquisition of the dedicated vehicle is made, treat
that credit as the acquisition of 1 alternative fueled
vehicle that the fleet or covered person is required to
acquire under this title.''.
SEC. 704. INCREMENTAL COST ALLOCATION.
Section 303(c) of the Energy Policy Act of 1992 (42 U.S.C.
13212(c)) is amended by striking ``may'' and inserting
``shall''.
SEC. 705. ALTERNATIVE COMPLIANCE AND FLEXIBILITY.
(a) Alternative Compliance.--
(1) In general.--Title V of the Energy Policy Act
of 1992 (42 U.S.C. 13251 et seq.) is amended--
(A) by redesignating section 514 as section
515; and
(B) by inserting after section 513 the
following:
``SEC. 514. ALTERNATIVE COMPLIANCE.
``(a) Application for Waiver.--Any covered person subject
to section 501 and any State subject to section 507(o) may
petition the Secretary for a waiver of the applicable
requirements of section 501 or 507(o).
``(b) Grant of Waiver.--The Secretary may grant a waiver of
the requirements of section 501 or 507(o) upon a showing that
the fleet owned, operated, leased, or otherwise controlled by
the State or covered person--
``(1) will achieve a reduction in its annual
consumption of petroleum fuels equal to the reduction
in consumption ofpetroleum that would result from 100
percent compliance with fuel use requirements in section 501, or, for
entities covered under section 507(o), a reduction equal to the covered
State entity's consumption of alternative fuels if all its alternative
fuel vehicles given credit under section 508 were to use alternative
fuel 100 percent of the time; and
``(2) is in compliance with all applicable vehicle
emission standards established by the Administrator
under the Clean Air Act (42 U.S.C. 7401 et seq.).
``(c) Revocation of Waiver.--The Secretary shall revoke any
waiver granted under this section if the State or covered
person fails to comply with subsection (b).''.
(2) Table of contents amendment.--The table of
contents of the Energy Policy Act of 1992 (42 U.S.C.
prec. 13201) is amended by striking the item relating
to section 514 and inserting the following:
``Sec. 514. Alternative compliance.
``Sec. 515. Authorization of appropriations.''.
(b) Credits.--Section 508 of the Energy Policy Act of 1992
(42 U.S.C. 13258) (as amended by section 703) is amended--
(1) by redesignating subsections (b) through (e) as
subsections (c) through (f), respectively;
(2) by striking subsection (a) and inserting the
following:
``(a) In General.--The Secretary shall allocate a credit to
a fleet or covered person that is required to acquire an
alternative fueled vehicle under this title, if that fleet or
person acquires an alternative fueled vehicle--
``(1) in excess of the number that fleet or person
is required to acquire under this title;
``(2) before the date on which that fleet or person
is required to acquire an alternative fueled vehicle
under this title; or
``(3) that is eligible to receive credit under
subsection (b).
``(b) Maximum Available Power.--The Secretary shall
allocate credit to a fleet under subsection (a)(3) for the
acquisition by the fleet of a hybrid vehicle as follows:
``(1) For a hybrid vehicle with at least 4 percent
but less than 10 percent maximum available power, the
Secretary shall allocate 25 percent of 1 credit.
``(2) For a hybrid vehicle with at least 10 percent
but less than 20 percent maximum available power, the
Secretary shall allocate 50 percent of 1 credit.
``(3) For a hybrid vehicle with at least 20 percent
but less than 30 percent maximum available power, the
Secretary shall allocate 75 percent of 1 credit.
``(4) For a hybrid vehicle with 30 percent or more
maximum available power, the Secretary shall allocate 1
credit.''; and
(3) by adding at the end the following:
``(g) Credit for Investment in Alternative Fuel
Infrastructure.--
``(1) Definition of qualifying infrastructure.--In
this subsection, the term `qualifying infrastructure'
means--
``(A) equipment required to refuel or
recharge alternative fueled vehicles;
``(B) facilities or equipment required to
maintain, repair, or operate alternative fueled
vehicles; and
``(C) such other activities as the
Secretary considers to constitute an
appropriate expenditure in support of the
operation, maintenance, or further widespread
adoption of or utilization of alternative
fueled vehicles.
``(2) Issuance of credits.--The Secretary shall
issue a credit to a fleet or covered person under this
title for investment in qualifying infrastructure if
the qualifying infrastructure is open to the general
public during regular business hours.
``(3) Amount.--For the purpose of credits under
this subsection--
``(A) 1 credit shall be equal to a minimum
investment of $25,000 in cash or equivalent
expenditure, as determined by the Secretary;
and
``(B) except in the case of a Federal or
State fleet, no part of the investment may be
provided by Federal or State funds.
``(4) Use of credits.--At the request of a fleet or
covered person allocated a credit under this
subsection, the Secretary shall, for the year in which
the investment is made, treat that credit as the
acquisition of 1 alternative fueled vehicle that the
fleet or covered person is required to acquire under
this title.
``(h) Definition of Maximum Available Power.--In this
section, the term `maximum available power' means the quotient
obtained by dividing--
``(1) the maximum power available from the energy
storage device of a hybrid vehicle, during a standard
10-second pulse power or equivalent test; by
``(2) the sum of--
``(A) the maximum power described in
subparagraph (A); and
``(B) the net power of the internal
combustion or heat engine, as determined in
accordance with standards established by the
Society of Automobile Engineers.''.
(c) Lease Condensate Fuels.--Section 301 of the Energy
Policy Act of 1992 (42 U.S.C. 13211) (as amended by section
702) is amended--
(1) in paragraph (2), by inserting ``mixtures
containing 50 percent or more by volume of lease
condensate or fuels extracted from lease condensate;''
after ``liquefied petroleum gas;'';
(2) in paragraph (14)--
(A) by inserting ``mixtures containing 50
percent or more by volume of lease condensate
or fuels extracted from lease condensate,''
after ``liquefied petroleum gas,''; and
(B) by striking ``and'' at the end;
(3) in paragraph (15), by striking the period at
the end and inserting ``; and''; and
(4) by adding at the end the following:
``(16) the term `lease condensate' means a mixture,
primarily of pentanes and heavier hydrocarbons, that is
recovered as a liquid from natural gas in lease
separation facilities.''.
(d) Lease Condensate Use Credits.--
(1) In general.--Title III of the Energy Policy Act
of 1992 (42 U.S.C. 13211 et seq.) is amended by adding
at the end the following:
``SEC. 313. LEASE CONDENSATE USE CREDITS.
``(a) In General.--Subject to subsection (d), the Secretary
shall allocate 1 credit under this section to a fleet or
covered person for each qualifying volume of the lease
condensate component of fuel containing at least 50 percent
lease condensate, or fuels extracted from lease condensate,
after the date of enactment of this section for use by the
fleet or covered person in vehicles owned or operated by the
fleet or covered person that weigh more than 8,500 pounds gross
vehicle weight rating.
``(b) Requirements.--A credit allocated under this
section--
``(1) shall be subject to the same exceptions,
authority, documentation, and use of credits that are
specified for qualifying volumes of biodiesel in
section 312; and
``(2) shall not be considered a credit under
section 508.
``(c) Regulation.--
``(1) In general.--Subject to subsection (d), not
later than January 1, 2004, after the collection of
appropriate information and data that consider usage
options,uses in other industries, products, or
processes, potential volume capacities, costs, air emissions, and fuel
efficiencies, the Secretary shall issue a regulation establishing
requirements and procedures for the implementation of this section.
``(2) Qualifying volume.--The regulation shall
include a determination of an appropriate qualifying
volume for lease condensate, except that in no case
shall the Secretary determine that the qualifying
volume for lease condensate is less than 1,125 gallons.
``(d) Applicability.--This section applies unless the
Secretary finds that the use of lease condensate as an
alternative fuel would adversely affect public health or safety
or ambient air quality or the environment.''.
(2) Table of contents amendment.--The table of
contents of the Energy Policy Act of 1992 (42 U.S.C.
prec. 13201) is amended by adding at the end of the
items relating to title III the following:
``Sec. 313. Lease condensate use credits.''.
(e) Emergency Exemption.--Section 301 of the Energy Policy
Act of 1992 (42 U.S.C. 13211) (as amended by section 702 and
this section) is amended in paragraph (9)(E) by inserting
before the semicolon at the end ``, including vehicles directly
used in the emergency repair of transmission lines and in the
restoration of electricity service following power outages, as
determined by the Secretary''.
SEC. 706. REVIEW OF ENERGY POLICY ACT OF 1992 PROGRAMS.
(a) In General.--Not later than 180 days after the date of
enactment of this section, the Secretary of Energy shall
complete a study to determine the effect that titles III, IV,
and V of the Energy Policy Act of 1992 (42 U.S.C. 13211 et
seq.) have had on--
(1) the development of alternative fueled vehicle
technology;
(2) the availability of that technology in the
market; and
(3) the cost of alternative fueled vehicles.
(b) Topics.--As part of the study under subsection (a), the
Secretary shall specifically identify--
(1) the number of alternative fueled vehicles
acquired by fleets or covered persons required to
acquire alternative fueled vehicles;
(2) the quantity, by type, of alternative fuel
actually used in alternative fueled vehicles acquired
by fleets or covered persons;
(3) the quantity of petroleum displaced by the use
of alternative fuels in alternative fueled vehicles
acquired by fleets or covered persons;
(4) the direct and indirect costs of compliance
with requirements under titles III, IV, and V of the
Energy Policy Act of 1992 (42 U.S.C. 13211 et seq.),
including--
(A) vehicle acquisition requirements
imposed on fleets or covered persons;
(B) administrative and recordkeeping
expenses;
(C) fuel and fuel infrastructure costs;
(D) associated training and employee
expenses; and
(E) any other factors or expenses the
Secretary determines to be necessary to compile
reliable estimates of the overall costs and
benefits of complying with programs under those
titles for fleets, covered persons, and the
national economy;
(5) the existence of obstacles preventing
compliance with vehicle acquisition requirements and
increased use of alternative fuel in alternative fueled
vehicles acquired by fleets or covered persons; and
(6) the projected impact of amendments to the
Energy Policy Act of 1992 made by this title.
(c) Report.--Upon completion of the study under this
section, the Secretary shall submit to Congress a report that
describes the results of the study and includes any
recommendations of the Secretary for legislative or
administrative changes concerning the alternative fueled
vehicle requirements under titles III, IV and V of the Energy
Policy Act of 1992 (42 U.S.C. 13211 et seq.).
SEC. 707. REPORT CONCERNING COMPLIANCE WITH ALTERNATIVE FUELED VEHICLE
PURCHASING REQUIREMENTS.
Section 310(b)(1) of the Energy Policy Act of 1992 (42
U.S.C. 13218(b)(1)) is amended by striking ``1 year after the
date of enactment of this subsection'' and inserting ``February
15, 2004''.
Subtitle B--Hybrid Vehicles, Advanced Vehicles, and Fuel Cell Buses
PART 1--HYBRID VEHICLES
SEC. 711. HYBRID VEHICLES.
The Secretary of Energy shall accelerate efforts directed
toward the improvement of batteries and other rechargeable
energy storage systems, power electronics, hybrid systems
integration, and other technologies for use in hybrid vehicles.
PART 2--ADVANCED VEHICLES
SEC. 721. DEFINITIONS.
In this part:
(1) Alternative fueled vehicle.--
(A) In general.--The term ``alternative
fueled vehicle'' means a vehicle propelled
solely on an alternative fuel (as defined in
section 301 of the Energy Policy Act of 1992
(42 U.S.C. 13211)).
(B) Exclusion.--The term ``alternative
fueled vehicle'' does not include a vehicle
that the Secretary determines, by regulation,
does not yield substantial environmental
benefits over a vehicle operating solely on
gasoline or diesel derived from fossil fuels.
(2) Fuel cell vehicle.--The term ``fuel cell
vehicle'' means a vehicle propelled by an electric
motor powered by a fuel cell system that converts
chemical energy into electricity by combining oxygen
(from air) with hydrogen fuel that is stored on the
vehicle or is produced onboard by reformation of a
hydrocarbon fuel. Such fuel cell system may or may not
include the use of auxiliary energy storage systems to
enhance vehicle performance.
(3) Hybrid vehicle.--The term ``hybrid vehicle''
means a medium or heavy duty vehicle propelled by an
internal combustion engine or heat engine using any
combustible fuel and an onboard rechargeable energy
storage device.
(4) Neighborhood electric vehicle.--The term
``neighborhood electric vehicle'' means a motor vehicle
that--
(A) meets the definition of a low-speed
vehicle (as defined in part 571 of title 49,
Code of Federal Regulations);
(B) meets the definition of a zero-emission
vehicle (as defined in section 86.1702-99 of
title 40, Code of Federal Regulations);
(C) meets the requirements of Federal Motor
Vehicle Safety Standard No. 500; and
(D) has a maximum speed of not greater than
25 miles per hour.
(5) Pilot program.--The term ``pilot program''
means the competitive grant program established under
section 722.
(6) Secretary.--The term ``Secretary'' means the
Secretary of Energy.
(7) Ultra-low sulfur diesel vehicle.--The term
``ultra-low sulfur diesel vehicle'' means a vehicle
manufactured in any of model years 2003 through 2006
powered by a heavy-duty diesel engine that--
(A) is fueled by diesel fuel that contains
sulfur at not more than 15 parts per million;
and
(B) emits not more than the lesser of--
(i) for vehicles manufactured in--
(I) model year 2003, 3.0
grams per brake horsepower-hour
of oxides of nitrogen and .01
grams per brake horsepower-hour
of particulate matter; and
(II) model years 2004
through 2006, 2.5 grams per
brake horsepower-hour of
nonmethane hydrocarbons and
oxides of nitrogen and .01
grams per brake horsepower-hour
of particulate matter; or
(ii) the quantity of emissions of
nonmethane hydrocarbons, oxides of
nitrogen, and particulate matter of the
best-performing technology of ultra-low
sulfur diesel vehicles of the same
class and application that are
commercially available.
SEC. 722. PILOT PROGRAM.
(a) Establishment.--The Secretary, in consultation with the
Secretary of Transportation, shall establish a competitive
grant pilot program, to be administered through the Clean
Cities Program of the Department of Energy, to provide not more
than 15 geographically dispersed project grants to State
governments, local governments, or metropolitan transportation
authorities to carry out a project or projects for the purposes
described in subsection (b).
(b) Grant Purposes.--A grant under this section may be used
for the following purposes:
(1) The acquisition of alternative fueled vehicles
or fuel cell vehicles, including--
(A) passenger vehicles (including
neighborhood electric vehicles); and
(B) motorized 2-wheel bicycles, scooters,
or other vehicles for use by law enforcement
personnel or other State or local government or
metropolitan transportation authority
employees.
(2) The acquisition of alternative fueled vehicles,
hybrid vehicles, or fuel cell vehicles, including--
(A) buses used for public transportation or
transportation to and from schools;
(B) delivery vehicles for goods or
services; and
(C) ground support vehicles at public
airports (including vehicles to carry baggage
or push or pull airplanes toward or away from
terminal gates).
(3) The acquisition of ultra-low sulfur diesel
vehicles.
(4) Installation or acquisition of infrastructure
necessary to directly support an alternative fueled
vehicle, fuel cell vehicle, or hybrid vehicle project
funded by the grant, including fueling and other
support equipment.
(5) Operation and maintenance of vehicles,
infrastructure, and equipment acquired as part of a
project funded by the grant.
(c) Applications.--
(1) Requirements.--
(A) In general.--The Secretary shall issue
requirements for applying for grants under the
pilot program.
(B) Minimum requirements.--At a minimum,
the Secretary shall require that an application
for a grant--
(i) be submitted by the head of a
State or local government or a
metropolitan transportation authority,
or any combination thereof, and a
registered participant in the Clean
Cities Program of the Department of
Energy; and
(ii) include--
(I) a description of the
project proposed in the
application, including how the
project meets the requirements
of this part;
(II) an estimate of the
ridership or degree of use of
the project;
(III) an estimate of the
air pollution emissions reduced
and fossil fuel displaced as a
result of the project, and a
plan to collect and disseminate
environmental data, related to
the project to be funded under
the grant, over the life of the
project;
(IV) a description of how
the project will be sustainable
without Federal assistance
after the completion of the
term of the grant;
(V) a complete description
of the costs of the project,
including acquisition,
construction, operation, and
maintenance costs over the
expected life of the project;
(VI) a description of which
costs of the project will be
supported by Federal assistance
under this part; and
(VII) documentation to the
satisfaction of the Secretary
that diesel fuel containing
sulfur at not more than 15
parts per million is available
for carrying out the project,
and a commitment by the
applicant to use such fuel in
carrying out the project.
(2) Partners.--An applicant under paragraph (1) may
carry out a project under the pilot program in
partnership with public and private entities.
(d) Selection Criteria.--In evaluating applications under
the pilot program, the Secretary shall--
(1) consider each applicant's previous experience
with similar projects; and
(2) give priority consideration to applications
that--
(A) are most likely to maximize protection
of the environment;
(B) demonstrate the greatest commitment on
the part of the applicant to ensure funding for
the proposed project and the greatest
likelihood that the project will be maintained
or expanded after Federal assistance under this
part is completed; and
(C) exceed the minimum requirements of
subsection (c)(1)(B)(ii).
(e) Pilot Project Requirements.--
(1) Maximum amount.--The Secretary shall not
provide more than $20,000,000 in Federal assistance
under the pilot program to any applicant.
(2) Cost sharing.--The Secretary shall not provide
more than 50 percent of the cost, incurred during the
period of the grant, of any project under the pilot
program.
(3) Maximum period of grants.--The Secretary shall
not fund any applicant under the pilot program for more
than 5 years.
(4) Deployment and distribution.--The Secretary
shall seek to the maximum extent practicable to ensure
a broad geographic distribution of project sites.
(5) Transfer of information and knowledge.--The
Secretary shall establish mechanisms to ensure that the
information and knowledge gained by participants in the
pilot program are transferred among the pilot program
participants and to other interested parties, including
other applicants that submitted applications.
(f) Schedule.--
(1) Publication.--Not later than 90 days after the
date of enactment of this Act, the Secretary shall
publish in the Federal Register, Commerce Business
Daily, and elsewhere as appropriate, a request for
applications to undertake projects under the pilot
program. Applications shall be due not later than 180
days after the date of publication of the notice.
(2) Selection.--Not later than 180 days after the
date by which applications for grants are due, the
Secretary shall select by competitive, peer reviewed
proposal, all applications for projects to be awarded a
grant under the pilot program.
(g) Limit on Funding.--The Secretary shall provide not less
than 20 nor more than 25 percent of the grant funding made
available under this section for the acquisition of ultra-low
sulfur diesel vehicles.
SEC. 723. REPORTS TO CONGRESS.
(a) Initial Report.--Not later than 60 days after the date
on which grants are awarded under this part, the Secretary
shall submit to Congress a report containing--
(1) an identification of the grant recipients and a
description of the projects to be funded;
(2) an identification of other applicants that
submitted applications for the pilot program; and
(3) a description of the mechanisms used by the
Secretary to ensure that the information and knowledge
gained by participants in the pilot program are
transferred among the pilot program participants and to
other interested parties, including other applicants
that submitted applications.
(b) Evaluation.--Not later than 3 years after the date of
enactment of this Act, and annually thereafter until the pilot
program ends, the Secretary shall submit to Congress a report
containing an evaluation of the effectiveness of the pilot
program, including--
(1) an assessment of the benefits to the
environment derived from the projects included in the
pilot program; and
(2) an estimate of the potential benefits to the
environment to be derived from widespread application
of alternative fueled vehicles and ultra-low sulfur
diesel vehicles.
SEC. 724. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated to the Secretary to
carry out this part $200,000,000, to remain available until
expended.
PART 3--FUEL CELL BUSES
SEC. 731. FUEL CELL TRANSIT BUS DEMONSTRATION.
(a) In General.--The Secretary of Energy, in consultation
with the Secretary of Transportation, shall establish a transit
bus demonstration program to make competitive, merit-based
awards for 5-year projects to demonstrate not more than 25 fuel
cell transit buses (and necessary infrastructure) in 5
geographically dispersed localities.
(b) Preference.--In selecting projects under this section,
the Secretary of Energy shall give preference to projects that
are most likely to mitigate congestion and improve air quality.
(c) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary of Energy to carry out this
section $10,000,000 for each of fiscal years 2004 through 2008.
Subtitle C--Clean School Buses
SEC. 741. DEFINITIONS.
In this subtitle:
(1) Administrator.--The term ``Administrator''
means the Administrator of the Environmental Protection
Agency.
(2) Alternative fuel.--The term ``alternative
fuel'' means liquefied natural gas, compressed natural
gas, liquefied petroleum gas, hydrogen, propane, or
methanol or ethanol at no less than 85 percent by
volume.
(3) Alternative fuel school bus.--The term
``alternative fuel school bus'' means a school bus that
meets all of the requirements of this subtitle and is
operated solely on an alternative fuel.
(4) Emissions control retrofit technology.--The
term ``emissions control retrofit technology'' means a
particulate filter or other emissions control equipment
that is verified or certified by the Administrator or
the California Air Resources Board as an effective
emission reduction technology when installed on an
existing school bus.
(5) Idling.--The term ``idling'' means operating an
engine while remaining stationary for more than
approximately 15 minutes, except that the term does not
apply to routine stoppages associated with traffic
movement or congestion.
(6) Secretary.--The term ``Secretary'' means the
Secretary of Energy.
(7) Ultra-low sulfur diesel fuel.--The term
``ultra-low sulfur diesel fuel'' means diesel fuel that
contains sulfur at not more than 15 parts per million.
(8) Ultra-low sulfur diesel fuel school bus.--The
term ``ultra-low sulfur diesel fuel school bus'' means
a school bus that meets all of the requirements of this
subtitle and is operated solely on ultra-low sulfur
diesel fuel.
SEC. 742. PROGRAM FOR REPLACEMENT OF CERTAIN SCHOOL BUSES WITH CLEAN
SCHOOL BUSES.
(a) Establishment.--The Administrator, in consultation with
the Secretary and other appropriate Federal departments and
agencies, shall establish a program for awarding grants on a
competitive basis to eligible entities for the replacement of
existing school buses manufactured before model year 1991 with
alternative fuel school buses and ultra-low sulfur diesel fuel
school buses.
(b) Requirements.--
(1) In general.--Not later than 90 days after the
date of enactment of this Act, the Administrator shall
establish and publish in the Federal Register grant
requirements on eligibility for assistance, and on
implementation of the program established under
subsection (a), including instructions for the
submission of grant applications and certification
requirements to ensure compliance with this subtitle.
(2) Application deadlines.--The requirements
established under paragraph (1) shall require
submission of grant applications not later than--
(A) in the case of the first year of
program implementation, the date that is 180
days after the publication of the requirements
in the Federal Register; and
(B) in the case of each subsequent year,
June 1 of the year.
(c) Eligible Recipients.--A grant shall be awarded under
this section only--
(1) to 1 or more local or State governmental
entities responsible for providing school bus service
to 1 or more public school systems or responsible for
the purchase of school buses;
(2) to 1 or more contracting entities that provide
school bus service to 1 or more public school systems,
if the grant application is submitted jointly with the
1 or more school systems to be served by the buses,
except that the application may provide that buses
purchased using funds awarded shall be owned, operated,
and maintained exclusively by the 1 or more contracting
entities; or
(3) to a nonprofit school transportation
association representing private contracting entities,
if the association has notified and received approval
from the 1 or more school systems to be served by the
buses.
(d) Award Deadlines.--
(1) In general.--Subject to paragraph (2), the
Administrator shall award a grant made to a qualified
applicant for a fiscal year--
(A) in the case of the first fiscal year of
program implementation, not later than the date
that is 90 days after the application deadline
established under subsection (b)(2); and
(B) in the case of each subsequent fiscal
year, not later than August 1 of the fiscal
year.
(2) Insufficient number of qualified grant
applications.--If the Administrator does not receive a
sufficient number of qualified grant applications to
meet the requirements of subsection (i)(1) for a fiscal
year, the Administrator shall award a grant made to a
qualified applicant under subsection (i)(2) not later
than September 30 of the fiscal year.
(e) Types of Grants.--
(1) In general.--A grant under this section shall
be used for the replacement of school buses
manufactured before model year 1991 with alternative
fuel school buses and ultra-low sulfur diesel fuel
school buses.
(2) No economic benefit.--Other than the receipt of
the grant, a recipient of a grant under this section
may not receive any economic benefit in connection with
the receipt of the grant.
(3) Priority of grant applications.--The
Administrator shall give priority to applicants that
propose to replace school buses manufactured before
model year 1977.
(f) Conditions of Grant.--A grant provided under this
section shall include the following conditions:
(1) School bus fleet.--All buses acquired with
funds provided under the grant shall be operated as
part of the school bus fleet for which the grant was
made for a minimum of 5 years.
(2) Use of funds.--Funds provided under the grant
may only be used--
(A) to pay the cost, except as provided in
paragraph (3), of new alternative fuel school
buses or ultra-low sulfur diesel fuel school
buses, including State taxes and contract fees
associated with the acquisition of such buses;
and
(B) to provide--
(i) up to 20 percent of the price
of the alternative fuel school buses
acquired, for necessary alternative
fuel infrastructure if the
infrastructure will only be available
to the grant recipient; and
(ii) up to 25 percent of the price
of the alternative fuel school buses
acquired, for necessary alternative
fuel infrastructure if the
infrastructure will be available to the
grant recipient and to other bus
fleets.
(3) Grant recipient funds.--The grant recipient
shall be required to provide at least--
(A) in the case of a grant recipient
described in paragraph (1) or (3) of subsection
(c), the lesser of--
(i) an amount equal to 15 percent
of the total cost of each bus received;
or
(ii) $15,000 per bus; and
(B) in the case of a grant recipient
described in subsection (c)(2), the lesser of--
(i) an amount equal to 20 percent
of the total cost of each bus received;
or
(ii) $20,000 per bus.
(4) Ultra-low sulfur diesel fuel.--In the case of a
grant recipient receiving a grant for ultra-low sulfur
diesel fuel school buses, the grant recipient shall be
required to provide documentation to the satisfaction
of the Administrator that diesel fuel containing sulfur
at not more than 15 parts per million is available for
carrying out the purposes of the grant, and a
commitment by the applicant to use such fuel in
carrying out the purposes of the grant.
(5) Timing.--All alternative fuel school buses,
ultra-low sulfur diesel fuel school buses, or
alternative fuel infrastructure acquired under a grant
awarded under this section shall be purchased and
placed in service as soon as practicable.
(g) Buses.--
(1) In general.--Except as provided in paragraph
(2), funding under a grant made under this section for
the acquisition of new alternative fuel school buses or
ultra-low sulfur diesel fuel school buses shall only be
used to acquire school buses--
(A) with a gross vehicle weight of greater
than 14,000 pounds;
(B) that are powered by a heavy duty
engine;
(C) in the case of alternative fuel school
buses manufactured in model years 2004 through
2006, that emit not more than 1.8 grams per
brake horsepower-hour of nonmethane
hydrocarbons and oxides of nitrogen and .01
grams per brake horsepower-hour of particulate
matter; and
(D) in the case of ultra-low sulfur diesel
fuel school buses manufactured in model years
2004 through 2006, that emit not more than 2.5
grams per brake horsepower-hour of nonmethane
hydrocarbons and oxides of nitrogen and .01
grams per brake horsepower-hour of particulate
matter.
(2) Limitations.--A bus shall not be acquired under
this section that emits nonmethane hydrocarbons, oxides
of nitrogen, or particulate matter at a rate greater
than the best performing technology of the same class
of ultra-low sulfur diesel fuel school buses
commercially available at the time the grant is made.
(h) Deployment and Distribution.--The Administrator shall--
(1) seek, to the maximum extent practicable, to
achieve nationwide deployment of alternative fuel
school buses and ultra-low sulfur diesel fuel school
buses through the program under this section; and
(2) ensure a broad geographic distribution of grant
awards, with a goal of no State receiving more than 10
percent of the grant funding made available under this
section for a fiscal year.
(i) Allocation of Funds.--
(1) In general.--Subject to paragraph (2), of the
amount of grant funding made available to carry out
this section for any fiscal year, the Administrator
shall use--
(A) 70 percent for the acquisition of
alternative fuel school buses or supporting
infrastructure; and
(B) 30 percent for the acquisition of
ultra-low sulfur diesel fuel school buses.
(2) Insufficient number of qualified grant
applications.--After the first fiscal year in which
this program is in effect, if the Administrator does
not receive a sufficient number of qualified grant
applications to meet the requirements of subparagraph
(A) or (B) of paragraph (1) for a fiscal year,
effective beginning on August 1 of thefiscal year, the
Administrator shall make the remaining funds available to other
qualified grant applicants under this section.
(j) Reduction of School Bus Idling.--Each local educational
agency (as defined in section 9101 of the Elementary and
Secondary Education Act of 1965 (20 U.S.C. 7801)) that receives
Federal funds under the Elementary and Secondary Education Act
of 1965 (20 U.S.C. 6301 et seq.) is encouraged to develop a
policy, consistent with the health, safety, and welfare of
students and the proper operation and maintenance of school
buses, to reduce the incidence of unnecessary school bus idling
at schools when picking up and unloading students.
(k) Annual Report.--
(1) In general.--Not later than January 31 of each
year, the Administrator shall transmit to Congress a
report evaluating implementation of the programs under
this section and section 743.
(2) Components.--The reports shall include a
description of--
(A) the total number of grant applications
received;
(B) the number and types of alternative
fuel school buses, ultra-low sulfur diesel fuel
school buses, and retrofitted buses requested
in grant applications;
(C) grants awarded and the criteria used to
select the grant recipients;
(D) certified engine emission levels of all
buses purchased or retrofitted under the
programs under this section and section 743;
(E) an evaluation of the in-use emission
level of buses purchased or retrofitted under
the programs under this section and section
743; and
(F) any other information the Administrator
considers appropriate.
(l) Authorization of Appropriations.--There are authorized
to be appropriated to the Administrator to carry out this
section, to remain available until expended--
(1) $45,000,000 for fiscal year 2005;
(2) $65,000,000 for fiscal year 2006;
(3) $90,000,000 for fiscal year 2007; and
(4) such sums as are necessary for each of fiscal
years 2008 and 2009.
SEC. 743. DIESEL RETROFIT PROGRAM.
(a) Establishment.--The Administrator, in consultation with
the Secretary, shall establish a program for awarding grants on
a competitive basis to entities for the installation of
retrofit technologies for diesel school buses.
(b) Eligible Recipients.--A grant shall be awarded under
this section only--
(1) to a local or State governmental entity
responsible for providing school bus service to 1 or
more public school systems;
(2) to 1 or more contracting entities that provide
school bus service to 1 or more public school systems,
if the grant application is submitted jointly with the
1 or more school systems that the buses will serve,
except that the application may provide that buses
purchased using funds awarded shall be owned, operated,
and maintained exclusively by the 1 or more contracting
entities; or
(3) to a nonprofit school transportation
association representing private contracting entities,
if the association has notified and received approval
from the 1 or more school systems to be served by the
buses.
(c) Awards.--
(1) In general.--The Administrator shall seek, to
the maximum extent practicable, to ensure a broad
geographic distribution of grants under this section.
(2) Preferences.--In making awards of grants under
this section, the Administrator shall give preference
to proposals that--
(A) will achieve the greatest reductions in
emissions of nonmethane hydrocarbons, oxides of
nitrogen, or particulate matter per proposal or
per bus; or
(B) involve the use of emissions control
retrofit technology on diesel school buses that
operate solely on ultra-low sulfur diesel fuel.
(d) Conditions of Grant.--A grant shall be provided under
this section on the conditions that--
(1) buses on which retrofit emissions-control
technology are to be demonstrated--
(A) will operate on ultra-low sulfur diesel
fuel where such fuel is reasonably available or
required for sale by State or local law or
regulation;
(B) were manufactured in model year 1991 or
later; and
(C) will be used for the transportation of
school children to and from school for a
minimum of 5 years;
(2) grant funds will be used for the purchase of
emission control retrofit technology, including State
taxes and contract fees; and
(3) grant recipients will provide at least 15
percent of the total cost of the retrofit, including
the purchase of emission control retrofit technology
and all necessary labor for installation of the
retrofit.
(e) Verification.--Not later than 90 days after the date of
enactment of this Act, the Administrator shall publish in the
Federal Register procedures to verify--
(1) the retrofit emissions-control technology to be
demonstrated;
(2) that buses powered by ultra-low sulfur diesel
fuel on which retrofit emissions-control technology are
to be demonstrated will operate on diesel fuel
containing not more than 15 parts per million of
sulfur; and
(3) that grants are administered in accordance with
this section.
(f) Authorization of Appropriations.--There are authorized
to be appropriated to the Administrator to carry out this
section, to remain available until expended--
(1) $20,000,000 for fiscal year 2005;
(2) $35,000,000 for fiscal year 2006;
(3) $45,000,000 for fiscal year 2007; and
(4) such sums as are necessary for each of fiscal
years 2008 and 2009.
SEC. 744. FUEL CELL SCHOOL BUSES.
(a) Establishment.--The Secretary shall establish a program
for entering into cooperative agreements--
(1) with private sector fuel cell bus developers
for the development of fuel cell-powered school buses;
and
(2) subsequently, with not less than 2 units of
local government using natural gas-powered school buses
and such private sector fuel cell bus developers to
demonstrate the use of fuel cell-powered school buses.
(b) Cost Sharing.--The non-Federal contribution for
activities funded under this section shall be not less than--
(1) 20 percent for fuel infrastructure development
activities; and
(2) 50 percent for demonstration activities and for
development activities not described in paragraph (1).
(c) Reports to Congress.--Not later than 3 years after the
date of enactment of this Act, the Secretary shall transmit to
Congress a report that--
(1) evaluates the process of converting natural gas
infrastructure to accommodate fuel cell-powered school
buses; and
(2) assesses the results of the development and
demonstration program under this section.
(d) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary to carry out this section
$25,000,000 for the period of fiscal years 2004 through 2006.
Subtitle D--Miscellaneous
SEC. 751. RAILROAD EFFICIENCY.
(a) Establishment.--The Secretary of Energy shall, in
cooperation with the Secretary of Transportation and the
Administrator of the Environmental Protection Agency, establish
a cost-shared, public-private research partnership involving
the Federal Government, railroad carriers, locomotive
manufacturers and equipment suppliers, and the Association of
American Railroads, to develop and demonstrate railroad
locomotive technologies that increase fuel economy, reduce
emissions, and lower costs of operation.
(b) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary of Energy to carry out this
section--
(1) $25,000,000 for fiscal year 2005;
(2) $35,000,000 for fiscal year 2006; and
(3) $50,000,000 for fiscal year 2007.
SEC. 752. MOBILE EMISSION REDUCTIONS TRADING AND CREDITING.
(a) In General.--Not later than 180 days after the date of
enactment of this Act, the Administrator of the Environmental
Protection Agency shall submit to Congress a report on the
experience of the Administrator with the trading of mobile
source emission reduction credits for use by owners and
operators of stationary source emission sources to meet
emission offset requirements within a nonattainment area.
(b) Contents.--The report shall describe--
(1) projects approved by the Administrator that
include the trading of mobile source emission reduction
credits for use by stationary sources in complying with
offset requirements, including a description of--
(A) project and stationary sources
location;
(B) volumes of emissions offset and traded;
(C) the sources of mobile emission
reduction credits; and
(D) if available, the cost of the credits;
(2) the significant issues identified by the
Administrator in consideration and approval of trading
in the projects;
(3) the requirements for monitoring and assessing
the air quality benefits of any approved project;
(4) the statutory authority on which the
Administrator has based approval of the projects;
(5) an evaluation of how the resolution of issues
in approved projects could be used in other projects;
and
(6) any other issues that the Administrator
considers relevant to the trading and generation of
mobile source emission reduction credits for use by
stationary sources or for other purposes.
SEC. 753. AVIATION FUEL CONSERVATION AND EMISSIONS.
(a) In General.--Not later than 60 days after the date of
enactment of this Act, the Administrator of the Federal
Aviation Administration and the Administrator of the
Environmental Protection Agency shall jointly initiate a study
to identify--
(1) the impact of aircraft emissions on air quality
in nonattainment areas; and
(2) ways to promote fuel conservation measures for
aviation to--
(A) enhance fuel efficiency; and
(B) reduce emissions.
(b) Focus.--The study under subsection (a) shall focus on
how air traffic management inefficiencies, such as aircraft
idling at airports, result in unnecessary fuel burn and air
emissions.
(c) Report.--Not later than 1 year after the date of the
initiation of the study under subsection (a), the Administrator
of the Federal Aviation Administration and the Administrator of
the Environmental Protection Agency shall jointly submit to the
Committee on Energy and Commerce and the Committee on
Transportation and Infrastructure of the House of
Representatives and the Committee on Environment and Public
Works and the Committee on Commerce, Science, and
Transportation of the Senate a report that--
(1) describes the results of the study; and
(2) includes any recommendations on ways in which
unnecessary fuel use and emissions affecting air
quality may be reduced--
(A) without adversely affecting safety and
security and increasing individual aircraft
noise; and
(B) while taking into account all aircraft
emissions and the impact of the emissions on
human health.
SEC. 754. DIESEL FUELED VEHICLES.
(a) Definition of Tier 2 Emission Standards.--In this
section, the term ``tier 2 emission standards'' means the motor
vehicle emission standards that apply to passenger cars, light
trucks, and larger passenger vehicles manufactured after the
2003 model year, as issued on February 10, 2000, by the
Administrator of the Environmental Protection Agency under
sections 202 and 211 of the Clean Air Act (42 U.S.C. 7521,
7545).
(b) Diesel Combustion and After-Treatment Technologies.--
The Secretary of Energy shall accelerate efforts to improve
diesel combustion and after-treatment technologies for use in
diesel fueled motor vehicles.
(c) Goals.--The Secretary shall carry out subsection (b)
with a view toward achieving the following goals:
(1) Developing and demonstrating diesel
technologies that, not later than 2010, meet the
following standards:
(A) Tier 2 emission standards.
(B) The heavy-duty emissions standards of
2007 that are applicable to heavy-duty vehicles
under regulations issued by the Administrator
of the Environmental Protection Agency as of
the date of enactment of this Act.
(2) Developing the next generation of low-emission,
high-efficiency diesel engine technologies, including
homogeneous charge compression ignition technology.
SEC. 755. CONSERVE BY BICYCLING PROGRAM.
(a) Definitions.--In this section:
(1) Program.--The term ``program'' means the
Conserve by Bicycling Program established by subsection
(b).
(2) Secretary.--The term ``Secretary'' means the
Secretary of Transportation.
(b) Establishment.--There is established within the
Department of Transportation a program to be known as the
``Conserve by Bicycling Program''.
(c) Projects.--
(1) In general.--In carrying out the program, the
Secretary shall establish not more than 10 pilot
projects that are--
(A) dispersed geographically throughout the
United States; and
(B) designed to conserve energy resources
by encouraging the use of bicycles in place of
motor vehicles.
(2) Requirements.--A pilot project described in
paragraph (1) shall--
(A) use education and marketing to convert
motor vehicle trips to bicycle trips;
(B) document project results and energy
savings (in estimated units of energy
conserved);
(C) facilitate partnerships among
interested parties in at least 2 of the fields
of--
(i) transportation;
(ii) law enforcement;
(iii) education;
(iv) public health;
(v) environment; and
(vi) energy;
(D) maximize bicycle facility investments;
(E) demonstrate methods that may be used in
other regions of the United States; and
(F) facilitate the continuation of ongoing
programs that are sustained by local resources.
(3) Cost sharing.--At least 20 percent of the cost
of each pilot project described in paragraph (1) shall
be provided from State or local sources.
(d) Energy and Bicycling Research Study.--
(1) In general.--Not later than 2 years after the
date of enactment of this Act, the Secretary shall
enter into a contract with the National Academy of
Sciences for, and the National Academy of Sciences
shall conduct and submit to Congress a report on, a
study on the feasibility of converting motor vehicle
trips to bicycle trips.
(2) Components.--The study shall--
(A) document the results or progress of the
pilot projects under subsection (c);
(B) determine the type and duration of
motor vehicle trips that people in the United
States may feasibly make by bicycle, taking
into consideration factors such as--
(i) weather;
(ii) land use and traffic patterns;
(iii) the carrying capacity of
bicycles; and
(iv) bicycle infrastructure;
(C) determine any energy savings that would
result from the conversion of motor vehicle
trips to bicycle trips;
(D) include a cost-benefit analysis of
bicycle infrastructure investments; and
(E) include a description of any factors
that would encourage more motor vehicle trips
to be replaced with bicycle trips.
(e) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary to carry out thissection
$6,200,000, to remain available until expended, of which--
(1) $5,150,000 shall be used to carry out pilot
projects described in subsection (c);
(2) $300,000 shall be used by the Secretary to
coordinate, publicize, and disseminate the results of
the program; and
(3) $750,000 shall be used to carry out subsection
(d).
SEC. 756. REDUCTION OF ENGINE IDLING OF HEAVY-DUTY VEHICLES.
(a) Definitions.--In this section:
(1) Administrator.--The term ``Administrator''
means the Administrator of the Environmental Protection
Agency.
(2) Advanced truck stop electrification system.--
The term ``advanced truck stop electrification system''
means a stationary system that delivers heat, air
conditioning, electricity, and communications, and is
capable of providing verifiable and auditable evidence
of use of those services, to a heavy-duty vehicle and
any occupants of the heavy-duty vehicle without relying
on components mounted onboard the heavy-duty vehicle
for delivery of those services.
(3) Auxiliary power unit.--The term ``auxiliary
power unit'' means an integrated system that--
(A) provides heat, air conditioning, engine
warming, and electricity to the factory-
installed components on a heavy-duty vehicle as
if the main drive engine of the heavy-duty
vehicle were running; and
(B) is certified by the Administrator under
part 89 of title 40, Code of Federal
Regulations (or any successor regulation), as
meeting applicable emission standards.
(4) Heavy-duty vehicle.--The term ``heavy-duty
vehicle'' means a vehicle that--
(A) has a gross vehicle weight rating
greater than 12,500 pounds; and
(B) is powered by a diesel engine.
(5) Idle reduction technology.--The term ``idle
reduction technology'' means an advanced truck stop
electrification system, auxiliary power unit, or other
device or system of devices that--
(A) is used to reduce long-duration idling
of a heavy-duty vehicle; and
(B) allows for the main drive engine or
auxiliary refrigeration engine of a heavy-duty
vehicle to be shut down.
(6) Long-duration idling.--
(A) In general.--The term ``long-duration
idling'' means the operation of a main drive
engine or auxiliary refrigeration engine of a
heavy-duty vehicle, for a period greater than
15 consecutive minutes, at a time at which the
main drive engine is not engaged in gear.
(B) Exclusions.--The term ``long-duration
idling'' does not include the operation of a
main drive engine or auxiliary refrigeration
engine of a heavy-duty vehicle during a routine
stoppage associated with traffic movement or
congestion.
(b) Idle Reduction Technology Benefits, Programs, and
Studies.--
(1) In general.--Not later than 90 days after the
date of enactment of this Act, the Administrator
shall--
(A)(i) commence a review of the mobile
source air emission models of the Environmental
Protection Agency used under the Clean Air Act
(42 U.S.C. 7401 et seq.) to determine whether
the models accurately reflect the emissions
resulting from long-duration idling of heavy-
duty vehicles and other vehicles and engines;
and
(ii) update those models as the
Administrator determines to be appropriate; and
(B)(i) commence a review of the emission
reductions achieved by the use of idle
reduction technology; and
(ii) complete such revisions of the
regulations and guidance of the Environmental
Protection Agency as the Administrator
determines to be appropriate.
(2) Deadline for completion.--Not later than 180
days after the date of enactment of this Act, the
Administrator shall--
(A) complete the reviews under
subparagraphs (A)(i) and (B)(i) of paragraph
(1); and
(B) prepare and make publicly available 1
or more reports on the results of the reviews.
(3) Discretionary inclusions.--The reviews under
subparagraphs (A)(i) and (B)(i) of paragraph (1) and
the reports under paragraph (2)(B) may address the
potential fuel savings resulting from use of idle
reduction technology.
(4) Idle reduction deployment program.--
(A) Establishment.--
(i) In general.--Not later than 90
days after the date of enactment of
this Act, the Administrator, in
consultation with the Secretary of
Transportation, shall establish a
program to support deployment of idle
reduction technology.
(ii) Priority.--The Administrator
shall give priority to the deployment
of idle reduction technology based on
beneficial effects on air quality and
ability to lessen the emission of
criteria air pollutants.
(B) Funding.--
(i) Authorization of
appropriations.--There are authorized
to be appropriated to the Administrator
to carry out subparagraph (A)
$19,500,000 for fiscal year 2004,
$30,000,000 for fiscal year 2005, and
$45,000,000 for fiscal year 2006.
(ii) Cost sharing.--Subject to
clause (iii), the Administrator shall
require at least 50 percent of the
costs directly and specifically related
to any project under this section to be
provided from non-Federal sources.
(iii) Necessary and appropriate
reductions.--The Administrator may
reduce the non-Federal requirement
under clause (ii) if the Administrator
determines that the reduction is
necessary and appropriate to meet the
objectives of this section.
(5) Idling location study.--
(A) In general.--Not later than 90 days
after the date of enactment of this Act, the
Administrator, in consultation with the
Secretary of Transportation, shall commence a
study to analyze all locations at which heavy-
duty vehicles stop for long-duration idling,
including--
(i) truck stops;
(ii) rest areas;
(iii) border crossings;
(iv) ports;
(v) transfer facilities; and
(vi) private terminals.
(B) Deadline for completion.--Not later
than 180 days after the date of enactment of
this Act, the Administrator shall--
(i) complete the study under
subparagraph (A); and
(ii) prepare and make publicly
available 1 or more reports of the
results of the study.
(c) Vehicle Weight Exemption.--Section 127(a) of title 23,
United States Code, is amended--
(1) by designating the first through eleventh
sentences as paragraphs (1) through (11), respectively;
and
(2) by adding at the end the following:
``(12) Heavy duty vehicles.--
``(A) In general.--Subject to subparagraphs
(B) and (C), in order to promote reduction of
fuel use and emissions because of engine
idling, the maximum gross vehicle weight limit
and the axle weight limit for any heavy-duty
vehicle equipped with an idle reduction
technology shall be increased by a quantity
necessary to compensate for the additional
weight of the idle reduction system.
``(B) Maximum weight increase.--The weight
increase under subparagraph (A) shall be not
greater than 250 pounds.
``(C) Proof.--On request by a regulatory
agency or law enforcement agency, the vehicle
operator shall provide proof (through
demonstration or certification) that--
``(i) the idle reduction technology
is fully functional at all times; and
``(ii) the 250-pound gross weight
increase is not used for any purpose
other than the use of idle reduction
technology described in subparagraph
(A).''.
SEC. 757. BIODIESEL ENGINE TESTING PROGRAM.
(a) In General.--Not later that 180 days after the date of
enactment of this Act, the Secretary shall initiate a
partnership with diesel engine, diesel fuel injection system,
and diesel vehicle manufacturers and diesel and biodiesel fuel
providers, to include biodiesel testing in advanced diesel
engine and fuel system technology.
(b) Scope.--The program shall provide for testing to
determine the impact of biodiesel from different sources on
current and future emission control technologies, with emphasis
on--
(1) the impact of biodiesel on emissions warranty,
in-use liability, and antitampering provisions;
(2) the impact of long-term use of biodiesel on
engine operations;
(3) the options for optimizing these technologies
for both emissions and performance when switching
between biodiesel and diesel fuel; and
(4) the impact of using biodiesel in these fueling
systems and engines when used as a blend with 2006
Environmental Protection Agency-mandated diesel fuel
containing a maximum of 15-parts-per-million sulfur
content.
(c) Report.--Not later than 2 years after the date of
enactment of this Act, the Secretary shall provide an interim
report to Congress on the findings of the program, including a
comprehensive analysis of impacts from biodiesel on engine
operation for both existing and expected future diesel
technologies, and recommendations for ensuring optimal
emissions reductions and engine performance with biodiesel.
(d) Authorization of Appropriations.--There are authorized
to be appropriated $5,000,000 for each of fiscal years 2004
through 2008 to carry out this section.
(e) Definition.--For purposes of this section, the term
``biodiesel'' means a diesel fuel substitute produced from
nonpetroleum renewable resources that meets the registration
requirements for fuels and fuel additives established by the
Environmental Protection Agency under section 211 of the Clean
Air Act (42 U.S.C. 7545) and that meets the American Society
for Testing and Materials D6751-02a Standard Specification for
Biodiesel Fuel (B100) Blend Stock for Distillate Fuels.
SEC. 758. HIGH OCCUPANCY VEHICLE EXCEPTION.
Notwithstanding section 102(a) of title 23, United States
Code, a State may permit a vehicle with fewer than 2 occupants
to operate in high occupancy vehicle lanes if the vehicle--
(1) is a dedicated vehicle (as defined in section
301 of the Energy Policy Act of 1992 (42 U.S.C.
13211)); or
(2) is a hybrid vehicle (as defined by the State
for the purpose of this section).
Subtitle E--Automobile Efficiency
SEC. 771. AUTHORIZATION OF APPROPRIATIONS FOR IMPLEMENTATION AND
ENFORCEMENT OF FUEL ECONOMY STANDARDS.
In addition to any other funds authorized by law, there are
authorized to be appropriated to the National Highway Traffic
Safety Administration to carry out its obligations with respect
to average fuel economy standards $2,000,000 for each of fiscal
years 2004 through 2008.
SEC. 772. REVISED CONSIDERATIONS FOR DECISIONS ON MAXIMUM FEASIBLE
AVERAGE FUEL ECONOMY.
Section 32902(f) of title 49, United States Code, is
amended to read as follows:
``(f) Considerations for Decisions on Maximum Feasible
Average Fuel Economy.--When deciding maximum feasible average
fuel economy under this section, the Secretary of
Transportation shall consider the following matters:
``(1) Technological feasibility.
``(2) Economic practicability.
``(3) The effect of other motor vehicle standards
of the Government on fuel economy.
``(4) The need of the United States to conserve
energy.
``(5) The effects of fuel economy standards on
passenger automobiles, nonpassenger automobiles, and
occupant safety.
``(6) The effects of compliance with average fuel
economy standards on levels of automobile industry
employment in the United States.''.
SEC. 773. EXTENSION OF MAXIMUM FUEL ECONOMY INCREASE FOR ALTERNATIVE
FUELED VEHICLES.
(a) Manufacturing Incentives.--Section 32905 of title 49,
United States Code, is amended--
(1) in each of subsections (b) and (d), by striking
``1993-2004'' and inserting ``1993-2008'';
(2) in subsection (f), by striking ``2001'' and
inserting ``2005''; and
(3) in subsection (f)(1), by striking ``2004'' and
inserting ``2008''.
(b) Maximum Fuel Economy Increase.--Subsection (a)(1) of
section 32906 of title 49, United States Code, is amended--
(1) in subparagraph (A), by striking ``the model
years 1993-2004'' and inserting ``model years 1993-
2008''; and
(2) in subparagraph (B), by striking ``the model
years 2005-2008'' and inserting ``model years 2009-
2012''.
SEC. 774. STUDY OF FEASIBILITY AND EFFECTS OF REDUCING USE OF FUEL FOR
AUTOMOBILES.
(a) In General.--Not later than 30 days after the date of
the enactment of this Act, the Administrator of the National
Highway Traffic Safety Administration shall initiate a study of
the feasibility and effects of reducing by model year 2012, by
a significant percentage, the amount of fuel consumed by
automobiles.
(b) Subjects of Study.--The study under this section shall
include--
(1) examination of, and recommendation of
alternatives to, the policy under current Federal law
of establishing average fuel economy standards for
automobiles and requiring each automobile manufacturer
to comply with average fuel economy standards that
apply to the automobiles it manufactures;
(2) examination of how automobile manufacturers
could contribute toward achieving the reduction
referred to in subsection (a);
(3) examination of the potential of fuel cell
technology in motor vehicles in order to determine the
extent to which such technology may contribute to
achieving the reduction referred to in subsection (a);
and
(4) examination of the effects of the reduction
referred to in subsection (a) on--
(A) gasoline supplies;
(B) the automobile industry, including
sales of automobiles manufactured in the United
States;
(C) motor vehicle safety; and
(D) air quality.
(c) Report.--The Administrator shall submit to Congress a
report on the findings, conclusion, and recommendations of the
study under this section by not later than 1 year after the
date of the enactment of this Act.
TITLE VIII--HYDROGEN
SEC. 801. DEFINITIONS.
In this title:
(1) Advisory committee.--The term ``Advisory
Committee'' means the Hydrogen Technical and Fuel Cell
Advisory Committee established under section 805.
(2) Department.--The term ``Department'' means the
Department of Energy.
(3) Fuel cell.--The term ``fuel cell'' means a
device that directly converts the chemical energy of a
fuel and an oxidant into electricity by an
electrochemical process taking place at separate
electrodes in the device.
(4) Infrastructure.--The term ``infrastructure''
means the equipment, systems, or facilities used to
produce, distribute, deliver, or store hydrogen.
(5) Light duty vehicle.--The term ``light duty
vehicle'' means a car or truck classified by the
Department of Transportation as a Class I or IIA
vehicle.
(6) Secretary.--The term ``Secretary'' means the
Secretary of Energy.
SEC. 802. PLAN.
Not later than 6 months after the date of enactment of this
Act, the Secretary shall transmit to Congress a coordinated
plan for the programs described in this title and any other
programs of the Department that are directly related to fuel
cells or hydrogen. The plan shall describe, at a minimum--
(1) the agenda for the next 5 years for the
programs authorized under this title, including the
agenda for each activity enumerated in section 803(a);
(2) the types of entities that will carry out the
activities under this title and what role each entity
is expected to play;
(3) the milestones that will be used to evaluate
the programs for the next 5 years;
(4) the most significant technical and nontechnical
hurdles that stand in the way of achieving the goals
described in section 803(b), and how the programs will
address those hurdles; and
(5) the policy assumptions that are implicit in the
plan, including any assumptions that would affect the
sources of hydrogen or the marketability of hydrogen-
related products.
SEC. 803. PROGRAMS.
(a) Activities.--The Secretary, in partnership with the
private sector, shall conduct programs to address--
(1) production of hydrogen from diverse energy
sources, including--
(A) fossil fuels, which may include carbon
capture and sequestration;
(B) hydrogen-carrier fuels (including
ethanol and methanol);
(C) renewable energy resources, including
biomass; and
(D) nuclear energy;
(2) use of hydrogen for commercial, industrial, and
residential electric power generation;
(3) safe delivery of hydrogen or hydrogen-carrier
fuels, including--
(A) transmission by pipeline and other
distribution methods; and
(B) convenient and economic refueling of
vehicles either at central refueling stations
or through distributed on-site generation;
(4) advanced vehicle technologies, including--
(A) engine and emission control systems;
(B) energy storage, electric propulsion,
and hybrid systems;
(C) automotive materials; and
(D) other advanced vehicle technologies;
(5) storage of hydrogen or hydrogen-carrier fuels,
including development of materials for safe and
economic storage in gaseous, liquid, or solid form at
refueling facilities and onboard vehicles;
(6) development of safe, durable, affordable, and
efficient fuel cells, including fuel-flexible fuel cell
power systems, improved manufacturing processes, high-
temperature membranes, cost-effective fuel processing
for natural gas, fuel cell stack and system
reliability, low temperature operation, and cold start
capability;
(7) development, after consultation with the
private sector, of necessary codes and standards
(including international codes and standards and
voluntary consensus standards adopted in accordance
with OMB Circular A-119) and safety practices for the
production, distribution, storage, and use of hydrogen,
hydrogen-carrier fuels, and related products; and
(8) a public education program to develop improved
knowledge and acceptability of hydrogen-based systems.
(b) Program Goals.--
(1) Vehicles.--For vehicles, the goals of the
program are--
(A) to enable a commitment by automakers no
later than year 2015 to offer safe, affordable,
and technically viable hydrogen fuel cell
vehicles in the mass consumer market; and
(B) to enable production, delivery, and
acceptance by consumers of model year 2020
hydrogen fuel cell and other hydrogen-powered
vehicles that will have--
(i) a range of at least 300 miles;
(ii) improved performance and ease
of driving;
(iii) safety and performance
comparable to vehicle technologies in
the market; and
(iv) when compared to light duty
vehicles in model year 2003--
(I) fuel economy that is
substantially higher;
(II) substantially lower
emissions of air pollutants;
and
(III) equivalent or
improved vehicle fuel system
crash integrity and occupant
protection.
(2) Hydrogen energy and energy infrastructure.--For
hydrogen energy and energy infrastructure, the goals of
the program are to enable a commitment not later than
2015 that will lead to infrastructure by 2020 that will
provide--
(A) safe and convenient refueling;
(B) improved overall efficiency;
(C) widespread availability of hydrogen
from domestic energy sources through--
(i) production, with consideration
of emissions levels;
(ii) delivery, including
transmission by pipeline and other
distribution methods for hydrogen; and
(iii) storage, including storage in
surface transportation vehicles;
(D) hydrogen for fuel cells, internal
combustion engines, and other energy conversion
devices for portable, stationary, and
transportation applications; and
(E) other technologies consistent with the
Department's plan.
(3) Fuel cells.--The goals for fuel cells and their
portable, stationary, and transportation applications
are to enable--
(A) safe, economical, and environmentally
sound hydrogen fuel cells;
(B) fuel cells for light duty and other
vehicles; and
(C) other technologies consistent with the
Department's plan.
(c) Demonstration.--In carrying out the programs under this
section, the Secretary shall fund a limited number of
demonstration projects, consistent with a determination of the
maturity, cost-effectiveness, and environmental impacts
oftechnologies supporting each project. In selecting projects under
this subsection, the Secretary shall, to the extent practicable and in
the public interest, select projects that--
(1) involve using hydrogen and related products at
existing facilities or installations, such as existing
office buildings, military bases, vehicle fleet
centers, transit bus authorities, or units of the
National Park System;
(2) depend on reliable power from hydrogen to carry
out essential activities;-
(3) lead to the replication of hydrogen
technologies and draw such technologies into the
marketplace;
(4) include vehicle, portable, and stationary
demonstrations of fuel cell and hydrogen-based energy
technologies;
(5) address the interdependency of demand for
hydrogen fuel cell applications and hydrogen fuel
infrastructure;
(6) raise awareness of hydrogen technology among
the public;
(7) facilitate identification of an optimum
technology among competing alternatives;
(8) address distributed generation using renewable
sources; and
(9) address applications specific to rural or
remote locations, including isolated villages and
islands, the National Park System, and tribal entities.
The Secretary shall give preference to projects which address
multiple elements contained in paragraphs (1) through (9).
(d) Deployment.--In carrying out the programs under this
section, the Secretary shall, in partnership with the private
sector, conduct activities to facilitate the deployment of
hydrogen energy and energy infrastructure, fuel cells, and
advanced vehicle technologies.
(e) Funding.--
(1) In general.--The Secretary shall carry out the
programs under this section using a competitive, merit-
based review process and consistent with the generally
applicable Federal laws and regulations governing
awards of financial assistance, contracts, or other
agreements.
(2) Research centers.--Activities under this
section may be carried out by funding nationally
recognized university-based or Federal laboratory
research centers.
(f) Cost Sharing.--
(1) Research and development.--Except as otherwise
provided in this title, for research and development
programs carried out under this title the Secretary
shall require a commitment from non-Federal sources of
at least 20 percent of the cost of the project. The
Secretary may reduce or eliminate the non-Federal
requirement under this paragraph if the Secretary
determines that the research and development is of a
basic or fundamental nature or involves technical
analyses or educational activities.
(2) Demonstration and commercial application.--
Except as otherwise provided in this title, the
Secretary shall require at least 50 percent of the
costs directly and specifically related to any
demonstration or commercial application project under
this title to be provided from non-Federal sources. The
Secretary may reduce the non-Federal requirement under
this paragraph if the Secretary determines that the
reduction is necessary and appropriate considering the
technological risks involved in the project and is
necessary to meet the objectives of this title.
(3) Calculation of amount.--In calculating the
amount of the non-Federal commitment under paragraph
(1) or (2), the Secretary may include personnel,
services, equipment, and other resources.
(4) Size of non-federal share.--The Secretary may
consider the size of the non-Federal share in selecting
projects.
(g) Disclosure.--Section 623 of the Energy Policy Act of
1992 (42 U.S.C. 13293) relating to the protection of
information shall apply to projects carried out through grants,
cooperative agreements, or contracts under this title.
SEC. 804. INTERAGENCY TASK FORCE.
(a) Establishment.--Not later than 120 days after the date
of enactment of this Act, the President shall establish an
interagency task force chaired by the Secretary with
representatives from each of the following:
(1) The Office of Science and Technology Policy
within the Executive Office of the President.
(2) The Department of Transportation.
(3) The Department of Defense.
(4) The Department of Commerce (including the
National Institute of Standards and Technology).
(5) The Department of State.
(6) The Environmental Protection Agency.
(7) The National Aeronautics and Space
Administration.
(8) Other Federal agencies as the Secretary
determines appropriate.
(b) Duties.--
(1) Planning.--The interagency task force shall
work toward--
(A) a safe, economical, and environmentally
sound fuel infrastructure for hydrogen and
hydrogen-carrier fuels, including an
infrastructure that supports buses and other
fleet transportation;
(B) fuel cells in government and other
applications, including portable, stationary,
and transportation applications;
(C) distributed power generation, including
the generation of combined heat, power, and
clean fuels including hydrogen;
(D) uniform hydrogen codes, standards, and
safety protocols; and
(E) vehicle hydrogen fuel system integrity
safety performance.
(2) Activities.--The interagency task force may
organize workshops and conferences, may issue
publications, and may create databases to carry out its
duties. The interagency task force shall--
(A) foster the exchange of generic,
nonproprietary information and technology among
industry, academia, and government;
(B) develop and maintain an inventory and
assessment of hydrogen, fuel cells, and other
advanced technologies, including the commercial
capability of each technology for the economic
and environmentally safe production,
distribution, delivery, storage, and use of
hydrogen;
(C) integrate technical and other
information made available as a result of the
programs and activities under this title;
(D) promote the marketplace introduction of
infrastructure for hydrogen fuel vehicles; and
(E) conduct an education program to provide
hydrogen and fuel cell information to potential
end-users.
(c) Agency Cooperation.--The heads of all agencies,
including those whose agencies are not represented on the
interagency task force, shall cooperate with and furnish
information to the interagency task force, the Advisory
Committee, and the Department.
SEC. 805. ADVISORY COMMITTEE.
(a) Establishment.--The Hydrogen Technical and Fuel Cell
Advisory Committee is established to advise the Secretary on
the programs and activities under this title.
(b) Membership.--
(1) Members.--The Advisory Committee shall be
comprised of not fewer than 12 nor more than 25
members. The members shall be appointed by the
Secretary to represent domestic industry, academia,
professional societies, government agencies, Federal
laboratories, previous advisory panels, and financial,
environmental, and other appropriate organizations
based on the Department's assessment of the technical
and other qualifications of committee members and the
needs of the Advisory Committee.
(2) Terms.--The term of a member of the Advisory
Committee shall not be more than 3 years. The Secretary
may appoint members of the Advisory Committee in a
manner that allows the terms of the members serving at
any time to expire at spaced intervals so as to ensure
continuity in the functioning of the Advisory
Committee. A member of the Advisory Committee whose
term is expiring may be reappointed.
(3) Chairperson.--The Advisory Committee shall have
a chairperson, who is elected by the members from among
their number.
(c) Review.--The Advisory Committee shall review and make
recommendations to the Secretary on--
(1) the implementation of programs and activities
under this title;
(2) the safety, economical, and environmental
consequences of technologies for the production,
distribution, delivery, storage, or use of hydrogen
energy and fuel cells; and
(3) the plan under section 802.
(d) Response.--
(1) Consideration of recommendations.--The
Secretary shall consider, but need not adopt, any
recommendations of the Advisory Committee under
subsection (c).
(2) Biennial report.--The Secretary shall transmit a
biennial report to Congress describing any recommendations made
by the Advisory Committee since the previous report. The report
shall include a description of how the Secretary has
implemented or plans to implement the recommendations, or an
explanation of the reasons that a recommendation will not be
implemented. The report shall be transmitted along with the
President's budget proposal.
(e) Support.--The Secretary shall provide resources
necessary in the judgment of the Secretary for the Advisory
Committee to carry out its responsibilities under this title.
SEC. 806. EXTERNAL REVIEW.
(a) Plan.--The Secretary shall enter into an arrangement
with the National Academy of Sciences to review the plan
prepared under section 802, which shall be completed not later
than 6 months after the Academy receives the plan. Not later
than 45 days after receiving the review, the Secretary shall
transmit the review to Congress along with a plan to implement
the review's recommendations or an explanation of the reasons
that a recommendation will not be implemented.
(b) Additional review.--The Secretary shall enter into an
arrangement with the National Academy of Sciences under which
the Academy will review the programs under section 803 during
the fourth year following the date of enactment of this Act.
The Academy's review shall include the research priorities and
technical milestones, and evaluate the progress toward
achieving them. The review shall be completed not later than 5
years after the date of enactment of this Act. Not later than
45 days after receiving the review, the Secretary shall
transmit the review to Congress along with a plan to implement
the review's recommendations or an explanation for the reasons
that a recommendation will not be implemented.
SEC. 807. MISCELLANEOUS PROVISIONS.
(a) Representation.--The Secretary may represent the United
States interests with respect to activities and programs under
this title, in coordination with the Department of
Transportation, the National Institute of Standards and
Technology, and other relevant Federal agencies, before
governments and nongovernmental organizations including--
(1) other Federal, State, regional, and local
governments and their representatives;
(2) industry and its representatives, including
members of the energy and transportation industries;
and
(3) in consultation with the Department of State,
foreign governments and their representatives including
international organizations.
(b) Regulatory Authority.--Nothing in this title shall be
construed to alter the regulatory authority of the Department.
SEC. 808. SAVINGS CLAUSE.
Nothing in this title shall be construed to affect the
authority of the Secretary of Transportation that may exist
prior to the date of enactment of this Act with respect to--
(1) research into, and regulation of, hydrogen-
powered vehicles fuel systems integrity, standards, and
safety under subtitle VI of title 49, United States
Code;
(2) regulation of hazardous materials
transportation under chapter 51 of title 49, United
States Code;
(3) regulation of pipeline safety under chapter 601
of title 49, United States Code;
(4) encouragement and promotion of research,
development, and deployment activities relating to
advanced vehicle technologies under section 5506 of
title 49, United States Code;
(5) regulation of motor vehicle safety under
chapter 301 of title 49, United States Code;
(6) automobile fuel economy under chapter 329 of
title 49, United States Code; or
(7) representation of the interests of the United
States with respect to the activities and programs
under the authority of title 49, United States Code.
SEC. 809. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated to the Secretary to
carry out this title, in addition to any amounts made available
for these purposes under other Acts--
(1) $273,500,000 for fiscal year 2004;
(2) $375,000,000 for fiscal year 2005;
(3) $450,000,000 for fiscal year 2006;
(4) $500,000,000 for fiscal year 2007; and
(5) $550,000,000 for fiscal year 2008.
TITLE IX--RESEARCH AND DEVELOPMENT
SEC. 901. GOALS.
(a) In General.--The Secretary shall conduct a balanced set
of programs of energy research, development, demonstration, and
commercial application to support Federal energy policy and
programs by the Department. Such programs shall be focused on--
(1) increasing the efficiency of all energy
intensive sectors through conservation and improved
technologies;
(2) promoting diversity of energy supply;
(3) decreasing the Nation's dependence on foreign
energy supplies;
(4) improving United States energy security; and
(5) decreasing the environmental impact of energy-
related activities.
(b) Goals.--The Secretary shall publish measurable 5-year
cost and performance-based goals with each annual budget
submission in at least the following areas:
(1) Energy efficiency for buildings, energy-
consuming industries, and vehicles.
(2) Electric energy generation (including
distributed generation), transmission, and storage.
(3) Renewable energy technologies including wind
power, photovoltaics, solar thermal systems, geothermal
energy, hydrogen-fueled systems, biomass-based systems,
biofuels, and hydropower.
(4) Fossil energy including power generation,
onshore and offshore oil and gas resource recovery, and
transportation.
(5) Nuclear energy including programs for existing
and advanced reactors and education of future
specialists.
(c) Public Comment.--The Secretary shall provide mechanisms
for input on the annually published goals from industry,
university, and other public sources.
(d) Effect of Goals.--
(1) No new authority or requirement.--Nothing in
subsection (a) or the annually published goals shall--
(A) create any new--
(i) authority for any Federal
agency; or
(ii) requirement for any other
person;
(B) be used by a Federal agency to support
the establishment of regulatory standards or
regulatory requirements; or
(C) alter the authority of the Secretary to
make grants or other awards.
(2) No limitation.--Nothing in this subsection
shall be construed to limit the authority of the
Secretary to impose conditions on grants or other
awards based on the goals in subsection (a) or any
subsequent modification thereto.
SEC. 902. DEFINITIONS.
For purposes of this title:
(1) Department.--The term ``Department'' means the
Department of Energy.
(2) Departmental mission.--The term ``departmental
mission'' means any of the functions vested in the
Secretary of Energy by the Department of Energy
Organization Act (42 U.S.C. 7101 et seq.) or other law.
(3) Institution of higher education.--The term
``institution of higher education'' has the meaning
given that term in section 101(a) of the Higher
Education Act of 1965 (20 U.S.C. 1001(a)).
(4) National laboratory.--The term ``National
Laboratory'' means any of the following laboratories
owned by the Department:
(A) Ames Laboratory.
(B) Argonne National Laboratory.
(C) Brookhaven National Laboratory.
(D) Fermi National Accelerator Laboratory.
(E) Idaho National Engineering and
Environmental Laboratory.
(F) Lawrence Berkeley National Laboratory.
(G) Lawrence Livermore National Laboratory.
(H) Los Alamos National Laboratory.
(I) National Energy Technology Laboratory.
(J) National Renewable Energy Laboratory.
(K) Oak Ridge National Laboratory.
(L) Pacific Northwest National Laboratory.
(M) Princeton Plasma Physics Laboratory.
(N) Sandia National Laboratories.
(O) Stanford Linear Accelerator Center.
(P) Thomas Jefferson National Accelerator
Facility.
(5) Nonmilitary energy laboratory.--The term
``nonmilitary energy laboratory'' means the
laboratories listed in paragraph (4), except for those
listed in subparagraphs (G), (H), and (N).
(6) Secretary.--The term ``Secretary'' means the
Secretary of Energy.
(7) Single-purpose research facility.--The term
``single-purpose research facility'' means any of the
primarily single-purpose entities owned by the
Department or any other organization of the Department
designated by the Secretary.
Subtitle A--Energy Efficiency
SEC. 904. ENERGY EFFICIENCY.
(a) In General.--The following sums are authorized to be
appropriated to the Secretary for energy efficiency and
conservation research, development, demonstration, and
commercial application activities, including activities
authorized under this subtitle:
(1) For fiscal year 2004, $616,000,000.
(2) For fiscal year 2005, $695,000,000.
(3) For fiscal year 2006, $772,000,000.
(4) For fiscal year 2007, $865,000,000.
(5) For fiscal year 2008, $920,000,000.
(b) Allocations.--From amounts authorized under subsection
(a), the following sums are authorized:
(1) For activities under section 905--
(A) for fiscal year 2004, $20,000,000;
(B) for fiscal year 2005, $30,000,000;
(C) for fiscal year 2006, $50,000,000;
(D) for fiscal year 2007, $50,000,000; and
(E) for fiscal year 2008, $50,000,000.
(2) For activities under section 907--
(A) for fiscal year 2004, $4,000,000; and
(B) for each of fiscal years 2005 through
2008, $7,000,000.
(3) For activities under section 908--
(A) for fiscal year 2004, $20,000,000;
(B) for fiscal year 2005, $25,000,000;
(C) for fiscal year 2006, $30,000,000;
(D) for fiscal year 2007, $35,000,000; and
(E) for fiscal year 2008, $40,000,000.
(4) For activities under section 909, $2,000,000
for each of fiscal years 2005 through 2008.
(c) Extended Authorization.--There are authorized to be
appropriated to the Secretary for activities under section 905,
$50,000,000 for each of fiscal years 2009 through 2013.
(d) Limitation on Use of Funds.--None of the funds
authorized to be appropriated under this section may be used
for--
(1) the issuance and implementation of energy
efficiency regulations;
(2) the Weatherization Assistance Program under
part A of title IV of the Energy Conservation and
Production Act (42 U.S.C. 6861 et seq.);
(3) the State Energy Program under part D of title
III of the Energy Policy and Conservation Act (42
U.S.C. 6321 et seq.); or
(4) the Federal Energy Management Program under
part 3 of title V of the National Energy Conservation
Policy Act (42 U.S.C. 8251 et seq.).
SEC. 905. NEXT GENERATION LIGHTING INITIATIVE.
(a) In General.--The Secretary shall carry out a Next
Generation Lighting Initiative in accordance with this section
to support research, development, demonstration, and commercial
application activities related to advanced solid-state lighting
technologies based on white light emitting diodes.
(b) Objectives.--The objectives of the initiative shall be
to develop advanced solid-state organic and inorganic lighting
technologies based on white light emitting diodes that,
compared to incandescent and fluorescent lighting technologies,
are longer lasting; more energy-efficient; and cost-
competitive, and have less environmental impact.
(c) Industry Alliance.--The Secretary shall, not later than
3 months after the date of enactment of this section,
competitively select an Industry Alliance to represent
participants that are private, for-profit firms which, as a
group, are broadly representative of United States solid state
lighting research, development, infrastructure, and
manufacturing expertise as a whole.
(d) Research.--
(1) In general.--The Secretary shall carry out the
research activities of the Next Generation Lighting
Initiative through competitively awarded grants to
researchers, including Industry Alliance participants,
National Laboratories, and institutions of higher
education.
(2) Assistance from the industry alliance.--The
Secretary shall annually solicit from the Industry
Alliance--
(A) comments to identify solid-state
lighting technology needs;
(B) assessment of the progress of the
Initiative's research activities; and
(C) assistance in annually updating solid-
state lighting technology roadmaps.
(3) Availability of information and roadmaps.--The
information and roadmaps under paragraph (2) shall be
available to the public and public response shall be
solicited by the Secretary.
(e) Development, Demonstration, and Commercial
Application.--The Secretary shall carry out a development,
demonstration, and commercial application program for the Next
Generation Lighting Initiative through competitively selected
awards. The Secretary may give preference to participants of
the Industry Alliance selected pursuant to subsection (c).
(f) Intellectual Property.--The Secretary may require, in
accordance with the authorities provided in section 202(a)(ii)
of title 35, United States Code, section 152 of the Atomic
Energy Act of 1954 (42 U.S.C. 2182), and section 9 of the
Federal Nonnuclear Energy Research and Development Act of 1974
(42 U.S.C. 5908), that--
(1) for any new invention resulting from activities
under subsection (d)--
(A) the Industry Alliance members that are
active participants in research, development,
and demonstration activities related to the
advanced solid-state lighting technologies that
are the subject of this section shall be
granted first option to negotiate with the
invention owner nonexclusive licenses and
royalties for uses of the invention related to
solid-state lighting on terms that are
reasonable under the circumstances; and
(B)(i) for 1 year after a United States
patent is issued for the invention, the patent
holder shall not negotiate any license or
royalty with any entity that is not a
participant in the Industry Alliance described
in subparagraph (A); and
(ii) during the year described in clause
(i), the invention owner shall negotiate
nonexclusive licenses and royalties in good
faith with any interested participant in the
Industry Alliance described in subparagraph
(A); and
(2) such other terms as the Secretary determines
are required to promote accelerated commercialization
of inventions made under the Initiative.
(g) National Academy Review.--The Secretary shall enter
into an arrangement with the National Academy of Sciences to
conduct periodic reviews of the Next Generation Lighting
Initiative. The Academy shall review the research priorities,
technical milestones, and plans for technology transfer and
progress towards achieving them. The Secretary shall consider
the results of such reviews in evaluating the information
obtained under subsection (d)(2).
(h) Definitions.--As used in this section:
(1) Advanced solid-state lighting.--The term
``advanced solid-state lighting'' means a
semiconducting device package and delivery system that
produces white light using externally applied voltage.
(2) Research.--The term ``research'' includes
research on the technologies, materials, and
manufacturing processes required for white light
emitting diodes.
(3) Industry alliance.--The term ``Industry
Alliance'' means an entity selected by the Secretary
under subsection (c).
(4) White light emitting diode.--The term ``white
light emitting diode'' means a semiconducting package,
utilizing either organic or inorganic materials, that
produces white light using externally applied voltage.
SEC. 906. NATIONAL BUILDING PERFORMANCE INITIATIVE.
(a) Interagency Group.--Not later than 90 days after the
date of enactment of this Act, the Director of the Office of
Science and Technology Policy shall establish an interagency
group to develop, in coordination with the advisory committee
established under subsection (e), a National Building
Performance Initiative (in this section referred to as the
``Initiative''). The interagency group shall be co-chaired by
appropriate officials of the Department and the Department of
Commerce, who shall jointly arrange for the provision of
necessary administrative support to the group.
(b) Integration of Efforts.--The Initiative, working with
the National Institute of Building Sciences, shall integrate
Federal, State, and voluntary private sector efforts to reduce
the costs of construction, operation, maintenance, and
renovation of commercial, industrial, institutional, and
residential buildings.
(c) Plan.--Not later than 1 year after the date of
enactment of this Act, the interagency group shall submit to
Congress a plan for carrying out the appropriate Federal role
in the Initiative. The plan shall include--
(1) research, development, demonstration, and
commercial application of systems and materials for new
construction and retrofit relating to the building
envelope and building system components; and
(2) the collection, analysis, and dissemination of
research results and other pertinent information on
enhancing building performance to industry, government
entities, and the public.
(d) Department of Energy Role.--Within the Federal portion
of the Initiative, the Department shall be the lead agency for
all aspects of building performance related to use and
conservation of energy.
(e) Advisory Committee.--
(1) Establishment.--The Secretary, in consultation
with the Secretary of Commerce and the Director of the
Office of Science and Technology Policy, shall
establish an advisory committee to--
(A) analyze and provide recommendations on
potential private sector roles and
participation in the Initiative; and
(B) review and provide recommendations on
the plan described in subsection (c).
(2) Membership.--Membership of the advisory
committee shall include representatives with a broad
range of appropriate expertise, including expertise
in--
(A) building research and technology;
(B) architecture, engineering, and building
materials and systems; and
(C) the residential, commercial, and
industrial sectors of the construction
industry.
(f) Construction.--Nothing in this section provides any
Federal agency with new authority to regulate building
performance.
SEC. 907. SECONDARY ELECTRIC VEHICLE BATTERY USE PROGRAM.
(a) Definitions.--For purposes of this section:
(1) Associated equipment.--The term ``associated
equipment'' means equipment located where the batteries
will be used that is necessary to enable the use of the
energy stored in the batteries.
(2) Battery.--The term `battery'' means an energy
storage device that previously has been used to provide
motive power in a vehicle powered in whole or in part
by electricity.
(b) Program.--The Secretary shall establish and conduct a
research, development, demonstration, and commercial
application program for the secondary use of batteries if the
Secretary finds that there are sufficient numbers of such
batteries to support the program. The program shall be--
(1) designed to demonstrate the use of batteries in
secondary applications, including utility and
commercial power storage and power quality;
(2) structured to evaluate the performance,
including useful service life and costs, of such
batteries in field operations, and the necessary
supporting infrastructure, including reuse and disposal
of batteries; and
(3) coordinated with ongoing secondary battery use
programs at the National Laboratories and in industry.
(c) Solicitation.--Not later than 180 days after the date
of enactment of this Act, if the Secretary finds under
subsection (b) that there are sufficient numbers of batteries
to support the program, the Secretary shall solicit proposals
to demonstrate the secondary use of batteries and associated
equipment and supporting infrastructure in geographic locations
throughout the United States. The Secretary may make additional
solicitations for proposals if the Secretary determines that
such solicitations are necessary to carry out this section.
(d) Selection of Proposals.--
(1) In general.--The Secretary shall, not later
than 90 days after the closing date established by the
Secretary for receipt of proposals under subsection
(c), select up to 5 proposals which may receive
financial assistance under this section, subject to the
availability of appropriations.
(2) Diversity; environmental effect.--In selecting
proposals, the Secretary shall consider diversity of
battery type, geographic and climatic diversity, and
life-cycle environmental effects of the approaches.
(3) Limitation.--No 1 project selected under this
section shall receive more than 25 percent of the funds
authorized for the program under this section.
(4) Optimization of federal resources.--The
Secretary shall consider the extent of involvement of
State or local government and other persons in each
demonstration project to optimize use of Federal
resources.
(5) Other criteria.--The Secretary may consider
such other criteria as the Secretary considers
appropriate.
(e) Conditions.--The Secretary shall require that--
(1) relevant information be provided to the
Department, the users of the batteries, the proposers,
and the battery manufacturers;
(2) the proposer provide at least 50 percent of the
costs associated with the proposal; and
(3) the proposer provide to the Secretary such
information regarding the disposal of the batteries as
the Secretary may require to ensure that the proposer
disposes of the batteries in accordance with applicable
law.
SEC. 908. ENERGY EFFICIENCY SCIENCE INITIATIVE.
(a) Establishment.--The Secretary shall establish an Energy
Efficiency Science Initiative to be managed by the Assistant
Secretary in the Department with responsibility for energy
conservation under section 203(a)(9) of the Department of
Energy Organization Act (42 U.S.C. 7133(a)(9)), in consultation
with the Director of the Office of Science, for grants to be
competitively awarded and subject to peer review for research
relating to energy efficiency.
(b) Report.--The Secretary shall submit to Congress, along
with the President's annual budget request under section
1105(a) of title 31, United States Code, a report on the
activities of the Energy Efficiency Science Initiative,
including a description of the process used to award the funds
and an explanation of how the research relates to energy
efficiency.
SEC. 909. ELECTRIC MOTOR CONTROL TECHNOLOGY.
The Secretary shall conduct a research, development,
demonstration, and commercial application program on advanced
control devices to improve the energy efficiency of electric
motors used in heating, ventilation, air conditioning, and
comparable systems.
SEC. 910. ADVANCED ENERGY TECHNOLOGY TRANSFER CENTERS.
(a) Grants.--Not later than 18 months after the date of
enactment of this Act, the Secretary shall make grants to
nonprofit institutions, State and local governments, or
universities (or consortia thereof), to establish a
geographically dispersed network of Advanced Energy Technology
Transfer Centers, to be located in areas the Secretary
determines have the greatest need of the services of such
Centers.
(b) Activities.--
(1) In general.--Each Center shall operate a
program to encourage demonstration and commercial
application of advanced energy methods and technologies
through education and outreach to building and
industrial professionals, and to other individuals and
organizations with an interest in efficient energy use.
(2) Advisory panel.--Each Center shall establish an
advisory panel to advise the Center on how best to
accomplish the activities under paragraph (1).
(c) Application.--A person seeking a grant under this
section shall submit to the Secretary an application in such
form and containing such information as the Secretary may
require. The Secretary may award a grant under this section to
an entity already in existence if the entity is otherwise
eligible under this section.
(d) Selection Criteria.--The Secretary shall award grants
under this section on the basis of the following criteria, at a
minimum:
(1) The ability of the applicant to carry out the
activities in subsection (b).
(2) The extent to which the applicant will
coordinate the activities of the Center with other
entities, such as State and local governments,
utilities, and educational and research institutions.
(e) Matching Funds.--The Secretary shall require a non-
Federal matching requirement of at least 50 percent of the
costs of establishing and operating each Center.
(f) Advisory Committee.--The Secretary shall establish an
advisory committee to advise the Secretary on the establishment
of Centers under this section. The advisory committee shall be
composed of individuals with expertise in the area of advanced
energy methods and technologies, including at least 1
representative from--
(1) State or local energy offices;
(2) energy professionals;
(3) trade or professional associations;
(4) architects, engineers, or construction
professionals;
(5) manufacturers;
(6) the research community; and
(7) nonprofit energy or environmental
organizations.
(g) Definitions.--For purposes of this section:
(1) Advanced energy methods and technologies.--The
term ``advanced energy methods and technologies'' means
all methods and technologies that promote energy
efficiency and conservation, including distributed
generation technologies, and life-cycle analysis of
energy use.
(2) Center.--The term ``Center'' means an Advanced
Energy Technology Transfer Center established pursuant
to this section.
(3) Distributed generation.--The term ``distributed
generation'' means an electric power generation
facility that is designed to serve retail electric
consumers at or near the facility site.
Subtitle B--Distributed Energy and Electric Energy Systems
SEC. 911. DISTRIBUTED ENERGY AND ELECTRIC ENERGY SYSTEMS.
(a) In General.--The following sums are authorized to be
appropriated to the Secretary for distributed energy and
electric energy systems activities, including activities
authorized under this subtitle:
(1) For fiscal year 2004, $190,000,000.
(2) For fiscal year 2005, $200,000,000.
(3) For fiscal year 2006, $220,000,000.
(4) For fiscal year 2007, $240,000,000.
(5) For fiscal year 2008, $260,000,000.
(b) Micro-Cogeneration Energy Technology.--From amounts
authorized under subsection (a), $20,000,000 for each of fiscal
years 2004 and 2005 is authorized for activities under section
914.
SEC. 912. HYBRID DISTRIBUTED POWER SYSTEMS.
(a) Requirement.--Not later than 1 year after the date of
enactment of this Act, the Secretary shall develop and transmit
to Congress a strategy for a comprehensive research,
development, demonstration, and commercial application program
to develop hybrid distributed power systems that combine--
(1) 1 or more renewable electric power generation
technologies of 10 megawatts or less located near the
site of electric energy use; and
(2) nonintermittent electric power generation
technologies suitable for use in a distributed power
system.
(b) Contents.--The strategy shall--
(1) identify the needs best met with such hybrid
distributed power systems and the technological
barriers to the use of such systems;
(2) provide for the development of methods to
design, test, integrate into systems, and operate such
hybrid distributed power systems;
(3) include, as appropriate, research, development,
demonstration, and commercial application on related
technologies needed for the adoption of such hybrid
distributed power systems, including energy storage
devices and environmental control technologies;
(4) include research, development, demonstration,
and commercial application of interconnection
technologies for communications and controls of
distributed generation architectures, particularly
technologies promoting real-time response to power
market information and physical conditions on the
electrical grid; and
(5) describe how activities under the strategy will
be integrated with other research, development,
demonstration, and commercial application activities
supported by the Department related to electric power
technologies.
SEC. 913. HIGH POWER DENSITY INDUSTRY PROGRAM.
The Secretary shall establish a comprehensive research,
development, demonstration, and commercial application program
to improve energy efficiency of high power density facilities,
including data centers, server farms, and telecommunications
facilities. Such program shall consider technologies that
provide significant improvement in thermal controls, metering,
load management, peak load reduction, or the efficient cooling
of electronics.
SEC. 914. MICRO-COGENERATION ENERGY TECHNOLOGY.
The Secretary shall make competitive, merit-based grants to
consortia for the development of micro-cogeneration energy
technology. The consortia shall explore--
(1) the use of small-scale combined heat and power
in residential heating appliances; and
(2) the use of excess power to operate other
appliances within the residence and supply excess
generated power to the power grid.
SEC. 915. DISTRIBUTED ENERGY TECHNOLOGY DEMONSTRATION PROGRAM.
The Secretary, within the sums authorized under section
911(a), may provide financial assistance to coordinating
consortia of interdisciplinary participants for demonstrations
designed to accelerate the utilization of distributed energy
technologies, such as fuel cells, microturbines, reciprocating
engines, thermally activated technologies, and combined heat
and power systems, in highly energy intensive commercial
applications.
SEC. 916. RECIPROCATING POWER.
The Secretary shall conduct a research, development, and
demonstration program regarding fuel system optimization and
emissions reduction after-treatment technologies for industrial
reciprocating engines. Such after-treatment technologies shall
use processes that reduce emissions by recirculating exhaust
gases and shall be designed to be retrofitted to any new or
existing diesel or natural gas engine used for power
generation, peaking power generation, combined heat and power,
or compression.
Subtitle C--Renewable Energy
SEC. 918. RENEWABLE ENERGY.
(a) In General.--The following sums are authorized to be
appropriated to the Secretary for renewable energy research,
development, demonstration, and commercial application
activities, including activities authorized under this
subtitle:
(1) For fiscal year 2004, $480,000,000.
(2) For fiscal year 2005, $550,000,000.
(3) For fiscal year 2006, $610,000,000.
(4) For fiscal year 2007, $659,000,000.
(5) For fiscal year 2008, $710,000,000.
(b) Bioenergy.--From the amounts authorized under
subsection (a), the following sums are authorized to be
appropriated to carry out section 919:
(1) For fiscal year 2004, $135,425,000.
(2) For fiscal year 2005, $155,600,000.
(3) For fiscal year 2006, $167,650,000.
(4) For fiscal year 2007, $180,000,000.
(5) For fiscal year 2008, $192,000,000.
(c) Concentrating Solar Power.--From amounts authorized
under subsection (a), the following sums are authorized to be
appropriated to carry out section 920:
(1) For fiscal year 2004, $20,000,000.
(2) For fiscal year 2005, $40,000,000.
(3) For each of fiscal years 2006, 2007 and 2008,
$50,000,000.
(d) Public Buildings.--From the amounts authorized under
subsection (a), $30,000,000 for each of the fiscal years 2004
through 2008 are authorized to be appropriated to carry out
section 922.
(e) Limits on Use of Funds.--
(1) No funds for renewable support and
implementation.--None of the funds authorized to be
appropriated under this section may be used for
Renewable Support and Implementation.
(2) Grants.--Of the funds authorized under
subsection (b), not less than $5,000,000 for each
fiscal year shall be made available for grants to
Historically Black Colleges and Universities, Tribal
Colleges, and Hispanic-Serving Institutions.
(3) Regional field verification program.--Of the
funds authorized under subsection (a), not less than
$4,000,000 for each fiscal year shall be made available
for the Regional Field Verification Program of the
Department.
(4) Off-stream pumped storage hydropower.--Of the
funds authorized under subsection (a), such sums as may
be necessary shall be made available for demonstration
projects of off-stream pumped storage hydropower.
(f) Consultation.--In carrying out this subtitle, the
Secretary, in consultation with the Secretary of Agriculture,
shall demonstrate the use of advanced wind power technology,
including combined use with coal gasification; biomass;
geothermal energy systems; and other renewable energy
technologies to assist in delivering electricity to rural and
remote locations.
SEC. 919. BIOENERGY PROGRAMS.
(a) Definitions.--For the purposes of this section:
(1) The term ``agricultural byproducts'' includes
waste products, including poultry fat and poultry
waste.
(2) The term ``cellulosic biomass'' means any
portion of a crop containing lignocellulose or
hemicellulose, including barley grain, grapeseed,
forest thinnings, rice bran, rice hulls, rice straw,
soybean matter, and sugarcane bagasse, or any crop
grown specifically for the purpose of producing
cellulosic feedstocks.
(b) Program.--The Secretary shall conduct a program of
research, development, demonstration, and commercial
application for bioenergy, including--
(1) biopower energy systems;
(2) biofuels;
(3) bio-based products;
(4) integrated biorefineries that may produce
biopower, biofuels, and bio-based products;
(5) cross-cutting research and development in
feedstocks and enzymes; and
(6) economic analysis.
(c) Biofuels and Bio-Based Products.--The goals of the
biofuels and bio-based products programs shall be to develop,
in partnership with industry--
(1) advanced biochemical and thermochemical
conversion technologies capable of making biofuels that
are price-competitive with gasoline or diesel in either
internal combustion engines or fuel cell-powered
vehicles, and bio-based products from a variety of
feedstocks, including grains, cellulosic biomass, and
other agricultural byproducts; and
(2) advanced biotechnology processes capable of
making biofuels and bio-based products with emphasis on
development of biorefinery technologies using enzyme-
based processing systems.
SEC. 920. CONCENTRATING SOLAR POWER RESEARCH AND DEVELOPMENT PROGRAM.
(a) In General.--The Secretary shall conduct a program of
research and development to evaluate the potential of
concentrating solar power for hydrogen production, including
cogeneration approaches for both hydrogen and electricity. Such
program shall take advantage of existing facilities to the
extent possible and shall include--
(1) development of optimized technologies that are
common to both electricity and hydrogen production;
(2) evaluation of thermochemical cycles for
hydrogen production at the temperatures attainable with
concentrating solar power;
(3) evaluation of materials issues for the
thermochemical cycles described in paragraph (2);
(4) system architectures and economics studies; and
(5) coordination with activities in the Advanced
Reactor Hydrogen Cogeneration Project on high
temperature materials, thermochemical cycles, and
economic issues.
(b) Assessment.--In carrying out the program under this
section, the Secretary shall--
(1) assess conflicting guidance on the economic
potential of concentrating solar power for electricity
production received from the National Research Council
report entitled ``Renewable Power Pathways: A Review of
the U.S. Department of Energy's Renewable Energy
Programs'' in 2000 and subsequent Department-funded
reviews of that report; and
(2) provide an assessment of the potential impact
of the technology before, or concurrent with,
submission of the fiscal year 2006 budget.
(c) Report.--Not later than 5 years after the date of
enactment of this Act, the Secretary shall provide a report to
Congress on the economic and technical potential for
electricity or hydrogen production, with or without
cogeneration, with concentrating solar power, including the
economic and technical feasibility of potential construction of
a pilot demonstration facility suitable for commercial
production of electricity or hydrogen from concentrating solar
power.
SEC. 921. MISCELLANEOUS PROJECTS.
The Secretary may conduct research, development,
demonstration, and commercial application programs for--
(1) ocean energy, including wave energy; and
(2) the combined use of renewable energy
technologies with one another and with other energy
technologies, including the combined use of wind power
and coal gasification technologies.
SEC. 922. RENEWABLE ENERGY IN PUBLIC BUILDINGS.
(a) Demonstration and Technology Transfer Program.--The
Secretary shall establish a program for the demonstration of
innovative technologies for solar and other renewable energy
sources in buildings owned or operated by a State or local
government, and for the dissemination of information resulting
from such demonstration to interested parties.
(b) Limit on Federal Funding.--The Secretary shall provide
under this section no more than 40 percent of the incremental
costs of the solar or other renewable energy source project
funded.
(c) Requirement.--As part of the application for awards
under this section, the Secretary shall require all
applicants--
(1) to demonstrate a continuing commitment to the
use of solar and other renewable energy sources in
buildings they own or operate; and
(2) to state how they expect any award to further
their transition to the significant use of renewable
energy.
SEC. 923. STUDY OF MARINE RENEWABLE ENERGY OPTIONS.
(a) In General.--The Secretary shall enter into an
arrangement with the National Academy of Sciences to conduct a
study on--
(1) the feasibility of various methods of renewable
generation of energy from the ocean, including energy
from waves, tides, currents, and thermal gradients; and
(2) the research, development, demonstration, and
commercial application activities required to make
marine renewable energy generation competitive with
other forms of electricity generation.
(b) Transmittal.--Not later than 1 year after the date of
enactment of this Act, the Secretary shall transmit the study
to Congress along with the Secretary's recommendations for
implementing the results of the study.
Subtitle D--Nuclear Energy
SEC. 924. NUCLEAR ENERGY.
(a) Core Programs.--The following sums are authorized to be
appropriated to the Secretary for nuclear energy research,
development, demonstration, and commercial application
activities, including activities authorized under this
subtitle, other than those described in subsection (b):
(1) For fiscal year 2004, $273,000,000.
(2) For fiscal year 2005, $355,000,000.
(3) For fiscal year 2006, $430,000,000.
(4) For fiscal year 2007, $455,000,000.
(5) For fiscal year 2008, $545,000,000.
(b) Nuclear Infrastructure Support.--The following sums are
authorized to be appropriated to the Secretary for activities
under section 925(e):
(1) For fiscal year 2004, $125,000,000.
(2) For fiscal year 2005, $130,000,000.
(3) For fiscal year 2006, $135,000,000.
(4) For fiscal year 2007, $140,000,000.
(5) For fiscal year 2008, $145,000,000.
(c) Allocations.--From amounts authorized under subsection
(a), the following sums are authorized:
(1) For activities under section 926--
(A) for fiscal year 2004, $140,000,000;
(B) for fiscal year 2005, $145,000,000;
(C) for fiscal year 2006, $150,000,000;
(D) for fiscal year 2007, $155,000,000; and
(E) for fiscal year 2008, $275,000,000.
(2) For activities under section 927--
(A) for fiscal year 2004, $35,200,000;
(B) for fiscal year 2005, $44,350,000;
(C) for fiscal year 2006, $49,200,000;
(D) for fiscal year 2007, $54,950,000; and
(E) for fiscal year 2008, $60,000,000.
(3) For activities under section 929, for each of
fiscal years 2004 through 2008, $6,000,000.
(d) Limitation on Use of Funds.--None of the funds
authorized under this section may be used for decommissioning
the Fast Flux Test Facility.
SEC. 925. NUCLEAR ENERGY RESEARCH AND DEVELOPMENT PROGRAMS.
(a) Nuclear Energy Research Initiative.--The Secretary
shall carry out a Nuclear Energy Research Initiative for
research and development related to nuclear energy.
(b) Nuclear Energy Plant Optimization Program.--The
Secretary shall carry out a Nuclear Energy Plant Optimization
Program to support research and development activities
addressing reliability, availability, productivity, component
aging, safety, and security of existing nuclear power plants.
(c) Nuclear Power 2010 Program.--The Secretary shall carry
out a Nuclear Power 2010 Program, consistent with
recommendations in the October 2001 report entitled ``A Roadmap
to Deploy New Nuclear Power Plants in the United States by
2010'' issued by the Nuclear Energy Research Advisory Committee
of the Department. Whatever type of reactor is chosen for the
hydrogen cogeneration project under subtitle C of title VI,
that type shall not be addressed in the Program under this
section. The Program shall include--
(1) support for first-of-a-kind engineering design
and certification expenses of advanced nuclear power
plant designs, which offer improved safety and
economics over current conventional plants and the
promise of near-term to medium-term commercial
deployment;
(2) action by the Secretary to encourage domestic
power companies to install new nuclear plant capacity
as soon as possible;
(3) utilization of the expertise and capabilities
of industry, universities, and National Laboratories in
evaluation of advanced nuclear fuel cycles and fuels
testing;
(4) consideration of proliferation-resistant
passively-safe, small reactors suitable for long-term
electricity production without refueling and suitable
for use in remote installations;
(5) participation of international collaborators in
research, development, design, and deployment efforts
as appropriate and consistent with United States
interests in nonproliferation of nuclear weapons;
(6) encouragement for university and industry
participation; and
(7) selection of projects such as to strengthen the
competitive position of the domestic nuclear power
industrial infrastructure.
(d) Generation IV Nuclear Energy Systems Initiative.--The
Secretary shall carry out a Generation IV Nuclear Energy
Systems Initiative to develop an overall technology plan and to
support research and development necessary to make an informed
technical decision about the most promising candidates for
eventual commercial application. The Initiative shall examine
advanced proliferation-resistant and passively safe reactor
designs, including designs that--
(1) are economically competitive with other
electric power generation plants;
(2) have higher efficiency, lower cost, and
improved safety compared to reactors in operation on
the date of enactment of this Act;
(3) use fuels that are proliferation-resistant and
have substantially reduced production of high-level
waste per unit of output; and
(4) use improved instrumentation.
(e) Nuclear Infrastructure Support.--The Secretary shall
develop and implement a strategy for the facilities of the
Office of Nuclear Energy, Science, and Technology and shall
transmit a report containing the strategy along with the
President's budget request to Congress for fiscal year 2006.
SEC. 926. ADVANCED FUEL CYCLE INITIATIVE.
(a) In General.--The Secretary, through the Director of the
Office of Nuclear Energy, Science, and Technology, shall
conduct an advanced fuel recycling technology research and
development program to evaluate proliferation-resistant fuel
recycling and transmutation technologies that minimize
environmental or public health and safety impacts as an
alternative to aqueous reprocessing technologies deployed as of
the date of enactment of this Act in support of evaluation of
alternative national strategies for spent nuclear fuel and the
Generation IV advanced reactor concepts, subject to annual
review by the Secretary's Nuclear Energy Research Advisory
Committee or other independent entity, as appropriate.
Opportunities to enhance progress of the program through
international cooperation should be sought.
(b) Reports.--The Secretary shall report on the activities
of the advanced fuel recycling technology research and
development program as part of the Department's annual budget
submission.
SEC. 927. UNIVERSITY NUCLEAR SCIENCE AND ENGINEERING SUPPORT.
(a) Establishment.--The Secretary shall support a program
to invest in human resources and infrastructure in the nuclear
sciences and engineering and related fields (including health
physics and nuclear and radiochemistry), consistent with
departmental missions related to civilian nuclear research and
development.
(b) Duties.--In carrying out the program under this
section, the Secretary shall establish fellowship and faculty
assistance programs, as well as provide support for fundamental
research and encourage collaborative research among industry,
National Laboratories, and universities through the Nuclear
Energy Research Initiative. The Secretary is encouraged to
support activities addressing the entire fuel cycle through
involvement of both the Office of Nuclear Energy, Science, and
Technology and the Office of Civilian Radioactive Waste
Management. The Secretary shall support communication and
outreach related to nuclear science, engineering, and nuclear
waste management, consistent with interests of the United
States in nonproliferation of nuclear weapons capabilities.
(c) Strengthening University Research and Training Reactors
and Associated Infrastructure.--Activities under this section
may include--
(1) converting research and training reactors
currently using high-enrichment fuels to low-enrichment
fuels, upgrading operational instrumentation, and
sharing of reactors among institutions of higher
education;
(2) providing technical assistance, in
collaboration with the United States nuclear industry,
in relicensing and upgrading research and training
reactors as part of a student training program; and
(3) providing funding, through the Innovations in
Nuclear Infrastructure and Education Program, for
reactor improvements as part of a focused effort that
emphasizes research, training, and education.
(d) University National Laboratory Interactions.--The
Secretary shall develop sabbatical fellowship and visiting
scientist programs to encourage sharing of personnel between
National Laboratories and universities.
(e) Operating and Maintenance Costs.--Funding for a
research project provided under this section may be used to
offset a portion of the operating and maintenance costs of a
research and training reactor at an institution of higher
education used in the research project.
SEC. 928. SECURITY OF REACTOR DESIGNS.
The Secretary, through the Director of the Office of
Nuclear Energy, Science, and Technology, shall conduct a
research and development program on cost-effective technologies
for increasing the safety of reactor designs from natural
phenomena and the security of reactor designs from deliberate
attacks.
SEC. 929. ALTERNATIVES TO INDUSTRIAL RADIOACTIVE SOURCES.
(a) Study.--The Secretary shall conduct a study and provide
a report to Congress not later than August 1, 2004. The study
shall--
(1) survey industrial applications of large
radioactive sources, including well-logging sources;
(2) review current domestic and international
Department, Department of Defense, Department of State,
and commercial programs to manage and dispose of
radioactive sources;
(3) discuss disposal options and practices for
currently deployed or future sources and, if
deficiencies are noted in existing disposal options or
practices for either deployed or future sources,
recommend options to remedy deficiencies; and
(4) develop a program plan for research and
development to develop alternatives to large industrial
sources that reduce safety, environmental, or
proliferation risks to either workers using the sources
or the public.
(b) Program.--The Secretary shall establish a research and
development program to implement the program plan developed
under subsection (a)(4). The program shall include miniaturized
particle accelerators for well-logging or other industrial
applications and portable accelerators for production of short-
lived radioactive materials at an industrial site.
SEC. 930. GEOLOGICAL ISOLATION OF SPENT FUEL.
The Secretary shall conduct a study to determine the
feasibility of deep borehole disposal of spent nuclear fuel and
high-level radioactive waste. The study shall emphasize
geological, chemical, and hydrological characterization of, and
design of engineered structures for, deep borehole
environments. Not later than 1 year after the date of enactment
of this Act, the Secretary shall transmit the study to
Congress.
Subtitle E--Fossil Energy
PART I--RESEARCH PROGRAMS
SEC. 931. FOSSIL ENERGY.
(a) In General.--The following sums are authorized to be
appropriated to the Secretary for fossil energy research,
development, demonstration, and commercial application
activities, including activities authorized under this part:
(1) For fiscal year 2004, $530,000,000.
(2) For fiscal year 2005, $556,000,000.
(3) For fiscal year 2006, $583,000,000.
(4) For fiscal year 2007, $611,000,000.
(5) For fiscal year 2008, $626,000,000.
(b) Allocations.--From amounts authorized under subsection
(a), the following sums are authorized:
(1) For activities under section 932(b)(2),
$28,000,000 for each of the fiscal years 2004 through
2008.
(2) For activities under section 934--
(A) for fiscal year 2004, $12,000,000;
(B) for fiscal year 2005, $15,000,000; and
(C) for each of fiscal years 2006 through
2008, $20,000,000.
(3) For activities under section 935--
(A) for fiscal year 2004, $259,000,000;
(B) for fiscal year 2005, $272,000,000;
(C) for fiscal year 2006, $285,000,000;
(D) for fiscal year 2007, $298,000,000; and
(E) for fiscal year 2008, $308,000,000.
(4) For the Office of Arctic Energy under section
3197 of the Floyd D. Spence National Defense
Authorization Act for Fiscal Year 2001 (42 U.S.C.
7144d), $25,000,000 for each of fiscal years 2004
through 2008.
(5) For activities under section 933, $4,000,000
for fiscal year 2004 and $2,000,000 for each of fiscal
years 2005 through 2008.
(c) Extended Authorization.--There are authorized to be
appropriated to the Secretary for the Office of Arctic Energy
under section 3197 of the Floyd D. Spence National Defense
Authorization Act for Fiscal Year 2001 (42 U.S.C. 7144d),
$25,000,000 for each of fiscal years 2009 through 2012.
(d) Limits on Use of Funds.--
(1) No funds for certain programs.--None of the
funds authorized under this section may be used for
Fossil Energy Environmental Restoration or Import/
Export Authorization.
(2) Institutions of higher education.--Of the funds
authorized under subsection (b)(2), not less than 20
percent of the funds appropriated for each fiscal year
shall be dedicated to research and development carried
out at institutions of higher education.
SEC. 932. OIL AND GAS RESEARCH PROGRAMS.
(a) Oil and Gas Research.--The Secretary shall conduct a
program of research, development, demonstration, and commercial
application on oil and gas, including--
(1) exploration and production;
(2) gas hydrates;
(3) reservoir life and extension;
(4) transportation and distribution infrastructure;
(5) ultraclean fuels;
(6) heavy oil and oil shale;
(7) related environmental research; and
(8) compressed natural gas marine transport.
(b) Fuel Cells.--
(1) In general.--The Secretary shall conduct a
program of research, development, demonstration, and
commercial application on fuel cells for low-cost,
high-efficiency, fuel-flexible, modular power systems.
(2) Improved manufacturing production and
processes.--The demonstrations under paragraph (1)
shall include fuel cell technology for commercial,
residential, and transportation applications, and
distributed generation systems, utilizing improved
manufacturing production and processes.
(c) Natural Gas and Oil Deposits Report.--Not later than 2
years after the date of enactment of this Act, and every 2
years thereafter, the Secretary of the Interior, in
consultation with other appropriate Federal agencies, shall
transmit a report to Congress of the latest estimates of
natural gas and oil reserves, reserves growth, and undiscovered
resources in Federal and State waters off the coast of
Louisiana and Texas.
(d) Integrated Clean Power and Energy Research.--
(1) National center or consortium of excellence.--
The Secretary shall establish a national center or
consortium of excellence in clean energy and power
generation, utilizing the resources of the existing
Clean Power and Energy Research Consortium, to address
the Nation's critical dependence on energy and the need
to reduce emissions.
(2) Program.--The center or consortium shall
conduct a program of research, development,
demonstration, and commercial application on
integrating the following focus areas:
(A) Efficiency and reliability of gas
turbines for power generation.
(B) Reduction in emissions from power
generation.
(C) Promotion of energy conservation
issues.
(D) Effectively utilizing alternative fuels
and renewable energy.
(E) Development of advanced materials
technology for oil and gas exploration and
utilization in harsh environments.
(F) Education on energy and power
generation issues.
SEC. 933. TECHNOLOGY TRANSFER.
The Secretary shall establish a competitive program to
award a contract to a nonprofit entity for the purpose of
transferring technologies developed with public funds. The
entity selected under this section shall have experience in
offshore oil and gas technology research management, in the
transfer of technologies developed with public funds to the
offshore and maritime industry, and in management of an
offshore and maritime industry consortium. The program
consortium selected under section 942 shall not be eligible for
selection under this section. When appropriate, the Secretary
shall consider utilizing the entity selected under this section
when implementing the activities authorized by section 975.
SEC. 934. RESEARCH AND DEVELOPMENT FOR COAL MINING TECHNOLOGIES.
(a) Establishment.--The Secretary shall carry out a program
of research and development on coal mining technologies. The
Secretary shall cooperate with appropriate Federal agencies,
coal producers, trade associations, equipment manufacturers,
institutions of higher education with mining engineering
departments, and other relevant entities.
(b) Program.--The research and development activities
carried out under this section shall--
(1) be guided by the mining research and
development priorities identified by the Mining
Industry of the Future Program and in the
recommendations from relevant reports of the National
Academy of Sciences on mining technologies;
(2) include activities exploring minimization of
contaminants in mined coal that contribute to
environmental concerns including development and
demonstration of electromagnetic wave imaging ahead of
mining operations;
(3) develop and demonstrate electromagnetic wave
imaging and radar techniques for horizontal drilling in
coal beds in order to increase methane recovery
efficiency, prevent spoilage of domestic coal reserves,
and minimize water disposal associated with methane
extraction; and
(4) expand mining research capabilities at
institutions of higher education.
SEC. 935. COAL AND RELATED TECHNOLOGIES PROGRAM.
(a) In General.--In addition to the programs authorized
under title IV, the Secretary shall conduct a program of
technology research, development, demonstration, and commercial
application for coal and power systems, including programs
tofacilitate production and generation of coal-based power through--
(1) innovations for existing plants;
(2) integrated gasification combined cycle;
(3) advanced combustion systems;
(4) turbines for synthesis gas derived from coal;
(5) carbon capture and sequestration research and
development;
(6) coal-derived transportation fuels and
chemicals;
(7) solid fuels and feedstocks;
(8) advanced coal-related research;
(9) advanced separation technologies; and
(10) a joint project for permeability enhancement
in coals for natural gas production and carbon dioxide
sequestration.
(b) Cost and Performance Goals.--In carrying out programs
authorized by this section, the Secretary shall identify cost
and performance goals for coal-based technologies that would
permit the continued cost-competitive use of coal for
electricity generation, as chemical feedstocks, and as
transportation fuel in 2007, 2015, and the years after 2020. In
establishing such cost and performance goals, the Secretary
shall--
(1) consider activities and studies undertaken to
date by industry in cooperation with the Department in
support of such assessment;
(2) consult with interested entities, including
coal producers, industries using coal, organizations to
promote coal and advanced coal technologies,
environmental organizations, and organizations
representing workers;
(3) not later than 120 days after the date of
enactment of this Act, publish in the Federal Register
proposed draft cost and performance goals for public
comments; and
(4) not later than 180 days after the date of
enactment of this Act and every 4 years thereafter,
submit to Congress a report describing final cost and
performance goals for such technologies that includes a
list of technical milestones as well as an explanation
of how programs authorized in this section will not
duplicate the activities authorized under the Clean
Coal Power Initiative authorized under subtitle A of
title IV.
SEC. 936. COMPLEX WELL TECHNOLOGY TESTING FACILITY.
The Secretary, in coordination with industry leaders in
extended research drilling technology, shall establish a
Complex Well Technology Testing Facility at the Rocky Mountain
Oilfield Testing Center to increase the range of extended
drilling technologies.
SEC. 937. FISCHER-TROPSCH DIESEL FUEL LOAN GUARANTEE PROGRAM.
(a) Definition of Fischer-Tropsch Diesel Fuel.--In this
section, the term ``Fischer-Tropsch diesel fuel'' means diesel
fuel that--
(1) contains less than 10 parts per million sulfur;
and
(2) is produced through the Fischer-Tropsch
liquification process from coal or waste from coal that
was mined in the United States.
(b) Loan Guarantees.--
(1) Establishment of program.--The Secretary of
Energy shall establish a program to provide guarantees
of loans by private lending institutions for the
construction of facilities for the production of
Fischer-Tropsch diesel fuel and commercial byproducts
of that production.
(2) Requirements.--The Secretary may provide a loan
guarantee under paragraph (1) if--
(A) without a loan guarantee, credit is not
available to the applicant under reasonable
terms or conditions sufficient to finance the
construction of a facility described in
paragraph (1);
(B) the prospective earning power of the
applicant and the character and value of the
security pledged provide a reasonable assurance
of repayment of the loan to be guaranteed in
accordance with the terms of the loan; and
(C) the loan bears interest at a rate
determined by the Secretary to be reasonable,
taking into account the current average yield
on outstanding obligations of the United States
with remaining periods of maturity comparable
to the maturity of the loan.
(3) Criteria.--In selecting recipients of loan
guarantees from among applicants, the Secretary shall
give preference to proposals that--
(A) meet all Federal and State permitting
requirements;
(B) are most likely to be successful; and
(C) are located in local markets that have
the greatest need for the facility because of--
(i) the availability of domestic
coal or coal waste for conversion; or
(ii) a projected high level of
demand for Fischer-Tropsch diesel fuel
or other commercial byproducts of the
facility.
(4) Maturity.--A loan guaranteed under paragraph
(1) shall have a maturity of not more than 25 years.
(5) Terms and conditions.--The loan agreement for a
loan guaranteed under paragraph (1) shall provide that
no provision of the loan may be amended or waived
without the consent of the Secretary.
(6) Guarantee fee.--A recipient of a loan guarantee
under paragraph (1) shall pay the Secretary an amount
to be determined by the Secretary to be sufficient to
cover the administrative costs of the Secretary
relating to the loan guarantee.
(7) Full faith and credit.--
(A) In general.--The full faith and credit
of the United States is pledged to payment of
loan guarantees made under this section.
(B) Conclusive evidence.--Any loan
guarantee made by the Secretary under this
section shall be conclusive evidence of the
eligibility of the loan for the guarantee with
respect to principal and interest.
(C) Validity.--The validity of a loan
guarantee shall be incontestable in the hands
of a holder of the guaranteed loan.
(8) Reports.--Until each guaranteed loan under this
section is repaid in full, the Secretary shall annually
submit to Congress a report on the activities of the
Secretary under this section.
(9) Authorization of appropriations.--There are
authorized to be appropriated such sums as are
necessary to carry out this section.
(10) Termination of authority.--The authority of
the Secretary to issue a new loan guarantee under
paragraph (1) terminates on the date that is 5 years
after the date of enactment of this Act.
PART II--ULTRA-DEEPWATER AND UNCONVENTIONAL NATURAL GAS AND OTHER
PETROLEUM RESOURCES
SEC. 941. PROGRAM AUTHORITY.
(a) In General.--The Secretary shall carry out a program
under this part of research, development, demonstration, and
commercial application of technologies for ultra-deepwater and
unconventional natural gas and other petroleum resource
exploration and production, including addressing the technology
challenges for small producers, safe operations, and
environmental mitigation (including reduction of greenhouse gas
emissions and sequestration of carbon).
(b) Program Elements.--The program under this part shall
address the following areas, including improving safety and
minimizing environmental impacts of activities within each
area:
(1) Ultra-deepwater technology, including drilling
to formations in the Outer Continental Shelf to depths
greater than 15,000 feet.
(2) Ultra-deepwater architecture.
(3) Unconventional natural gas and other petroleum
resource exploration and production technology,
including the technology challenges of small producers.
(c) Limitation on Location of Field Activities.--Field
activities under the program under this part shall be carried
out only--
(1) in--
(A) areas in the territorial waters of the
United States not under any Outer Continental
Shelf moratorium as of September 30, 2002;
(B) areas onshore in the United States on
public land administered by the Secretary of
the Interior available for oil and gas leasing,
where consistent with applicable law and land
use plans; and
(C) areas onshore in the United States on
State or private land, subject to applicable
law; and
(2) with the approval of the appropriate Federal or
State land management agency or private land owner.
(d) Research at National Energy Technology Laboratory.--The
Secretary, through the National Energy Technology Laboratory,
shall carry out research complementary to research under
subsection (b).
(e) Consultation With Secretary of the Interior.--In
carrying out this part, the Secretary shall consult regularly
with the Secretary of the Interior.
SEC. 942. ULTRA-DEEPWATER PROGRAM.
(a) In general.--The Secretary shall carry out the
activities under section 941(a), to maximize the use of the
ultra-deepwater natural gas and other petroleum resources of
the United States by increasing the supply of such resources,
through reducing the cost and increasing the efficiency of
exploration for and production of such resources, while
improving safety and minimizing environmental impacts.
(b) Role of the Secretary.--The Secretary shall have
ultimate responsibility for, and oversight of, all aspects of
the program under this section.
(c) Role of the Program Consortium.--
(1) In general.--The Secretary may contract with a
consortium to--
(A) manage awards pursuant to subsection
(f)(4);
(B) make recommendations to the Secretary
for project solicitations;
(C) disburse funds awarded under subsection
(f) as directed by the Secretary in accordance
with the annual plan under subsection (e); and
(D) carry out other activities assigned to
the program consortium by this section.
(2) Limitation.--The Secretary may not assign any
activities to the program consortium except as
specifically authorized under this section.
(3) Conflict of interest.--
(A) Procedures.--The Secretary shall
establish procedures--
(i) to ensure that each board
member, officer, or employee of the
program consortium who is in a
decision-making capacity under
subsection (f)(3) or (4) shall disclose
to the Secretary any financial
interests in, or financial
relationships with, applicants for or
recipients of awards under this
section, including those of his or her
spouse or minor child, unless such
relationships or interests would be
considered to be remote or
inconsequential; and
(ii) to require any board member,
officer, or employee with a financial
relationship or interest disclosed
under clause (i) to recuse himself or
herself from any review under
subsection (f)(3) or oversight under
subsection (f)(4) with respect to such
applicant or recipient.
(B) Failure to comply.--The Secretary may
disqualify an application or revoke an award
under this section if a board member, officer,
or employee has failed to comply with
procedures required under subparagraph (A)(ii).
(d) Selection of the Program Consortium.--
(1) In general.--The Secretary shall select the
program consortium through an open, competitive
process.
(2) Members.--The program consortium may include
corporations, trade associations, institutions of
higher education, National Laboratories, or other
research institutions. After submitting a proposal
under paragraph (4), the program consortium may not add
members without the consent of the Secretary.
(3) Tax status.--The program consortium shall be an
entity that is exempt from tax under section 501(c)(3)
of the Internal Revenue Code of 1986.
(4) Schedule.--Not later than 180 days after the
date of enactment of this Act, the Secretary shall
solicit proposals from eligible consortia to perform
the duties in subsection (c)(1), which shall be
submitted not later than 360 days after the date of
enactment of this Act. The Secretary shall select the
program consortium not later than 18 months after such
date of enactment.
(5) Application.--Applicants shall submit a
proposal including such information as the Secretary
may require. At a minimum, each proposal shall--
(A) list all members of the consortium;
(B) fully describe the structure of the
consortium, including any provisions relating
to intellectual property; and
(C) describe how the applicant would carry
out the activities of the program consortium
under this section.
(6) Eligibility.--To be eligible to be selected as
the program consortium, an applicant must be an entity
whose members collectively have demonstrated
capabilities in planning and managing research,
development, demonstration, and commercial application
programs in natural gas or other petroleum exploration
or production.
(7) Criterion.--The Secretary shall consider the
amount of the fee an applicant proposes to receive
under subsection (g) in selecting a consortium under
this section.
(e) Annual Plan.--
(1) In general.--The program under this section
shall be carried out pursuant to an annual plan
prepared by the Secretary in accordance with paragraph
(2).
(2) Development.--
(A) Solicitation of recommendations.--
Before drafting an annual plan under this
subsection, the Secretary shall solicit
specific written recommendations from the
program consortium for each element to be
addressed in the plan, including those
described in paragraph (4). The Secretary may
request that the program consortium submit its
recommendations in the form of a draft annual
plan.
(B) Submission of recommendations; other
comment.--The Secretary shall submit the
recommendations of the program consortium under
subparagraph (A) to the Ultra-Deepwater
Advisory Committee established under section
945(a) for review, and such Advisory Committee
shall provide to the Secretary written comments
by a date determined by the Secretary. The
Secretary may also solicit comments from any
other experts.
(C) Consultation.--The Secretary shall
consult regularly with the program consortium
throughout the preparation of the annual plan.
(3) Publication.--The Secretary shall transmit to
Congress and publish in the Federal Register the
annualplan, along with any written comments received under paragraph
(2)(A) and (B).
(4) Contents.--The annual plan shall describe the
ongoing and prospective activities of the program under
this section and shall include--
(A) a list of any solicitations for awards
that the Secretary plans to issue to carry out
research, development, demonstration, or
commercial application activities, including
the topics for such work, who would be eligible
to apply, selection criteria, and the duration
of awards; and
(B) a description of the activities
expected of the program consortium to carry out
subsection (f)(4).
(5) Estimates of increased royalty receipts.--The
Secretary, in consultation with the Secretary of the
Interior, shall provide an annual report to Congress
with the President's budget on the estimated cumulative
increase in Federal royalty receipts (if any) resulting
from the implementation of this part. The initial
report under this paragraph shall be submitted in the
first President's budget following the completion of
the first annual plan required under this subsection.
(f) Awards.--
(1) In general.--The Secretary shall make awards to
carry out research, development, demonstration, and
commercial application activities under the program
under this section. The program consortium shall not be
eligible to receive such awards, but members of the
program consortium may receive such awards.
(2) Proposals.--The Secretary shall solicit
proposals for awards under this subsection in such
manner and at such time as the Secretary may prescribe,
in consultation with the program consortium.
(3) Review.--The Secretary shall make awards under
this subsection through a competitive process, which
shall include a review by individuals selected by the
Secretary. Such individuals shall include, for each
application, Federal officials, the program consortium,
and non-Federal experts who are not board members,
officers, or employees of the program consortium or of
a member of the program consortium.
(4) Oversight.--
(A) In general.--The program consortium
shall oversee the implementation of awards
under this subsection, consistent with the
annual plan under subsection (e), including
disbursing funds and monitoring activities
carried out under such awards for compliance
with the terms and conditions of the awards.
(B) Effect.--Nothing in subparagraph (A)
shall limit the authority or responsibility of
the Secretary to oversee awards, or limit the
authority of the Secretary to review or revoke
awards.
(C) Provision of information.--The
Secretary shall provide to the program
consortium the information necessary for the
program consortium to carry out its
responsibilities under this paragraph.
(g) Administrative Costs.--
(1) In general.--To compensate the program
consortium for carrying out its activities under this
section, the Secretary shall provide to the program
consortium funds sufficient to administer the program.
This compensation may include a management fee
consistent with Department of Energy contracting
practices and procedures.
(2) Advance.--The Secretary shall advance funds to
the program consortium upon selection of the
consortium, which shall be deducted from amounts to be
provided under paragraph (1).
(h) Audit.--The Secretary shall retain an independent,
commercial auditor to determine the extent to which funds
provided to the program consortium, and funds provided under
awards made under subsection (f), have been expended in a
manner consistent with the purposes and requirements of this
part. The auditor shall transmit a report annually to the
Secretary, who shall transmit the report to Congress, along
with a plan to remedy any deficiencies cited in the report.
SEC. 943. UNCONVENTIONAL NATURAL GAS AND OTHER PETROLEUM RESOURCES
PROGRAM.
(a) In General.--The Secretary shall carry out activities
under subsection 941(b)(3), to maximize the use of the onshore
unconventional natural gas and other petroleum resources of the
United States, by increasing the supply of such resources,
through reducing the cost and increasing the efficiency of
exploration for and production of such resources, while
improving safety and minimizing environmental impacts.
(b) Awards.--
(1) In general.--The Secretary shall carry out this
section through awards to research consortia made
through an open, competitive process. As a condition of
award of funds, qualified research consortia shall--
(A) demonstrate capability and experience
in unconventional onshore natural gas or other
petroleum research and development;
(B) provide a research plan that
demonstrates how additional natural gas or oil
production will be achieved; and
(C) at the request of the Secretary,
provide technical advice to the Secretary for
the purposes of developing the annual plan
required under subsection (e).
(2) Production potential.--The Secretary shall seek
to ensure that the number and types of awards made
under this subsection have reasonable potential to lead
to additional oil and natural gas production on Federal
lands.
(3) Schedule.--To carry out this subsection, not
later than 180 days after the date of enactment of this
Act, the Secretary shall solicit proposals from
research consortia, which shall be submitted not later
than 360 days after the date of enactment of this Act.
The Secretary shall select the first group of research
consortia to receive awards under this subsection not
later than 18 months after such date of enactment.
(c) Audit.--The Secretary shall retain an independent,
commercial auditor to determine the extent to which funds
provided under awards made under this section have been
expended in a manner consistent with the purposes and
requirements of this part. The auditor shall transmit a report
annually to the Secretary, who shall transmit the report to
Congress, along with a plan to remedy any deficiencies cited in
the report.
(d) Focus Areas for Awards.--
(1) Unconventional resources.--Awards from
allocations under section 949(d)(2) shall focus on
areas including advanced coalbed methane, deep
drilling, natural gas production from tight sands,
natural gas production from gas shales, stranded gas,
innovative exploration and production techniques,
enhanced recovery techniques, and environmental
mitigation of unconventional natural gas and other
petroleum resources exploration and production.
(2) Small producers.--Awards from allocations under
section 949(d)(3) shall be made to consortia consisting
of small producers or organized primarily for the
benefit of small producers, and shall focus on areas
including complex geology involving rapid changes in
the type and quality of the oil and gas reservoirs
across the reservoir; low reservoir pressure;
unconventional natural gas reservoirs in coalbeds, deep
reservoirs, tight sands, or shales; and unconventional
oil reservoirs in tar sands and oil shales.
(e) Annual Plan.--
(1) In general.--The program under this section
shall be carried out pursuant to an annual plan
prepared by the Secretary in accordance with paragraph
(2).
(2) Development.--
(A) Written recommendations.--Before
drafting an annual plan under this subsection,
the Secretary shall solicit specific written
recommendations from the research consortia
receiving awards under subsection (b) and the
Unconventional Resources Technology Advisory
Committee for each element to be addressed in
the plan, including those described in
subparagraph (D).
(B) Consultation.--The Secretary shall
consult regularly with the research consortia
throughout the preparation of the annual plan.
(C) Publication.--The Secretary shall
transmit to Congress and publish in the Federal
Register the annual plan, along with any
written comments received under subparagraph
(A).
(D) Contents.--The annual plan shall
describe the ongoing and prospective activities
under this section and shall include a list of
any solicitations for awards that the Secretary
plans to issue to carry out research,
development, demonstration, or commercial
application activities, including the topics
for such work, who would be eligible to apply,
selection criteria, and the duration of awards.
(3) Estimates of increased royalty receipts.--The
Secretary, in consultation with the Secretary of the
Interior, shall provide an annual report to Congress
with the President's budget on the estimated cumulative
increase in Federal royalty receipts (if any) resulting
from the implementation of this part. The initial
report under this paragraph shall be submitted in the
first President's budget following the completion of
the first annual plan required under this subsection.
(f) Activities by the United States Geological Survey.--The
Secretary of the Interior, through the United States Geological
Survey, shall, where appropriate, carry out programs of long-
term research to complement the programs under this section.
SEC. 944. ADDITIONAL REQUIREMENTS FOR AWARDS.
(a) Demonstration Projects.--An application for an award
under this part for a demonstration project shall describe with
specificity the intended commercial use of the technology to be
demonstrated.
(b) Flexibility in Locating Demonstration Projects.--
Subject to the limitation in section 941(c), a demonstration
project under this part relating to an ultra-deepwater
technology or an ultra-deepwater architecture may be conducted
in deepwater depths.
(c) Intellectual Property Agreements.--If an award under
this part is made to a consortium (other than the program
consortium), the consortium shall provide to the Secretary a
signed contract agreed to by all members of the consortium
describing the rights of each member to intellectual property
used or developed under the award.
(d) Technology Transfer.--2.5 percent of the amount of each
award made under this part shall be designated for technology
transfer and outreach activities under this title.
(e) Cost Sharing Reduction for Independent Producers.--In
applying the cost sharing requirements under section 972 to an
award under this part the Secretary may reduce or eliminate the
non-Federal requirement if the Secretary determines that the
reduction is necessary and appropriate considering the
technological risks involved in the project.
SEC. 945. ADVISORY COMMITTEES.
(a) Ultra-Deepwater Advisory Committee.--
(1) Establishment.--Not later than 270 days after
the date of enactment of this Act, the Secretary shall
establish an advisory committee to be known as the
Ultra-Deepwater Advisory Committee.
(2) Membership.--The advisory committee under this
subsection shall be composed of members appointed by
the Secretary including--
(A) individuals with extensive research
experience or operational knowledge of offshore
natural gas and other petroleum exploration and
production;
(B) individuals broadly representative of
the affected interests in ultra-deepwater
natural gas and other petroleum production,
including interests in environmental protection
and safe operations;
(C) no individuals who are Federal
employees; and
(D) no individuals who are board members,
officers, or employees of the program
consortium.
(3) Duties.--The advisory committee under this
subsection shall--
(A) advise the Secretary on the development
and implementation of programs under this part
related to ultra-deepwater natural gas and
other petroleum resources; and
(B) carry out section 942(e)(2)(B).
(4) Compensation.--A member of the advisory
committee under this subsection shall serve without
compensation but shall receive travel expenses in
accordance with applicable provisions under subchapter
I of chapter 57 of title 5, United States Code.
(b) Unconventional Resources Technology Advisory
Committee.--
(1) Establishment.--Not later than 270 days after
the date of enactment of this Act, the Secretary shall
establish an advisory committee to be known as the
Unconventional Resources Technology Advisory Committee.
(2) Membership.--The advisory committee under this
subsection shall be composed of members appointed by
the Secretary including--
(A) a majority of members who are employees
or representatives of independent producers of
natural gas and other petroleum, including
small producers;
(B) individuals with extensive research
experience or operational knowledge of
unconventional natural gas and other petroleum
resource exploration and production;
(C) individuals broadly representative of
the affected interests in unconventional
natural gas and other petroleum resource
exploration and production, including interests
in environmental protection and safe
operations; and
(D) no individuals who are Federal
employees.
(3) Duties.--The advisory committee under this
subsection shall advise the Secretary on the
development and implementation of activities under this
part related to unconventional natural gas and other
petroleum resources.
(4) Compensation.--A member of the advisory
committee under this subsection shall serve without
compensation but shall receive travel expenses in
accordance with applicable provisions under subchapter
I of chapter 57 of title 5, United States Code.
(c) Prohibition.--No advisory committee established under
this section shall make recommendations on funding awards to
particular consortia or other entities, or for specific
projects.
SEC. 946. LIMITS ON PARTICIPATION.
An entity shall be eligible to receive an award under this
part only if the Secretary finds--
(1) that the entity's participation in the program
under this part would be in the economic interest of
the United States; and
(2) that either--
(A) the entity is a United States-owned
entity organized under the laws of the United
States; or
(B) the entity is organized under the laws
of the United States and has a parent entity
organized under the laws of a country that
affords--
(i) to United States-owned entities
opportunities, comparable to those
afforded to any other entity, to
participate in any cooperative research
venture similar to those authorized
under this part;
(ii) to United States-owned
entities local investment opportunities
comparable to those afforded to any
other entity; and
(iii) adequate and effective
protection for the intellectual
property rights of United States-owned
entities.
SEC. 947. SUNSET.
The authority provided by this part shall terminate on
September 30, 2011.
SEC. 948. DEFINITIONS.
In this part:
(1) Deepwater.--The term ``deepwater'' means a
water depth that is greater than 200 but less than
1,500 meters.
(2) Independent producer of oil or gas.--
(A) In general.--The term ``independent
producer of oil or gas'' means any person that
produces oil or gas other than a person to whom
subsection (c) of section 613A of the Internal
Revenue Code of 1986 does not apply by reason
of paragraph (2) (relating to certain
retailers) or paragraph (4) (relating to
certain refiners) of section 613A(d) of such
Code.
(B) Rules for applying paragraphs (2) and
(4) of section 613a(d).--For purposes of
subparagraph (A), paragraphs (2) and (4) of
section 613A(d) of the Internal Revenue Code of
1986 shall be applied by substituting
``calendar year'' for ``taxable year'' each
place it appears in such paragraphs.
(3) Program consortium.--The term ``program
consortium'' means the consortium selected under
section 942(d).
(4) Remote or inconsequential.--The term ``remote
or inconsequential'' has the meaning given that term in
regulations issued by the Office of Government Ethics
under section 208(b)(2) of title 18, United States
Code.
(5) Small producer.--The term ``small producer''
means an entity organized under the laws of the United
States with production levels of less than 1,000
barrels per day of oil equivalent.
(6) Ultra-deepwater.--The term ``ultra-deepwater''
means a water depth that is equal to or greater than
1,500 meters.
(7) Ultra-deepwater architecture.--The term
``ultra-deepwater architecture'' means the integration
of technologies for the exploration for, or production
of, natural gas or other petroleum resources located at
ultra-deepwater depths.
(8) Ultra-deepwater technology.--The term ``ultra-
deepwater technology'' means a discrete technology that
is specially suited to address 1 or more challenges
associated with the exploration for, or production of,
natural gas or other petroleum resources located at
ultra-deepwater depths.
(9) Unconventional natural gas and other petroleum
resource.--The term ``unconventional natural gas and
other petroleum resource'' means natural gas and other
petroleum resource located onshore in an economically
inaccessible geological formation, including resources
of small producers.
SEC. 949. FUNDING.
(a) In General.--
(1) Oil and gas lease income.--For each of fiscal
years 2004 through 2013, from any Federal royalties,
rents, and bonuses derived from Federal onshore and
offshore oil and gas leases issued under the Outer
Continental Shelf Lands Act and the Mineral Leasing Act
which are deposited in the Treasury, and after
distribution of any such funds as described in
subsection (c), $150,000,000 shall be deposited into
the Ultra-Deepwater and Unconventional Natural Gas and
Other Petroleum Research Fund (in this section referred
to as the Fund). For purposes of this section, the term
``royalties'' excludes proceeds from the sale of
royalty production taken in kind and royalty production
that is transferred under section 27(a)(3) of the Outer
Continental Shelf Lands Act (43 U.S.C. 1353(a)(3)).
(2) Authorization of appropriations.--In addition
to amounts described in paragraph (1), there are
authorized to be appropriated to the Secretary, to be
deposited in the Fund, $50,000,000 for each of the
fiscal years 2004 through 2013, to remain available
until expended.
(b) Obligational Authority.--Monies in the Fund shall be
available to the Secretary for obligation under this part
without fiscal year limitation, to remain available until
expended.
(c) Prior Distributions.--The distributions described in
subsection (a) are those required by law--
(A) to States and to the Reclamation Fund
under the Mineral Leasing Act (30 U.S.C.
191(a)); and
(B) to other funds receiving monies from
Federal oil and gas leasing programs,
including--
(i) any recipients pursuant to
section 8(g) of the Outer Continental
Shelf Lands Act (43 U.S.C. 1337(g));
(ii) the Land and Water
Conservation Fund, pursuant to section
2(c) of the Land and Water Conservation
Fund Act of 1965 (16 U.S.C. 4601-5(c));
(iii) the Historic Preservation
Fund, pursuant to section 108 of the
National Historic Preservation Act (16
U.S.C. 470h); and
(iv) the Secure Energy Reinvestment
Fund.
(d) Allocation.--Amounts obligated from the Fund under this
section in each fiscal year shall be allocated as follows:
(1) 50 percent shall be for activities under
section 942.
(2) 35 percent shall be for activities under
section 943(d)(1).
(3) 10 percent shall be for activities under
section 943(d)(2).
(4) 5 percent shall be for research under section
941(d).
(e) Fund.--There is hereby established in the Treasury of
the United States a separate fund to be known as the ``Ultra-
Deepwater and Unconventional Natural Gas and Other Petroleum
Research Fund''.
Subtitle F--Science
SEC. 951. SCIENCE.
(a) In General.--The following sums are authorized to be
appropriated to the Secretary for research, development,
demonstration, and commercial application activities of the
Office of Science, including activities authorized under this
subtitle, including the amounts authorized under the amendment
made by section 958(c)(2)(C), and including basic energy
sciences, advanced scientific computing research, biological
and environmental research, fusion energy sciences, high energy
physics, nuclear physics, and research analysis and
infrastructure support:
(1) For fiscal year 2004, $3,785,000,000.
(2) For fiscal year 2005, $4,153,000,000.
(3) For fiscal year 2006, $4,618,000,000.
(4) For fiscal year 2007, $5,310,000,000.
(5) For fiscal year 2008, $5,800,000,000.
(b) Allocations.--From amounts authorized under subsection
(a), the following sums are authorized:
(1) For activities of the Fusion Energy Sciences
Program, including activities under sections 952 and
953--
(A) for fiscal year 2004, $335,000,000;
(B) for fiscal year 2005, $349,000,000;
(C) for fiscal year 2006, $362,000,000;
(D) for fiscal year 2007, $377,000,000; and
(E) for fiscal year 2008, $393,000,000.
(2) For the Spallation Neutron Source--
(A) for construction in fiscal year 2004,
$124,600,000;
(B) for construction in fiscal year 2005,
$79,800,000;
(C) for completion of construction in
fiscal year 2006, $41,100,000; and
(D) for other project costs (including
research and development necessary to complete
the project, preoperations costs, and capital
equipment related to construction),
$103,279,000 for the period encompassing fiscal
years 2003 through 2006, to remain available
until expended through September 30, 2006.
(3) For Catalysis Research activities under section
956--
(A) for fiscal year 2004, $33,000,000;
(B) for fiscal year 2005, $35,000,000;
(C) for fiscal year 2006, $36,500,000;
(D) for fiscal year 2007, $38,200,000; and
(E) for fiscal year 2008, $40,100,000.
(4) For Nanoscale Science and Engineering Research
activities under section 957--
(A) for fiscal year 2004, $270,000,000;
(B) for fiscal year 2005, $292,000,000;
(C) for fiscal year 2006, $322,000,000;
(D) for fiscal year 2007, $355,000,000; and
(E) for fiscal year 2008, $390,000,000.
(5) For activities under section 957(c), from the
amounts authorized under paragraph (4) of this
subsection--
(A) for fiscal year 2004, $135,000,000;
(B) for fiscal year 2005, $150,000,000;
(C) for fiscal year 2006, $120,000,000;
(D) for fiscal year 2007, $100,000,000; and
(E) for fiscal year 2008, $125,000,000.
(6) For activities in the Genomes to Life Program
under section 959--
(A) for fiscal year 2004, $100,000,000; and
(B) for fiscal years 2005 through 2008,
such sums as may be necessary.
(7) For activities in the Energy-Water Supply
Program under section 961, $30,000,000 for each of
fiscal years 2004 through 2008.
(c) ITER Construction.--In addition to the funds authorized
under subsection (b)(1), such sums as may be necessary for
costs associated with ITER construction, consistent with
limitations under section 952.
SEC. 952. UNITED STATES PARTICIPATION IN ITER.
(a) In General.--The United States may participate in ITER
in accordance with the provisions of this section.
(b) Agreement.--
(1) In general.--The Secretary is authorized to
negotiate an agreement for United States participation
in ITER.
(2) Contents.--Any agreement for United States
participation in ITER shall, at a minimum--
(A) clearly define the United States
financial contribution to construction and
operating costs;
(B) ensure that the share of ITER's high-
technology components manufactured in the
United States is at least proportionate to the
United States financial contribution to ITER;
(C) ensure that the United States will not
be financially responsible for cost overruns in
components manufactured in other ITER
participating countries;
(D) guarantee the United States full access
to all data generated by ITER;
(E) enable United States researchers to
propose and carry out an equitable share of the
experiments at ITER;
(F) provide the United States with a role
in all collective decisionmaking related to
ITER; and
(G) describe the process for discontinuing
or decommissioning ITER and any United States
role in those processes.
(c) Plan.--The Secretary, in consultation with the Fusion
Energy Sciences Advisory Committee, shall develop a plan for
the participation of United States scientists in ITER that
shall include the United States research agenda for ITER,
methods to evaluate whether ITER is promoting progress toward
making fusion a reliable and affordable source of power, and a
description of how work at ITER will relate to other elements
of the United States fusion program. The Secretary shall
request a review of the plan by the National Academy of
Sciences.
(d) Limitation.--No funds shall be expended for the
construction of ITER until the Secretary has transmitted to
Congress--
(1) the agreement negotiated pursuant to subsection
(b) and 120 days have elapsed since that transmission;
(2) a report describing the management structure of
ITER and providing a fixed dollar estimate of the cost
of United States participation in the construction of
ITER, and 120 days have elapsed since that
transmission;
(3) a report describing how United States
participation in ITER will be funded without reducing
funding for other programs in the Office of Science,
including other fusion programs, and 60 days have
elapsed since that transmission; and
(4) the plan required by subsection (c) (but not
the National Academy of Sciences review of that plan),
and 60 days have elapsed since that transmission.
(e) Alternative to ITER.--If at any time during the
negotiations on ITER, the Secretary determines that
construction and operation of ITER is unlikely or infeasible,
the Secretary shall send to Congress, as part of the budget
request for the following year, a plan for implementing the
domestic burning plasma experiment known as FIRE, including
costs and schedules for such a plan. The Secretary shall refine
such plan in full consultation with the Fusion Energy Sciences
Advisory Committee and shall also transmit such plan to the
National Academy of Sciences for review.
(f) Definitions.--In this section and sections 951(b)(1)
and (c):
(1) Construction.--The term ``construction'' means
the physical construction of the ITER facility, and the
physical construction, purchase, or manufacture of
equipment or components that are specifically designed
for the ITER facility, but does not mean the design of
the facility, equipment, or components.
(2) FIRE.--The term ``FIRE'' means the Fusion
Ignition Research Experiment, the fusion research
experiment for which design work has been supported by
the Department as a possible alternative burning plasma
experiment in the event that ITER fails to move
forward.
(3) ITER.--The term ``ITER'' means the
international burning plasma fusion research project in
which the President announced United States
participation on January 30, 2003.
SEC. 953. PLAN FOR FUSION ENERGY SCIENCES PROGRAM.
(a) Declaration of Policy.--It shall be the policy of the
United States to conduct research, development, demonstration,
and commercial application to provide for the scientific,
engineering, and commercial infrastructure necessary to ensure
that the United States is competitive with other nations in
providing fusion energy for its own needs and the needs of
other nations, including by demonstrating electric power or
hydrogen production for the United States energy grid utilizing
fusion energy at the earliest date possible.
(b) Planning.--
(1) In general.--Not later than 180 days after the
date of enactment of this Act, the Secretary shall
present to Congress a plan, with proposed cost
estimates, budgets, and potential international
partners, for the implementation of the policy
described in subsection (a). The plan shall ensure
that--
(A) existing fusion research facilities are
more fully utilized;
(B) fusion science, technology, theory,
advanced computation, modeling, and simulation
are strengthened;
(C) new magnetic and inertial fusion
research facilities are selected based on
scientific innovation, cost effectiveness, and
their potential to advance the goal of
practical fusion energy at the earliest date
possible, and those that are selected are
funded at a cost-effective rate;
(D) communication of scientific results and
methods between the fusion energy science
community and the broader scientific and
technology communities is improved;
(E) inertial confinement fusion facilities
are utilized to the extent practicable for the
purpose of inertial fusion energy research and
development; and
(F) attractive alternative inertial and
magnetic fusion energy approaches are more
fully explored.
(2) Costs and schedules.--Such plan shall also
address the status of and, to the degree possible,
costs and schedules for--
(A) in coordination with the program under
section 960, the design and implementation of
international or national facilities for the
testing of fusion materials; and
(B) the design and implementation of
international or national facilities for the
testing and development of key fusion
technologies.
SEC. 954. SPALLATION NEUTRON SOURCE.
(a) Definition.--For the purposes of this section, the term
``Spallation Neutron Source'' means Department Project 99-E-
334, Oak Ridge National Laboratory, Oak Ridge, Tennessee.
(b) Report.--The Secretary shall report on the Spallation
Neutron Source as part of the Department's annual budget
submission, including a description of the achievement of
milestones, a comparison of actual costs to estimated costs,
and any changes in estimated project costs or schedule.
(c) Limitations.--The total amount obligated by the
Department, including prior year appropriations, for the
Spallation Neutron Source shall not exceed--
(1) $1,192,700,000 for costs of construction;
(2) $219,000,000 for other project costs; and
(3) $1,411,700,000 for total project cost.
SEC. 955. SUPPORT FOR SCIENCE AND ENERGY FACILITIES AND INFRASTRUCTURE.
(a) Facility and Infrastructure Policy.--The Secretary
shall develop and implement a strategy for facilities and
infrastructure supported primarily from the Office of Science,
the Office of Energy Efficiency and Renewable Energy, the
Office of Fossil Energy, or the Office of Nuclear Energy,
Science, and Technology Programs at all National Laboratories
and single-purpose research facilities. Such strategy shall
provide cost-effective means for--
(1) maintaining existing facilities and
infrastructure, as needed;
(2) closing unneeded facilities;
(3) making facility modifications; and
(4) building new facilities.
(b) Report.--
(1) In general.--The Secretary shall prepare and
transmit, along with the President's budget request to
Congress for fiscal year 2006, a report containing the
strategy developed under subsection (a).
(2) Contents.--For each National Laboratory and
single-purpose research facility, for the facilities
primarily used for science and energy research, such
report shall contain--
(A) the current priority list of proposed
facilities and infrastructure projects,
including cost and schedule requirements;
(B) a current 10-year plan that
demonstrates the reconfiguration of its
facilities and infrastructure to meet its
missions and to address its long-term
operational costs and return on investment;
(C) the total current budget for all
facilities and infrastructure funding; and
(D) the current status of each facility and
infrastructure project compared to the original
baseline cost, schedule, and scope.
SEC. 956. CATALYSIS RESEARCH AND DEVELOPMENT PROGRAM.
(a) Establishment.--The Secretary, through the Office of
Science, shall support a program of research and development in
catalysis science consistent with the Department's statutory
authorities related to research and development. The program
shall include efforts to--
(1) enable catalyst design using combinations of
experimental and mechanistic methodologies coupled with
computational modeling of catalytic reactions at the
molecular level;
(2) develop techniques for high throughput
synthesis, assay, and characterization at nanometer and
subnanometer scales in situ under actual operating
conditions;
(3) synthesize catalysts with specific site
architectures;
(4) conduct research on the use of precious metals
for catalysis; and
(5) translate molecular understanding to the design
of catalytic compounds.
(b) Duties of the Office of Science.--In carrying out the
program under this section, the Director of the Office of
Science shall--
(1) support both individual investigators and
multidisciplinary teams of investigators to pioneer new
approaches in catalytic design;
(2) develop, plan, construct, acquire, share, or
operate special equipment or facilities for the use of
investigators in collaboration with national user
facilities such as nanoscience and engineering centers;
(3) support technology transfer activities to
benefit industry and other users of catalysis science
and engineering; and
(4) coordinate research and development activities
with industry and other Federal agencies.
(c) Triennial Assessment.--The National Academy of Sciences
shall review the catalysis program every 3 years to report on
gains made in the fundamental science of catalysis and its
progress towards developing new fuels for energy production and
material fabrication processes.
SEC. 957. NANOSCALE SCIENCE AND ENGINEERING RESEARCH, DEVELOPMENT,
DEMONSTRATION, AND COMMERCIAL APPLICATION.
(a) Establishment.--The Secretary, acting through the
Office of Science, shall support a program of research,
development, demonstration, and commercial application in
nanoscience and nanoengineering. The program shall include
efforts to further the understanding of the chemistry, physics,
materials science, and engineering of phenomena on the scale of
nanometers and to apply that knowledge to the Department's
mission areas.
(b) Duties of the Office of Science.--In carrying out the
program under this section, the Office of Science shall--
(1) support both individual investigators and teams
of investigators, including multidisciplinary teams;
(2) carry out activities under subsection (c);
(3) support technology transfer activities to
benefit industry and other users of nanoscience and
nanoengineering;
(4) coordinate research and development activities
with other Department programs, industry, and other
Federal agencies;
(5) ensure that societal and ethical concerns will
be addressed as the technology is developed by--
(A) establishing a research program to
identify societal and ethical concerns related
to nanotechnology, and ensuring that the
results of such research are widely
disseminated; and
(B) integrating, insofar as possible,
research on societal and ethical concerns with
nanotechnology research and development; and
(6) ensure that the potential of nanotechnology to
produce or facilitate the production of clean,
inexpensive energy is realized by supporting
nanotechnology energy applications research and
development.
(c) Nanoscience and Nanoengineering Research Centers and
Major Instrumentation.--
(1) In general.--The Secretary shall carry out
projects to develop, plan, construct, acquire, operate,
or support special equipment, instrumentation, or
facilities for investigators conducting research and
development in nanoscience and nanoengineering.
(2) Activities.--Projects under paragraph (1) may
include the measurement of properties at the scale of
nanometers, manipulation at such scales, and the
integration of technologies based on nanoscience or
nanoengineering into bulk materials or other
technologies.
(3) Facilities.--Facilities under paragraph (1) may
include electron microcharacterization facilities,
microlithography facilities, scanning probe facilities,
and related instrumentation.
(4) Collaborations.--The Secretary shall encourage
collaborations among Department programs, institutions
of higher education, laboratories, and industry at
facilities under this subsection.
SEC. 958. ADVANCED SCIENTIFIC COMPUTING FOR ENERGY MISSIONS.
(a) In General.--The Secretary, acting through the Office
of Science, shall support a program to advance the Nation's
computing capability across a diverse set of grand challenge,
computationally based, science problems related to departmental
missions.
(b) Duties of the Office of Science.--In carrying out the
program under this section, the Office of Science shall--
(1) advance basic science through computation by
developing software to solve grand challenge science
problems on new generations of computing platforms in
collaboration with other Department program offices;
(2) enhance the foundations for scientific
computing by developing the basic mathematical and
computing systems software needed to take full
advantage of the computing capabilities of computers
with peak speeds of 100 teraflops or more, some of
which may be unique to the scientific problem of
interest;
(3) enhance national collaboratory and networking
capabilities by developing software to integrate
geographically separated researchers into effective
research teams and to facilitate access to and movement
and analysis of large (petabyte) data sets;
(4) develop and maintain a robust scientific
computing hardware infrastructure to ensure that the
computing resources needed to address departmental
missions are available; and
(5) explore new computing approaches and
technologies that promise to advance scientific
computing, including developments in quantum computing.
(c) High-Performance Computing Act of 1991 Amendments.--The
High-Performance Computing Act of 1991 is amended--
(1) in section 4 (15 U.S.C. 5503)--
(A) in paragraph (3) by striking ``means''
and inserting ``and networking and information
technology mean'', and by striking ``(including
vector supercomputers and large scale parallel
systems)''; and
(B) in paragraph (4), by striking ``packet
switched''; and
(2) in section 203 (15 U.S.C. 5523)--
(A) in subsection (a), by striking all
after ``As part of the'' and inserting
``Networking and Information Technology
Research and Development Program, the Secretary
of Energy shall conduct basic and applied
research in networking and information
technology, with emphasis on supporting
fundamental research in the physical sciences
and engineering, and energy applications;
providing supercomputer access and advanced
communication capabilities and facilities to
scientific researchers; and developing tools
for distributed scientific collaboration.'';
(B) in subsection (b), by striking
``Program'' and inserting ``Networking and
Information Technology Research and Development
Program''; and
(C) by amending subsection (e) to read as
follows:
``(e) Authorization of Appropriations.--There are
authorized to be appropriated to the Secretary of Energy to
carry out the Networking and Information Technology Research
and Development Program such sums as may be necessary for
fiscal years 2004 through 2008.''.
(d) Coordination.--The Secretary shall ensure that the
program under this section is integrated and consistent with--
(1) the Advanced Simulation and Computing Program,
formerly known as the Accelerated Strategic
ComputingInitiative, of the National Nuclear Security Administration;
and
(2) other national efforts related to advanced
scientific computing for science and engineering.
(e) Report.--
(1) In general.--Before undertaking any new
initiative to develop any new advanced architecture for
high-speed computing, the Secretary, through the
Director of the Office of Science, shall transmit a
report to Congress describing--
(A) the expected duration and cost of the
initiative;
(B) the technical milestones the initiative
is designed to achieve;
(C) how institutions of higher education
and private firms will participate in the
initiative; and
(D) why the goals of the initiative could
not be achieved through existing programs.
(2) Limitation.--No funds may be expended on any
initiative described in paragraph (1) until 30 days
after the report required by that paragraph is
transmitted to Congress.
SEC. 959. GENOMES TO LIFE PROGRAM.
(a) Program.--
(1) Establishment.--The Secretary shall establish a
research, development, and demonstration program in
genetics, protein science, and computational biology to
support the energy, national security, and
environmental mission of the Department.
(2) Grants.--The program shall support individual
investigators and multidisciplinary teams of
investigators through competitive, merit-reviewed
grants.
(3) Consultation.--In carrying out the program, the
Secretary shall consult with other Federal agencies
that conduct genetic and protein research.
(b) Goals.--The program shall have the goal of developing
technologies and methods based on the biological functions of
genomes, microbes, and plants that--
(1) can facilitate the production of fuels,
including hydrogen;
(2) convert carbon dioxide to organic carbon;
(3) improve national security and combat terrorism;
(4) detoxify soils and water at Department
facilities contaminated with heavy metals and
radiological materials; and
(5) address other Department missions as identified
by the Secretary.
(c) Plan.--
(1) Development of plan.--Not later than 1 year
after the date of enactment of this Act, the Secretary
shall prepare and transmit to Congress a research plan
describing how the program authorized pursuant to this
section will be undertaken to accomplish the program
goals established in subsection (b).
(2) Review of plan.--The Secretary shall contract
with the National Academy of Sciences to review the
research plan developed under this subsection. The
Secretary shall transmit the review to Congress not
later than 18 months after transmittal of the research
plan under paragraph (1), along with the Secretary's
response to the recommendations contained in the
review.
(d) Genomes to Life User Facilities and Ancillary
Equipment.--
(1) In general.--Within the funds authorized to be
appropriated pursuant to this Act, the amounts
specified under section 951(b)(6) shall, subject to
appropriations, be available for projects to develop,
plan, construct, acquire, or operate special equipment,
instrumentation, or facilities for investigators
conducting research, development, demonstration, and
commercial application in systems biology and
proteomics and associated biological disciplines.
(2) Facilities.--Facilities under paragraph (1) may
include facilities, equipment, or instrumentation for--
(A) the production and characterization of
proteins;
(B) whole proteome analysis;
(C) characterization and imaging of
molecular machines; and
(D) analysis and modeling of cellular
systems.
(3) Collaborations.--The Secretary shall encourage
collaborations among universities, laboratories, and
industry at facilities under this subsection. All
facilities under this subsection shall have a specific
mission of technology transfer to other institutions.
(e) Prohibition on Biomedical and Human Cell and Human
Subject Research.--
(1) No biomedical research.--In carrying out the
program under this section, the Secretary shall not
conduct biomedical research.
(2) Limitations.--Nothing in this section shall
authorize the Secretary to conduct any research or
demonstrations--
(A) on human cells or human subjects; or
(B) designed to have direct application
with respect to human cells or human subjects.
SEC. 960. FISSION AND FUSION ENERGY MATERIALS RESEARCH PROGRAM.
In the President's fiscal year 2006 budget request, the
Secretary shall establish a research and development program on
material science issues presented by advanced fission reactors
and the Department's fusion energy program. The program shall
develop a catalog of material properties required for these
applications, develop theoretical models for materials
possessing the required properties, benchmark models against
existing data, and develop a roadmap to guide further research
and development in this area.
SEC. 961. ENERGY-WATER SUPPLY PROGRAM.
(a) Establishment.--There is established within the
Department the Energy-Water Supply Program, to study energy-
related and certain other issues associated with the supply of
drinking water and operation of community water systems and to
study water supply issues related to energy.
(b) Definitions.--For the purposes of this section:
(1) Administrator.--The term ``Administrator''
means the Administrator of the Environmental Protection
Agency.
(2) Agency.--The term ``Agency'' means the
Environmental Protection Agency.
(3) Foundation.--The term ``Foundation'' means the
American Water Works Association Research Foundation.
(4) Indian tribe.--The term ``Indian tribe'' has
the meaning given the term in section 4 of the Indian
Self-Determination and Education Assistance Act (25
U.S.C. 450b).
(5) Program.--The term ``Program'' means the
Energy-Water Supply Program established by this
section.
(c) Program Areas.--The Program shall develop methods,
means, procedures, equipment, and improved technologies
relating to--
(1) the arsenic removal program under subsection
(d);
(2) the desalination program under subsection (e);
and
(3) the water and energy sustainability program
under subsection (f).
(d) Arsenic Removal Program.--
(1) In general.--As soon as practicable after the
date of enactment of this Act, the Secretary, in
coordination with the Administrator and in partnership
with the Foundation, shall utilize the facilities,
institutions, and relationships established in the
Consolidated Appropriations Resolution, 2003 as
described in Senate Report 107-220 to carry out a
research program to provide innovative methods and
means for removal of arsenic.
(2) Required evaluations.--The program shall, to
the maximum extent practicable, evaluate the means of--
(A) reducing energy costs incurred in using
arsenic removal technologies;
(B) minimizing materials, operating, and
maintenance costs; and
(C) minimizing any quantities of waste
(especially hazardous waste) that result from
use of arsenic removal technologies.
(3) Peer review.--Where applicable and reasonably
available, projects undertaken under this subsection
shall be peer-reviewed.
(4) Community water systems.--In carrying out the
program under this subsection, the Secretary, in
coordination with the Administrator, shall--
(A) select projects involving a
geographically and hydrologically diverse group
of community water systems (as defined in
section 1003 of the Public Health Service Act
(42 U.S.C. 300)) and water chemistries, that
have experienced technical or economic
difficulties in providing drinking water with
levels of arsenic at 10 parts-per-billion or
lower, which projects shall be designed to
develop innovative methods and means to deliver
drinking water that contains less than 10 parts
per billion of arsenic; and
(B) provide not less than 40 percent of all
funds spent pursuant to this subsection to
address the needs of, and in collaboration
with, rural communities or Indian tribes.
(5) Cost effectiveness.--The Foundation shall
create methods for determining cost effectiveness of
arsenic removal technologies used in the program.
(6) Education, training, and technology.--The
Foundation shall include education, training, and
technology transfer as part of the program.
(7) Coordination.--The Secretary shall consult with
the Administrator to ensure that all activities
conducted under the program are coordinated with the
Agency and do not duplicate other programs in the
Agency and other Federal agencies, State programs, and
academia.
(8) Reports.--Not later than 1 year after the date
of commencement of the program under this subsection,
and once every year thereafter, the Secretary shall
submit to the Committee on Energy and Commerce of the
House of Representatives and the Committee on
Environment and Public Works and the Committee on
Energy and Natural Resources of the Senate a report on
the results of the program under this subsection.
(e) Desalination Program.--
(1) In general.--The Secretary, in cooperation with
the Commissioner of Reclamation of the Department of
the Interior, shall carry out a program to conduct
research and develop methods and means for desalination
in accordance with the desalination technology progress
plan developed under title II of the Energy and Water
Development Appropriations Act, 2002 (115 Stat. 498),
and described in Senate Report 107-39 under the heading
``water and related resources'' in the ``Bureau of
Reclamation'' section.
(2) Requirements.--The desalination program shall--
(A) use the resources of the Department and
the Department of the Interior that were
involved in the development of the 2003
National Desalination and Water Purification
Technology Roadmap for next-generation
desalination technology;
(B) focus on technologies that are
appropriate for use in desalinating brackish
groundwater, drinking water, wastewater and
other saline water supplies, or disposal of
residual brine or salt; and
(C) consider the use of renewable energy
sources.
(3) Construction projects.--Funds made available to
carry out this subsection may be used for construction
projects, including completion of the National
Desalination Research Center for brackish groundwater
and ongoing operational costs of this facility.
(4) Steering committee.--The Secretary and the
Commissioner of Reclamation of the Department of the
Interior shall jointly establish a steering committee
for activities conducted under this subsection. The
steering committee shall be jointly chaired by 1
representative from the program and 1 representative
from the Bureau of Reclamation.
(f) Water and Energy Sustainability Program.--
(1) In general.--The Secretary shall develop a
program to identify methods, means, procedures,
equipment, and improved technologies necessary to
ensure that sufficient quantities of water are
available to meet energy needs and sufficient energy is
available to meet water needs.
(2) Assessments.--In order to acquire information
and avoid duplication, the Secretary shall work in
collaboration with the Secretary of the Interior, the
Army Corps of Engineers, the Administrator, the
Secretary of Commerce, the Secretary of Defense,
relevant State agencies, nongovernmental organizations,
and academia, to assess--
(A) future water resources needed to
support energy development and production
within the United States including water used
for hydropower, and production of, or
electricity generation by, hydrogen, biomass,
fossil fuels, and nuclear fuel;
(B) future energy resources needed to
support water purification and wastewater
treatment, including desalination and water
conveyance;
(C) use of impaired and nontraditional
water supplies for energy production other than
oil and gas extraction;
(D) technology and programs for improving
water use efficiency; and
(E) technologies to reduce water use in
energy development and production.
(3) Roadmap; tools.--The Secretary shall--
(A) develop a program plan and technology
development roadmap for the Water and Energy
Sustainability Program to identify scientific
and technical requirements and activities that
are required to support planning for energy
sustainability under current and potential
future conditions of water availability, use of
impaired water for energy production and other
uses, and reduction of water use in energy
development and production;
(B) develop tools for national and local
energy and water sustainability planning,
including numerical models, decision analysis
tools, economic analysis tools, databases, and
planning methodologies and strategies;
(C) implement at least 3 planning projects
involving energy development or production that
use the tools described in subparagraph (B) and
assess the viability of those tools at the
scale of river basins with at least 1
demonstration involving an international
border; and
(D) transfer those tools to other Federal
agencies, State agencies, nonprofit
organizations, industry, and academia.
(4) Report.--Not later than 1 year after the date
of enactment of this Act, the Secretary shall submit to
Congress a report on the Water and Energy
Sustainability Program that--
(A) includes the results of the assessment
under paragraph (2) and the program plan and
technology development roadmap; and
(B) identifies policy, legal, and
institutional issues related to water and
energy sustainability.
SEC. 962. NITROGEN FIXATION.
The Secretary, acting through the Office of Science, shall
support a program of research, development, demonstration, and
commercial application on biological nitrogen fixation,
including plant genomics research relevant to the development
of commercial crop varieties with enhanced nitrogen fixation
efficiency and ability.
Subtitle G--Energy and Environment
SEC. 964. UNITED STATES-MEXICO ENERGY TECHNOLOGY COOPERATION.
(a) Program.--The Secretary shall establish a research,
development, demonstration, and commercial application program
to be carried out in collaboration with entities in Mexico and
the United States to promote energy efficient, environmentally
sound economic development along the United States-Mexico
border that minimizes public health risks from industrial
activities in the border region.
(b) Program Management.--The program under subsection (a)
shall be managed by the Department of Energy Carlsbad
Environmental Management Field Office.
(c) Technology Transfer.--In carrying out projects and
activities under this section, the Secretary shall assess the
applicability of technology developed under the Environmental
Management Science Program of the Department.
(d) Intellectual Property.--In carrying out this section,
the Secretary shall comply with the requirements of any
agreement entered into between the United States and Mexico
regarding intellectual property protection.
(e) Authorization of Appropriations.--The following sums
are authorized to be appropriated to the Secretary to carry out
activities under this section:
(1) For each of fiscal years 2004 and 2005,
$5,000,000.
(2) For each of fiscal years 2006, 2007, and 2008,
$6,000,000.
SEC. 965. WESTERN HEMISPHERE ENERGY COOPERATION.
(a) Program.--The Secretary shall carry out a program to
promote cooperation on energy issues with Western Hemisphere
countries.
(b) Activities.--Under the program, the Secretary shall
fund activities to work with Western Hemisphere countries to--
(1) assist the countries in formulating and
adopting changes in economic policies and other
policies to--
(A) increase the production of energy
supplies; and
(B) improve energy efficiency; and
(2) assist in the development and transfer of
energy supply and efficiency technologies that would
have a beneficial impact on world energy markets.
(c) University Participation.--To the extent practicable,
the Secretary shall carry out the program under this section
with the participation of universities so as to take advantage
of the acceptance of universities by Western Hemisphere
countries as sources of unbiased technical and policy expertise
when assisting the Secretary in--
(1) evaluating new technologies;
(2) resolving technical issues;
(3) working with those countries in the development
of new policies; and
(4) training policymakers, particularly in the case
of universities that involve the participation of
minority students, such as Hispanic-serving
institutions and Historically Black Colleges and
Universities.
(d) Authorization of Appropriations.--There are authorized
to be appropriated to carry out this section--
(1) $8,000,000 for fiscal year 2004;
(2) $10,000,000 for fiscal year 2005;
(3) $13,000,000 for fiscal year 2006;
(4) $16,000,000 for fiscal year 2007; and
(5) $19,000,000 for fiscal year 2008.
SEC. 966. WASTE REDUCTION AND USE OF ALTERNATIVES.
(a) Grant Authority.--The Secretary may make a single grant
to a qualified institution to examine and develop the
feasibility of burning post-consumer carpet in cement kilns as
an alternative energy source. The purposes of the grant shall
include determining--
(1) how post-consumer carpet can be burned without
disrupting kiln operations;
(2) the extent to which overall kiln emissions may
be reduced;
(3) the emissions of air pollutants and other
relevant environmental impacts; and
(4) how this process provides benefits to both
cement kiln operations and carpet suppliers.
(b) Qualified Institution.--For the purposes of subsection
(a), a qualified institution is a research-intensive
institution of higher education with demonstrated expertise in
the fields of fiber recycling and logistical modeling of carpet
waste collection and preparation.
(c) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary for carrying out this
section $500,000.
SEC. 967. REPORT ON FUEL CELL TEST CENTER.
(a) Report.--Not later than 1 year after the date of
enactment of this Act, the Secretary shall transmit to Congress
a report on the results of a study of the establishment of a
test center for next-generation fuel cells at an institution of
higher education that has available a continuous source of
hydrogen and access to the electric transmission grid. Such
report shall include a conceptual design for such test center
and a projection of the costs of establishing the test center.
(b) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary for carrying out this
section $500,000.
SEC. 968. ARCTIC ENGINEERING RESEARCH CENTER.
(a) In General.--The Secretary of Energy (referred to in
this section as the ``Secretary'') in consultation with the
Secretary of Transportation and the United States Arctic
Research Commission shall provide annual grants to a university
located adjacent to the Arctic Energy Office of the Department
of Energy, to establish and operate a university research
center to be headquartered in Fairbanks and to be known as the
``Arctic Engineering Research Center'' (referred to in this
section as the ``Center'').
(b) Purpose.--The purpose of the Center shall be to conduct
research on, and develop improved methods of, construction and
use of materials to improve the overall performance of roads,
bridges, residential, commercial, and industrial structures,
and other infrastructure in the Arctic region, with an emphasis
on developing--
(1) new construction techniques for roads, bridges,
rail, and related transportation infrastructure and
residential, commercial, and industrial infrastructure
that are capable of withstanding the Arctic environment
and using limited energy resources as efficiently as
possible;
(2) technologies and procedures for increasing
road, bridge, rail, and related transportation
infrastructure and residential, commercial, and
industrial infrastructure safety, reliability, and
integrity in the Arctic region;
(3) new materials and improving the performance and
energy efficiency of existing materials for the
construction of roads, bridges, rail, and related
transportation infrastructure and residential,
commercial, and industrial infrastructure in the Arctic
region; and
(4) recommendations for new local, regional, and
State permitting and building codes to ensure
transportation and building safety and efficient energy
use when constructing, using, and occupying such
infrastructure in the Arctic region.
(c) Objectives.--The Center shall carry out--
(1) basic and applied research in the subjects
described in subsection (b), the products of which
shall be judged by peers or other experts in the field
to advance the body of knowledge in road, bridge, rail,
and infrastructure engineering in the Arctic region;
and
(2) an ongoing program of technology transfer that
makes research results available to potential users in
a form that can be implemented.
(d) Amount of Grant.--For each of fiscal years 2004 through
2009, the Secretary shall provide a grant in the amount of
$3,000,000 to the institution specified in subsection (a) to
carry out this section.
(e) Authorization of Appropriations.--There are authorized
to be appropriated to carry out this section $3,000,000 for
each of fiscal years 2004 through 2009.
SEC. 969. BARROW GEOPHYSICAL RESEARCH FACILITY.
(a) Establishment.--The Secretary of Commerce, in
consultation with the Secretaries of Energy and the Interior,
the Director of the National Science Foundation, and the
Administrator of the Environmental Protection Agency, shall
establish a joint research facility in Barrow, Alaska, to be
known as the ``Barrow Geophysical Research Facility'', to
support scientific research activities in the Arctic.
(b) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretaries of Commerce, Energy, and
the Interior, the Director of the National Science Foundation,
and the Administrator of the Environmental Protection Agency
for the planning, design, construction, and support of the
Barrow Geophysical Research Facility $61,000,000.
SEC. 970. WESTERN MICHIGAN DEMONSTRATION PROJECT.
The Administrator of the Environmental Protection Agency,
in consultation with the State of Michigan and affected local
officials, shall conduct a demonstration project to address the
effect of transported ozone and ozone precursors in
Southwestern Michigan. The demonstration program shall address
projected nonattainment areas in Southwestern Michigan that
include counties with design values for ozone of less than .095
based on years 2000 to 2002 or the most current 3-year period
of air quality data. The Administrator shall assess any
difficulties such areas may experience in meeting the 8-hour
national ambient air quality standard for ozone due to the
effect of transported ozone or ozone precursors into the areas.
The Administrator shall work with State and local officials to
determine the extent of ozone and ozone precursor transport, to
assess alternatives to achieve compliance with the 8-hour
standard apart from local controls, and to determine the
timeframe in which such compliance could take place. The
Administrator shall complete this demonstration project no
later than 2 years after the date of enactment of this section
and shall not impose any requirement or sanction that might
otherwise apply during the pendency of the demonstration
project.
Subtitle H--Management
SEC. 971. AVAILABILITY OF FUNDS.
Funds authorized to be appropriated to the Department under
this title shall remain available until expended.
SEC. 972. COST SHARING.
(a) Research and Development.--Except as otherwise provided
in this title, for research and development programs carried
out under this title the Secretary shall require a commitment
from non-Federal sources of at least 20 percent of the cost of
the project. The Secretary may reduce or eliminate the non-
Federal requirement under this subsection if the Secretary
determines that the research and development is of a basic or
fundamental nature or involves technical analyses or
educational activities.
(b) Demonstration and Commercial Application.--Except as
otherwise provided in this title, the Secretary shall require
at least 50 percent of the costs directly and specifically
related to any demonstration or commercial application project
under this title to be provided from non-Federal sources. The
Secretary may reduce the non-Federal requirement under this
subsection if the Secretary determines that the reduction is
necessary and appropriate considering the technological risks
involved in the project and is necessary to meet the objectives
of this title.
(c) Calculation of Amount.--In calculating the amount of
the non-Federal commitment under subsection (a) or (b), the
Secretary may include personnel, services, equipment, and other
resources.
(d) Size of Non-Federal Share.--The Secretary may consider
the size of the non-Federal share in selecting projects.
SEC. 973. MERIT REVIEW OF PROPOSALS.
Awards of funds authorized under this title shall be made
only after an impartial review of the scientific and technical
merit of the proposals for such awards has been carried out by
or for the Department.
SEC. 974. EXTERNAL TECHNICAL REVIEW OF DEPARTMENTAL PROGRAMS.
(a) National Energy Research and Development Advisory
Boards.--
(1) In general.--The Secretary shall establish 1 or
more advisory boards to review Department research,
development, demonstration, and commercial application
programs in energy efficiency, renewable energy,
nuclear energy, and fossil energy.
(2) Existing advisory boards.--The Secretary may
designate an existing advisory board within the
Department to fulfill the responsibilities of an
advisory board under this subsection, and may enter
into appropriate arrangements with the National Academy
of Sciences to establish such an advisory board.
(b) Office of Science Advisory Committees.--
(1) Utilization of existing committees.--The
Secretary shall continue to use the scientific program
advisory committees chartered under the Federal
Advisory Committee Act (5 U.S.C. App.) by the Office of
Science to oversee research and development programs
under that Office.
(2) Science advisory committee.--
(A) Establishment.--There shall be in the
Office of Science a Science Advisory Committee
that includes the chairs of each of the
advisory committees described in paragraph (1).
(B) Responsibilities.--The Science Advisory
Committee shall--
(i) serve as the science advisor to
the Director of the Office of Science;
(ii) advise the Director with
respect to the well-being and
management of the National Laboratories
and single-purpose research facilities;
(iii) advise the Director with
respect to education and workforce
training activities required for
effective short-term and long-term
basic and applied research activities
of the Office of Science; and
(iv) advise the Director with
respect to the well being of the
university research programs supported
by the Office of Science.
(c) Membership.--Each advisory board under this section
shall consist of persons with appropriate expertise
representing a diverse range of interests.
(d) Meetings and Purposes.--Each advisory board under this
section shall meet at least semiannually to review and advise
on the progress made by the respective research, development,
demonstration, and commercial application program or programs.
The advisory board shall also review the measurable cost and
performance-based goals for such programs as established under
section 901(b), and the progress on meeting such goals.
(e) Periodic Reviews and Assessments.--The Secretary shall
enter into appropriate arrangements with the National Academy
of Sciences to conduct periodic reviews and assessments of the
programs authorized by this title, the measurable cost and
performance-based goals for such programs as established under
section 901(b), if any, and the progress on meeting such goals.
Such reviews and assessments shall be conducted every 5 years,
or more often as the Secretary considers necessary, and the
Secretary shall transmit to Congress reports containing the
results of all such reviews and assessments.
SEC. 975. IMPROVED COORDINATION OF TECHNOLOGY TRANSFER ACTIVITIES.
(a) Technology Transfer Coordinator.--The Secretary shall
designate a Technology Transfer Coordinator to perform
oversight of and policy development for technology transfer
activities at the Department. The Technology Transfer
Coordinator shall--
(1) coordinate the activities of the Technology
Transfer Working Group;
(2) oversee the expenditure of funds allocated to
the Technology Transfer Working Group; and
(3) coordinate with each technology partnership
ombudsman appointed under section 11 of the Technology
Transfer Commercialization Act of 2000 (42 U.S.C.
7261c).
(b) Technology Transfer Working Group.--The Secretary shall
establish a Technology Transfer Working Group, which shall
consist of representatives of the National Laboratories and
single-purpose research facilities, to--
(1) coordinate technology transfer activities
occurring at National Laboratories and single-purpose
research facilities;
(2) exchange information about technology transfer
practices, including alternative approaches to
resolution of disputes involving intellectual property
rights and other technology transfer matters; and
(3) develop and disseminate to the public and
prospective technology partners information about
opportunities and procedures for technology transfer
with the Department, including those related to
alternative approaches to resolution of disputes
involving intellectual property rights and other
technology transfer matters.
(c) Technology Transfer Responsibility.--Nothing in this
section shall affect the technology transfer responsibilities
of Federal employees under the Stevenson-Wydler Technology
Innovation Act of 1980 (15 U.S.C. 3701 et seq.).
SEC. 976. FEDERAL LABORATORY EDUCATIONAL PARTNERS.
(a) Distribution of Royalties Received by Federal
Agencies.--Section 14(a)(1)(B)(v) of the Stevenson-Wydler
Technology Innovation Act of 1980 (15 U.S.C.
3710c(a)(1)(B)(v)), is amended to read as follows:
``(v) for scientific research and
development and for educational assistance and
other purposes consistent with the missions and
objectives of the agency and the laboratory.''.
(b) Cooperative Research and Development Agreements.--
Section 12(b)(5)(C) of the Stevenson-Wydler Technology
Innovation Act of 1980 (15 U.S.C. 3710a(b)(5)(C)) is amended to
read as follows:
``(C) for scientific research and development and
for educational assistance consistent with the missions
and objectives of the agency and the laboratory.''.
SEC. 977. INTERAGENCY COOPERATION.
The Secretary shall enter into discussions with the
Administrator of the National Aeronautics and Space
Administration with the goal of reaching an interagency working
agreement between the 2 agencies that would make the National
Aeronautics and Space Administration's expertise in energy,
gained from its existing and planned programs, more readily
available to the relevant research, development, demonstration,
and commercial applications programs of the Department.
Technologies to be discussed should include the National
Aeronautics and Space Administration's modeling, research,
development, testing, and evaluation of new energy
technologies, including solar, wind, fuel cells, and hydrogen
storage and distribution.
SEC. 978. TECHNOLOGY INFRASTRUCTURE PROGRAM.
(a) Establishment.--The Secretary shall establish a
Technology Infrastructure Program in accordance with this
section.
(b) Purpose.--The purpose of the Technology Infrastructure
Program shall be to improve the ability of National
Laboratories and single-purpose research facilities to support
departmental missions by--
(1) stimulating the development of technology
clusters that can support departmental missions at the
National Laboratories or single-purpose research
facilities;
(2) improving the ability of National Laboratories
and single-purpose research facilities to leverage and
benefit from commercial research, technology, products,
processes, and services; and
(3) encouraging the exchange of scientific and
technological expertise between National Laboratories
or single-purpose research facilities and entities that
can support departmental missions at the National
Laboratories or single-purpose research facilities,
such as institutions of higher education; technology-
related business concerns; nonprofit institutions; and
agencies of State, tribal, or local governments.
(c) Projects.--The Secretary shall authorize the Director
of each National Laboratory or single-purpose research facility
to implement the Technology Infrastructure Program at such
National Laboratory or facility through projects that meet the
requirements of subsections (d) and (e).
(d) Program Requirements.--Each project funded under this
section shall meet the following requirements:
(1) Each project shall include at least 1 of each
of the following entities: A business; an institution
of higher education; a nonprofit institution; and an
agency of a State, local, or tribal government.
(2) Not less than 50 percent of the costs of each
project funded under this section shall be provided
from non-Federal sources. The calculation of costs paid
by the non-Federal sources to a project shall include
cash, personnel, services, equipment, and other
resources expended on the project after start of the
project. Independent research and development expenses
of Government contractors that qualify for
reimbursement under section 31.205-18(e) of the Federal
Acquisition Regulation issued pursuant to section
25(c)(1) of the Office of Federal Procurement Policy
Act (41 U.S.C. 421(c)(1)) may be credited toward costs
paid by non-Federal sources to a project, if the
expenses meet the other requirements of this section.
(3) All projects under this section shall be
competitively selected using procedures determined by
the Secretary.
(4) Any participant that receives funds under this
section may use generally accepted accounting
principles for maintaining accounts, books, and records
relating to the project.
(5) No Federal funds shall be made available under
this section for construction or any project for more
than 5 years.
(e) Selection Criteria.--
(1) In general.--The Secretary shall allocate funds
under this section only if the Director of the National
Laboratory or single-purpose research facility managing
the project determines that the project is likely to
improve the ability of the National Laboratory or
single-purpose research facility to achieve technical
success in meeting departmental missions.
(2) Criteria.--The Secretary shall consider the
following criteria in selecting a project to receive
Federal funds:
(A) The potential of the project to promote
the development of a commercially sustainable
technology cluster following the period of
Department investment, which will derive most
of the demand for its products or services from
the private sector, and which will support
departmental missions at the participating
National Laboratory or single-purpose research
facility.
(B) The potential of the project to promote
the use of commercial research, technology,
products, processes, and services by the
participating National Laboratory or single-
purpose research facility to achieve its
mission or the commercial development of
technological innovations made at the
participating National Laboratory or single-
purpose research facility.
(C) The extent to which the project
involves a wide variety and number of
institutions of higher education, nonprofit
institutions, and technology-related business
concerns that can support the missions of the
participating National Laboratory or single-
purpose research facility and that will make
substantive contributions to achieving the
goals of the project.
(D) The extent to which the project focuses
on promoting the development of technology-
related business concerns that are small
businesses or involves such small businesses
substantively in the project.
(E) Such other criteria as the Secretary
determines to be appropriate.
(f) Allocation.--In allocating funds for projects approved
under this section, the Secretary shall provide--
(1) the Federal share of the project costs; and
(2) additional funds to the National Laboratory or
single-purpose research facility managing the project
to permit the National Laboratory or single-purpose
research facility to carry out activities relating to
the project, and to coordinate such activities with the
project.
(g) Report to Congress.--Not later than July 1, 2006, the
Secretary shall report to Congress on whether the Technology
Infrastructure Program should be continued and, if so, how the
program should be managed.
(h) Definitions.--In this section:
(1) Technology cluster.--The term ``technology
cluster'' means a concentration of technology-related
business concerns, institutions of higher education, or
nonprofit institutions that reinforce each other's
performance in the areas of technology development
through formal or informal relationships.
(2) Technology-related business concern.--The term
``technology-related business concern'' means a for-
profit corporation, company, association, firm,
partnership, or small business concern that conducts
scientific or engineering research; develops new
technologies; manufactures products based on new
technologies; or performs technological services.
(i) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary for activities under this
section $10,000,000 for each of fiscal years 2004, 2005, and
2006.
SEC. 979. REPROGRAMMING.
(a) Distribution Report.--Not later than 60 days after the
date of the enactment of an Act appropriating amounts
authorized under this title, the Secretary shall transmit to
the appropriate authorizing committees of Congress a report
explaining how such amounts will be distributed among the
authorizations contained in this title.
(b) Prohibition.--
(1) In general.--No amount identified under
subsection (a) shall be reprogrammed if such
reprogramming would result in an obligation which
changes an individual distribution required to be
reported under subsection (a) by more than 5 percent
unless the Secretary has transmitted to the appropriate
authorizing committees of Congress a report described
in subsection (c) and a period of 30 days has elapsed
after such committees receive the report.
(2) Computation.--In the computation of the 30-day
period described in paragraph (1), there shall be
excluded any day on which either House of Congress is
not in session because of an adjournment of more than 3
days to a day certain.
(c) Reprogramming Report.--A report referred to in
subsection (b)(1) shall contain a full and complete statement
of the action proposed to be taken and the facts and
circumstances relied on in support of the proposed action.
SEC. 980. CONSTRUCTION WITH OTHER LAWS.
Except as otherwise provided in this title, the Secretary
shall carry out the research, development, demonstration, and
commercial application programs, projects, and activities
authorized by this title in accordance with the applicable
provisions of the Atomic Energy Act of 1954 (42 U.S.C. 2011 et
seq.), the Federal Nonnuclear Research and Development Act of
1974 (42 U.S.C. 5901 et seq.), the Energy Policy Act of 1992
(42 U.S.C. 13201 et seq.), the Stevenson-Wydler Technology
Innovation Act of 1980 (15 U.S.C. 3701 et seq.), chapter 18 of
title 35, United States Code (commonly referred to as the Bayh-
Dole Act), and any other Act under which the Secretary is
authorized to carry out such activities.
SEC. 981. REPORT ON RESEARCH AND DEVELOPMENT PROGRAM EVALUATION
METHODOLOGIES.
Not later than 180 days after the date of enactment of this
Act, the Secretary shall enter into appropriate arrangements
with the National Academy of Sciences to investigate and report
on the scientific and technical merits of any evaluation
methodology currently in use or proposed for use in relation to
the scientific and technical programs of the Department by the
Secretary or other Federal official. Not later than 6 months
after receiving the report of the National Academy, the
Secretary shall submit such report to Congress, along with any
other views or plans of the Secretary with respect to the
future use of such evaluation methodology.
SEC. 982. DEPARTMENT OF ENERGY SCIENCE AND TECHNOLOGY SCHOLARSHIP
PROGRAM.
(a) Establishment of Program.--
(1) In general.--The Secretary is authorized to
establish a Department of Energy Science and Technology
Scholarship Program to award scholarships to
individuals that is designed to recruit and prepare
students for careers in the Department.
(2) Competitive process.--Individuals shall be
selected to receive scholarships under this section
through a competitive process primarily on the basis of
academic merit, with consideration given to financial
need and the goal of promoting the participation of
individuals identified in section 33 or 34 of the
Science and Engineering Equal Opportunities Act (42
U.S.C. 1885a or 1885b).
(3) Service agreements.--To carry out the Program
the Secretary shall enter into contractual agreements
with individuals selected under paragraph (2) under
which the individuals agree to serve as full-time
employees of the Department, for the period described
in subsection (f)(1), in positions needed by the
Department and for which the individuals are qualified,
in exchange for receiving a scholarship.
(b) Scholarship Eligibility.--In order to be eligible to
participate in the Program, an individual must--
(1) be enrolled or accepted for enrollment as a
full-time student at an institution of higher education
in an academic program or field of study described in
the list made available under subsection (d);
(2) be a United States citizen; and
(3) at the time of the initial scholarship award,
not be a Federal employee as defined in section 2105 of
title 5 of the United States Code.
(c) Application Required.--An individual seeking a
scholarship under this section shall submit an application to
the Secretary at such time, in such manner, and containing such
information, agreements, or assurances as the Secretary may
require.
(d) Eligible Academic Programs.--The Secretary shall make
publicly available a list of academic programs and fields of
study for which scholarships under the Program may be utilized,
and shall update the list as necessary.
(e) Scholarship Requirement.--
(1) In general.--The Secretary may provide a
scholarship under the Program for an academic year if
the individual applying for the scholarship has
submitted to the Secretary, as part of the application
required under subsection (c), a proposed academic
program leading to a degree in a program or field of
study on the list made available under subsection (d).
(2) Duration of eligibility.--An individual may not
receive a scholarship under this section for more than
4 academic years, unless the Secretary grants a waiver.
(3) Scholarship amount.--The dollar amount of a
scholarship under this section for an academic year
shall be determined under regulations issued by the
Secretary, but shall in no case exceed the cost of
attendance.
(4) Authorized uses.--A scholarship provided under
this section may be expended for tuition, fees, and
other authorized expenses as established by the
Secretary by regulation.
(5) Contracts regarding direct payments to
institutions.--The Secretary may enter into a
contractual agreement with an institution of higher
education under which the amounts provided for a
scholarship under this section for tuition, fees, and
other authorized expenses are paid directly to the
institution with respect to which the scholarship is
provided.
(f) Period of Obligated Service.--
(1) Duration of service.--The period of service for
which an individual shall be obligated to serve as an
employee of the Department is, except as provided in
subsection (h)(2), 24 months for each academic year for
which a scholarship under this section is provided.
(2) Schedule for service.--
(A) In general.--Except as provided in
subparagraph (B), obligated service under
paragraph (1) shall begin not later than 60
days after the individual obtains the
educational degree for which the scholarship
was provided.
(B) Deferral.--The Secretary may defer the
obligation of an individual to provide a period
of service under paragraph (1) if the Secretary
determines that such a deferral is appropriate.
The Secretary shall prescribe the terms and
conditions under which a service obligation may
be deferred through regulation.
(g) Penalties for Breach of Scholarship Agreement.--
(1) Failure to complete academic training.--
Scholarship recipients who fail to maintain a high
level of academic standing, as defined by the Secretary
by regulation, who are dismissed from their educational
institutions for disciplinary reasons, or who
voluntarily terminate academic training before
graduation from the educational program for which the
scholarship was awarded, shall be in breach of their
contractual agreement and, in lieu of any service
obligation arising under such agreement, shall be
liable to the United States for repayment not later
than 1 year after the date of default of all
scholarship funds paid to them and to the institution
of higher education on their behalf under the
agreement, except as provided in subsection (h)(2). The
repayment period may be extended by the Secretary when
determined to be necessary, as established by
regulation.
(2) Failure to begin or complete the service
obligation or meet the terms and conditions of
deferment.--A scholarship recipient who, for any
reason, fails to begin or complete a service obligation
under this section after completion of academic
training, or fails to comply with the terms and
conditions of deferment established by the Secretary
pursuant to subsection (f)(2)(B), shall be in breach of
the contractual agreement. When a recipient breaches an
agreement for the reasons stated in the preceding
sentence, the recipient shall be liable to the United
States for an amount equal to--
(A) the total amount of scholarships
received by such individual under this section;
plus
(B) the interest on the amounts of such
awards which would be payable if at the time
the awards were received they were loans
bearing interest at the maximum legal
prevailing rate, as determined by the Treasurer
of the United States,
multiplied by 3.
(h) Waiver or Suspension of Obligation.--
(1) Death of individual.--Any obligation of an
individual incurred under the Program (or a contractual
agreement thereunder) for service or payment shall be
canceled upon the death of the individual.
(2) Impossibility or extreme hardship.--The
Secretary shall by regulation provide for the partial
or total waiver or suspension of any obligation of
service or payment incurred by an individual under the
Program (or a contractual agreement thereunder)
whenever compliance by the individual is impossible or
would involve extreme hardship to the individual, or if
enforcement of such obligation with respect to the
individual would be contrary to the best interests of
the Government.
(i) Definitions.--In this section the following definitions
apply:
(1) Cost of attendance.--The term ``cost of
attendance'' has the meaning given that term in section
472 of the Higher Education Act of 1965 (20 U.S.C.
1087ll).
(2) Program.--The term ``Program'' means the
Department of Energy Science and Technology Scholarship
Program established under this section.
(j) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary for activities under this
section--
(1) for fiscal year 2004, $800,000;
(2) for fiscal year 2005, $1,600,000;
(3) for fiscal year 2006, $2,000,000;
(4) for fiscal year 2007, $2,000,000; and
(5) for fiscal year 2008, $2,000,000.
SEC. 983. REPORT ON EQUAL EMPLOYMENT OPPORTUNITY PRACTICES.
Not later than 12 months after the date of enactment of
this Act, and biennially thereafter, the Secretary shall
transmit to Congress a report on the equal employment
opportunity practices at National Laboratories. Such report
shall include--
(1) a thorough review of each laboratory
contractor's equal employment opportunity policies,
including promotion to management and professional
positions and pay raises;
(2) a statistical report on complaints and their
disposition in the laboratories;
(3) a description of how equal employment
opportunity practices at the laboratories are treated
in the contract and in calculating award fees for each
contractor;
(4) a summary of disciplinary actions and their
disposition by either the Department or the relevant
contractors for each laboratory;
(5) a summary of outreach efforts to attract women
and minorities to the laboratories;
(6) a summary of efforts to retain women and
minorities in the laboratories; and
(7) a summary of collaboration efforts with the
Office of Federal Contract Compliance Programs to
improve equal employment opportunity practices at the
laboratories.
SEC. 984. SMALL BUSINESS ADVOCACY AND ASSISTANCE.
(a) Small Business Advocate.--The Secretary shall require
the Director of each National Laboratory, and may require the
Director of a single-purpose research facility, to designate a
small business advocate to--
(1) increase the participation of small business
concerns, including socially and economically
disadvantaged small business concerns, in procurement,
collaborative research, technology licensing, and
technology transfer activities conducted by the
National Laboratory or single-purpose research
facility;
(2) report to the Director of the National
Laboratory or single-purpose research facility on the
actual participation of small business concerns,
including socially and economically disadvantaged small
business concerns, in procurement, collaborative
research, technology licensing, and technology transfer
activities along with recommendations, if appropriate,
on how to improve participation;
(3) make available to small businesses training,
mentoring, and information on how to participate in
procurement and collaborative research activities;
(4) increase the awareness inside the National
Laboratory or single-purpose research facility of the
capabilities and opportunities presented by small
business concerns; and
(5) establish guidelines for the program under
subsection (b) and report on the effectiveness of such
program to the Director of the National Laboratory or
single-purpose research facility.
(b) Establishment of Small Business Assistance Program.--
The Secretary shall require the Director of each National
Laboratory, and may require the Director of a single-purpose
research facility, to establish a program to provide small business
concerns--
(1) assistance directed at making them more
effective and efficient subcontractors or suppliers to
the National Laboratory or single-purpose research
facility; or
(2) general technical assistance, the cost of which
shall not exceed $10,000 per instance of assistance, to
improve the small business concerns' products or
services.
(c) Use of Funds.--None of the funds expended under
subsection (b) may be used for direct grants to the small
business concerns.
(d) Definitions.--In this section:
(1) Small business concern.--The term ``small
business concern'' has the meaning given such term in
section 3 of the Small Business Act (15 U.S.C. 632).
(2) Socially and economically disadvantaged small
business concerns.--The term ``socially and
economically disadvantaged small business concerns''
has the meaning given such term in section 8(a)(4) of
the Small Business Act (15 U.S.C. 637(a)(4)).
(e) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary for activities under this
section $5,000,000 for each of fiscal years 2004 through 2008.
SEC. 985. REPORT ON MOBILITY OF SCIENTIFIC AND TECHNICAL PERSONNEL.
Not later than 2 years after the date of enactment of this
Act, the Secretary shall transmit a report to Congress
identifying any policies or procedures of a contractor
operating a National Laboratory or single-purpose research
facility that create disincentives to the temporary transfer of
scientific and technical personnel among the contractor-
operated National Laboratories or contractor-operated single-
purpose research facilities and provide suggestions for
improving interlaboratory exchange of scientific and technical
personnel.
SEC. 986. NATIONAL ACADEMY OF SCIENCES REPORT.
Not later than 90 days after the date of enactment of this
Act, the Secretary shall enter into an arrangement with the
National Academy of Sciences for the Academy to--
(1) conduct a study on--
(A) the obstacles to accelerating the
commercial application of energy technology;
and
(B) the adequacy of Department policies and
procedures for, and oversight of, technology
transfer-related disputes between contractors
of the Department and the private sector; and
(2) transmit a report to Congress on
recommendations developed as a result of the study.
SEC. 987. OUTREACH.
The Secretary shall ensure that each program authorized by
this title includes an outreach component to provide
information, as appropriate, to manufacturers, consumers,
engineers, architects, builders, energy service companies,
institutions of higher education, small businesses, facility
planners and managers, State and local governments, and other
entities.
SEC. 988. COMPETITIVE AWARD OF MANAGEMENT CONTRACTS.
None of the funds authorized to be appropriated to the
Secretary by this title may be used to award a management and
operating contract for a nonmilitary energy laboratory of the
Department unless such contract is competitively awarded or the
Secretary grants, on a case-by-case basis, a waiver to allow
for such a deviation. The Secretary may not delegate the
authority to grant such a waiver and shall submit to Congress a
report notifying Congress of the waiver and setting forth the
reasons for the waiver at least 60 days prior to the date of
the award of such a contract.
SEC. 989. EDUCATIONAL PROGRAMS IN SCIENCE AND MATHEMATICS.
(a) Activities.--Section 3165(a) of the Department of
Energy Science Education Enhancement Act (42 U.S.C. 7381b(a))
is amended by adding at the end the following:
``(14) Support competitive events for students,
under supervision of teachers, designed to encourage
student interest and knowledge in science and
mathematics.''.
(b) Authorization of Appropriations.--Section 3169 of the
Department of Energy Science Education Enhancement Act (42
U.S.C. 7381e), as so redesignated by section 1102(b), is
amended by inserting before the period ``; and $40,000,000 for
each of fiscal years 2004 through 2008''.
TITLE X--DEPARTMENT OF ENERGY MANAGEMENT
SEC. 1001. ADDITIONAL ASSISTANT SECRETARY POSITION.
(a) Additional Assistant Secretary Position To Enable
Improved Management of Nuclear Energy Issues.--
(1) In general.--Section 203(a) of the Department
of Energy Organization Act (42 U.S.C. 7133(a)) is
amended by striking ``six Assistant Secretaries'' and
inserting ``7 Assistant Secretaries''.
(2) Sense of congress.--It is the sense of Congress
that the leadership for departmental missions in
nuclear energy should be at the Assistant Secretary
level.
(b) Technical and Conforming Amendments.--
(1) Title 5.--Section 5315 of title 5, United
States Code, is amended by striking ``Assistant
Secretaries of Energy (6)'' and inserting ``Assistant
Secretaries of Energy (7)''.
(2) Department of energy organization act.--The
table of contents for the Department of Energy
Organization Act (42 U.S.C. 7101 note) is amended--
(A) by striking ``Section 209'' and
inserting ``Sec. 209'';
(B) by striking ``213.'' and inserting
``Sec. 213.'';
(C) by striking ``214.'' and inserting
``Sec. 214.'';
(D) by striking ``215.'' and inserting
``Sec. 215.''; and
(E) by striking ``216.'' and inserting
``Sec. 216.''.
SEC. 1002. OTHER TRANSACTIONS AUTHORITY.
Section 646 of the Department of Energy Organization Act
(42 U.S.C. 7256) is amended by adding at the end the following:
``(g)(1) In addition to other authorities granted to the
Secretary under law, the Secretary may enter into other
transactions on such terms as the Secretary may deem
appropriate in furtherance of research, development, or
demonstration functions vested in the Secretary. Such other
transactions shall not be subject to the provisions of section
9 of the Federal Nonnuclear Energy Research and Development Act
of 1974 (42 U.S.C. 5908) or section 152 of the Atomic Energy
Act of 1954 (42 U.S.C. 2182).
``(2)(A) The Secretary shall ensure that--
``(i) to the maximum extent the Secretary
determines practicable, no transaction entered into
under paragraph (1) provides for research, development,
or demonstration that duplicates research, development,
or demonstration being conducted under existing
projects carried out by the Department;
``(ii) to the extent the Secretary determines
practicable, the funds provided by the Government under
a transaction authorized by paragraph (1) do not exceed
the total amount provided by other parties to the
transaction; and
``(iii) to the extent the Secretary determines
practicable, competitive, merit-based selection
procedures shall be used when entering into
transactions under paragraph (1).
``(B) A transaction authorized by paragraph (1) may be used
for a research, development, or demonstration project only if
the Secretary makes a written determination that the use of a
standard contract, grant, or cooperative agreement for the
project is not feasible or appropriate.
``(3)(A) The Secretary shall protect from disclosure,
including disclosure under section 552 of title 5, United
States Code, for up to 5 years after the date the information
is received by the Secretary--
``(i) a proposal, proposal abstract, and supporting
documents submitted to the Department in a competitive
or noncompetitive process having the potential for
resulting in an award under paragraph (1) to the party
submitting the information; and
``(ii) a business plan and technical information
relating to a transaction authorized by paragraph (1)
submitted to the Department as confidential business
information.
``(B) The Secretary may protect from disclosure, for up to
5 years after the information was developed, any information
developed pursuant to a transaction under paragraph (1) which
developed information is of a character that it would be
protected from disclosure under section 552(b)(4) of title 5,
United States Code, if obtained from a person other than a
Federal agency.
``(4) Not later than 90 days after the date of enactment of
this subsection, the Secretary shall prescribe guidelines for
using other transactions authorized by paragraph (1). Such
guidelines shall be published in the Federal Register for
public comment under rulemaking procedures of the Department.
``(5) The authority of the Secretary under this subsection
may be delegated only to an officer of the Department who is
appointed by the President by and with the advice and consent
of the Senate and may not be delegated to any other person.
``(6)(A) Not later than September 31, 2005, the Comptroller
General of the United States shall report to Congress on the
Department's use of the authorities granted under this section,
including the ability to attract nontraditional government
contractors and whether additional safeguards are needed with
respect to the use of such authorities.
``(B) In this section, the term `nontraditional Government
contractor' has the same meaning as the term `nontraditional
defense contractor' as defined in section 845(e) of the
National Defense Authorization Act for Fiscal Year 1994 (Public
Law 103-160; 10 U.S.C. 2371 note).''.
TITLE XI--PERSONNEL AND TRAINING
SEC. 1101. TRAINING GUIDELINES FOR ELECTRIC ENERGY INDUSTRY PERSONNEL.
The Secretary of Energy, in consultation with the Secretary
of Labor and jointly with the electric industry and recognized
employee representatives, shall develop model personnel
training guidelines to support electric system reliability and
safety. The training guidelines shall, at a minimum--
(1) include training requirements for workers
engaged in the construction, operation, inspection, and
maintenance of electric generation, transmission, and
distribution, including competency and certification
requirements, and assessment requirements that include
initial and ongoing evaluation of workers,
recertification assessment procedures, and methods for
examining or testing the qualification of individuals
performing covered tasks; and
(2) consolidate existing training guidelines on the
construction, operation, maintenance, and inspection of
electric generation, transmission, and distribution
facilities, such as those established by the National
Electric Safety Code and other industry consensus
standards.
SEC. 1102. IMPROVED ACCESS TO ENERGY-RELATED SCIENTIFIC AND TECHNICAL
CAREERS.
(a) Department of Energy Science Education Programs.--
Section 3164 of the Department of Energy Science Education
Enhancement Act (42 U.S.C. 7381a) is amended by adding at the
end the following:
``(c) Programs for Students From Underrepresented Groups.--
In carrying out a program under subsection (a), the Secretary
shall give priority to activities that are designed to
encourage students from underrepresented groups to pursue
scientific and technical careers.''.
(b) Partnerships With Historically Black Colleges and
Universities, Hispanic-Servicing Institutions, and Tribal
Colleges.--The Department of Energy Science Education
Enhancement Act (42 U.S.C. 7381 et seq.) is amended--
(1) by redesignating sections 3167 and 3168 as
sections 3168 and 3169, respectively; and
(2) by inserting after section 3166 the following:
``SEC. 3167. PARTNERSHIPS WITH HISTORICALLY BLACK COLLEGES AND
UNIVERSITIES, HISPANIC-SERVING INSTITUTIONS, AND
TRIBAL COLLEGES.
``(a) Definitions.--In this section:
``(1) Hispanic-serving institution.--The term
`Hispanic-serving institution' has the meaning given
that term in section 502(a) of the Higher Education Act
of 1965 (20 U.S.C. 1101a(a)).
``(2) Historically black college or university.--
The term `historically Black college or university' has
the meaning given the term `part B institution' in
section 322 of the Higher Education Act of 1965 (20
U.S.C. 1061).
``(3) National laboratory.--The term `National
Laboratory' has the meaning given that term in section
902 of the Energy Policy Act of 2003.
``(4) Science facility.--The term `science
facility' has the meaning given the term `single-
purpose research facility' in section 902 of the Energy
Policy Act of 2003.
``(5) Tribal college.--The term `tribal college'
has the meaning given the term `Tribal College or
University' in section 316(b)(3) of the Higher
Education Act of 1965 (20 U.S.C. 1059c(b)(3)).
``(b) Education Partnership.--The Secretary shall direct
the Director of each National Laboratory and, to the extent
practicable, the head of any science facility to increase the
participation of historically Black colleges or universities,
Hispanic-serving institutions, or tribal colleges in activities
that increase the capacity of the historically Black colleges
or universities, Hispanic-serving institutions, or tribal
colleges to train personnel in science or engineering.
``(c) Activities.--An activity under subsection (b) may
include--
``(1) collaborative research;
``(2) equipment transfer;
``(3) training activities conducted at a National
Laboratory or science facility; and
``(4) mentoring activities conducted at a National
Laboratory or science facility.
``(d) Report.--Not later than 2 years after the date of
enactment of the Energy Policy Act of 2003, the Secretary shall
submit to Congress a report on the activities carried out under
this section.''.
SEC. 1103. NATIONAL POWER PLANT OPERATIONS TECHNOLOGY AND EDUCATION
CENTER.
(a) Establishment.--The Secretary shall support the
establishment of a National Power Plant Operations Technology
and Education Center (in this section referred to as the
``Center''), to address the need for training and educating
certified operators for nonnuclear electric power generation
plants.
(b) Role.--The Center shall provide both training and
continuing education relating to nonnuclear electric power
generation plant technologies and operations. The Center shall
conduct training and education activities on site and through
Internet-based information technologies that allow for learning
at remote sites.
(c) Criteria for Competitive Selection.--The Secretary
shall support the establishment of the Center at an institution
of higher education with expertise in power plant technology
and operation and with the ability to provide onsite as well as
Internet-based training.
SEC. 1104. INTERNATIONAL ENERGY TRAINING.
(a) In General.--The Secretary of Energy, in consultation
with the Secretaries of Commerce, Interior, and State and the
Federal Energy Regulatory Commission, shall coordinate training
and outreach efforts for international commercial energy
markets in countries with developing and restructuring
economies.
(b) Components.--The efforts may address--
(1) production-related fiscal regimes;
(2) grid and network issues;
(3) energy user and demand side response;
(4) international trade of energy; and
(5) international transportation of energy.
(c) Authorization of Appropriations.--There are authorized
to be appropriated to carry out this section $1,500,000 for
each of fiscal years 2004 through 2007.
TITLE XII--ELECTRICITY
SEC. 1201. SHORT TITLE.
This title may be cited as the ``Electric Reliability Act
of 2003''.
Subtitle A--Reliability Standards
SEC. 1211. ELECTRIC RELIABILITY STANDARDS.
(a) In General.--Part II of the Federal Power Act (16 U.S.C
824 et seq.) is amended by adding at the end the following:
``SEC. 215. ELECTRIC RELIABILITY.
``(a) Definitions.--For purposes of this section:
``(1) The term `bulk-power system' means--
``(A) facilities and control systems
necessary for operating an interconnected
electric energy transmission network (or any
portion thereof); and
``(B) electric energy from generation
facilities needed to maintain transmission
system reliability.
The term does not include facilities used in the local
distribution of electric energy.
``(2) The terms `Electric Reliability Organization'
and `ERO' mean the organization certified by the
Commission under subsection (c) the purpose of which is
to establish and enforce reliability standards for the
bulk-power system, subject to Commission review.
``(3) The term `reliability standard' means a
requirement, approved by the Commission under this
section, to provide for reliable operation of the bulk-
power system. The term includes requirements for the
operation of existing bulk-power system facilities and
the design of planned additions or modifications to
such facilities to the extent necessary to provide for
reliable operation of the bulk-power system, but the
term does not include any requirement to enlarge such
facilities or to construct new transmission capacity or
generation capacity.
``(4) The term `reliable operation' means operating
the elements of the bulk-power system within equipment
and electric system thermal, voltage, and stability
limits so that instability, uncontrolled separation, or
cascading failures of such system will not occur as a
result of a sudden disturbance or unanticipated failure
of system elements.
``(5) The term `Interconnection' means a geographic
area in which the operation of bulk-power system
components is synchronized such that the failure of 1
or more of such components may adversely affect the
ability of the operators of other components within the
system to maintain reliable operation of the facilities
within their control.
``(6) The term `transmission organization' means a
Regional Transmission Organization, Independent System
Operator, independent transmission provider, or other
transmission organization finally approved by the
Commission for the operation of transmission
facilities.
``(7) The term `regional entity' means an entity
having enforcement authority pursuant to subsection
(e)(4).
``(b) Jurisdiction and Applicability.--(1) The Commission
shall have jurisdiction, within the United States, over the ERO
certified by the Commission under subsection (c), any regional
entities, and all users, owners and operators of the bulk-power
system, including but not limited to the entities described in
section 201(f), for purposes of approving reliability standards
established under this section and enforcing compliance with
this section. All users, owners and operators of the bulk-power
system shall comply with reliability standards that take effect
under this section.
``(2) The Commission shall issue a final rule to implement
the requirements of this section not later than 180 days after
the date of enactment of this section.
``(c) Certification.--Following the issuance of a
Commission rule under subsection (b)(2), any person may submit
an application to the Commission for certification as the
Electric Reliability Organization. The Commission may certify 1
such ERO if the Commission determines that such ERO--
``(1) has the ability to develop and enforce,
subject to subsection (e)(2), reliability standards
that provide for an adequate level of reliability of
the bulk-power system; and
``(2) has established rules that--
``(A) assure its independence of the users
and owners and operators of the bulk-power
system, while assuring fair stakeholder
representation in the selection of its
directors and balanced decisionmaking in any
ERO committee or subordinate organizational
structure;
``(B) allocate equitably reasonable dues,
fees, and other charges among end users for all
activities under this section;
``(C) provide fair and impartial procedures
for enforcement of reliability standards
through the imposition of penalties in
accordance with subsection (e) (including
limitations on activities, functions, or
operations, or other appropriate sanctions);
``(D) provide for reasonable notice and
opportunity for public comment, due process,
openness, and balance of interests in
developing reliability standards and otherwise
exercising its duties; and
``(E) provide for taking, after
certification, appropriate steps to gain
recognition in Canada and Mexico.
``(d) Reliability Standards.--(1) The Electric Reliability
Organization shall file each reliability standard or
modification to a reliability standard that it proposes to be
made effective under this section with the Commission.
``(2) The Commission may approve, by rule or order, a
proposed reliability standard or modification to a reliability
standard if it determines that the standard is just,
reasonable, not unduly discriminatory or preferential, and in
the public interest. The Commission shall give due weight to
the technical expertise of the Electric Reliability
Organization with respect to the content of a proposed standard
or modification to a reliability standard and to the technical
expertise of a regional entity organized on an Interconnection-
wide basis with respect to a reliability standard to be
applicable within that Interconnection, but shall not defer
with respect to the effect of a standard on competition. A
proposed standard or modification shall take effect upon
approval by the Commission.
``(3) The Electric Reliability Organization shall
rebuttably presume that a proposal from a regional entity
organized on an Interconnection-wide basis for a reliability
standard or modification to a reliability standard to be
applicable on an Interconnection-wide basis is just,
reasonable, and not unduly discriminatory or preferential, and
in the public interest.
``(4) The Commission shall remand to the Electric
Reliability Organization for further consideration a proposed
reliability standard or a modification to a reliability
standard that the Commission disapproves in whole or in part.
``(5) The Commission, upon its own motion or upon
complaint, may order the Electric Reliability Organization to
submit to the Commission a proposed reliability standard or a
modification to a reliability standard that addresses a
specific matter if the Commission considers such a new or
modified reliability standard appropriate to carry out this
section.
``(6) The final rule adopted under subsection (b)(2) shall
include fair processes for the identification and timely
resolution of any conflict between a reliability standard and
any function, rule, order, tariff, rate schedule, or agreement
accepted, approved, or ordered by the Commission applicable to
a transmission organization. Such transmission organization
shall continue to comply with such function, rule, order,
tariff, rate schedule or agreement accepted approved, or
ordered by the Commission until--
``(A) the Commission finds a conflict exists
between a reliability standard and any such provision;
``(B) the Commission orders a change to such
provision pursuant to section 206 of this part; and
``(C) the ordered change becomes effective under
this part.
If the Commission determines that a reliability standard needs
to be changed as a result of such a conflict, it shall order
the ERO to develop and file with the Commission a modified
reliability standard under paragraph (4) or (5) of this
subsection.
``(e) Enforcement.--(1) The ERO may impose, subject to
paragraph (2), a penalty on a user or owner or operator of the
bulk-power system for a violation of a reliability standard
approved by the Commission under subsection (d) if the ERO,
after notice and an opportunity for a hearing--
``(A) finds that the user or owner or operator has
violated a reliability standard approved by the
Commission under subsection (d); and
``(B) files notice and the record of the proceeding
with the Commission.
``(2) A penalty imposed under paragraph (1) may take effect
not earlier than the 31st day after the ERO files with the
Commission notice of the penalty and the record of proceedings.
Such penalty shall be subject to review by the Commission, on
its own motion or upon application by the user, owner or
operator that is the subject of the penalty filed within 30
days after the date such notice is filed with the Commission.
Application to the Commission for review, or the initiation of
review by the Commission on its own motion, shall not operate
as a stay of such penalty unless the Commission otherwise
orders upon its own motion or upon application by the user,
owner or operator that is the subject of such penalty. In any
proceeding to review a penalty imposed under paragraph (1), the
Commission, after notice and opportunity for hearing (which
hearing may consist solely of the record before the ERO and
opportunity for the presentation of supporting reasons to
affirm, modify, or set aside the penalty), shall by order
affirm, set aside, reinstate, or modify the penalty, and, if
appropriate, remand to the ERO for further proceedings. The
Commission shall implement expedited procedures for such
hearings.
``(3) On its own motion or upon complaint, the Commission
may order compliance with a reliability standard and may impose
a penalty against a user or owner or operator of the bulk-power
system if the Commission finds, after notice and opportunity
for a hearing, that the user or owner or operator of the bulk-
power system has engaged or is about to engage in any acts or
practices that constitute or will constitute a violation of a
reliability standard.
``(4) The Commission shall issue regulations authorizing
the ERO to enter into an agreement to delegate authority to a
regional entity for the purpose of proposing reliability
standards to the ERO and enforcing reliability standards under
paragraph (1) if--
``(A) the regional entity is governed by--
``(i) an independent board;
``(ii) a balanced stakeholder board; or
``(iii) a combination independent and
balanced stakeholder board.
``(B) the regional entity otherwise satisfies the
provisions of subsection (c)(1) and (2); and
``(C) the agreement promotes effective and
efficient administration of bulk-power system
reliability.
The Commission may modify such delegation. The ERO and the
Commission shall rebuttably presume that a proposal for
delegation to a regional entity organized on an
Interconnection-wide basis promotes effective and efficient
administration of bulk-power system reliability and should be
approved. Such regulation may provide that the Commission may
assign the ERO's authority to enforce reliability standards
under paragraph (1) directly to a regional entity consistent
with the requirements of this paragraph.
``(5) The Commission may take such action as is necessary
or appropriate against the ERO or a regional entity to ensure
compliance with a reliability standard or any Commission order
affecting the ERO or a regional entity.
``(6) Any penalty imposed under this section shall bear a
reasonable relation to the seriousness of the violation and
shall take into consideration the efforts of such user, owner,
or operator to remedy the violation in a timely manner.
``(f) Changes in Electric Reliability Organization Rules.--
The Electric Reliability Organization shall file with the
Commission for approval any proposed rule or proposed rule
change, accompanied by an explanation of its basis and purpose.
The Commission, upon its own motion or complaint, may propose a
change to the rules of the ERO. A proposed rule or proposed
rule change shall take effect upon a finding by the Commission,
after notice and opportunity for comment, that the change is
just, reasonable, not unduly discriminatory or preferential, is
in the public interest, and satisfies the requirements of
subsection (c).
``(g) Reliability Reports.--The ERO shall conduct periodic
assessments of the reliability and adequacy of the bulk-power
system in North America.
``(h) Coordination With Canada and Mexico.--The President
is urged to negotiate international agreements with the
governments of Canada and Mexico to provide for effective
compliance with reliability standards and the effectiveness of
the ERO in the United States and Canada or Mexico.
``(i) Savings Provisions.--(1) The ERO shall have authority
to develop and enforce compliance with reliability standards
for only the bulk-power system.
``(2) This section does not authorize the ERO or the
Commission to order the construction of additional generation
or transmission capacity or to set and enforce compliance with
standards for adequacy or safety of electric facilities or
services.
``(3) Nothing in this section shall be construed to preempt
any authority of any State to take action to ensure the safety,
adequacy, and reliability of electric service within that
State, as long as such action is not inconsistent with any
reliability standard.
``(4) Within 90 days of the application of the Electric
Reliability Organization or other affected party, and after
notice and opportunity for comment, the Commission shall issue
a final order determining whether a State action is
inconsistent with a reliability standard, taking into
consideration any recommendation of the ERO.
``(5) The Commission, after consultation with the ERO and
the State taking action, may stay the effectiveness of any
State action, pending the Commission's issuance of a final
order.
``(j) Regional Advisory Bodies.--The Commission shall
establish a regional advisory body on the petition of at least
\2/3\ of the States within a region that have more than \1/2\
of their electric load served within the region. A regional
advisory body shall be composed of 1 member from each
participating State in the region, appointed by the Governor of
each State, and may include representatives of agencies,
States, and provinces outside the United States. A regional
advisory body may provide advice to the Electric Reliability
Organization, a regional entity, or the Commission regarding
the governance of an existing or proposed regional entity
within the same region, whether a standard proposed to apply
within the region is just, reasonable, not unduly
discriminatory or preferential, and in the public interest,
whether fees proposed to be assessed within the region are
just, reasonable, not unduly discriminatory or preferential,
and in the public interest and any other responsibilities
requested by the Commission. The Commission may give deference
to the advice of any such regional advisory body if that body
is organized on an Interconnection-wide basis.
``(k) Alaska and Hawaii.--The provisions of this section do
not apply to Alaska or Hawaii.''.
(b) Status of ERO.--The Electric Reliability Organization
certified by the Federal Energy Regulatory Commission under
section 215(c) of the Federal Power Act and any regional entity
delegated enforcement authority pursuant to section 215(e)(4)
of that Act are not departments, agencies, or instrumentalities
of the United States Government.
Subtitle B--Transmission Infrastructure Modernization
SEC. 1221. SITING OF INTERSTATE ELECTRIC TRANSMISSION FACILITIES.
(a) Amendment of Federal Power Act.--Part II of the Federal
Power Act is amended by adding at the end the following:
``SEC. 216. SITING OF INTERSTATE ELECTRIC TRANSMISSION FACILITIES.
``(a) Designation of National Interest Electric
Transmission Corridors.--
``(1) Transmission congestion study.--Within 1 year
after the enactment of this section, and every 3 years
thereafter, the Secretary of Energy, in consultation
with affected States, shall conduct a study of electric
transmission congestion. After considering alternatives
and recommendations from interested parties, including
an opportunity for comment from affected States, the
Secretary shall issue a report, based on such study,
which may designate any geographic area experiencing
electric energy transmission capacity constraints or
congestion that adversely affects consumers as a
national interest electric transmission corridor. The
Secretary shall conduct the study and issue the report
in consultation with any appropriate regional entity
referenced in section 215 of this Act.
``(2) Considerations.--In determining whether to
designate a national interest electric transmission
corridor referred to in paragraph (1) under this
section, the Secretary may consider whether--
``(A) the economic vitality and development
of the corridor, or the end markets served by
the corridor, may be constrained by lack of
adequate or reasonably priced electricity;
``(B)(i) economic growth in the corridor,
or the end markets served by the corridor, may
be jeopardized by reliance on limited sources
of energy; and
``(ii) a diversification of supply is
warranted;
``(C) the energy independence of the United
States would be served by the designation;
``(D) the designation would be in the
interest of national energy policy; and
``(E) the designation would enhance
national defense and homeland security.
``(b) Construction Permit.--Except as provided in
subsection (i), the Commission is authorized, after notice and
an opportunity for hearing, to issue a permit or permits for
the construction or modification of electric transmission
facilities in a national interest electric transmission
corridor designated by the Secretary under subsection (a) if
the Commission finds that--
``(1)(A) a State in which the transmission
facilities are to be constructed or modified is without
authority to--
``(i) approve the siting of the facilities;
or
``(ii) consider the interstate benefits
expected to be achieved by the proposed
construction or modification of transmission
facilities in the State;
``(B) the applicant for a permit is a transmitting
utility under this Act but does not qualify to apply
for a permit or siting approval for the proposed
project in a State because the applicant does not serve
end-use customers in the State; or
``(C) a State commission or other entity that has
authority to approve the siting of the facilities has--
``(i) withheld approval for more than 1
year after the filing of an application
pursuant to applicable law seeking approval or
1 year after the designation of the relevant
national interest electric transmission
corridor, whichever is later; or
``(ii) conditioned its approval in such a
manner that the proposed construction or
modification will not significantly reduce
transmission congestion in interstate commerce
or is not economically feasible;
``(2) the facilities to be authorized by the permit
will be used for the transmission of electric energy in
interstate commerce;
``(3) the proposed construction or modification is
consistent with the public interest;
``(4) the proposed construction or modification
will significantly reduce transmission congestion in
interstate commerce and protects or benefits consumers;
and
``(5) the proposed construction or modification is
consistent with sound national energy policy and will
enhance energy independence.
``(c) Permit Applications.--Permit applications under
subsection (b) shall be made in writing to the Commission. The
Commission shall issue rules setting forth the form of the
application, the information to be contained in the
application, and the manner of service of notice of the permit
application upon interested persons.
``(d) Comments.--In any proceeding before the Commission
under subsection (b), the Commission shall afford each State in
which a transmission facility covered by the permit is or will
be located, each affected Federal agency and Indian tribe,
private property owners, and other interested persons, a
reasonable opportunity to present their views and
recommendations with respect to the need for and impact of a
facility covered by the permit.
``(e) Rights-of-Way.--In the case of a permit under
subsection (b) for electric transmission facilities to be
located on property other than property owned by the United
States or a State, if the permit holder cannot acquire by
contract, or is unable to agree with the owner of the property
to the compensation to be paid for, the necessary right-of-way
to construct or modify such transmission facilities, the permit
holder may acquire the right-of-way by the exercise of the
right of eminent domain in the district court of the United
States for the district in which the property concerned is
located, or in the appropriate court of the State in which the
property is located. The practice and procedure in any action
or proceeding for that purpose in the district court of the
United States shall conform as nearly as may be with the
practice and procedure in similar action or proceeding in the
courts of the State where the property is situated.
``(f) State Law.--Nothing in this section shall preclude
any person from constructing or modifying any transmission
facility pursuant to State law.
``(g) Compensation.--Any exercise of eminent domain
authority pursuant to this section shall be considered a taking
of private property for which just compensation is due. Just
compensation shall be an amount equal to the full fair market
value of the property taken on the date of the exercise of
eminent domain authority, except that the compensation shall
exceed fair market value if necessary to make the landowner
whole for decreases in the value of any portion of the land not
subject to eminent domain. Any parcel of land acquired by
eminent domain under this subsection shall be transferred back
to the owner from whom it was acquired (or his heirs or
assigns) if the land is not used for the construction or
modification of electric transmission facilities within a
reasonable period of time after the acquisition. Other than
construction, modification, operation, or maintenance of
electric transmission facilities and related facilities,
property acquired under subsection (e) may not be used for any
purpose (including use for any heritage area, recreational
trail, or park) without the consent of the owner of the parcel
from whom the property was acquired (or the owner's heirs or
assigns).
``(h) Coordination of Federal Authorizations for
Transmission and Distribution Facilities.--
``(1) Lead agency.--If an applicant, or prospective
applicant, for a Federal authorization related to an
electric transmission or distribution facility so
requests, the Department of Energy (DOE) shall act as
the lead agency for purposes of coordinating all
applicable Federal authorizations and related
environmental reviews of the facility. For purposes of
this subsection, the term `Federal authorization' means
any authorization required under Federal law in order
to site a transmission or distribution facility,
including but not limited to such permits, special use
authorizations, certifications, opinions, or other
approvals as may be required, whether issued by a
Federal or a State agency. To the maximum extent
practicable under applicable Federal law, the Secretary
of Energy shall coordinate this Federal authorization
and review process with any Indian tribes, multi-State
entities, and State agencies that are responsible for
conducting any separate permitting and environmental
reviews of the facility, to ensure timely and efficient
review and permit decisions.
``(2) Authority to set deadlines.--As lead agency,
the Department of Energy, in consultation with agencies
responsible for Federal authorizations and, as
appropriate, with Indian tribes, multi-State entities,
and State agencies that are willing to coordinate their
own separate permitting and environmental reviews with
the Federal authorization and environmental reviews,
shall establish prompt and binding intermediate
milestones and ultimate deadlines for the review of,
and Federal authorization decisions relating to, the
proposed facility. The Secretary of Energy shall ensure
that once an application has been submitted with such
data as the Secretary considers necessary, all permit
decisions and related environmental reviews under all
applicable Federal laws shall be completed within 1
year or, if a requirement of another provision of
Federal law makes this impossible, as soon thereafter
as is practicable. The Secretary of Energy also shall
provide an expeditious pre-application mechanism for
prospective applicants to confer with the agencies
involved to have each such agency determine and
communicate to the prospective applicant within 60 days
of when the prospective applicant submits a request for
such information concerning--
``(A) the likelihood of approval for a
potential facility; and
``(B) key issues of concern to the agencies
and public.
``(3) Consolidated environmental review and record
of decision.--As lead agency head, the Secretary of
Energy, in consultation with the affected agencies,
shall prepare a single environmental review document,
which shall be used as the basis for all decisions on
the proposed project under Federal law. The document
may be an environmental assessment or environmental
impact statement under the National Environmental
Policy Act of 1969 if warranted, or such other form of
analysis as may be warranted. The Secretary of Energy
and the heads of other agencies shall streamline the
review and permitting of transmission and distribution
facilities within corridors designated under section
503 of the Federal Land Policy and Management Act (43
U.S.C. 1763) by fully taking into account prior
analyses and decisions relating to the corridors. Such
document shall include consideration by the relevant
agencies of any applicable criteria or other matters as
required under applicable laws.
``(4) Appeals.--In the event that any agency has
denied a Federal authorization required for a
transmission or distribution facility, or has failed to
act by the deadline established by the Secretary
pursuant to this section for deciding whether to issue
the authorization, the applicant or any State in which
the facility would be located may file an appeal with
the Secretary, who shall, in consultation with the
affected agency, review the denial or take action on
the pending application. Based on the overall record
and in consultation with the affected agency, the
Secretary may then either issue the necessary
authorization with any appropriate conditions, or deny
the application. The Secretary shall issue a decision
within 90 days of the filing of the appeal. In making a
decision under this paragraph, the Secretary shall
comply with applicable requirements of Federal law,
including any requirements of the Endangered Species
Act, the Clean Water Act, the National Forest
Management Act, the National Environmental Policy Act
of 1969, and the Federal Land Policy and Management
Act.
``(5) Conforming regulations and memoranda of
understanding.--Not later than 18 months after the date
of enactment of this section, the Secretary of Energy
shall issue any regulations necessary to implement this
subsection. Not later than 1 year after the date of
enactment of this section, the Secretary and the heads
of all Federal agencies with authority to issue Federal
authorizations shall enter into Memoranda of
Understanding to ensure the timely and coordinated
review and permitting of electricity transmission and
distribution facilities. The head of each Federal
agency with authority to issue a Federal authorization
shall designate a senior official responsible for, and
dedicate sufficient other staff and resources to
ensure, full implementation of the DOE regulations and
any Memoranda. Interested Indian tribes, multi-State
entities, and State agencies may enter such Memoranda
of Understanding.
``(6) Duration and Renewal.--Each Federal land use
authorization for an electricity transmission or
distribution facility shall be issued--
``(A) for a duration, as determined by the
Secretary of Energy, commensurate with the
anticipated use of the facility, and
``(B) with appropriate authority to manage
the right-of-way for reliability and
environmental protection.
Upon the expiration of any such authorization
(including an authorization issued prior to enactment
of this section),the authorization shall be reviewed
for renewal taking fully into account reliance on such electricity
infrastructure, recognizing its importance for public health, safety
and economic welfare and as a legitimate use of Federal lands.
``(7) Maintaining and enhancing the transmission
infrastructure.--In exercising the responsibilities
under this section, the Secretary of Energy shall
consult regularly with the Federal Energy Regulatory
Commission (FERC), FERC-approved electric reliability
organizations (including related regional entities),
and FERC-approved Regional Transmission Organizations
and Independent System Operators.
``(i) Interstate Compacts.--The consent of Congress is
hereby given for 3 or more contiguous States to enter into an
interstate compact, subject to approval by Congress,
establishing regional transmission siting agencies to
facilitate siting of future electric energy transmission
facilities within such States and to carry out the electric
energy transmission siting responsibilities of such States. The
Secretary of Energy may provide technical assistance to
regional transmission siting agencies established under this
subsection. Such regional transmission siting agencies shall
have the authority to review, certify, and permit siting of
transmission facilities, including facilities in national
interest electric transmission corridors (other than facilities
on property owned by the United States). The Commission shall
have no authority to issue a permit for the construction or
modification of electric transmission facilities within a State
that is a party to a compact, unless the members of a compact
are in disagreement and the Secretary makes, after notice and
an opportunity for a hearing, the finding described in section
(b)(1)(C).
``(j) Savings Clause.--Nothing in this section shall be
construed to affect any requirement of the environmental laws
of the United States, including, but not limited to, the
National Environmental Policy Act of 1969. Subsection (h)(4) of
this section shall not apply to any Congressionally-designated
components of the National Wilderness Preservation System, the
National Wild and Scenic Rivers System, or the National Park
system (including National Monuments therein).
``(k) ERCOT.--This section shall not apply within the area
referred to in section 212(k)(2)(A).''.
(b) Reports to Congress on Corridors and Rights of Way on
Federal Lands.--The Secretary of the Interior, the Secretary of
Energy, the Secretary of Agriculture, and the Chairman of the
Council on Environmental Quality shall, within 90 days of the
date of enactment of this subsection, submit a joint report to
Congress identifying each of the following:
(1) All existing designated transmission and
distribution corridors on Federal land and the status
of work related to proposed transmission and
distribution corridor designations under Title V of the
Federal Land Policy and Management Act (43 U.S.C. 1761
et. seq.), the schedule for completing such work, any
impediments to completing the work, and steps that
Congress could take to expedite the process.
(2) The number of pending applications to locate
transmission and distribution facilities on Federal
lands, key information relating to each such facility,
how long each application has been pending, the
schedule for issuing a timely decision as to each
facility, and progress in incorporating existing and
new such rights-of-way into relevant land use and
resource management plans or their equivalent.
(3) The number of existing transmission and
distribution rights-of-way on Federal lands that will
come up for renewal within the following 5-, 10-, and
15-year periods, and a description of how the
Secretaries plan to manage such renewals.
SEC. 1222. THIRD-PARTY FINANCE.
(a) Existing Facilities.--The Secretary of Energy
(hereinafter in this section referred to as the ``Secretary''),
acting through the Administrator of the Western Area Power
Administration (hereinafter in this section referred to as
``WAPA''), or through the Administrator of the Southwestern
Power Administration (hereinafter in this section referred to
as ``SWPA''), or both, may design, develop, construct, operate,
maintain, or own, or participate with other entities in
designing, developing, constructing, operating, maintaining, or
owning, an electric power transmission facility and related
facilities (``Project'') needed to upgrade existing
transmission facilities owned by SWPA or WAPA if the Secretary
of Energy, in consultation with the applicable Administrator,
determines that the proposed Project--
(1)(A) is located in a national interest electric
transmission corridor designated under section 216(a)
of the Federal Power Act and will reduce congestion of
electric transmission in interstate commerce; or
(B) is necessary to accommodate an actual or
projected increase in demand for electric transmission
capacity;
(2) is consistent with--
(A) transmission needs identified, in a
transmission expansion plan or otherwise, by
the appropriate Regional Transmission
Organization or Independent System Operator (as
defined in the Federal Power Act), if any, or
approved regional reliability organization; and
(B) efficient and reliable operation of the
transmission grid; and
(3) would be operated in conformance with prudent
utility practice.
(b) New Facilities.--The Secretary, acting through WAPA or
SWPA, or both, may design, develop, construct, operate,
maintain, or own, or participate with other entities in
designing, developing, constructing, operating, maintaining, or
owning, a new electric power transmission facility and related
facilities (``Project'') located within any State in which WAPA
or SWPA operates if the Secretary, in consultation with the
applicable Administrator, determines that the proposed
Project--
(1)(A) is located in an area designated under
section 216(a) of the Federal Power Act and will reduce
congestion of electric transmission in interstate
commerce; or
(B) is necessary to accommodate an actual or
projected increase in demand for electric transmission
capacity;
(2) is consistent with--
(A) transmission needs identified, in a
transmission expansion plan or otherwise, by
the appropriate Regional Transmission
Organization or Independent System Operator, if
any, or approved regional reliability
organization; and
(B) efficient and reliable operation of the
transmission grid;
(3) will be operated in conformance with prudent
utility practice;
(4) will be operated by, or in conformance with the
rules of, the appropriate (A) Regional Transmission
Organization or Independent System Operator, if any, or
(B) if such an organization does not exist, regional
reliability organization; and
(5) will not duplicate the functions of existing
transmission facilities or proposed facilities which
are the subject of ongoing or approved siting and
related permitting proceedings.
(c) Other Funds.--
(1) In general.--In carrying out a Project under
subsection (a) or (b), the Secretary may accept and use
funds contributed by another entity for the purpose of
carrying out the Project.
(2) Availability.--The contributed funds shall be
available for expenditure for the purpose of carrying
out the Project--
(A) without fiscal year limitation; and
(B) as if the funds had been appropriated
specifically for that Project.
(3) Allocation of costs.--In carrying out a Project
under subsection (a) or (b), any costs of the Project
not paid for by contributions from another entity shall
be collected through rates charged to customers using
the new transmission capability provided by the Project
and allocated equitably among these project
beneficiaries using the new transmission capability.
(d) Relationship to Other Laws.--Nothing in this section
affects any requirement of--
(1) any Federal environmental law, including the
National Environmental Policy Act of 1969 (42 U.S.C.
4321 et seq.);
(2) any Federal or State law relating to the siting
of energy facilities; or
(3) any existing authorizing statutes.
(e) Savings Clause.--Nothing in this section shall
constrain or restrict an Administrator in the utilization of
other authority delegated to the Administrator of WAPA or SWPA.
(f) Secretarial Determinations.--Any determination made
pursuant to subsections (a) or (b) shall be based on findings
by the Secretary using the best available data.
(g) Maximum Funding Amount.--The Secretary shall not accept
and use more than $100,000,000 under subsection (c)(1) for the
period encompassing fiscal years 2004 through 2013.
SEC. 1223. TRANSMISSION SYSTEM MONITORING.
Within 6 months after the date of enactment of this Act,
the Secretary of Energy and the Federal Energy Regulatory
Commission shall study and report to Congress on the steps
which must be taken to establish a system to make available to
all transmission system owners and Regional Transmission
Organizations (as defined in the Federal Power Act) within the
Eastern and Western Interconnections real-time information on
the functional status of all transmission lines within such
Interconnections. In such study, the Commission shall assess
technical means for implementing such transmission information
system and identify the steps the Commission or Congress must
take to require the implementation of such system.
SEC. 1224. ADVANCED TRANSMISSION TECHNOLOGIES.
(a) Authority.--The Federal Energy Regulatory Commission,
in the exercise of its authorities under the Federal Power Act
and the Public Utility Regulatory Policies Act of 1978, shall
encourage the deployment of advanced transmission technologies.
(b) Definition.--For the purposes of this section, the term
``advanced transmission technologies'' means technologies that
increase the capacity, efficiency, or reliability of existing
or new transmission facilities, including, but not limited to--
(1) high-temperature lines (including
superconducting cables);
(2) underground cables;
(3) advanced conductor technology (including
advanced composite conductors, high-temperature low-sag
conductors, and fiber optic temperature sensing
conductors);
(4) high-capacity ceramic electric wire,
connectors, and insulators;
(5) optimized transmission line configurations
(including multiple phased transmission lines);
(6) modular equipment;
(7) wireless power transmission;
(8) ultra-high voltage lines;
(9) high-voltage DC technology;
(10) flexible AC transmission systems;
(11) energy storage devices (including pumped
hydro, compressed air, superconducting magnetic energy
storage, flywheels, and batteries);
(12) controllable load;
(13) distributed generation (including PV, fuel
cells, microturbines);
(14) enhanced power device monitoring;
(15) direct system state sensors;
(16) fiber optic technologies;
(17) power electronics and related software
(including real time monitoring and analytical
software); and
(18) any other technologies the Commission
considers appropriate.
(c) Obsolete or Impracticable Technologies.--The Commission
is authorized to cease encouraging the deployment of any
technology described in this section on a finding that such
technology has been rendered obsolete or otherwise
impracticable to deploy.
SEC. 1225. ELECTRIC TRANSMISSION AND DISTRIBUTION PROGRAMS.
(a) Electric Transmission and Distribution Program.--The
Secretary of Energy (hereinafter in this section referred to as
the ``Secretary'') acting through the Director of the Office of
Electric Transmission and Distribution shall establish a
comprehensive research, development, demonstration and
commercial application program to promote improved reliability
and efficiency of electrical transmission and distribution
systems. This program shall include--
(1) advanced energy delivery and storage
technologies, materials, and systems, including new
transmission technologies, such as flexible alternating
current transmission systems, composite conductor
materials and other technologies that enhance
reliability, operational flexibility, or power-carrying
capability;
(2) advanced grid reliability and efficiency
technology development;
(3) technologies contributing to significant load
reductions;
(4) advanced metering, load management, and control
technologies;
(5) technologies to enhance existing grid
components;
(6) the development and use of high-temperature
superconductors to--
(A) enhance the reliability, operational
flexibility, or power-carrying capability of
electric transmission or distribution systems;
or
(B) increase the efficiency of electric
energy generation, transmission, distribution,
or storage systems;
(7) integration of power systems, including systems
to deliver high-quality electric power, electric power
reliability, and combined heat and power;
(8) supply of electricity to the power grid by
small scale, distributed and residential-based power
generators;
(9) the development and use of advanced grid
design, operation and planning tools;
(10) any other infrastructure technologies, as
appropriate; and
(11) technology transfer and education.
(b) Program Plan.--Not later than 1 year after the date of
the enactment of this legislation, the Secretary, in
consultation with other appropriate Federal agencies, shall
prepare and transmit to Congress a 5-year program plan to guide
activities under this section. In preparing the program plan,
the Secretary may consult with utilities, energy services
providers, manufacturers, institutions of higher education,
other appropriate State and local agencies, environmental
organizations, professional and technical societies, and any
other persons the Secretary considers appropriate.
(c) Implementation.--The Secretary shall consider
implementing this program using a consortium of industry,
university and national laboratory participants.
(d) Report.--Not later than 2 years after the transmittal
of the plan under subsection (b), the Secretary shall transmit
a report to Congress describing the progress made under this
section and identifying any additional resources needed to
continue the development and commercial application of
transmission and distribution infrastructure technologies.
(e) Power Delivery Research Initiative.--
(1) In general.--The Secretary shall establish a
research, development, demonstration, and commercial
application initiative specifically focused on power
delivery utilizing components incorporating high
temperature superconductivity.
(2) Goals.--The goals of this initiative shall be
to--
(A) establish facilities to develop high
temperature superconductivity power
applications in partnership with manufacturers
and utilities;
(B) provide technical leadership for
establishing reliability for high temperature
superconductivity power applications including
suitable modeling and analysis;
(C) facilitate commercial transition toward
direct current power transmission, storage, and
use for high power systems utilizing high
temperature superconductivity; and
(D) facilitate the integration of very low
impedance high temperature superconducting
wires and cables in existing electric networks
to improve system performance, power flow
control and reliability.
(3) Requirements.--The initiative shall include--
(A) feasibility analysis, planning,
research, and design to construct
demonstrations of superconducting links in high
power, direct current and controllable
alternating current transmission systems;
(B) public-private partnerships to
demonstrate deployment of high temperature
superconducting cable into testbeds simulating
a realistic transmission grid and under varying
transmission conditions, including actual grid
insertions; and
(C) testbeds developed in cooperation with
national laboratories, industries, and
universities to demonstrate these technologies,
prepare the technologies for commercial
introduction, and address cost or performance
roadblocks to successful commercial use.
(4) Authorization of appropriations.--For purposes
of carrying out this subsection, there are authorized
to be appropriated--
(A) for fiscal year 2004, $15,000,000;
(B) for fiscal year 2005, $20,000,000;
(C) for fiscal year 2006, $30,000,000;
(D) for fiscal year 2007, $35,000,000; and
(E) for fiscal year 2008, $40,000,000.
SEC. 1226. ADVANCED POWER SYSTEM TECHNOLOGY INCENTIVE PROGRAM.
(a) Program.--The Secretary of Energy is authorized to
establish an Advanced Power System Technology Incentive Program
to support the deployment of certain advanced power system
technologies and to improve and protect certain critical
governmental, industrial, and commercial processes. Funds
provided under this section shall be used by the Secretary to
make incentive payments to eligible owners or operators of
advanced power system technologies to increase power generation
through enhanced operational, economic, and environmental
performance. Payments under this section may only be made upon
receipt by the Secretary of an incentive payment application
establishing an applicant as either--
(1) a qualifying advanced power system technology
facility; or
(2) a qualifying security and assured power
facility.
(b) Incentives.--Subject to availability of funds, a
payment of 1.8 cents per kilowatt-hour shall be paid to the
owner or operator of a qualifying advanced power system
technology facility under this section for electricity
generated at such facility. An additional 0.7 cents per
kilowatt-hour shall be paid to the owner or operator of a
qualifying security and assured power facility for electricity
generated at such facility. Any facility qualifying under this
section shall be eligible for an incentive payment for up to,
but not more than, the first 10,000,000 kilowatt-hours produced
in any fiscal year.
(c) Eligibility.--For purposes of this section:
(1) Qualifying advanced power system technology
facility.--The term ``qualifying advanced power system
technology facility'' means a facility using an
advanced fuel cell, turbine, or hybrid power system or
power storage system to generate or store electric
energy.
(2) Qualifying security and assured power
facility.--The term ``qualifying security and assured
power facility'' means a qualifying advanced power
system technology facility determined by the Secretary
of Energy, in consultation with the Secretary of
Homeland Security, to be in critical need of secure,
reliable, rapidly available, high-quality power for
critical governmental, industrial, or commercial
applications.
(d) Authorization.--There are authorized to be appropriated
to the Secretary of Energy for the purposes of this section,
$10,000,000 for each of the fiscal years 2004 through 2010.
SEC. 1227. OFFICE OF ELECTRIC TRANSMISSION AND DISTRIBUTION.
(a) Creation of an Office of Electric Transmission and
Distribution.--Title II of the Department of Energy
Organization Act (42 U.S.C. 7131 et seq.) (as amended by
section 502(a) of this Act) is amended by inserting the
following after section 217, as added by title V of this Act:
``SEC. 218. OFFICE OF ELECTRIC TRANSMISSION AND DISTRIBUTION.
``(a) Establishment.--There is established within the
Department an Office of Electric Transmission and Distribution.
This Office shall be headed by a Director, subject to the
authority of the Secretary. The Director shall be appointed by
the Secretary. The Director shall be compensated at the annual
rate prescribed for level IV of the Executive Schedule under
section 5315 of title 5, United States Code.
``(b) Director.--The Director shall--
``(1) coordinate and develop a comprehensive,
multi-year strategy to improve the Nation's electricity
transmission and distribution;
``(2) implement or, where appropriate, coordinate
the implementation of, the recommendations made in the
Secretary's May 2002 National Transmission Grid Study;
``(3) oversee research, development, and
demonstration to support Federal energy policy related
to electricity transmission and distribution;
``(4) grant authorizations for electricity import
and export pursuant to section 202(c), (d), (e), and
(f) of the Federal Power Act (16 U.S.C. 824a);
``(5) perform other functions, assigned by the
Secretary, related to electricity transmission and
distribution; and
``(6) develop programs for workforce training in
power and transmission engineering.''.
(b) Conforming Amendments.--(1) The table of contents of
the Department of Energy Organization Act (42 U.S.C. 7101 note)
is amended by inserting after the item relating to section 217
the following new item:
``Sec. 218. Office of Electric Transmission and Distribution.''.
(2) Section 5315 of title 5, United States Code, is amended
by inserting after the item relating to ``Inspector General,
Department of Energy.'' the following:
``Director, Office of Electric Transmission and
Distribution, Department of Energy.''.
Subtitle C--Transmission Operation Improvements
SEC. 1231. OPEN NONDISCRIMINATORY ACCESS.
Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is
amended by inserting after section 211 the following new
section:
``SEC. 211A. OPEN ACCESS BY UNREGULATED TRANSMITTING UTILITIES.
``(a) Transmission Services.--Subject to section 212(h),
the Commission may, by rule or order, require an unregulated
transmitting utility to provide transmission services--
``(1) at rates that are comparable to those that
the unregulated transmitting utility charges itself;
and
``(2) on terms and conditions (not relating to
rates) that are comparable to those under which such
unregulated transmitting utility provides transmission
services to itself and that are not unduly
discriminatory or preferential.
``(b) Exemption.--The Commission shall exempt from any rule
or order under this section any unregulated transmitting
utility that--
``(1) sells no more than 4,000,000 megawatt hours
of electricity per year; or
``(2) does not own or operate any transmission
facilities that are necessary for operating an
interconnected transmission system (or any portion
thereof); or
``(3) meets other criteria the Commission
determines to be in the public interest.
``(c) Local Distribution Facilities.--The requirements of
subsection (a) shall not apply to facilities used in local
distribution.
``(d) Exemption Termination.--Whenever the Commission,
after an evidentiary hearing held upon a complaint and after
giving consideration to reliability standards established under
section 215, finds on the basis of a preponderance of the
evidence that any exemption granted pursuant to subsection (b)
unreasonably impairs the continued reliability of an
interconnected transmission system, it shall revoke the
exemption granted to that transmitting utility.
``(e) Application to Unregulated Transmitting Utilities.--
The rate changing procedures applicable to public utilities
under subsections (c) and (d) of section 205 are applicable to
unregulated transmitting utilities for purposes of this
section.
``(f) Remand.--In exercising its authority under paragraph
(1) of subsection (a), the Commission may remand transmission
rates to an unregulated transmitting utility for review and
revision where necessary to meet the requirements of subsection
(a).
``(g) Other Requests.--The provision of transmission
services under subsection (a) does not preclude a request for
transmission services under section 211.
``(h) Limitation.--The Commission may not require a State
or municipality to take action under this section that would
violate a private activity bond rule for purposes of section
141 of the Internal Revenue Code of 1986 (26 U.S.C. 141).
``(i) Transfer of Control of Transmitting Facilities.--
Nothing in this section authorizes the Commission to require an
unregulated transmitting utility to transfer control or
operational control of its transmitting facilities to an RTO or
any other Commission-approved independent transmission
organization designated to provide nondiscriminatory
transmission access.
``(j) Definition.--For purposes of this section, the term
`unregulated transmitting utility' means an entity that--
``(1) owns or operates facilities used for the
transmission of electric energy in interstate commerce;
and
``(2) is an entity described in section 201(f).''.
SEC. 1232. SENSE OF CONGRESS ON REGIONAL TRANSMISSION ORGANIZATIONS.
It is the sense of Congress that, in order to promote fair,
open access to electric transmission service, benefit retail
consumers, facilitate wholesale competition, improve
efficiencies in transmission grid management, promote grid
reliability, remove opportunities for unduly discriminatory or
preferential transmission practices, and provide for the
efficient development of transmission infrastructure needed to
meet the growing demands of competitive wholesale power
markets, all transmitting utilities in interstate commerce
should voluntarily become members of Regional Transmission
Organizations as defined in section 3 of the Federal Power Act.
SEC. 1233. REGIONAL TRANSMISSION ORGANIZATION APPLICATIONS PROGRESS
REPORT.
Not later than 120 days after the date of enactment of this
section, the Federal Energy Regulatory Commission shall submit
to Congress a report containing each of the following:
(1) A list of all regional transmission
organization applications filed at the Commission
pursuant to subpart F of part 35 of title 18, Code of
Federal Regulations (in this section referred to as
``Order No. 2000''), including an identification of
each public utility and other entity included within
the proposed membership of the regional transmission
organization.
(2) A brief description of the status of each
pending regional transmission organization application,
including a precise explanation of how each fails to
comply with the minimal requirements of Order No. 2000
and what steps need to be taken to bring each
application into such compliance.
(3) For any application that has not been finally
approved by the Commission, a detailed description of
every aspect of the application that the Commission has
determined does not conform to the requirements of
Order No. 2000.
(4) For any application that has not been finally
approved by the Commission, an explanation by the
Commission of why the items described pursuant to
paragraph (3) constitute material noncompliance with
the requirements of the Commission's Order No. 2000
sufficient to justify denial of approval by the
Commission.
(5) For all regional transmission organization
applications filed pursuant to the Commission's Order
No. 2000, whether finally approved or not--
(A) a discussion of that regional
transmission organization's efforts to minimize
rate seams between itself and--
(i) other regional transmission
organizations; and
(ii) entities not participating in
a regional transmission organization;
(B) a discussion of the impact of such
seams on consumers and wholesale competition;
and
(C) a discussion of minimizing cost-
shifting on consumers.
SEC. 1234. FEDERAL UTILITY PARTICIPATION IN REGIONAL TRANSMISSION
ORGANIZATIONS.
(a) Definitions.--For purposes of this section--
(1) Appropriate federal regulatory authority.--The
term ``appropriate Federal regulatory authority''
means--
(A) with respect to a Federal power
marketing agency (as defined in the Federal
Power Act), the Secretary of Energy, except
that the Secretary may designate the
Administrator of a Federal power marketing
agency to act as the appropriate Federal
regulatory authority with respect to the
transmission system of that Federal power
marketing agency; and
(B) with respect to the Tennessee Valley
Authority, the Board of Directors of the
Tennessee Valley Authority.
(2) Federal utility.--The term ``Federal utility''
means a Federal power marketing agency or the Tennessee
Valley Authority.
(3) Transmission system.--The term ``transmission
system'' means electric transmission facilities owned,
leased, or contracted for by the United States and
operated by a Federal utility.
(b) Transfer.--The appropriate Federal regulatory authority
is authorized to enter into a contract, agreement or other
arrangement transferring control and use of all or part of the
Federal utility's transmission system to an RTO or ISO (as
defined in the Federal Power Act), approved by the Federal
Energy Regulatory Commission. Such contract, agreement or
arrangement shall include--
(1) performance standards for operation and use of
the transmission system that the head of the Federal
utility determines necessary or appropriate, including
standards that assure recovery of all the Federal
utility's costs and expenses related to the
transmission facilities that are the subject of the
contract, agreement or other arrangement; consistency
with existing contracts and third-party financing
arrangements; and consistency with said Federal
utility's statutory authorities, obligations, and
limitations;
(2) provisions for monitoring and oversight by the
Federal utility of the RTO's or ISO's fulfillment of
the terms and conditions of the contract, agreement or
other arrangement, including a provision for the
resolution of disputes through arbitration or other
means with the regional transmission organization or
with other participants, notwithstanding the
obligations and limitations of any other law regarding
arbitration; and
(3) a provision that allows the Federal utility to
withdraw from the RTO or ISO and terminate the
contract, agreement or other arrangement in accordance
with its terms.
Neither this section, actions taken pursuant to it, nor any
other transaction of a Federal utility using an RTO or ISO
shall confer upon the Federal Energy Regulatory Commission
jurisdiction or authority over the Federal utility's electric
generation assets, electric capacity or energy that the Federal
utility is authorized by law to market, or the Federal
utility's power sales activities.
(c) Existing Statutory and Other Obligations.--
(1) System operation requirements.--No statutory
provision requiring or authorizing a Federal utility
totransmit electric power or to construct, operate or maintain its
transmission system shall be construed to prohibit a transfer of
control and use of its transmission system pursuant to, and subject to
all requirements of subsection (b).
(2) Other obligations.--This subsection shall not
be construed to--
(A) suspend, or exempt any Federal utility
from, any provision of existing Federal law,
including but not limited to any requirement or
direction relating to the use of the Federal
utility's transmission system, environmental
protection, fish and wildlife protection, flood
control, navigation, water delivery, or
recreation; or
(B) authorize abrogation of any contract or
treaty obligation.
(3) Repeal.--Section 311 of title III of Appendix B
of the Act of October 27, 2000 (P.L. 106-377, section
1(a)(2); 114 Stat. 1441, 1441A-80; 16 U.S.C. 824n) is
repealed.
SEC. 1235. STANDARD MARKET DESIGN.
(a) Remand.--The Commission's proposed rulemaking entitled
``Remedying Undue Discrimination through Open Access
Transmission Service and Standard Electricity Market Design''
(Docket No. RM01-12-000) (``SMD NOPR'') is remanded to the
Commission for reconsideration. No final rule mandating a
standard electricity market design pursuant to the proposed
rulemaking, including any rule or order of general
applicability within the scope of the proposed rulemaking, may
be issued before October 31, 2006, or take effect before
December 31, 2006. Any final rule issued by the Commission
pursuant to the proposed rulemaking shall be preceded by a
second notice of proposed rulemaking issued after the date of
enactment of this Act and an opportunity for public comment.
(b) Savings Clause.--This section shall not be construed to
modify or diminish any authority or obligation the Commission
has under this Act, the Federal Power Act, or other applicable
law, including, but not limited to, any authority to--
(1) issue any rule or order (of general or
particular applicability) pursuant to any such
authority or obligation; or
(2) act on a filing or filings by 1 or more
transmitting utilities for the voluntary formation of a
Regional Transmission Organization or Independent
System Operator (as defined in the Federal Power Act)
(and related market structures or rules) or voluntary
modification of an existing Regional Transmission
Organization or Independent System Operator (and
related market structures or rules).
SEC. 1236. NATIVE LOAD SERVICE OBLIGATION.
Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is
amended by adding at the end the following:
``SEC. 217. NATIVE LOAD SERVICE OBLIGATION.
``(a) Meeting Service Obligations.--(1) Any load-serving
entity that, as of the date of enactment of this section--
``(A) owns generation facilities, markets the
output of Federal generation facilities, or holds
rights under 1 or more wholesale contracts to purchase
electric energy, for the purpose of meeting a service
obligation, and
``(B) by reason of ownership of transmission
facilities, or 1 or more contracts or service
agreements for firm transmission service, holds firm
transmission rights for delivery of the output of such
generation facilities or such purchased energy to meet
such service obligation,
is entitled to use such firm transmission rights, or,
equivalent tradable or financial transmission rights, in order
to deliver such output or purchased energy, or the output of
other generating facilities or purchased energy to the extent
deliverable using such rights, to the extent required to meet
its service obligation.
``(2) To the extent that all or a portion of the service
obligation covered by such firm transmission rights or
equivalent tradable or financial transmission rights is
transferred to another load-serving entity, the successor load-
serving entity shall be entitled to use the firm transmission
rights or equivalent tradable or financial transmission rights
associated with the transferred service obligation. Subsequent
transfers to another load-serving entity, or back to the
original load-serving entity, shall be entitled to the same
rights.
``(3) The Commission shall exercise its authority under
this Act in a manner that facilitates the planning and
expansion of transmission facilities to meet the reasonable
needs of load-serving entities to satisfy their service
obligations.
``(b) Allocation of Transmission Rights.--Nothing in this
section shall affect any methodology approved by the Commission
prior to September 15, 2003, for the allocation of transmission
rights by an RTO or ISO that has been authorized by the
Commission to allocate transmission rights.
``(c) Certain Transmission Rights.--The Commission may
exercise authority under this Act to make transmission rights
not used to meet an obligation covered by subsection (a)
available to other entities in a manner determined by the
Commission to be just, reasonable, and not unduly
discriminatory or preferential.
``(d) Obligation To Build.--Nothing in this Act shall
relieve a load-serving entity from any obligation under State
or local law to build transmission or distribution facilities
adequate to meet its service obligations.
``(e) Contracts.--Nothing in this section shall provide a
basis for abrogating any contract or service agreement for firm
transmission service or rights in effect as of the date of the
enactment of this subsection.
``(f) Water Pumping Facilities.--The Commission shall
ensure that any entity described in section 201(f) that owns
transmission facilities used predominately to support its own
water pumping facilities shall have, with respect to such
facilities, protections for transmission service comparable to
those provided to load-serving entities pursuant to this
section.
``(g) ERCOT.--This section shall not apply within the area
referred to in section 212(k)(2)(A).
``(h) Jurisdiction.--This section does not authorize the
Commission to take any action not otherwise within its
jurisdiction.
``(i) Effect of Exercising Rights.--An entity that lawfully
exercises rights granted under subsection (a) shall not be
considered by such action as engaging in undue discrimination
or preference under this Act.
``(j) TVA Area.--For purposes of subsection (a)(1)(B), a
load-serving entity that is located within the service area of
the Tennessee Valley Authority and that has a firm wholesale
power supply contract with the Tennessee Valley Authority shall
be deemed to hold firm transmission rights for the transmission
of such power.
``(k) Definitions.--For purposes of this section:
``(1) The term `distribution utility' means an
electric utility that has a service obligation to end-
users or to a State utility or electric cooperative
that, directly or indirectly, through 1 or more
additional State utilities or electric cooperatives,
provides electric service to end-users.
``(2) The term `load-serving entity' means a
distribution utility or an electric utility that has a
service obligation.
``(3) The term `service obligation' means a
requirement applicable to, or the exercise of authority
granted to, an electric utility under Federal, State or
local law or under long-term contracts to provide
electric service to end-users or to a distribution
utility.
``(4) The term `State utility' means a State or any
political subdivision of a State, or any agency,
authority, or instrumentality of any 1 or more of the
foregoing, or a corporation which is wholly owned,
directly or indirectly, by any 1 or more of the
foregoing, competent to carry on the business of
developing, transmitting, utilizing or distributing
power.''.
SEC. 1237. STUDY ON THE BENEFITS OF ECONOMIC DISPATCH.
(a) Study.--The Secretary of Energy, in coordination and
consultation with the States, shall conduct a study on--
(1) the procedures currently used by electric
utilities to perform economic dispatch;
(2) identifying possible revisions to those
procedures to improve the ability of nonutility
generation resources to offer their output for sale for
the purpose of inclusion in economic dispatch; and
(3) the potential benefits to residential,
commercial, and industrial electricity consumers
nationally and in each State if economic dispatch
procedures were revised to improve the ability of
nonutility generation resources to offer their output
for inclusion in economic dispatch.
(b) Definition.--The term ``economic dispatch'' when used
in this section means the operation of generation facilities to
produce energy at the lowest cost to reliably serve consumers,
recognizing any operational limits of generation and
transmission facilities.
(c) Report to Congress and the States.--Not later than 90
days after the date of enactment of this Act, and on a yearly
basis following, the Secretary of Energy shall submit a report
to Congress and the States on the results of the study
conducted under subsection (a), including recommendations to
Congress and the States for any suggested legislative or
regulatory changes.
Subtitle D--Transmission Rate Reform
SEC. 1241. TRANSMISSION INFRASTRUCTURE INVESTMENT.
Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is
amended by adding at the end the following:
``SEC. 218. TRANSMISSION INFRASTRUCTURE INVESTMENT.
``(a) Rulemaking Requirement.--Within 1 year after the
enactment of this section, the Commission shall establish, by
rule, incentive-based (including, but not limited to
performance-based) rate treatments for the transmission of
electric energy in interstate commerce by public utilities for
the purpose of benefiting consumers by ensuring reliability and
reducing the cost of delivered power by reducing transmission
congestion. Such rule shall--
``(1) promote reliable and economically efficient
transmission and generation of electricity by promoting
capital investment in the enlargement, improvement,
maintenance and operation of facilities for the
transmission of electric energy in interstate commerce;
``(2) provide a return on equity that attracts new
investment in transmission facilities (including
related transmission technologies);
``(3) encourage deployment of transmission
technologies and other measures to increase the
capacity and efficiency of existing transmission
facilities and improve the operation of such
facilities; and
``(4) allow recovery of all prudently incurred
costs necessary to comply with mandatory reliability
standards issued pursuant to section 215 of this Act.
The Commission may, from time to time, revise such rule.
``(b) Additional Incentives for RTO Participation.--In the
rule issued under this section, the Commission shall, to the
extent within its jurisdiction, provide for incentives to each
transmitting utility or electric utility that joins a Regional
Transmission Organization or Independent System Operator.
Incentives provided by the Commission pursuant to such rule
shall include--
``(1) recovery of all prudently incurred costs to
develop and participate in any proposed or approved
RTO, ISO, or independent transmission company;
``(2) recovery of all costs previously approved by
a State commission which exercised jurisdiction over
the transmission facilities prior to the utility's
participation in the RTO or ISO, including costs
necessary to honor preexisting transmission service
contracts, in a manner which does not reduce the
revenues the utility receives for transmission services
for a reasonable transition period after the utility
joins the RTO or ISO;
``(3) recovery as an expense in rates of the costs
prudently incurred to conduct transmission planning and
reliability activities, including the costs of
participating in RTO, ISO and other regional planning
activities and design, study and other precertification
costs involved in seeking permits and approvals for
proposed transmission facilities;
``(4) a current return in rates for construction
work in progress for transmission facilities and full
recovery of prudently incurred costs for constructing
transmission facilities;
``(5) formula transmission rates; and
``(6) a maximum 15-year accelerated depreciation on
new transmission facilities for rate treatment
purposes.
The Commission shall ensure that any costs recoverable pursuant
to this subsection may be recovered by such utility through the
transmission rates charged by such utility or through the
transmission rates charged by the RTO or ISO that provides
transmission service to such utility.
``(c) Just and Reasonable Rates.--All rates approved under
the rules adopted pursuant to this section, including any
revisions to such rules, are subject to the requirement of
sections 205 and 206 that all rates, charges, terms, and
conditions be just and reasonable and not unduly discriminatory
or preferential.''.
SEC. 1242. VOLUNTARY TRANSMISSION PRICING PLANS.
Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is
amended by adding at the end the following:
``SEC. 219. VOLUNTARY TRANSMISSION PRICING PLANS.
``(a) In General.--Any transmission provider, including an
RTO or ISO, may submit to the Commission a plan or plans under
section 205 containing the criteria for determining the person
or persons that will be required to pay for any construction of
new transmission facilities or expansion, modification or
upgrade of transmission facilities (in this section referred to
as `transmission service related expansion') or new generator
interconnection.
``(b) Voluntary Transmission Pricing Plans.--(1) Any plan
or plans submitted under subsection (a) shall specify the
method or methods by which costs may be allocated or assigned.
Such methods may include, but are not limited to:
``(A) directly assigned;
``(B) participant funded; or
``(C) rolled into regional or sub-regional rates.-
``(2) FERC shall approve a plan or plans submitted under
subparagraph (B) of paragraph (1) if such plan or plans--
``(A) result in rates that are just and reasonable
and not unduly discriminatory or preferential
consistent with section 205; and
``(B) ensure that the costs of any transmission
service related expansion or new generator
interconnection not required to meet applicable
reliability standards established under section 215 are
assigned in a fair manner, meaning that those who
benefit from the transmission service related expansion
or new generator interconnection pay an appropriate
share of the associated costs, provided that--
``(i) costs may not be assigned or
allocated to an electric utility if the native
load customers of that utility would not have
required such transmission service related
expansion or new generator interconnection
absent the request for transmission service
related expansion or new generator
interconnection that necessitated the
investment;
``(ii) the party requesting such
transmission service related expansion or new
generator interconnection shall not be required
to pay for both--
``(I) the assigned cost of the
upgrade; and
``(II) the difference between--
``(aa) the embedded cost
paid for transmission services
(including the cost of the
requested upgrade); and
``(bb) the embedded cost
that would have been paid
absent the upgrade; and
``(iii) the party or parties who pay for
facilities necessary for the transmission
service related expansion or new generator
interconnection receives full compensation for
its costs for the participant funded facilities
in the form of--
``(I) monetary credit equal to the
cost of the participant funded
facilities (accounting for the time
value of money at the Gross Domestic
Product deflator), which credit shall
be pro-rated in equal installments over
a period of not more than 30 years and
shall not exceed in total the amount of
the initial investment, against the
transmission charges that the funding
entity or its assignee is otherwise
assessed by the transmission provider;
``(II) appropriate financial or
physical rights; or
``(III) any other method of cost
recovery or compensation approved by
the Commission.
``(3) A plan submitted under this section shall apply only
to--
``(A) a contract or interconnection agreement
executed or filed with the Commission after the date of
enactment of this section; or
``(B) an interconnection agreement pending
rehearing as of November 1, 2003.
``(4) Nothing in this section diminishes or alters the
rights of individual members of an RTO or ISO under this Act.
``(5) Nothing in this section shall affect the allocation
of costs or the cost methodology employed by an RTO or ISO
authorized by the Commission to allocate costs (including costs
for transmission service related expansion or new generator
interconnection) prior to the date of enactment of this
section.
``(6) This section shall not apply within the area referred
to in section 212(k)(2)(A).
``(7) The term `transmission provider' means a public
utility that owns or operates facilities that provide
interconnection or transmission service in interstate
commerce.''.
Subtitle E--Amendments to PURPA
SEC. 1251. NET METERING AND ADDITIONAL STANDARDS.
(a) Adoption of Standards.--Section 111(d) of the Public
Utility Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)) is
amended by adding at the end the following:
``(11) Net metering.--Each electric utility shall
make available upon request net metering service to any
electric consumer that the electric utility serves. For
purposes of this paragraph, the term `net metering
service' means service to an electric consumer under
which electric energy generated by that electric
consumer from an eligible on-site generating facility
and delivered to the local distribution facilities may
be used to offset electric energy provided by the
electric utility to the electric consumer during the
applicable billing period.
``(12) Fuel sources.--Each electric utility shall
develop a plan to minimize dependence on 1 fuel source
and to ensure that the electric energy it sells to
consumers is generated using a diverse range of fuels
and technologies, including renewable technologies.
``(13) Fossil fuel generation efficiency.--Each
electric utility shall develop and implement a 10-year
plan to increase the efficiency of its fossil fuel
generation.''.
(b) Compliance.--
(1) Time limitations.--Section 112(b) of the Public
Utility Regulatory Policies Act of 1978 (16 U.S.C.
2622(b)) is amended by adding at the end the following:
``(3)(A) Not later than 2 years after the enactment of this
paragraph, each State regulatory authority (with respect to
each electric utility for which it has ratemaking authority)
and each nonregulated electric utility shall commence the
consideration referred to in section 111, or set a hearing date
for such consideration, with respect to each standard
established by paragraphs (11) through (13) of section 111(d).
``(B) Not later than 3 years after the date of the
enactment of this paragraph, each State regulatory authority
(with respect to each electric utility for which it has
ratemaking authority), and each nonregulated electric utility,
shall complete the consideration, and shall make the
determination, referred to in section 111 with respect to each
standard established by paragraphs (11) through (13) of section
111(d).''.
(2) Failure to comply.--Section 112(c) of the
Public Utility Regulatory Policies Act of 1978 (16
U.S.C. 2622(c)) is amended by adding at the end the
following:
``In the case of each standard established by paragraphs (11)
through (13) of section 111(d), the reference contained in this
subsection to the date of enactment of this Act shall be deemed
to be a reference to the date of enactment of such paragraphs
(11) through (13).''.
(3) Prior state actions.--
(A) In general.--Section 112 of the Public
Utility Regulatory Policies Act of 1978 (16
U.S.C. 2622) is amended by adding at the end
the following:
``(d) Prior State Actions.--Subsections (b) and (c) of this
section shall not apply to the standards established by
paragraphs (11) through (13) of section 111(d) in the case of
any electric utility in a State if, before the enactment of
this subsection--
``(1) the State has implemented for such utility
the standard concerned (or a comparable standard);
``(2) the State regulatory authority for such State
or relevant nonregulated electric utility has conducted
a proceeding to consider implementation of the standard
concerned (or a comparable standard) for such utility;
or
``(3) the State legislature has voted on the
implementation of such standard (or a comparable
standard) for such utility.''.
(B) Cross reference.--Section 124 of such
Act (16 U.S.C. 2634) is amended by adding the
following at the end thereof: ``In the case of
each standard established by paragraphs (11)
through (13) of section 111(d), the reference
contained in this subsection to the date of
enactment of this Act shall be deemed to be a
reference to the date of enactment of such
paragraphs (11) through (13).''.
SEC. 1252. SMART METERING.
(a) In General.--Section 111(d) of the Public Utilities
Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)) is amended
by adding at the end the following:
``(14) Time-based metering and communications.--
``(A) Not later than 18 months after the
date of enactment of this paragraph, each
electric utility shall offer each of its
customer classes, and provide individual
customers upon customer request, a time-based
rate schedule under which the rate charged by
the electric utility varies during different
time periods and reflects the variance, if any,
in the utility's costs of generating and
purchasing electricity at the wholesale level.
The time-based rate schedule shall enable the
electric consumer to manage energy use and cost
through advanced metering and communications
technology.
``(B) The types of time-based rate
schedules that may be offered under the
schedule referred to in subparagraph (A)
include, among others--
``(i) time-of-use pricing whereby
electricity prices are set for a
specific time period on an advance or
forward basis, typically not changing
more often than twice a year, based on
the utility's cost of generating and/or
purchasing such electricity at the
wholesale level for the benefit of the
consumer. Prices paid for energy
consumed during these periods shall be
pre-established and known to consumers
in advance of such consumption,
allowing them to vary their demand and
usage in response to such prices and
manage their energy costs by shifting
usage to a lower cost period or
reducing their consumption overall;
``(ii) critical peak pricing
whereby time-of-use prices are in
effect except for certain peak days,
when prices may reflect the costs of
generating and/or purchasing
electricity at the wholesale level and
when consumers may receive additional
discounts for reducing peak period
energy consumption; and
``(iii) real-time pricing whereby
electricity prices are set for a
specific time period on an advanced or
forward basis, reflecting the utility's
cost of generating and/or purchasing
electricity at the wholesale level, and
may change as often as hourly.
``(C) Each electric utility subject to
subparagraph (A) shall provide each customer
requesting a time-based rate with a time-based
meter capable of enabling the utility and
customer to offer and receive such rate,
respectively.
``(D) For purposes of implementing this
paragraph, any reference contained in this
section to the date of enactment of the Public
Utility Regulatory Policies Act of 1978 shall
be deemed to be a reference to the date of
enactment of this paragraph.
``(E) In a State that permits third-party
marketers to sell electric energy to retail
electric consumers, such consumers shall be
entitled to receive the same time-based
metering and communications device and service
as a retail electric consumer of the electric
utility.
``(F) Notwithstanding subsections (b) and
(c) of section 112, each State regulatory
authority shall, not later than 18 months after
the date of enactment of this paragraph conduct
an investigation in accordance with section
115(i) and issue a decision whether it is
appropriate to implement the standards set out
in subparagraphs (A) and (C).''.
(b) State Investigation of Demand Response and Time-Based
Metering.--Section 115 of the Public Utilities Regulatory
Policies Act of 1978 (16 U.S.C. 2625) is amended as follows:
(1) By inserting in subsection (b) after the phrase
``the standard for time-of-day rates established by
section 111(d)(3)'' the following: ``and the standard
for time-based metering and communications established
by section 111(d)(14)''.
(2) By inserting in subsection (b) after the phrase
``are likely to exceed the metering'' the following:
``and communications''.
(3) By adding the at the end the following:
``(i) Time-based metering and communications.--In making a
determination with respect to the standard established by
section 111(d)(14), the investigation requirement of section
111(d)(14)(F) shall be as follows: Each State regulatory
authority shall conduct an investigation and issue a decision
whether or not it is appropriate for electric utilities to
provide and install time-based meters and communications
devices for each of their customers which enable such customers
to participate in time-based pricing rate schedules and other
demand response programs.''.
(c) Federal Assistance on Demand Response.--Section 132(a)
of the Public Utility Regulatory Policies Act of 1978 (16
U.S.C. 2642(a)) is amended by striking ``and'' at the end of
paragraph (3), striking the period at the end of paragraph (4)
and inserting ``; and'', and by adding the following at the end
thereof:
``(5) technologies, techniques, and rate-making
methods related to advanced metering and communications
and the use of these technologies, techniques and
methods in demand response programs.''.
(d) Federal Guidance.--Section 132 of the Public Utility
Regulatory Policies Act of 1978 (16 U.S.C. 2642) is amended by
adding the following at the end thereof:
``(d) Demand response.--The Secretary shall be responsible
for--
``(1) educating consumers on the availability,
advantages, and benefits of advanced metering and
communications technologies, including the funding of
demonstration or pilot projects;
``(2) working with States, utilities, other energy
providers and advanced metering and communications
experts to identify and address barriers to the
adoption of demand response programs; and
``(3) not later than 180 days after the date of
enactment of the Energy Policy Act of 2003, providing
Congress with a report that identifies and quantifies
the national benefits of demand response and makes a
recommendation on achieving specific levels of such
benefits by January 1, 2005.''.
(e) Demand Response and Regional Coordination.--
(1) In general.--It is the policy of the United
States to encourage States to coordinate, on a regional
basis, State energy policies to provide reliable and
affordable demand response services to the public.
(2) Technical assistance.--The Secretary of Energy
shall provide technical assistance to States and
regional organizations formed by 2 or more States to
assist them in--
(A) identifying the areas with the greatest
demand response potential;
(B) identifying and resolving problems in
transmission and distribution networks,
including through the use of demand response;
(C) developing plans and programs to use
demand response to respond to peak demand or
emergency needs; and
(D) identifying specific measures consumers
can take to participate in these demand
response programs.
(3) Report.--Not later than 1 year after the date
of enactment of the Energy Policy Act of 2003, the
Commission shall prepare and publish an annual report,
by appropriate region, that assesses demand response
resources, including those available from all consumer
classes, and which identifies and reviews--
(A) saturation and penetration rate of
advanced meters and communications
technologies, devices and systems;
(B) existing demand response programs and
time-based rate programs;
(C) the annual resource contribution of
demand resources;
(D) the potential for demand response as a
quantifiable, reliable resource for regional
planning purposes; and
(E) steps taken to ensure that, in regional
transmission planning and operations, demand
resources are provided equitable treatment as a
quantifiable, reliable resource relative to the
resource obligations of any load-serving
entity, transmission provider, or transmitting
party.
(f) Federal Encouragement of Demand Response Devices.--It
is the policy of the United States that time-based pricing and
other forms of demand response, whereby electricity customers
are provided with electricity price signals and the ability to
benefit by responding to them, shall be encouraged, and the
deployment of such technology and devices that enable
electricity customers to participate in such pricing and demand
response systems shall be facilitated. It is further the policy
of the United States that the benefits of such demand response
that accrue to those not deploying such technology and devices,
but who are part of the same regional electricity entity, shall
be recognized.
(g) Time Limitations.--Section 112(b) of the Public Utility
Regulatory Policies Act of 1978 (16 U.S.C. 2622(b)) is amended
by adding at the end the following:
``(4)(A) Not later than 1 year after the enactment
of this paragraph, each State regulatory authority
(with respect to each electric utility for which it has
ratemaking authority) and each nonregulated electric
utility shall commence the consideration referred to in
section 111, or set a hearing date for such
consideration, with respect to the standard established
by paragraph (14) of section 111(d).
``(B) Not later than 2 years after the date of the
enactment of this paragraph, each State regulatory
authority (with respect to each electric utility for
which it has ratemaking authority), and each
nonregulated electric utility, shall complete the
consideration, and shall make the determination,
referred to in section 111 with respect to the standard
established by paragraph (14) of section 111(d).''.
(h) Failure To Comply.--Section 112(c) of the Public
Utility Regulatory Policies Act of 1978 (16 U.S.C. 2622(c)) is
amended by adding at the end the following:
``In the case of the standard established by paragraph (14) of
section 111(d), the reference contained in this subsection to
the date of enactment of this Act shall be deemed to be a
reference to the date of enactment of such paragraph (14).''.
(i) Prior State Actions Regarding Smart Metering
Standards.--
(1) In general.--Section 112 of the Public Utility
Regulatory Policies Act of 1978 (16 U.S.C. 2622) is
amended by adding at the end the following:
``(e) Prior State Actions.--Subsections (b) and (c) of this
section shall not apply to the standard established by
paragraph (14) of section 111(d) in the case of any electric
utility in a State if, before the enactment of this
subsection--
``(1) the State has implemented for such utility
the standard concerned (or a comparable standard);
``(2) the State regulatory authority for such State
or relevant nonregulated electric utility has conducted
a proceeding to consider implementation of the standard
concerned (or a comparable standard) for such utility
within the previous 3 years; or
``(3) the State legislature has voted on the
implementation of such standard (or a comparable
standard) for such utility within the previous 3
years.''.
(2) Cross reference.--Section 124 of such Act (16
U.S.C. 2634) is amended by adding the following at the
end thereof: ``In the case of the standard established
by paragraph (14) of section 111(d), the reference
contained in this subsection to the date of enactment
of this Act shall be deemed to be a reference to the
date of enactment of such paragraph (14).''.
SEC. 1253. COGENERATION AND SMALL POWER PRODUCTION PURCHASE AND SALE
REQUIREMENTS.
(a) Termination of Mandatory Purchase and Sale
Requirements.--Section 210 of the Public Utility Regulatory
Policies Act of 1978 (16 U.S.C. 824a-3) is amended by adding at
the end the following:
``(m) Termination of Mandatory Purchase and Sale
Requirements.--
``(1) Obligation to purchase.--After the date of
enactment of this subsection, no electric utility shall
be required to enter into a new contract or obligation
to purchase electric energy from a qualifying
cogeneration facility or a qualifying small power
production facility under this section if the
Commission finds that the qualifying cogeneration
facility or qualifying small power production facility
has nondiscriminatory access to--
``(A)(i) independently administered,
auction-based day ahead and real time wholesale
markets for the sale of electric energy; and
(ii) wholesale markets for long-term sales of
capacity and electric energy; or
``(B)(i) transmission and interconnection
services that are provided by a Commission-
approved regional transmission entity and
administered pursuant to an open access
transmission tariff that affords
nondiscriminatory treatment to all customers;
and (ii) competitive wholesale markets that
provide a meaningful opportunity to sell
capacity, including long-term and short-term
sales, and electric energy, including long-
term, short-term and real-time sales, to buyers
other than the utility to which the qualifying
facility is interconnected. In determining
whether a meaningful opportunity to sell
exists, the Commission shall consider, among
other factors, evidence of transactions within
the relevant market; or
``(C) wholesale markets for the sale of
capacity and electric energy that are, at a
minimum, of comparable competitive quality as
markets described in subparagraphs (A) and (B).
``(2) Revised purchase and sale obligation for new
facilities.--(A) After the date of enactment of this
subsection, no electric utility shall be required
pursuant to this section to enter into a new contract
or obligation to purchase from or sell electric energy
to a facility that is not an existing qualifying
cogeneration facility unless the facility meets the
criteria for qualifying cogeneration facilities
established by the Commission pursuant to the
rulemaking required by subsection (n).
``(B) For the purposes of this paragraph, the term
`existing qualifying cogeneration facility' means a
facility that--
``(i) was a qualifying cogeneration
facility on the date of enactment of subsection
(m); or
``(ii) had filed with the Commission a
notice of self-certification, self
recertification or an application for
Commission certification under 18 C.F.R.
292.207 prior to the date on which the
Commission issues the final rule required by
subsection (n).
``(3) Commission review.--Any electric utility may
file an application with the Commission for relief from
the mandatory purchase obligation pursuant to this
subsection on a service territory-wide basis. Such
application shall set forth the factual basis upon
which relief is requested and describe why the
conditions set forth in subparagraphs (A), (B) or (C)
of paragraph (1) of this subsection have been met.
After notice, including sufficient notice to
potentially affected qualifying cogeneration facilities
and qualifying small power production facilities, and
an opportunity for comment, the Commission shall make a
final determination within 90 days of such application
regarding whether the conditions set forth in
subparagraphs (A), (B) or (C) of paragraph (1) have
been met.
``(4) Reinstatement of obligation to purchase.--At
any time after the Commission makes a finding under
paragraph (3) relieving an electric utility of its
obligation to purchase electric energy, a qualifying
cogeneration facility, a qualifying small power
production facility, a State agency, or any other
affected person may apply to the Commission for an
order reinstating the electric utility's obligation to
purchase electric energy under this section. Such
application shall set forth the factual basis upon
which the application is based and describe why the
conditions set forth in subparagraphs (A), (B) or (C)
of paragraph (1) of this subsection are no longer met.
After notice, including sufficient notice to
potentially affected utilities, and opportunity for
comment, the Commission shall issue an order within 90
days of such application reinstating the electric
utility's obligation to purchase electric energy under
this section if the Commission finds that the
conditions set forth in subparagraphs (A), (B) or (C)
of paragraph (1) which relieved the obligation to
purchase, are no longer met.
``(5) Obligation to sell.--After the date of
enactment of this subsection, no electric utility shall
be required to enter into a new contract or obligation
to sell electric energy to a qualifying cogeneration
facility or a qualifying small power production
facility under this section if the Commission finds
that--
``(A) competing retail electric suppliers
are willing and able to sell and deliver
electric energy to the qualifying cogeneration
facility or qualifying small power production
facility; and
``(B) the electric utility is not required
by State law to sell electric energy in its
service territory.
``(6) No effect on existing rights and remedies.--
Nothing in this subsection affects the rights or
remedies of any party under any contract or obligation,
in effect or pending approval before the appropriate
State regulatory authority or non-regulated electric
utility on the date of enactment of this subsection, to
purchase electric energy or capacity from or to sell
electric energy or capacity to a qualifying
cogeneration facility or qualifying small power
production facility under this Act (including the right
to recover costs of purchasing electric energy or
capacity).
``(7) Recovery of costs.--(A) The Commission shall
issue and enforce such regulations as are necessary to
ensure that an electric utility that purchases electric
energy or capacity from a qualifying cogeneration
facility or qualifying small power production facility
in accordance with any legally enforceable obligation
entered into or imposed under this section recovers all
prudently incurred costs associated with the purchase.
``(B) A regulation under subparagraph (A) shall be
enforceable in accordance with the provisions of law
applicable to enforcement of regulations under the
Federal Power Act (16 U.S.C. 791a et seq.).
``(n) Rulemaking for New Qualifying Facilities.--(1)(A) Not
later than 180 days after the date of enactment of this
section, the Commission shall issue a rule revising the
criteria in 18 C.F.R. 292.205 for new qualifying cogeneration
facilities seeking to sell electric energy pursuant to section
210 of this Act to ensure--
``(i) that the thermal energy output of a new
qualifying cogeneration facility is used in a
productive and beneficial manner;
``(ii) the electrical, thermal, and chemical output
of the cogeneration facility is used fundamentally for
industrial, commercial, or institutional purposes and
is not intended fundamentally for sale to an electric
utility, taking into account technological, efficiency,
economic, and variable thermal energy requirements, as
well as State laws applicable to sales of electric
energy from a qualifying facility to its host facility;
and
``(iii) continuing progress in the development of
efficient electric energy generating technology.
``(B) The rule issued pursuant to section (n)(1)(A) shall
be applicable only to facilities that seek to sell electric
energy pursuant to section 210 of this Act. For all other
purposes, except as specifically provided in section (m)(2)(A),
qualifying facility status shall be determined in accordance
with the rules and regulations of this Act.
``(2) Notwithstanding rule revisions under paragraph (1),
the Commission's criteria for qualifying cogeneration
facilities in effect prior to the date on which the Commission
issues the final rule required by paragraph (1) shall continue
to apply to any cogeneration facility that--
``(A) was a qualifying cogeneration facility on the
date of enactment of subsection (m), or
``(B) had filed with the Commission a notice of
self-certification, self-recertification or an
application for Commission certification under 18
C.F.R. 292.207 prior to the date on which the
Commission issues the final rule required by paragraph
(1).''.
(b) Elimination of Ownership Limitations.--
(1) Qualifying small power production facility.--
Section 3(17)(C) of the Federal Power Act (16 U.S.C.
796(17)(C)) is amended to read as follows:
``(C) `qualifying small power production
facility' means a small power production
facility that the Commission determines, by
rule, meets such requirements (including
requirements respecting fuel use, fuel
efficiency, and reliability) as the Commission
may, by rule, prescribe;''.
(2) Qualifying cogeneration facility.--Section
3(18)(B) of the Federal Power Act (16 U.S.C.
796(18)(B)) is amended to read as follows:
``(B) `qualifying cogeneration facility'
means a cogeneration facility that the
Commission determines, by rule, meets such
requirements (including requirements respecting
minimum size, fuel use, and fuel efficiency) as
the Commission may, by rule, prescribe;''.
Subtitle F--Repeal of PUHCA
SEC. 1261. SHORT TITLE.
This subtitle may be cited as the ``Public Utility Holding
Company Act of 2003''.
SEC. 1262. DEFINITIONS.
For purposes of this subtitle:
(1) Affiliate.--The term ``affiliate'' of a company
means any company, 5 percent or more of the outstanding
voting securities of which are owned, controlled, or
held with power to vote, directly or indirectly, by
such company.
(2) Associate company.--The term ``associate
company'' of a company means any company in the same
holding company system with such company.
(3) Commission.--The term ``Commission'' means the
Federal Energy Regulatory Commission.
(4) Company.--The term ``company'' means a
corporation, partnership, association, joint stock
company, business trust, or any organized group of
persons, whether incorporated or not, or a receiver,
trustee, or other liquidating agent of any of the
foregoing.
(5) Electric utility company.--The term ``electric
utility company'' means any company that owns or
operates facilities used for the generation,
transmission, or distribution of electric energy for
sale.
(6) Exempt wholesale generator and foreign utility
company.--The terms ``exempt wholesale generator'' and
``foreign utility company'' have the same meanings as
in sections 32 and 33, respectively, of the Public
Utility Holding Company Act of 1935 (15 U.S.C. 79z-5a,
79z-5b), as those sections existed on the day before
the effective date of this subtitle.
(7) Gas utility company.--The term ``gas utility
company'' means any company that owns or operates
facilities used for distribution at retail (other than
the distribution only in enclosed portable containers
or distribution to tenants or employees of the company
operating such facilities for their own use and not for
resale) of natural or manufactured gas for heat, light,
or power.
(8) Holding company.--The term ``holding company''
means--
(A) any company that directly or indirectly
owns, controls, or holds, with power to vote,
10 percent or more of the outstanding voting
securities of a public-utility company or of a
holding company of any public-utility company;
and
(B) any person, determined by the
Commission, after notice and opportunity for
hearing, to exercise directly or indirectly
(either alone or pursuant to an arrangement or
understanding with 1 or more persons) such a
controlling influence over the management or
policies of any public-utility company or
holding company as to make it necessary or
appropriate for the rate protection of utility
customers with respect to rates that such
person be subject to the obligations, duties,
and liabilities imposed by this subtitle upon
holding companies.
(9) Holding company system.--The term ``holding
company system'' means a holding company, together with
its subsidiary companies.
(10) Jurisdictional rates.--The term
``jurisdictional rates'' means rates accepted or
established by the Commission for the transmission of
electric energy in interstate commerce, the sale of
electric energy at wholesale in interstate commerce,
the transportation of natural gas in interstate
commerce, and the sale in interstate commerce of
natural gas for resale for ultimate public consumption
for domestic, commercial, industrial, or any other use.
(11) Natural gas company.--The term ``natural gas
company'' means a person engaged in the transportation
of natural gas in interstate commerce or the sale of
such gas in interstate commerce for resale.
(12) Person.--The term ``person'' means an
individual or company.
(13) Public utility.--The term ``public utility''
means any person who owns or operates facilities used
for transmission of electric energy in interstate
commerce or sales of electric energy at wholesale in
interstate commerce.
(14) Public-utility company.--The term ``public-
utility company'' means an electric utility company or
a gas utility company.
(15) State commission.--The term ``State
commission'' means any commission, board, agency, or
officer, by whatever name designated, of a State,
municipality, or other political subdivision of a State
that, under the laws of such State, has jurisdiction to
regulate public utility companies.
(16) Subsidiary company.--The term ``subsidiary
company'' of a holding company means--
(A) any company, 10 percent or more of the
outstanding voting securities of which are
directly or indirectly owned, controlled, or
held with power to vote, by such holding
company; and
(B) any person, the management or policies
of which the Commission, after notice and
opportunity for hearing, determines to be
subject to a controlling influence, directly or
indirectly, by such holding company (either
alone or pursuant to an arrangement or
understanding with 1 or more other persons) so
as to make it necessary for the rate protection
of utility customers with respect to rates that
such person be subject to the obligations,
duties, and liabilities imposed by this
subtitle upon subsidiary companies of holding
companies.
(17) Voting security.--The term ``voting security''
means any security presently entitling the owner or
holder thereof to vote in the direction or management
of the affairs of a company.
SEC. 1263. REPEAL OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935.
The Public Utility Holding Company Act of 1935 (15 U.S.C.
79 et seq.) is repealed.
SEC. 1264. FEDERAL ACCESS TO BOOKS AND RECORDS.
(a) In General.--Each holding company and each associate
company thereof shall maintain, and shall make available to the
Commission, such books, accounts, memoranda, and other records
as the Commission determines are relevant to costs incurred by
a public utility or natural gas company that is an associate
company of such holding company and necessary or appropriate
for the protection of utility customers with respect to
jurisdictional rates.
(b) Affiliate Companies.--Each affiliate of a holding
company or of any subsidiary company of a holding company shall
maintain, and shall make available to the Commission, such
books, accounts, memoranda, and other records with respect to
any transaction with another affiliate, as the Commission
determines are relevant to costs incurred by a public utility
or natural gas company that is an associate company of such
holding company and necessary or appropriate for the protection
of utility customers with respect to jurisdictional rates.
(c) Holding Company Systems.--The Commission may examine
the books, accounts, memoranda, and other records of any
company in a holding company system, or any affiliate thereof,
as the Commission determines are relevant to costs incurred by
a public utility or natural gas company within such holding
company system and necessary or appropriate for the protection
of utility customers with respect to jurisdictional rates.
(d) Confidentiality.--No member, officer, or employee of
the Commission shall divulge any fact or information that may
come to his or her knowledge during the course of examination
of books, accounts, memoranda, or other records as provided in
this section, except as may be directed by the Commission or by
a court of competent jurisdiction.
SEC. 1265. STATE ACCESS TO BOOKS AND RECORDS.
(a) In General.--Upon the written request of a State
commission having jurisdiction to regulate a public-utility
company in a holding company system, the holding company or any
associate company or affiliate thereof, other than such public-
utility company, wherever located, shall produce for inspection
books, accounts, memoranda, and other records that--
(1) have been identified in reasonable detail in a
proceeding before the State commission;
(2) the State commission determines are relevant to
costs incurred by such public-utility company; and
(3) are necessary for the effective discharge of
the responsibilities of the State commission with
respect to such proceeding.
(b) Limitation.--Subsection (a) does not apply to any
person that is a holding company solely by reason of ownership
of 1 or more qualifying facilities under the Public Utility
Regulatory Policies Act of 1978 (16 U.S.C. 2601 et seq.).
(c) Confidentiality of Information.--The production of
books, accounts, memoranda, and other records under subsection
(a) shall be subject to such terms and conditions as may be
necessary and appropriate to safeguard against unwarranted
disclosure to the public of any trade secrets or sensitive
commercial information.
(d) Effect on State Law.--Nothing in this section shall
preempt applicable State law concerning the provision of books,
accounts, memoranda, and other records, or in any way limit the
rights of any State to obtain books, accounts, memoranda, and
other records under any other Federal law, contract, or
otherwise.
(e) Court Jurisdiction.--Any United States district court
located in the State in which the State commission referred to
in subsection (a) is located shall have jurisdiction to enforce
compliance with this section.
SEC. 1266. EXEMPTION AUTHORITY.
(a) Rulemaking.--Not later than 90 days after the effective
date of this subtitle, the Commission shall issue a final rule
to exempt from the requirements of section 1264 (relating to
Federal access to books and records) any person that is a
holding company, solely with respect to 1 or more--
(1) qualifying facilities under the Public Utility
Regulatory Policies Act of 1978 (16 U.S.C. 2601 et
seq.);
(2) exempt wholesale generators; or
(3) foreign utility companies.
(b) Other Authority.--The Commission shall exempt a person
or transaction from the requirements of section 1264 (relating
to Federal access to books and records) if, upon application or
upon the motion of the Commission--
(1) the Commission finds that the books, accounts,
memoranda, and other records of any person are not
relevant to the jurisdictional rates of a public
utility or natural gas company; or
(2) the Commission finds that any class of
transactions is not relevant to the jurisdictional
rates of a public utility or natural gas company.
SEC. 1267. AFFILIATE TRANSACTIONS.
(a) Commission Authority Unaffected.--Nothing in this
subtitle shall limit the authority of the Commission under the
Federal Power Act (16 U.S.C. 791a et seq.) to require that
jurisdictional rates are just and reasonable, including the
ability to deny or approve the pass through of costs, the
prevention of cross-subsidization, and the issuance of such
rules and regulations as are necessary or appropriate for the
protection of utility consumers.
(b) Recovery of Costs.--Nothing in this subtitle shall
preclude the Commission or a State commission from exercising
its jurisdiction under otherwise applicable law to determine
whether a public-utility company, public utility, or natural
gas company may recover in rates any costs of an activity
performed by an associate company, or any costs of goods or
services acquired by such public-utility company from an
associate company.
SEC. 1268. APPLICABILITY.
Except as otherwise specifically provided in this subtitle,
no provision of this subtitle shall apply to, or be deemed to
include--
(1) the United States;
(2) a State or any political subdivision of a
State;
(3) any foreign governmental authority not
operating in the United States;
(4) any agency, authority, or instrumentality of
any entity referred to in paragraph (1), (2), or (3);
or
(5) any officer, agent, or employee of any entity
referred to in paragraph (1), (2), (3), or (4) acting
as such in the course of his or her official duty.
SEC. 1269. EFFECT ON OTHER REGULATIONS.
Nothing in this subtitle precludes the Commission or a
State commission from exercising its jurisdiction under
otherwise applicable law to protect utility customers.
SEC. 1270. ENFORCEMENT.
The Commission shall have the same powers as set forth in
sections 306 through 317 of the Federal Power Act (16 U.S.C.
825e-825p) to enforce the provisions of this subtitle.
SEC. 1271. SAVINGS PROVISIONS.
(a) In General.--Nothing in this subtitle, or otherwise in
the Public Utility Holding Company Act of 1935, or rules,
regulations, or orders thereunder, prohibits a person from
engaging in or continuing to engage in activities or
transactions in which it is legally engaged or authorized to
engage on the date of enactment of this Act, if that person
continues to comply with the terms (other than an expiration
date or termination date) of any such authorization, whether by
rule or by order.
(b) Effect on Other Commission Authority.--Nothing in this
subtitle limits the authority of the Commission under the
Federal Power Act (16 U.S.C. 791a et seq.) or the Natural Gas
Act (15 U.S.C. 717 et seq.).
SEC. 1272. IMPLEMENTATION.
Not later than 12 months after the date of enactment of
this subtitle, the Commission shall--
(1) issue such regulations as may be necessary or
appropriate to implement this subtitle (other than
section 1265, relating to State access to books and
records); and
(2) submit to Congress detailed recommendations on
technical and conforming amendments to Federal law
necessary to carry out this subtitle and the amendments
made by this subtitle.
SEC. 1273. TRANSFER OF RESOURCES.
All books and records that relate primarily to the
functions transferred to the Commission under this subtitle
shall be transferred from the Securities and Exchange
Commission to the Commission.
SEC. 1274. EFFECTIVE DATE.
(a) In General.--Except for section 1272 (relating to
implementation), this subtitle shall take effect 12 months
after the date of enactment of this subtitle.
(b) Compliance With Certain Rules.--If the Commission
approves and makes effective any final rulemaking modifying the
standards of conduct governing entities that own, operate, or
control facilities for transmission of electricity in
interstate commerce or transportation of natural gas in
interstate commerce prior to the effective date of this
subtitle, any action taken by a public-utility company or
utility holding company to comply with the requirements of such
rulemaking shall not subject such public-utility company or
utility holding company to any regulatory requirement
applicable to a holding company under the Public Utility
Holding Company Act of 1935 (15 U.S.C. 79 et seq.).
SEC. 1275. SERVICE ALLOCATION.
(a) FERC Review.--In the case of non-power goods or
administrative or management services provided by an associate
company organized specifically for the purpose of providing
such goods or services to any public utility in the same
holding company system, at the election of the system or a
State commission having jurisdiction over the public utility,
the Commission, after the effective date of this subtitle,
shall review and authorize the allocation of the costs for such
goods or services to the extent relevant to that associate
company in order to assure that each allocation is appropriate
for the protection of investors and consumers of such public
utility.
(b) Cost Allocation.--Nothing in this section shall
preclude the Commission or a State commission from exercising
its jurisdiction under other applicable law with respect to the
review or authorization of any costs allocated to a public
utility in a holding company system located in the affected
State as a result of the acquisition of non-power goods or
administrative and management services by such public utility
from an associate company organized specifically for that
purpose.
(c) Rules.--Not later than 6 months after the date of
enactment of this Act, the Commission shall issue rules (which
rules shall be effective no earlier than the effective date of
this subtitle) to exempt from the requirements of this section
any company in a holding company system whose public utility
operations are confined substantially to a single State and any
other class of transactions that the Commission finds is not
relevant to the jurisdictional rates of a public utility.
(d) Public Utility.--As used in this section, the term
``public utility'' has the meaning given that term in section
201(e) of the Federal Power Act.
SEC. 1276. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated such funds as may
be necessary to carry out this subtitle.
SEC. 1277. CONFORMING AMENDMENTS TO THE FEDERAL POWER ACT.
(a) Conflict of Jurisdiction.--Section 318 of the Federal
Power Act (16 U.S.C. 825q) is repealed.
(b) Definitions.--(1) Section 201(g)(5) of the Federal
Power Act (16 U.S.C. 824(g)(5)) is amended by striking ``1935''
and inserting ``2003''.
(2) Section 214 of the Federal Power Act (16 U.S.C. 824m)
is amended by striking ``1935'' and inserting ``2003''.
Subtitle G--Market Transparency, Enforcement, and Consumer Protection
SEC. 1281. MARKET TRANSPARENCY RULES.
Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is
amended by adding at the end the following:
``SEC. 220. MARKET TRANSPARENCY RULES.
``(a) In General.--Not later than 180 days after the date
of enactment of this section, the Commission shall issue rules
establishing an electronic information system to provide the
Commission and the public with access to such information as is
necessary or appropriate to facilitate price transparency and
participation in markets subject to the Commission's
jurisdiction under this Act. Such systems shall provide
information about the availability and market price of
wholesale electric energy and transmission services to the
Commission, State commissions, buyers and sellers of wholesale
electric energy, users of transmission services, and the public
on a timely basis. The Commission shall have authority to
obtain such information from any electric utility or
transmitting utility, including any entity described in section
201(f).
``(b) Exemptions.--The Commission shall exempt from
disclosure information it determines would, if disclosed, be
detrimental to the operation of an effective market or
jeopardize system security. This section shall not apply to
transactions for the purchase or sale of wholesale electric
energy or transmission services within the area described in
section 212(k)(2)(A). In determining the information to be made
available under this section and time to make such information
available, the Commission shall seek to ensure that consumers
and competitive markets are protected from the adverse effects
of potential collusion or other anti-competitive behaviors that
can be facilitated by untimely public disclosure of
transaction-specific information.
``(c) Commodity Futures Trading Commission.--This section
shall not affect the exclusive jurisdiction of the Commodity
Futures Trading Commission with respect to accounts,
agreements, contracts, or transactions in commodities under the
Commodity Exchange Act (7 U.S.C. 1 et seq.). Any request for
information to a designated contract market, registered
derivatives transaction execution facility, board of trade,
exchange, or market involving accounts, agreements, contracts,
or transactions in commodities (including natural gas,
electricity and other energy commodities) within the exclusive
jurisdiction of the Commodity Futures Trading Commission shall
be directed to the Commodity Futures Trading Commission.
``(d) Savings Provision.--In exercising its authority under
this section, the Commission shall not--
``(1) compete with, or displace from the market
place, any price publisher; or
``(2) regulate price publishers or impose any
requirements on the publication of information.''.
SEC. 1282. MARKET MANIPULATION.
Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is
amended by adding at the end the following:
``SEC. 221. PROHIBITION ON FILING FALSE INFORMATION.
``No person or other entity (including an entity described
in section 201(f)) shall willfully and knowingly report any
information relating to the price of electricity sold at
wholesale or availability of transmission capacity, which
information the person or any other entity knew to be false at
the time of the reporting, to a Federal agency with intent to
fraudulently affect the data being compiled by such Federal
agency.
``SEC. 222. PROHIBITION ON ROUND TRIP TRADING.
``(a) Prohibition.--No person or other entity (including an
entity described in section 201(f)) shall willfully and
knowingly enter into any contract or other arrangement to
execute a `round trip trade' for the purchase or sale of
electric energy at wholesale.
``(b) Definition.--For the purposes of this section, the
term `round trip trade' means a transaction, or combination of
transactions, in which a person or any other entity--
``(1) enters into a contract or other arrangement
to purchase from, or sell to, any other person or other
entity electric energy at wholesale;
``(2) simultaneously with entering into the
contract or arrangement described in paragraph (1),
arranges a financially offsetting trade with such other
person or entity for the same such electric energy, at
the same location, price, quantity and terms so that,
collectively, the purchase and sale transactions in
themselves result in no financial gain or loss; and
``(3) enters into the contract or arrangement with
a specific intent to fraudulently affect reported
revenues, trading volumes, or prices.''.
SEC. 1283. ENFORCEMENT.
(a) Complaints.--Section 306 of the Federal Power Act (16
U.S.C. 825e) is amended as follows:
(1) By inserting ``electric utility,'' after ``Any
person,''.
(2) By inserting ``, transmitting utility,'' after
``licensee'' each place it appears.
(b) Review of Commission Orders.--Section 313(a) of the
Federal Power Act (16 U.S.C. 8251) is amended by inserting
`electric utility,' after `person,' in the first 2 places it
appears and by striking `any person unless such person' and
inserting `any entity unless such entity'.
(c) Investigations.--Section 307(a) of the Federal Power
Act (16 U.S.C. 825f(a)) is amended as follows:
(1) By inserting `, electric utility, transmitting
utility, or other entity' after `person' each time it
appears.
(2) By striking the period at the end of the first
sentence and inserting the following: ``or in obtaining
information about the sale of electric energy at
wholesale in interstate commerce and the transmission
of electric energy in interstate commerce.''.
(d) Criminal Penalties.--Section 316 of the Federal Power
Act (16 U.S.C. 825o) is amended--
(1) in subsection (a), by striking ``$5,000'' and
inserting ``$1,000,000'', and by striking ``two years''
and inserting ``5 years'';
(2) in subsection (b), by striking ``$500'' and
inserting ``$25,000''; and
(3) by striking subsection (c).
(e) Civil Penalties.--Section 316A of the Federal Power Act
(16 U.S.C. 825o-1) is amended as follows:
(1) In subsections (a) and (b), by striking
``section 211, 212, 213, or 214'' each place it appears
and inserting ``Part II''.
(2) In subsection (b), by striking ``$10,000'' and
inserting ``$1,000,000''.
SEC. 1284. REFUND EFFECTIVE DATE.
Section 206(b) of the Federal Power Act (16 U.S.C. 824e(b))
is amended as follows:
(1) By striking ``the date 60 days after the filing
of such complaint nor later than 5 months after the
expiration of such 60-day period'' in the second
sentence and inserting ``the date of the filing of such
complaint nor later than 5 months after the filing of
such complaint''.
(2) By striking ``60 days after'' in the third
sentence and inserting ``of''.
(3) By striking ``expiration of such 60-day
period'' in the third sentence and inserting
``publication date''.
(4) By striking the fifth sentence and inserting
the following: ``If no final decision is rendered by
the conclusion of the 180-day period commencing upon
initiation of a proceeding pursuant to this section,
the Commission shall state the reasons why it has
failed to do so and shall state its best estimate as to
when it reasonably expects to make such decision.''.
SEC. 1285. REFUND AUTHORITY.
Section 206 of the Federal Power Act (16 U.S.C. 824e) is
amended by adding the following new subsection at the end
thereof:
``(e)(1) Except as provided in paragraph (2), if an entity
described in section 201(f) voluntarily makes a short-term sale
of electric energy and the sale violates Commission rules in
effect at the time of the sale, such entity shall be subject to
the Commission's refund authority under this section with
respect to such violation.
``(2) This section shall not apply to--
``(A) any entity that sells less than 8,000,000
megawatt hours of electricity per year; or
``(B) any electric cooperative.
``(3) For purposes of this subsection, the term `short-term
sale' means an agreement for the sale of electric energy at
wholesale in interstate commerce that is for a period of 31
days or less (excluding monthly contracts subject to automatic
renewal).
``(4) The Commission shall have refund authority under
subsection (e)(1) with respect to a voluntary short-term sale
of electric energy by the Bonneville Power Administration (in
this section `Bonneville') only if the sale is at an unjust and
unreasonable rate and, in that event, may order a refund only
for short-term sales made by Bonneville at rates that are
higher than the highest just and reasonable rate charged by any
other entity for a short-term sale of electric energy in the
same geographic market for the same, or most nearly comparable,
period as the sale by Bonneville.
``(5) With respect to any Federal power marketing agency or
the Tennessee Valley Authority, the Commission shall not assert
or exercise any regulatory authority or powers under subsection
(e)(1) other than the ordering of refunds to achieve a just and
reasonable rate.''.
SEC. 1286. SANCTITY OF CONTRACT.
(a) In General.--The Federal Energy Regulatory Commission
(in this section, ``the Commission'') shall have no authority
to abrogate or modify any provision of an executed contract or
executed contract amendment described in subsection (b) that
has been entered into or taken effect, except upon a finding
that failure to take such action would be contrary to the
public interest.
(b) Limitation.--Except as provided in subsection (c), this
section shall apply only to a contract or contract amendment--
(1) executed on or after the date of enactment of
this Act; and
(2) entered into--
(A) for the purchase or sale of electric
energy under section 205 of the Federal Power
Act (16 U.S.C. 824d) where the seller has been
authorized by the Commission to charge market-
based rates; or
(B) under section 4 of the Natural Gas Act
(15 U.S.C. 717c) where the natural gas company
has been authorized by the Commission to charge
market-based rates for the service described in
the contract.
(c) Exclusion.--This section shall not apply to an executed
contract or executed contract amendment that expressly provides
for a standard of review other than the public interest
standard.
(d) Savings Provision.--With respect to contracts to which
this section does not apply, nothing in this section alters
existing law regarding the applicable standard of review for a
contract subject to the jurisdiction of the Commission.
SEC. 1287. CONSUMER PRIVACY AND UNFAIR TRADE PRACTICES.
(a) Privacy.--The Federal Trade Commission may issue rules
protecting the privacy of electric consumers from the
disclosure of consumer information obtained in connection with
the sale or delivery of electric energy to electric consumers.
(b) Slamming.--The Federal Trade Commission may issue rules
prohibiting the change of selection of an electric utility
except with the informed consent of the electric consumer or if
approved by the appropriate State regulatory authority.
(c) Cramming.--The Federal Trade Commission may issue rules
prohibiting the sale of goods and services to an electric
consumer unless expressly authorized by law or the electric
consumer.
(d) Rulemaking.--The Federal Trade Commission shall proceed
in accordance with section 553 of title 5, United States Code,
when prescribing a rule under this section.
(e) State Authority.--If the Federal Trade Commission
determines that a State's regulations provide equivalent or
greater protection than the provisions of this section, such
State regulations shall apply in that State in lieu of the
regulations issued by the Commission under this section.
(f) Definitions.--For purposes of this section:
(1) State regulatory authority.--The term ``State
regulatory authority'' has the meaning given that term
in section 3(21) of the Federal Power Act (16 U.S.C.
796(21)).
(2) Electric consumer and electric utility.--The
terms ``electric consumer'' and ``electric utility''
have the meanings given those terms in section 3 of the
Public Utility Regulatory Policies Act of 1978 (16
U.S.C. 2602).
Subtitle H--Merger Reform
SEC. 1291. MERGER REVIEW REFORM AND ACCOUNTABILITY.
(a) Merger Review Reform.--Within 180 days after the date
of enactment of this Act, the Secretary of Energy, in
consultation with the Federal Energy Regulatory Commission and
the Attorney General of the United States, shall prepare, and
transmit to Congress each of the following:
(1) A study of the extent to which the authorities
vested in the Federal Energy Regulatory Commission
under section 203 of the Federal Power Act are
duplicative of authorities vested in--
(A) other agencies of Federal and State
Government; and
(B) the Federal Energy Regulatory
Commission, including under sections 205 and
206 of the Federal Power Act.
(2) Recommendations on reforms to the Federal Power
Act that would eliminate any unnecessary duplication in
the exercise of regulatory authority or unnecessary
delays in the approval (or disapproval) of applications
for the sale, lease, or other disposition of public
utility facilities.
(b) Merger Review Accountability.--Not later than 1 year
after the date of enactment of this Act and annually
thereafter, with respect to all orders issued within the
preceding year that impose a condition on a sale, lease, or
other disposition of public utility facilities under section
203(b) of the Federal Power Act, the Federal Energy Regulatory
Commission shall transmit a report to Congress explaining each
of the following:
(1) The condition imposed.
(2) Whether the Commission could have imposed such
condition by exercising its authority under any
provision of the Federal Power Act other than under
section 203(b).
(3) If the Commission could not have imposed such
condition other than under section 203(b), why the
Commission determined that such condition was
consistent with the public interest.
SEC. 1292. ELECTRIC UTILITY MERGERS.
(a) Amendment.--Section 203(a) of the Federal Power Act (16
U.S.C. 824b(a)) is amended to read as follows:
``(a)(1) No public utility shall, without first having
secured an order of the Commission authorizing it to do so--
``(A) sell, lease, or otherwise dispose of the
whole of its facilities subject to the jurisdiction of
the Commission, or any part thereof of a value in
excess of $10,000,000;
``(B) merge or consolidate, directly or indirectly,
such facilities or any part thereof with those of any
other person, by any means whatsoever; or
``(C) purchase, acquire, or take any security with
a value in excess of $10,000,000 of any other public
utility.
``(2) No holding company in a holding company system that
includes a public utility shall purchase, acquire, or take any
security with a value in excess of $10,000,000 of, or, by any
means whatsoever, directly or indirectly, merge or consolidate
with, a public utility or a holding company in a holding
company system that includes a public utility with a value in
excess of $10,000,000 without first having secured an order of
the Commission authorizing it to do so.
``(3) Upon receipt of an application for such approval the
Commission shall give reasonable notice in writing to the
Governor and State commission of each of the States in which
the physical property affected, or any part thereof, is
situated, and to such other persons as it may deem advisable.
``(4) After notice and opportunity for hearing, the
Commission shall approve the proposed disposition,
consolidation, acquisition, or change in control, if it finds
that the proposed transaction will be consistent with the
public interest. In evaluating whether a transaction will be
consistent with the public interest, the Commission shall
consider whether the proposed transaction--
``(A) will adequately protect consumer interests;
``(B) will be consistent with competitive wholesale
markets;
``(C) will impair the financial integrity of any
public utility that is a party to the transaction or an
associate company of any party to the transaction; and
``(D) satisfies such other criteria as the
Commission considers consistent with the public
interest.
``(5) The Commission shall, by rule, adopt procedures for
the expeditious consideration of applications for the approval
of dispositions, consolidations, or acquisitions under this
section. Such rules shall identify classes of transactions, or
specify criteria for transactions, that normally meet the
standards established in paragraph (4). The Commission shall
provide expedited review for such transactions. The Commission
shall grant or deny any other application for approval of a
transaction not later than 180 days after the application is
filed. If the Commission does not act within 180 days, such
application shall be deemed granted unless the Commission
finds, based on good cause, that further consideration is
required to determine whether the proposed transaction meets
the standards of paragraph (4) and issues an order tolling the
time for acting on the application for not more than 180 days,
at the end of which additional period the Commission shall
grant or deny the application.
``(6) For purposes of this subsection, the terms `associate
company', `holding company', and `holding company system' have
the meaning given those terms in the Public Utility Holding
Company Act of 2003.''.
(b) Effective Date.--The amendments made by this section
shall take effect 12 months after the date of enactment of this
section.
Subtitle I--Definitions
SEC. 1295. DEFINITIONS.
(a) Electric Utility.--Section 3(22) of the Federal Power
Act (16 U.S.C. 796(22)) is amended to read as follows:
``(22) Electric utility.--The term `electric
utility' means any person or Federal or State agency
(including any entity described in section 201(f)) that
sells electric energy; such term includes the Tennessee
Valley Authority and each Federal power marketing
administration.''.
(b) Transmitting Utility.--Section 3(23) of the Federal
Power Act (16 U.S.C. 796(23)) is amended to read as follows:
``(23) Transmitting utility.--The term
`transmitting utility' means an entity, including any
entity described in section 201(f), that owns,
operates, or controls facilities used for the
transmission of electric energy--
``(A) in interstate commerce; or
``(B) for the sale of electric energy at
wholesale.''.
(c) Additional Definitions.--Section 3 of the Federal Power
Act (16 U.S.C. 796) is amended by adding at the end the
following:
``(26) Electric cooperative.--The term `electric
cooperative' means a cooperatively owned electric
utility.
``(27) RTO.--The term `Regional Transmission
Organization' or `RTO' means an entity of sufficient
regional scope approved by the Commission to exercise
operational or functional control of facilities used
for the transmission of electric energy in interstate
commerce and to ensure nondiscriminatory access to such
facilities.
``(28) ISO.--The term `Independent System Operator'
or `ISO' means an entity approved by the Commission to
exercise operational or functional control of
facilities used for the transmission of electric energy
in interstate commerce and to ensure nondiscriminatory
access to such facilities.''.
(d) Commission.--For the purposes of this title, the term
``Commission'' means the Federal Energy Regulatory Commission.
(e) Applicability.--Section 201(f) of the Federal Power Act
(16 U.S.C. 824(f)) is amended by adding after ``political
subdivision of a state,'' the following: ``an electric
cooperative that has financing under the Rural Electrification
Act of 1936 (7 U.S.C. 901 et seq.) or that sells less than
4,000,000 megawatt hours of electricity per year,''.
Subtitle J--Technical and Conforming Amendments
SEC. 1297. CONFORMING AMENDMENTS.
The Federal Power Act is amended as follows:
(1) Section 201(b)(2) of such Act (16 U.S.C.
824(b)(2)) is amended as follows:
(A) In the first sentence by striking
``210, 211, and 212'' and inserting
``203(a)(2), 206(e), 210, 211, 211A, 212, 215,
216, 217, 218, 219, 220, 221, and 222''.
(B) In the second sentence by striking
``210 or 211'' and inserting ``203(a)(2),
206(e), 210, 211, 211A, 212, 215, 216, 217,
218, 219, 220, 221, and 222''.
(C) Section 201(b)(2) of such Act is
amended by striking ``The'' in the first place
it appears and inserting ``Notwithstanding
section 201(f), the'' and in the second
sentence after ``any order'' by inserting ``or
rule''.
(2) Section 201(e) of such Act is amended by
striking ``210, 211, or 212'' and inserting ``206(e),
206(f), 210, 211, 211A, 212, 215, 216, 217, 218, 219,
220, 221, and 222''.
(3) Section 206 of such Act (16 U.S.C. 824e) is
amended as follows:
(A) In subsection (b), in the seventh
sentence, by striking ``the public utility to
make''.
(B) In the first sentence of subsection
(a), by striking `hearing had' and inserting
``hearing held''.
(4) Section 211(c) of such Act (16 U.S.C. 824j(c))
is amended by--
(A) striking ``(2)'';
(B) striking ``(A)'' and inserting ``(1)''
(C) striking ``(B)'' and inserting ``(2)'';
and
(D) striking ``termination of
modification'' and inserting ``termination or
modification''.
(5) Section 211(d)(1) of such Act (16 U.S.C.
824j(d)(1)) is amended by striking ``electric utility''
the second time it appears and inserting ``transmitting
utility''.
(6) Section 315 (c) of such Act (16 U.S.C. 825n(c))
is amended by striking ``subsection'' and inserting
``section''.
TITLE XIII--ENERGY TAX INCENTIVES
SEC. 1300. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) Short Title.--This title may be cited as the ``Energy
Tax Policy Act of 2003''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this title an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a section
or other provision, the reference shall be considered to be
made to a section or other provision of the Internal Revenue
Code of 1986.
Subtitle A--Conservation
PART I--RESIDENTIAL AND BUSINESS PROPERTY
SEC. 1301. CREDIT FOR RESIDENTIAL ENERGY EFFICIENT PROPERTY.
(a) In General.--Subpart A of part IV of subchapter A of
chapter 1 (relating to nonrefundable personal credits) is
amended by inserting after section 25B the following new
section:
``SEC. 25C. RESIDENTIAL ENERGY EFFICIENT PROPERTY.
``(a) Allowance of Credit.--In the case of an individual,
there shall be allowed as a credit against the tax imposed by
this chapter for the taxable year an amount equal to the sum
of--
``(1) 15 percent of the qualified solar water
heating property expenditures made by the taxpayer
during such year,
``(2) 15 percent of the qualified photovoltaic
property expenditures made by the taxpayer during such
year,
``(3) 15 percent of the qualified wind energy
property expenditures made by the taxpayer during such
year, and
``(4) 20 percent of the qualified fuel cell
property expenditures made by the taxpayer during such
year.
``(b) Limitations.--
``(1) Maximum credit.--
``(A) In general.--The credit allowed under
subsection (a) shall not exceed--
``(i) $2,000 for property described
in paragraph (1), (2), or (3) of
subsection (c), and
``(ii) $500 for each 0.5 kilowatt
of capacity of property described in
subsection (c)(4).
``(B) Prior expenditures by taxpayer on
same residence taken into account.--In
determining the amount of the credit allowed to
a taxpayer with respect to any dwelling unit
under this section, the dollar amount under
subparagraph (A)(i) with respect to each type
of property described in such subparagraph
shall be reduced by the credit allowed to the
taxpayer under this section with respect to
such property for all preceding taxable years
with respect to such dwelling unit.
``(2) Property standards.--No credit shall be
allowed under this section for an item of property
unless--
``(A) the original use of such property
commences with the taxpayer,
``(B) such property reasonably can be
expected to remain in use for at least 5 years,
``(C) such property is installed on or in
connection with a dwelling unit located in the
United States and used as a residence by the
taxpayer,
``(D) in the case of solar water heating
property, such property is certified for
performance by the non-profit Solar Rating and
Certification Corporation or a comparable
entity endorsed by the government of the State
in which such property is installed,
``(E) in the case of fuel cell property,
such property meets the performance and quality
standards (if any) which have been prescribed
by the Secretary by regulations (after
consultation with the Secretary of Energy), and
``(F) in the case of any photovoltaic
property, fuel cell property, or wind energy
property, such property meets appropriate fire
and electric code requirements.
``(c) Definitions.--For purposes of this section--
``(1) Qualified solar water heating property
expenditure.--The term `qualified solar water heating
property expenditure' means an expenditure for property
which uses solar energy to heat water for use in a
dwelling unit.
``(2) Qualified photovoltaic property
expenditure.--The term `qualified photovoltaic property
expenditure' means an expenditure for property which
uses solar energy to generate electricity for use in a
dwelling unit and which is not described in paragraph
(1).
``(3) Qualified wind energy property expenditure.--
The term `qualified wind energy property expenditure'
means an expenditure for property which uses wind
energy to generate electricity for use in a dwelling
unit.
``(4) Qualified fuel cell property expenditure.--
The term `qualified fuel cell property expenditure'
means an expenditure for any qualified fuel cell
property (as defined in section 48(c)(1)).
``(d) Special Rules.--For purposes of this section--
``(1) Solar panels.--No expenditure relating to a
solar panel or other property installed as a roof (or
portion thereof) shall fail to be treated as property
described in paragraph (1) or (2) of subsection (c)
solely because it constitutes a structural component of
the structure on which it is installed.
``(2) Swimming pools, etc., used as storage
medium.--Expenditures which are properly allocable to a
swimming pool, hot tub, or any other energy storage
medium which has a function other than the function of
such storage shall not be taken into account for
purposes of this section.
``(3) Dollar amounts in case of joint occupancy.--
In the case of any dwelling unit which is jointly
occupied and used during any calendar year as a
residence by 2 or more individuals, the following rules
shall apply:
``(A) The amount of the credit allowable
under subsection (a) by reason of expenditures
made during such calendar year by any of such
individuals with respect to such dwelling unit
shall be determined by treating all of such
individuals as 1 taxpayer whose taxable year is
such calendar year.
``(B) There shall be allowable, with
respect to such expenditures to each of such
individuals, a credit under subsection (a) for
the taxable year in which such calendar year
ends in an amount which bears the same ratio to
the amount determined under subparagraph (A) as
the amount of such expenditures made by such
individual during such calendar year bears to
the aggregate of such expenditures made by all
of such individuals during such calendar year.
``(C) Subparagraphs (A) and (B) shall be
applied separately with respect to expenditures
described in paragraphs (1), (2), (3), and (4)
of subsection (c).
``(4) Tenant-stockholder in cooperative housing
corporation.--In the case of an individual who is a
tenant-stockholder (as defined in section 216) in a
cooperative housing corporation (as defined in such
section), such individual shall be treated as having
made the individual's tenant-stockholder's
proportionate share (as defined in section 216(b)(3))
of any expenditures of such corporation.
``(5) Condominiums.--
``(A) In general.--In the case of an
individual who is a member of a condominium
management association with respect to a
condominium which the individual owns, such
individual shall be treated as having made the
individual's proportionate share of any
expenditures of such association.
``(B) Condominium management association.--
For purposes of this paragraph, the term
`condominium management association' means an
organization which meets the requirements of
paragraph (1) of section 528(c) (other than
subparagraph (E) thereof) with respect to a
condominium project substantially all of the
units of which are used as residences.
``(6) Allocation in certain cases.--Except in the
case of qualified wind energy property expenditures, if
less than 80 percent of the use of an item is for
nonbusiness purposes, only that portion of the
expenditures for such item which is properly allocable
to use for nonbusiness purposes shall be taken into
account.
``(7) When expenditure made; amount of
expenditure.--
``(A) In general.--Except as provided in
subparagraph (B), an expenditure with respect
to an item shall be treated as made when the
original installation of the item is completed.
``(B) Expenditures part of building
construction.--In the case of an expenditure in
connection with the construction or
reconstruction of a structure, such expenditure
shall be treated as made when the original use
of the constructed or reconstructed structure
by the taxpayer begins.
``(C) Amount.--The amount of any
expenditure shall be the cost thereof.
``(8) Property financed by subsidized energy
financing.--For purposes of determining the amount of
expenditures made by any individual with respect to any
dwelling unit, there shall not be taken into account
expenditures which are made from subsidized energy
financing (as defined in section 48(a)(4)(C)).
``(9) Denial of depreciation on wind energy
property for which credit allowed.--No deduction shall
be allowed under section 167 for property which uses
wind energy to generate electricity if the taxpayer is
allowed a credit under this section with respect to
such property.
``(e) Basis Adjustments.--For purposes of this subtitle, if
a credit is allowed under this section for any expenditure with
respect to any property, the increase in the basis of such
property which would (but for this subsection) result from such
expenditure shall be reduced by the amount of the credit so
allowed.
``(f) Termination.--The credit allowed under this section
shall not apply to taxable years beginning after December 31,
2006 (December 31, 2008, with respect to qualified photovoltaic
property expenditures).''.
(b) Conforming Amendments.--
(1) Section 1016(a) is amended by striking ``and''
at the end of paragraph (27), by striking the period at
the end of paragraph (28) and inserting ``, and'', and
by adding at the end the following new paragraph:
``(29) to the extent provided in section 25C(e), in
the case of amounts with respect to which a credit has
been allowed under section 25C.''.
(2) The table of sections for subpart A of part IV
of subchapter A of chapter 1 is amended by inserting
after the item relating to section 25B the following
new item:
``Sec. 25C. Residential energy efficient property.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years ending after December 31, 2003.
SEC. 1302. EXTENSION AND EXPANSION OF CREDIT FOR ELECTRICITY PRODUCED
FROM CERTAIN RENEWABLE RESOURCES.
(a) Expansion of Qualified Energy Resources.--Subsection
(c) of section 45 (relating to electricity produced from
certain renewable resources) is amended to read as follows:
``(c) Qualified Energy Resources.--For purposes of this
section--
``(1) In general.--The term `qualified energy
resources' means--
``(A) wind,
``(B) closed-loop biomass,
``(C) open-loop biomass,
``(D) geothermal energy,
``(E) solar energy,
``(F) small irrigation power, and
``(G) municipal solid waste.
``(2) Closed-loop biomass.--The term `closed-loop
biomass' means any organic material from a plant which
is planted exclusively for purposes of being used at a
qualified facility to produce electricity.
``(3) Open-loop biomass.--
``(A) In general.--The term `open-loop
biomass' means--
``(i) any agricultural livestock
waste nutrients, or
``(ii) any solid, nonhazardous,
cellulosic waste material which is
segregated from other waste materials
and which is derived from--
``(I) any of the following
forest-related resources: mill
and harvesting residues,
precommercial thinnings, slash,
and brush,
``(II) solid wood waste
materials, including waste
pallets, crates, dunnage,
manufacturing and construction
wood wastes (other than
pressure-treated, chemically-
treated, or painted wood
wastes), and landscape or
right-of-way tree trimmings,
but not including municipal
solid waste, gas derived from
the biodegradation of solid
waste, or paper which is
commonly recycled, or
``(III) agriculture
sources, including orchard tree
crops, vineyard, grain,
legumes, sugar, and other crop
by-products or residues.
Such term shall not include closed-loop
biomass.
``(B) Agricultural livestock waste
nutrients.--
``(i) In general.--The term
`agricultural livestock waste
nutrients' means agricultural livestock
manure and litter, including wood
shavings, straw, rice hulls, and other
bedding material for the disposition of
manure.
``(ii) Agricultural livestock.--The
term `agricultural livestock' includes
bovine, swine, poultry, and sheep.
``(4) Geothermal energy.--The term `geothermal
energy' means energy derived from a geothermal deposit
(within the meaning of section 613(e)(2)).
``(5) Small irrigation power.--The term `small
irrigation power' means power--
``(A) generated without any dam or
impoundment of water through an irrigation
system canal or ditch, and
``(B) the nameplate capacity rating of
which is not less than 150 kilowatts but is
less than 5 megawatts.
``(6) Municipal solid waste.--The term `municipal
solid waste' has the meaning given the term `solid
waste' under section 2(27) of the Solid Waste Disposal
Act (42 U.S.C. 6903).''.
(b) Extension and Expansion of Qualified Facilities.--
(1) In general.--Section 45 is amended by
redesignating subsection (d) as subsection (e) and by
inserting after subsection (c) the following new
subsection:
``(d) Qualified Facilities.--For purposes of this section--
``(1) Wind facility.--In the case of a facility
using wind to produce electricity, the term `qualified
facility' means any facility owned by the taxpayer
which is originally placed in service after December
31, 1993, and before January 1, 2007.
``(2) Closed-loop biomass facility.--
``(A) In general.--In the case of a
facility using closed-loop biomass to produce
electricity, the term `qualified facility'
means any facility--
``(i) owned by the taxpayer which
is originally placed in service after
December 31, 1992, and before January
1, 2007, or
``(ii) owned by the taxpayer which
before January 1, 2007, is originally
placed in service and modified to use
closed-loop biomass to co-fire with
coal, with other biomass, or with both,
but only if the modification is
approved under the Biomass Power for
Rural Development Programs or is part
of a pilot project of the Commodity
Credit Corporation as described in 65
Fed. Reg. 63052.
``(B) Special rules.--In the case of a
qualified facility described in subparagraph
(A)(ii)--
``(i) the 10-year period referred
to in subsection (a) shall be treated
as beginning no earlier than the date
of the enactment of the Energy Tax
Policy Act of 2003,
``(ii) the amount of the credit
determined under subsection (a) with
respect to the facility shall be an
amount equal to the amount determined
without regard to this clause
multiplied by the ratio of the thermal
content of the closed-loop biomass used
in such facility to the thermal content
of all fuels used in such facility, and
``(iii) if the owner of such
facility is not the producer of the
electricity, the person eligible for
the credit allowable under subsection
(a) shall be the lessee or the operator
of such facility.
``(3) Open-loop biomass facilities.--
``(A) In general.--In the case of a
facility using open-loop biomass to produce
electricity, the term `qualified facility'
means any facility owned by the taxpayer
which--
``(i) in the case of a facility
using agricultural livestock waste
nutrients--
``(I) is originally placed
in service after the date of
the enactment of the Energy Tax
Policy Act of 2003 and before
January 1, 2007, and
``(II) the nameplate
capacity rating of which is not
less than 150 kilowatts, and
``(ii) in the case of any other
facility, is originally placed in
service before January 1, 2007.
``(B) Credit eligibility.--In the case of
any facility described in subparagraph (A), if
the owner of such facility is not the producer
of the electricity, the person eligible for the
credit allowable under subsection (a) shall be
the lessee or the operator of such facility.
``(4) Geothermal or solar energy facility.--In the
case of a facility using geothermal or solar energy to
produce electricity, the term `qualified facility'
means any facility owned by the taxpayer which is
originally placed in service after the date of the
enactment of the Energy Tax Policy Act of 2003 and
before January 1, 2007. Such term shall not include any
property described in section 48(a)(3) the basis of
which is taken into account by the taxpayer for
purposes of determining the energy credit under section
48.
``(5) Small irrigation power facility.--In the case
of a facility using small irrigation power to produce
electricity, the term `qualified facility' means any
facility owned by the taxpayer which is originally
placed in service after the date of the enactment of
the Energy Tax Policy Act of 2003 and before January 1,
2007.
``(6) Landfill gas facilities.--In the case of a
facility producing electricity from gas derived from
the biodegradation of municipal solid waste, the term
`qualified facility' means any facility owned by the
taxpayer which is originally placed in service after
the date of the enactment of the Energy Tax Policy Act
of 2003 and before January 1, 2007.
``(7) Trash combustion facilities.--In the case of
a facility which burns municipal solid waste to produce
electricity, the term `qualified facility' means any
facility owned by the taxpayer which is originally
placed in service after the date of the enactment of
the Energy Tax Policy Act of 2003 and before January 1,
2007.''.
(2) Conforming amendment.--Section 45(e), as so
redesignated, is amended by striking ``subsection
(c)(3)(A)'' in paragraph (7)(A)(i) and inserting
``subsection (d)(1)''.
(c) Special Credit Rate and Period for Electricity Produced
and Sold After Enactment Date.--Section 45(b) is amended by
adding at the end the following new paragraph:
``(4) Credit rate and period for electricity
produced and sold from certain facilities.--
``(A) Credit rate.--In the case of
electricity produced and sold in any calendar
year after 2003 at any qualified facility
described in paragraph (3), (5), (6), or (7) of
subsection (d), the amount in effect under
subsection (a)(1) for such calendar year
(determined before the application of the last
sentence of paragraph (2) of this subsection)
shall be reduced by one-third.
``(B) Credit period.--
``(i) In general.--Except as
provided in clause (ii), in the case of
any facility described in paragraph
(3), (4), (5), (6), or (7) of
subsection (d), the 5-year period
beginning on the date the facility was
originally placed in service shall be
substituted for the 10-year period in
subsection (a)(2)(A)(ii).
``(ii) Certain open-loop biomass
facilities.--In the case of any
facility described in subsection
(d)(3)(A)(ii) placed in service before
the date of the enactment of this
paragraph, the 5-year period beginning
on January 1, 2004, shall be
substituted for the 10-year period in
subsection (a)(2)(A)(ii).''.
(d) Coordination With Other Credits.--Section 45(e), as so
redesignated, is amended by adding at the end the following new
paragraph:
``(8) Coordination with other credits.--The term
`qualified facility' shall not include--
``(A) any property with respect to which a
credit is allowed under section 25C, and
``(B) any facility the production from
which is allowed as a credit under section 45K,
for the taxable year or any prior taxable year.''.
(e) Coordination With Section 48.--Section 48(a)(3)
(defining energy property) is amended by adding at the end the
following new sentence: ``Such term shall not include any
property which is part of a facility the production from which
is allowed as a credit under section 45 for the taxable year or
any prior taxable year.''.
(f) Elimination of Certain Credit Reductions.--Section
45(b)(3) (relating to credit reduced for grants, tax-exempt
bonds, subsidized energy financing, and other credits) is
amended--
(1) by inserting ``the lesser of \1/2\ or'' before
``a fraction'' in the matter preceding subparagraph
(A), and
(2) by adding at the end the following new
sentence: ``This paragraph shall not apply with respect
to any facility described in subsection
(d)(2)(A)(ii).''.
(g) Effective Dates.--
(1) In general.--Except as otherwise provided in
this subsection, the amendments made by this section
shall apply to electricity produced and sold after the
date of the enactment of this Act, in taxable years
ending after such date.
(2) Certain biomass facilities.--With respect to
any facility described in section 45(d)(3)(A)(ii) of
the Internal Revenue Code of 1986, as added by
subsection (b)(1), which is placed in service before
the date of the enactment of this Act, the amendments
made by this section shall apply to electricity
produced and sold after December 31, 2003, in taxable
years ending after such date.
(3) Credit rate and period for new facilities.--The
amendments made by subsection (c)shall apply to
electricity produced and sold after December 31, 2003, in taxable years
ending after such date.
(4) Nonapplication of amendments to preeffective
date poultry waste facilities.--The amendments made by
this section shall not apply with respect to any
poultry waste facility (within the meaning of section
45(c)(3)(C), as in effect on the day before the date of
the enactment of this Act) placed in service before
January 1, 2004.
(h) GAO Study.--The Comptroller General of the United
States shall conduct a study on the market viability of
producing electricity from resources with respect to which
credit is allowed under section 45 of the Internal Revenue Code
of 1986 but without such credit. In the case of open-loop
biomass and municipal solid waste resources, the study should
take into account savings associated with not having to dispose
of such resources. In conducting such study, the Comptroller
shall estimate the dollar value of the environmental impact of
producing electricity from such resources relative to producing
electricity from fossil fuels using the latest generation of
technology. Not later than June 30, 2006, the Comptroller shall
report on such study to the Committee on Ways and Means of the
House of Representatives and the Committee on Finance of the
Senate.
SEC. 1303. CREDIT FOR BUSINESS INSTALLATION OF QUALIFIED FUEL CELLS.
(a) In General.--Section 48(a)(3)(A) (defining energy
property) is amended by striking ``or'' at the end of clause
(i), by adding ``or'' at the end of clause (ii), and by
inserting after clause (ii) the following new clause:
``(iii) qualified fuel cell
property,''.
(b) Qualified Fuel Cell Property.--Section 48 (relating to
energy credit; reforestation credit) is amended by adding at
the end the following new subsection:
``(c) Qualified Fuel Cell Property.--For purposes of
subsection (a)(3)(A)(iii)--
``(1) In general.--The term `qualified fuel cell
property' means a fuel cell power plant which generates
at least 0.5 kilowatt of electricity using an
electrochemical process.
``(2) Limitation.--The energy credit with respect
to any qualified fuel cell property shall not exceed an
amount equal to $500 for each 0.5 kilowatt of capacity
of such property.
``(3) Fuel cell power plant.--The term `fuel cell
power plant' means an integrated system, comprised of a
fuel cell stack assembly and associated balance of
plant components, which converts a fuel into
electricity using electrochemical means.
``(4) Termination.--The term `qualified fuel cell
property' shall not include any property placed in
service after December 31, 2006.''.
(c) Energy Percentage.--Subparagraph (A) of section
48(a)(2) (relating to energy percentage) is amended to read as
follows:
``(A) In general.--The energy percentage
is--
``(i) in the case of qualified fuel
cell property, 20 percent, and
``(ii) in the case of any other
energy property, 10 percent.''.
(d) Conforming Amendment.--Section 48(a)(1) is amended by
inserting ``except as provided in subsection (c)(2),'' before
``the energy''.
(e) Effective Date.--The amendments made by this section
shall apply to periods after December 31, 2003, under rules
similar to the rules of section 48(m) of the Internal Revenue
Code of 1986 (as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990).
SEC. 1304. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.
(a) In General.--Subpart A of part IV of subchapter A of
chapter 1 (relating to nonrefundable personal credits), as
amended by this Act, is amended by inserting after section 25C
the following new section:
``SEC. 25D. ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.
``(a) Allowance of Credit.--In the case of an individual,
there shall be allowed as a credit against the tax imposed by
this chapter for the taxable year an amount equal to 20 percent
of the amount paid or incurred by the taxpayer for qualified
energy efficiency improvements installed during such taxable
year.
``(b) Limitations.--
``(1) Maximum credit.--The credit allowed by this
section with respect to a dwelling unit shall not
exceed $2,000.
``(2) Prior credit amounts for taxpayer on same
dwelling taken into account.--If a credit was allowed
to the taxpayer under subsection (a) with respect to a
dwelling unit in 1 or more prior taxable years, the
amount of the credit otherwise allowable for the
taxable year with respect to that dwelling unit shall
be reduced by the sum of the credits allowed under
subsection (a) to the taxpayer with respect to the
dwelling unit for all prior taxable years.
``(c) Qualified Energy Efficiency Improvements.--For
purposes of this section, the term `qualified energy efficiency
improvements' means any energy efficient building envelope
component which meets the prescriptive criteria for such
component established by the 2000 International Energy
Conservation Code, as such Code (including supplements) is in
effect on the date of the enactment of this section (or, in the
case of a metal roof with appropriate pigmented coatings which
meet the Energy Star program requirements), if--
``(1) such component is installed in or on a
dwelling unit--
``(A) located in the United States,
``(B) owned and used by the taxpayer as the
taxpayer's principal residence (within the
meaning of section 121), and
``(C) which has not been treated as a
qualified new energy efficient home for
purposes of any credit allowed under section
45G,
``(2) the original use of such component commences
with the taxpayer, and
``(3) such component reasonably can be expected to
remain in use for at least 5 years.
If the aggregate cost of such components with respect to any
dwelling unit exceeds $1,000, such components shall be treated
as qualified energy efficiency improvements only if such
components are also certified in accordance with subsection (d)
as meeting such prescriptive criteria.
``(d) Certification.--The certification described in
subsection (c) shall be--
``(1) determined on the basis of the technical
specifications or applicable ratings (including product
labeling requirements) for the measurement of energy
efficiency (based upon energy use or building envelope
component performance) for the energy efficient
building envelope component,
``(2) provided by a local building regulatory
authority, a utility, a manufactured home production
inspection primary inspection agency (IPIA), or an
accredited home energy rating system provider who is
accredited by or otherwise authorized to use approved
energy performance measurement methods by the
Residential Energy Services Network (RESNET), and
``(3) made in writing in a manner which specifies
in readily verifiable fashion the energy efficient
building envelope components installed and their
respective energy efficiency levels.
``(e) Definitions and Special Rules.--For purposes of this
section--
``(1) Building envelope component.--The term
`building envelope component' means--
``(A) any insulation material or system
which is specifically and primarily designed to
reduce the heat loss or gain of a dwelling unit
when installed in or on such dwelling unit,
``(B) exterior windows (including
skylights),
``(C) exterior doors, and
``(D) any metal roof installed on a
dwelling unit, but only if such roof has
appropriate pigmented coatings which are
specifically and primarily designed to reduce
the heat gain of such dwelling unit.
``(2) Manufactured homes included.--The term
`dwelling unit' includes a manufactured home which
conforms to Federal Manufactured Home Construction and
Safety Standards (section 3280 of title 24, Code of
Federal Regulations).
``(3) Application of rules.--Rules similar to the
rules under paragraphs (3), (4), and (5) of section
25C(d) shall apply.
``(f) Basis Adjustment.--For purposes of this subtitle, if
a credit is allowed under this section for any expenditure with
respect to any property, the increase in the basis of such
property which would (but for this subsection) result from such
expenditure shall be reduced by the amount of the credit so
allowed.
``(g) Application of Section.--This section shall apply to
qualified energy efficiency improvements installed after
December 31, 2003, and before January 1, 2007.''.
(b) Conforming Amendments.--
(1) Subsection (a) of section 1016, as amended by
this Act, is amended by striking ``and'' at the end of
paragraph (28), by striking the period at the end of
paragraph (29) and inserting ``, and'', and by adding
at the end the following new paragraph:
``(30) to the extent provided in section 25D(f), in
the case of amounts with respect to which a credit has
been allowed under section 25D.''.
(2) The table of sections for subpart A of part IV
of subchapter A of chapter 1, as amended by this Act,
is amended by inserting after the item relating to
section 25C the following new item:
``Sec. 25D. Energy efficiency improvements to existing homes.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years ending after December 31, 2003.
SEC. 1305. CREDIT FOR CONSTRUCTION OF NEW ENERGY EFFICIENT HOMES.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business related credits) is amended by
adding at the end the following new section:
``SEC. 45G. NEW ENERGY EFFICIENT HOME CREDIT.
``(a) In General.--For purposes of section 38, in the case
of an eligible contractor with respect to a qualified new
energy efficient home, the credit determined under this section
for the taxable year with respect to such home is an amount
equal to the aggregate adjusted bases of all energy efficient
property installed in such home during construction of such
home.
``(b) Limitations.--
``(1) Maximum credit.--
``(A) In general.--The credit allowed by
this section with respect to a dwelling unit
shall not exceed--
``(i) in the case of a dwelling
unit described in clause (i) or (iii)
of subsection (c)(3)(D), $1,000, and
``(ii) in the case of a dwelling
unit described in subsection
(c)(3)(D)(ii), $2,000.
``(B) Prior credit amounts on same dwelling
unit taken into account.--If a credit was
allowed under subsection (a) with respect to a
dwelling unit in 1 or more prior taxable years,
the amount of the credit otherwise allowable
for the taxable year with respect to such
dwelling unit shall be reduced by the sum of
the credits allowed under subsection (a) with
respect to the dwelling unit for all prior
taxable years.
``(2) Coordination with certain credits.--For
purposes of this section--
``(A) the basis of any property referred to
in subsection (a) shall be reduced by that
portion of the basis of any property which is
attributable to qualified rehabilitation
expenditures (as defined in section 47(c)(2))
or to the energy percentage of energy property
(as determined under section 48(a)), and
``(B) expenditures taken into account under
section 47 or 48(a) shall not be taken into
account under this section.
``(c) Definitions.--For purposes of this section--
``(1) Eligible contractor.--The term `eligible
contractor' means--
``(A) the person who constructed the
qualified new energy efficient home, or
``(B) in the case of a qualified new energy
efficient home which is a manufactured home,
the manufactured home producer of such home.
If more than 1 person is described in subparagraph (A)
or (B) with respect to any qualified new energy
efficient home, such term means the person designated
as such by the owner of such home.
``(2) Energy efficient property.--The term `energy
efficient property' means any energy efficient building
envelope component, and any energy efficient heating or
cooling equipment or system, which can, individually or
in combination with other components, result in a
dwelling unit meeting the requirements of this section.
``(3) Qualified new energy efficient home.--The
term `qualified new energy efficient home' means a
dwelling unit--
``(A) located in the United States,
``(B) the construction of which is
substantially completed after December 31,
2003,
``(C) the original use of which, after such
construction, is reasonably expected to be as a
residence by the person who acquires such
dwelling unit from the eligible contractor,
``(D) which is--
``(i) certified to have a level of
annual heating and cooling energy
consumption which is at least 30
percent below the annual level of
heating and cooling energy consumption
of a comparable dwelling unit
constructed in accordance with the
standards of chapter 4 of the 2000
International Energy Conservation Code,
as such Code (including supplements) is
in effect on the date of the enactment
of this section, and to have building
envelope component improvements account
for at least \1/3\ of such 30 percent,
``(ii) certified to have a level of
annual heating and cooling energy
consumption which is at least 50
percent below such annual level and to
have building envelope component
improvements account for at least \1/5\
of such 50 percent, or
``(iii) a manufactured home which--
``(I) conforms to Federal
Manufactured Home Construction
and Safety Standards (section
3280 of title 24, Code of
Federal Regulations), and
``(II) meets the applicable
standards required by the
Administrator of the
Environmental Protection Agency
under the Energy Star Labeled
Homes program.
``(4) Construction.--The term `construction'
includes substantial reconstruction and rehabilitation.
``(5) Acquire.--The term `acquire' includes
purchase and, in the case of reconstruction and
rehabilitation, such term includes a binding written
contract for such reconstruction or rehabilitation.
``(6) Building envelope component.--The term
`building envelope component' means--
``(A) any insulation material or system
which is specifically and primarily designed to
reduce the heat loss or gain of a dwelling unit
when installed in or on such dwelling unit,
``(B) exterior windows (including
skylights),
``(C) exterior doors, and
``(D) any metal roof installed on a
dwelling unit, but only if such roof has
appropriate pigmented coatings which--
``(i) are specifically and
primarily designed to reduce the heat
gain of such dwelling unit, and
``(ii) meet the Energy Star program
requirements.
``(d) Certification.--
``(1) Method of certification.--A certification
described in subsection (c)(3)(D) shall be determined
in accordance with guidance prescribed by the
Secretary. Such guidance shall specify procedures and
methods for calculating energy and cost savings.
``(2) Form.--A certification described in
subsection (c)(3)(D) shall be made in writing--
``(A) in a manner which specifies in
readily verifiable fashion the energy efficient
building envelope components and energy
efficient heating or cooling equipment
installed and their respective rated energy
efficiency performance, and
``(B) in the case of a qualified new energy
efficient home which is a manufactured home,
accompanied by such documentation as required
by the Administrator of the Environmental
Protection Agency under the Energy Star Labeled
Homes program.
``(e) Basis Adjustment.--For purposes of this subtitle, if
a credit is determined under this section for any expenditure
with respect to any property, the increase in the basis of such
property which would (but for this subsection) result from such
expenditure shall be reduced by the amount of the credit so
determined.
``(f) Application of Section.--Subsection (a) shall apply
to qualified new energy efficient homes acquired during the
period beginning on January 1, 2004, and ending on December 31,
2006.''.
(b) Credit Made Part of General Business Credit.--Section
38(b) (relating to current year business credit) is amended by
striking ``plus'' at the end of paragraph (14), by striking the
period at the end of paragraph (15) and inserting ``, plus'',
and by adding at the end the following new paragraph:
``(16) the new energy efficient home credit
determined under section 45G(a).''.
(c) Basis Adjustment.--Subsection (a) of section 1016, as
amended by this Act, is amended by striking ``and'' at the end
of paragraph (29), by striking the period at the end of
paragraph (30) and inserting ``, and'', and by adding at the
end the following new paragraph:
``(31) to the extent provided in section 45G(e), in
the case of amounts with respect to which a credit has
been allowed under section 45G.''.
(d) Limitation on Carryback.--
(1) In general.--Subsection (d) of section 39 is
amended to read as follows:
``(d) Transitional Rule.--No portion of the unused business
credit for any taxable year which is attributable to a credit
specified in section 38(b) or any portion thereof may be
carried back to any taxable year before the first taxable year
for which such specified credit or such portion is allowable
(without regard to subsection (a)).''.
(2) Effective date.--The amendment made by
paragraph (1) shall apply with respect to taxable years
ending after December 31, 2002.
(e) Deduction for Certain Unused Business Credits.--Section
196(c) (defining qualified business credits) is amended by
striking ``and'' at the end of paragraph (10), by striking the
period at the end of paragraph (11) and inserting ``, and'',
and by adding after paragraph (11) the following new paragraph:
``(12) the new energy efficient home credit
determined under section 45G(a).''.
(f) Clerical Amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 is amended by adding
at the end the following new item:
``Sec. 45G. New energy efficient home credit.''.
(g) Effective Date.--The amendments made by this section
shall apply to taxable years ending after December 31, 2003.
SEC. 1306. ENERGY CREDIT FOR COMBINED HEAT AND POWER SYSTEM PROPERTY.
(a) In General.--Section 48(a)(3)(A) (defining energy
property), as amended by this Act, is amended by striking
``or'' at the end of clause (ii), by adding ``or'' at the end
of clause (iii), and by inserting after clause (iii) the
following new clause:
``(iv) combined heat and power
system property,''.
(b) Combined Heat and Power System Property.--Section 48
(relating to energy credit; reforestation credit), as amended
by this Act, is amended by adding at the end the following new
subsection:
``(d) Combined Heat and Power System Property.--For
purposes of subsection (a)(3)(A)(iv)--
``(1) Combined heat and power system property.--The
term `combined heat and power system property' means
property comprising a system--
``(A) which uses the same energy source for
the simultaneous or sequential generation of
electrical power, mechanical shaft power, or
both, in combination with the generation of
steam or other forms of useful thermal energy
(including heating and cooling applications),
``(B) which has an electrical capacity of
not more than 15 megawatts or a mechanical
energy capacity of not more than 2,000
horsepower or an equivalent combination of
electrical and mechanical energy capacities,
``(C) which produces--
``(i) at least 20 percent of its
total useful energy in the form of
thermal energy which is not used to
produce electrical or mechanical power
(or combination thereof), and
``(ii) at least 20 percent of its
total useful energy in the form of
electrical or mechanical power (or
combination thereof),
``(D) the energy efficiency percentage of
which exceeds 60 percent, and
``(E) which is placed in service before
January 1, 2007.
``(2) Special rules.--
``(A) Energy efficiency percentage.--For
purposes of this subsection, the energy
efficiency percentage of a system is the
fraction--
``(i) the numerator of which is the
total useful electrical, thermal, and
mechanical power produced by the system
at normal operating rates, and expected
to be consumed in its normal
application, and
``(ii) the denominator of which is
the lower heating value of the fuel
sources for the system.
``(B) Determinations made on btu basis.--
The energy efficiency percentage and the
percentages under paragraph (1)(C) shall be
determined on a Btu basis.
``(C) Input and output property not
included.--The term `combined heat and power
system property' does not include property used
to transport the energy source to the facility
or to distribute energy produced by the
facility.
``(D) Public utility property.--
``(i) Accounting rule for public
utility property.--If the combined heat
and power system property is public
utility property (as defined in section
168(i)(10)), the taxpayer may only
claim the credit under subsection (a)
if, with respect to such property, the
taxpayer uses a normalization method of
accounting.
``(ii) Certain exception not to
apply.--The matter in subsection (a)(3)
which follows subparagraph (D) thereof
shall not apply to combined heat and
power system property.
``(3) Systems using bagasse.--If a system is
designed to use bagasse for at least 90 percent of the
energy source--
``(A) paragraph (1)(D) shall not apply, but
``(B) the amount of credit determined under
subsection (a) with respect to such system
shall not exceed the amount which bears the
same ratio to such amount of credit (determined
without regard to this paragraph) as the energy
efficiency percentage of such system bears to
60 percent.''.
(c) Effective Date.--The amendments made by this subsection
shall apply to periods after December 31, 2003, in taxable
years ending after such date, under rules similar to the rules
of section 48(m) of the Internal Revenue Code of 1986 (as in
effect on the day before the date of the enactment of the
Revenue Reconciliation Act of 1990).
SEC. 1307. CREDIT FOR ENERGY EFFICIENT APPLIANCES.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business-related credits), as amended by
this Act, is amended by adding at the end the following new
section:
``SEC. 45H. ENERGY EFFICIENT APPLIANCE CREDIT.
``(a) Allowance of Credit.--For purposes of section 38, the
energy efficient appliance credit determined under this section
for the taxable year is an amount equal to the sum of--
``(1) the tier I appliance amount, and
``(2) the tier II appliance amount,
with respect to qualified energy efficient appliances produced
by the taxpayer during the calendar year ending with or within
the taxable year.
``(b) Appliance Amounts.--For purposes of subsection (a)--
``(1) Tier i appliance amount.--The tier I
appliance amount is equal to--
``(A) $100, multiplied by
``(B) an amount (rounded to the nearest
whole number) equal to the applicable
percentage of the eligible production.
``(2) Tier ii appliance amount.--The tier II
appliance amount is equal to $150, multiplied by an
amount equal to the eligible production reduced by the
amount determined under paragraph (1)(B).
``(3) Applicable percentage.--The applicable
percentage is the percentage determined by dividing the
tier I appliances produced by the taxpayer during the
calendar year by the sum of the tier I and tier II
appliances so produced.
``(4) Eligible production.--The eligible production
of qualified energy efficient appliances by the
taxpayer for any calendar year is the excess of--
``(A) the number of such appliances which
are produced by the taxpayer during such
calendar year, over
``(B) 110 percent of the average annual
number of such appliances which were produced
by the taxpayer (or any predecessor) during the
preceding 3-calendar year period.
``(c) Qualified Energy Efficient Appliance.--For purposes
of this section--
``(1) In general.--The term `qualified energy
efficient appliance' means any tier I appliance or tier
II appliance which is produced in the United States.
``(2) Tier i appliance.--The term `tier I
appliance' means--
``(A) a clothes washer which is produced
with at least a 1.50 MEF, and
``(B) a refrigerator which consumes at
least 15 percent (20 percent in the case of a
refrigerator produced after 2006) less kilowatt
hours per year than the energy conservation
standards for refrigerators promulgated by the
Department of Energy and effective on July 1,
2001.
``(3) Tier ii appliance.--The term `tier II
appliance' means a refrigerator produced before 2007
which consumes at least 20 percent less kilowatt hours
per year than the energy conservation standards
described in paragraph (2)(B).
``(4) Clothes washer.--The term `clothes washer'
means a residential clothes washer, including a
residential style coin operated washer.
``(5) Refrigerator.--The term `refrigerator' means
an automatic defrost refrigerator-freezer which has an
internal volume of at least 16.5 cubic feet.
``(6) MEF.--The term `MEF' means Modified Energy
Factor (as determined by the Secretary of Energy).
``(7) Produced.--The term `produced' includes
manufactured.
``(d) Limitation on Maximum Credit.--
``(1) In general.--The amount of credit allowed
under subsection (a) with respect to a taxpayer for any
taxable year shall not exceed $60,000,000, reduced by
the amount of the credit allowed under subsection (a)
to the taxpayer (or any predecessor) for any prior
taxable year.
``(2) Limitation based on gross receipts.--The
credit allowed under subsection (a) with respect to a
taxpayer for the taxable year shallnot exceed an amount
equal to 2 percent of the average annual gross receipts of the taxpayer
for the 3 taxable years preceding the taxable year for which the credit
is determined.
``(3) Gross receipts.--For purposes of this
subsection, the rules of paragraphs (2) and (3) of
section 448(c) shall apply.
``(e) Special Rules.--For purposes of this section--
``(1) In general.--Rules similar to the rules of
subsections (c), (d), and (e) of section 52 shall
apply.
``(2) Controlled groups.--
``(A) In general.--All persons treated as a
single employer under subsection (a) or (b) of
section 52 or subsection (m) or (o) of section
414 shall be treated as a single manufacturer.
``(B) Inclusion of foreign corporations.--
For purposes of subparagraph (A), in applying
subsections (a) and (b) of section 52 to this
section, section 1563 shall be applied without
regard to subsection (b)(2)(C) thereof.
``(f) Verification.--The taxpayer shall submit such
information or certification as the Secretary, after
consultation with the Secretary of Energy, determines necessary
to claim the credit amount under subsection (a).
``(g) Termination.--This section shall not apply with
respect to appliances produced after December 31, 2007.''.
(b) Credit Made Part of General Business Credit.--Section
38(b) (relating to current year business credit), as amended by
this Act, is amended by striking ``plus'' at the end of
paragraph (15), by striking the period at the end of paragraph
(16) and inserting ``, plus'', and by adding at the end the
following new paragraph:
``(17) the energy efficient appliance credit
determined under section 45H(a).''.
(c) Clerical Amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1, as amended by this
Act, is amended by adding at the end the following new item:
``Sec. 45H. Energy efficient appliance credit.''.
(d) Effective Date.--The amendments made by this section
shall apply to appliances produced after December 31, 2003, in
taxable years ending after such date.
SEC. 1308. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.
(a) In General.--Part VI of subchapter B of chapter 1
(relating to itemized deductions for individuals and
corporations) is amended by inserting after section 179A the
following new section:
``SEC. 179B. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.
``(a) In General.--There shall be allowed as a deduction an
amount equal to the cost of energy efficient commercial
building property placed in service during the taxable year.
``(b) Maximum Amount of Deduction.--The deduction under
subsection (a) with respect to any building for the taxable
year and all prior taxable years shall not exceed an amount
equal to the product of--
``(1) $1.50, and
``(2) the square footage of the building.
``(c) Definitions.--For purposes of this section--
``(1) Energy efficient commercial building
property.--The term `energy efficient commercial
building property' means property--
``(A) which is installed on or in a
building--
``(i) which is located in the
United States, and
``(ii) which is the type of
structure to which the Standard 90.1-
2001 is applicable,
``(B) which is installed as part of--
``(i) the lighting systems,
``(ii) the heating, cooling,
ventilation, and hot water systems, or
``(iii) the building envelope, and
``(C) which is certified in accordance with
subsection (d)(4) as being installed as part of
a plan designed to reduce the total annual
energy and power costs with respect to the
lighting systems, heating, cooling,
ventilation, and hot water systems of the
building by 50 percent or more in comparison to
a reference building which meets the minimum
requirements of Standard 90.1-2001 using
methods of calculation under subsection (d)(2).
``(2) Standard 90.1-2001.--The term `Standard 90.1-
2001' means Standard 90.1-2001 of the American Society
of Heating, Refrigerating, and Air Conditioning
Engineers and the Illuminating Engineering Society of
North America (as in effect on April 2, 2003).
``(d) Special Rules.--
``(1) Partial allowance.--
``(A) In general.--Except as provided in
subsection (f), in the case of a building
placed in service on or before the date of the
enactment of this section, if--
``(i) the requirement of subsection
(c)(1)(C) is not met, but
``(ii) there is a certification in
accordance with subsection (d)(4) that
any system referred to in subsection
(c)(1)(B) satisfies the energy-savings
targets established by the Secretary
under subparagraph (B) with respect to
such system,
then the requirement of subsection (c)(1)(C)
shall be treated as met with respect to such
system, and the deduction under subsection (a)
shall be allowed with respect to energy
efficient commercial building property
installed as part of such system and as part of
a plan to meet such targets, except that
subsection (b) shall be applied to such
property by substituting `$.50' for `$1.50'.
``(B) Regulations.--The Secretary, after
consultation with the Secretary of Energy,
shall establish a target for each system
described in subsection (c)(1)(B) which, if
such targets were met for all such systems, the
building would meet the requirements of
subsection (c)(1)(C).
``(2) Methods of calculation.--The Secretary, after
consultation with the Secretary of Energy, shall
promulgate regulations which describe in detail methods
for calculating and verifying energy and power cost for
purposes of this section.
``(3) Notice to owner.--Each certification required
under this section shall include an explanation to the
building owner regarding the energy efficiency features
of the building and its projected annual energy costs.
``(4) Certification.--
``(A) In general.--The Secretary shall
prescribe the manner and method for the making
of certifications under this section.
``(B) Procedures.--The Secretary shall
include as part of the certification process
procedures for inspection and testing by
qualified individuals described in subparagraph
(C) to ensure compliance of buildings with
energy-savings plans and targets. Such
procedures shall be--
``(i) comparable, given the
difference between commercial and
residential buildings, to the
requirements in the Mortgage Industry
National Accreditation Procedures for
Home Energy Rating Systems, and
``(ii) fuel neutral such that the
same energy efficiency measures allow a
building to be eligible for the
deduction under this section regardless
of whether such building uses a gas or
oil furnace or boiler, an electric heat
pump, or other fuel source.
``(C) Qualified individuals.--Individuals
qualified to determine compliance shall be only
those individuals who are recognized by an
organization certified by the Secretary for
such purposes.
``(e) Basis Reduction.--For purposes of this subtitle, if a
deduction is allowed under this section with respect to any
energy efficient commercial building property, the basis of
such property shall be reduced by the amount of the deduction
so allowed.
``(f) Interim Rules for Lighting Systems.--Until such time
as the Secretary issues final regulations under subsection
(d)(1)(B) with respect to property which is part of a lighting
system--
``(1) In general.--The lighting system target under
subsection (d)(1)(A)(ii) shall be a reduction in
lighting power density of 25 percent (50 percent in the
case of a warehouse) of the minimum requirements in
Table 9.3.1.1 or Table 9.3.1.2 (not including
additional interior lighting power allowances) of
Standard 90.1-2001.
``(2) Reduction in deduction if reduction less than
40 percent.--
``(A) In general.--If, with respect to the
lighting system of any building other than a
warehouse, the reduction in lighting power
density of the lighting system is not at least
40 percent, only the applicable percentage of
the amount of deduction otherwise allowable
under this section with respect to such
property shall be allowed.
``(B) Applicable percentage.--For purposes
of subparagraph (A), the applicable percentage
is the number of percentage points (not greater
than 100) equal to the sum of--
``(i) 50, and
``(ii) the amount which bears the
same ratio to 50 as the excess of the
reduction of lighting power density of
the lighting system over 25 percentage
points bears to 15.
``(C) Exceptions.--This subsection shall
not apply to any system--
``(i) the controls and circuiting
of which do not comply fully with the
mandatory and prescriptive requirements
of Standard 90.1-2001 and which do not
include provision for bilevel switching
in all occupancies except hotel and
motel guest rooms, store rooms,
restrooms, and public lobbies, or
``(ii) which does not meet the
minimum requirements for calculated
lighting levels as set forth in the
Illuminating Engineering Society of
North America Lighting Handbook,
Performance and Application, Ninth
Edition, 2000.
``(g) Regulations.--The Secretary shall promulgate such
regulations as necessary--
``(1) to take into account new technologies
regarding energy efficiency and renewable energy for
purposes of determining energy efficiency and savings
under this section, and
``(2) to provide for a recapture of the deduction
allowed under this section if the plan described in
subsection (c)(1)(C) or (d)(1)(A) is not fully
implemented.
``(h) Termination.--This section shall not apply with
respect to property placed in service after December 31,
2007.''.
(b) Conforming Amendments.--
(1) Section 1016(a), as amended by this section, is
amended by striking ``and'' at the end of paragraph
(30), by striking the period at the end of paragraph
(31) and inserting ``, and'', and by adding at the end
the following new paragraph:
``(32) to the extent provided in section
179B(e).''.
(2) Section 1245(a) is amended by inserting
``179B,'' after ``179A,'' both places it appears in
paragraphs (2)(C) and (3)(C).
(3) Section 1250(b)(3) is amended by inserting
before the period at the end of the first sentence ``or
by section 179B''.
(4) Section 263(a)(1) is amended by striking ``or''
at the end of subparagraph (G), by striking the period
at the end of subparagraph (H) and inserting ``, or'',
and by inserting after subparagraph (H) the following
new subparagraph:
``(I) expenditures for which a deduction is
allowed under section 179B.''.
(5) Section 312(k)(3)(B) is amended by striking
``or 179A'' each place it appears in the heading and
text and inserting ``, 179A, or 179B''.
(c) Clerical Amendment.--The table of sections for part VI
of subchapter B of chapter 1 is amended by inserting after
section 179A the following new item:
``Sec. 179B. Energy efficient commercial buildings deduction.''.
(d) Effective Date.--The amendments made by this section
shall apply to property placed in service after the date of the
enactment of this Act in taxable years ending after such date.
SEC. 1309. THREE-YEAR APPLICABLE RECOVERY PERIOD FOR DEPRECIATION OF
QUALIFIED ENERGY MANAGEMENT DEVICES.
(a) In General.--Section 168(e)(3)(A) (defining 3-year
property) is amended by striking ``and'' at the end of clause
(ii), by striking the period at the end of clause (iii) and
inserting ``, and'', and by adding at the end the following new
clause:
``(iv) any qualified energy
management device.''.
(b) Definition of Qualified Energy Management Device.--
Section 168(i) (relating to definitions and special rules) is
amended by inserting at the end the following new paragraph:
``(15) Qualified energy management device.--
``(A) In general.--The term `qualified
energy management device' means any energy
management device which is placed in service
before January 1, 2008, by a taxpayer who is a
supplier of electric energy or a provider of
electric energy services.
``(B) Energy management device.--For
purposes of subparagraph (A), the term `energy
management device' means any meter or metering
device which is used by the taxpayer--
``(i) to measure and record
electricity usage data on a time-
differentiated basis in at least 4
separate time segments per day, and
``(ii) to provide such data on at
least a monthly basis to both consumers
and the taxpayer.''.
(c) Alternative System.--The table contained in section
168(g)(3)(B) is amended by inserting after the item relating to
subparagraph (A)(iii) the following:
``(A)(iv)......................................................... 20''.
(d) Effective Date.--The amendments made by this section
shall apply to property placed in service after the date of the
enactment of this Act, in taxable years ending after such date.
SEC. 1310. CREDIT FOR PRODUCTION FROM ADVANCED NUCLEAR POWER
FACILITIES.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business related credits), as amended by
this Act, is amended by adding after section 45K the following
new section:
``SEC. 45L. CREDIT FOR PRODUCTION FROM ADVANCED NUCLEAR POWER
FACILITIES.
``(a) General Rule.--For purposes of section 38, the
advanced nuclear power facility production credit of any
taxpayer for any taxable year is equal to the product of--
``(1) 1.8 cents, multiplied by
``(2) the kilowatt hours of electricity--
``(A) produced by the taxpayer at an
advanced nuclear power facility during the 8-
year period beginning on the date the facility
was originally placed in service, and
``(B) sold by the taxpayer to an unrelated
person during the taxable year.
``(b) National Limitation.--
``(1) In general.--The amount of credit which would
(but for this subsection and subsection (c)) be allowed
with respect to any facility for any taxable year shall
not exceed the amount which bears the same ratio to
such amount of credit as--
``(A) the national megawatt capacity
limitation allocated to the facility, bears to
``(B) the total megawatt nameplate capacity
of such facility.
``(2) Amount of national limitation.--The national
megawatt capacity limitation shall be 6,000 megawatts.
``(3) Allocation of limitation.--The Secretary
shall allocate the national megawatt capacity
limitation in such manner as the Secretary may
prescribe.
``(4) Regulations.--Not later than 6 months after
the date of the enactment of this section, the
Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of
this subsection. Such regulations shall provide a
certification process under which the Secretary, after
consultation with the Secretary of Energy, shall
approve and allocate the national megawatt capacity
limitation.
``(c) Other Limitations.--
``(1) Annual limitation.--The amount of the credit
allowable under subsection (a) (after the application
of subsection (b)) for any taxable year with respect to
any facility shall not exceed an amount which bears the
same ratio to $125,000,000 as--
``(A) the national megawatt capacity
limitation allocated under subsection (b) to
the facility, bears to
``(B) 1,000.
``(2) Other limitations.--Rules similar to the
rules of section 45(b) shall apply for purposes of this
section, except that paragraph (2) thereof shall not
apply to the 1.8 cents under subsection (a)(1).
``(d) Advanced Nuclear Power Facility.--For purposes of
this section--
``(1) In general.--The term `advanced nuclear power
facility' means any advanced nuclear facility--
``(A) which is owned by the taxpayer and
which uses nuclear energy to produce
electricity, and
``(B) which is placed in service after the
date of the enactment of this paragraph and
before January 1, 2021.
``(2) Advanced nuclear facility.--For purposes of
paragraph (1), the term `advanced nuclear facility'
means any nuclear facility the reactor design for which
is approved after the date of the enactment of this
paragraph by the Nuclear Regulatory Commission (and
such design or a substantially similar design of
comparable capacity was not approved on or before such
date).
``(e) Other Rules To Apply.--Rules similar to the rules of
paragraphs (1), (2), (3), (4), and (5) of section 45(e) shall
apply for purposes of this section.''
(b) Credit Treated as Business Credit.--Section 38(b), as
amended by this Act, is amended by striking ``plus'' at the end
of paragraph (20), by striking the period at the end of
paragraph (21) and inserting ``, plus'', and by adding at the
end the following:
``(22) the advanced nuclear power facility
production credit determined under section 45L(a).''.
(c) Clerical Amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1, as amended by this
Act, is amended by adding at the end the following:
``Sec. 45L. Credit for production from advanced nuclear power
facilities.''.
(d) Effective Date.--The amendments made by this section
shall apply to production in taxable years beginning after
December 31, 2003.
PART II--FUELS AND ALTERNATIVE MOTOR VEHICLES
SEC. 1311. REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES ON RAILROADS AND
INLAND WATERWAY TRANSPORTATION WHICH REMAIN IN
GENERAL FUND.
(a) Taxes on Trains.--
(1) In general.--Subparagraph (A) of section
4041(a)(1) is amended by striking ``or a diesel-powered
train'' each place it appears and by striking ``or
train''.
(2) Conforming amendments.--
(A) Subparagraph (C) of section 4041(a)(1)
is amended by striking clause (ii) and by
redesignating clause (iii) as clause (ii).
(B) Subparagraph (C) of section 4041(b)(1)
is amended by striking all that follows
``section 6421(e)(2)'' and inserting a period.
(C) Subsection (d) of section 4041 is
amended by redesignating paragraph (3) as
paragraph (4) and by inserting after paragraph
(2) the following new paragraph:
``(3) Diesel fuel used in trains.--There is hereby
imposed a tax of 0.1 cent per gallon on any liquid
other than gasoline (as defined in section 4083)--
``(A) sold by any person to an owner,
lessee, or other operator of a diesel-powered
train for use as a fuel in such train, or
``(B) used by any person as a fuel in a
diesel-powered train unless there was a taxable
sale of such fuel under subparagraph (A).
No tax shall be imposed by this paragraph on the sale
or use of any liquid if tax was imposed on such liquid
under section 4081.''.
(D) Subsection (f) of section 4082 is
amended by striking ``section 4041(a)(1)'' and
inserting ``subsections (d)(3) and (a)(1) of
section 4041, respectively''.
(E) Paragraph (3) of section 4083(a) is
amended by striking ``or a diesel-powered
train''.
(F) Paragraph (3) of section 6421(f) is
amended to read as follows:
``(3) Gasoline used in trains.--In the case of
gasoline used as a fuel in a train, this section shall
not apply with respect to the Leaking Underground
Storage Tank Trust Fund financing rate under section
4081.''.
(G) Paragraph (3) of section 6427(l) is
amended to read as follows:
``(3) Refund of certain taxes on fuel used in
diesel-powered trains.--For purposes of this
subsection, the term `nontaxable use' includes fuel
used in a diesel-powered train. The preceding sentence
shall not apply to the tax imposed by section 4041(d)
and the Leaking Underground Storage Tank Trust Fund
financing rate under section 4081 except with respect
to fuel sold for exclusive use by a State or any
political subdivision thereof.''.
(b) Fuel Used on Inland Waterways.--
(1) In general.--Paragraph (1) of section 4042(b)
is amended by adding ``and'' at the end of subparagraph
(A), by striking ``, and'' at the end of subparagraph
(B) and inserting a period, and by striking
subparagraph (C).
(2) Conforming amendment.--Paragraph (2) of section
4042(b) is amended by striking subparagraph (C).
(c) Effective Date.--The amendments made by this section
shall take effect on January 1, 2004.
SEC. 1312. REDUCED MOTOR FUEL EXCISE TAX ON CERTAIN MIXTURES OF DIESEL
FUEL.
(a) In General.--Paragraph (2) of section 4081(a) is
amended by adding at the end the following:
``(C) Diesel-water fuel emulsion.--In the
case of diesel-water fuel emulsion at least 14
percent of which is water and with respect to
which the emulsion additive is registered by a
United States manufacturer with the
Environmental Protection Agency pursuant to
section 211 of the Clean Air Act (as in effect
on March 31, 2003), subparagraph (A)(iii) shall
be applied by substituting `19.7 cents' for
`24.3 cents'.''.
(b) Special Rules for Diesel-Water Fuel Emulsions.--
(1) Refunds for tax-paid purchases.--Section 6427
is amended by redesignating subsections(m) through (p)
as subsections (n) through (q), respectively, and by inserting after
subsection (l) the following new subsection:
``(m) Diesel Fuel Used To Produce Emulsion.--
``(1) In general.--Except as provided in subsection
(k), if any diesel fuel on which tax was imposed by
section 4081 at the regular tax rate is used by any
person in producing an emulsion described in section
4081(a)(2)(C) which is sold or used in such person's
trade or business, the Secretary shall pay (without
interest) to such person an amount equal to the excess
of the regular tax rate over the incentive tax rate
with respect to such fuel.
``(2) Definitions.--For purposes of paragraph (1)--
``(A) Regular tax rate.--The term `regular
tax rate' means the aggregate rate of tax
imposed by section 4081 determined without
regard to section 4081(a)(2)(C).
``(B) Incentive tax rate.--The term
`incentive tax rate' means the aggregate rate
of tax imposed by section 4081 determined with
regard to section 4081(a)(2)(C).''.
(2) Later separation of fuel.--
(A) In general.--Section 4081 (relating to
imposition of tax) is amended by redesignating
subsections (d) and (e) as subsections (e) and
(f), respectively, and by inserting after
subsection (c) the following new subsection:
``(d) Later Separation of Fuel From Diesel-Water Fuel
Emulsion.--If any person separates the taxable fuel from a
diesel-water fuel emulsion on which tax was imposed under
subsection (a) at a rate determined under subsection (a)(2)(C)
(or with respect to which a credit or payment was allowed or
made by reason of section 6427), such person shall be treated
as the refiner of such taxable fuel. The amount of tax imposed
on any removal of such fuel by such person shall be reduced by
the amount of tax imposed (and not credited or refunded) on any
prior removal or entry of such fuel.''.
(B) Conforming amendment.--Subsection (d)
of section 6416 is amended by striking
``section 4081(e)'' and inserting ``section
4081(f)''.
(c) Effective Date.--The amendments made by this section
shall take effect on January 1, 2004.
SEC. 1313. SMALL ETHANOL PRODUCER CREDIT.
(a) Allocation of Alcohol Fuels Credit to Patrons of a
Cooperative.--Section 40(g) (relating to definitions and
special rules for eligible small ethanol producer credit) is
amended by adding at the end the following new paragraph:
``(6) Allocation of small ethanol producer credit
to patrons of cooperative.--
``(A) Election to allocate.--
``(i) In general.--In the case of a
cooperative organization described in
section 1381(a), any portion of the
credit determined under subsection
(a)(3) for the taxable year may, at the
election of the organization, be
apportioned pro rata among patrons of
the organization on the basis of the
quantity or value of business done with
or for such patrons for the taxable
year.
``(ii) Form and effect of
election.--An election under clause (i)
for any taxable year shall be made on a
timely filed return for such year. Such
election, once made, shall be
irrevocable for such taxable year.
``(B) Treatment of organizations and
patrons.--The amount of the credit apportioned
to patrons under subparagraph (A)--
``(i) shall not be included in the
amount determined under subsection (a)
with respect to the organization for
the taxable year, and
``(ii) shall be included in the
amount determined under subsection (a)
for the taxable year of each patron for
which the patronage dividends for the
taxable year described in subparagraph
(A) are included in gross income.
``(C) Special rule.--If the amount of a
credit which has been apportioned to any patron
under this paragraph is decreased for any
reason--
``(i) such amount shall not
increase the tax imposed on such
patron, and
``(ii) the tax imposed by this
chapter on such organization shall be
increased by such amount.
The increase under clause (ii) shall not be
treated as tax imposed by this chapter for
purposes of determining the amount of any
credit under this chapter or for purposes of
section 55.''.
(b) Definition of Small Ethanol Producer.--Section 40(g)
(relating to definitions and special rules for eligible small
ethanol producer credit) is amended by striking ``30,000,000''
each place it appears and inserting ``60,000,000''.
(c) Conforming Amendment.--Section 1388 (relating to
definitions and special rules for cooperative organizations) is
amended by adding at the end the following new subsection:
``(k) Cross Reference.--
``For provisions relating to the apportionment of the alcohol
fuels credit between cooperative organizations and their
patrons, see section 40(g)(6).''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2003.
SEC. 1314. INCENTIVES FOR BIODIESEL.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business related credits) is amended by
inserting after section 40 the following new section:
``SEC. 40A. BIODIESEL USED AS FUEL.
``(a) General Rule.--For purposes of section 38, the
biodiesel fuels credit determined under this section for the
taxable year is an amount equal to the sum of--
``(1) the biodiesel mixture credit, plus
``(2) the biodiesel credit.
``(b) Definition of Biodiesel Mixture Credit and Biodiesel
Credit.--For purposes of this section--
``(1) Biodiesel mixture credit.--
``(A) In general.--The biodiesel mixture
credit of any taxpayer for any taxable year is
50 cents for each gallon of biodiesel used by
the taxpayer in the production of a qualified
biodiesel mixture.
``(B) Qualified biodiesel mixture.--The
term `qualified biodiesel mixture' means a
mixture of biodiesel and a taxable fuel (within
the meaning of section 4083(a)(1)) which--
``(i) is sold by the taxpayer
producing such mixture to any person
for use as a fuel, or
``(ii) is used as a fuel by the
taxpayer producing such mixture.
``(C) Sale or use must be in trade or
business, etc.--Biodiesel used in the
production of a qualified biodiesel mixture
shall be taken into account--
``(i) only if the sale or use
described in subparagraph (B) is in a
trade or business of the taxpayer, and
``(ii) for the taxable year in
which such sale or use occurs.
``(D) Casual off-farm production not
eligible.--No credit shall be allowed under
this section with respect to any casual off-
farm production of a qualified biodiesel
mixture.
``(2) Biodiesel credit.--
``(A) In general.--The biodiesel credit of
any taxpayer for any taxable year is 50 cents
for each gallon of biodiesel which is not in a
mixture and which during the taxable year--
``(i) is used by the taxpayer as a
fuel in a trade or business, or
``(ii) is sold by the taxpayer at
retail to a person and placed in the
fuel tank of such person's vehicle.
``(B) User credit not to apply to biodiesel
sold at retail.--No credit shall be allowed
under subparagraph (A)(i) with respect to any
biodiesel which was sold in a retail sale
described in subparagraph (A)(ii).
``(3) Credit for agri-biodiesel.--In the case of
any biodiesel which is agri-biodiesel, paragraphs
(1)(A) and (2)(A) shall be applied by substituting
`$1.00' for `50 cents'.
``(4) Certification for biodiesel.--No credit shall
be allowed under this section unless the taxpayer
obtains a certification (in such form and manner as
prescribed by the Secretary) from the producer of the
biodiesel which identifies the product produced and the
percentage of biodiesel and agri-biodiesel in the
product.
``(c) Coordination With Credit Against Excise Tax.--The
amount of the credit determined under this section with respect
to any biodiesel shall be properly reduced to take into account
any benefit provided with respect to such biodiesel solely by
reason of the application of section 6426.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Biodiesel.--The term `biodiesel' means the
monoalkyl esters of long chain fatty acids derived from
plant or animal matter which meet--
``(A) the registration requirements for
fuels and fuel additives established by the
Environmental Protection Agency under section
211 of the Clean Air Act (42 U.S.C. 7545), and
``(B) the requirements of the American
Society of Testing and Materials D6751.
``(2) Agri-biodiesel.--The term `agri-biodiesel'
means biodiesel derived solely from virgin oils,
including esters derived from virgin vegetable oils
from corn, soybeans, sunflower seeds, cottonseeds,
canola, crambe, rapeseeds, safflowers, flaxseeds, rice
bran, and mustard seeds, and from animal fats.
``(3) Mixture or biodiesel not used as a fuel,
etc.--
``(A) Mixtures.--If--
``(i) any credit was determined
under this section with respect to
biodiesel used in the production of any
qualified biodiesel mixture, and
``(ii) any person--
``(I) separates the
biodiesel from the mixture, or
``(II) without separation,
uses the mixture other than as
a fuel,
then there is hereby imposed on such person a
tax equal to the product of the rate applicable
under subsection (b)(1)(A) and the number of
gallons of such biodiesel in such mixture.
``(B) Biodiesel.--If--
``(i) any credit was determined
under this section with respect to the
retail sale of any biodiesel, and
``(ii) any person mixes such
biodiesel or uses such biodiesel other
than as a fuel,
then there is hereby imposed on such person a
tax equal to the product of the rate applicable
under subsection (b)(2)(A) and the number of
gallons of such biodiesel.
``(C) Applicable laws.--All provisions of
law, including penalties, shall, insofar as
applicable and not inconsistent with this
section, apply in respect of any tax imposed
under subparagraph (A) or (B) as if such tax
were imposed by section 4081 and not by this
chapter.
``(4) Pass-thru in the case of estates and
trusts.--Under regulations prescribed by the Secretary,
rules similar to the rules of subsection (d) of section
52 shall apply.
``(e) Termination.--This section shall not apply to any
sale or use after December 31, 2005.''.
(b) Credit Treated as Part of General Business Credit.--
Section 38(b) (relating to current year business credit) is
amended by striking ``plus'' at the end of paragraph (16), by
striking the period at the end ofparagraph (17) and inserting
``, plus'', and by adding at the end the following new paragraph:
``(18) the biodiesel fuels credit determined under
section 40A(a).''.
(c) Conforming Amendments.--
(1)(A) Section 87 is amended to read as follows:
``SEC. 87. ALCOHOL AND BIODIESEL FUELS CREDITS.
``Gross income includes--
``(1) the amount of the alcohol fuels credit
determined with respect to the taxpayer for the taxable
year under section 40(a), and
``(2) the biodiesel fuels credit determined with
respect to the taxpayer for the taxable year under
section 40A(a).''.
(B) The item relating to section 87 in the table of
sections for part II of subchapter B of chapter 1 is
amended by striking ``fuel credit'' and inserting ``and
biodiesel fuels credits''.
(2) Section 196(c), as amended by this Act, is
amended by striking ``and'' at the end of paragraph
(11), by striking the period at the end of paragraph
(12) and inserting ``, and'', and by adding at the end
the following new paragraph:
``(13) the biodiesel fuels credit determined under
section 40A(a).''.
(3) The table of sections for subpart D of part IV
of subchapter A of chapter 1 is amended by adding after
the item relating to section 40 the following new item:
``Sec. 40A. Biodiesel used as fuel.''.
(d) Effective Date.--The amendments made by this section
shall apply to fuel produced, and sold or used, after December
31, 2003, in taxable years ending after such date.
SEC. 1315. ALCOHOL FUEL AND BIODIESEL MIXTURES EXCISE TAX CREDIT.
(a) In General.--Subchapter B of chapter 65 (relating to
rules of special application) is amended by inserting after
section 6425 the following new section:
``SEC. 6426. CREDIT FOR ALCOHOL FUEL AND BIODIESEL MIXTURES.
``(a) Allowance of Credits.--There shall be allowed as a
credit against the tax imposed by section 4081 an amount equal
to the sum of--
``(1) the alcohol fuel mixture credit, plus
``(2) the biodiesel mixture credit.
``(b) Alcohol Fuel Mixture Credit.--
``(1) In general.--For purposes of this section,
the alcohol fuel mixture credit is the product of the
applicable amount and the number of gallons of alcohol
used by the taxpayer in producing any alcohol fuel
mixture for sale or use in a trade or business of the
taxpayer.
``(2) Applicable amount.--For purposes of this
subsection--
``(A) In general.--Except as provided in
subparagraph (B), the applicable amount is 52
cents (51 cents in the case of any sale or use
after 2004).
``(B) Mixtures not containing ethanol.--In
the case of an alcohol fuel mixture in which
none of the alcohol consists of ethanol, the
applicable amount is 60 cents.
``(3) Alcohol fuel mixture.--For purposes of this
subsection, the term `alcohol fuel mixture' means a
mixture of alcohol and a taxable fuel which--
``(A) is sold by the taxpayer producing
such mixture to any person for use as a fuel,
``(B) is used as a fuel by the taxpayer
producing such mixture, or
``(C) is removed from the refinery by a
person producing such mixture.
``(4) Other definitions.--For purposes of this
subsection--
``(A) Alcohol.--The term `alcohol' includes
methanol and ethanol but does not include--
``(i) alcohol produced from
petroleum, natural gas, or coal
(including peat), or
``(ii) alcohol with a proof of less
than 190 (determined without regard to
any added denaturants).
Such term also includes an alcohol gallon
equivalent of ethyl tertiary butyl ether or
other ethers produced from such alcohol.
``(B) Taxable fuel.--The term `taxable
fuel' has the meaning given such term by
section 4083(a)(1).
``(5) Termination.--This subsection shall not apply
to any sale, use, or removal for any period after
December 31, 2010.
``(c) Biodiesel Mixture Credit.--
``(1) In general.--For purposes of this section,
the biodiesel mixture credit is the product of the
applicable amount and the number of gallons ofbiodiesel
used by the taxpayer in producing any biodiesel mixture for sale or use
in a trade or business of the taxpayer.
``(2) Applicable amount.--For purposes of this
subsection--
``(A) In general.--Except as provided in
subparagraph (B), the applicable amount is 50
cents.
``(B) Amount for agri-biodiesel.--In the
case of any biodiesel which is agri-biodiesel,
the applicable amount is $1.00.
``(3) Biodiesel mixture.--For purposes of this
section, the term `biodiesel mixture' means a mixture
of biodiesel and a taxable fuel which--
``(A) is sold by the taxpayer producing
such mixture to any person for use as a fuel,
``(B) is used as a fuel by the taxpayer
producing such mixture, or
``(C) is removed from the refinery by a
person producing such mixture.
``(4) Certification for biodiesel.--No credit shall
be allowed under this section unless the taxpayer
obtains a certification (in such form and manner as
prescribed by the Secretary) from the producer of the
biodiesel which identifies the product produced and the
percentage of biodiesel and agri-biodiesel in the
product.
``(5) Other definitions.--Any term used in this
subsection which is also used in section 40A shall have
the meaning given such term by section 40A.
``(6) Termination.--This subsection shall not apply
to any sale, use, or removal for any period after
December 31, 2005.
``(d) Mixture not used as a fuel, etc.--
``(1) Imposition of tax.--If--
``(A) any credit was determined under this
section with respect to alcohol or biodiesel
used in the production of any alcohol fuel
mixture or biodiesel mixture, respectively, and
``(B) any person--
``(i) separates the alcohol or
biodiesel from the mixture, or
``(ii) without separation, uses the
mixture other than as a fuel,
then there is hereby imposed on such person a
tax equal to the product of the applicable
amount and the number of gallons of such
alcohol or biodiesel.
``(2) Applicable laws.--All provisions of law,
including penalties, shall, insofar as applicable and
not inconsistent with this section, apply in respect of
any tax imposed under paragraph (1) as if such tax were
imposed by section 4081 and not by this section.
``(e) Coordination With Exemption From Excise Tax.--Rules
similar to the rules under section 40(c) shall apply for
purposes of this section.''.
(b) Registration Requirement.--Section 4101(a) (relating to
registration) is amended by inserting ``and every person
producing biodiesel (as defined in section 40A(d)(1)) or
alcohol (as defined in section 6426(b)(4)(A))'' after ``4091''.
(c) Additional Amendments.--
(1) Section 40(c) is amended by striking ``or
section 4091(c)'' and inserting ``section 4091(c), or
section 6426''.
(2) Section 40(e)(1) is amended--
(A) by striking ``2007'' in subparagraph
(A) and inserting ``2010'', and
(B) by striking ``2008'' in subparagraph
(B) and inserting ``2011''.
(3) Section 40(h) is amended--
(A) by striking ``2007'' in paragraph (1)
and inserting ``2010'', and
(B) by striking ``, 2006, or 2007'' in the
table contained in paragraph (2) and inserting
``through 2010''.
(4)(A) Subpart C of part III of subchapter A of
chapter 32 is amended by adding at the end the
following new section:
``SEC. 4104. INFORMATION REPORTING FOR PERSONS CLAIMING CERTAIN TAX
BENEFITS.
``(a) In General.--The Secretary shall require any person
claiming tax benefits under the provisions of section 34, 40,
40A, 4041(b)(2), 4041(k), 4081(c), 6426, or 6427(f) to file a
quarterly return (in such manner as the Secretary may
prescribe) providing such information relating to such benefits
and the coordination of such benefits as the Secretary may
require to ensure the proper administration and use of such
benefits.
``(b) Enforcement.--With respect to any person described in
subsection (a) and subject to registration requirements under
this title, rules similar to rules of section 4222(c) shall
apply with respect to any requirement under this section.''.
(B) The table of sections for subpart C of part III
of subchapter A of chapter 32 is amended by adding at
the end the following new item:
``Sec. 4104. Information reporting for persons claiming certain tax
benefits.''.
(5) Section 6427(i)(3) is amended--
(A) by adding at the end of subparagraph
(A) the following new flush sentence:
``In the case of an electronic claim, this
subparagraph shall be applied without regard to
clause (i).'', and
(B) by striking ``20 days of the date of
the filing of such claim'' in subparagraph (B)
and inserting ``45 days of the date of the
filing of such claim (20 days in the case of an
electronic claim)''.
(6) Section 9503(b)(1) is amended by adding at the
end the following new flush sentence:
``For purposes of this paragraph, taxes received under
sections 4041 and 4081 shall be determined without
reduction for credits under section 6426.''.
(d) Clerical Amendment.--The table of sections for
subchapter B of chapter 65 is amended by inserting after the
item relating to section 6425 the following new item:
``Sec. 6426. Credit for alcohol fuel and biodiesel mixtures.''.
(e) Effective Dates.--
(1) In general.--Except as provided in paragraphs
(2) and (3), the amendments made by this section shall
apply to fuel sold, used, or removed after December 31,
2003.
(2) Subsection (c)(4).--The amendments made by
subsection (c)(4) shall take effect on January 1, 2004.
(3) Subsection (c)(5).--The amendments made by
subsection (c)(5) shall apply to claims filed after
December 31, 2004.
(f) Format for Filing.--The Secretary of the Treasury shall
prescribe the electronic format for filing claims described in
section 6427(i)(3)(B) of the Internal Revenue Code of 1986 (as
amended by subsection (c)(5)(A)) not later than December 31,
2004.
SEC. 1316. NONAPPLICATION OF EXPORT EXEMPTION TO DELIVERY OF FUEL TO
MOTOR VEHICLES REMOVED FROM UNITED STATES.
(a) In General.--Section 4221(d)(2) (defining export) is
amended by adding at the end the following new sentence: ``Such
term does not include the delivery of a taxable fuel (as
defined in section 4083(a)(1)) into a fuel tank of a motor
vehicle which is shipped or driven out of the United States.''.
(b) Conforming Amendments.--
(1) Section 4041(g) (relating to other exemptions)
is amended by adding at the end the following new
sentence: ``Paragraph (3) shall not apply to the sale
for delivery of a liquid into a fuel tank of a motor
vehicle which is shipped or driven out of the United
States.''.
(2) Clause (iv) of section 4081(a)(1)(A) (relating
to tax on removal, entry, or sale) is amended by
inserting ``or at a duty-free sales enterprise (as
defined in section 555(b)(8) of the Tariff Act of
1930)'' after ``section 4101''.
(c) Effective Date.--The amendments made by this section
shall apply to sales or deliveries made after the date of the
enactment of this Act.
SEC. 1317. REPEAL OF PHASEOUTS FOR QUALIFIED ELECTRIC VEHICLE CREDIT
AND DEDUCTION FOR CLEAN FUEL-VEHICLES.
(a) Credit for Qualified Electric Vehicles.--Subsection (b)
of section 30 (relating to limitations) is amended by striking
paragraph (2) and redesignating paragraph (3) as paragraph (2).
(b) Deduction for Clean-Fuel Vehicles and Certain Refueling
Property.--Paragraph (1) of section 179A(b) (relating to
qualified clean-fuel vehicle property) is amended to read as
follows:
``(1) Qualified clean-fuel vehicle property.-- The
cost which may be taken into account under subsection
(a)(1)(A) with respect to any motor vehicle shall not
exceed--
``(A) in the case of a motor vehicle not
described in subparagraph (B) or (C), $2,000,
``(B) in the case of any truck or van with
a gross vehicle weight rating greater than
10,000 pounds but not greater than 26,000
pounds, $5,000, or
``(C) $50,000 in the case of--
``(i) a truck or van with a gross
vehicle weight rating greater than
26,000 pounds, or
``(ii) any bus which has a seating
capacity of at least 20 adults (not
including the driver).''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after the date of the
enactment of this Act.
SEC. 1318. ALTERNATIVE MOTOR VEHICLE CREDIT.
(a) In General.--Subpart B of part IV of subchapter A of
chapter 1 (relating to foreign tax credit, etc.) is amended by
adding at the end the following:
``SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT.
``(a) Allowance of Credit.--There shall be allowed as a
credit against the tax imposed by this chapter for the taxable
year an amount equal to the sum of--
``(1) the new qualified fuel cell motor vehicle
credit determined under subsection (b),
``(2) the new advanced lean burn technology motor
vehicle credit determined under subsection (c),
``(3) the new qualified hybrid motor vehicle credit
determined under subsection (d), and
``(4) the new qualified alternative fuel motor
vehicle credit determined under subsection (e).
``(b) New Qualified Fuel Cell Motor Vehicle Credit.--
``(1) In general.--For purposes of subsection (a),
the new qualified fuel cell motor vehicle credit
determined under this subsection with respect to a new
qualified fuel cell motor vehicle placed in service by
the taxpayer during the taxable year shall be
determined in accordance with the following table:
``In the case of a vehicle
which has a gross
vehicle weight rating of-- The new qualified
fuel cell motor
vehicle credit is--
Not more than 8,500 lbs................................... $4,000
More than 8,500 lbs but not more than 14,000 lbs.......... $10,000
More than 14,000 lbs but not more than 26,000 lbs......... $20,000
More than 26,000 lbs...................................... $40,000.
``(2) Increase for fuel efficiency.--
``(A) In general.--The amount determined
under paragraph (1) with respect to a new
qualified fuel cell motor vehicle which is a
passenger automobile or light truck shall be
increased by the additional credit amount.
``(B) Additional credit amount.--For
purposes of subparagraph (A), the additional
credit amount shall be determined in accordance
with the following table:
``In the case of a vehicle which achieves a
fuel economy (expressed as a percentage
of the 2002 model year city fuel economy) of-- The additional
credit amount is--
At least 150 percent but less than 175 percent............ $1,000
At least 175 percent but less than 200 percent............ $1,500
At least 200 percent but less than 225 percent............ $2,000
At least 225 percent but less than 250 percent............ $2,500
At least 250 percent but less than 275 percent............ $3,000
At least 275 percent but less than 300 percent............ $3,500
At least 300 percent...................................... $4,000.
``(3) New qualified fuel cell motor vehicle.--For
purposes of this subsection, the term `new qualified
fuel cell motor vehicle' means a motor vehicle--
``(A) which is propelled by power derived
from one or more cells which convert chemical
energy directly into electricity by combining
oxygen with hydrogen fuel which is stored on
board the vehicle in any form and may or may
not require reformation prior to use,
``(B) which, in the case of a passenger
automobile or light truck, has received--
``(i) a certificate of conformity
under the Clean Air Act and meets or
exceeds the equivalent qualifying
California low emission vehicle
standard under section 243(e)(2) of the
Clean Air Act for that make and model
year, and
``(ii) a certificate that such
vehicle meets or exceeds the Bin 5 Tier
II emission standard established in
regulations prescribed by the
Administrator of the Environmental
Protection Agency under section 202(i)
of the Clean Air Act for that make and
model year vehicle,
``(C) the original use of which commences
with the taxpayer,
``(D) which is acquired for use or lease by
the taxpayer and not for resale, and
``(E) which is made by a manufacturer.
``(c) New Advanced Lean Burn Technology Motor Vehicle
Credit.--
``(1) In general.--For purposes of subsection (a),
the new advanced lean burn technology motor vehicle
credit determined under this subsection with respect to
a new advanced lean burn technology motor vehicle
placed in service by the taxpayer during the taxable
year is the credit amount determined under paragraph
(2).
``(2) Credit amount.--
``(A) Fuel economy.--The credit amount
determined under this paragraph shall be
determined in accordance with the following
table:
``In the case of a vehicle which achieves a fuel economy (expressed as a
percentage of the 2002 model year city fuel economy) of-- The credit
amount is--
At least 125 percent but less than 150 percent............ $400
At least 150 percent but less than 175 percent............ $800
At least 175 percent but less than 200 percent............ $1,200
At least 200 percent but less than 225 percent............ $1,600
At least 225 percent but less than 250 percent............ $2,000
At least 250 percent...................................... $2,400.
``(B) Conservation credit.--The amount
determined under subparagraph (A) with respect
to a new advanced lean burn technology motor
vehicle shall be increased by the conservation
credit amount determined in accordance with the
following table:
``In the case of a vehicle which
achieves a lifetime fuel savings
(expressed in gallons of gasoline) of-- The conservation
credit amount
is--
At least 1,200 but less than 1,800........................ $250
At least 1,800 but less than 2,400........................ $500
At least 2,400 but less than 3,000........................ $750
At least 3,000............................................ $1,000.
``(3) New advanced lean burn technology motor
vehicle.--For purposes of this subsection, the term
`new advanced lean burn technology motor vehicle' means
a passenger automobile or a light truck--
``(A) with an internal combustion engine
which--
``(i) is designed to operate
primarily using more air than is
necessary for complete combustion of
the fuel,
``(ii) incorporates direct
injection,
``(iii) achieves at least 125
percent of the 2002 model year city
fuel economy,
``(iv) for 2004 and later model
vehicles, has received a certificate
that such vehicle meets or exceeds--
``(I) in the case of a
vehicle having a gross vehicle
weight rating of 6,000 pounds
or less, the Bin 5 Tier II
emission standard established
in regulations prescribed by
the Administrator of the
Environmental Protection Agency
under section 202(i) of the
Clean Air Act for that make and
model year vehicle, and
``(II) in the case of a
vehicle having a gross vehicle
weight rating of more than
6,000 pounds but not more than
8,500 pounds, the Bin 8 Tier II
emission standard which is so
established.
``(B) the original use of which commences
with the taxpayer,
``(C) which is acquired for use or lease by
the taxpayer and not for resale, and
``(D) which is made by a manufacturer.
``(4) Lifetime fuel savings.--For purposes of this
subsection, the term `lifetime fuel savings' means, in
the case of any new advanced lean burn technology motor
vehicle, an amount equal to the excess (if any) of--
``(A) 120,000 divided by the 2002 model
year city fuel economy for the vehicle inertia
weight class, over
``(B) 120,000 divided by the city fuel
economy for such vehicle.
``(d) New Qualified Hybrid Motor Vehicle Credit.--
``(1) In general.--For purposes of subsection (a),
the new qualified hybrid motor vehicle credit
determined under this subsection with respect to a new
qualified hybrid motor vehicle placed in service by the
taxpayer during the taxable year is the credit amount
determined under paragraph (2).
``(2) Credit amount.--
``(A) Credit amount for passenger
automobiles and light trucks.--In the case of a
new qualified hybrid motor vehicle which is a
passenger automobile or light truck and which
has a gross vehicle weight rating of not more
than 8,500 pounds, the amount determined under
this paragraph is the sum of the amounts
determined under clauses (i) and (ii).
``(i) Fuel economy.--The amount
determined under this clause is the
amount which would be determined under
subsection (c)(2)(A) if such vehicle
were a vehicle referred to in such
subsection.
``(ii) Conservation credit.--The
amount determined under this clause is
the amount which would be determined
undersubsection (c)(2)(B) if such
vehicle were a vehicle referred to in such subsection.
``(B) Credit amount for other motor
vehicles.--
``(i) In general.--In the case of
any new qualified hybrid motor vehicle
to which subparagraph (A) does not
apply, the amount determined under this
paragraph is the amount equal to the
applicable percentage of the qualified
incremental hybrid cost of the vehicle
as certified under clause (v).
``(ii) Applicable percentage.--For
purposes of clause (i), the applicable
percentage is--
``(I) 20 percent if the
vehicle achieves an increase in
city fuel economy relative to a
comparable vehicle of at least
30 percent but less than 40
percent,
``(II) 30 percent if the
vehicle achieves such an
increase of at least 40 percent
but less than 50 percent, and
``(III) 40 percent if the
vehicle achieves such an
increase of at least 50
percent.
``(iii) Qualified incremental
hybrid cost.--For purposes of this
subparagraph, the qualified incremental
hybrid cost of any vehicle is equal to
the amount of the excess of the
manufacturer's suggested retail price
for such vehicle over such price for a
comparable vehicle, to the extent such
amount does not exceed--
``(I) $7,500, if such
vehicle has a gross vehicle
weight rating of not more than
14,000 pounds,
``(II) $15,000, if such
vehicle has a gross vehicle
weight rating of more than
14,000 pounds but not more than
26,000 pounds, and
``(III) $30,000, if such
vehicle has a gross vehicle
weight rating of more than
26,000 pounds.
``(iv) Comparable vehicle.--For
purposes of this subparagraph, the term
`comparable vehicle' means, with
respect to any new qualified hybrid
motor vehicle, any vehicle which is
powered solely by a gasoline or diesel
internal combustion engine and which is
comparable in weight, size, and use to
such vehicle.
``(v) Certification.--A
certification described in clause (i)
shall be made by the manufacturer and
shall be determined in accordance with
guidance prescribed by the Secretary.
Such guidance shall specify procedures
and methods for calculating fuel
economy savings and incremental hybrid
costs.
``(3) New qualified hybrid motor vehicle.--For
purposes of this subsection--
``(A) In general.--The term `new qualified
hybrid motor vehicle' means a motor vehicle--
``(i) which draws propulsion energy
from onboard sources of stored energy
which are both--
``(I) an internal
combustion or heat engine using
consumable fuel, and
``(II) a rechargeable
energy storage system,
``(ii) which, in the case of a
vehicle to which paragraph (2)(A)
applies, has received a certificate of
conformity under the Clean Air Act and
meets or exceeds the equivalent
qualifying California low emission
vehicle standard under section
243(e)(2) of the Clean Air Act for that
make and model year, and
``(I) in the case of a
vehicle having a gross vehicle
weight rating of 6,000 pounds
or less, the Bin 5 Tier II
emission standard established
in regulations prescribed by
the Administrator of the
Environmental Protection Agency
under section 202(i) of the
Clean Air Act for that make and
model year vehicle, and
``(II) in the case of a
vehicle having a gross vehicle
weight rating of more than
6,000 pounds but not more than
8,500 pounds, the Bin 8 Tier II
emission standard which is so
established,
``(iii) which has a maximum
available power of at least--
``(I) 4 percent in the case
of a vehicle to which paragraph
(2)(A) applies,
``(II) 10 percent in the
case of a vehicle which has a
gross vehicle weight rating or
more than 8,500 pounds and not
than 14,000 pounds, and
``(III) 15 percent in the
case of a vehicle in excess of
14,000 pounds,
``(iv) which, in the case of a
vehicle to which paragraph (2)(B)
applies, has an internal combustion or
heat engine which has received a
certificate of conformity under the
Clean Air Act as meeting the emission
standards set in the regulations
prescribed by the Administrator of the
Environmental Protection Agency for
2004 through 2007 model year diesel
heavy duty engines or ottocycle heavy
duty engines, as applicable,
``(v) the original use of which
commences with the taxpayer,
``(vi) which is acquired for use or
lease by the taxpayer and not for
resale, and
``(vii) which is made by a
manufacturer.
Such term shall not include any vehicle which
is not a passenger automobile or light truck if
such vehicle has a gross vehicle weight rating
of less than 8,500 pounds.
``(B) Consumable fuel.--For purposes of
subparagraph (A)(i)(I), the term `consumable
fuel' means any solid, liquid, or gaseous
matter which releases energy when consumed by
an auxiliary power unit.
``(C) Maximum available power.--
``(i) Certain passenger automobiles
and light trucks.--In the case of a
vehicle to which paragraph (2)(A)
applies, the term `maximum available
power' means the maximum power
available from the rechargeable energy
storage system, during a standard 10
second pulse power or equivalent test,
divided by such maximum power and the
SAE net power of the heat engine.
``(ii) Other motor vehicles.--In
the case of a vehicle to which
paragraph (2)(B) applies, the term
`maximum available power' means the
maximum power available from the
rechargeable energy storage system,
during a standard 10 second pulse power
or equivalent test, divided by the
vehicle's total traction power. For
purposes of the preceding sentence, the
term `total traction power' means the
sum of the peak power from the
rechargeable energy storage system and
the heat engine peak power of the
vehicle, except that if such storage
system is the sole means by which the
vehicle can be driven, the total
traction power is the peak power of
such storage system.
``(e) New Qualified Alternative Fuel Motor Vehicle
Credit.--
``(1) Allowance of credit.--Except as provided in
paragraph (5), the new qualified alternative fuel motor
vehicle credit determined under this subsection is an
amount equal to the applicable percentage of the
incremental cost of any new qualified alternative fuel
motor vehicle placed in service by the taxpayer during
the taxable year.
``(2) Applicable percentage.--For purposes of
paragraph (1), the applicable percentage with respect
to any new qualified alternative fuel motor vehicle
is--
``(A) 40 percent, plus
``(B) 30 percent, if such vehicle--
``(i) has received a certificate of
conformity under the Clean Air Act and
meets or exceeds the most stringent
standard available for certification
under the Clean Air Act for that make
and model year vehicle (other than a
zero emission standard), or
``(ii) has received an order
certifying the vehicle as meeting the
same requirements as vehicles which may
be sold or leased in California and
meets or exceeds the most stringent
standard available for certification
under the State laws of California
(enacted in accordance with a waiver
granted under section 209(b) of the
Clean Air Act) for that make and model
year vehicle (other than a zero
emission standard).
For purposes of the preceding sentence, in the case of
any new qualified alternative fuel motor vehicle which
has a gross vehicle weight rating of more than 14,000
pounds, the most stringent standard available shall be
such standard available for certification on the date
of the enactment of the Energy Tax Policy Act of 2003.
``(3) Incremental cost.--For purposes of this
subsection, the incremental cost of any new qualified
alternative fuel motor vehicle is equal to the amount
of the excess of the manufacturer's suggested retail
price for such vehicle over such price for a gasoline
or diesel fuel motor vehicle of the same model, to the
extent such amount does not exceed--
``(A) $5,000, if such vehicle has a gross
vehicle weight rating of not more than 8,500
pounds,
``(B) $10,000, if such vehicle has a gross
vehicle weight rating of more than 8,500 pounds
but not more than 14,000 pounds,
``(C) $25,000, if such vehicle has a gross
vehicle weight rating of more than 14,000
pounds but not more than 26,000 pounds, and
``(D) $40,000, if such vehicle has a gross
vehicle weight rating of more than 26,000
pounds.
``(4) New qualified alternative fuel motor
vehicle.--For purposes of this subsection--
``(A) In general.--The term `new qualified
alternative fuel motor vehicle' means any motor
vehicle--
``(i) which is only capable of
operating on an alternative fuel,
``(ii) the original use of which
commences with the taxpayer,
``(iii) which is acquired by the
taxpayer for use or lease, but not for
resale, and
``(iv) which is made by a
manufacturer.
``(B) Alternative fuel.--The term
`alternative fuel' means compressed natural
gas, liquefied natural gas, liquefied petroleum
gas,hydrogen, and any liquid at least 85
percent of the volume of which consists of methanol.
``(5) Credit for mixed-fuel vehicles.--
``(A) In general.--In the case of a mixed-
fuel vehicle placed in service by the taxpayer
during the taxable year, the credit determined
under this subsection is an amount equal to--
``(i) in the case of a 75/25 mixed-
fuel vehicle, 70 percent of the credit
which would have been allowed under
this subsection if such vehicle was a
qualified alternative fuel motor
vehicle, and
``(ii) in the case of a 90/10
mixed-fuel vehicle, 90 percent of the
credit which would have been allowed
under this subsection if such vehicle
was a qualified alternative fuel motor
vehicle.
``(B) Mixed-fuel vehicle.--For purposes of
this subsection, the term `mixed-fuel vehicle'
means any motor vehicle described in
subparagraph (C) or (D) of paragraph (3),
which--
``(i) is certified by the
manufacturer as being able to perform
efficiently in normal operation on a
combination of an alternative fuel and
a petroleum-based fuel,
``(ii) either--
``(I) has received a
certificate of conformity under
the Clean Air Act, or
``(II) has received an
order certifying the vehicle as
meeting the same requirements
as vehicles which may be sold
or leased in California and
meets or exceeds the low
emission vehicle standard under
section 88.105-94 of title 40,
Code of Federal Regulations,
for that make and model year
vehicle,
``(iii) the original use of which
commences with the taxpayer,
``(iv) which is acquired by the
taxpayer for use or lease, but not for
resale, and
``(v) which is made by a
manufacturer.
``(C) 75/25 mixed-fuel vehicle.--For
purposes of this subsection, the term `75/25
mixed-fuel vehicle' means a mixed-fuel vehicle
which operates using at least 75 percent
alternative fuel and not more than 25 percent
petroleum-based fuel.
``(D) 90/10 mixed-fuel vehicle.--For
purposes of this subsection, the term `90/10
mixed-fuel vehicle' means a mixed-fuel vehicle
which operates using at least 90 percent
alternative fuel and not more than 10 percent
petroleum-based fuel.
``(f) Limitation on Number of New Qualified Hybrid and
Advanced Lean-Burn Technology Vehicles Eligible for Credit.--
``(1) In general.--In the case of a qualified
vehicle sold during the phaseout period, only the
applicable percentage of the credit otherwise allowable
under subsection (c) or (d) shall be allowed.
``(2) Phaseout period.--For purposes of this
subsection, the phaseout period is the period beginning
with the second calendar quarter following the calendar
quarter which includes the first date on which the
number of qualified vehicles manufactured by the
manufacturer of the vehicle referred to in paragraph
(1) sold for use in the United States after the date of
the enactment of this section is at least 80,000.
``(3) Applicable percentage.--For purposes of
paragraph (1), the applicable percentage is--
``(A) 50 percent for the first 2 calendar
quarters of the phaseout period,
``(B) 25 percent for the 3d and 4th
calendar quarters of the phaseout period, and
``(C) 0 percent for each calendar quarter
thereafter.
``(4) Controlled groups.--
``(A) In general.--For purposes of this
subsection, all persons treated as a single
employer under subsection (a) or (b) of section
52 or subsection (m) or (o) of section 414
shall be treated as a single manufacturer.
``(B) Inclusion of foreign corporations.--
For purposes of subparagraph (A), in applying
subsections (a) and (b) of section 52 to this
section, section 1563 shall be applied without
regard to subsection (b)(2)(C) thereof.
``(5) Qualified vehicle.--For purposes of this
subsection, the term `qualified vehicle' means any new
qualified hybrid motor vehicle and any new advanced
lean burn technology motor vehicle.
``(g) Limitation Based on Amount of Tax.--The credit
allowed under subsection (a) for the taxable year shall not
exceed the excess of--
``(1) the sum of the regular tax liability (as
defined in section 26(b)) plus the tax imposed by
section 55, over
``(2) the sum of the credits allowable under
subpart A and sections 27 and 30 for the taxable year.
``(h) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Motor vehicle.--The term `motor vehicle' has
the meaning given such term by section 30(c)(2).
``(2) Other terms.--The terms `automobile',
`passenger automobile', `light truck', and
`manufacturer' have the meanings given such terms in
regulations prescribed by the Administrator of the
Environmental Protection Agency for purposes of the
administration of title II of the Clean Air Act (42
U.S.C. 7521 et seq.).
``(3) 2002 model year city fuel economy.--
``(A) In general.--The 2002 model year city
fuel economy with respect to a vehicle shall be
determined in accordance with the following
tables:
``(i) In the case of a passenger
automobile:
``If vehicle inertia weight claThe 2002 model year city fuel economy is:
1,500 or 1,750 lbs............................................ 45.2 mpg
2,000 lbs..................................................... 39.6 mpg
2,250 lbs..................................................... 35.2 mpg
2,500 lbs..................................................... 31.7 mpg
2,750 lbs..................................................... 28.8 mpg
3,000 lbs..................................................... 26.4 mpg
3,500 lbs..................................................... 22.6 mpg
4,000 lbs..................................................... 19.8 mpg
4,500 lbs..................................................... 17.6 mpg
5,000 lbs..................................................... 15.9 mpg
5,500 lbs..................................................... 14.4 mpg
6,000 lbs..................................................... 13.2 mpg
6,500 lbs..................................................... 12.2 mpg
7,000 to 8,500 lbs............................................ 11.3 mpg.
``(ii) In the case of a light
truck:
``If vehicle inertia weight claThe 2002 model year city fuel economy is:
1,500 or 1,750 lbs............................................ 39.4 mpg
2,000 lbs..................................................... 35.2 mpg
2,250 lbs..................................................... 31.8 mpg
2,500 lbs..................................................... 29.0 mpg
2,750 lbs..................................................... 26.8 mpg
3,000 lbs..................................................... 24.9 mpg
3,500 lbs..................................................... 21.8 mpg
4,000 lbs..................................................... 19.4 mpg
4,500 lbs..................................................... 17.6 mpg
5,000 lbs..................................................... 16.1 mpg
5,500 lbs..................................................... 14.8 mpg
6,000 lbs..................................................... 13.7 mpg
6,500 lbs..................................................... 12.8 mpg
7,000 to 8,500 lbs............................................ 12.1 mpg.
``(B) Vehicle inertia weight class.--For
purposes of subparagraph (A), the term `vehicle
inertia weight class' has the same meaning as
when defined in regulations prescribed by the
Administrator of the Environmental Protection
Agency for purposes of the administration of
title II of the Clean Air Act (42 U.S.C. 7521
et seq.).
``(4) Fuel economy.--Fuel economy with respect to
any vehicle shall be measured under rules similar to
the rules under section 4064(c).
``(5) Reduction in basis.--For purposes of this
subtitle, if a credit is allowed under this section for
any expenditure with respect to any property, the
increase in the basis of such property which would (but
for this paragraph) result from such expenditure shall
be reduced by the amount of the credit so allowed.
``(6) No double benefit.--The amount of any
deduction or credit allowable under this chapter (other
than the credits allowable under this section and
section 30) shall be reduced by the amount of credit
allowed under subsection (a) for such vehicle for the
taxable year.
``(7) Recapture.--The Secretary shall, by
regulations, provide for recapturing the benefit of any
credit allowable under subsection (a) with respect to
any property which ceases to be property eligible for
such credit (including recapture in the case of a lease
period of less than the economic life of a vehicle).
``(8) Property used outside united states, etc.,
not qualified.--No credit shall be allowed under
subsection (a) with respect to any property referred to
in section 50(b) or with respect to the portion of the
cost of any property taken into account under section
179.
``(9) Election not to take credit.--No credit shall
be allowed under subsection (a) for any vehicle if the
taxpayer elects to not have this section apply to such
vehicle.
``(10) Business carryovers allowed.--If the credit
allowable under subsection (a) for a taxable year
exceeds the limitation under subsection (g) for such
taxable year, such excess (to the extent of the credit
allowable with respect to property subject to the
allowance for depreciation) shall be allowed as a
credit carryback and carryforward under rules similar
to the rules of section 39.
``(11) Interaction with motor vehicle safety
standards.--Unless otherwise provided in this section,
a motor vehicle shall not be considered eligible for a
credit under this section unless such vehicle is in
compliance with the motor vehicle safety provisions of
sections 30101 through 30169 of title 49, United States
Code.
``(i) Regulations.--
``(1) In general.--The Secretary shall promulgate
such regulations as necessary to carry out the
provisions of this section.
``(2) Determination of motor vehicle eligibility.--
The Secretary, after coordination with the Secretary of
Transportation and the Administrator of the
Environmental Protection Agency, shall prescribe such
regulations as necessary to determine whether a motor
vehicle meets the requirements to be eligible for a
credit under this section.
``(j) Termination.--This section shall not apply to any
property placed in service after--
``(1) in the case of a new qualified alternative
fuel motor vehicle, December 31, 2006,
``(2) in the case of a new advanced lean burn
technology motor vehicle or a new qualified hybrid
motor vehicle, December 31, 2008, and
``(3) in the case of a new qualified fuel cell
motor vehicle, December 31, 2012.''.
(b) Conforming Amendments.--
(1) Section 30(d) (relating to special rules) is
amended by adding at the end the following new
paragraphs:
``(5) No double benefit.--No credit shall be
allowed under this section for any motor vehicle for
which a credit is also allowed under section 30B.''.
(2) Section 1016(a), as amended by this Act, is
amended by striking ``and'' at the end of paragraph
(31), by striking the period at the end of paragraph
(32) and inserting ``, and'', and by adding at the end
the following:
``(33) to the extent provided in section
30B(h)(5).''.
(3) Section 6501(m) is amended by inserting
``30B(h)(9),'' after ``30(d)(4),''.
(4) The table of sections for subpart B of part IV
of subchapter A of chapter 1 is amended by inserting
after the item relating to section 30A the following:
``Sec. 30B. Alternative motor vehicle credit.''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after the date of the
enactment of this Act, in taxable years ending after such date.
(d) Sticker Information Required at Retail Sale.--
(1) In general.--The Secretary of the Treasury
shall issue regulations under which each qualified
vehicle sold at retail shall display a notice--
(A) that such vehicle is a qualified
vehicle, and
(B) that the buyer may not benefit from the
credit allowed under section 30B of the
Internal Revenue Code of 1986 if such buyer has
insufficient tax liability.
(2) Qualified vehicle.--For purposes of paragraph
(1), the term ``qualified vehicle'' means a vehicle
with respect to which a credit is allowed under section
30B of the Internal Revenue Code of 1986.
SEC. 1319. MODIFICATIONS OF DEDUCTION FOR CERTAIN REFUELING PROPERTY.
(a) In General.--Subsection (f) of section 179A is amended
to read as follows:
``(f) Termination.--This section shall not apply to any
property placed in service--
``(1) in the case of property relating to hydrogen,
after December 31, 2011, and
``(2) in the case of any other property, after
December 31, 2008.''.
(b) Incentive for Production of Hydrogen at Qualified
Clean-Fuel Vehicle Refueling Property.--Section 179A(d)
(defining qualified clean-fuel vehicle refueling property) is
amended by adding at the end the following new flush sentence:
``In the case of clean-burning fuel which is hydrogen produced
from another clean-burning fuel, paragraph (3)(A) shall be
applied by substituting `production, storage, or dispensing'
for `storage or dispensing' both places it appears.''.
(c) Increase in Location Expenditures.--Section
179A(b)(2)(A)(i) is amended by striking ``$100,000'' and
inserting ``$150,000''.
(d) Nonbusiness Use of Qualified Clean-Fuel Vehicle
Refueling Property.--Section 179A(d) is amended by striking
paragraph (1) and by redesignating paragraphs (2) and (3) as
paragraphs (1) and (2), respectively.
(e) Effective Date.--The amendments made by this section
shall apply to property placed in service after the date of the
enactment of this Act, in taxable years ending after such date.
Subtitle B--Reliability
SEC. 1321. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR PROPERTY.
(a) In General.--Subparagraph (C) of section 168(e)(3)
(relating to classification of certain property) is amended by
striking ``and'' at the end of clause (i), by redesignating
clause (ii) as clause (iii), and by inserting after clause (i)
the following new clause:
``(ii) any natural gas gathering
line, and''.
(b) Natural Gas Gathering Line.--Subsection (i) of section
168, as amended by this Act, is amended by adding after
paragraph (15) the following new paragraph:
``(16) Natural gas gathering line.--The term
`natural gas gathering line' means--
``(A) the pipe, equipment, and
appurtenances determined to be a gathering line
by the Federal Energy Regulatory Commission, or
``(B) the pipe, equipment, and
appurtenances used to deliver natural gas from
the wellhead or a commonpoint to the point at
which such gas first reaches--
``(i) a gas processing plant,
``(ii) an interconnection with a
transmission pipeline for which a
certificate as an interstate
transmission pipeline has been issued
by the Federal Energy Regulatory
Commission,
``(iii) an interconnection with an
intrastate transmission pipeline, or
``(iv) a direct interconnection
with a local distribution company, a
gas storage facility, or an industrial
consumer.''.
(c) Alternative System.--The table contained in section
168(g)(3)(B) is amended by inserting after the item relating to
subparagraph (C)(i) the following:
``(C)(ii)......................................................... 14''.
(d) Alternative Minimum Tax Exception.--Subparagraph (B) of
section 56(a)(1) is amended by inserting before the period the
following: ``, or in section 168(e)(3)(C)(ii)''.
(e) Effective Date.--The amendments made by this section
shall apply to property placed in service after the date of the
enactment of this Act, in taxable years ending after such date.
SEC. 1322. NATURAL GAS DISTRIBUTION LINES TREATED AS 15-YEAR PROPERTY.
(a) In General.--Subparagraph (E) of section 168(e)(3)
(relating to classification of certain property) is amended by
striking ``and'' at the end of clause (ii), by striking the
period at the end of clause (iii) and by inserting ``, and'',
and by adding at the end the following new clause:
``(iv) any natural gas distribution
line.''.
(b) Alternative System.--The table contained in section
168(g)(3)(B) is amended by inserting after the item relating to
subparagraph (E)(iii) the following:
``(E)(iv)......................................................... 35''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after the date of the
enactment of this Act, in taxable years ending after such date.
SEC. 1323. ELECTRIC TRANSMISSION PROPERTY TREATED AS 15-YEAR PROPERTY.
(a) In General.--Subparagraph (E) of section 168(e)(3)
(relating to classification of certain property), as amended by
this Act, is amended by striking ``and'' at the end of clause
(iii), by striking the period at the end of clause (iv) and by
inserting ``, and'', and by adding at the end the following new
clause:
``(v) any section 1245 property (as
defined in section 1245(a)(3)) used in
the transmission at 69 or more
kilovolts of electricity for sale the
original use of which commences with
the taxpayer after the date of the
enactment of this clause.''.
(b) Alternative System.--The table contained in section
168(g)(3)(B) is amended by inserting after the item relating to
subparagraph (E)(iv) the following:
``(E)(v).......................................................... 30''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after the date of the
enactment of this Act, in taxable years ending after such date.
SEC. 1324. EXPENSING OF CAPITAL COSTS INCURRED IN COMPLYING WITH
ENVIRONMENTAL PROTECTION AGENCY SULFUR REGULATIONS.
(a) In General.--Part VI of subchapter B of chapter 1
(relating to itemized deductions for individuals and
corporations), as amended by this Act, is amended by inserting
after section 179B the following new section:
``SEC. 179C. DEDUCTION FOR CAPITAL COSTS INCURRED IN COMPLYING WITH
ENVIRONMENTAL PROTECTION AGENCY SULFUR REGULATIONS.
``(a) Treatment as Expenses.--A small business refiner (as
defined in section 45I(c)(1)) may elect to treat 75 percent of
qualified capital costs (as defined in section 45I(c)(2)) which
are paid or incurred by the taxpayer during the taxable year as
expenses which are not chargeableto capital account. Any cost
so treated shall be allowed as a deduction for the taxable year in
which paid or incurred.
``(b) Reduced Percentage.--In the case of a small business
refiner with average daily domestic refinery runs for the 1-
year period ending on December 31, 2002, in excess of 155,000
barrels, the number of percentage points described in
subsection (a) shall be reduced (not below zero) by the product
of such number (before the application of this subsection) and
the ratio of such excess to 50,000 barrels.
``(c) Basis Reduction.--
``(1) In general.--For purposes of this title, the
basis of any property shall be reduced by the portion
of the cost of such property taken into account under
subsection (a).
``(2) Ordinary income recapture.--For purposes of
section 1245, the amount of the deduction allowable
under subsection (a) with respect to any property which
is of a character subject to the allowance for
depreciation shall be treated as a deduction allowed
for depreciation under section 167.''.
``(d) Coordination With Other Provisions.--Section 280B
shall not apply to amounts which are treated as expenses under
this section.''.
(b) Conforming Amendments.--
(1) Section 263(a)(1), as amended by this Act, is
amended by striking ``or'' at the end of subparagraph
(H), by striking the period at the end of subparagraph
(I) and inserting ``; or'', and by adding at the end
the following new subparagraph:
``(J) expenditures for which a deduction is
allowed under section 179C.''.
(2) Section 263A(c)(3) is amended by inserting
``179C,'' after ``section''.
(3) Section 312(k)(3)(B), as amended by this Act,
is amended by striking ``or 179B'' each place it
appears in the heading and text and inserting ``179B,
or 179C''.
(4) Section 1016(a), as amended by this Act, is
amended by striking ``and'' at the end of paragraph
(32), by striking the period at the end of paragraph
(33) and inserting ``, and'', and by adding at the end
the following new paragraph:
``(34) to the extent provided in section 179C(c).''
(5) Paragraphs (2)(C) and (3)(C) of section
1245(a), as amended by this Act, are each amended by
inserting ``179C,'' after ``179B,''.
(6) The table of sections for part VI of subchapter
B of chapter 1, as amended by this Act, is amended by
inserting after the item relating to section 179B the
following new item:
``Sec. 179C. Deduction for capital costs incurred in complying
with Environmental Protection Agency sulfur
regulations.''.
(c) Effective Date.--The amendment made by this section
shall apply to expenses paid or incurred after December 31,
2002, in taxable years ending after such date.
SEC. 1325. CREDIT FOR PRODUCTION OF LOW SULFUR DIESEL FUEL.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business-related credits), as amended by
this Act, is amended by adding at the end the following new
section:
``SEC. 45I. CREDIT FOR PRODUCTION OF LOW SULFUR DIESEL FUEL.
``(a) In General.--For purposes of section 38, the amount
of the low sulfur diesel fuel production credit determined
under this section with respect to any facility of a small
business refiner is an amount equal to 5 cents for each gallon
of low sulfur diesel fuel produced during the taxable year by
such small business refiner at such facility.
``(b) Maximum Credit.--
``(1) In general.--The aggregate credit determined
under subsection (a) for any taxable year with respect
to any facility shall not exceed--
``(A) 25 percent of the qualified capital
costs incurred by the small business refiner
with respect to such facility, reduced by
``(B) the aggregate credits determined
under this section for all prior taxable years
with respect to such facility.
``(2) Reduced percentage.--In the case of a small
business refiner with average daily domestic refinery
runs for the 1-year period ending on December 31, 2002,
in excess of 155,000 barrels, the number of percentage
points described in paragraph (1) shall be reduced (not
below zero) by the product of such number (before the
application of this paragraph) and the ratio of such
excess to 50,000 barrels.
``(c) Definitions and Special Rule.--For purposes of this
section--
``(1) Small business refiner.--The term `small
business refiner' means, with respect to any taxable
year, a refiner of crude oil--
``(A) with respect to which not more than
1,500 individuals are engaged in the refinery
operations of the business on any day during
such taxable year, and
``(B) the average daily domestic refinery
run or average retained production of which for
all facilities of the taxpayer for the 1-year
period ending on December 31, 2002, did not
exceed 205,000 barrels.
``(2) Qualified capital costs.--The term `qualified
capital costs' means, with respect to any facility,
those costs paid or incurred during the applicable
period for compliance with the applicable EPA
regulations with respect to such facility, including
expenditures for the construction of new process
operation units or the dismantling and reconstruction
of existing process units to be used in the production
of low sulfur diesel fuel, associated adjacent or
offsite equipment (including tankage, catalyst, and
power supply), engineering, construction period
interest, and sitework.
``(3) Applicable epa regulations.--The term
`applicable EPA regulations' means the Highway Diesel
Fuel Sulfur Control Requirements of the Environmental
Protection Agency.
``(4) Applicable period.--The term `applicable
period' means, with respect to any facility, the period
beginning on January 1, 2003, and ending on the earlier
of the date which is 1 year after the date on which the
taxpayer must comply with the applicable EPA
regulations with respect to such facility or December
31, 2009.
``(5) Low sulfur diesel fuel.--The term `low sulfur
diesel fuel' means diesel fuel with a sulfur content of
15 parts per million or less.
``(d) Reduction in Basis.--For purposes of this subtitle,
if a credit is determined under this section for any
expenditure with respect to any property, the increase in basis
of such property which would (but for this subsection) result
from such expenditure shall be reduced by the amount of the
credit so determined.
``(e) Special Rule for Determination of Refinery Runs.--For
purposes this section and section 179C(b), in the calculation
of average daily domestic refinery run or retained production,
only refineries which on April 1, 2003, were refineries of the
refiner or a related person (within the meaning of section
613A(d)(3)), shall be taken into account.
``(f) Certification.--
``(1) Required.--No credit shall be allowed unless,
not later than the date which is 30 months after the
first day of the first taxable year in which the low
sulfur diesel fuel production credit is allowed with
respect to a facility, the small business refiner
obtains certification from the Secretary, after
consultation with the Administrator of the
Environmental Protection Agency, that the taxpayer's
qualified capital costs with respect to such facility
will result in compliance with the applicable EPA
regulations.
``(2) Contents of application.--An application for
certification shall include relevant information
regarding unit capacities and operating characteristics
sufficient for the Secretary, after consultation with
the Administrator of the Environmental Protection
Agency, to determine that such qualified capital costs
are necessary for compliance with the applicable EPA
regulations.
``(3) Review period.--Any application shall be
reviewed and notice of certification, if applicable,
shall be made within 60 days of receipt of such
application. In the event the Secretary does not notify
the taxpayer of the results of such certification
within such period, the taxpayer may presume the
certification to be issued until so notified.
``(4) Statute of limitations.--With respect to the
credit allowed under this section--
``(A) the statutory period for the
assessment of any deficiency attributable to
such credit shall not expire before the end of
the 3-year period ending on the date that the
review period described in paragraph (3) ends
with respect to the taxpayer, and
``(B) such deficiency may be assessed
before the expiration of such 3-year period
notwithstanding the provisions of any other law
or rule of law which would otherwise prevent
such assessment.
``(g) Cooperative Organizations.--
``(1) Apportionment of credit.--
``(A) In general.--In the case of a
cooperative organization described in section
1381(a), any portion of the credit determined
under subsection (a) for the taxable year may,
at the election of the organization, be
apportioned among patrons eligible to share in
patronage dividends on the basis of the
quantityor value of business done with or for
such patrons for the taxable year.
``(B) Form and effect of election.--An
election under subparagraph (A) for any taxable
year shall be made on a timely filed return for
such year. Such election, once made, shall be
irrevocable for such taxable year.
``(2) Treatment of organizations and patrons.--
``(A) Organizations.--The amount of the
credit not apportioned to patrons pursuant to
paragraph (1) shall be included in the amount
determined under subsection (a) for the taxable
year of the organization.
``(B) Patrons.--The amount of the credit
apportioned to patrons pursuant to paragraph
(1) shall be included in the amount determined
under subsection (a) for the first taxable year
of each patron ending on or after the last day
of the payment period (as defined in section
1382(d)) for the taxable year of the
organization or, if earlier, for the taxable
year of each patron ending on or after the date
on which the patron receives notice from the
cooperative of the apportionment.
``(3) Special rule.--If the amount of a credit
which has been apportioned to any patron under this
subsection is decreased for any reason--
``(A) such amount shall not increase the
tax imposed on such patron, and
``(B) the tax imposed by this chapter on
such organization shall be increased by such
amount.
The increase under subparagraph (B) shall not be
treated as tax imposed by this chapter for purposes of
determining the amount of any credit under this chapter
or for purposes of section 55.''.
(b) Credit Made Part of General Business Credit.--
Subsection (b) of section 38 (relating to general business
credit), as amended by this Act, is amended by striking
``plus'' at the end of paragraph (17), by striking the period
at the end of paragraph (18) and inserting ``, plus'', and by
adding at the end the following new paragraph:
``(19) in the case of a small business refiner, the
low sulfur diesel fuel production credit determined
under section 45I(a).''.
(c) Denial of Double Benefit.--Section 280C (relating to
certain expenses for which credits are allowable) is amended by
adding at the end the following new subsection:
``(d) Low Sulfur Diesel Fuel Production Credit.--No
deduction shall be allowed for that portion of the expenses
otherwise allowable as a deduction for the taxable year which
is equal to the amount of the credit determined for the taxable
year under section 45I(a).''.
(d) Basis Adjustment.--Section 1016(a) (relating to
adjustments to basis), as amended by this Act, is amended by
striking ``and'' at the end of paragraph (33), by striking the
period at the end of paragraph (34) and inserting ``, and'',
and by adding at the end the following new paragraph:
``(35) in the case of a facility with respect to
which a credit was allowed under section 45I, to the
extent provided in section 45I(d).''.
(e) Deduction for Certain Unused Business Credits.--Section
196(c) (defining qualified business credits), as amended by
this Act, is amended by striking ``and'' at the end of
paragraph (12), by striking the period at the end of paragraph
(13) and inserting ``, and'', and by adding after paragraph
(13) the following new paragraph:
``(14) the low sulfur diesel fuel production credit
determined under section 45I(a).''.
(e) Clerical Amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1, as amended by this
Act, is amended by adding at the end the following new item:
``Sec. 45I. Credit for production of low sulfur diesel fuel.''.
(f) Effective Date.--The amendments made by this section
shall apply to expenses paid or incurred after December 31,
2002, in taxable years ending after such date.
SEC. 1326. DETERMINATION OF SMALL REFINER EXCEPTION TO OIL DEPLETION
DEDUCTION.
(a) In General.--Paragraph (4) of section 613A(d) (relating
to limitations on application of subsection (c)) is amended to
read as follows:
``(4) Certain refiners excluded.--If the taxpayer
or 1 or more related persons engages in the refining of
crude oil, subsection (c) shall not apply to the
taxpayer for a taxable year if the average daily
refinery runs of the taxpayer and such persons for the
taxable year exceed 67,500 barrels. For purposes of
this paragraph, the average daily refinery runs for any
taxable year shall be determined by dividing the
aggregate refinery runs for the taxable year by the
number of days in the taxable year.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 1327. SALES OR DISPOSITIONS TO IMPLEMENT FEDERAL ENERGY REGULATORY
COMMISSION OR STATE ELECTRIC RESTRUCTURING POLICY.
(a) In General.--Section 451 (relating to general rule for
taxable year of inclusion) is amended by adding at the end the
following new subsection:
``(i) Special Rule for Sales or Dispositions To Implement
Federal Energy Regulatory Commission or State Electric
Restructuring Policy.--
``(1) In general.--In the case of any qualifying
electric transmission transaction for which the
taxpayer elects the application of this section,
qualified gain from such transaction shall be
recognized--
``(A) in the taxable year which includes
the date of such transaction to the extent the
amount realized from such transaction exceeds--
``(i) the cost of exempt utility
property which is purchased by the
taxpayer duringthe 4-year period
beginning on such date, reduced (but not below zero) by
``(ii) any portion of such cost
previously taken into account under
this subsection, and
``(B) ratably over the 8-taxable year
period beginning with the taxable year which
includes the date of such transaction, in the
case of any such gain not recognized under
subparagraph (A).
``(2) Qualified gain.--For purposes of this
subsection, the term `qualified gain' means, with
respect to any qualifying electric transmission
transaction in any taxable year--
``(A) any ordinary income derived from such
transaction which would be required to be
recognized under section 1245 or 1250 for such
taxable year (determined without regard to this
subsection), and
``(B) any income derived from such
transaction in excess of the amount described
in subparagraph (A) which is required to be
included in gross income for such taxable year
(determined without regard to this subsection).
``(3) Qualifying electric transmission
transaction.--For purposes of this subsection, the term
`qualifying electric transmission transaction' means
any sale or other disposition before January 1, 2007,
of--
``(A) property used in the trade or
business of providing electric transmission
services, or
``(B) any stock or partnership interest in
a corporation or partnership, as the case may
be, whose principal trade or business consists
of providing electric transmission services,
but only if such sale or disposition is to an
independent transmission company.
``(4) Independent transmission company.--For
purposes of this subsection, the term `independent
transmission company' means--
``(A) an independent transmission provider
approved by the Federal Energy Regulatory
Commission,
``(B) a person--
``(i) who the Federal Energy
Regulatory Commission determines in its
authorization of the transaction under
section 203 of the Federal Power Act
(16 U.S.C. 824b) or by declaratory
order is not a market participant
within the meaning of such Commission's
rules applicable to independent
transmission providers, and
``(ii) whose transmission
facilities to which the election under
this subsection applies are under the
operational control of a Federal Energy
Regulatory Commission-approved
independent transmission provider
before the close of the period
specified in such authorization, but
not later than the close of the period
applicable under subsection (a)(2)(B)
as extended under paragraph (2), or
``(C) in the case of facilities subject to
the jurisdiction of the Public Utility
Commission of Texas--
``(i) a person which is approved by
that Commission as consistent with
Texas State law regarding an
independent transmission provider, or
``(ii) a political subdivision or
affiliate thereof whose transmission
facilities are under the operational
control of a person described in clause
(i).
``(5) Exempt utility property.--For purposes of
this subsection--
``(A) In general.--The term `exempt utility
property' means property used in the trade or
business of--
``(i) generating, transmitting,
distributing, or selling electricity,
or
``(ii) producing, transmitting,
distributing, or selling natural gas.
``(B) Nonrecognition of gain by reason of
acquisition of stock.--Acquisition of control
of a corporation shall be taken into account
under this subsection with respect to a
qualifying electric transmission transaction
only if the principal trade or business of such
corporation is a trade or business referred to
in subparagraph (A).
``(6) Special rule for consolidated groups.--In the
case of a corporation which is a member of an
affiliated group filing a consolidated return, any
exempt utility property purchased by another member of
such group shall be treated as purchased by such
corporation for purposes of applying paragraph (1)(A).
``(7) Time for assessment of deficiencies.--If the
taxpayer has made the election under paragraph (1) and
any gain is recognized by such taxpayer as provided in
paragraph (1)(B), then--
``(A) the statutory period for the
assessment of any deficiency, for any taxable
year in which any part of the gain on the
transaction is realized, attributable to such
gain shall not expire prior to the expiration
of 3 years from the date the Secretary is
notified by the taxpayer (in such manner as the
Secretary may by regulations prescribe) of the
purchase of exempt utility property or of an
intention not to purchase such property, and
``(B) such deficiency may be assessed
before the expiration of such 3-year period
notwithstanding any law or rule of law which
would otherwise prevent such assessment.
``(8) Purchase.--For purposes of this subsection,
the taxpayer shall be considered to have purchased any
property if the unadjusted basis of such property is
its cost within the meaning of section 1012.
``(9) Election.--An election under paragraph (1)
shall be made at such time and in such manner as the
Secretary may require and, once made, shall be
irrevocable.
``(10) Nonapplication of installment sales
treatment.--Section 453 shall not apply to any
qualifying electric transmission transaction with
respect to which an election to apply this subsection
is made.''.
(b) Effective Date.--The amendments made by this section
shall apply to transactions occurring after the date of the
enactment of this Act, in taxable years ending after such date.
SEC. 1328. MODIFICATIONS TO SPECIAL RULES FOR NUCLEAR DECOMMISSIONING
COSTS.
(a) Repeal of Limitation on Deposits Into Fund Based on
Cost of Service; Contributions After Funding Period.--
Subsection (b) of section 468A (relating to special rules for
nuclear decommissioning costs) is amended to read as follows:
``(b) Limitation on Amounts Paid Into Fund.--
``(1) In general.--The amount which a taxpayer may
pay into the Fund for any taxable year shall not exceed
the ruling amount applicable to such taxable year.
``(2) Contributions after funding period.--
Notwithstanding any other provision of this section, a
taxpayer may pay into the Fund in any taxable year
after the last taxable year to which the ruling amount
applies. Payments may not be made under the preceding
sentence to the extent such payments would cause the
assets of the Fund to exceed the nuclear
decommissioning costs allocable to the taxpayer's
current or former interest in the nuclear power plant
to which the Fund relates. The limitation under the
preceding sentence shall be determined by taking into
account a reasonable rate of inflation for the nuclear
decommissioning costs and a reasonable after-tax rate
of return on the assets of the Fund until such assets
are anticipated to be expended.''.
(b) Clarification of Treatment of Fund Transfers.--Section
468A(e) (relating to Nuclear Decommissioning Reserve Fund) is
amended by adding at the end the following new paragraph:
``(8) Treatment of fund transfers.--
``(A) In general.--If, in connection with
the transfer of the taxpayer's interest in a
nuclear power plant, the taxpayer transfers the
Fund with respect to such power plant to the
transferee of such interest and the transferee
elects to continue the application of this
section to such Fund--
``(i) the transfer of such Fund
shall not cause such Fund to be
disqualified from the application of
this section, and
``(ii) no amount shall be treated
as distributed from such Fund, or be
includable in gross income, by reason
of such transfer.
``(B) Special rules if transferor is tax-
exempt entity.--
``(i) In general.--If--
``(I) a person exempt from
taxation under this title
transfers an interest in a
nuclear power plant,
``(II) such person has set
aside amounts for nuclear
decommissioning which are
transferred to the transferee
of the interest, and
``(III) the transferee
elects the application of this
subparagraph no later than the
due date (including extensions)
of its return of tax for the
taxable year in which the
transfer occurs,
the amounts so set aside shall be
treated as if contributed by such
person to a Fund immediately before the
transfer and then transferred in the
Fund to the transferee.
``(ii) Limitation.--The amount
treated as transferred to a Fund under
clause (i) shall not exceed the amount
which bears the same ratio to the
present value of the nuclear
decommissioning costs of the transferor
with respect to the nuclear power plant
as the number of years the nuclear
power plant has been in service bears
to the estimated useful life of such
power plant.
``(iii) Basis.--The transferee's
basis in any asset treated as
transferred in the Fund shall be the
same as the adjusted basis of such
asset in the hands of the transferor.
``(iv) Ruling amount required.--
This subparagraph shall not apply to
any transfer unless the transferee
requests from the Secretary a schedule
of ruling amounts.
``(v) Election disregarded.--An
election under this subparagraph shall
be disregarded in determining the
Federal income tax of the transferor.''
(c) Treatment of Certain Decommissioning Costs.--
(1) In general.--Section 468A is amended by
redesignating subsections (f) and (g) as subsections
(g) and (h), respectively, and by inserting after
subsection (e) the following new subsection:
``(f) Transfers Into Qualified Funds.--
``(1) In general.--Notwithstanding subsection (b),
any taxpayer maintaining a Fund to which this section
applies with respect to a nuclear power plant may
transfer into such Fund not more than an amount equal
to the present value of the portion of the total
nuclear decommissioning costs with respect to such
nuclear power plant previously excluded for such
nuclear power plant under subsection (d)(2)(A) as in
effect immediately before the date of the enactment of
the Energy Tax Policy Act of 2003.
``(2) Deduction for amounts transferred.--
``(A) In general.--Except as provided in
subparagraph (C), the deduction allowed by
subsection (a) for any transfer permitted by
this subsection shall be allowed ratably over
the remaining estimated useful life (within the
meaning of subsection (d)(2)(A)) of the nuclear
power plant beginning with the taxable year
during which the transfer is made.
``(B) Denial of deduction for previously
deducted amounts.--No deduction shall be
allowed for any transfer under this subsection
of an amount for which a deduction was
previously allowed to the taxpayer (or a
predecessor) or a corresponding amount was not
included in gross income of the taxpayer (or a
predecessor). For purposes of the preceding
sentence, a ratable portion of each transfer
shall be treated as being from previously
deducted or excluded amounts to the extent
thereof.
``(C) Transfers of qualified funds.--If--
``(i) any transfer permitted by
this subsection is made to any Fund to
which this section applies, and
``(ii) such Fund is transferred
thereafter,
any deduction under this subsection for taxable
years ending after the date that such Fund is
transferred shall be allowed to the transferor
for the taxable year which includes such date.
``(D) Special rules.--
``(i) Gain or loss not
recognized.--No gain or loss shall be
recognized on any transfer permitted by
this subsection.
``(ii) Transfers of appreciated
property.--If appreciated property is
transferred in a transfer permitted by
this subsection, the amount of the
deduction shall not exceed the adjusted
basis of such property.
``(3) New ruling amount required.--Paragraph (1)
shall not apply to any transfer unless the taxpayer
requests from the Secretary a new schedule of ruling
amounts in connection with such transfer.
``(4) No basis in qualified funds.--Notwithstanding
any other provision of law, the taxpayer's basis in any
Fund to which this section applies shall not be
increased by reason of any transfer permitted by this
subsection.''.
(2) New ruling amount to take into account total
costs.--Subparagraph (A) of section 468A(d)(2)
(defining ruling amount) is amended to read as follows:
``(A) fund the total nuclear
decommissioning costs with respect to such
power plant over the estimated useful life of
such power plant, and''.
(d) Technical Amendments.--Section 468A(e)(2) (relating to
taxation of Fund) is amended--
(1) by striking ``rate set forth in subparagraph
(B)'' in subparagraph (A) and inserting ``rate of 20
percent'',
(2) by striking subparagraph (B), and
(3) by redesignating subparagraphs (C) and (D) as
subparagraphs (B) and (C), respectively.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2003.
SEC. 1329. TREATMENT OF CERTAIN INCOME OF COOPERATIVES.
(a) Income From Open Access and Nuclear Decommissioning
Transactions.--
(1) In general.--Subparagraph (C) of section
501(c)(12) is amended by striking ``or'' at the end of
clause (i), by striking clause (ii), and by adding at
the end the following new clauses:
``(ii) from any provision or sale
of electric energy transmission
services or ancillary services if such
services are provided on a
nondiscriminatory open access basis
under an open access transmission
tariff approved or accepted by FERC or
under an independent transmission
provider agreement approved or accepted
by FERC (other than income received or
accrued directly or indirectly from a
member),
``(iii) from the provision or sale
of electric energy distribution
services or ancillary services if such
services are provided on a
nondiscriminatory open access basis to
distribute electric energy not owned by
the mutual or electric cooperative
company--
``(I) to end-users who are
served by distribution
facilities not owned by such
company or any of its members
(other than income received or
accrued directly or indirectly
from a member), or
``(II) generated by a
generation facility not owned
or leased by such company or
any of its members and which is
directly connected to
distribution facilities owned
by such company or any of its
members (other than income
received or accrued directly or
indirectly from a member),
``(iv) from any nuclear
decommissioning transaction, or
``(v) from any asset exchange or
conversion transaction.''.
(2) Definitions and special rules.--Paragraph (12)
of section 501(c) is amended by adding at the end the
following new subparagraphs:
``(E) For purposes of subparagraph (C)(ii),
the term `FERC' means the Federal Energy
Regulatory Commission and references to such
term shall be treated as including the Public
Utility Commission of Texas with respect to any
ERCOT utility (as defined in section
212(k)(2)(B) of the Federal Power Act (16
U.S.C. 824k(k)(2)(B))).
``(F) For purposes of subparagraph
(C)(iii), the term `nuclear decommissioning
transaction' means--
``(i) any transfer into a trust,
fund, or instrument established to pay
any nuclear decommissioning costs if
the transfer is in connection with the
transfer of the mutual or cooperative
electric company's interest in a
nuclear power plant or nuclear power
plant unit,
``(ii) any distribution from any
trust, fund, or instrument established
to pay any nuclear decommissioning
costs, or
``(iii) any earnings from any
trust, fund, or instrument established
to pay any nuclear decommissioning
costs.
``(G) For purposes of subparagraph (C)(iv),
the term `asset exchange or conversion
transaction' means any voluntary exchange or
involuntary conversion of any property related
to generating, transmitting, distributing, or
selling electric energy by a mutual or
cooperative electric company, the gain from
which qualifies for deferred recognition under
section 1031 or 1033, but only if the
replacement property acquired by such company
pursuant to such section constitutes property
which is used, or to be used, for--
``(i) generating, transmitting,
distributing, or selling electric
energy, or
``(ii) producing, transmitting,
distributing, or selling natural
gas.''.
(b) Treatment of Income From Load Loss Transactions, Etc.--
Paragraph (12) of section 501(c), as amended by subsection
(a)(2), is amended by adding after subparagraph (G) the
following new subparagraph:
``(H)(i) In the case of a mutual or
cooperative electric company described in this
paragraph or an organization described in
section 1381(a)(2)(C), income received or
accrued from a load loss transaction shall be
treated as an amount collected from members for
the sole purpose of meeting losses and
expenses.
``(ii) For purposes of clause (i), the term
`load loss transaction' means any wholesale or
retail sale of electric energy (other than to
members) to the extent that the aggregate sales
during the recovery period do not exceed the
load loss mitigation sales limit for such
period.
``(iii) For purposes of clause (ii), the
load loss mitigation sales limit for the
recovery period is the sum of the annual load
losses for each year of such period.
``(iv) For purposes of clause (iii), a
mutual or cooperative electric company's annual
load loss for each year of the recovery period
is the amount (if any) by which--
``(I) the megawatt hours of
electric energy sold during such year
to members of such electric company are
less than
``(II) the megawatt hours of
electric energy sold during the base
year to such members.
``(v) For purposes of clause (iv)(II), the
term `base year' means--
``(I) the calendar year preceding
the start-up year, or
``(II) at the election of the
mutual or cooperative electric company,
the second or third calendar years
preceding the start-up year.
``(vi) For purposes of this subparagraph,
the recovery period is the 7-year period
beginning with the start-up year.
``(vii) For purposes of this subparagraph,
the start-up year is the first year that the
mutual or cooperative electric company offers
nondiscriminatory open access or the calendar
year which includes the date of the enactment
of this subparagraph, if later, at the election
of such company.
``(viii) A company shall not fail to be
treated as a mutual or cooperative electric
company for purposes of this paragraph or as a
corporation operating on a cooperative basis
for purposes of section 1381(a)(2)(C) by reason
of the treatment under clause (i).
``(ix) For purposes of subparagraph (A), in
the case of a mutual or cooperative electric
company, income received, or accrued,
indirectly from a member shall be treated as an
amount collected from members for the sole
purpose of meeting losses and expenses.''.
(c) Exception From Unrelated Business Taxable Income.--
Subsection (b) of section 512 (relating to modifications) is
amended by adding at the end the following new paragraph:
``(18) Treatment of mutual or cooperative electric
companies.--In the case of a mutual or cooperative
electric company described in section 501(c)(12), there
shall be excluded income which is treated as member
income under subparagraph (H) thereof.''.
(d) Cross Reference.--Section 1381 is amended by adding at
the end the following new subsection:
``(c) Cross Reference.--
``For treatment of income from load loss transactions of
organizations described in subsection (a)(2)(C), see section
501(c)(12)(H).''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 1330. ARBITRAGE RULES NOT TO APPLY TO PREPAYMENTS FOR NATURAL GAS.
(a) In General.--Subsection (b) of section 148 (relating to
higher yielding investments) is amended by adding at the end
the following new paragraph:
``(4) Safe harbor for prepaid natural gas.--
``(A) In general.--The term `investment-
type property' does not include a prepayment
under a qualified natural gas supply contract.
``(B) Qualified natural gas supply
contract.--For purposes of this paragraph, the
term `qualified natural gas supply
contract'means any contract to acquire natural gas for resale by a
utility owned by a governmental unit if the amount of gas permitted to
be acquired under the contract by the utility during any year does not
exceed the sum of--
``(i) the annual average amount
during the testing period of natural
gas purchased (other than for resale)
by customers of such utility who are
located within the service area of such
utility, and
``(ii) the amount of natural gas to
be used to transport the prepaid
natural gas to the utility during such
year.
``(C) Natural gas used to generate
electricity.--Natural gas used to generate
electricity shall be taken into account in
determining the average under subparagraph
(B)(i)--
``(i) only if the electricity is
generated by a utility owned by a
governmental unit, and
``(ii) only to the extent that the
electricity is sold (other than for
resale) to customers of such utility
who are located within the service area
of such utility.
``(D) Adjustments for changes in customer
base.--
``(i) New business customers.--If--
``(I) after the close of
the testing period and before
the date of issuance of the
issue, the utility owned by a
governmental unit enters into a
contract to supply natural gas
(other than for resale) for a
business use at a property
within the service area of such
utility, and
``(II) the utility did not
supply natural gas to such
property during the testing
period or the ratable amount of
natural gas to be supplied
under the contract is
significantly greater than the
ratable amount of gas supplied
to such property during the
testing period,
then a contract shall not fail to be
treated as a qualified natural gas
supply contract by reason of supplying
the additional natural gas under the
contract referred to in subclause (I).
``(ii) Lost customers.--The average
under subparagraph (B)(i) shall not
exceed the annual amount of natural gas
reasonably expected to be purchased
(other than for resale) by persons who
are located within the service area of
such utility and who, as of the date of
issuance of the issue, are customers of
such utility.
``(E) Ruling requests.--The Secretary may
increase the average under subparagraph (B)(i)
for any period if the utility owned by the
governmental unit establishes to the
satisfaction of the Secretary that, based on
objective evidence of growth in natural gas
consumption or population, such average would
otherwise be insufficient for such period.
``(F) Adjustment for natural gas otherwise
on hand.--
``(i) In general.--The amount
otherwise permitted to be acquired
under the contract for any period shall
be reduced by--
``(I) the applicable share
of natural gas held by the
utility on the date of issuance
of the issue, and
``(II) the natural gas (not
taken into account under
subclause (I)) which the
utility has a right to acquire
during such period (determined
as of the date of issuance of
the issue).
``(ii) Applicable share.--For
purposes of the clause (i), the term
`applicable share' means, with respect
to any period, the natural gas
allocable to such period if the gas
were allocated ratably over the period
to which the prepayment relates.
``(G) Intentional acts.--Subparagraph (A)
shall cease to apply to any issue if the
utility owned by the governmental unit engages
in any intentional act to render the volume of
natural gas acquired by such prepayment to be
in excess of the sum of--
``(i) the amount of natural gas
needed (other than for resale) by
customers of such utility who are
located within the service area of such
utility, and
``(ii) the amount of natural gas
used to transport such natural gas to
the utility.
``(H) Testing period.--For purposes of this
paragraph, the term `testing period' means,
with respect to an issue, the most recent 5
calendar years ending before the date of
issuance of the issue.
``(I) Service area.--For purposes of this
paragraph, the service area of a utility owned
by a governmental unit shall be comprised of--
``(i) any area throughout which
such utility provided at all times
during the testing period--
``(I) in the case of a
natural gas utility, natural
gas transmission or
distribution services, and
``(II) in the case of an
electric utility, electricity
distribution services,
``(ii) any area within a county
contiguous to the area described in
clause (i) in which retail customers of
such utility are located if such area
is not also served by another utility
providing natural gas or electricity
services, as the case may be, and
``(iii) any area recognized as the
service area of such utility under
State or Federal law.''.
(b) Private Loan Financing Test Not To Apply to Prepayments
for Natural Gas.--Paragraph (2) of section 141(c) (providing
exceptions to the private loan financing test) is amended by
striking ``or'' at the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and inserting ``, or'',
and by adding at the end the following new subparagraph:
``(C) is a qualified natural gas supply
contract (as defined in section 148(b)(4)).''.
(c) Exception for Qualified Electric and Natural Gas Supply
Contracts.--Section 141(d) is amended by adding at the end the
following new paragraph:
``(7) Exception for qualified electric and natural
gas supply contracts.--The term `nongovernmental output
property' shall not include any contract for the
prepayment of electricity or natural gas which is not
investment property under section 148(b)(2).''.
(d) Effective Date.--The amendments made by this section
shall apply to obligations issued after the date of the
enactment of this Act.
Subtitle C--Production
PART I--OIL AND GAS PROVISIONS
SEC. 1341. OIL AND GAS FROM MARGINAL WELLS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business credits), as amended by this
Act, is amended by adding at the end the following:
``SEC. 45J. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL WELLS.
``(a) General Rule.--For purposes of section 38, the
marginal well production credit for any taxable year is an
amount equal to the product of--
``(1) the credit amount, and
``(2) the qualified credit oil production and the
qualified natural gas production which is attributable
to the taxpayer.
``(b) Credit Amount.--For purposes of this section--
``(1) In general.--The credit amount is--
``(A) $3 per barrel of qualified crude oil
production, and
``(B) 50 cents per 1,000 cubic feet of
qualified natural gas production.
``(2) Reduction as oil and gas prices increase.--
``(A) In general.--The $3 and 50 cents
amounts under paragraph (1) shall each be
reduced (but not below zero) by an amount which
bears the same ratio to such amount (determined
without regard to this paragraph) as--
``(i) the excess (if any) of the
applicable reference price over $15
($1.67 for qualified natural gas
production), bears to
``(ii) $3 ($0.33 for qualified
natural gas production).
The applicable reference price for a taxable
year is the reference price of the calendar
year preceding the calendar year in which the
taxable year begins.
``(B) Inflation adjustment.--In the case of
any taxable year beginning in a calendar year
after 2003, each of the dollar amounts
contained in subparagraph (A) shall be
increased to an amount equal to such dollar
amount multiplied by the inflation adjustment
factor for such calendar year (determined under
section 43(b)(3)(B) by substituting `2002' for
`1990').
``(C) Reference price.--For purposes of
this paragraph, the term `reference price'
means, with respect to any calendar year--
``(i) in the case of qualified
crude oil production, the reference
price determined under section
45K(d)(2)(C), and
``(ii) in the case of qualified
natural gas production, the Secretary's
estimate of the annual average wellhead
price per 1,000 cubic feet for all
domestic natural gas.
``(c) Qualified Crude Oil and Natural Gas Production.--For
purposes of this section--
``(1) In general.--The terms `qualified crude oil
production' and `qualified natural gas production' mean
domestic crude oil or natural gas which is produced
from a qualified marginal well.
``(2) Limitation on amount of production which may
qualify.--
``(A) In general.--Crude oil or natural gas
produced during any taxable year from any well
shall not be treated as qualified crude oil
production or qualified natural gas production
to the extent production from the well during
the taxable year exceeds 1,095 barrels or
barrel-of-oil equivalents (as defined in
section 45K(d)(5)).
``(B) Proportionate reductions.--
``(i) Short taxable years.--In the
case of a short taxable year, the
limitations under this paragraph shall
be proportionately reduced to reflect
the ratio which the number of days in
such taxable year bears to 365.
``(ii) Wells not in production
entire year.--In the case of a well
which is not capable of production
during each day of a taxable year, the
limitations under this paragraph
applicable to the well shall be
proportionately reduced to reflect the
ratio which the number of days of
production bears to the total number of
days in the taxable year.
``(3) Definitions.--
``(A) Qualified marginal well.--The term
`qualified marginal well' means a domestic
well--
``(i) the production from which
during the taxable year is treated as
marginal production under section
613A(c)(6), or
``(ii) which, during the taxable
year--
``(I) has average daily
production of not more than 25
barrel-of-oil equivalents (as
so defined), and
``(II) produces water at a
rate not less than 95 percent
of total well effluent.
``(B) Crude oil, etc.--The terms `crude
oil', `natural gas', `domestic', and `barrel'
have the meanings given such terms by section
613A(e).
``(d) Other Rules.--
``(1) Production attributable to the taxpayer.--In
the case of a qualified marginal well in which there is
more than one owner of operating interests in the well
and the crude oil or natural gas production exceeds the
limitation under subsection (c)(2), qualifying crude
oil production or qualifying natural gas production
attributable to the taxpayer shall be determined on the
basis of the ratio which taxpayer's revenue interest in
the production bears to the aggregate of the revenue
interests of all operating interest owners in the
production.
``(2) Operating interest required.--Any credit
under this section may be claimed only on production
which is attributable to the holder of an operating
interest.
``(3) Production from nonconventional sources
excluded.--In the case of production from a qualified
marginal well which is eligible for the credit allowed
under section 45K for the taxable year, no credit shall
be allowable under this section unless the taxpayer
elects not to claim the credit under section 45K with
respect to the well.''.
(b) Credit Treated as Business Credit.--Section 38(b), as
amended by this Act, is amended by striking ``plus'' at the end
of paragraph (18), by striking the period at the end of
paragraph (19) and inserting ``, plus'', and by adding at the
end the following:
``(20) the marginal oil and gas well production
credit determined under section 45J(a).''.
(c) Carryback.--Subsection (a) of section 39 (relating to
carryback and carryforward of unused credits generally) is
amended by adding at the end the following:
``(3) 5-year carryback for marginal oil and gas
well production credit.--Notwithstanding subsection
(d), in the case of the marginal oil and gas well
production credit--
``(A) this section shall be applied
separately from the business credit (other than
the marginal oil and gas well production
credit),
``(B) paragraph (1) shall be applied by
substituting `5 taxable years' for `1 taxable
years' in subparagraph (A) thereof, and
``(C) paragraph (2) shall be applied--
``(i) by substituting `25 taxable
years' for `21 taxable years' in
subparagraph (A) thereof, and
``(ii) by substituting `24 taxable
years' for `20 taxable years' in
subparagraph (B) thereof.''.
(d) Clerical Amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1, as amended by this
Act, is amended by adding at the end the following:
``Sec. 45J. Credit for producing oil and gas from marginal
wells.''.
(e) Effective Date.--The amendments made by this section
shall apply to production in taxable years beginning after
December 31, 2003.
SEC. 1342. TEMPORARY SUSPENSION OF LIMITATION BASED ON 65 PERCENT OF
TAXABLE INCOME AND EXTENSION OF SUSPENSION OF
TAXABLE INCOME LIMIT WITH RESPECT TO MARGINAL
PRODUCTION.
(a) Limitation Based on 65 Percent of Taxable Income.--
Subsection (d) of section 613A (relating to limitation on
percentage depletion in case of oil and gas wells) is amended
by adding at the end the following new paragraph:
``(6) Temporary suspension of taxable income
limit.--Paragraph (1) shall not apply to taxable years
beginning after December 31, 2003, and before January
1, 2005, including with respect to amounts carried
under the second sentence of paragraph (1) to such
taxable years.''.
(b) Extension of Suspension of Taxable Income Limit With
Respect to Marginal Production.--Subparagraph (H) of section
613A(c)(6) (relating to temporary suspension of taxable income
limit with respect to marginal production) is amended by
striking ``2004'' and inserting ``2005''.
(c) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 2003.
SEC. 1343. AMORTIZATION OF DELAY RENTAL PAYMENTS.
(a) In General.--Section 167 (relating to depreciation) is
amended by redesignating subsection (h) as subsection (i) and
by inserting after subsection (g) the following new subsection:
``(h) Amortization of Delay Rental Payments for Domestic
Oil and Gas Wells.--
``(1) In general.--Any delay rental payment paid or
incurred in connection with the development of oil or
gas wells within the United States (as defined in
section 638) shall be allowed as a deduction ratably
over the 24-month period beginning on the date that
such payment was paid or incurred.
``(2) Half-year convention.--For purposes of
paragraph (1), any payment paid or incurred during the
taxable year shall be treated as paid or incurred on
the mid-point of such taxable year.
``(3) Exclusive method.--Except as provided in this
subsection, no depreciation or amortization deduction
shall be allowed with respect to such payments.
``(4) Treatment upon abandonment.--If any property
to which a delay rental payment relates is retired or
abandoned during the 24-month period described in
paragraph (1), no deduction shall be allowed on account
of such retirement or abandonment and the amortization
deduction under this subsection shall continue with
respect to such payment.
``(5) Delay rental payments.--For purposes of this
subsection, the term `delay rental payment' means an
amount paid for the privilege of deferring development
of an oil or gas well under an oil or gas lease.''.
(b) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred in taxable years
beginning after the date of the enactment of this Act.
SEC. 1344. AMORTIZATION OF GEOLOGICAL AND GEOPHYSICAL EXPENDITURES.
(a) In General.--Section 167 (relating to depreciation), as
amended by this Act, is amended by redesignating subsection (i)
as subsection (j) and by inserting after subsection (h) the
following new subsection:
``(i) Amortization of Geological and Geophysical
Expenditures.--
``(1) In general.--Any geological and geophysical
expenses paid or incurred in connection with the
exploration for, or development of, oil or gas within
the United States (as defined in section 638) shall be
allowed as a deduction ratably over the 24-month period
beginning on the date that such expense was paid or
incurred.
``(2) Special rules.--For purposes of this
subsection, rules similar to the rules of paragraphs
(2), (3), and (4) of subsection (h) shall apply.''.
(b) Conforming Amendment.--Section 263A(c)(3) is amended by
inserting ``167(h), 167(i),'' after ``under section''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred in taxable years
beginning after the date of the enactment of this Act.
SEC. 1345. EXTENSION AND MODIFICATION OF CREDIT FOR PRODUCING FUEL FROM
A NONCONVENTIONAL SOURCE.
(a) In General.--Section 29 (relating to credit for
producing fuel from a nonconventional source) is amended by
adding at the end the following new subsection:
``(h) Extension for Other Facilities.--Notwithstanding
subsection (f)--
``(1) New oil and gas wells and facilities.--In the
case of a well or facility for producing qualified
fuels described in subparagraph (A) or (B) of
subsection (c)(1) which was drilled or placed in
service after the date of the enactment of this
subsection and before January 1, 2007, this
sectionshall apply with respect to such fuels produced at such well or
facility and sold during the period--
``(A) beginning on the later of January 1,
2004, or the date that such well is drilled or
such facility is placed in service, and
``(B) ending on the earlier of the date
which is 4 years after the date such period
began or December 31, 2009.
``(2) Old oil and gas wells and facilities.--In the
case of a well or facility producing qualified fuels
described in subparagraph (A) or (B)(i) of subsection
(c)(1) or a facility producing natural gas and
byproducts by coal gasification from lignite,
subsection (f)(2) shall be applied by substituting
`2008' for `2003' with respect to wells and facilities
described in subsection (f)(1) with respect to such
fuels.
``(3) Extension for facilities producing qualified
fuel from landfill gas.--
``(A) In general.--In the case of a
facility for producing qualified fuel from
landfill gas which was placed in service after
June 30, 1998, and before January 1, 2007, this
section shall apply to fuel produced at such
facility and sold during the period--
``(i) beginning on the later of
January 1, 2004, or the date that such
facility is placed in service, and
``(ii) ending on the earlier of the
date which is 4 years after the date
such period began or December 31, 2009.
``(B) Reduction of credit for certain
landfill facilities.--In the case of a facility
to which subparagraph (A) applies and which is
located at a landfill which is required
pursuant to section 60.751(b)(2) or section
60.33c of title 40, Code of Federal Regulations
(as in effect on April 3, 2003) to install and
operate a collection and control system which
captures gas generated within the landfill,
subsection (a)(1) shall be applied to gas so
captured by substituting `$2' for `$3' for the
taxable year during which such system is
required to be installed and operated.
``(4) Facilities producing fuels from agricultural
and animal waste.--
``(A) In general.--In the case of any
facility for producing liquid, gaseous, or
solid fuels from qualified agricultural and
animal wastes, including such fuels when used
as feedstocks, which is placed in service after
the date of the enactment of this subsection
and before January 1, 2007, this section shall
apply with respect to fuel produced at such
facility and sold during the period--
``(i) beginning on the later of
January 1, 2004, or the date that such
facility is placed in service, and
``(ii) ending on the earlier of the
date which is 4 years after the date
such period began or December 31, 2009.
``(B) Qualified agricultural and animal
waste.--For purposes of this paragraph, the
term `qualified agricultural and animal waste'
means agriculture and animal waste, including
by-products, packaging, and any materials
associated with the processing, feeding,
selling, transporting, or disposal of
agricultural or animal products or wastes.
``(5) Facilities producing refined coal.--
``(A) In general.--In the case of a
facility described in subparagraph (C) for
producing refined coal which is placed in
service after the date of the enactment of this
subsection and before January 1, 2008, this
section shall apply with respect to fuel
produced at such facility and sold before the
close of the 5-year period beginning on the
date such facility is placed in service.
``(B) Refined coal.--For purposes of this
paragraph, the term `refined coal' means a fuel
which is a liquid, gaseous, or solid synthetic
fuel produced from coal (including lignite) or
high carbon fly ash, including such fuel used
as a feedstock.
``(C) Covered facilities.--
``(i) In general.--A facility is
described in this subparagraph if such
facility produces refined coal using a
technology which the taxpayer certifies
(in such manner as the Secretary may
prescribe) results in--
``(I) a qualified emission
reduction, and
``(II) a qualified enhanced
value.
``(ii) Qualified emission
reduction.--For purposes of this
subparagraph, the term `qualified
emission reduction' means a reduction
of at least 20 percent of the emissions
of nitrogen oxide and either sulfur
dioxide or mercury released when
burning the refined coal (excluding any
dilution caused by materials combined
or added during the production
process), as compared to the emissions
released when burning the feedstock
coal or comparable coal predominantly
available in the marketplace as of
January 1, 2003.
``(iii) Qualified enhanced value.--
For purposes of this subparagraph, the
term `qualified enhanced value' means
an increase of at least 50 percent in
the market value of the refined coal
(excluding any increase caused by
materials combined or added during the
production process), as compared to the
value of the feedstock coal.
``(iv) Advanced clean coal
technology units excluded.--A facility
described in this subparagraph shall
not include any advanced clean coal
technology unit (as defined in section
48A(e)).
``(6) Coalmine gas.--
``(A) In general.--This section shall apply
to coalmine gas--
``(i) captured or extracted by the
taxpayer during the period beginning on
the day after the date of the enactment
of this subsection and ending on
December 31, 2006, and
``(ii) utilized as a fuel source or
sold by or on behalf of the taxpayer to
an unrelated person during such period.
``(B) Coalmine gas.--For purposes of this
paragraph, the term `coalmine gas' means any
methane gas which is--
``(i) liberated during or as a
result of coal mining operations, or
``(ii) extracted up to 10 years in
advance of coal mining operations as
part of a specific plan to mine a coal
deposit.
``(C) Special rule for advanced
extraction.--In the case of coalmine gas which
is captured in advance of coal mining
operations, the credit under subsection (a)
shall be allowed only after the date the coal
extraction occurs in the immediate area where
the coalmine gas was removed.
``(D) Noncompliance with pollution laws.--
This paragraph shall not apply to the capture
or extraction of coalmine gas from coal mining
operations with respect to any period in which
such coal mining operations are not in
compliance with applicable Federal pollution
prevention, control, and permit requirements.
``(7) Coke and coke gas.--In the case of a facility
for producing coke or coke gas which was placed in
service before January 1, 1993, or after June 30, 1998,
and before January 1, 2007, this section shall apply
with respect to coke and coke gas produced in such
facility and sold during the during the period--
``(A) beginning on the later of January 1,
2004, or the date that such facility is placed
in service, and
``(B) ending on the earlier of the date
which is 4 years after the date such period
began or December 31, 2009.
``(8) Special rules.--In determining the amount of
credit allowable under this section solely by reason of
this subsection--
``(A) Fuels treated as qualified fuels.--
Any fuel described in paragraph (3), (4), (5),
or (6) shall be treated as a qualified fuel for
purposes of this section.
``(B) Daily limit.--The amount of qualified
fuels sold during any taxable year which may be
taken into account by reason of this subsection
with respect to any property or facility shall
not exceed an average barrel-of-oil equivalent
of 200,000 cubic feet of natural gas per day.
Days before the date the property or facility
is placed in service shall not be taken into
account in determining such average.
``(C) Extension period to commence with
unadjusted credit amount and new phaseout
adjustment.--For purposes of applying
subsection (b)(2), in the case of fuels sold
after 2003--
``(i) paragraphs (1)(A) and (2) of
subsection (b) shall be applied by
substituting `$35.00' for `$23.50', and
``(ii) subparagraph (B) of
subsection (d)(2) shall be applied by
substituting `2002' for `1979'.
``(D) Denial of double benefit.--This
subsection shall not apply to any facility
producing qualified fuels for which a credit
was allowed under this section for the taxable
year or any preceding taxable year by reason of
subsection (g).''.
(b) Treatment as Business Credit.--
(1) Credit moved to subpart relating to business
related credits.--The Internal Revenue Code of 1986 is
amended by redesignating section 29, as amended by this
Act, as section 45K and by moving section 45K (as so
redesignated) from subpart B of part IV of subchapter A
of chapter 1 to the end of subpart D of part IV of
subchapter A of chapter 1.
(2) Credit treated as business credit.--Section
38(b) is amended by striking ``plus'' at the end of
paragraph (19), by striking the period at the end of
paragraph (20) and inserting ``, plus'', and by adding
at the end the following:
``(21) the nonconventional source production credit
determined under section 45K(a).''.
(3) Conforming amendments.--
(A) Section 30(b)(2)(A), as redesignated by
section 1317(a), is amended by striking
``sections 27 and 29'' and inserting ``section
27''.
(B) Sections 43(b)(2) and 613A(c)(6)(C) are
each amended by striking ``section
29(d)(2)(C)'' and inserting ``section
45K(d)(2)(C)''.
(C) Section 45K(a), as redesignated by
paragraph (1), is amended by striking ``At the
election of the taxpayer, there shall be
allowed as a credit against the tax imposed by
this chapter for the taxable year'' and
inserting ``For purposes of section 38, if the
taxpayer elects to have this section apply, the
nonconventional source production credit
determined under this section for the taxable
year is''.
(D) Section 45K(b), as so redesignated, is
amended by striking paragraph (6).
(E) Section 53(d)(1)(B)(iii) is amended by
striking ``under section 29'' and all that
follows through ``or not allowed''.
(F) Section 55(c)(2) is amended by striking
``29(b)(6),''.
(G) Subsection (a) of section 772 is
amended by inserting ``and'' at the end of
paragraph (9), by striking paragraph (10), and
by redesignating paragraph (11) as paragraph
(10).
(H) Paragraph (5) of section 772(d) is
amended by striking ``the foreign tax credit,
and the credit allowable under section 29'' and
inserting ``and the foreign tax credit''.
(I) The table of sections for subpart B of
part IV of subchapter A of chapter 1 is amended
by striking the item relating to section 29.
(J) The table of sections for subpart D of
part IV of subchapter A of chapter 1, as
amended by this Act, is amended by inserting
after the item relating to section 45J the
following new item:
``Sec. 45K. Credit for producing fuel from a nonconventional
source.''.
(c) Determinations Under Natural Gas Policy Act of 1978.--
Subparagraph (A) of section 45K(c)(2), as redesignated by
subsection (b)(1), is amended--
(1) by inserting ``by the Secretary, after
consultation with the Federal Energy Regulatory
Commission,'' after ``shall be made'', and
(2) by inserting ``(as in effect before the repeal
of such section)'' after ``1978''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph
(2), the amendments made by this section shall apply to
fuel produced and sold after December 31, 2003, in
taxable years ending after such date.
(2) Determinations under natural gas policy act of
1978.--The amendments made by subsection (c) shall
apply as if included in the provisions repealing
section 503 of the Natural Gas Policy Act of 1978.
PART II--ALTERNATIVE MINIMUM TAX PROVISIONS
SEC. 1346. NEW NONREFUNDABLE PERSONAL CREDITS ALLOWED AGAINST REGULAR
AND MINIMUM TAXES.
(a) In General.--
(1) Section 25c.--Section 25C(b), as added by
section 1301 of this Act, is amended by adding at the
end the following new paragraph:
``(3) Limitation based on amount of tax.--The
credit allowed under subsection (a) for the taxable
year shall not exceed the excess of--
``(A) the sum of the regular tax liability
(as defined in section 26(b)) plus the tax
imposed by section 55, over
``(B) the sum of the credits allowable
under this subpart (other than this section and
section 25D) and section 27 for the taxable
year.''.
(2) Section 25D.--Section 25D(b), as added by
section 1304 of this Act, is amended by adding at the
end the following new paragraph:
``(3) Limitation based on amount of tax.--The
credit allowed under subsection (a) for the taxable
year shall not exceed the excess of--
``(A) the sum of the regular tax liability
(as defined in section 26(b)) plus the tax
imposed by section 55, over
``(B) the sum of the credits allowable
under this subpart (other than this section)
and section 27 for the taxable year.''.
(b) Conforming Amendments.--
(1) Section 23(b)(4)(B) is amended by inserting
``and sections 25C and 25D'' after ``this section''.
(2) Section 24(b)(3)(B) is amended by striking
``and 25B'' and inserting ``, 25B, 25C, and 25D''.
(3) Section 25(e)(1)(C) is amended by inserting
``25C, and 25D'' after ``25B,''.
(4) Section 25B(g)(2) is amended by striking
``section 23'' and inserting ``sections 23, 25C, and
25D''.
(5) Section 26(a)(1) is amended by striking ``and
25B'' and inserting ``25B, 25C, and 25D''.
(6) Section 904(h) is amended by striking ``and
25B'' and inserting ``25B, 25C, and 25D''.
(7) Section 1400C(d) is amended by striking ``and
25B'' and inserting ``25B, 25C, and 25D''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2003.
SEC. 1347. BUSINESS RELATED ENERGY CREDITS ALLOWED AGAINST REGULAR AND
MINIMUM TAX.
(a) In General.--Subsection (c) of section 38 (relating to
limitation based on amount of tax) is amended by redesignating
paragraph (4) as paragraph (5) and by inserting after paragraph
(3) the following new paragraph:
``(4) Special rules for specified energy credits.--
``(A) In general.--In the case of specified
energy credits--
``(i) this section and section 39
shall be applied separately with
respect to such credits, and
``(ii) in applying paragraph (1) to
such credits--
``(I) the tentative minimum
tax shall be treated as being
zero, and
``(II) the limitation under
paragraph (1) (as modified by
subclause (I)) shall be reduced
by the credit allowed under
subsection (a) for the taxable
year (other than the specified
energy credits).
``(B) Specified energy credits.--For
purposes of this subsection, the term
`specified energy credits' means the credits
determined under sections 45G, 45H, 45I, and
45J. For taxable years beginning after December
31, 2003, such term includes the credit
determined under section 40. For taxable years
beginning after December 31, 2003, and before
January 1, 2006, such term includes the credit
determined under section 43.
``(C) Special rule for electricity produced
from qualified facilities.--For purposes of
this subsection, the term `specified energy
credits' shall include the credit determined
under section 45 to the extent that such credit
is attributable to electricity produced--
``(i) at a facility which is
originally placed in service after the
date of the enactment of this
paragraph, and
``(ii) during the 4-year period
beginning on the date that such
facility was originally placed in
service.''.
(b) Conforming Amendments.--
(1) Paragraph (2)(A)(ii)(II) of section 38(c) is
amended by striking ``or'' and inserting a comma and by
inserting ``, and the specified energy credits'' after
``employee credit''.
(2) Paragraph (3)(A)(ii)(II) of section 38(c) is
amended by inserting ``and the specified energy
credits'' after ``employee credit''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 1348. TEMPORARY REPEAL OF ALTERNATIVE MINIMUM TAX PREFERENCE FOR
INTANGIBLE DRILLING COSTS.
(a) In General.--Clause (ii) of section 57(a)(2)(E) is
amended by adding at the end the following new sentence: ``The
preceding sentence shall not apply to taxable years beginning
after December 31, 2003, and before January 1, 2006.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31, 2003.
PART III--CLEAN COAL INCENTIVES
SEC. 1351. CREDIT FOR CLEAN COAL TECHNOLOGY UNITS.
(a) In General.--Subpart E of part IV of subchapter A of
chapter 1 (relating to rules for computing investment credit)
is amended by inserting after section 48 the following new
section:
``SEC. 48A. CLEAN COAL TECHNOLOGY CREDIT.
``(a) In General.--For purposes of section 46, the clean
coal technology credit for any taxable year is an amount equal
to the applicable percentage of the basis of qualified clean
coal property placed in service during such year.
``(b) Applicable Percentage.--For purposes of this section,
the applicable percentage is--
``(1) 15 percent in the case of property placed in
service in connection with any basic clean coal
technology unit, and
``(2) 17.5 percent in the case of property placed
in service in connection with any advanced clean coal
technology unit.
``(c) Qualified Clean Coal Property.--For purposes of this
section--
``(1) In general.--The term `qualified clean coal
property' means section 1245 property--
``(A) which is installed in connection
with--
``(i) an existing coal-based unit
as part of the conversion of such unit
to any basic or advanced clean coal
technology unit, or
``(ii) any new advanced clean coal
technology unit,
``(B) which is placed in service after
December 31, 2003, and before--
``(i) in the case of property to
which subsection (b)(1) applies,
January 1, 2014, and
``(ii) in the case of property to
which subsection (b)(2) applies,
January 1, 2017 (January 1, 2013, in
the case of property installed in
connection with an eligible advanced
pulverized coal or atmospheric
fluidized bed combustion technology
unit),
``(C) the original use of which commences
with the taxpayer, and
``(D) which has a useful life of not less
than 4 years.
``(2) Existing coal-based unit.--The term `existing
coal-based unit' means a coal-based electricity
generating steam generator-turbine unit--
``(A) which is not a basic or advanced
clean coal technology unit, and
``(B) which is in operation on or before
January 1, 2004.
In the case of a unit being converted to a basic clean
coal technology unit, such term shall not include a
unit having a nameplate capacity rating of more than
300 megawatts.
``(3) New advanced clean coal technology unit.--The
term `new advanced clean coal technology unit' means
any advanced clean coal technology unit which is placed
in service after December 31, 2003, and the original
use of which commences with the taxpayer.
``(d) Basic Clean Coal Technology Unit.--For purposes of
this section--
``(1) In general.--The term `basic clean coal
technology unit' means a unit which--
``(A) uses clean coal technology (including
advanced pulverized coal or atmospheric
fluidized bed combustion, pressurized fluidized
bed combustion, and integrated gasification
combined cycle) for the production of
electricity,
``(B) uses an input of at least 75 percent
coal to produce at least 50 percent of its
thermal output as electricity,
``(C) has a design net heat rate of at
least 500 less than that of the existing coal-
based unit prior to its conversion,
``(D) has a maximum design net heat rate of
not more than 9,500, and
``(E) meets the pollution control
requirements of paragraph (2).
Such term shall not include an advanced clean coal
technology unit.
``(2) Pollution control requirements.--
``(A) In general.--A unit meets the
requirements of this paragraph if--
``(i) its emissions of sulfur
dioxide, nitrogen oxide, or
particulates meet the lower of the
emission levels for each such emission
specified in--
``(I) subparagraph (B), or
``(II) the new source
performance standards of the
Clean Air Act (42 U.S.C. 7411)
which are in effect forthe
category of source at the time of the conversion of the unit, and
``(ii) its emissions do not exceed
any relevant emission level specified
by regulation pursuant to the hazardous
air pollutant requirements of the Clean
Air Act (42 U.S.C. 7412) in effect at
the time of the conversion of the unit.
``(B) Specific levels.--The levels
specified in this subparagraph are--
``(i) in the case of sulfur dioxide
emissions, 50 percent of the sulfur
dioxide emission levels specified in
the new source performance standards of
the Clean Air Act (42 U.S.C. 7411) in
effect on the date of the enactment of
this section for the category of
source,
``(ii) in the case of nitrogen
oxide emissions--
``(I) 0.1 pound per million
Btu of heat input if the unit
is not a cyclone-fired boiler,
and
``(II) if the unit is a
cyclone-fired boiler, 15
percent of the uncontrolled
nitrogen oxide emissions from
such boilers, and
``(iii) in the case of particulate
emissions, 0.02 pound per million Btu
of heat input.
``(3) Design net heat rate.--The design net heat
rate with respect to any unit, measured in Btu per
kilowatt hour (HHV)--
``(A) shall be based on the design annual
heat input to and the design annual net
electrical power, fuels, and chemicals output
from such unit (determined without regard to
such unit's co-generation of steam),
``(B) shall be adjusted for the heat
content of the design coal to be used by the
unit if it is less than 12,000 Btu per pound
according to the following formula:
Design net heat rate = Unit net heat rate [l-
(((12,000-design coal heat content, Btu per pound)/
1,000) 0.013)],
``(C) shall be corrected for the site
reference conditions of--
``(i) elevation above sea level of
500 feet,
``(ii) air pressure of 14.4 pounds
per square inch absolute (psia),
``(iii) temperature, dry bulb of
63+F,
``(iv) temperature, wet bulb of
54+F, and
``(v) relative humidity of 55
percent, and
``(D) if carbon capture controls have been
installed with respect to any existing coal-
based unit and such controls remove at least 50
percent of the unit's carbon dioxide emissions,
shall be adjusted up to the design heat rate
level which would have resulted without the
installation of such controls.
``(4) HHV.--The term `HHV' means higher heating
value.
``(e) Advanced Clean Coal Technology Unit.--For purposes of
this section--
``(1) In general.--The term `advanced clean coal
technology unit' means any electricity generating unit
of the taxpayer--
``(A) which is--
``(i) an eligible advanced
pulverized coal or atmospheric
fluidized bed combustion technology
unit,
``(ii) an eligible pressurized
fluidized bed combustion technology
unit,
``(iii) an eligible integrated
gasification combined cycle technology
unit, or
``(iv) an eligible other technology
unit,
``(B) which uses an input of at least 75
percent coal to produce at least 50 percent of
its thermal output as electricity, and
``(C) which meets the carbon emission rate
requirements of paragraph (6).
``(2) Eligible advanced pulverized coal or
atmospheric fluidized bed combustion technology unit.--
The term `eligible advanced pulverized coal or
atmospheric fluidized bed combustion technology unit'
means a clean coal technology unit using advanced
pulverized coal or atmospheric fluidized bed combustion
technology which has a design net heat rate of not more
than 8,500 (8,900 in the case of units placed in
service before 2009).
``(3) Eligible pressurized fluidized bed combustion
technology unit.--The term `eligible pressurized
fluidized bed combustion technology unit' means a clean
coal technology unit using pressurized fluidized bed
combustion technology which has a design net heat rate
of not more than 7,720 (8,900 in the case of units
placed in service before 2009, and 8,500 in the case of
units placed in service after 2008 and before 2013).
``(4) Eligible integrated gasification combined
cycle technology unit.--The term `eligible integrated
gasification combined cycle technology unit' means a
clean coal technology unit using integrated
gasification combined cycle technology, with or without
fuel or chemical co-production--
``(A) which has a design net heat rate of
not more than 7,720 (8,900 in the case of units
placed in service before 2009, and 8,500 in the
case of units placed in service after 2008 and
before 2013), and
``(B) has a net thermal efficiency (HHV)
using coal with fuel or chemical co-production
of not less than 44.2 percent (38.4 percent in
the case of units placed in service before
2009, and 40.2 percent in the case of units
placed in service after 2008 and before 2013).
``(5) Eligible other technology unit.--The term
`eligible other technology unit' means a clean coal
technology unit--
``(A) which uses any other technology for
the production of electricity, and
``(B) which has a design net heat rate
which meets the requirement of paragraph (2).
``(6) Carbon emission rate requirements.--
``(A) In general.--Except as provided in
subparagraph (B), a unit meets the requirements
of this paragraph if--
``(i) in the case of a unit using
design coal with a heat content of not
more than 9,000 Btu per pound, the
carbon emission rate is less than 0.60
pound of carbon per kilowatt hour, and
``(ii) in the case of a unit using
design coal with a heat content of more
than 9,000 Btu per pound, the carbon
emission rate is less than 0.54 pound
of carbon per kilowatt hour.
``(B) Eligible other technology unit.--In
the case of an eligible other technology unit,
subparagraph (A) shall be applied by
substituting `0.51' and `0.459' for `0.60' and
`0.54', respectively.
``(f) National Limitations on Credit.--For purposes of this
section--
``(1) In general.--The amount of credit which would
(but for this subsection) be allowed with respect to
any property shall not exceed the amount which bears
the same ratio to such amount of credit as--
``(A) the national megawatt capacity
limitation allocated to the taxpayer with
respect to the basic or advanced clean coal
technology unit to which such property relates,
bears to
``(B) the total megawatt capacity of such
unit.
The capacity described in subparagraph (B) shall be the
reasonably expected capacity after the installation of
the property.
``(2) Amount of national limitation.--
``(A) Advanced units.--The national
megawatt capacity limitation for advanced clean
coal technology units shall be 6,000 megawatts.
Of such amount, the national megawatt capacity
limitation is--
``(i) for advanced clean coal
technology units using advanced
pulverized coal or atmospheric
fluidized bed combustion technology,
not more than 1,500 megawatts (not more
than 750 megawatts in the case of units
placed in service before 2009),
``(ii) for such units using
pressurized fluidized bed combustion
technology, not more than 750 megawatts
(not more than 375 megawatts in the
case of units placed in service before
2009),
``(iii) for such units using
integrated gasification combined cycle
technology, with or without fuel or
chemical co-production, not more than
3,000 megawatts (not more than 1,250
megawatts in the case of units placed
in service before 2009), and
``(iv) for such units using other
technology for the production of
electricity, not more than 750
megawatts (not more than 375 megawatts
in the case of units placed in service
before 2009).
``(B) Basic units.--The national megawatt
capacity limitation for basic clean coal
technology units shall be 4,000 megawatts.
``(3) Allocation of limitation.--The Secretary
shall allocate the national megawatt capacity
limitations in such manner as the Secretary may
prescribe, except that the Secretary may not allocate
more than 300 megawatts to any basic clean coal
technology unit.
``(4) Regulations.--Not later than 6 months after
the date of the enactment of this section, the
Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of
this subsection. Such regulations shall provide a
certification process under which the Secretary, after
consultation with the Secretary of Energy, shall
approve and allocate the national megawatt capacity
limitations--
``(A) to encourage that units with the
highest thermal efficiencies, when adjusted for
the heat content of the design coal and site
reference conditions, and environmental
performance, be placed in service as soon as
possible, and
``(B) to allocate capacity to taxpayers
which have a definite and credible plan for
placing into commercial operation a basic or
advanced clean coal technology unit,
including--
``(i) a site,
``(ii) contractual commitments for
procurement and construction or, in the
case of regulated utilities, the
agreement of the State utility
commission,
``(iii) filings for all necessary
preconstruction approvals,
``(iv) a demonstrated record of
having successfully completed
comparable projects on a timely basis,
and
``(v) such other factors which the
Secretary determines are appropriate.
``(g) Special Rules.--For purposes of this section--
``(1) Certain progress expenditure rules made
applicable.--Rules similar to the rules of subsections
(c)(4) and (d) of section 46 (as in effect on the day
before the date of the enactment of the Revenue
Reconciliation Act of 1990) shall apply for purposes of
this section.
``(2) Property financed by subsidized financing or
industrial development bonds.--Rules similar to the
rules of section 45(b)(3) shall apply for purposes of
this section.
``(3) Noncompliance with pollution laws.--The terms
`basic clean coal technology unit'and `advanced clean
coal technology unit' shall not include any unit which is not in
compliance with the applicable Federal pollution prevention, control,
and permit requirements at any time during the period applicable under
subsection (c)(1)(B).
``(4) Denial of credit for units receiving certain
other federal assistance.--The terms `basic clean coal
technology unit' and `advanced clean coal technology
unit' shall not include any unit if, at any time during
the period applicable under subsection (c)(1)(B), any
funding is provided to such unit under the Clean Coal
Technology Program, the Power Plant Improvement
Initiative, or the Clean Coal Power Initiative
administered by the Secretary of Energy.
``(5) Coordination with other credits.--This
section shall not apply to any property with respect to
which the rehabilitation credit under section 47, the
energy credit under section 48, or any credit under
section 45 or 45K is allowable unless the taxpayer
elects to waive the application of such credit to such
property.''.
(b) Special Recapture Rules.--
(1) Subsection (a) of section 50 is amended by
redesignating paragraph (3), (4), and (5) as paragraphs
(4), (5), and (6), respectively, and by inserting after
paragraph (2) the following new paragraph:
``(3) Special rules for clean coal technology
credits.--
``(A) Early disposition, etc.--If, during
any taxable year, qualified clean coal property
is disposed of, or otherwise ceases to be part
of a basic or advanced clean coal technology
unit with respect to the taxpayer, before the
close of the recovery period under section 168
for such unit, then the tax under this chapter
for such taxable year shall be increased by--
``(i) the aggregate decrease in the
credits allowed under section 38 for
all prior taxable years which would
have resulted solely from reducing to
zero any credit determined under
section 48A with respect to such
property, multiplied by
``(ii) a fraction--
``(I) the numerator of
which is the number of years in
the period beginning with the
year of such disposition or
cessation and ending with the
last year of such recovery
period, and
``(II) the denominator of
which is the total number of
years in such recovery period.
``(B) Property ceases to qualify for
progress expenditures.--Rules similar to the
rules of this paragraph shall apply in cases
where qualified progress expenditures were
taken into account under the rules referred to
in section 48A(g)(1).
``(C) Increased recapture in certain
cases.--The fraction in subparagraph (A)(ii)
shall be 1 in any case in which the property
ceases to be a basic or advanced clean coal
technology unit by reason of paragraph (3),
(4), or (5) of section 48A(g).
``(D) Coordination with other recapture
rules.--Paragraphs (1) and (2) shall not apply
to qualified clean coal property.
``(E) Definitions.--Terms used in this
section which are also used in section 48A
shall have the meanings given to such terms in
section 48A.''.
(2) Paragraph (4) of section 50(a), as redesignated
by paragraph (1), is amended by striking ``or (2)'' and
inserting ``, (2), or (3)''.
(3) Paragraph (5) of section 50(a), as so
redesignated, is amended by striking ``and (2)'' and
inserting ``, (2), and (3)''.
(4) Section 1371(d)(1) is amended by striking
``section 50(a)(4)'' and inserting ``section
50(a)(5)''.
(c) Technical Amendments.--
(1) Section 46 (relating to amount of credit) is
amended by striking ``and'' at the end of paragraph
(2), by striking the period at the end of paragraph (3)
and inserting ``, and'', and by adding at the end the
following new paragraph:
``(4) the clean coal technology credit.''.
(2) Section 49(a)(1)(C) is amended by striking
``and'' at the end of clause (ii), by striking the
period at the end of clause (iii) and inserting ``,
and'', and by adding at the end the following new
clause:
``(iv) the portion of the basis of
any qualified clean coal property (as
defined by section 48A(c)).''.
(3) The table of sections for subpart E of part IV
of subchapter A of chapter 1 is amended by inserting
after the item relating to section 48 the following new
item:
``Sec. 48A. Clean coal technology credit.''.
(d) Effective Date.--The amendments made by this section
shall apply to periods after December 31, 2003, under rules
similar to the rules of section 48(m) of the Internal Revenue
Code of 1986 (as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990).
SEC. 1352. EXPANSION OF AMORTIZATION FOR CERTAIN POLLUTION CONTROL
FACILITIES.
(a) Eligibility of Post-1975 Pollution Control
Facilities.--
(1) In general.--Paragraph (1) of section 169(d) is
amended by striking ``before January 1, 1976,'' and by
striking ``a new identifiable'' and inserting ``an
identifiable''.
(2) Identifiable treatment facility.--Paragraph (4)
of section 169(d) is amended to read as follows:
``(4) Identifiable treatment facility.--For
purposes of paragraph (1), the term
`identifiable treatment facility' includes only
tangible property (not including a building and
its structural components, other than a
buildingwhich is exclusively a treatment
facility) which is of a character subject to the allowance for
depreciation provided in section 167, which is identifiable as a
treatment facility, and which is property--
``(A) the construction, reconstruction, or
erection of which is completed by the taxpayer,
or
``(B) the original use of the property
commences with the taxpayer.''
(3) Technical amendment.--Section 169(d)(3) is
amended by striking ``Health, Education, and Welfare''
and inserting ``Health and Human Services''.
(b) Coordination With Section 48A Investment Credit.--
Section 169 is amended by redesignating subsections (e) though
(j) as subsection (f) through (k), respectively, and by
inserting after subsection (d) the following new subsection:
``(e) Coordination With Section 48A Investment Credit.--
``(1) In general.--In the case of any treatment
facility used in connection with a plant or other
property to which an amount is allocated under section
48A(f), this section shall apply only if such plant or
other property was in operation before January 1, 1976.
``(2) 36-month amortization with respect to pre-
1976 plants not allocated credit.--References in this
section to 60 months shall be treated as references to
36 months in the case of treatment facilities used in
connection with a plant or other property in operation
before January 1, 1976, if no allocation is made under
section 48A(f) with respect to such plant or
property.''
(c) Effective Date.--The amendments made by this section
shall apply to facilities placed in service after the date of
the enactment of this Act.
SEC. 1353. 5-YEAR RECOVERY PERIOD FOR ELIGIBLE INTEGRATED GASIFICATION
COMBINED CYCLE TECHNOLOGY UNIT ELIGIBLE FOR CREDIT.
(a) In General.--Subparagraph (B) of section 168(e)(3)
(defining 5-year property) is amended by striking ``and'' at
the end of clause (v), by striking the period at the end of
clause (vi) and inserting ``, and'', and by inserting after
clause (vi) the following new clause:
``(vii) any section 1245 property
which is part of an eligible integrated
gasification combined cycle technology
unit (as defined in section 48A(e)(4))
for which an allocation is made under
section 48A(f).''
(b) Alternative System.--The table contained in section
168(g)(3)(B) (relating to special rule for certain property
assigned to classes) is amended by inserting after the item
relating to subparagraph (B)(iii) the following new item:
``(B)(vii)........................................................ 20''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after the date of the
enactment of this Act in taxable years ending after such date.
PART IV--HIGH VOLUME NATURAL GAS PROVISIONS
SEC. 1355. HIGH VOLUME NATURAL GAS PIPE TREATED AS 7-YEAR PROPERTY.
(a) In General.--Section 168(e)(3)(C) (defining 7-year
property), as amended by this Act, is amended by striking
``and'' at the end of clause (ii), by redesignating clause
(iii) as clause (iv), and by inserting after clause (ii) the
following new clause:
``(iii) any high volume natural gas
pipe the original use of which
commences with the taxpayer after the
date of the enactment of this clause,
and''.
(b) High Volume Natural Gas Pipe.--Section 168(i) (relating
to definitions and special rules), as amended by this Act, is
amended by adding at the end the following new paragraph:
``(17) High volume natural gas pipe.--The term
`high volume natural gas pipe' means--
``(A) pipe which has an interior diameter
of at least 42 inches and which is part of a
natural gas pipeline system, and
``(B) any related equipment and
appurtenances used in connection with such
pipe.''.
(c) Alternative System.--The table contained in section
168(g)(3)(B) (relating to special rule for certain property
assigned to classes), as amended by this Act, is amended by
inserting after the item relating to subparagraph (C)(ii) the
following new item:
``(C)(iii)........................................................ 22''.
(d) Alternative Minimum Tax Exception.--Subparagraph (B) of
section 56(a)(1), as amended by this Act, is amended by
inserting before the period the following: ``, or in section
168(e)(3)(C)(iii)''.
(e) Effective Date.--The amendments made by this section
shall apply to property placed in service on or after the date
of the enactment of this Act.
SEC. 1356. EXTENSION OF ENHANCED OIL RECOVERY CREDIT TO HIGH VOLUME
NATURAL GAS FACILITIES.
(a) In General.--Section 43(c)(1) (defining qualified
enhanced oil recovery costs) is amended by adding at the end
the following new subparagraph:
``(D) Any amount which is paid or incurred
during the taxable year in connection with the
construction of a gas treatment plant which--
``(i) prepares natural gas for
transportation through a pipeline with
a capacity of at least
1,000,000,000,000 Btu of natural gas
per day, and
``(ii) produces carbon dioxide
which is injected into hydrocarbon-
bearing geological formations.''.
(b) Effective Date.--The amendment made by this section
shall apply to costs paid or incurred in taxable years
beginning after December 31, 2003.
Subtitle D--Additional Provisions
SEC. 1361. EXTENSION OF ACCELERATED DEPRECIATION BENEFIT FOR ENERGY-
RELATED BUSINESSES ON INDIAN RESERVATIONS.
Paragraph (8) of section 168(j) (relating to termination)
is amended by adding at the end the following new sentence:
``The preceding sentence shall be applied by substituting
`December 31, 2005' for `December 31, 2004' in the case of
property placed in service as part of a facility for--
``(A) the generation or transmission of
electricity (including from any qualified
energy resource, as defined in section 45(c)),
``(B) an oil or gas well,
``(C) the transmission or refining of oil
or gas, or
``(D) the production of any qualified fuel
(as defined in section 45K(c)).''.
SEC. 1362. PAYMENT OF DIVIDENDS ON STOCK OF COOPERATIVES WITHOUT
REDUCING PATRONAGE DIVIDENDS.
(a) In General.--Subsection (a) of section 1388 (relating
to patronage dividend defined) is amended by adding at the end
the following: ``For purposes of paragraph (3), net earnings
shall not be reduced by amounts paid during the year as
dividends on capital stock or other proprietary capital
interests of the organization to the extent that the articles
of incorporation or bylaws of such organization or other
contract with patrons provide that such dividends are in
addition to amounts otherwise payable to patrons which are
derived from business done with or for patrons during the
taxable year.''.
(b) Effective Date.--The amendment made by this section
shall apply to distributions in taxable years ending after the
date of the enactment of this Act.
SEC. 1363. DISTRIBUTIONS FROM PUBLICLY TRADED PARTNERSHIPS TREATED AS
QUALIFYING INCOME OF REGULATED INVESTMENT
COMPANIES.
(a) In General.--Paragraph (2) of section 851(b) (defining
regulated investment company) is amended to read as follows:
``(2) at least 90 percent of its gross income is
derived from--
``(A) dividends, interest, payments with
respect to securities loans (as defined in
section 512(a)(5)), and gains from the sale or
other disposition of stock or securities (as
defined in section 2(a)(36) of the Investment
Company Act of 1940, as amended) or foreign
currencies, or other income (including but not
limited to gains from options, futures or
forward contracts) derived with respect to its
business of investing in such stock,
securities, or currencies, and
``(B) distributions or other income derived
from an interest in a qualified publicly traded
partnership (as defined in subsection (h));
and''
(b) Source Flow-Through Rule Not To Apply.--The last
sentence of section 851(b) is amended by inserting ``(other
than a qualified publicly traded partnership as defined in
subsection (h))'' after ``derived from a partnership''.
(c) Limitation on Ownership.--Subsection (c) of section 851
is amended by redesignating paragraph (5) as paragraph (6) and
inserting after paragraph (4) the following new paragraph:
``(5) The term `outstanding voting securities of
such issuer' shall include the equity securities of a
qualified publicly traded partnership (as defined in
subsection (h)).''.
(d) Definition of Qualified Publicly Traded Partnership.--
Section 851 is amended by adding at the end the following new
subsection:
``(h) Qualified Publicly Traded Partnership.--For purposes
of this section, the term `qualified publicly traded
partnership' means a publicly traded partnership described in
section 7704(b) other than a partnership which would satisfy
the gross income requirements of section 7704(c)(2) if
qualifying income included only income described in subsection
(b)(2)(A).''.
(e) Definition of Qualifying Income.--Section 7704(d)(4) is
amended by striking ``section 851(b)(2)'' and inserting
``section 851(b)(2)(A)''.
(f) Limitation on Composition of Assets.--Subparagraph (B)
of section 851(b)(3) is amended to read as follows:
``(B) not more than 25 percent of the value
of its total assets is invested in--
``(i) the securities (other than
Government securities or the securities
of other regulated investment
companies) of any one issuer,
``(ii) the securities (other than
the securities of other regulated
investment companies) of two or more
issuers which the taxpayer controls and
which are determined, under regulations
prescribed by the Secretary, to be
engaged in the same or similar trades
or businesses or related trades or
businesses, or
``(iii) the securities of one or
more qualified publicly traded
partnerships (as defined in subsection
(h)).''.
(g) Application of Special Passive Activity Rule to
Regulated Investment Companies.--Subsection (k) of section 469
(relating to separate application of section in case of
publicly traded partnerships) is amended by adding at the end
the following new paragraph:
``(4) Application to regulated investment
companies.--For purposes of this section, a regulated
investment company (as defined in section 851) holding
an interest in a qualified publicly traded partnership
(as defined in section 851(h)) shall be treated as a
taxpayer described in subsection (a)(2) with respect to
items attributable to such interest.''.
(h) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 1364. CEILING FANS.
(a) In General.--Subchapter II of chapter 99 of the
Harmonized Tariff Schedule of the United States is amended by
inserting in numerical sequence the following new heading:
`` 9902.84.14 Ceiling fans for Free No change No change On or ''.
permanent before 12/
installation 31/2005
(provided for
in subheading
8414.51.00).
(b) Effective Date.--The amendment made by this section
applies to goods entered, or withdrawn from warehouse, for
consumption on or after the 15th day after the date of
enactment of this Act.
SEC. 1365. CERTAIN STEAM GENERATORS, AND CERTAIN REACTOR VESSEL HEADS,
USED IN NUCLEAR FACILITIES.
(a) Certain Steam Generators.--Heading 9902.84.02 of the
Harmonized Tariff Schedule of the United States is amended by
striking ``12/31/2006'' and inserting ``12/31/2008''.
(b) Certain Reactor Vessel Heads.--Subchapter II of chapter
99 of the Harmonized Tariff Schedule of the United States is
amended by inserting in numerical sequence the following new
heading:
`` 9902.84.03 Reactor vessel Free No change No change On or ''.
heads for before 12/
nuclear 31/2007
reactors
(provided for
in subheading
8401.40.00).
(c) Effective Date.--
(1) Subsection (a).--The amendment made by
subsection (a) shall take effect on the date of the
enactment of this Act.
(2) Subsection (b).--The amendment made by
subsection (b) shall apply to goods entered, or
withdrawn from warehouse, for consumption on or after
the 15th day after the date of the enactment of this
Act.
SEC. 1366. BROWNFIELDS DEMONSTRATION PROGRAM FOR QUALIFIED GREEN
BUILDING AND SUSTAINABLE DESIGN PROJECTS.
(a) Treatment as Exempt Facility Bond.--Subsection (a) of
section 142 (relating to the definition of exempt facility
bond) is amended by striking ``or'' at the end of paragraph
(12), by striking the period at the end of paragraph (13) and
inserting ``, or'', and by inserting at the end the following
new paragraph:
``(14) qualified green building and sustainable
design projects.''.
(b) Qualified Green Building and Sustainable Design
Projects.--Section 142 (relating to exempt facility bonds) is
amended by adding at the end thereof the following new
subsection:
``(l) Qualified Green Building and Sustainable Design
Projects.--
``(1) In general.--For purposes of subsection
(a)(14), the term `qualified green building and
sustainable design project' means any project which is
designated by the Secretary, after consultation with
the Administrator of the Environmental Protection
Agency, as a qualified green building and sustainable
design project and which meets the requirements of
clauses (i), (ii), (iii), and (iv) of paragraph (4)(A).
``(2) Designations.--
``(A) In general.--Within 60 days after the
end of the application period described in
paragraph (3)(A), the Secretary, after
consultation with the Administrator of the
Environmental Protection Agency, shall
designate qualified green building and
sustainable design projects. At least one of
the projects designated shall be located in, or
within a 10-mile radius of, an empowerment zone
as designated pursuant to section 1391, and at
least one of the projects designated shall be
located in a rural State. No more than one
project shall be designated in a State. A
project shall not be designated if such project
includes a stadium or arena for professional
sports exhibitions or games.
``(B) Minimum conservation and technology
innovation objectives.--The Secretary, after
consultation with the Administrator of the
Environmental Protection Agency, shall ensure
that, in the aggregate, the projects designated
shall--
``(i) reduce electric consumption
by more than 150 megawatts annually as
compared to conventional construction,
``(ii) reduce daily sulfur dioxide
emissions by at least 10 tons compared
to coal generation power,
``(iii) expand by 75 percent the
domestic solar photovoltaic market in
the United States (measured in
megawatts) as compared to the expansion
of that market from 2001 to 2002, and
``(iv) use at least 25 megawatts of
fuel cell energy generation.
``(3) Limited designations.--A project may not be
designated under this subsection unless--
``(A) the project is nominated by a State
or local government within 180 days of the
enactment of this subsection, and
``(B) such State or local government
provides written assurances that the project
willsatisfy the eligibility criteria described
in paragraph (4).
``(4) Application.--
``(A) In general.--A project may not be
designated under this subsection unless the
application for such designation includes a
project proposal which describes the energy
efficiency, renewable energy, and sustainable
design features of the project and demonstrates
that the project satisfies the following
eligibility criteria:
``(i) Green building and
sustainable design.--At least 75
percent of the square footage of
commercial buildings which are part of
the project is registered for United
States Green Building Council's LEED
certification and is reasonably
expected (at the time of the
designation) to receive such
certification.
``(ii) Brownfield redevelopment.--
The project includes a brownfield site
as defined by section 101(39) of the
Comprehensive Environmental Response,
Compensation, and Liability Act of 1980
(42 U.S.C. 9601), including a site
described in subparagraph
(D)(ii)(II)(aa) thereof.
``(iii) State and local support.--
The project receives specific State or
local government resources which will
support the project in an amount equal
to at least $5,000,000. For purposes of
the preceding sentence, the term
`resources' includes tax abatement
benefits and contributions in kind.
``(iv) Size.--The project includes
at least one of the following:
``(I) At least 1,000,000
square feet of building.
``(II) At least 20 acres.
``(v) Use of tax benefit.--The
project proposal includes a description
of the net benefit of the tax-exempt
financing provided under this
subsection which will be allocated for
financing of one or more of the
following:
``(I) The purchase,
construction, integration, or
other use of energy efficiency,
renewable energy, and
sustainable design features of
the project.
``(II) Compliance with LEED
certification standards.
``(III) The purchase,
remediation, and foundation
construction and preparation of
the brownfields site.
``(vi) Employment.--The project is
projected to provide permanent
employment of at least 1,500 full time
equivalents (150 full time equivalents
in rural States) when completed and
construction employment of at least
1,000 full time equivalents (100 full
time equivalents in rural States).
The application shall include an independent
analysis which describes the project's economic
impact, including the amount of projected
employment.
``(B) Project description.--Each
application described in subparagraph (A) shall
contain for each project a description of--
``(i) the amount of electric
consumption reduced as compared to
conventional construction,
``(ii) the amount of sulfur dioxide
daily emissions reduced compared to
coal generation,
``(iii) the amount of the gross
installed capacity of the project's
solar photovoltaic capacity measured in
megawatts, and
``(iv) the amount, in megawatts, of
the project's fuel cell energy
generation.
``(5) Certification of use of tax benefit.--No
later than 30 days after the completion of the project,
each project must certify to the Secretary that the net
benefit of the tax-exempt financing was used for the
purposes described in paragraph (4).
``(6) Definitions.--For purposes of this
subsection--
``(A) Rural state.--The term `rural State'
means any State which has--
``(i) a population of less than
4,500,000 according to the 2000 census,
``(ii) a population density of less
than 150 people per square mile
according to the 2000 census, and
``(iii) increased in population by
less than half the rate of the national
increase between the 1990 and 2000
censuses.
``(B) Local government.--The term `local
government' has the meaning given such term by
section 1393(a)(5).
``(C) Net benefit of tax-exempt
financing.--The term `net benefit of tax-exempt
financing' means the present value of the
interest savings (determined by a calculation
established by the Secretary) which result from
the tax-exempt status of the bonds.
``(7) Aggregate face amount of tax-exempt
financing.--
``(A) In general.--An issue shall not be
treated as an issue described in subsection
(a)(14) if the aggregate face amount of bonds
issued by the State or local government
pursuant thereto for a project (when added to
the aggregate face amount of bonds previously
so issued for such project) exceeds an amount
designated by the Secretary as part of the
designation.
``(B) Limitation on amount of bonds.--The
Secretary may not allocate authority to issue
qualified green building and sustainable design
project bonds in an aggregate face amount
exceeding $2,000,000,000.
``(8) Termination.--Subsection (a)(14) shall not
apply with respect to any bond issued after September
30, 2009.
``(9) Treatment of current refunding bonds.--
Paragraphs (7)(B) and (8) shall not apply to any bond
(or series of bonds) issued to refund a bond issued
under subsection (a)(14) before October 1, 2009, if--
``(A) the average maturity date of the
issue of which the refunding bond is a part is
not later than the average maturity date of the
bonds to be refunded by such issue,
``(B) the amount of the refunding bond does
not exceed the outstanding amount of the
refunded bond, and
``(C) the net proceeds of the refunding
bond are used to redeem the refunded bond not
later than 90 days after the date of the
issuance of the refunding bond.
For purposes of subparagraph (A), average maturity shall be
determined in accordance with section 147(b)(2)(A).''.
(c) Exemption From General State Volume Caps.--Paragraph
(3) of section 146(g) (relating to exception for certain bonds)
is amended--
(1) by striking ``or (13)'' and inserting ``(13),
or (14)'', and
(2) by striking ``and qualified public educational
facilities'' and inserting ``qualified public
educational facilities, and qualified green building
and sustainable design projects''.
(d) Special Rule for Assets Financed Under This Section and
Accountability.--
(1) Denial of double benefit.--Any asset financed
with bonds issued pursuant to this section shall be
ineligible for any credit or deduction established
under the Energy Tax Policy Act of 2003.
(2) Accountability.--Each issuer shall maintain, on
behalf of each project, an interest bearing reserve
account equal to 1 percent of the net proceeds of any
bond issued under this section for such project. Not
later than 5 years after the date of issuance, the
Secretary of the Treasury, after consultation with the
Administrator of the Environmental Protection Agency,
shall determine whether the project financed with such
bonds has substantially complied with the terms and
conditions described in section 142(l)(4) of the
Internal Revenue Code of 1986 (as added by this
section). If the Secretary, after such consultation,
certifies that the project has substantially complied
with such terms and conditions and meets the
commitments set forth in the application for such
project described in section 142(l)(4) of such Code,
amounts in the reserve account, including all interest,
shall be released to the project. If the Secretary
determines that the project has not substantially
complied with such terms and conditions, amounts in the
reserve account, including all interest, shall be paid
to the United States Treasury.
(e) Effective Date.--The amendments made by this section
shall apply to bonds issued after the date of the enactment of
this Act.
TITLE XIV--MISCELLANEOUS
Subtitle A--Rural and Remote Electricity Construction
SEC. 1401. DENALI COMMISSION PROGRAMS.
(a) Power Cost Equalization Program.--There are authorized
to be appropriated to the Denali Commission established by the
Denali Commission Act of 1998 (42 U.S.C. 3121 note) not more
than $5,000,000 for each of fiscal years 2005 through 2011 for
the purposes of funding the power cost equalization program
established under section 42.45.100 of the Alaska Statutes.
(b) Availability of Funds.--
(1) Purpose.--Amounts described in paragraph (2)
shall be available to the Denali Commission to permit
energy generation and development (including fuel
cells, hydroelectric, solar, wind, wave, and tidal
energy, and alternative energy sources), energy
transmission (including interties), fuel tank
replacement and clean-up, fuel transportation networks
and related facilities, power cost equalization
programs, and other energy programs, notwithstanding
any other provision of law.
(2) Amounts.--(A) Except as provided in
subparagraph (B), the amounts referred to in paragraph
(1) shall be any Federal royalties, rents, and bonuses
derived from the Federal share of Federal oil and gas
leases in the National Petroleum Reserve in Alaska, up
to a maximum of $50,000,000, for each of the fiscal
years 2004 through 2013.
(B) If amounts available under subparagraph (A) for
one of the fiscal years 2004 through 2013 are less than
$50,000,000, the Secretary of Energy shall make
available an amount sufficient to ensure that the
amount available under this subsection for that fiscal
year equals $50,000,000, from amounts remaining after
deposits are made under section 949(a)(1), from the
same source from which those deposits are made.
SEC. 1402. RURAL AND REMOTE COMMUNITY ASSISTANCE.
(a) Program.--Section 19 of the Rural Electrification Act
of 1936 (7 U.S.C 918a) is amended by striking all that precedes
subsection (b) and inserting the following:
``SEC. 19. ELECTRIC GENERATION, TRANSMISSION, AND DISTRIBUTION
FACILITIES EFFICIENCY GRANTS AND LOANS TO RURAL AND
REMOTE COMMUNITIES WITH EXTREMELY HIGH ELECTRICITY
COSTS.
``(a) In General.--The Secretary, acting through the Rural
Utilities Service, may--
``(1) in coordination with State rural development
initiatives, make grants and loans to persons, States,
political subdivisions of States, and other entities
organized under the laws of States, to acquire,
construct, extend, upgrade, and otherwise improve
electric generation, transmission, and distribution
facilities serving communities in which the average
revenue per kilowatt hour of electricity for all
consumers is greater than 150 percent of the average
revenue per kilowatt hour of electricity for all
consumers in the United States (as determined by the
Energy Information Administration using the most recent
data available);
``(2) make grants and loans to the Denali
Commission established by the Denali Commission Act of
1998 (42 U.S.C. 3121 note; Public 105-277) to be used
for the purpose of providing funds to acquire,
construct, extend, upgrade, finance, and otherwise
improve electric generation, transmission, and
distribution facilities serving communities described
in paragraph (1); and
``(3) make grants to State entities to establish
and support a revolving fund to provide a more cost-
effective means of purchasing fuel in areas where the
fuel cannot be shipped by means of surface
transportation.''.
(b) Definition of Person.--Section 13 of the Rural
Electrification Act of 1936 (7 U.S.C. 913) is amended by
striking ``or association'' and inserting ``association, or
Indian tribe (as defined in section 4 of the Indian Self-
Determination and Education Assistance Act)''.
Subtitle B--Coastal Programs
SEC. 1411. ROYALTY PAYMENTS UNDER LEASES UNDER THE OUTER CONTINENTAL
SHELF LANDS ACT.
(a) Royalty Relief.--
(1) In general.--For purposes of providing
compensation for lessees and a State for which amounts
are authorized by section 6004(c) of the Oil Pollution
Act of 1990 (Public Law 101-380), a lessee may withhold
from payment any royalty due and owing to the United
States under any leases under the Outer Continental
Shelf Lands Act (43 U.S.C. 1301 et seq.) for offshore
oil or gas production from a covered lease tract if, on
or before the date that the payment is due and payable
to the United States, the lessee makes a payment to the
Secretary of the Interior of 44 cents for every $1 of
royalty withheld.
(2) Use of amounts paid to secretary.--Within 30
days after the Secretary of the Interior receives
payments under paragraph (1), the Secretary of the
Interior shall--
(A) make 47.5 percent of such payments
available to the State referred to in section
6004(c) of the Oil Pollution Act of 1990; and
(B) make 52.5 percent of such payments
available equally, only for the programs and
purposes identified as number 282 at page 1389
of House Report number 108-10 and for a program
described at page 1159 of that Report in the
State referred to in such section 6004(c).
(3) Treatment of amounts.--Any royalty withheld by
a lessee in accordance with this section (including any
portion thereof that is paid to the Secretary of the
Interior under paragraph (1)) shall be treated as paid
for purposes of satisfaction of the royalty obligations
of the lessee to the United States.
(4) Certification of withheld amounts.--The
Secretary of the Treasury shall--
(A) determine the amount of royalty
withheld by a lessee under this section; and
(B) promptly publish a certification when
the total amount of royalty withheld by the
lessee under this section is equal to--
(i) the dollar amount stated at
page 47 of Senate Report number 101-
534, which is designated therein as the
total drainage claim for the West Delta
field; plus
(ii) interest as described at page
47 of that Report.
(b) Period of Royalty Relief.--Subsection (a) shall apply
to royalty amounts that are due and payable in the period
beginning on January 1, 2004, and ending on the date on which
the Secretary of the Treasury publishes a certification under
subsection (a)(4)(B).
(c) Definitions.--As used in this section:
(1) Covered lease tract.--The term ``covered lease
tract'' means a leased tract (or portion of a leased
tract)--
(A) lying seaward of the zone defined and
governed by section 8(g) of the Outer
Continental Shelf Lands Act (43 U.S.C.
1337(g)); or
(B) lying within such zone but to which
such section does not apply.
(2) Lessee.--The term ``lessee''--
(A) means a person or entity that, on the
date of the enactment of the Oil Pollution Act
of 1990, was a lessee referred to in section
6004(c) of that Act (as in effect on that date
of the enactment), but did not hold lease
rights in Federal offshore lease OCS-G-5669;
and
(B) includes successors and affiliates of a
person or entity described in subparagraph (A).
SEC. 1412. DOMESTIC OFFSHORE ENERGY REINVESTMENT.
(a) Domestic Offshore Energy Reinvestment Program.--The
Outer Continental Shelf Lands Act (43 U.S.C. 1331 et seq.) is
amended by adding at the end the following:
``SEC. 32. DOMESTIC OFFSHORE ENERGY REINVESTMENT PROGRAM.
``(a) Definitions.--In this section:
``(1) Approved plan.--The term `approved plan'
means a Secure Energy Reinvestment Plan approved by the
Secretary under this section.
``(2) Coastal energy state.--The term `Coastal
Energy State' means a Coastal State off the coastline
of which, within the seaward lateral boundary as
determined by the map referenced in subsection
(c)(2)(A), outer Continental Shelf bonus bids or
royalties are generated, other than bonus bids or
royalties from a leased tract within any area of the
outer Continental Shelf for which a moratorium on new
leasing was in effect as of January 1, 2002, unless the
lease was issued before the establishment of the
moratorium and was in production on such date.
``(3) Coastal political subdivision.--The term
`coastal political subdivision' means a county, parish,
or other equivalent subdivision of a Coastal Energy
State, all or part of which lies within the boundaries
of the coastal zone of the State, as identified in the
State's approved coastal zone management program under
the Coastal Zone Management Act of 1972 (16 U.S.C. 1451
et seq.) on the date of the enactment of this section.
``(4) Coastal population.--The term `coastal
population' means the population of a coastal political
subdivision, as determined by the most recent official
data of the Census Bureau.
``(5) Coastline.--The term `coastline' has the same
meaning as the term `coast line' in subsection 2(c) of
the Submerged Lands Act (43 U.S.C. 1301(c)).
``(6) Fund.--The term `Fund' means the Secure
Energy Reinvestment Fund established by this section.
``(7) Leased tract.--The term `leased tract' means
a tract maintained under section 6 or leased under
section 8 for the purpose of drilling for, developing,
and producing oil and natural gas resources.
``(8) Qualified outer continental shelf revenues.--
(A) Except as provided in subparagraph (B), the term
`qualified outer Continental Shelf revenues' means all
amounts received by the United States on or after
October 1, 2003, from each leased tract or portion of a
leased tract lying seaward of the zone defined and
governed by section 8(g), or lying within such zone but
to which section 8(g) does not apply, including bonus
bids, rents, royalties (including payments for
royalties taken in kind and sold), net profit share
payments, and related interest.
``(B) Such term does not include any revenues from
a leased tract or portion of a leased tract that is
included within any area of the outer Continental Shelf
for which a moratorium on new leasing was in effect as
of January 1, 2002, unless the lease was issued before
the establishment of the moratorium and was in
production on such date.
``(9) Secretary.--The term `Secretary' means the
Secretary of the Interior.
``(b) Secure Energy Reinvestment Fund.--
``(1) Establishment.--There is established in the
Treasury of the United States a separate account which
shall be known as the `Secure Energy Reinvestment
Fund'. The Fund shall consist of amounts deposited
under paragraph (2), and such other amounts as may be
appropriated to the Fund.
``(2) Deposits.--For each fiscal year after fiscal
year 2003, the Secretary of the Treasury shall deposit
into the Fund the following:
``(A) Notwithstanding section 9, all
qualified outer Continental Shelf revenues
attributable to royalties received by the
United States in the fiscal year that are in
excess of the following amount:
``(i) $3,455,000,000 in the case of
royalties received in fiscal year 2004.
``(ii) $3,726,000,000 in the case
of royalties received in fiscal year
2005.
``(iii) $4,613,000,000 in the case
of royalties received in fiscal year
2006.
``(iv) $5,226,000,000 in the case
of royalties received in fiscal year
2007.
``(v) $5,841,000,000 in the case of
royalties received in fiscal year 2008.
``(vi) $5,763,000,000 in the case
of royalties received in fiscal year
2009.
``(vii) $6,276,000,000 in the case
of royalties received in fiscal year
2010.
``(viii) $6,351,000,000 in the case
of royalties received in fiscal year
2011.
``(ix) $6,551,000,000 in the case
of royalties received in fiscal year
2012.
``(x) $5,120,000,000 in the case of
royalties received in fiscal year 2013.
``(B) Notwithstanding section 9, all
qualified outer Continental shelf revenues
attributable to bonus bids received by the
United States in each of the fiscal years 2004
through 2013 that are in excess of
$1,000,000,000.
``(C) Notwithstanding section 9, in
addition to amounts deposited under
subparagraphs (A) and (B), $35,000,000 of
amounts received by the United States each
fiscal year as royalties for oil or gas
production on the outer Continental Shelf,
except that no amounts shall be deposited under
this subparagraph before fiscal year 2004 or
after fiscal year 2013.
``(D) All interest earned under paragraph
(4).
``(E) All repayments under subsection (f).
``(3) Reduction in deposit.--(A) For each fiscal
year after fiscal year 2013 in which amounts received
by the United States as royalties for oil or gas
production on the outer Continental Shelf are less than
the sum of the amounts described in subparagraph (B)
(before the application of this subparagraph), the
Secretary of the Treasury shall reduce each of the
amounts described in subparagraph (B) proportionately.
``(B) The amounts referred to in subparagraph (A)
are the following:
``(i) The amount required to be covered
into the Historic Preservation Fund under
section 108 of the National Historic
Preservation Act (16 U.S.C. 470h) on the date
of the enactment of this paragraph.
``(ii) The amount required to be credited
to the Land and Water Conservation Fund under
section 2(c)(2) of the Land and Water
Conservation Fund Act of 1965 (16 U.S.C. 4601-
5(c)(2)) on the date of the enactment of this
paragraph.
``(iii) The amount required to be deposited
under subparagraph (C) of paragraph (2) of this
subsection.
``(4) Investment.--The Secretary of the Treasury
shall invest moneys in the Fund (including interest) in
public debt securities with maturities suitable to the
needs of the Fund, as determined by the Secretary of
the Treasury, and bearing interest at rates determined
by the Secretary of the Treasury, taking into
consideration current market yields on outstanding
marketable obligations of the United States of
comparable maturity. Such invested moneys shall remain
invested until needed to meet requirements for
disbursement under this section.
``(5) Review and revision of baseline amounts.--Not
later than December 31, 2008, the Secretary of the
Interior, in consultation with the Secretary of the
Treasury, shall--
``(A) determine the amount and composition
of outer Continental Shelf revenues that were
received by the United States in each of the
fiscal years 2004 through 2008;
``(B) project the amount and composition of
outer Continental Shelf revenues that will be
received in the United States in each of the
fiscal years 2009 through 2013; and
``(C) submit to the Congress a report
regarding whether any of the dollar amounts set
forth in clauses (v) though (x) of paragraph
(2)(A) or paragraph (2)(B) should be modified
to reflect those projections.
``(6) Authorization of appropriation of additional
amounts.--In addition to the amounts deposited into the
Fund under paragraph (2) there are authorized to be
appropriated to the Fund--
``(A) for each of fiscal years 2004 through
2013 up to $500,000,000; and
``(B) for each fiscal year after fiscal
year 2013 up to 25 percent of qualified outer
Continental Shelf revenues received by the
United States in the preceding fiscal year.
``(c) Use of Secure Energy Reinvestment Fund.--
``(1) In general.--(A) The Secretary shall use
amounts in the Fund remaining after the application of
subsections (h) and (i) to pay to each Coastal Energy
State that has a Secure Energy Reinvestment Plan
approved by the Secretary under this section, and to
coastal political subdivisions of such State, the
amount allocated to the State or coastal political
subdivision, respectively, under this subsection.
``(B) The Secretary shall make payments under this
paragraph in December of 2004, and of each year
thereafter, from revenues received by the United States
in the immediately preceding fiscal year.
``(2) Allocation.--The Secretary shall allocate
amounts deposited into the Fund in a fiscal year, and
other amounts determined by the Secretary to be
available, among Coastal Energy States that have an
approved plan, and to coastal political subdivisions of
such States, as follows:
``(A)(i) Of the amounts made available for
each of the first 10 fiscal years for which
amounts are available for allocation under this
paragraph, the allocation for each Coastal
Energy State shall be calculated based on the
ratio of qualified outer Continental Shelf
revenues generated off the coastline of the
Coastal Energy State to the qualified outer
Continental Shelf revenues generated off the
coastlines of all Coastal Energy States for the
period beginning January 1, 1992, and ending
December 31, 2001.
``(ii) Of the amounts available for a
fiscal year in a subsequent 10-fiscal-year
period, the allocation for each Coastal Energy
State shall be calculated based on such ratio
determined by the Secretary with respect to
qualified outer Continental Shelf revenues
generated in each subsequent corresponding 10-
year period.
``(iii) For purposes of this subparagraph,
qualified outer Continental Shelf revenues
shall be considered to be generated off the
coastline of a Coastal Energy State if the
geographic center of the lease tract from which
the revenues are generated is located within
the area formed by the extension of the State's
seaward lateral boundaries, calculated using
the strict and scientifically derived
conventions established to delimit
international lateral boundaries under the Law
of the Sea, as indicated on the map entitled
`Calculated Seaward Lateral Boundaries' and
dated October 2003, on file in the Office of
the Director, Minerals Management Service.
``(B) 35 percent of each Coastal Energy
State's allocable share as determined under
subparagraph (A) shall be allocated among and
paid directly to the coastal political
subdivisions of the State by the Secretary
based on the following formula:
``(i) 25 percent shall be allocated
based on the ratio of each coastal
political subdivision's coastal
population to the coastal population of
all coastal political subdivisions of
the Coastal Energy State.
``(ii) 25 percent shall be
allocated based on the ratio of each
coastal political subdivision's
coastline miles to the coastline miles
of all coastal political subdivisions
of the State. In the case of a coastal
political subdivision without a
coastline, the coastline of the
political subdivision for purposes of
this clause shall be one-third the
average length of the coastline of the
other coastal political subdivisions of
the State.
``(iii) 50 percent shall be
allocated based on a formula that
allocates 75 percent of the funds based
on such coastal political subdivision's
relative distance from any leased tract
used to calculate that State's
allocation and 25 percent of the funds
based on the relative level of outer
Continental Shelf oil and gas
activities in a coastal political
subdivision to the level of outer
Continental Shelf oil and gas
activities in all coastal political
subdivisions in such State, as
determined by the Secretary, except
that in the case of a coastal political
subdivision in the State of California
that has a coastal shoreline, that is
not within 200 miles of the geographic
center of a leased tract or portion of
a leased tract, and in which there is
located one or more oil refineries the
allocation under this clause shall be
determined as if that coastal political
subdivision were located within a
distance of 50 miles from the
geographic center of the closest leased
tract with qualified outer Continental
Shelf revenues.
``(3) Reallocation.--Any amount allocated to a
Coastal Energy State or coastal political subdivision
of such a State but not disbursed because of a failure
of a Coastal Energy State to have an approved plan
shall be reallocated by the Secretary among all other
Coastal Energy States in a manner consistent with this
subsection, except that the Secretary--
``(A) shall hold the amount in escrow
within the Fund until the earlier of the end of
the next fiscal year in which the allocation is
made or the final resolution of any appeal
regarding the disapproval of a plan submitted
by the State under this section; and
``(B) shall continue to hold such amount in
escrow until the end of the subsequent fiscal
year thereafter, if the Secretary determines
that such State is making a good faith effort
to develop and submit, or update, a Secure
Energy Reinvestment Plan under subsection (d).
``(4) Minimum share.--Notwithstanding any other
provision of this subsection, the amount allocated
under this subsection to each Coastal Energy State each
fiscal year shall be not less than 5 percent of the
total amount available for that fiscal year for
allocation under this subsection to Coastal Energy
States, except that for any Coastal Energy State
determined by the Secretary to have an area formed by
the extension of the State's seaward lateral boundary,
as designated by the map referenced in paragraph
(2)(A)(iii), of less than 490 square statute miles, the
amount allocated to such State shall not be less than
10 percent of the total amount available for that
fiscal year for allocation under this subsection.
``(5) Recomputation.--If the allocation to one or
more Coastal Energy States under paragraph (4) with
respect to a fiscal year is greater than the amount
that would be allocated to such States under this
subsection if paragraph (4) did not apply, then the
allocations under this subsection to all other Coastal
Energy States shall be paid from the amount remaining
after deduction of the amounts allocated under
paragraph (4), but shall be reduced on a pro rata basis
by the sum of the allocations under paragraph (4) so
that not more than 100 percent of the funds available
in the Fund for allocation with respect to that fiscal
year is allocated.
``(d) Secure Energy Reinvestment Plan.--
``(1) Development and submission of state plans.--
The Governor of each State seeking to receive funds
under this section shall prepare, and submit to the
Secretary, a Secure Energy Reinvestment Plan describing
planned expenditures of funds received under this
section. The Governor shall include in the State plan
submitted to the Secretary plans prepared by the
coastal political subdivisions of the State. The
Governor and the coastal political subdivision shall
solicit local input and provide for public
participation in the development of the State plan. In
describing the planned expenditures, the State and
coastal political subdivisions shall include only items
that are uses authorized under subsection (e).
``(2) Approval or disapproval.--
``(A) In general.--The Secretary may not
disburse funds to a State or coastal political
subdivision of a State under this section
before the date the State has an approved plan.
The Secretary shall approve a Secure Energy
Reinvestment Plan submitted by a State under
paragraph (1) if the Secretary determines that
the expenditures provided for in the plan are
uses authorized under subsection (e), and that
the plan contains each of the following:
``(i) The name of the State agency
that will have the authority to
represent and act for the State in
dealing with the Secretary for purposes
of this section.
``(ii) A program for the
implementation of the plan, that (I)
has as a goal improving the
environment, (II) has as a goal
addressing the impacts of oil and gas
production from the outer Continental
Shelf, and (III) includes a description
of how the State and coastal political
subdivisions of the State will evaluate
the effectiveness of the plan.
``(iii) Certification by the
Governor that ample opportunity has
been accorded for public participation
in the development and revision of the
plan.
``(iv) Measures for taking into
account other relevant Federal
resources and programs. The plan shall
be correlated so far as practicable
with other State, regional, and local
plans.
``(v) For any State for which the
ratio determined under subsection
(c)(2)(A)(i) or (c)(2)(A)(ii), as
appropriate, expressed as a percentage,
exceeds 25 percent, a plan to spend not
less than 30 percent of the total funds
provided under this section each fiscal
year to that State and appropriate
coastal political subdivisions, to
address the socioeconomic or
environmental impacts identified in the
plan that remain significant or
progressive after implementation of
mitigation measures identified in the
most current environmental impact
statement (as of the date of the
enactment of this clause) required
under the National Environmental
Protection Act of 1969 for lease sales
under this Act.
``(vi) A plan to utilize at least
one-half of the funds provided pursuant
to subsection (c)(2)(B), and a portion
of other funds provided to such State
under this section, on programs or
projects that are coordinated and
conducted in partnership between the
State and coastal political
subdivision.
``(B) Procedure and timing.--The Secretary
shall approve or disapprove each plan submitted
in accordance with this subsection within 90
days after its submission.
``(3) Amendment or revision.--Any amendment to or
revision of an approved plan shall be prepared and
submitted in accordance with the requirements under
this paragraph for the submittal of plans, and shall be
approved or disapproved by the Secretary in accordance
with paragraph (2)(B).
``(e) Authorized Uses.--A Coastal Energy State, and a
coastal political subdivision of such a State, shall use
amounts paid under this section (including any such amounts
deposited into a trust fund administered by the State or
coastal political subdivision dedicated to uses consistent with
this subsection), in compliance with Federal and State law and
the approved plan of the State, only for one or more of the
following purposes:
``(1) Projects and activities, including
educational activities, for the conservation,
protection, or restoration of coastal areas including
wetlands.
``(2) Mitigating damage to, or the protection of,
fish, wildlife, or natural resources.
``(3) To the extent of such sums as are considered
reasonable by the Secretary, planning assistance and
administrative costs of complying with this section.
``(4) Implementation of federally approved plans or
programs for marine, coastal, subsidence, or
conservation management or for protection of resources
from natural disasters.
``(5) Mitigating impacts of outer Continental Shelf
activities through funding onshore infrastructure and
public service needs.
``(f) Compliance With Authorized Uses.--If the Secretary
determines that an expenditure of an amount made by a Coastal
Energy State or coastal political subdivision is not in
accordance with the approved plan of the State (including the
plans of coastal political subdivisions included in such plan),
the Secretary shall not disburse any further amounts under this
section to that Coastal Energy State or coastal political
subdivision until--
``(1) the amount is repaid to the Secretary; or
``(2) the Secretary approves an amendment to the
plan that authorizes the expenditure.
``(g) Arbitration of State and Local Disputes.--The
Secretary may require, as a condition of any payment under this
section, that a State or coastal political subdivision in a
State must submit to arbitration--
``(1) any dispute between the State or coastal
political subdivision (or both) and the Secretary
regarding implementation of this section; and
``(2) any dispute between the State and political
subdivision regarding implementation of this section,
including any failure to include, in the plan submitted
by the State for purposes of subsection (d), any
spending plan of the coastal political subdivision.
``(h) Administrative Expenses.--Of amounts in the Fund each
fiscal year, the Secretary may use up to one-half of one
percent for the administrative costs of implementing this
section.
``(i) Funding for Consortium.--
``(1) In general.--Of amounts deposited into the
Fund in each fiscal year 2004 through 2013, 2 percent
shall be available to the Secretary of the Interior to
provide funding for the Coastal Restoration and
Enhancement through Science and Technology program.
``(2) Treatment.--Any amount available under this
subsection for a fiscal year shall, for purposes of
determining the amount appropriated under any other
provision of law that authorizes appropriations to
carry out the program referred to in paragraph (1), be
treated as appropriated under that other provision.
``(j) Disposition of Funds.--A Coastal Energy State or
coastal political subdivision may use funds provided to such
entity under this section, subject to subsection (e), for any
payment that is eligible to be made with funds provided to
States under section 35 of the Mineral Leasing Act (30 U.S.C.
191).
``(k) Reports.--Each fiscal year following a fiscal year in
which a Coastal Energy State or coastal political subdivision
of a Coastal Energy State receives funds under this section,
the Governor of the Coastal Energy State, in coordination with
such State's coastal political subdivisions, shall account for
all funds so received for the previous fiscal year in a written
report to the Secretary. The report shall include, in
accordance with regulations prescribed by the Secretary, a
description of all projects and activities that received such
funds. In order to avoid duplication, such report may
incorporate, by reference, any other reports required to be
submitted under other provisions of law.
``(l) Signs.--The Secretary shall require, as a condition
of any allocation of funds provided with amounts made available
by this section, that each State and coastal political
subdivision shall include on any sign otherwise installed at
any site at or near an entrance or public use focal point area
for which such funds are used, a statement that the existence
or development of the site (or both), as appropriate, is a
product of such funds.''.
(b) Additional Amendments.--Section 31 of the Outer
Continental Shelf Lands Act (43 U.S.C. 1356a) is amended--
(1) by striking subsection (a);
(2) in subsection (c) by striking ``For fiscal year
2001, $150,000,000 is'' and inserting ``Such sums as
may be necessary to carry out this section are'';
(3) in subsection (d)(1)(B) by striking ``,
except'' and all that follows through the end of the
sentence and inserting a period;
(4) by redesignating subsections (b) though (g) in
order as subsection (a) through (f); and
(5) by striking ``subsection (f)'' each place it
appears and inserting ``subsection (e)''.
(c) Utilization of Coastal Restoration and Enhancement
Through Science and Technology Program.--
(1) Authorization.--The Secretary of the Interior
and the Secretary of Commerce may each use the Coastal
Restoration and Enhancement through Science and
Technology program for the purposes of--
(A) assessing the effects of coastal
habitat restoration techniques;
(B) developing improved ecosystem modeling
capabilities for improved predictions of
coastal conditions and habitat change and for
developing new technologies for restoration
activities; and
(C) identifying economic options to address
socioeconomic consequences of coastal
degradation.
(2) Condition.--The Secretary of the Interior, in
consultation with the Secretary of Commerce, shall
ensure that the program--
(A) establishes procedures designed to
avoid duplicative activities among Federal
agencies and entities receiving Federal funds;
(B) coordinates with persons involved in
similar activities; and
(C) establishes a mechanism to collect,
organize, and make available information and
findings on coastal restoration.
(3) Report.--Not later than September 30, 2008, the
Secretary of the Interior, in consultation with the
Secretary of Commerce, shall transmit a report to the
Congress on the effectiveness of any Federal and State
restoration efforts conducted pursuant to this
subsection and make recommendations to improve
coordinated coastal restoration efforts.
(4) Funding.--For each of fiscal years 2004 through
2013, there is authorized to be appropriated to the
Secretary $10,000,000 to carry out activities under
this subsection.
Subtitle C--Reforms to the Board of Directors of the Tennessee Valley
Authority
SEC. 1431. CHANGE IN COMPOSITION, OPERATION, AND DUTIES OF THE BOARD OF
DIRECTORS OF THE TENNESSEE VALLEY AUTHORITY.
The Tennessee Valley Authority Act of 1933 (16 U.S.C. 831
et seq.) is amended by striking section 2 and inserting the
following:
``SEC. 2. MEMBERSHIP, OPERATION, AND DUTIES OF THE BOARD OF DIRECTORS.
``(a) Membership.--
``(1) Appointment.--The Board of Directors of the
Corporation (referred to in this Act as the `Board')
shall be composed of 9 members appointed by the
President by and with the advice and consent of the
Senate, at least 5 of whom shall be a legal resident of
a State any part of which is in the service area of the
Corporation.
``(2) Chairman.--The members of the Board shall
select 1 of the members to act as chairman of the
Board.
``(b) Qualifications.--To be eligible to be appointed as a
member of the Board, an individual--
``(1) shall be a citizen of the United States;
``(2) shall have management expertise relative to a
large for-profit or nonprofit corporate, government, or
academic structure;
``(3) shall not be an employee of the Corporation;
and
``(4) shall make full disclosure to Congress of any
investment or other financial interest that the
individual holds in the energy industry.
``(c) Recommendations.--In appointing members of the Board,
the President shall--
``(1) consider recommendations from such public
officials as--
``(A) the Governors of States in the
service area;
``(B) individual citizens;
``(C) business, industrial, labor, electric
power distribution, environmental, civic, and
service organizations; and
``(D) the congressional delegations of the
States in the service area; and
``(2) seek qualified members from among persons who
reflect the diversity, including the geographical
diversity, and needs of the service area of the
Corporation.
``(d) Terms.--
``(1) In general.--A member of the Board shall
serve a term of 5 years. A member of the Board whose
term has expired may continue to serve after the
member's term has expired until the date on which a
successor takes office, except that the member shall
not serve beyond the end of the session of Congress in
which the term of the member expires.
``(2) Vacancies.--A member appointed to fill a
vacancy on the Board occurring before the expiration of
the term for which the predecessor of the member was
appointed shall be appointed for the remainder of that
term.
``(e) Quorum.--
``(1) In general.--Five of the members of the Board
shall constitute a quorum for the transaction of
business.
``(2) Vacancies.--A vacancy on the Board shall not
impair the power of the Board to act.
``(f) Compensation.--
``(1) In general.--A member of the Board shall be
entitled to receive--
``(A) a stipend of--
``(i) $45,000 per year; or
``(ii)(I) in the case of the
chairman of any committee of the Board
created by the Board, $46,000 per year;
or
``(II) in the case of the chairman
of the Board, $50,000 per year; and
``(B) travel expenses, including per diem
in lieu of subsistence, in the same manner as
persons employed intermittently in Government
service under section 5703 of title 5, United
States Code.
``(2) Adjustments in stipends.--The amount of the
stipend under paragraph (1)(A)(i) shall be adjusted by
the same percentage, at the same time and manner, and
subject to the same limitations as are applicable to
adjustments under section 5318 of title 5, United
States Code.
``(g) Duties.--
``(1) In general.--The Board shall--
``(A) establish the broad goals,
objectives, and policies of the Corporation
that are appropriate to carry out this Act;
``(B) develop long-range plans to guide the
Corporation in achieving the goals, objectives,
and policies of the Corporation and provide
assistance to the chief executive officer to
achieve those goals, objectives, and policies;
``(C) ensure that those goals, objectives,
and policies are achieved;
``(D) approve an annual budget for the
Corporation;
``(E) adopt and submit to Congress a
conflict-of-interest policy applicable to
members of the Board and employees of the
Corporation;
``(F) establish a compensation plan for
employees of the Corporation in accordance with
subsection (i);
``(G) approve all compensation (including
salary or any other pay, bonuses, benefits,
incentives, and any other form of remuneration)
of all managers and technical personnel that
report directly to the chief executive officer
(including any adjustment to compensation);
``(H) ensure that all activities of the
Corporation are carried out in compliance with
applicable law;
``(I) create an audit committee, composed
solely of Board members independent of the
management of the Corporation, which shall--
``(i) in consultation with the
inspector general of the Corporation,
recommend to the Board an external
auditor;
``(ii) receive and review reports
from the external auditor of the
Corporation and inspector general of
the Corporation; and
``(iii) make such recommendations
to the Board as the audit committee
considers necessary;
``(J) create such other committees of Board
members as the Board considers to be
appropriate;
``(K) conduct such public hearings as it
deems appropriate on issues that could have a
substantial effect on--
``(i) the electric ratepayers in
the service area; or
``(ii) the economic, environmental,
social, or physical well-being of the
people of the service area;
``(L) establish the electricity rates
charged by the Corporation; and
``(M) engage the services of an external
auditor for the Corporation.
``(2) Meetings.--The Board shall meet at least 4
times each year.
``(h) Chief Executive Officer.--
``(1) Appointment.--The Board shall appoint a
person to serve as chief executive officer of the
Corporation.
``(2) Qualifications.--
``(A) In general.--To serve as chief
executive officer of the Corporation, a
person--
``(i) shall have senior executive-
level management experience in large,
complex organizations;
``(ii) shall not be a current
member of the Board or have served as a
member of the Board within 2 years
before being appointed chief executive
officer; and
``(iii) shall comply with the
conflict-of-interest policy adopted by
the Board.
``(B) Expertise.--In appointing a chief
executive officer, the Board shall give
particular consideration to appointing an
individual with expertise in the electric
industry and with strong financial skills.
``(3) Tenure.--The chief executive officer shall
serve at the pleasure of the Board.
``(i) Compensation Plan.--
``(1) In general.--The Board shall approve a
compensation plan that specifies all compensation
(including salary or any other pay, bonuses, benefits,
incentives, and any other form of remuneration) for the
chief executive officer and employees of the
Corporation.
``(2) Annual survey.--The compensation plan shall
be based on an annual survey of the prevailing
compensation for similar positions in private industry,
including engineering and electric utility companies,
publicly owned electric utilities, and Federal, State,
and local governments.
``(3) Considerations.--The compensation plan shall
provide that education, experience, level of
responsibility, geographic differences, and retention
and recruitment needs will be taken into account in
determining compensation of employees.
``(4) Positions at or below level iv.--The chief
executive officer shall determine the salary and
benefits of employees whose annual salary is not
greater than the annual rate payable for positions at
level IV of the Executive Schedule under section 5315
of title 5, United States Code.
``(5) Positions above level iv.--On the
recommendation of the chief executive officer, the
Board shall approve the salaries of employees whose
annual salaries would be in excess of the annual rate
payable for positions at level IV of the Executive
Schedule under section 5315 of title 5, United States
Code.''.
SEC. 1432. CHANGE IN MANNER OF APPOINTMENT OF STAFF.
Section 3 of the Tennessee Valley Authority Act of 1933 (16
U.S.C. 831b) is amended--
(1) by striking the first undesignated paragraph
and inserting the following:
``(a) Appointment by the Chief Executive Officer.--The
chief executive officer shall appoint, with the advice and
consent of the Board, and without regard to the provisions of
the civil service laws applicable to officers and employees of
the United States, such managers, assistant managers, officers,
employees, attorneys, and agents as are necessary for the
transaction of the business of the Corporation.''; and
(2) by striking ``All contracts'' and inserting the
following:
``(b) Wage Rates.--All contracts''.
SEC. 1433. CONFORMING AMENDMENTS.
(a) The Tennessee Valley Authority Act of 1933 (16 U.S.C.
831 et seq.) is amended--
(1) by striking ``board of directors'' each place
it appears and inserting ``Board of Directors''; and
(2) by striking ``board'' each place it appears and
inserting ``Board''.
(b) Section 9 of the Tennessee Valley Authority Act of 1933
(16 U.S.C. 831h) is amended--
(1) by striking ``The Comptroller General of the
United States shall audit'' and inserting the
following:
``(c) Audits.--The Comptroller General of the United States
shall audit''; and
(2) by striking ``The Corporation shall determine''
and inserting the following:
``(d) Administrative Accounts and Business Documents.--The
Corporation shall determine''.
(c) Title 5, United States Code, is amended--
(1) in section 5314, by striking ``Chairman, Board
of Directors of the Tennessee Valley Authority.''; and
(2) in section 5315, by striking ``Members, Board
of Directors of the Tennessee Valley Authority.''.
SEC. 1434. APPOINTMENTS; EFFECTIVE DATE; TRANSITION.
(a) Appointments.--
(1) In general.--As soon as practicable after the
date of enactment of this Act, the President shall
submit to the Senate nominations of 6 persons to serve
as members of the Board of Directors of the Tennessee
Valley Authority in addition to the members serving on
the date of enactment of this Act.
(2) Initial terms.--Notwithstanding section 2(d) of
the Tennessee Valley Authority Act of 1933 (as amended
by this subtitle), in making the appointments under
paragraph (1), the President shall appoint--
(A) 2 members for a term to expire on May
18, 2006;
(B) 2 members for a term to expire on May
18, 2008; and
(C) 2 members for a term to expire on May
18, 2010.
(b) Effective Date.--The amendments made by this section
and sections 1431, 1432, and 1433 take effect on the later of
the date on which at least 3 persons nominated under subsection
(a) take office or May 18, 2005.
(c) Selection of Chairman.--The Board of Directors of the
Tennessee Valley Authority shall select 1 of the members to act
as chairman of the Board not later than 30 days after the
effective date of this section.
(d) Conflict-of-Interest Policy.--The Board of Directors of
the Tennessee Valley Authority shall adopt and submit to
Congress a conflict-of-interest policy, as required by section
2(g)(1)(E) of the Tennessee Valley Authority Act of 1933 (as
amended by this subtitle), as soon as practicable after the
effective date of this section.
(e) Transition.--A person who is serving as a member of the
board of directors of the Tennessee Valley Authority on the
date of enactment of this Act--
(1) shall continue to serve until the end of the
current term of the member; but
(2) after the effective date specified in
subsection (b), shall serve under the terms of the
Tennessee Valley Authority Act of 1933 (as amended by
this subtitle); and
(3) may not be reappointed.
Subtitle D--Other Provisions
SEC. 1441. CONTINUATION OF TRANSMISSION SECURITY ORDER.
Department of Energy Order No. 202-03-2, issued by the
Secretary of Energy on August 28, 2003, shall remain in effect
unless rescinded by Federal statute.
SEC. 1442. REVIEW OF AGENCY DETERMINATIONS.
Section 7 of the Natural Gas Act (15 U.S.C. 717f) is
amended by adding at the end the following:
``(i)(1) The United States Court of Appeals for the
District of Columbia Circuit shall have original and exclusive
jurisdiction over any civil action--
``(A) for review of any order or action of any
Federal or State administrative agency or officer to
issue, condition, or deny any permit, license,
concurrence, or approval issued under authority of any
Federal law, other than the Coastal Zone Management Act
of 1972 (16 U.S.C. 1451 et seq.), required for the
construction of a natural gas pipeline for which a
certificate of public convenience and necessity is
issued by the Commission under this section;
``(B) alleging unreasonable delay by any Federal or
State administrative agency or officer in entering an
order or taking other action described in subparagraph
(A); or
``(C) challenging any decision made or action taken
under this subsection.
``(2)(A) If the Court finds that the order, action, or
failure to act is not consistent with the public convenience
and necessity (as determined by the Commission under this
section), or would prevent the construction and operation of
natural gas facilities authorized by the certificate of public
convenience and necessity, the permit, license, concurrence, or
approval that is the subject of the order, action, or failure
to act shall be deemed to have been issued subject to any
conditions set forth in the reviewed order or action that the
Court finds to be consistent with the public convenience and
necessity.
``(B) For purposes of paragraph (1)(B), the failure of an
agency or officer to issue any such permit, license,
concurrence, or approval within the later of 1 year after the
date of filing of an application for the permit, license,
concurrence, or approval or 60 days after the date of issuance
of the certificate of public convenience and necessity under
this section, shall be considered to be unreasonable delay
unless the Court, for good cause shown, determines otherwise.
``(C) The Court shall set any action brought under
paragraph (1) for expedited consideration.''.
SEC. 1443. ATTAINMENT DATES FOR DOWNWIND OZONE NONATTAINMENT AREAS.
Section 181 of the Clean Air Act (42 U.S.C. 7511) is
amended by adding the following new subsection at the end
thereof:
``(d) Extended Attainment Date for Certain Downwind
Areas.--
``(1) Definitions.--(A) The term `upwind area'
means an area that--
``(i) significantly contributes to
nonattainment in another area, hereinafter
referred to as a `downwind area'; and
``(ii) is either--
``(I) a nonattainment area with a
later attainment date than the downwind
area, or
``(II) an area in another State
that the Administrator has found to be
significantly contributing to
nonattainment in the downwind area in
violation of section 110(a)(2)(D) and
for which the Administrator has
established requirements through notice
and comment rulemaking to eliminate the
emissions causing such significant
contribution.
``(B) The term `current classification' means the
classification of a downwind area under this section at
the time of the determination under paragraph (2).
``(2) Extension.--If the Administrator--
``(A) determines that any area is a
downwind area with respect to a particular
national ambient air quality standard for
ozone; and
``(B) approves a plan revision for such
area as provided in paragraph (3) prior to a
reclassification under subsection (b)(2)(A),
the Administrator, in lieu of such reclassification,
shall extend the attainment date for such downwind area
for such standard in accordance with paragraph (5).
``(3) Required approval.--In order to extend the
attainment date for a downwind area under this
subsection, the Administrator must approve a revision
of the applicable implementation plan for the downwind
area for such standard that--
``(A) complies with all requirements of
this Act applicable under the current
classification of the downwind area, including
any requirements applicable to the area under
section 172(c) for such standard; and
``(B) includes any additional measures
needed to demonstrate attainment by the
extended attainment date provided under this
subsection.
``(4) Prior reclassification determination.--If, no
more than 18 months prior to the date of enactment of
this subsection, the Administrator made a
reclassification determination under subsection
(b)(2)(A) for any downwind area, and the Administrator
approves the plan revision referred to in paragraph (3)
for such area within 12 months after the date of
enactment of this subsection, the reclassification
shall be withdrawn and the attainment date extended in
accordance with paragraph (5) upon such approval. The
Administrator shall also withdraw a reclassification
determination under subsection (b)(2)(A) made after the
date of enactment of this subsection and extend the
attainment date in accordance with paragraph (5) if the
Administrator approves the plan revision referred to in
paragraph (3) within 12 months of the date the
reclassification determination under subsection
(b)(2)(A) is issued. In such instances the `current
classification' used for evaluating the revision of the
applicable implementation plan under paragraph (3)
shall be the classification of the downwind area under
this section immediately prior to such
reclassification.
``(5) Extended date.--The attainment date extended
under this subsection shall provide for attainment of
such national ambient air quality standard for ozone in
the downwind area as expeditiously as practicable but
no later than the date on which the last reductions in
pollution transport necessary for attainment in the
downwind area are required to be achieved by the upwind
area or areas.''.
SEC. 1444. ENERGY PRODUCTION INCENTIVES
(a) In General.--A State may provide to any entity--
(1) a credit against any tax or fee owed to the
State under a State law, or
(2) any other tax incentive,
determined by the State to be appropriate, in the amount
calculated under and in accordance with a formula determined by
the State, for production described in subsection (b) in the
State by the entity that receives such credit or such
incentive.
(b) Eligible Entities.--Subsection (a) shall apply with
respect to the production in the State of--
(1) electricity from coal mined in the State and
used in a facility, if such production meets all
applicable Federal and State laws and if such facility
uses scrubbers or other forms of clean coal technology,
(2) electricity from a renewable source such as
wind, solar, or biomass, or
(3) ethanol.
(c) Effect on Interstate Commerce--Any action taken by a
State in accordance with this section with respect to a tax or
fee payable, or incentive applicable, for any period beginning
after the date of the enactment of this Act shall--
(1) be considered to be a reasonable regulation of
commerce; and
(2) not be considered to impose an undue burden on
interstate commerce or to otherwise impair, restrain,
or discriminate, against interstate commerce.
SEC. 1445. USE OF GRANULAR MINE TAILINGS.
(a) Amendment.--Subtitle F of the Solid Waste Disposal Act
(42 U.S.C. 6961 et seq.) is amended by adding at the end the
following:
``SEC. 6006. USE OF GRANULAR MINE TAILINGS.
``(a) Mine Tailings.--
``(1) In general.--Not later than 180 days after
the date of enactment of this section, the
Administrator, in consultation with the Secretary of
Transportation and heads of other Federal agencies,
shall establish criteria (including an evaluation of
whether to establish a numerical standard for
concentration of lead and other hazardous substances)
for the safe and environmentally protective use of
granular mine tailings from the Tar Creek, Oklahoma
Mining District, known as `chat', for--
``(A) cement or concrete projects; and
``(B) transportation construction projects
(including transportation construction projects
involving the use of asphalt) that are carried
out, in whole or in part, using Federal funds.
``(2) Requirements.--In establishing criteria under
paragraph (1), the Administrator shall consider--
``(A) the current and previous uses of
granular mine tailings as an aggregate for
asphalt; and
``(B) any environmental and public health
risks and benefits derived from the removal,
transportation, and use in transportation
projects of granular mine tailings.
``(3) Public participation.--In establishing the
criteria under paragraph (1), the Administrator shall
solicit and consider comments from the public.
``(4) Applicability of criteria.--On the
establishment of the criteria under paragraph (1), any
use of the granular mine tailings described in
paragraph (1) in a transportation project that is
carried out, in whole or in part, using Federal funds,
shall meet the criteria established under paragraph
(1).
``(b) Effect of Sections.--Nothing in this section or
section 6005 affects any requirement of any law (including a
regulation) in effect on the date of enactment of this
section.''.
(b) Conforming Amendment.--The table of contents of the
Solid Waste Disposal Act (42 U.S.C. prec. 6901) is amended by
adding at the end of the items relating to subtitle F the
following:
``Sec. 6006. Use of granular mine tailings.''.
TITLE XV--ETHANOL AND MOTOR FUELS
Subtitle A--General Provisions
SEC. 1501. RENEWABLE CONTENT OF MOTOR VEHICLE FUEL.
(a) In General.--Section 211 of the Clean Air Act (42
U.S.C. 7545) is amended--
(1) by redesignating subsection (o) as subsection
(q); and
(2) by inserting after subsection (n) the
following:
``(o) Renewable Fuel Program.--
``(1) Definitions.--In this section:
``(A) Ethanol.--(i) The term `cellulosic
biomass ethanol' means ethanol derived from any
lignocellulosic or hemicellulosic matter that
is available on a renewable or recurring basis,
including--
``(I) dedicated energy crops and
trees;
``(II) wood and wood residues;
``(III) plants;
``(IV) grasses;
``(V) agricultural residues; and
``(VI) fibers.
``(ii) The term `waste derived ethanol'
means ethanol derived from--
``(I) animal wastes, including
poultry fats and poultry wastes, and
other waste materials; or
``(II) municipal solid waste.
``(B) Renewable fuel.--
``(i) In general.--The term
`renewable fuel' means motor vehicle
fuel that--
``(I)(aa) is produced from
grain, starch, oilseeds, or
other biomass; or
``(bb) is natural gas
produced from a biogas source,
including a landfill, sewage
waste treatment plant, feedlot,
or other place where decaying
organic material is found; and
``(II) is used to replace
or reduce the quantity of
fossil fuel present in a fuel
mixture used to operate a motor
vehicle.
``(ii) Inclusion.--The term
`renewable fuel' includes cellulosic
biomass ethanol, waste derived ethanol,
and biodiesel (as defined in section
312(f) of the Energy Policy Act of 1992
(42 U.S.C. 13220(f)) and any blending
components derived from renewable fuel
(provided that only the renewable fuel
portion of any such blending component
shall be considered part of the
applicable volume under the renewable
fuel program established by this
subsection).
``(C) Small refinery.--The term `small
refinery' means a refinery for which average
aggregate daily crude oil throughput for the
calendar year (as determined by dividing the
aggregate throughput for the calendar year by
the number of days in the calendar year) does
not exceed 75,000 barrels.
``(2) Renewable fuel program.--
``(A) In general.--Not later than 1 year
after the enactment of this subsection, the
Administrator shall promulgate regulations
ensuring that motor vehicle fuel sold or
dispensed to consumers in the contiguous United
States, on an annual average basis, contains
the applicable volume of renewable fuel as
specified in subparagraph (B). Regardless of
the date of promulgation, such regulations
shall contain compliance provisions for
refiners, blenders, and importers, as
appropriate, to ensure that the requirements of
this section are met, but shall not restrict
where renewable fuel can be used, or impose any
per-gallon obligation for the use of renewable
fuel. If the Administrator does not promulgate
such regulations, the applicable percentage
referred to in paragraph (4), on a volume
percentage of gasoline basis, shall be 2.2 in
2005.
``(B) Applicable volume.--
``(i) Calendar years 2005 through
2012.--For the purpose of subparagraph
(A), the applicable volume for any of
calendar years 2005 through 2012 shall
be determined in accordance with the
following table:
``Applicable volume of renewable fuel
Calendar year: (In billions of gallons)
2005.................................................. 3.1
2006.................................................. 3.3
2007.................................................. 3.5
2008.................................................. 3.8
2009.................................................. 4.1
2010.................................................. 4.4
2011.................................................. 4.7
2012.................................................. 5.0
``(ii) Calendar year 2013 and
thereafter.--For the purpose of
subparagraph (A), the applicable volume
for calendar year 2013 and each
calendar year thereafter shall be equal
to the product obtained by
multiplying--
``(I) the number of gallons
of gasoline that the
Administrator estimates will be
sold or introduced into
commerce in the calendar year;
and
``(II) the ratio that--
``(aa) 5.0 billion
gallons of renewable
fuels; bears to
``(bb) the number
of gallons of gasoline
sold or introduced into
commerce in calendar
year 2012.
``(3) Non-contiguous state opt-in.--Upon the
petition of a non-contiguous State, the Administrator
may allow the renewable fuel program established by
subtitle A of title XV of the Energy Policy Act of 2003
to apply in such non-contiguous State at the same time
or any time after the Administrator promulgates
regulations under paragraph (2). The Administrator may
promulgate or revise regulations under paragraph (2),
establish applicablepercentages under paragraph (4),
provide for the generation of credits under paragraph (6), and take
such other actions as may be necessary to allow for the application of
the renewable fuels program in a non-contiguous State.
``(4) Applicable percentages.--
``(A) Provision of estimate of volumes of
gasoline sales.--Not later than October 31 of
each of calendar years 2004 through 2011, the
Administrator of the Energy Information
Administration shall provide to the
Administrator of the Environmental Protection
Agency an estimate of the volumes of gasoline
that will be sold or introduced into commerce
in the United States during the following
calendar year.
``(B) Determination of applicable
percentages.--
``(i) In general.--Not later than
November 30 of each of the calendar
years 2004 through 2011, based on the
estimate provided under subparagraph
(A), the Administrator shall determine
and publish in the Federal Register,
with respect to the following calendar
year, the renewable fuel obligation
that ensures that the requirements of
paragraph (2) are met.
``(ii) Required elements.--The
renewable fuel obligation determined
for a calendar year under clause (i)
shall--
``(I) be applicable to
refiners, blenders, and
importers, as appropriate;
``(II) be expressed in
terms of a volume percentage of
gasoline sold or introduced
into commerce; and
``(III) subject to
subparagraph (C)(i), consist of
a single applicable percentage
that applies to all categories
of persons specified in
subclause (I).
``(C) Adjustments.--In determining the
applicable percentage for a calendar year, the
Administrator shall make adjustments--
``(i) to prevent the imposition of
redundant obligations to any person
specified in subparagraph (B)(ii)(I);
and
``(ii) to account for the use of
renewable fuel during the previous
calendar year by small refineries that
are exempt under paragraph (11).
``(5) Equivalency.--For the purpose of paragraph
(2), 1 gallon of either cellulosic biomass ethanol or
waste derived ethanol--
``(A) shall be considered to be the
equivalent of 1.5 gallon of renewable fuel; or
``(B) if the cellulostic biomass ethanol or
waste derived ethanol is derived from
agricultural residue or is an agricultural
byproduct (as that term is used in section 919
of the Energy Policy Act of 2003), shall be
considered to be the equivalent of 2.5 gallons
of renewable fuel.
``(6) Credit program.--
``(A) In general.--The regulations
promulgated to carry out this subsection shall
provide for the generation of an appropriate
amount of credits by any person that refines,
blends, or imports gasoline that contains a
quantity of renewable fuel that is greater than
the quantity required under paragraph (2). Such
regulations shall provide for the generation of
an appropriate amount of credits for biodiesel
fuel. If a small refinery notifies the
Administrator that it waives the exemption
provided paragraph (11), the regulations shall
provide for the generation of credits by the
small refinery beginning in the year following
such notification.
``(B) Use of credits.--A person that
generates credits under subparagraph (A) may
use the credits, or transfer all or a portion
of the credits to another person, for the
purpose of complying with paragraph (2).
``(C) Life of credits.--A credit generated
under this paragraph shall be valid to show
compliance--
``(i) in the calendar year in which
the credit was generated or the next
calendar year; or
``(ii) in the calendar year in
which the credit was generated or next
two consecutive calendar years if the
Administrator promulgates regulations
under paragraph (7).
``(D) Inability to purchase sufficient
credits.--The regulations promulgated to carry
out this subsection shall include provisions
allowing any person that is unable to generate
or purchase sufficient credits to meet the
requirements under paragraph (2) to carry
forward a renewable fuel deficit provided that,
in the calendar year following the year in
which the renewable fuel deficit is created,
such person shall achieve compliance with the
renewable fuel requirement under paragraph (2),
and shall generate or purchase additional
renewable fuel credits to offset the renewable
fuel deficit of the previous year.
``(7) Seasonal variations in renewable fuel use.--
``(A) Study.--For each of the calendar
years 2005 through 2012, the Administrator of
the Energy Information Administration shall
conduct a study of renewable fuels blending to
determine whether there are excessive seasonal
variations in the use of renewable fuels.
``(B) Regulation of excessive seasonal
variations.--If, for any calendar year, the
Administrator of the Energy Information
Administration, based on the study under
subparagraph (A), makes the determinations
specified in subparagraph (C), the
Administrator shall promulgate regulations to
ensure that 35 percent or more of the quantity
of renewable fuels necessary to meet the
requirement of paragraph (2) is used during
each of the periods specified in subparagraph
(D) of each subsequent calendar year.
``(C) Determinations.--The determinations
referred to in subparagraph (B) are that--
``(i) less than 35 percent of the
quantity of renewable fuels necessary
to meet the requirement of paragraph
(2) has been used during one of the
periods specified in subparagraph (D)
of the calendar year;
``(ii) a pattern of excessive
seasonal variation described in clause
(i) will continue in subsequent
calendar years; and
``(iii) promulgating regulations or
other requirements to impose a 35
percent or more seasonal use of
renewable fuels will not prevent or
interfere with the attainment of
national ambient air quality standards
or significantly increase the price of
motor fuels to the consumer.
``(D) Periods.--The two periods referred to
in this paragraph are--
``(i) April through September; and
``(ii) January through March and
October through December.
``(E) Exclusions.--Renewable fuels blended
or consumed in 2005 in a State which has
received a waiver under section 209(b) shall
not be included in the study in subparagraph
(A).
``(8) Waivers.--
``(A) In general.--The Administrator, in
consultation with the Secretary of Agriculture
and the Secretary of Energy, may waive the
requirement of paragraph (2) in whole or in
part on petition by one or more States by
reducing the national quantity of renewable
fuel required under this subsection--
``(i) based on a determination by
the Administrator, after public notice
and opportunity for comment, that
implementation of the requirement would
severely harm the economy or
environment of a State, a region, or
the United States; or
``(ii) based on a determination by
the Administrator, after public notice
and opportunity for comment, that there
is an inadequate domestic supply or
distribution capacity to meet the
requirement.
``(B) Petitions for waivers.--The
Administrator, in consultation with the
Secretary of Agriculture and the Secretary of
Energy, shall approve or disapprove a State
petition for a waiver of the requirement of
paragraph (2) within 90 days after the date on
which the petition is received by the
Administrator.
``(C) Termination of waivers.--A waiver
granted under subparagraph (A) shall terminate
after 1 year, but may be renewed by the
Administrator after consultation with the
Secretary of Agriculture and the Secretary of
Energy.
``(9) Study and waiver for initial year of
program.--Not later than 180 days after the enactment
of this subsection, the Secretary of Energy shall
complete for the Administrator a study assessing
whether the renewable fuels requirement under paragraph
(2) will likely result in significant adverse consumer
impacts in 2005, on a national, regional, or State
basis. Such study shall evaluate renewable fuel
supplies and prices, blendstock supplies, and supply
and distribution system capabilities. Based on such
study, the Secretary shall make specific
recommendations to the Administrator regarding waiver
of the requirements of paragraph (2), in whole or in
part, to avoid any such adverse impacts. Within 270
days after the enactment of this subsection, the
Administrator shall, consistent with the
recommendations of the Secretary, waive, in whole or in
part, the renewable fuels requirement under paragraph
(2) by reducing the national quantity of renewable fuel
required under this subsection in 2005. This paragraph
shall not be interpreted as limiting the
Administrator's authority to waive the requirements of
paragraph (2) in whole, or in part, under paragraph (8)
or paragraph (10), pertaining to waivers.
``(10) Assessment and waiver.--The Administrator,
in consultation with the Secretary of Energy and the
Secretary of Agriculture, shall evaluate the
requirement of paragraph (2) and determine, prior to
January 1, 2007, and prior to January 1 of any
subsequent year in which the applicable volume of
renewable fuel is increased under paragraph (2)(B),
whether the requirement of paragraph (2), including the
applicable volume of renewable fuel contained in
paragraph (2)(B) should remain in effect, in whole or
in part, during 2007 or any year or years subsequent to
2007. In evaluating the requirement of paragraph (2)
and in making any determination under this section, the
Administrator shall consider the best available
information and data collected by accepted methods or
best available means regarding--
``(A) the capacity of renewable fuel
producers to supply an adequate amount of
renewable fuel at competitive prices to fulfill
the requirement of paragraph (2);
``(B) the potential of the requirement of
paragraph (2) to significantly raise the price
of gasoline, food (excluding the net price
impact on the requirement in paragraph (2) on
commodities used in the production of ethanol),
or heating oil for consumers in any significant
area or region of the country above the price
that would otherwise apply to such commodities
in the absence of such requirement;
``(C) the potential of the requirement of
paragraph (2) to interfere with the supply of
fuel in any significant gasoline market or
region of the country, including interference
with the efficient operation of refiners,
blenders, importers, wholesale suppliers, and
retail vendors of gasoline, and other motor
fuels; and
``(D) the potential of the requirement of
paragraph (2) to cause or promote exceedances
of Federal, State, or local air quality
standards.
If the Administrator determines, by clear and
convincing information, after public notice and the
opportunity for comment, that the requirement of
paragraph (2) would have significant and meaningful
adverse impact on the supply of fuel and related
infrastructure or on the economy, public health, or
environment of any significant area or region of the
country, the Administrator may waive, in whole or in
part, the requirement of paragraph (2) in any one year
for which the determination is made for that area or
region of the country, except that any such waiver
shall not have the effect of reducing the applicable
volume of renewable fuel specified in paragraph (2)(B)
with respect to any year for which the determination is
made. In determining economic impact under this
paragraph, the Administrator shall not consider the
reduced revenues available from the Highway Trust Fund
(section 9503 of the Internal Revenue Code of 1986) as
a result of the use of ethanol.
``(11) Small refineries.--
``(A) In general.--The requirement of
paragraph (2) shall not apply to small
refineries until the first calendar year
beginning more than 5 years after the first
year set forth in the table in paragraph
(2)(B)(i). Not later than December 31, 2007,
the Secretary of Energy shall complete for the
Administrator a study to determine whether the
requirement of paragraph (2) would impose a
disproportionate economic hardship on small
refineries. For any small refinery that the
Secretary of Energy determines would experience
a disproportionate economic hardship, the
Administrator shall extend the small refinery
exemption forsuch small refinery for no less
than two additional years.
``(B) Economic hardship.--
``(i) Extension of exemption.--A
small refinery may at any time petition
the Administrator for an extension of
the exemption from the requirement of
paragraph (2) for the reason of
disproportionate economic hardship. In
evaluating a hardship petition, the
Administrator, in consultation with the
Secretary of Energy, shall consider the
findings of the study in addition to
other economic factors.
``(ii) Deadline for action on
petitions.--The Administrator shall act
on any petition submitted by a small
refinery for a hardship exemption not
later than 90 days after the receipt of
the petition.
``(C) Credit program.--If a small refinery
notifies the Administrator that it waives the
exemption provided by this Act, the regulations
shall provide for the generation of credits by
the small refinery beginning in the year
following such notification.
``(D) Opt-in for small refiners.--A small
refinery shall be subject to the requirements
of this section if it notifies the
Administrator that it waives the exemption
under subparagraph (A).
``(12) Ethanol market concentration analysis.--
``(A) Analysis.--
``(i) In general.--Not later than
180 days after the date of enactment of
this subsection, and annually
thereafter, the Federal Trade
Commission shall perform a market
concentration analysis of the ethanol
production industry using the
Herfindahl-Hirschman Index to determine
whether there is sufficient competition
among industry participants to avoid
price setting and other anticompetitive
behavior.
``(ii) Scoring.--For the purpose of
scoring under clause (i) using the
Herfindahl-Hirschman Index, all
marketing arrangements among industry
participants shall be considered.
``(B) Report.--Not later than December 1,
2004, and annually thereafter, the Federal
Trade Commission shall submit to Congress and
the Administrator a report on the results of
the market concentration analysis performed
under subparagraph (A)(i).''.
(b) Penalties and Enforcement.--Section 211(d) of the Clean
Air Act (42 U.S.C. 7545(d)) is amended as follows:
(1) In paragraph (1)--
(A) in the first sentence, by striking ``or
(n)'' each place it appears and inserting
``(n), or (o)''; and
(B) in the second sentence, by striking
``or (m)'' and inserting ``(m), or (o)''.
(2) In the first sentence of paragraph (2), by
striking ``and (n)'' each place it appears and
inserting ``(n), and (o)''.
(c) Survey of Renewable Fuel Market.--
(1) Survey and report.--Not later than December 1,
2006, and annually thereafter, the Administrator of the
Environmental Protection Agency (in consultation with
the Secretary of Energy acting through the
Administrator of the Energy Information Administration)
shall--
(A) conduct, with respect to each
conventional gasoline use area and each
reformulated gasoline use area in each State, a
survey to determine the market shares of--
(i) conventional gasoline
containing ethanol;
(ii) reformulated gasoline
containing ethanol;
(iii) conventional gasoline
containing renewable fuel; and
(iv) reformulated gasoline
containing renewable fuel; and
(B) submit to Congress, and make publicly
available, a report on the results of the
survey under subparagraph (A).
(2) Recordkeeping and reporting requirements.--The
Administrator of the Environmental Protection Agency
(hereinafter in this subsection referred to as the
``Administrator'') may require any refiner, blender, or
importer to keep such records and make such reports as
are necessary to ensure that the survey conducted under
paragraph (1) is accurate. The Administrator, to avoid
duplicative requirements, shall rely, to the extent
practicable, on existing reporting and recordkeeping
requirements and other information available to the
Administrator including gasoline distribution patterns
that include multistate use areas.
(3) Applicable law.--Activities carried out under
this subsection shall be conducted in a manner designed
to protect confidentiality of individual responses.
SEC. 1502. FUELS SAFE HARBOR.
(a) In General.--Notwithstanding any other provision of
Federal or State law, no renewable fuel, as defined by section
211(o)(1) of the Clean Air Act, or methyl tertiary butyl ether
(hereinafterin this section referred to as ``MTBE''), used or
intended to be used as a motor vehicle fuel, nor any motor
vehicle fuel containing such renewable fuel or MTBE, shall be
deemed a defective product by virtue of the fact that it is, or
contains, such a renewable fuel or MTBE, if it does not violate
a control or prohibition imposed by the Administrator of the
Environmental Protection Agency (hereinafter in this section
referred to as the ``Administrator'') under section 211 of such
Act, and the manufacturer is in compliance with all requests
for information under subsection (b) of such section 211 of
such Act. If the safe harbor provided by this section does not
apply, the existence of a claim of defective product shall be
determined under otherwise applicable law. Nothing in this
subsection shall be construed to affect the liability of any
person for environmental remediation costs, drinking water
contamination, negligence for spills or other reasonably
foreseeable events, public or private nuisance, trespass,
breach of warranty, breach of contract, or any other liability
other than liability based upon a claim of defective product.
(b) Effective Date.--This section shall be effective as of
September 5, 2003, and shall apply with respect to all claims
filed on or after that date.
SEC. 1503. FINDINGS AND MTBE TRANSITION ASSISTANCE.
(a) Findings.--Congress finds that--
(1) since 1979, methyl tertiary butyl ether
(hereinafter in this section referred to as ``MTBE'')
has been used nationwide at low levels in gasoline to
replace lead as an octane booster or anti-knocking
agent;
(2) Public Law 101-549 (commonly known as the
``Clean Air Act Amendments of 1990'') (42 U.S.C. 7401
et seq.) established a fuel oxygenate standard under
which reformulated gasoline must contain at least 2
percent oxygen by weight;
(3) at the time of the adoption of the fuel oxygen
standard, Congress was aware that significant use of
MTBE would result from the adoption of that standard,
and that the use of MTBE would likely be important to
the cost-effective implementation of that program;
(4) Congress was aware that gasoline and its
component additives can and do leak from storage tanks;
(5) the fuel industry responded to the fuel
oxygenate standard established by Public Law 101-549 by
making substantial investments in--
(A) MTBE production capacity; and
(B) systems to deliver MTBE-containing
gasoline to the marketplace;
(6) having previously required oxygenates like MTBE
for air quality purposes, Congress has--
(A) reconsidered the relative value of MTBE
in gasoline;
(B) decided to establish a date certain for
action by the Environmental Protection Agency
to prohibit the use of MTBE in gasoline; and
(C) decided to provide for the elimination
of the oxygenate requirement for reformulated
gasoline and to provide for a renewable fuels
content requirement for motor fuel; and
(7) it is appropriate for Congress to provide some
limited transition assistance--
(A) to merchant producers of MTBE who
produced MTBE in response to a market created
by the oxygenate requirement contained in the
Clean Air Act; and
(B) for the purpose of mitigating any fuel
supply problems that may result from the
elimination of the oxygenate requirement for
reformulated gasoline and from the decision to
establish a date certain for action by the
Environmental Protection Agency to prohibit the
use of MTBE in gasoline.
(b) Purposes.--The purpose of this section is to provide
assistance to merchant producers of MTBE in making the
transition from producing MTBE to producing other fuel
additives.
(c) MTBE Merchant Producer Conversion Assistance.--Section
211(c) of the Clean Air Act (42 U.S.C. 7545(c)) is amended by
adding at the end the following:
``(5) MTBE merchant producer conversion
assistance.--
``(A) In general.--
``(i) Grants.--The Secretary of
Energy, in consultation with the
Administrator, may make grants to
merchant producers of methyl tertiary
butyl ether (hereinafter in this
subsection referred to as `MTBE') in
the United States to assist the
producers in the conversion of eligible
production facilities described in
subparagraph (C) to the production of
iso-octane, iso-octene, alkylates, or
renewable fuels.
``(ii) Determination.--The
Administrator, in consultation with the
Secretary of Energy, may determine that
transition assistance for the
production of iso-octane, iso-octene,
alkylates, or renewable fuels is
inconsistent with the provisions of
subparagraph (B) and, on that basis,
may deny applications for grants
authorized by this paragraph.
``(B) Further grants.--The Secretary of
Energy, in consultation with the Administrator,
may also further make grants to merchant
producers of MTBE in the United States to
assist the producers in the conversion of
eligible production facilities described in
subparagraph (C) to the production of such
other fuel additives (unless the Administrator
determines that such fuel additives may
reasonably be anticipated to endanger public
health or the environment) that, consistent
with this subsection--
``(i) have been registered and have
been tested or are being tested in
accordance with the requirements of
this section; and
``(ii) will contribute to replacing
gasoline volumes lost as a result of
amendments made to subsection (k) of
this section by section 1504(a) and
1506 of the Energy Policy Act of 2003.
``(C) Eligible production facilities.--A
production facility shall be eligible to
receive a grant under this paragraph if the
production facility--
``(i) is located in the United
States; and
``(ii) produced MTBE for
consumption before April 1, 2003 and
ceased production at any time after the
date of enactment of this paragraph.
``(D) Authorization of appropriations.--
There are authorized to be appropriated to
carry out this paragraph $250,000,000 for each
of fiscal years 2005 through 2012, to remain
available until expended.''.
(d) Effect on State Law.--The amendments made to the Clean
Air Act by this title have no effect regarding any available
authority of States to limit the use of methyl tertiary butyl
ether in motor vehicle fuel.
SEC. 1504. USE OF MTBE.
(a) In General.--Subject to subsections (e) and (f), not
later than December 31, 2014, the use of methyl tertiary butyl
ether (hereinafter in this section referred to as ``MTBE'') in
motor vehicle fuel in any State other than a State described in
subsection (c) is prohibited.
(b) Regulations.--The Administrator of the Environmental
Protection Agency (hereafter referred to in this section as the
``Administrator'') shall promulgate regulations to effect the
prohibition in subsection (a).
(c) States That Authorize Use.--A State described in this
subsection is a State in which the Governor of the State
submits a notification to the Administrator authorizing the use
of MTBE in motor vehicle fuel sold or used in the State.
(d) Publication of Notice.--The Administrator shall publish
in the Federal Register each notice submitted by a State under
subsection (c).
(e) Trace Quantities.--In carrying out subsection (a), the
Administrator may allow trace quantities of MTBE, not to exceed
0.5 percent by volume, to be present in motor vehicle fuel in
cases that the Administrator determines to be appropriate.
(f) Limitation.--The Administrator, under authority of
subsection (a), shall not prohibit or control the production of
MTBE for export from the United States or for any other use
other than for use in motor vehicle fuel.
SEC. 1505. NATIONAL ACADEMY OF SCIENCES REVIEW AND PRESIDENTIAL
DETERMINATION.
(a) NAS Review.--Not later than May 31, 2013, the Secretary
shall enter into an arrangement with the National Academy of
Sciences to review the use of methyl tertiary butyl ether
(hereafter referred to in this section as ``MTBE'') in fuel and
fuel additives. The review shall only use the best available
scientific information and data collected by accepted methods
or the best available means. The review shall examine the use
of MTBE in fuel and fuel additives, significant beneficial and
detrimental effects of this use on environmental quality or
public health or welfare including the costs and benefits of
such effects, likely effects of controls or prohibitions on
MTBE regarding fuel availability and price, and other
appropriate and reasonable actions that are available to
protect the environment or public health or welfare from any
detrimental effects of the use of MTBE in fuel or fuel
additives. The review shall be peer-reviewed prior to
publication and all supporting data and analytical models shall
be available to the public. The review shall be completed no
later than May 31, 2014.
(b) Presidential Determination.--No later than June 30,
2014, the President may make a determination that restrictions
on the use of MTBE to be implemented pursuant to section 1504
shall not take place and that the legal authority contained in
section 1504 to prohibit the use of MTBE in motor vehicle fuel
shall become null and void.
SEC. 1506. ELIMINATION OF OXYGEN CONTENT REQUIREMENT FOR REFORMULATED
GASOLINE.
(a) Elimination.--
(1) In general.--Section 211(k) of the Clean Air
Act (42 U.S.C. 7545(k)) is amended as follows:
(A) In paragraph (2)--
(i) in the second sentence of
subparagraph (A), by striking
``(including the oxygen content
requirement contained in subparagraph
(B))'';
(ii) by striking subparagraph (B);
and
(iii) by redesignating
subparagraphs (C) and (D) as
subparagraphs (B) and (C),
respectively.
(B) In paragraph (3)(A), by striking clause
(v).
(C) In paragraph (7)--
(i) in subparagraph (A)--
(I) by striking clause (i);
and
(II) by redesignating
clauses (ii) and (iii) as
clauses (i) and (ii),
respectively; and
(ii) in subparagraph (C)--
(I) by striking clause
(ii).
(II) by redesignating
clause (iii) as clause (ii).
(2) Effective date.--The amendments made by
paragraph (1) take effect 270 days after the date of
enactment of this Act, except that such amendments
shall take effect upon such date of enactment in any
State that has received a waiver under section 209(b)
of the Clean Air Act.
(b) Maintenance of Toxic Air Pollutant Emission
Reductions.--Section 211(k)(1) of the Clean Air Act (42 U.S.C.
7545(k)(1)) is amended as follows:
(1) By striking ``Within 1 year after the enactment
of the Clean Air Act Amendments of 1990,'' and
inserting the following:
``(A) In general.--Not later than November
15, 1991,''.
(2) By adding at the end the following:
``(B) Maintenance of toxic air pollutant
emissions reductions from reformulated
gasoline.--
``(i) Definitions.--In this
subparagraph the term `PADD' means a
Petroleum Administration for Defense
District.
``(ii) Regulations regarding
emissions of toxic air pollutants.--Not
later than 270 days after the date of
enactment of this subparagraph the
Administrator shall establish, for each
refinery or importer, standards for
toxic air pollutants from use of the
reformulated gasoline produced or
distributed by the refinery or importer
that maintain the reduction of the
average annual aggregate emissions of
toxic air pollutants for reformulated
gasoline produced or distributed by the
refinery or importer during calendar
years 1999 and 2000, determined on the
basis of data collected by the
Administrator with respect to the
refinery or importer.
``(iii) Standards applicable to
specific refineries or importers.--
``(I) Applicability of
standards.--For any calendar
year, the standards applicable
to a refinery or importer under
clause (ii) shall apply to the
quantity of gasoline produced
or distributed by the refinery
or importer in the calendar
year only to the extent that
the quantity is less than or
equal to the average annual
quantity of reformulated
gasoline produced or
distributed by the refinery or
importer during calendar years
1999 and 2000.
``(II) Applicability of
other standards.--For any
calendar year, the quantity of
gasoline produced or
distributed by a refinery or
importer that is in excess of
the quantity subject to
subclause (I) shall be subject
to standards for toxic air
pollutants promulgated under
subparagraph (A) and paragraph
(3)(B).
``(iv) Credit program.--The
Administrator shall provide for the
granting and use of credits for
emissions of toxic air pollutants in
the same manner as provided in
paragraph (7).
``(v) Regional protection of toxics
reduction baselines.--
``(I) In general.--Not
later than 60 days after the
date of enactment of this
subparagraph, and not later
than April 1 of each calendar
year that begins after that
date of enactment, the
Administrator shall publish in
the Federal Register a report
that specifies, with respect to
the previous calendar year--
``(aa) the quantity
of reformulated
gasoline produced that
is in excess of the
average annual quantity
of reformulated
gasoline produced in
1999 and 2000; and
``(bb) the
reduction of the
average annual
aggregate emissions of
toxic air pollutants in
each PADD, based on
retail survey data or
data from other
appropriate sources.
``(II) Effect of failure to
maintain aggregate toxics
reductions.--If, in any
calendar year, the reduction of
the average annual aggregate
emissions of toxic air
pollutants in a PADD fails to
meet or exceed the reduction of
the average annual aggregate
emissions of toxic air
pollutants in the PADD in
calendar years 1999 and 2000,
the Administrator, not later
than 90 days after the date of
publication of the report for
the calendar year under
subclause (I), shall--
``(aa) identify, to
the maximum extent
practicable, the
reasons for the
failure, including the
sources, volumes, and
characteristics of
reformulated gasoline
that contributed to the
failure; and
``(bb) promulgate
revisions to the
regulations promulgated
under clause (ii), to
take effect not earlier
than 180 days but not
later than 270 days
after the date of
promulgation, to
provide that,
notwithstanding clause
(iii)(II), all
reformulated gasoline
produced or distributed
at each refinery or
importer shall meet the
standards applicable
under clause (ii) not
later than April 1 of
the year following the
report in subclause
(II) and for subsequent
years.
``(vi) Regulations to control
hazardous air pollutants from motor
vehicles and motor vehicle fuels.--Not
later than July 1, 2004, the
Administrator shall promulgate final
regulations to control hazardous air
pollutants from motor vehicles and
motor vehicle fuels, as provided for in
section 80.1045 of title 40, Code of
Federal Regulations (as in effect on
the date of enactment of this
subparagraph).''.
(c) Consolidation in Reformulated Gasoline Regulations.--
Not later than 180 days after the date of enactment of this
Act, the Administrator of the Environmental Protection Agency
shall revise the reformulated gasoline regulations under
subpart D of part 80 of title 40, Code of Federal Regulations,
to consolidate the regulations applicable to VOC-Control
Regions 1 and 2 under section 80.41 of that title by
eliminating the less stringent requirements applicable to
gasoline designated for VOC-Control Region 2 and instead
applying the more stringent requirements applicable to gasoline
designated for VOC-Control Region 1.
(d) Savings Clause.--Nothing in this section is intended to
affect or prejudice either any legal claims or actions with
respect to regulations promulgated by the Administrator of
theEnvironmental Protection Agency (hereinafter in this subsection
referred to as the ``Administrator'') prior to the date of enactment of
this Act regarding emissions of toxic air pollutants from motor
vehicles or the adjustment of standards applicable to a specific
refinery or importer made under such prior regulations and the
Administrator may apply such adjustments to the standards applicable to
such refinery or importer under clause (iii)(I) of section 211(k)(1)(B)
of the Clean Air Act, except that--
(1) the Administrator shall revise such adjustments
to be based only on calendar years 1999-2000; and
(2) for adjustments based on toxic air pollutant
emissions from reformulated gasoline significantly
below the national annual average emissions of toxic
air pollutants from all reformulated gasoline, the
Administrator may revise such adjustments to take
account of the scope of Federal or State prohibitions
on the use of methyl tertiary butyl ether imposed after
the date of the enactment of this paragraph, except
that any such adjustment shall require such refiner or
importer, to the greatest extent practicable, to
maintain the reduction achieved during calendar years
1999-2000 in the average annual aggregate emissions of
toxic air pollutants from reformulated gasoline
produced or distributed by the refinery or importer:
Provided that, any such adjustment shall not be made at
a level below the average percentage of reductions of
emissions of toxic air pollutants for reformulated
gasoline supplied to PADD I during calendar years 1999-
2000.
SEC. 1507. ANALYSES OF MOTOR VEHICLE FUEL CHANGES.
Section 211 of the Clean Air Act (42 U.S.C. 7545) is
amended by inserting after subsection (o) the following:
``(p) Analyses of Motor Vehicle Fuel Changes and Emissions
Model.--
``(1) Anti-backsliding analysis.--
``(A) Draft analysis.--Not later than 4
years after the date of enactment of this
subsection, the Administrator shall publish for
public comment a draft analysis of the changes
in emissions of air pollutants and air quality
due to the use of motor vehicle fuel and fuel
additives resulting from implementation of the
amendments made by subtitle A of title XV of
the Energy Policy Act of 2003.
``(B) Final analysis.--After providing a
reasonable opportunity for comment but not
later than 5 years after the date of enactment
of this paragraph, the Administrator shall
publish the analysis in final form.
``(2) Emissions model.--For the purposes of this
subsection, as soon as the necessary data are
available, the Administrator shall develop and finalize
an emissions model that reasonably reflects the effects
of gasoline characteristics or components on emissions
from vehicles in the motor vehicle fleet during
calendar year 2005.''.
SEC. 1508. DATA COLLECTION.
Section 205 of the Department of Energy Organization Act
(42 U.S.C. 7135) is amended by adding at the end the following:
``(m) Renewable Fuels Survey.--(1) In order to improve the
ability to evaluate the effectiveness of the Nation's renewable
fuels mandate, the Administrator shall conduct and publish the
results of a survey of renewable fuels demand in the motor
vehicle fuels market in the United States monthly, and in a
manner designed to protect the confidentiality of individual
responses. In conducting the survey, the Administrator shall
collect information both on a national and regional basis,
including each of the following:
``(A) The quantity of renewable fuels produced.
``(B) The quantity of renewable fuels blended.
``(C) The quantity of renewable fuels imported.
``(D) The quantity of renewable fuels demanded.
``(E) Market price data.
``(F) Such other analyses or evaluations as the
Administrator finds is necessary to achieve the
purposes of this section.
``(2) The Administrator shall also collect or estimate
information both on a national and regional basis, pursuant to
subparagraphs (A) through (F) of paragraph (1), for the 5 years
prior to implementation of this subsection.
``(3) This subsection does not affect the authority of the
Administrator to collect data under section 52 of the Federal
Energy Administration Act of 1974 (15 U.S.C. 790a).''.
SEC. 1509. REDUCING THE PROLIFERATION OF STATE FUEL CONTROLS.
(a) EPA Approval of State Plans With Fuel Controls.--
Section 211(c)(4)(C) of the Clean Air Act (42 U.S.C.
7545(c)(4)(C)) is amended by adding at the end the following:
``The Administrator shall not approve a control or prohibition
respecting the use of a fuel or fuel additive under this
subparagraph unless the Administrator, after consultation with
the Secretary of Energy, publishes in the Federal Register a
finding that, in the Administrator's judgment, such control or
prohibition will not cause fuel supply or distribution
interruptions or have a significant adverse impact on fuel
producibility in the affected area or contiguous areas.''.
(b) Study.--The Administrator of the Environmental
Protection Agency (hereinafter in this subsection referred to
as the ``Administrator''), in cooperation with the Secretary of
Energy, shall undertake a study of the projected effects on air
quality, the proliferation of fuel blends, fuel availability,
and fuel costs of providing a preference for each of the
following:
(A) Reformulated gasoline referred to in subsection
(k) of section 211 of the Clean Air Act.
(B) A low RVP gasoline blend that has been
certified by the Administrator as having a Reid Vapor
Pressure of 7.0 pounds per square inch (psi).
(C) A low RVP gasoline blend that has been
certified by the Administrator as having a Reid Vapor
Pressure of 7.8 pounds per square inch (psi).
In carrying out such study, the Administrator shall obtain
comments from affected parties. The Administrator shall submit
the results of such study to the Congress not later than 18
months after the date of enactment of this Act, together with
any recommended legislative changes.
SEC. 1510. FUEL SYSTEM REQUIREMENTS HARMONIZATION STUDY.
(a) Study.--
(1) In general.--The Administrator of the
Environmental Protection Agency (hereinafter in this
section referred to as the ``Administrator'') and the
Secretary of Energy shall jointly conduct a study of
Federal, State, and local requirements concerning motor
vehicle fuels, including--
(A) requirements relating to reformulated
gasoline, volatility (measured in Reid vapor
pressure), oxygenated fuel, and diesel fuel;
and
(B) other requirements that vary from State
to State, region to region, or locality to
locality.
(2) Required elements.--The study shall assess--
(A) the effect of the variety of
requirements described in paragraph (1) on the
supply, quality, and price of motor vehicle
fuels available to consumers in various States
and localities;
(B) the effect of the requirements
described in paragraph (1) on achievement of--
(i) national, regional, and local
air quality standards and goals; and
(ii) related environmental and
public health protection standards and
goals;
(C) the effect of Federal, State, and local
motor vehicle fuel regulations, including
multiple motor vehicle fuel requirements, on--
(i) domestic refineries;
(ii) the fuel distribution system;
and
(iii) industry investment in new
capacity;
(D) the effect of the requirements
described in paragraph (1) on emissions from
vehicles, refineries, and fuel handling
facilities;
(E) the feasibility of developing national
or regional motor vehicle fuel slates for the
48 contiguous States that, while improving air
quality at the national, regional and local
levels consistent with the attainment of
national ambient air quality standards, could--
(i) enhance flexibility in the fuel
distribution infrastructure and improve
fuel fungibility;
(ii) reduce price volatility and
costs to consumers and producers;
(iii) provide increased liquidity
to the gasoline market; and
(iv) enhance fuel quality,
consistency, and supply;
(F) the feasibility of providing incentives
to promote cleaner burning motor vehicle fuel;
and
(G) the extent to which improvements in air
quality and any increases or decreases in the
price of motor fuel can be projected to result
from the Environmental Protection Agency's Tier
II requirements for conventional gasoline and
vehicle emission systems, the reformulated
gasoline program, the renewable content
requirements established by this subtitle,
State programs regarding gasoline volatility,
and any other requirements imposed by States or
localities affecting the composition of motor
fuel.
(b) Report.--
(1) In general.--Not later than December 31, 2007,
the Administrator and the Secretary of Energy shall
submit to Congress a report on the results of the study
conducted under subsection (a).
(2) Recommendations.--
(A) In general.--The report under this
subsection shall contain recommendations for
legislative and administrative actions that may
be taken--
(i) to improve air quality;
(ii) to reduce costs to consumers
and producers; and
(iii) to increase supply liquidity.
(B) Required considerations.--The
recommendations under subparagraph (A) shall
take into account the need to provide advance
notice of required modifications to refinery
and fuel distribution systems in order to
ensure an adequate supply of motor vehicle fuel
in all States.
(3) Consultation.--In developing the report under
this subsection, the Administrator and the Secretary of
Energy shall consult with--
(A) the Governors of the States;
(B) automobile manufacturers;
(C) motor vehicle fuel producers and
distributors; and
(D) the public.
SEC. 1511. COMMERCIAL BYPRODUCTS FROM MUNICIPAL SOLID WASTE AND
CELLULOSIC BIOMASS LOAN GUARANTEE PROGRAM.
(a) Definition of Municipal Solid Waste.--In this section,
the term ``municipal solid waste'' has the meaning given the
term ``solid waste'' in section 1004 of the Solid Waste
Disposal Act (42 U.S.C. 6903).
(b) Establishment of Program.--The Secretary of Energy
(hereinafter in this section referred to as the ``Secretary'')
shall establish a program to provide guarantees of loans by
private institutions for the construction of facilities for the
processing and conversion of municipal solid waste and
cellulosic biomass into fuel ethanol and other commercial
byproducts.
(c) Requirements.--The Secretary may provide a loan
guarantee under subsection (b) to an applicant if--
(1) without a loan guarantee, credit is not
available to the applicant under reasonable terms or
conditions sufficient to finance the construction of a
facility described in subsection (b);
(2) the prospective earning power of the applicant
and the character and value of the security pledged
provide a reasonable assurance of repayment of the loan
to be guaranteed in accordance with the terms of the
loan; and
(3) the loan bears interest at a rate determined by
the Secretary to be reasonable, taking into account the
current average yield on outstanding obligations of the
United States with remaining periods of maturity
comparable to the maturity of the loan.
(d) Criteria.--In selecting recipients of loan guarantees
from among applicants, the Secretary shall give preference to
proposals that--
(1) meet all applicable Federal and State
permitting requirements;
(2) are most likely to be successful; and
(3) are located in local markets that have the
greatest need for the facility because of--
(A) the limited availability of land for
waste disposal;
(B) the availability of sufficient
quantities of cellulosic biomass; or
(C) a high level of demand for fuel ethanol
or other commercial byproducts of the facility.
(e) Maturity.--A loan guaranteed under subsection (b) shall
have a maturity of not more than 20 years.
(f) Terms and Conditions.--The loan agreement for a loan
guaranteed under subsection (b) shall provide that no provision
of the loan agreement may be amended or waived without the
consent of the Secretary.
(g) Assurance of Repayment.--The Secretary shall require
that an applicant for a loan guarantee under subsection (b)
provide an assurance of repayment in the form of a performance
bond, insurance, collateral, or other means acceptable to the
Secretary in an amount equal to not less than 20 percent of the
amount of the loan.
(h) Guarantee Fee.--The recipient of a loan guarantee under
subsection (b) shall pay the Secretary an amount determined by
the Secretary to be sufficient to cover the administrative
costs of the Secretary relating to the loan guarantee.
(i) Full Faith and Credit.--The full faith and credit of
the United States is pledged to the payment of all guarantees
made under this section. Any such guarantee made by the
Secretary shall be conclusive evidence of the eligibility of
the loan for the guarantee with respect to principal and
interest. The validity of the guarantee shall be incontestable
in the hands of a holder of the guaranteed loan.
(j) Reports.--Until each guaranteed loan under this section
has been repaid in full, the Secretary shall annually submit to
Congress a report on the activities of the Secretary under this
section.
(k) Authorization of Appropriations.--There are authorized
to be appropriated such sums as are necessary to carry out this
section.
(l) Termination of Authority.--The authority of the
Secretary to issue a loan guarantee under subsection (b)
terminates on the date that is 10 years after the date of
enactment of this Act.
SEC. 1512. RESOURCE CENTER.
(a) Definition.--In this section, the term ``RFG State''
means a State in which is located one or more covered areas (as
defined in section 211(k)(10)(D) of the Clean Air Act (42
U.S.C. 7545(k)(10)(D)).
(b) Authorization of Appropriations for Resource Center.--
There are authorized to be appropriated, for a resource center
to further develop bioconversion technology using low-cost
biomass for the production of ethanol at the Center for
Biomass-Based Energy at the University of Mississippi and the
University of Oklahoma, $4,000,000 for each of fiscal years
2004 through 2006.
(c) Renewable Fuel Production Research and Development
Grants.--
(1) In general.--The Administrator of the
Environmental Protection Agency shall provide grants
for the research into, and development and
implementation of, renewable fuel production
technologies in RFG States with low rates of ethanol
production, including low rates of production of
cellulosic biomass ethanol.
(2) Eligibility.--
(A) In general.--The entities eligible to
receive a grant under this subsection are
academic institutions in RFG States, and
consortia made up of combinations of academic
institutions, industry, State government
agencies, or local government agencies in RFG
States, that have proven experience and
capabilities with relevant technologies.
(B) Application.--To be eligible to receive
a grant under this subsection, an eligible
entity shall submit to the Administrator an
application in such manner and form, and
accompanied by such information, as the
Administrator may specify.
(3) Authorization of appropriations.--There are
authorized to be appropriated to carry out this
subsection $25,000,000 for each of fiscal years 2004
through 2008.
SEC. 1513. CELLULOSIC BIOMASS AND WASTE-DERIVED ETHANOL CONVERSION
ASSISTANCE.
Section 211 of the Clean Air Act (42 U.S.C. 7545) is
amended by adding at the end the following:
``(r) Cellulosic Biomass and Waste-Derived Ethanol
Conversion Assistance.--
``(1) In general.--The Secretary of Energy may
provide grants to merchant producers of cellulosic
biomass ethanol and waste-derived ethanol in the United
States to assist the producers in building eligible
production facilities described in paragraph (2) for
the production of ethanol.
``(2) Eligible production facilities.--A production
facility shall be eligible to receive a grant under
this subsection if the production facility--
``(A) is located in the United States; and
``(B) uses cellulosic biomass or waste-
derived feedstocks derived from agricultural
residues, municipal solid waste, or
agricultural byproducts as that term is used in
section 919 of the Energy Policy Act of 2003.
``(3) Authorization of appropriations.--There are
authorized to be appropriated the following amounts to
carry out this subsection:
``(A) $100,000,000 for fiscal year 2004.
``(B) $250,000,000 for fiscal year 2005.
``(C) $400,000,000 for fiscal year 2006.''.
SEC. 1514. BLENDING OF COMPLIANT REFORMULATED GASOLINES.
Section 211 of the Clean Air Act (42 U.S.C. 7545) is
amended by adding at the end the following:
``(s) Blending of Compliant Reformulated Gasolines.--
``(1) In general.--Notwithstanding subsections (h)
and (k) and subject to the limitations in paragraph (2)
of this subsection, it shall not be a violation of this
subtitle for a gasoline retailer, during any month of
the year, to blend at a retail location batches of
ethanol-blended and non-ethanol-blended reformulated
gasoline, provided that--
``(A) each batch of gasoline to be blended
has been individually certified as in
compliance with subsections (h) and (k) prior
to being blended;
``(B) the retailer notifies the
Administrator prior to such blending, and
identifies the exact location of the retail
station and the specific tank in which such
blending will take place;
``(C) the retailer retains and, as
requested by the Administrator or the
Administrator's designee, makes available for
inspection such certifications accounting for
all gasoline at the retail outlet; and
``(D) the retailer does not, between June 1
and September 15 of each year, blend a batch of
VOC-controlled, or `summer', gasoline with a
batch of non-VOC-controlled, or `winter',
gasoline (as these terms are defined under
subsections (h) and (k)).
``(2) Limitations.--
``(A) Frequency limitation.--A retailer
shall only be permitted to blend batches of
compliant reformulated gasoline under this
subsection a maximum of two blending periods
between May 1 and September 15 of each calendar
year.
``(B) Duration of blending period.--Each
blending period authorized under subparagraph
(A) shall extend for a period of no more than
10 consecutive calendar days.
``(3) Surveys.--A sample of gasoline taken from a
retail location that has blended gasoline within the
past 30 days and is in compliance with subparagraphs
(A), (B), (C), and (D) of paragraph (1) shall not be
used in a VOC survey mandated by 40 C.F.R. Part 80.
``(4) State implementation plans.--A State shall be
held harmless and shall not be required to revise its
State implementation plan under section 110 to account
for the emissions from blended gasoline authorized
under paragraph (1).
``(5) Preservation of state law.--Nothing in this
subsection shall--
``(A) preempt existing State laws or
regulations regulating the blending of
compliant gasolines; or
``(B) prohibit a State from adopting such
restrictions in the future.
``(6) Regulations.--The Administrator shall
promulgate, after notice and comment, regulations
implementing this subsection within one year after the
date of enactment of this subsection.
``(7) Effective date.--This subsection shall become
effective 15 months after the date of its enactment and
shall apply to blended batches of reformulated gasoline
on or after that date, regardless of whether the
implementing regulations required by paragraph (6) have
been promulgated by the Administrator by that date.
``(8) Liability.--No person other than the person
responsible for blending under this subsection shall be
subject to an enforcement action or penalties under
subsection (d) solely arising from the blending of
compliant reformulated gasolines by the retailers.
``(9) Formulation of gasoline.--This subsection
does not grant authority to the Administrator or any
State (or any subdivision thereof) to require
reformulation of gasoline at the refinery to adjust for
potential or actual emissions increases due to the
blending authorized by this subsection.''.
Subtitle B--Underground Storage Tank Compliance
SEC. 1521. SHORT TITLE.
This subtitle may be cited as the ``Underground Storage
Tank Compliance Act of 2003''.
SEC. 1522. LEAKING UNDERGROUND STORAGE TANKS.
(a) In General.--Section 9004 of the Solid Waste Disposal
Act (42 U.S.C. 6991c) is amended by adding at the end the
following:
``(f) Trust Fund Distribution.--
``(1) In general.--
``(A) Amount and permitted uses of
distribution.--The Administrator shall
distribute to States not less than 80 percent
of the funds from the Trust Fund that are made
available to the Administrator under section
9014(2)(A) for each fiscal year for use in
paying the reasonable costs, incurred under a
cooperative agreement with any State for--
``(i) actions taken by the State
under section 9003(h)(7)(A);
``(ii) necessary administrative
expenses, as determined by the
Administrator, that are directly
related to State fund or State
assurance programs under subsection
(c)(1);
``(iii) any State fund or State
assurance program carried out under
subsection (c)(1) for a release from an
underground storage tank regulated
under this subtitle to the extent that,
as determined by the State in
accordance with guidelines developed
jointly by the Administrator and the
States, the financial resources of the
owner and operator of the underground
storage tank (including resources
provided by a program in accordance
with subsection (c)(1)) are not
adequate to pay the cost of a
corrective action without significantly
impairing the ability of the owner or
operator to continue in business; or
``(iv) enforcement, by a State or a
local government, of State or local
regulations pertaining to underground
storage tanks regulated under this
subtitle.
``(B) Use of funds for enforcement.--In
addition to the uses of funds authorized under
subparagraph (A), the Administrator may use
funds from the Trust Fund that are not
distributed to States under subparagraph (A)
for enforcement of any regulation promulgated
by the Administrator under this subtitle.
``(C) Prohibited uses.--Funds provided to a
State by the Administrator under subparagraph
(A) shall not be used by the State to provide
financial assistance to an owner or operator to
meet any requirement relating to underground
storage tanks under subparts B, C, D, H, and G
of part 280 of title 40, Code of Federal
Regulations (as in effect on the date of
enactment of this subsection).
``(2) Allocation.--
``(A) Process.--Subject to subparagraphs
(B) and (C), in the case of a State with which
the Administrator has entered into a
cooperative agreement under section
9003(h)(7)(A), the Administrator shall
distribute funds from the Trust Fund to the
State using an allocation process developed by
the Administrator.
``(B) Diversion of state funds.--The
Administrator shall not distribute funds under
subparagraph (A)(iii) of subsection (f)(1) to
any State that has diverted funds from a State
fund or State assurance program for purposes
other than those related to the regulation of
underground storage tanks covered by this
subtitle, with the exception of those transfers
that had been completed earlier than the date
of enactment of this subsection.
``(C) Revisions to process.--The
Administrator may revise the allocation process
referred to in subparagraph (A) after--
``(i) consulting with State
agencies responsible for overseeing
corrective action for releases from
underground storage tanks; and
``(ii) taking into consideration,
at a minimum, each of the following:
``(I) The number of
confirmed releases from
federally regulated leaking
underground storage tanks in
the States.
``(II) The number of
federally regulated underground
storage tanks in the States.
``(III) The performance of
the States in implementing and
enforcing the program.
``(IV) The financial needs
of the States.
``(V) The ability of the
States to use the funds
referred to in subparagraph (A)
in any year.
``(3) Distributions to state agencies.--
Distributions from the Trust Fund under this subsection
shall be made directly to a State agency that--
``(A) enters into a cooperative agreement
referred to in paragraph (2)(A); or
``(B) is enforcing a State program approved
under this section.
``(4) Cost recovery prohibition.--Funds from the
Trust Fund provided by States to owners or operators
under paragraph (1)(A)(iii) shall not be subject to
cost recovery by the Administrator under section
9003(h)(6).''.
(b) Withdrawal of Approval of State Funds.--Section 9004(c)
of the Solid Waste Disposal Act (42 U.S.C. 6991c(c)) is amended
by inserting the following new paragraph at the end thereof:
``(6) Withdrawal of approval.--After an opportunity
for good faith, collaborative efforts to correct
financial deficiencies with a State fund, the
Administrator may withdraw approval of any State fund
or State assurance program to be used as a financial
responsibility mechanism without withdrawing approval
of a State underground storage tank program under
section 9004(a).''.
SEC. 1523. INSPECTION OF UNDERGROUND STORAGE TANKS.
(a) Inspection Requirements.--Section 9005 of the Solid
Waste Disposal Act (42 U.S.C. 6991d) is amended by inserting
the following new subsection at the end thereof:
``(c) Inspection Requirements.--
``(1) Uninspected tanks.--In the case of
underground storage tanks regulated under this subtitle
that have not undergone an inspection since December
22, 1998, not later than 2 years after the date of
enactment of this subsection, the Administrator or a
State that receives funding under this subtitle, as
appropriate, shall conduct on-site inspections of all
such tanks to determine compliance with this subtitle
and the regulations under this subtitle (40 C.F.R. 280)
or a requirement or standard of a State program
developed under section 9004.
``(2) Periodic inspections.--After completion of
all inspections required under paragraph (1), the
Administrator or a State that receives funding under
this subtitle, as appropriate, shall conduct on-site
inspections of each underground storage tank regulated
under this subtitle at least once every 3 years to
determine compliance with this subtitle and the
regulations under this subtitle (40 C.F.R. 280) or a
requirement or standard of a State program developed
under section 9004. The Administrator may extend for up
to one additional year the first 3-year inspection
interval under this paragraph if the State demonstrates
that it has insufficient resources to complete all such
inspections within the first 3-year period.
``(3) Inspection authority.--Nothing in this
section shall be construed to diminish the
Administrator's or a State's authorities under section
9005(a).''.
(b) Study of Alternative Inspection Programs.--The
Administrator of the Environmental Protection Agency, in
coordination with a State, shall gather information on
compliance assurance programs that could serve as an
alternative to the inspection programs under section 9005(c) of
the Solid Waste Disposal Act (42 U.S.C. 6991d(c)) and shall,
within 4 years after the date of enactment of this Act, submit
a report to the Congress containing the results of such study.
SEC. 1524. OPERATOR TRAINING.
(a) In General.--Section 9010 of the Solid Waste Disposal
Act (42 U.S.C. 6991i) is amended to read as follows:
``SEC. 9010. OPERATOR TRAINING.
``(a) Guidelines.--
``(1) In general.--Not later than 2 years after the
date of enactment of the Underground Storage Tank
Compliance Act of 2003, in consultation and cooperation
with States and after public notice and opportunity for
comment, the Administrator shall publish guidelines
that specify training requirements for persons having
primary daily on-site management responsibility for the
operation and maintenance of underground storage tanks.
``(2) Considerations.--The guidelines described in
paragraph (1) shall take into account--
``(A) State training programs in existence
as of the date of publication of the
guidelines;
``(B) training programs that are being
employed by tank owners and tank operators as
of the date of enactment of the Underground
Storage Tank Compliance Act of 2003;
``(C) the high turnover rate of tank
operators and other personnel;
``(D) the frequency of improvement in
underground storage tank equipment technology;
``(E) the nature of the businesses in which
the tank operators are engaged; and
``(F) such other factors as the
Administrator determines to be necessary to
carry out this section.
``(b) State Programs.--
``(1) In general.--Not later than 2 years after the
date on which the Administrator publishes the
guidelines under subsection (a)(1), each State that
receives funding under this subtitle shall develop
State-specific training requirements that are
consistent with the guidelines developed under
subsection (a)(1).
``(2) Requirements.--State requirements described
in paragraph (1) shall--
``(A) be consistent with subsection (a);
``(B) be developed in cooperation with tank
owners and tank operators;
``(C) take into consideration training
programs implemented by tank owners and tank
operators as of the date of enactment of this
section; and
``(D) be appropriately communicated to tank
owners and operators.
``(3) Financial incentive.--The Administrator may
award to a State that develops and implements
requirements described in paragraph (1), in addition to
any funds that the State is entitled to receive under
this subtitle, not more than $200,000, to be used to
carry out the requirements.
``(c) Operators.--All persons having primary daily on-site
management responsibility for the operation and maintenance of
any underground storage tank shall--
``(1) meet the training requirements developed
under subsection (b); and
``(2) repeat the applicable requirements developed
under subsection (b), if the tank for which they have
primary daily on-site management responsibilities is
determined to be out of compliance with--
``(A) a requirement or standard promulgated
by the Administrator under section 9003; or
``(B) a requirement or standard of a State
program approved under section 9004.''.
(b) State Program Requirement.--Section 9004(a) of the
Solid Waste Disposal Act (42 U.S.C. 6991c(a)) is amended by
striking ``and'' at the end of paragraph (7), by striking the
period at the end of paragraph (8) and inserting ``; and'', and
by adding the following new paragraph at the end thereof:
``(9) State-specific training requirements as
required by section 9010.''.
(c) Enforcement.--Section 9006(d)(2) of such Act (42 U.S.C.
6991e) is amended as follows:
(1) By striking ``or'' at the end of subparagraph
(B).
(2) By adding the following new subparagraph after
subparagraph (C):
``(D) the training requirements established by
States pursuant to section 9010 (relating to operator
training); or''.
(d) Table of Contents.--The item relating to section 9010
in table of contents for the Solid Waste Disposal Act is
amended to read as follows:
``Sec. 9010. Operator training.''.
SEC. 1525. REMEDIATION FROM OXYGENATED FUEL ADDITIVES.
Section 9003(h) of the Solid Waste Disposal Act (42 U.S.C.
6991b(h)) is amended as follows:
(1) In paragraph (7)(A)--
(A) by striking ``paragraphs (1) and (2) of
this subsection'' and inserting ``paragraphs
(1), (2), and (12)'' ; and
(B) by striking ``and including the
authorities of paragraphs (4), (6), and (8) of
this subsection'' and inserting ``and the
authority under sections 9011 and 9012 and
paragraphs (4), (6), and (8),''.
(2) By adding at the end the following:
``(12) Remediation of oxygenated fuel
contamination.--
``(A) In general.--The Administrator and
the States may use funds made available under
section 9014(2)(B) to carry out corrective
actions with respect to a release of a fuel
containing an oxygenated fuel additive that
presents a threat to human health or welfare or
the environment.
``(B) Applicable authority.--The
Administrator or a State shall carry out
subparagraph (A) in accordance with paragraph
(2), and in the case of a State, in accordance
with a cooperative agreement entered into by
the Administrator and the State under paragraph
(7).''.
SEC. 1526. RELEASE PREVENTION, COMPLIANCE, AND ENFORCEMENT.
(a) Release Prevention and Compliance.--Subtitle I of the
Solid Waste Disposal Act (42 U.S.C. 6991 et seq.) is amended by
adding at the end the following:
``SEC. 9011. USE OF FUNDS FOR RELEASE PREVENTION AND COMPLIANCE.
``Funds made available under section 9014(2)(D) from the
Trust Fund may be used to conduct inspections, issue orders, or
bring actions under this subtitle--
``(1) by a State, in accordance with a grant or
cooperative agreement with the Administrator, of State
regulations pertaining to underground storage tanks
regulated under this subtitle; and
``(2) by the Administrator, for tanks regulated
under this subtitle (including under a State program
approved under section 9004).''.
(b) Government-Owned Tanks.--Section 9003 of the Solid
Waste Disposal Act (42 U.S.C. 6991b) is amended by adding at
the end the following:
``(i) Government-Owned Tanks.--
``(1) State compliance report.--(A) Not later than
2 years after the date of enactment of this subsection,
each State that receives funding under this subtitle
shall submit to the Administrator a State compliance
report that--
``(i) lists the location and owner of each
underground storage tank described in
subparagraph (B) in the State that, as of the
date of submission of the report, is not in
compliance with section 9003; and
``(ii) specifies the date of the last
inspection and describes the actions that have
been and will be taken to ensure compliance of
the underground storage tank listed under
clause (i) with this subtitle.
``(B) An underground storage tank described in this
subparagraph is an underground storage tank that is--
``(i) regulated under this subtitle; and
``(ii) owned or operated by the Federal,
State, or local government.
``(C) The Administrator shall make each report,
received under subparagraph (A), available to the
public through an appropriate media.
``(2) Financial incentive.--The Administrator may
award to a State that develops a report described in
paragraph (1), in addition to any other funds that the
State is entitled to receive under this subtitle, not
more than $50,000, to be used to carry out the report.
``(3) Not a safe harbor.--This subsection does not
relieve any person from any obligation or requirement
under this subtitle.''.
(c) Public Record.--Section 9002 of the Solid Waste
Disposal Act (42 U.S.C. 6991a) is amended by adding at the end
the following:
``(d) Public Record.--
``(1) In general.--The Administrator shall require
each State that receives Federal funds to carry out
this subtitle to maintain, update at least annually,
and make available to the public, in such manner and
form as the Administrator shall prescribe (after
consultation with States), a record of underground
storage tanks regulated under this subtitle.
``(2) Considerations.--To the maximum extent
practicable, the public record of a State,
respectively, shall include, for each year--
``(A) the number, sources, and causes of
underground storage tank releases in the State;
``(B) the record of compliance by
underground storage tanks in the State with--
``(i) this subtitle; or
``(ii) an applicable State program
approved under section 9004; and
``(C) data on the number of underground
storage tank equipment failures in the
State.''.
(d) Incentive for Performance.--Section 9006 of the Solid
Waste Disposal Act (42 U.S.C. 6991e) is amended by adding at
the end the following:
``(e) Incentive for Performance.--Both of the following may
be taken into account in determining the terms of a civil
penalty under subsection (d):
``(1) The compliance history of an owner or
operator in accordance with this subtitle or a program
approved under section 9004.
``(2) Any other factor the Administrator considers
appropriate.''.
(e) Table of Contents.--The table of contents for such
subtitle I is amended by adding the following new item at the
end thereof:
``Sec. 9011. Use of funds for release prevention and compliance.''.
SEC. 1527. DELIVERY PROHIBITION.
(a) In General.--Subtitle I of the Solid Waste Disposal Act
(42 U.S.C. 6991 et seq.) is amended by adding at the end the
following:
``SEC. 9012. DELIVERY PROHIBITION.
``(a) Requirements.--
``(1) Prohibition of delivery or deposit.--
Beginning 2 years after the date of enactment of this
section, it shall be unlawful to deliver to, deposit
into, or accept a regulated substance into an
underground storage tank at a facility which has been
identified by the Administrator or a State implementing
agency to be ineligible for fuel delivery or deposit.
``(2) Guidance.--Within 1 year after the date of
enactment of this section, the Administrator and States
that receive funding under this subtitle shall, in
consultation with the underground storage tank owner
and product delivery industries, for territory for
which they are the primary implementing agencies,
publish guidelines detailing the specific processes and
procedures they will use to implement the provisions of
this section. The processes and procedures include, at
a minimum--
``(A) the criteria for determining which
underground storage tank facilities are
ineligible for delivery or deposit;
``(B) the mechanisms for identifying which
facilities are ineligible for delivery or
deposit to the underground storage tank owning
and fuel delivery industries;
``(C) the process for reclassifying
ineligible facilities as eligible for delivery
or deposit; and
``(D) a delineation of, or a process for
determining, the specified geographic areas
subject to paragraph (4).
``(3) Delivery prohibition notice.--
``(A) Roster.--The Administrator and each
State implementing agency that receives funding
under this subtitle shall establish within 24
months after the date of enactment of this
section a Delivery Prohibition Roster listing
underground storage tanks under the
Administrator's or the State's jurisdiction
that are determined to be ineligible for
delivery or deposit pursuant to paragraph (2).
``(B) Notification.--The Administrator and
each State, as appropriate, shall make readily
known, to underground storage tank owners and
operators and to product delivery industries,
the underground storage tanks listed on a
Delivery Prohibition Roster by:
``(i) posting such Rosters,
including the physical location and
street address of each listed
underground storage tank, on official
web sites and, if the Administrator or
the State so chooses, other electronic
means;
``(ii) updating these Rosters
periodically; and
``(iii) installing a tamper-proof
tag, seal, or other device blocking the
fill pipes of such underground storage
tanks to prevent the delivery of
product into such underground storage
tanks.
``(C) Roster updates.--The Administrator
and the State shall update the Delivery
Prohibition Rosters as appropriate, but not
less than once a month on the first day of the
month.
``(D) Tampering with device.--
``(i) Prohibition.--It shall be
unlawful for any person, other than an
authorized representative of the
Administrator or a State, as
appropriate, to remove, tamper with,
destroy, or damage a device installed
by the Administrator or a State, as
appropriate, under subparagraph
(B)(iii) of this subsection.
``(ii) Civil penalties.--Any person
violating clause (i) of this
subparagraph shall be subject to a
civil penalty not to exceed $10,000 for
each violation.
``(4) Limitation.--
``(A) Rural and remote areas.--Subject to
subparagraph (B), the Administrator or a State
shall not include an underground storage tank
on a Delivery Prohibition Roster under
paragraph (3) if an urgent threat to public
health, as determined by the Administrator,
does not exist and if such a delivery
prohibition would jeopardize the availability
of, or access to, fuel in any rural and remote
areas.
``(B) Applicability of limitation.--The
limitation under subparagraph (A) shall apply
only during the 180-day period following the
date of a determination by the Administrator or
the appropriate State that exercising the
authority of paragraph (3) is limited by
subparagraph (A).
``(b) Effect on State Authority.--Nothing in this section
shall affect the authority of a State to prohibit the delivery
of a regulated substance to an underground storage tank.
``(c) Defense to Violation.--A person shall not be in
violation of subsection (a)(1) if the underground storage tank
into which a regulated substance is delivered is not listed on
the Administrator's or the appropriate State's Prohibited
Delivery Roster 7 calendar days prior to the delivery being
made.''.
(b) Enforcement.--Section 9006(d)(2) of such Act (42 U.S.C.
6991e(d)(2)) is amended as follows:
(1) By adding the following new subparagraph after
subparagraph (D):
``(E) the delivery prohibition requirement
established by section 9012,''.
(2) By adding the following new sentence at the end
thereof: ``Any person making or accepting a delivery or
deposit of a regulated substance to an underground
storage tank at an ineligible facility in violation of
section 9012 shall also be subject to the same civil
penalty for each day of such violation.''.
(c) Table of Contents.--The table of contents for such
subtitle I is amended by adding the following new item at the
end thereof:
``Sec. 9012. Delivery prohibition.''.
SEC. 1528. FEDERAL FACILITIES.
Section 9007 of the Solid Waste Disposal Act (42 U.S.C.
6991f) is amended to read as follows:
``SEC. 9007. FEDERAL FACILITIES.
``(a) In General.--Each department, agency, and
instrumentality of the executive, legislative, and judicial
branches of the Federal Government (1) having jurisdiction over
any underground storage tank or underground storage tank
system, or (2) engaged in any activity resulting, or which may
result, in the installation, operation, management, or closure
of any underground storage tank, release response activities
related thereto, or in the delivery, acceptance, or deposit of
any regulated substance to an underground storage tank or
underground storage tank system shall be subject to, and comply
with, all Federal, State, interstate, and local requirements,
both substantive and procedural (including any requirement for
permits or reporting or any provisions for injunctive relief
and such sanctions as may be imposed by a court to enforce such
relief), respecting underground storage tanks in the same
manner, and to the same extent, as any person is subject to
such requirements, including the payment of reasonable service
charges. The Federal, State, interstate, and local substantive
and procedural requirements referred to in this subsection
include, but are not limited to, all administrative orders and
all civil and administrative penalties and fines, regardless of
whether such penalties or fines are punitive or coercive in
nature or are imposed for isolated, intermittent, or continuing
violations. The United States hereby expressly waives any
immunity otherwise applicable to the United States with respect
to any such substantive or procedural requirement (including,
but not limited to, any injunctive relief, administrative order
or civil or administrative penalty or fine referred to in the
preceding sentence, or reasonable service charge). The
reasonable service charges referred to in this subsection
include, but are not limited to, fees or charges assessed in
connection with the processing and issuance of permits, renewal
of permits, amendments to permits, review of plans, studies,
and other documents, and inspection and monitoring of
facilities, as well as any other nondiscriminatory charges that
are assessed in connection with a Federal, State, interstate,
or local underground storage tank regulatory program. Neither
the United States, nor any agent, employee, or officer thereof,
shall be immune or exempt from any process or sanction of any
State or Federal Court with respect to the enforcement of any
such injunctive relief. No agent, employee, or officer of the
United States shall be personally liable for any civil penalty
under any Federal, State, interstate, or local law concerning
underground storage tanks with respect to any act or omission
within the scope of the official duties of the agent, employee,
or officer. An agent, employee, or officer of the United States
shall be subject to any criminal sanction (including, but not
limited to, any fine or imprisonment) under any Federal or
State law concerning underground storage tanks, but no
department, agency, or instrumentality of the executive,
legislative, or judicial branch of the Federal Government shall
be subject to any such sanction. The President may exempt any
underground storage tank of any department, agency, or
instrumentality in the executive branch from compliance with
such a requirement if he determines it to be in the paramount
interest of the United States to do so. No such exemption shall
be granted due to lack of appropriation unless the President
shall have specifically requested such appropriation as a part
of the budgetary process and the Congress shall have failed to
make available such requested appropriation. Any exemption
shall be for a period not in excess of one year, but additional
exemptions may be granted for periods not to exceed one year
upon the President's making a new determination. The President
shall report each January to the Congress all exemptions from
the requirements of this section granted during the preceding
calendar year, together with his reason for granting each such
exemption.
``(b) Review of and Report on Federal Underground Storage
Tanks.--
``(1) Review.--Not later than 12 months after the
date of enactment of the Underground Storage Tank
Compliance Act of 2003, each Federal agency that owns
or operates 1 or more underground storage tanks, or
that manages land on which 1 or more underground
storage tanks are located, shall submit to the
Administrator, the Committee on Energy and Commerce of
the United States House of Representatives, and the
Committee on the Environment and Public Works of the
United States Senate a compliance strategy report
that--
``(A) lists the location and owner of each
underground storage tank described in this
paragraph;
``(B) lists all tanks that are not in
compliance with this subtitle that are owned or
operated by the Federal agency;
``(C) specifies the date of the last
inspection by a State or Federal inspector of
each underground storage tank owned or operated
by the agency;
``(D) lists each violation of this subtitle
respecting any underground storage tank owned
or operated by the agency;
``(E) describes the operator training that
has been provided to the operator and other
persons having primary daily on-site management
responsibility for the operation and
maintenance of underground storage tanks owned
or operated by the agency; and
``(F) describes the actions that have been
and will be taken to ensure compliance for each
underground storage tank identified under
subparagraph (B).
``(2) Not a safe harbor.--This subsection does not
relieve any person from any obligation or requirement
under this subtitle.''.
SEC. 1529. TANKS ON TRIBAL LANDS.
(a) In General.--Subtitle I of the Solid Waste Disposal Act
(42 U.S.C. 6991 et seq.) is amended by adding the following at
the end thereof:
``SEC. 9013. TANKS ON TRIBAL LANDS.
``(a) Strategy.--The Administrator, in coordination with
Indian tribes, shall, not later than 1 year after the date of
enactment of this section, develop and implement a strategy--
``(1) giving priority to releases that present the
greatest threat to human health or the environment, to
take necessary corrective action in response to
releases from leaking underground storage tanks located
wholly within the boundaries of--
``(A) an Indian reservation; or
``(B) any other area under the jurisdiction
of an Indian tribe; and
``(2) to implement and enforce requirements
concerning underground storage tanks located wholly
within the boundaries of--
``(A) an Indian reservation; or
``(B) any other area under the jurisdiction
of an Indian tribe.
``(b) Report.--Not later than 2 years after the date of
enactment of this section, the Administrator shall submit to
Congress a report that summarizes the status of implementation
and enforcement of this subtitle in areas located wholly
within--
``(1) the boundaries of Indian reservations; and
``(2) any other areas under the jurisdiction of an
Indian tribe.
The Administrator shall make the report under this subsection
available to the public.
``(c) Not a Safe Harbor.--This section does not relieve any
person from any obligation or requirement under this subtitle.
``(d) State Authority.--Nothing in this section applies to
any underground storage tank that is located in an area under
the jurisdiction of a State, or that is subject to regulation
by a State, as of the date of enactment of this section.''.
(b) Table of Contents.--The table of contents for such
subtitle I is amended by adding the following new item at the
end thereof:
``Sec. 9013. Tanks on Tribal lands.''.
SEC. 1530. FUTURE RELEASE CONTAINMENT TECHNOLOGY.
Not later than 2 years after the date of enactment of this
Act, the Administrator of the Environmental Protection Agency,
after consultation with States, shall make available to the
public and to the Committee on Energy and Commerce of the House
of Representatives and the Committee on Environment and Public
Works of the Senate information on the effectiveness of
alternative possible methods and means for containing releases
from underground storage tanks systems.
SEC. 1531. AUTHORIZATION OF APPROPRIATIONS.
(a) In General.--Subtitle I of the Solid Waste Disposal Act
(42 U.S.C. 6991 et seq.) is amended by adding at the end the
following:
``SEC. 9014. AUTHORIZATION OF APPROPRIATIONS.
``There are authorized to be appropriated to the
Administrator the following amounts:
``(1) To carry out subtitle I (except sections
9003(h), 9005(c), 9011 and 9012) $50,000,000 for each
of fiscal years 2004 through 2008.
``(2) From the Trust Fund, notwithstanding section
9508(c)(1) of the Internal Revenue Code of 1986:
``(A) to carry out section 9003(h) (except
section 9003(h)(12)) $200,000,000 for each of
fiscal years 2004 through 2008;
``(B) to carry out section 9003(h)(12),
$200,000,000 for each of fiscal years 2004
through 2008;
``(C) to carry out sections 9004(f) and
9005(c) $100,000,000 for each of fiscal years
2004 through 2008; and
``(D) to carry out sections 9011 and 9012
$55,000,000 for each of fiscal years 2004
through 2008.''.
(b) Table of Contents.--The table of contents for such
subtitle I is amended by adding the following new item at the
end thereof:
``Sec. 9014. Authorization of appropriations.''.
SEC. 1532. CONFORMING AMENDMENTS.
(a) In General.--Section 9001 of the Solid Waste Disposal
Act (42 U.S.C. 6991) is amended as follows:
(1) By striking ``For the purposes of this
subtitle--'' and inserting ``In this subtitle:''.
(2) By redesignating paragraphs (1), (2), (3), (4),
(5), (6), (7), and (8) as paragraphs (10), (7), (4),
(3), (8), (5), (2), and (6), respectively.
(3) By inserting before paragraph (2) (as
redesignated by paragraph (2) of this subsection) the
following:
``(1) Indian tribe.--
``(A) In general.-- The term `Indian tribe'
means any Indian tribe, band, nation, or other
organized group or community that is recognized
as being eligible for special programs and
services provided by the United States to
Indians because of their status as Indians.
``(B) Inclusions.--The term `Indian tribe'
includes an Alaska Native village, as defined
in or established under the Alaska Native
Claims Settlement Act (43 U.S.C. 1601 et seq.);
and''.
(4) By inserting after paragraph (8) (as
redesignated by paragraph (2) of this subsection) the
following:
``(9) Trust fund.-- The term `Trust Fund' means the
Leaking Underground Storage Tank Trust Fund established
by section 9508 of the Internal Revenue Code of
1986.''.
(b) Conforming Amendments.--The Solid Waste Disposal Act
(42 U.S.C. 6901 and following) is amended as follows:
(1) Section 9003(f) (42 U.S.C. 6991b(f)) is
amended--
(A) in paragraph (1), by striking
``9001(2)(B)'' and inserting ``9001(7)(B)'';
and
(B) in paragraphs (2) and (3), by striking
``9001(2)(A)'' each place it appears and
inserting ``9001(7)(A)''.
(2) Section 9003(h) (42 U.S.C. 6991b(h)) is amended
in paragraphs (1), (2)(C), (7)(A), and (11) by striking
``Leaking Underground Storage Tank Trust Fund'' each
place it appears and inserting ``Trust Fund''.
(3) Section 9009 (42 U.S.C. 6991h) is amended--
(A) in subsection (a), by striking
``9001(2)(B)'' and inserting ``9001(7)(B)'';
and
(B) in subsection (d), by striking
``section 9001(1) (A) and (B)'' and inserting
``subparagraphs (A) and (B) of section
9001(10)''.
SEC. 1533. TECHNICAL AMENDMENTS.
The Solid Waste Disposal Act is amended as follows:
(1) Section 9001(4)(A) (42 U.S.C. 6991(4)(A)) is
amended by striking ``sustances'' and inserting
``substances''.
(2) Section 9003(f)(1) (42 U.S.C. 6991b(f)(1)) is
amended by striking ``subsection (c) and (d) of this
section'' and inserting ``subsections (c) and (d)''.
(3) Section 9004(a) (42 U.S.C. 6991c(a)) is amended
by striking ``in 9001(2) (A) or (B) or both'' and
inserting ``in subparagraph (A) or (B) of section
9001(7)''.
(4) Section 9005 (42 U.S.C. 6991d) is amended--
(A) in subsection (a), by striking ``study
taking'' and inserting ``study, taking'';
(B) in subsection (b)(1), by striking
``relevent'' and inserting ``relevant''; and
(C) in subsection (b)(4), by striking
``Evironmental'' and inserting
``Environmental''.
TITLE XVI--STUDIES
SEC. 1601. STUDY ON INVENTORY OF PETROLEUM AND NATURAL GAS STORAGE.
(a) Definition.--For purposes of this section ``petroleum''
means crude oil, motor gasoline, jet fuel, distillates, and
propane.
(b) Study.--The Secretary of Energy shall conduct a study
on petroleum and natural gas storage capacity and operational
inventory levels, nationwide and by major geographical regions.
(c) Contents.--The study shall address--
(1) historical normal ranges for petroleum and
natural gas inventory levels;
(2) historical and projected storage capacity
trends;
(3) estimated operation inventory levels below
which outages, delivery slowdown, rationing,
interruptions in service, or other indicators of
shortage begin to appear;
(4) explanations for inventory levels dropping
below normal ranges; and
(5) the ability of industry to meet United States
demand for petroleum and natural gas without shortages
or price spikes, when inventory levels are below normal
ranges.
(d) Report to Congress.--Not later than 1 year after the
date of enactment of this Act, the Secretary of Energy shall
submit a report to Congress on the results of the study,
including findings and any recommendations for preventing
future supply shortages.
SEC. 1602. NATURAL GAS SUPPLY SHORTAGE REPORT.
(a) Report.--Not later than 6 months after the date of
enactment of this Act, the Secretary of Energy shall submit to
Congress a report on natural gas supplies and demand. In
preparing the report, the Secretary shall consult with experts
in natural gas supply and demand as well as representatives of
State and local units of government, tribal organizations, and
consumer and other organizations. As the Secretary deems
advisable, the Secretary may hold public hearings and provide
other opportunities for public comment. The report shall
contain recommendations for Federal actions that, if
implemented, will result in a balance between natural gas
supply and demand at a level that will ensure, to the maximum
extent practicable, achievement of the objectives established
in subsection (b).
(b) Objectives of Report.--In preparing the report, the
Secretary shall seek to develop a series of recommendations
that will result in a balance between natural gas supply and
demand adequate to--
(1) provide residential consumers with natural gas
at reasonable and stable prices;
(2) accommodate long-term maintenance and growth of
domestic natural gas-dependent industrial,
manufacturing, and commercial enterprises;
(3) facilitate the attainment of national ambient
air quality standards under the Clean Air Act;
(4) permit continued progress in reducing emissions
associated with electric power generation; and
(5) support development of the preliminary phases
of hydrogen-based energy technologies.
(c) Contents of Report.--The report shall provide a
comprehensive analysis of natural gas supply and demand in the
United States for the period from 2004 to 2015. The analysis
shall include, at a minimum--
(1) estimates of annual domestic demand for natural
gas that take into account the effect of Federal
policies and actions that are likely to increase and
decrease demand for natural gas;
(2) projections of annual natural gas supplies,
from domestic and foreign sources, under existing
Federal policies;
(3) an identification of estimated natural gas
supplies that are not available under existing Federal
policies;
(4) scenarios for decreasing natural gas demand and
increasing natural gas supplies comparing relative
economic and environmental impacts of Federal policies
that--
(A) encourage or require the use of natural
gas to meet air quality, carbon dioxide
emission reduction, or energy security goals;
(B) encourage or require the use of energy
sources other than natural gas, including coal,
nuclear, and renewable sources;
(C) support technologies to develop
alternative sources of natural gas and
synthetic gas, including coal gasification
technologies;
(D) encourage or require the use of energy
conservation and demand side management
practices; and
(E) affect access to domestic natural gas
supplies; and
(5) recommendations for Federal actions to achieve
the objectives of the report, including recommendations
that--
(A) encourage or require the use of energy
sources other than natural gas, including coal,
nuclear, and renewable sources;
(B) encourage or require the use of energy
conservation or demand side management
practices;
(C) support technologies for the
development of alternative sources of natural
gas and synthetic gas, including coal
gasification technologies; and
(D) will improve access to domestic natural
gas supplies.
SEC. 1603. SPLIT-ESTATE FEDERAL OIL AND GAS LEASING AND DEVELOPMENT
PRACTICES.
(a) Review.--In consultation with affected private surface
owners, oil and gas industry, and other interested parties, the
Secretary of the Interior shall undertake a review of the
current policies and practices with respect to management of
Federal subsurface oil and gas development activities and their
effects on the privately owned surface. This review shall
include--
(1) a comparison of the rights and responsibilities
under existing mineral and land law for the owner of a
Federal mineral lease, the private surface owners and
the Department;
(2) a comparison of the surface owner consent
provisions in section 714 of the Surface Mining Control
and Reclamation Act of 1977 (30 U.S.C. 1304) concerning
surface mining of Federal coal deposits and the surface
owner consent provisions for oil and gas development,
including coalbed methane production; and
(3) recommendations for administrative or
legislative action necessary to facilitate reasonable
access for Federal oil and gas activities while
addressing surface owner concerns and minimizing
impacts to private surface.
(b) Report.--The Secretary of the Interior shall report the
results of such review to Congress not later than 180 days
after the date of enactment of this Act.
SEC. 1604. RESOLUTION OF FEDERAL RESOURCE DEVELOPMENT CONFLICTS IN THE
POWDER RIVER BASIN.
The Secretary of the Interior shall--
(1) undertake a review of existing authorities to
resolve conflicts between the development of Federal
coal and the development of Federal and non-Federal
coalbed methane in the Powder River Basin in Wyoming
and Montana; and
(2) not later than 6 months after the date of
enactment of this Act, report to Congress on
alternatives to resolve these conflicts and
identification of a preferred alternative with specific
legislative language, if any, required to implement the
preferred alternative.
SEC. 1605. STUDY OF ENERGY EFFICIENCY STANDARDS.
The Secretary of Energy shall contract with the National
Academy of Sciences for a study, to be completed within 1
yearafter the date of enactment of this Act, to examine whether the
goals of energy efficiency standards are best served by measurement of
energy consumed, and efficiency improvements, at the actual site of
energy consumption, or through the full fuel cycle, beginning at the
source of energy production. The Secretary shall submit the report to
Congress.
SEC. 1606. TELECOMMUTING STUDY.
(a) Study Required.--The Secretary, in consultation with
the Commission, the Director of the Office of Personnel
Management, the Administrator of General Services, and the
Administrator of NTIA, shall conduct a study of the energy
conservation implications of the widespread adoption of
telecommuting by Federal employees in the United States.
(b) Required Subjects of Study.--The study required by
subsection (a) shall analyze the following subjects in relation
to the energy saving potential of telecommuting by Federal
employees:
(1) Reductions of energy use and energy costs in
commuting and regular office heating, cooling, and
other operations.
(2) Other energy reductions accomplished by
telecommuting.
(3) Existing regulatory barriers that hamper
telecommuting, including barriers to broadband
telecommunications services deployment.
(4) Collateral benefits to the environment, family
life, and other values.
(c) Report Required.--The Secretary shall submit to the
President and Congress a report on the study required by this
section not later than 6 months after the date of enactment of
this Act. Such report shall include a description of the
results of the analysis of each of the subject described in
subsection (b).
(d) Definitions.--As used in this section:
(1) Secretary.--The term ``Secretary'' means the
Secretary of Energy.
(2) Commission.--The term ``Commission'' means the
Federal Communications Commission.
(3) NTIA.--The term ``NTIA'' means the National
Telecommunications and Information Administration of
the Department of Commerce.
(4) Telecommuting.--The term ``telecommuting''
means the performance of work functions using
communications technologies, thereby eliminating or
substantially reducing the need to commute to and from
traditional worksites.
(5) Federal employee.--The term ``Federal
employee'' has the meaning provided the term
``employee'' by section 2105 of title 5, United States
Code.
SEC. 1607. LIHEAP REPORT.
Not later than 1 year after the date of enactment of this
Act, the Secretary of Health and Human Services shall transmit
to Congress a report on how the Low-Income Home Energy
Assistance Program could be used more effectively to prevent
loss of life from extreme temperatures. In preparing such
report, the Secretary shall consult with appropriate officials
in all 50 States and the District of Columbia.
SEC. 1608. OIL BYPASS FILTRATION TECHNOLOGY.
The Secretary of Energy and the Administrator of the
Environmental Protection Agency shall--
(1) conduct a joint study of the benefits of oil
bypass filtration technology in reducing demand for oil
and protecting the environment;
(2) examine the feasibility of using oil bypass
filtration technology in Federal motor vehicle fleets;
and
(3) include in such study, prior to any
determination of the feasibility of using oil bypass
filtration technology, the evaluation of products and
various manufacturers.
SEC. 1609. TOTAL INTEGRATED THERMAL SYSTEMS.
The Secretary of Energy shall--
(1) conduct a study of the benefits of total
integrated thermal systems in reducing demand for oil
and protecting the environment; and
(2) examine the feasibility of using total
integrated thermal systems in Department of Defense and
other Federal motor vehicle fleets.
SEC. 1610. UNIVERSITY COLLABORATION.
Not later than 2 years after the date of enactment of this
Act, the Secretary of Energy shall transmit to Congress a
report that examines the feasibility of promoting
collaborations between large institutions of higher education
and small institutions of higher education through grants,
contracts, and cooperative agreements made by the Secretary for
energy projects. The Secretary shall also consider providing
incentives for the inclusion of small institutions of higher
education, including minority-serving institutions, in energy
research grants, contracts, and cooperative agreements.
SEC. 1611. RELIABILITY AND CONSUMER PROTECTION ASSESSMENT.
Not later than 5 years after the date of enactment of this
Act, and each 5 years thereafter, the Federal Energy Regulatory
Commission shall assess the effects of the exemption of
electric cooperatives and government-owned utilities from
Commission regulation under section 201(f) of the Federal Power
Act. The assessment shall include any effects on--
(1) reliability of interstate electric transmission
networks;
(2) benefit to consumers, and efficiency, of
competitive wholesale electricity markets;
(3) just and reasonable rates for electricity
consumers; and
(4) the ability of the Commission to protect
electricity consumers.
If the Commission finds that the 201(f) exemption results in
adverse effects on consumers or electric reliability, the
Commission shall make appropriate recommendations to Congress
pursuant to section 311 of the Federal Power Act.
And the Senate agree to the same.
From the Committee on Energy and Commerce, for
consideration of the House bill and the Senate
amendment, and modifications committed to
conference:
Billy Tauzin,
Michael Bilirakis,
Joe Barton,
Fred Upton,
Cliff Stearns,
Paul Gillmor,
John Shimkus,
From the Committee on Agriculture, for
consideration of secs. 30202, 30208, 30212,
Title III of Division C, secs. 30604, 30901,
and 30903 of the House bill and secs. 265, 301,
604, 941-948, 950, 1103, 1221, 1311-1313, and
2008 of the Senate amendment, and modifications
committed to conference:
Bob Goodlatte,
Frank D. Lucas,
Charles W. Stenholm,
From the Committee on Armed Services, for
consideration of secs. 11005, 11010, 14001-
14007, 14009-14015, 21805 and 21806 of the
House bill and secs. 301, 501-507, 509, 513,
809, 821, 914, 920, 1401, 1407-1409, 1411,
1801, and 1803 of the Senate amendment, and
modifications committed to conference:
Duncan Hunter,
Curt Weldon,
From the Committee on Education and the
Workforce, for consideration of secs. 11021,
12014, 14033, and 30406 of the House bill and
secs. 715, 774, 901, 903, 1505, and 1507 of the
Senate amendment, and modifications committed
to conference:
Sam Johnson,
From the Committee on Financial Services, for
consideration of Division G of the House bill
and secs. 931-940 and 950 of the Senate
amendment and modifications committed to
conference:
Robert W. Ney,
From the Committee on Government Reform, for
consideration of secs. 11002, 11005, 11006,
11010, 11011, 14025, 14033, and 22002 of the
House bill and secs. 263, 805, 806, 914-916,
918, 920, 1406, and 1410 of the Senate
amendment, and modifications committed to
conference:
Tom Davis,
Tim Murphy,
From the Committee on the Judiciary, for
consideration of secs. 12008, 12401, 14014,
14026, 14027, 14028, 14033, 16012, 16045,
16084, 30101, 30210, and 30408 of the House
bill and secs. 206, 209, 253, 531-532, 708,
767, 783, and 1109 of the Senate amendment, and
modifications committed to conference:
Lamar Smith,
From the Committee on Resources, for
consideration of secs. 12005, 12007, 12011,
12101, 13001, 21501, 21521-21530, Division C,
and sec. 60009 of the House bill and secs. 201,
265, 272, 301, 401-407, 602-606, 609, 612, 705,
707, 712, 721, 1234, 1351-1352, 1704, and 1811
of the Senate amendment, and modifications
committed to conference:
Richard Pombo,
Barbara Cubin,
Provided that Mr. Kind is appointed in lieu of
Mr. Rahall for consideration of Title IV of
Division C of the House bill, and modifications
committed to conference:
From the Committee on Science, for
consideration of secs. 11009, 11025, 12301-
12312, 14001-14007, 14009-14015, 14029, 15021-
15024, 15031-15034, 15041, 15045, Division B,
sec. 30301, Division E, and Division F of the
House bill and secs. 501-507, 509, 513-516,
770-772, 807-809, 814-816, 824, 832, 1001-1022,
Title XI, Title XII, Title XIII, Title XIV,
secs. 1502, 1504-1505, Title XVI, and secs.
1801-1805 of the Senate amendment, and
modifications committed to conference:
Judy Biggert,
Ralph M. Hall,
Provided that Mr. Costello is appointed in lieu
of Mr. Hall of Texas for consideration of
Division E of the House bill, and modifications
committed to conference:
Jerry Costello,
Provided that Mr. Lampson is appointed in lieu
of Mr. Hall of Texas for consideration of sec.
21708 and Division F of the House bill, and
secs. 824 and 1223 of the Senate amendment and
modifications committed to conference:
Nick Lampson,
From the Committee on Transportation and
Infrastructure, for consideration of secs.
11001-11004, 11006, 11009-11011, 12001-12012,
12014, 12401, 12403, 13001, 13201, 13202,
15021-15024, 15031-15034, 15041, 15043, 15051,
16012, 16021, 16022, 16023, 16031, 16081,
16082, 16092, 23001-23004, 30407, 30410, and
30901 of the House bill and secs. 102, 201,
205, 301, 701-783, 812, 814, 816, 823, 911-916,
918-920, 949, 1214, 1261-1262, and 1351-1352 of
the Senate amendment, and modifications
committed to conference:
Don Young,
Thomas Petri,
From the Committee on Ways and Means, for
consideration of Division D of the House bill
and Division H and I of the Senate amendment,
and modifications committed to conference:
William Thomas,
Jim McCrery,
Managers on the Part of the House.
Pete V. Domenici,
Don Nickles,
Larry E. Craig,
Ben Nighthorse Campbell,
Craig Thomas,
Chuck Grassley,
Trent Lott,
Byron L. Dorgan,
Managers on the Part of the Senate.
JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE
The managers on the part of the House and the Senate at
the conference on the disagreeing votes of the two Houses on
the amendment of the Senate to the bill (H.R. 6), to provide
for security and diversity in the energy supply for the
American people, and for other purposes, submit the following
joint statement to the House and the Senate in explanation of
the effect of the action agreed upon by the managers and
recommended in the accompanying conference report:
The Senate amendment struck all of the House bill after
the enacting clause and inserted a substitute text.
The House recedes from its disagreement to the amendment
of the Senate with an amendment that is a substitute for the
House bill and the Senate amendment. The differences between
the House bill, the Senate amendment, and the substitute agreed
to in conference are noted below, except for clerical
corrections, conforming changes made necessary by agreements
reached by the conferees, and minor drafting and clarifying
changes.
TITLE I--ENERGY EFFICIENCY
Title I of the conference report sets new performance
requirements for the operations of Federal agencies and
buildings, requires Federal agencies to procure energy
efficient products, and mandates metering of energy use in
Federal buildings. The title has a permanent authorization for
the Energy Savings Performance Contracts (ESPC) program, and
establishes a pilot program for ESPC non-building applications.
The conference report authorizes funding for new programs to
expand State and local energy efficiency programs in low-income
communities and in public buildings such as schools, hospitals
and government facilities. It provides funding to States and
local governments to encourage consumers to replace existing
appliances with more energy efficient units. The conference
report sets energy efficiency standards for a number of new
consumer products, and directs the Department of Energy to
initiate rulemakings to set standards for others. It requires
the Federal Trade Commission to review and improve energy
efficiency labeling programs. The conference report also
authorizes funding for the Energy Star program and a consumer
education program on HVAC maintenance. Authorization for the
Low-Income Home Energy Assistance Program is extended and
expanded, and additional funds are provided for state energy
and weatherization programs. The report includes a number of
changes to public housing law that encourage improved energy
efficiency in the construction and maintenance of public
housing, improve Federal efficiency standards for public
housing facilities, and require public housing agencies to
purchase energy efficient products.
TITLE II--RENEWABLE ENERGY
Title II of the conference report provides for an ongoing
assessment of renewable energy resources, extends existing
authority for incentive programs for production of renewable
electricity, requires an update of energy plans for insular
areas, and requires the Federal government to purchase a set
amount of electric energy from renewable resources. The report
authorizes $300 million for solar programs, and sets a goal of
installing 20,000 solar roof-top systems in Federal buildings
by 2010. The use of biomass from Federal or Indian lands is
encouraged by the creation of a grant program to produce
electric energy, transportation fuels, or substitutes for
petroleum products from biomass. The program encourages removal
of hazardous fuels from the highest risk areas on Federal and
Indian lands and development of new technologies to use
biomass.
Subtitle B updates the Geothermal Steam Act by amending
the leasing provisions to provide for a competitive leasing
system. The subtitle also directs other actions that will
facilitate new development of geothermal resources. Subtitle C
amends the Federal Power Act to streamline the process for
issuance of hydroelectric licenses. It also provides production
incentives and promotes efficiency improvements at
hydroelectric facilities.
TITLE III--OIL AND GAS
Title III of the conference report includes a variety of
oil and gas production provisions. It improves the Federal
permitting process and expedites the construction of the Alaska
Natural Gas Pipeline.
Subtitle A permanently authorizes the Strategic Petroleum
Reserve and extends authorization for the National Oilheat
Research Alliance. Subtitle B provides financial incentives to
encourage production in deep water and production from deep
natural gas wells in the Gulf of Mexico. The subtitle also
provides royalty relief to marginal wells located on Federal
lands and the Outer Continental Shelf. The Secretary of the
Interior is authorized to provide royalty relief to existing,
non-producing offshore leases in Alaska. The report
addressesnatural gas market transparency, and provides additional
market reforms.
Subtitle C includes several provisions that will improve
access to Federal lands and expedite the approval of permits on
multiple-use lands. There are also provisions to improve
inspection and enforcement of existing permits. The Secretaries
of the Interior and Agriculture are instructed to designate
energy corridors on western lands that can be used for the
deployment of energy transportation and transmission rights-of-
way. A regional pilot program is established to develop
procedures for the timely processing of applications and
permits for Federal lands.
Subtitle D authorizes expedited certification and
permitting of a pipeline to transport natural gas from Alaska
to markets in the continental United States to meet the rapidly
growing demand for natural gas. The conference report includes
loan guarantee authority to support the construction of the
pipeline, and establishes an executive-level office to
coordinate agency actions related to the pipeline.
TITLE IV--COAL
Title IV of the conference report contains provisions
that provide critical research related to the country's most
abundant fossil resource: coal: Subtitle A authorizes a Clean
Coal Power Initiative, providing $200 million annually for
clean coal research in coal-based gasification technologies.
The Secretary of Energy is directed to set increasingly
restrictive emission targets over the life of the program to
develop state-of-the-art technology. Subtitle B provides
financial assistance to a variety of clean coal projects around
the nation. Subtitle C amends several provisions of the Mineral
Leasing Act governing the Federal Coal Leasing Program,
including those pertaining to: lease modifications to avoid the
bypass of coal; mining requirements for logical mining units;
payment of advance royalties; and the deadline for submission
of a coal lease operation and reclamation plan.
TITLE V--INDIAN ENERGY
Title V of the conference report, referred to as the
Indian Tribal Energy Development and Self-Determination Act of
2003, assists Indian Tribes in the development of Indian energy
resources by increasing Tribes' internal capacity to develop
their own resources. The title provides grants and technical
assistance, and streamlines the approval process for Tribal
leases, agreements, and rights-of-way so that outside parties
have more incentive to partner with Tribes in developing energy
resources. Included in this title are provisions creating an
Office of Indian Energy Policy and Programs within the
Department of Energy to support the development of tribal
energy resources. Section 505 makes Dine Power Authority, a
Navajo Nation enterprise, eligible for funding under this
title. Section 506 directs the Secretary of Housing and Urban
Development to promote energy efficiency for Indian housing.
The title also provides a complete substitute for title
26 of the Energy Policy Act of 1992. Sections 2602 and 2603
authorize the Secretary of the Interior to provide grants to
tribes to develop and utilize their energy resources and to
enhance the legal and administrative ability of tribes to
manage their resources. Section 2604 establishes a process by
which an Indian tribe, upon demonstrating its technical and
financial capacity, could negotiate and execute energy resource
development leases, agreements and rights-of-way with third
parties without first obtaining the approval of the Secretary
of the Interior. Section 2605 authorizes the Secretary of the
Interior to review activities authorized under the Indian
Mineral Development Act. Section 2606 authorizes WAPA to make
power allocations to meet the firming and reserve needs of
Indian-owned energy projects and acquire power generated by
Indian tribes for firming and reserve needs, so long as the
rates and terms are competitive. Section 2607 authorizes a
study of wind and hydropower potential along the Missouri
River.
TITLE VI--NUCLEAR MATTERS
Title VI of the conference report provides for programs
to ensure that nuclear energy remains a major component of the
Nation's energy supply. Price Anderson liability protection is
extended for both NRC licensees and DOE contractors. Coverage
is increased and indexed for inflation, and non-profit
contractors of the Department are made subject to payment of
penalties assessed for nuclear safety violations. A research,
development, and construction project is authorized for a new
test reactor to be constructed at the Idaho National
Engineering and Environmental Laboratory. The reactor will
serve as a national testbed for advanced reactor technologies
that provide improved attributes over existing plants, and for
co-generation of hydrogen by nuclear energy. Limits, with
several listed exemptions, are imposed on future salesor
transfers of government stockpiles of uranium, subject to tests that
fair market value is received for sales and that national security is
not adversely impacted. Important nuclear security programs are
established, along with industry reforms, including whistleblower
protection, antitrust review, and legal fee reimbursement.
TITLE VII--FUELS AND VEHICLES
Title VII of the conference report makes a number of
changes to the alternative fuel vehicle mandate program
applicable to Federal, State, local and fuel provider vehicle
fleets pursuant to the Energy Policy Act of 1992. In
particular, credits towards compliance with fleet mandates can
be accrued for the actual use of alternative fuels, the
purchase of neighborhood electric vehicles, investment in
alternative fuel infrastructures, or equivalent contributions
toward compliance by other fleets with their mandates through
the purchase of vehicles or fueling infrastructure. The bill
requires a complete review of alternative fuel mandates, and
enables States to enact regulations to allow alternative fuel
vehicles to use High Occupancy Vehicle lanes regardless of the
number of passengers carried. The conference report requires
the National Highway Transportation Safety Administration
(NHTSA) to additionally consider the effects on passenger
safety and employment levels in the U.S. auto industry when
setting fuel economy standards, requires an analysis of the
fuel economy program, and extends incentives for ``dual-fuel''
vehicles for another four years.
TITLE VIII--HYDROGEN
Title VIII of the conference report provides for basic
hydrogen energy research and development programs. The title
authorizes new research and development programs for hydrogen
vehicle technologies and hydrogen fuel. The title provides
authorization for a variety of programs to demonstrate hydrogen
and fuel cells for use in light- and heavy-duty vehicle fleets,
stationary power applications, and international projects. The
title requires Federal agencies to consider methods of
incorporating hydrogen and fuel cell technologies into their
missions, and establishes an interagency task force to oversee
hydrogen initiatives.
TITLE IX--RESEARCH AND DEVELOPMENT
Title IX of the conference report provides the research
and development base for the full range of energy-related
technologies. Subtitles include those devoted to Energy
Efficiency, Distributed Energy and Electric Energy Systems,
Renewable Energy, Nuclear Energy, Fossil Energy, Science,
Energy and Environment, and Management. Broad goals are
established to guide the research and development activities of
diversifying energy supplies, increasing energy efficiency,
decreasing dependence on foreign energy supplies, improving
energy security, and decreasing environmental impact. The
Secretary is annually directed to publish specific goals in
major program areas consistent with these broad goals.
TITLE X--DEPARTMENT OF ENERGY MANAGEMENT
Title X of the conference report creates a new Assistant
Secretary position and expresses the sense of the Congress that
the position should be used to improve management of Nuclear
Energy at the Department of Energy, and grants the Secretary of
Energy authority to enter into other transactions as
appropriate to further research, development, or demonstration
goals of the Department.
TITLE XI--PERSONNEL AND TRAINING
Title XI of the conference report requires establishment
of training guidelines for electric energy industry personnel
and centers for building technologies and power plant
operations training. It also directs increased activity by the
Department of Energy to improve recruitment of under-
represented groups into energy professions. The title directs
the Secretary of Energy to support establishment of a National
Power Plant Operations Center, and encourages agency
coordination for training and outreach efforts for
international commercial energy markets in countries with
developing and restructuring economies.
TITLE XII--ELECTRICITY
Title XII of the conference report reduces regulatory
uncertainty, promotes transmission infrastructure development
and security, and increases consumer protections associated
with the production and delivery of electricity. Subtitle A
requires development of mandatory rules to ensure transmission
grid reliability. Subtitle B addresses transmission siting,
third-party financing of transmission, and research programs
related to transmission upgrades and improvements. Subtitle C
protects transmission access for native load customers and
authorizes the Federal Energy Regulatory Commission [FERC] to
exercise limited jurisdiction over currently unregulated
transmitting utilities to ensure open access to the
transmission grid. It also remands the proposed rulemaking on
Standard Market Design to FERC and prohibits a final rule
before December 31, 2006. Subtitle D directs FERC to issue
rules on transmission pricing policies and cost allocation for
transmission expansion. Subtitle E amends the Public Utility
Regulatory Policies Act of 1978 (PURPA). It prospectively
repeals the requirement for mandatory purchase from qualifying
facilities by electric utilities if a competitive market exists
and establishes new criteria for qualifying cogeneration
facilities. Subtitle F repeals the Public Utility Holding
Company Act of 1935 (PUHCA). Subtitle G addresses market
transparency and manipulation, contract sanctity, and unfair
trade practices. It also increases penalties for violations of
the Federal Power Act. Subtitle H provides for merger review
reform and accountability. Subtitle I defines new terms in the
Federal Power Act, and Subtitle J makes technical and
conforming amendments.
TITLE XIII--ENERGY TAXES
----------
CONTENTS
Page
I. Conservation....................................................457
A. Residential and Business Property..................... 457
1. Residential solar hot water, photovoltaics and
other energy efficient property (sec. 41001 of
the House bill, sec. 2103 of the Senate
amendment, and new sec. 25C of the Code)......... 457
2. Credit for electricity produced from certain
sources (sec. 41002 of the House bill, secs.
1901, 1902, 1903, 1904, 1905, and 1906 of Senate
amendment, and sec. 45 of the Code).............. 459
3. Tax incentives for fuel cells (sec. 41003 of the
House bill, secs. 2103 and 2104 of the Senate
amendment, and sec. 48 and new sec. 25C of the
Code)............................................ 465
4. Energy efficient improvements to existing homes
(secs. 41004 of the House bill, sec. 2109 of the
Senate amendment, and new sec. 25D of the Code).. 467
5. Energy efficient new homes (sec. 41005 of the
House bill, sec. 2101 of the Senate amendment,
and new sec. 45G of the Code).................... 469
6. Energy credit for combined heat and power system
property (sec. 41006 of the House bill, sec. 2108
of the Senate amendment, and sec. 48 of the Code) 472
7. Energy efficient appliances (sec. 2102 of the
Senate amendment and new sec. 45H of the Code)... 474
8. Energy efficient commercial building deduction
(sec. 2105 of Senate amendment, and new sec. 179B
of the Code)..................................... 476
9. Three-year applicable recovery period for
depreciation of qualified energy management
devices and qualified water submetering devices
(secs. 2107 and 2111 of the Senate amendment and
sec. 168 of the Code)............................ 478
10. Allowance of deduction for qualified energy
management devices and qualified water
submetering devices (secs. 2106 and 2110 of the
Senate amendment)................................ 480
11. Credit for electricity produced from advanced
nuclear power facilities (new sec. 45L of the
Code)............................................ 480
B. Fuels and Alternative Motor Vehicles.................. 482
1. Repeal certain excise taxes on rail diesel fuel
and inland waterway barge fuels (sec. 41008 of
the House bill and secs. 4041, 4042, 6421, and
6427 of the Code)................................ 482
2. Btu-based rate for diesel/water emulsion fuel
(sec. 41009 of the House bill and secs. 4081 and
6427 of the Code)................................ 482
3. Modifications to small producer ethanol credit
(sec. 2005 of the Senate amendment and sec. 40 of
the Code)........................................ 483
4. Transfer full amount of excise tax imposed on
gasohol to the highway trust fund (sec. 2006 of
the Senate amendment)............................ 484
5. Incentives for biodiesel (sec. 2008 of the Senate
amendment and new sec. 40A of the Code).......... 485
6. Alcohol and biodiesel excise tax credit and
extension of alcohol fuels income tax credit
(secs. 40, 4101, 6427, 9503 and new secs. 4104,
and 6426 of the Code)............................ 488
7. Nonapplication of export exemption to delivery of
fuel to motor vehicles removed from United States
(sec. 2504 of the Senate amendment and secs.
4221, 4041, and 4081 of the Code)................ 494
8. Modification of credit for electric vehicles
(sec. 41010 of the House bill, sec. 2002 of
Senate amendment, and sec. 30 of the Code)....... 496
9. Alternative motor vehicle credit (sec. 41011 of
the House bill, secs. 2001 and 2010 of Senate
amendment, and new sec. 30B of the Code)......... 497
10. Modifications of deduction for refueling property
(secs. 2003 and 2010 of Senate amendment and sec.
179A of the Code)................................ 505
11. Credit for retail sale of alternative motor
vehicle fuels (secs. 2004 and 2010 of Senate
amendment)....................................... 506
II. Reliability.....................................................507
A. Natural Gas Gathering Lines Treated as Seven-Year
Property (sec. 42001 of the House bill, sec. 2302 of
the Senate amendment, and sec. 168 of the Code)...... 507
B. Natural Gas Distribution Lines Treated as Fifteen-Year
Property (sec. 42002 of the House bill, sec. 2311 of
the Senate amendment, and sec. 168 of the Code)...... 508
C. Transmission Property Treated as Fifteen-Year Property
(sec. 42003 of the House bill and sec. 168 of the
Code)................................................ 509
D. Expensing of Capital Costs Incurred for Production in
Complying with Environmental Protection Agency Sulfur
Regulations for Small Refiners (sec. 42004 of the
House bill, sec. 2303 of the Senate amendment, and
new sec. 179C of the Code)........................... 510
E. Credit for Small Refiners for Production of Diesel
Fuel in Compliance with Environmental Protection
Agency Sulfur Regulations for Small Refiners (sec.
42005 of the House bill, sec. 2304 of Senate
amendment, and new sec. 45I of the Code)............. 511
F. Determination of Small Refiner Exception to Oil
Depletion Deduction (sec. 42006 of the House bill,
sec. 2305 of the Senate amendment, and sec. 613A of
the Code)............................................ 512
G. Sales or Dispositions to Implement Federal Energy
Regulatory Commission or State Electric Restructuring
Policy (sec. 42007 of the House bill, sec. 2404 of
the Senate amendment, and sec. 451 of the Code)...... 513
H. Modification to Special Rules for Nuclear
Decommissioning Costs (sec. 42008 of the House bill,
sec. 2402 of the Senate amendment, and sec. 468A of
the Code)............................................ 514
I. Treatment of Certain Income of Electric Cooperatives
(sec. 42009 of the House bill, secs. 2403 and 2406 of
the Senate amendment, and sec. 501 of the Code)...... 518
1. Exempt certain prepayments for natural gas from
tax-exempt bond arbitrage rules (sec. 3213 of the
House bill and secs. 141 and 148 of the Code).... 526
III.Production......................................................529
A. Oil and Gas Provisions................................ 529
1. Oil and gas production from marginal wells (sec.
43001 of the House bill, sec. 2301 of the Senate
amendment, and secs., 38, 39, and new sec. 45J of
the Code)........................................ 529
2. Temporary suspension of limitation based on 65
percent of taxable income and extension of
suspension of taxable income limit with respect
to marginal production (sec. 43002 of the House
bill, sec. 2306 of the Senate amendment, and sec.
613A of the Code)................................ 530
3. Delay rental payments (sec. 43003 of the House
bill, sec. 2308 of the Senate amendment, and sec.
167 of the Code)................................. 532
4. Geological and geophysical costs (sec. 43004 of
the House bill, sec. 2307 of the Senate
amendment, and sec. 167 of the Code)............. 533
B. Extension and Modification of Credit for Producing
Fuel From a Non-Conventional Source (sec. 43005 of
the House bill, secs. 2309 and 2310 of the Senate
amendment, and sec. 29 and new section 45K of the
Code)................................................ 534
C. Alternative Minimum Tax Provisions.................... 540
1. Allow personal energy credits against the
alternative minimum tax (sec. 41007 of the House
bill, secs. 2103(b) and 2109(b) of the Senate
amendment, and sec. 26 of the Code).............. 540
2. Increase tax limitation on use of business energy
credits (secs. 43006 and 43008 of the House bill,
secs. 2005(b)(3) and 2503(c) of the Senate
amendment, and sec. 38 of the Code).............. 541
3. Intangible drilling costs (IDCs) (sec. 43007 of
the House bill and sec. 57 of the Code).......... 542
D. Clean Coal Incentives................................. 543
1. Credit for production from a clean coal technology
unit (secs. 2201 and 2221 of Senate amendment)... 543
2. Investment credit for clean coal technology units
(secs. 2211 and 2221 of Senate amendment and new
sec. 48A of the Code)............................ 544
3. Credit for production from advanced clean coal
technology (secs. 2212 and 2221 of Senate
amendment)....................................... 548
4. Amortization of pollution control facilities (sec.
169 of the Code)................................. 549
5. Eligible integrated gasification combined cycle
technology unit treated as five-year property
(sec. 168 of the Code)........................... 550
E. High Volume Natural Gas Provisions.................... 551
1. High volume natural gas pipe treated as seven-year
property (sec. 168 of the Code).................. 551
2. Credit for production of Alaska natural gas (sec.
2503 of Senate amendment)........................ 552
3. Enhanced oil recovery credit for certain gas
processing facilities (sec. 43 of the Code)...... 553
IV. Additional Provisions...........................................554
A. Extension of Tax Incentives for Energy-Related
Businesses on Indian Reservations (sec. 2501 of the
Senate amendment and sec. 168 of the Code)........... 554
B. GAO Study (sec. 2502 of the Senate amendment)......... 555
C. Treatment of Certain Dispositions of Dairy Property to
Implement Bovine Tuberculosis Eradication Program
(sec. 2505 of the Senate amendment).................. 556
D. Expand Exemption from Aviation Fuels Excise Taxes for
Aerial Applicators (sec. 2506 of the Senate
amendment)........................................... 556
E. Modification of Rural Airport Definition (sec. 2507 of
the Senate amendment)................................ 557
F. Exempt Transportation by Seaplane From Ticket Taxes
(sec. 2508 of the Senate amendment).................. 558
G. Credit for Taxpayers Owning Commercial Power Takeoff
Vehicles (sec. 2009 of the Senate amendment)......... 558
H. Payment of Dividends on Stock of Cooperatives Without
Reducing Patronage Dividends (sec. 1388 of the Code). 559
I. Distributions from Publicly Traded Partnerships
Treated as Qualifying Income of Regulated Investment
Company (secs. 851 and 469(k) of the Code)........... 560
J. Suspension of Duties on Ceiling Fans (Chapter 99, II
of the Harmonized Tariff Schedule of the United
States).............................................. 562
K. Suspension of Duties on Nuclear Steam Generators
(Chapter 99, II of the Harmonized Tariff Schedule of
the United States)................................... 563
L. Suspension of Duties on Nuclear Reactor Vessel Heads
(Chapter 99, II of the Harmonized Tariff Schedule of
the United States)................................... 563
M. Brownfields Demonstration Program for Qualified Green
Building and Sustainable Design Projects (secs. 142
and 146 of the Code)................................. 564
V. Tax Complexity Analysis.........................................567
I. CONSERVATION
A. Residential and Business Property
1. Residential solar hot water, photovoltaics and other energy
efficient property (sec. 41001 of the House bill, sec. 2103 of
the Senate amendment, and new sec. 25C of the Code)
PRESENT LAW
A nonrefundable, 10-percent business energy credit is
allowed for the cost of new property that is equipment (1) that
uses solar energy to generate electricity, to heat or cool a
structure, or to provide solar process heat, or (2) used to
produce, distribute, or use energy derived from a geothermal
deposit, but only, in the case of electricity generated by
geothermal power, up to the electric transmission stage.
The business energy tax credits are components of the
general business credit (sec. 38(b)(1)). The business energy
tax credits, when combined with all other components of the
general business credit, generally may not exceed for any
taxable year the excess of the taxpayer's net income tax over
the greater of (1) 25 percent of net regular tax liability
above $25,000 or (2) the tentative minimum tax. For credits
arising in taxable years beginning after December 31, 1997, an
unused general business credit generally may be carried back
one year and carried forward 20 years (sec. 39).
A taxpayer may exclude from income the value of any
subsidy provided by a public utility for the purchase or
installation of an energy conservation measure. An energy
conservation measure means any installation or modification
primarily designed to reduce consumption of electricity or
natural gas or to improve the management of energy demand with
respect to a dwelling unit (sec. 136).
There is no present-law personal tax credit for energy
efficient residential property.
HOUSE BILL
The provision provides a personal tax credit for the
purchase of qualified photovoltaic property and qualified solar
water heating property that is used exclusively for purposes
other than heating swimming pools and hot tubs. The credit is
equal to 15 percent of qualified investment up to a maximum
credit of $2,000 for solar water heating property and $2,000
for rooftop photovoltaic property. This credit is
nonrefundable, and the depreciable basis of the property is
reduced by the amount of the credit.
Qualifying solar water heating property is property that
heats water for use in a dwelling unit located in the United
States and used as a residence if at least half of the energy
used by such property for such purpose is derived from the sun.
Qualified photovoltaic property is property that uses solar
energy to generate electricity for use in a dwelling unit.
Expenditures for labor costs allocable to onsite preparation,
assembly, or original installation of property eligible for the
credit are eligible expenditures.
Certain equipment safety requirements need to be met to
qualify for the credit. Special proration rules apply in the
case of jointly owned property, condominiums, and tenant-
stockholders in cooperative housing corporations.
Effective date.--The credit applies to purchases in
taxable years ending after December 31, 2003 and before January
1, 2007 (January 1, 2009 in the case of qualified photovoltaic
property).
SENATE AMENDMENT
The Senate amendment includes the provisions of the House
bill. Additionally, the Senate amendment adds a 30-percent
credit for qualified wind energy property, up to a maximum
credit of $2,000. Qualified wind energy property is property
that uses wind energy to generate electricity for use in a
dwelling unit.
The Senate amendment also provides a 100 percent credit,
with caps, for the purchase of other qualified energy efficient
property, as described below.
Electric heat pump hot water heaters with an energy
factor of at least 1.7. The maximum credit is $75 per unit.
Electric heat pumps with a heating efficiency of at least
9 HSPF (Heating Seasonal Performance Factor) and a cooling
efficiency of at least 15 SEER (Seasonal Energy Efficiency
Rating) and an energy efficiency ratio (EER) of 12.5 or
greater. The maximum credit is $250 per unit.
Advanced natural gas furnaces that achieve a 95 percent
annual fuel utilization efficiency. The maximum credit is $250
per unit.
Central air conditioners with an efficiency of at least
15 SEER and an EER of 12.5 or greater. The maximum credit is
$250 per unit.
Natural gas water heaters with an Energy Factor of at
least 0.8. The maximum credit is $75 per unit.
Geothermal heat pumps that have an EER of at least 21.
The maximum credit is $250 per unit.
With the exception of wind energy property, if less than
80 percent of the property is used for nonbusiness purposes,
only that portion of expenditures that is used for nonbusiness
purposes is taken into account.
Effective date.--The credit applies to purchases after
December 31, 2002, and before January 1, 2008.
CONFERENCE AGREEMENT
The conference agreement generally follows the House bill
with respect to residential solar and photovoltaic property.
With respect to wind energy property, the conference agreement
follows the Senate amendment with two modifications. First, the
credit rate is reduced to 15 percent. Second, with respect to
property a portion of which is used in business, the taxpayer
may choose either to claim the personal credit, or to claim
depreciation for the business use portion of the property, but
not both. The conference agreement clarifies that the $2,000
credit cap that applies to solar, photovoltaic, and wind energy
property applies across all taxable years. Thus, with respect
to a given dwelling, a taxpayer can claim at most $2,000 in
credits for solar water heating property, $2,000 for
photovoltaic property, and $2,000 for wind energy property. The
conference agreement also clarifies that no section 45 credit
may be claimed with respect to any electricity produced from
property for which a residential energy efficient property
credit has been claimed.
The conference agreement does not follow the Senate
amendment with respect to all other energy efficient property.
It is intended under the conference agreement that
availability of the credit for photovoltaic and wind energy
property would not be impacted by any net-metering or net-
billing arrangements under which the taxpayer sells excess
electricity back to a utility. It is also intended that
expenditures for labor costs properly allocable to the onsite
preparation, assembly, or original installation of qualifying
property and for piping or wiring to interconnect such property
to the dwelling unit can be taken into account for determining
the amount of the credit.
Effective date.--The credit applies to purchases in
taxable years ending after December 31, 2003, and before
January 1, 2007 (January 1, 2009, in the case of qualified
photovoltaic property).
2. Credit for electricity produced from certain sources (sec. 41002 of
the House bill, secs. 1901, 1902, 1903, 1904, 1905, and 1906 of
Senate amendment, and sec. 45 of the Code)
PRESENT LAW
An income tax credit is allowed for the production of
electricity from either qualified wind energy, qualified
``closed-loop'' biomass, or qualified poultry waste facilities
(sec. 45). The amount of the credit is 1.5 cents per kilowatt-
hour (indexed for inflation) of electricity produced. The
amount of the credit is 1.8 cents per kilowatt-hour for 2003.
The credit is reduced for grants, tax-exempt bonds, subsidized
energy financing, and other credits.
The credit applies to electricity produced by a wind
energy facility placed in service after December 31, 1993, and
before January 1, 2004, to electricity produced by a closed-
loop biomass facility placed in service after December 31,
1992, and before January 1, 2004, and to a poultry waste
facility placed in service after December 31, 1999, and before
January 1, 2004. The credit is allowable for production during
the 10-year period after a facility is originally placed in
service. In order to claim the credit, a taxpayer must own the
facility and sell the electricity produced by the facility to
an unrelated party. In the case of a poultry waste facility,
the taxpayer may claim the credit as a lessee/operator of a
facility owned by a governmental unit.
HOUSE BILL
Extension of placed in service date for existing facilities
The House bill extends the placed in service date for
wind facilities and closed-loop biomass facilities to
facilities placed in service after December 31, 1993 (December
31, 1992, in the case of closed-loop biomass facilities) and
before January 1, 2007. The House bill does not extend the
placed in service date for poultry waste facilities.
Additional qualifying facilities
The House bill also defines three new qualifying
facilities: open-loop biomass facilities, landfill gas
facilities, and trash combustion facilities. Open-loop biomass
is defined as any solid, nonhazardous, cellulosic waste
material which is segregated from other waste materials and
which is derived from any of forest-related resources, solid
wood waste materials, or agricultural sources. Landfill gas is
defined as methane gas derived from the biodegradation of
municipal solid waste. Trash combustion facilities are
facilities that burn municipal solid waste (garbage) to produce
steam to drive a turbine for the production of electricity.
Qualifying open-loop biomass facilities and qualifying landfill
gas facilities include facilities used to produce electricity
placed in service before January 1, 2007. Qualifying trash
combustion facilities include facilities placed in service
after the date of enactment and before January 1, 2007.
In the case of qualifying open-loop biomass facilities
and qualifying landfill gas facilities placed in service on or
before the date of enactment, the taxpayer may claim the
section 45 production credit for only five years, commencing on
the date of enactment. In the case of qualifying open-loop
biomass facilities and qualifying landfill gas facilities
placed in service on or before the date of enactment, the
taxpayer may claim two-thirds of the otherwise allowable credit
for electricity produced at the facility.
Credit claimants and treatment of other subsidies
In the case of qualifying open-loop biomass facilities
originally placed in service on or before the date of
enactment, a lessee or operator may claim the credit in lieu of
the owner of the qualifying facility. In addition, for such
facilities, any reduction in credit by reason of grants, tax-
exempt bonds, subsidized energy financing, and other credits
cannot exceed 50 percent.
Alternative minimum tax
In the case of wind facilities placed in service after
the date of enactment, the taxpayer may claim credit for
electricity production against both the taxpayer's regular tax
and the taxpayer's alternative minimum tax, if any, for
electricity produced during the first four years of production
measured from the date on which the facility is placed in
service.
No facility that previously claimed or currently claims
credit under section 29 of the Code is a qualifying facility
for purposes of section 45.
Effective date.--The provision is effective for
electricity sold from qualifying facilities after the date of
enactment.
SENATE AMENDMENT
Extension of placed in service date for existing facilities
The Senate amendment extends the placed in service date
for wind facilities, closed-loop biomass facilities, and
poultry waste facilities to facilities placed in service after
December 31, 1993 (December 31, 1992, in the case of closed-
loop biomass facilities and December 31, 1999, in the case of
poultry waste facilities) and before January 1, 2007.
Additional qualifying facilities
The Senate amendment also defines seven new qualifying
energy resources: open-loop biomass, swine and bovine waste
nutrients, geothermal energy, solar energy, municipal
biosolids, recycled sludge, and small irrigation.
Open-loop biomass is defined as any solid, nonhazardous,
cellulosic waste material which is segregated from other waste
materials and which is derived from any of forest-related
resources, solid wood waste materials, or agricultural sources.
Eligible forest-related resources are mill residues,
precommercial thinnings, slash, and brush, but not including
old-growth timber (other than old growth timber that has been
permitted or contracted for removal by appropriate Federal
authority under the National Environmental Policy Act or
appropriate State law authority). Solid wood waste materials
include waste pallets, crates, dunnage, manufacturing and
construction wood wastes (other than pressure-treated,
chemically-treated, or painted wood wastes), and landscape or
right-of-way tree trimmings. Agricultural sources include
orchard tree crops, vineyard, grain, legumes, sugar, and other
crop by-products or residues. However, qualifying open-loop
biomass does not include municipal solid waste (garbage), gas
derived from biodegradation of solid waste, or paper that is
commonly recycled.
Swine and bovine waste nutrients are defined as swine and
bovine manure and litter, including bedding material for the
disposition of manure.
Geothermal energy is energy derived from a geothermal
deposit which is a geothermal reservoir consisting of natural
heat which is stored in rocks or in an aqueous liquid or vapor
(whether or not under pressure).
Municipal biosolids are the residue or solids removed by
a municipal wastewater treatment facility.
Recycled sludge is the recycled residue byproduct created
in the treatment of commercial, industrial, municipal, or
navigational wastewater, but not including residues from
incineration.
A small irrigation power facility is a facility that
generates electric power through an irrigation system canal or
ditch without any dam or impoundment of water. The installed
capacity of a qualified facility is less than five megawatts.
Qualifying open-loop biomass facilities are facilities
using open-loop biomass to produce electricity that are placed
in service prior to January 1, 2005. Qualifying swine and
bovine waste nutrient facilities are facilities using swine and
bovine waste nutrients to produce electricity that are placed
in service after the date of enactment and before January 1,
2007. Qualifying geothermal energy facilities are facilities
using geothermal deposits to produce electricity that are
placed in service after the date of enactment and before
January 1, 2007. Qualifying solar energy facilities are
facilities using solar energy to generate electricity that are
placed in service after the date of enactment and before
January 1, 2007. Qualifying municipal biosolids facilities are
facilities using municipal biosolids to generate electricity
that are originally placed in service after December 31, 2001,
and before January 1, 2007. Qualifying recycled sludge
facilities are facilities using recycled sludge to generate
electricity that are originally placed in service before
January 1, 2007. Qualifying small irrigation power facilities
are facilities using small irrigation power systems to generate
electricity that are originally placed in service after the
date of enactment and before January 1, 2007.
In the case of qualifying open-loop biomass facilities,
taxpayers may claim the otherwise allowable credit for a three-
year period. For a facility placed in service after the date of
enactment, the three-year period commences when the facility is
placed in service. In the case of open-loop biomass facility
originally placed in service before the date of enactment, the
three-year period commences after December 31, 2002, and the
otherwise allowable 1.5 cent-per-kilowatt-hour credit (adjusted
for inflation) is reduced to 1.0 cent-per-kilowatt-hour credit
(adjusted for inflation). In the case of qualifying geothermal
energy and solar energy facilities, taxpayers may claim the
otherwise allowable credit for the five-year period commencing
when the facility is placed service. In the case of electricity
generated from a recycled sludge facility the 10-year credit
period shall begin no earlier than the date of enactment.
In addition, the Senate amendment modifies present law to
provide that qualifying closed-loop biomass facilities include
any facility originally placed in service before December 31,
1992 and modified to use closed-loop biomass to co-fire with
coal before January 1, 2007. The taxpayer may claim credit for
all electricity produced at such qualifying facilities with no
reduction for the thermal value of the coal.
Credit claimants and treatment of other subsidies
In the case of qualifying open-loop biomass facilities
and qualifying closed-loop biomass facilities modified to use
closed-loop biomass to co-fire with coal, the Senate amendment
permits a lessee operator to claim the credit in lieu of the
owner of the facilities.
The Senate amendment provides that certain persons
(public utilities, electric cooperatives, rural electric
cooperatives, and Indian tribes) may sell, trade, or assign to
any taxpayer any credits that would otherwise be allowable to
that person, if that person were a taxpayer, for production of
electricity from a qualified facility owned by such person.
However, any credit sold, traded, or assigned may only be sold,
traded, or assigned once. Subsequent trades are not permitted.
In addition, any credits that would otherwise be allowable to
such person, to the extent provided by the Administrator of the
Rural Electrification Administration, may be applied as a
prepayment to certain loans or obligations undertaken by such
person under the Rural Electrification Act of 1936.
The Senate amendment repeals the present-law reduction in
allowable credit for facilities financed with tax-exempt bonds
or with certain loans received under the Rural Electrification
Act of 1936.
Effective date.--The Senate amendment generally is
effective for electricity sold from qualifying facilities after
the date of enactment. For electricity produced from qualifying
open-loop biomass facilities originally placed in service prior
to the date of enactment, the provision is effective January 1,
2003.
CONFERENCE AGREEMENT
Extension of placed in service date for existing facilities
The conference agreement extends the placed in service
date for wind facilities and closed-loop biomass facilities to
facilities placed in service after December 31, 1993 (December
31, 1992, in the case of closed-loop biomass facilities) and
before January 1, 2007.
Under the conference agreement, qualifying closed-loop
biomass facilities include any facility originally placed in
service before December 31, 1992, and modified to use closed-
loop biomass to co-fire with coal, to co-fire with other
biomass, or to co-fire with coal and other biomass before
January 1, 2007. The taxpayer may claim credit for electricity
produced at such qualifying facilities with the credit amount
equal to the otherwise allowable credit multiplied by the ratio
of the thermal content of the closed-loop biomass fuel burned
in the facility to the thermal content of all fuels burned in
the facility.
Additional qualifying resource and facilities
The conference agreement also defines five new qualifying
resources: open-loop biomass (including agricultural livestock
waste nutrients), geothermal energy, solar energy, small
irrigation power, and municipal solid waste. Two different
qualifying facilities use municipal solid waste as a qualifying
resource: landfill gas facilities and trash combustion
facilities.
Qualifying open-loop biomass facilities are facilities
using biomass to produce electricity that are placed in service
prior to January 1, 2007. Qualifying agricultural livestock
waste nutrient facilities are facilities using agricultural
livestock waste nutrients to produce electricity that are
placed in service after the date of enactment and before
January 1, 2007.\1\ The installed capacity of a qualified
agricultural livestock waste nutrient facility is not less than
150 kilowatts.
---------------------------------------------------------------------------
\1\ The provision deletes poultry litter as a separate qualifying
facility for facilities placed in service after the effective date.
Poultry litter facilities remain qualifying facilities as agricultural
waste nutrient facilities. Any poultry litter facility placed in
service on or prior to December 31, 2003, is unaffected by the
modifications made by this provision. For example, the value of the
credit that may be claimed for production from such a facility would
not be reduced by one-third as would be the case for other animal waste
nutrient facilities.
---------------------------------------------------------------------------
Qualifying geothermal energy facilities are facilities
using geothermal deposits to produce electricity that are
placed in service after the date of enactment and before
January 1, 2007. Qualifying solar energy facilities are
facilities using solar energy to generate electricity that are
placed in service after the date of enactment and before
January 1, 2007. A qualifying geothermal energy facility or
solar energy facility may not have claimed any credit under
sec. 48 of the Code.\2\
---------------------------------------------------------------------------
\2\ If a geothermal facility or solar facility claims credit for
any year under section 45 of the Code, the facility is precluded from
claiming any investment credit under section 48 of the Code in the
future.
---------------------------------------------------------------------------
A qualified small irrigation power facility is a facility
originally placed in service after the date of enactment and
before January 1, 2007. A small irrigation power facility is a
facility that generates electric power through an irrigation
system canal or ditch without any dam or impoundment of water.
The installed capacity of a qualified facility is not less than
150 kilowatts and less than five megawatts.
Landfill gas is defined as methane gas derived from the
biodegradation of municipal solid waste. Trash combustion
facilities are facilities that burn municipal solid waste
(garbage) to produce steam to drive a turbine for the
production of electricity. Qualifying landfill gas facilities
and qualifying trash combustion facilities include facilities
used to produce electricity placed in service after the date of
enactment and before January 1, 2007.
Credit period and credit rates
In general, as under present law, taxpayers may claim the
credit at a rate of 1.5 cents per kilowatt-hour (indexed for
inflation and currently 1.8 cents per kilowatt-hour) for 10
years of production commencing on the date the facility is
placed in service. In the case of open-loop biomass facilities
(including agricultural livestock waste nutrients), geothermal
energy, solar energy, small irrigation power, landfill gas
facilities, and trash combustion facilities the 10-year credit
period is reduced to five years commencing on the date the
facility is placed in service. In general, for facilities
placed in service prior to January 1, 2004, the credit period
commences on January 1, 2004. In the case of closed-loop
biomass facilities modified to co-fire with coal, to co-fire
with other biomass, or to co-fire with coal and other biomass,
the credit period shall begin no earlier than the date of
enactment.
In the case of open-loop biomass facilities (including
agricultural livestock waste nutrients), small irrigation
power, landfill gas facilities, and trash combustion
facilities, the otherwise allowable credit amount is reduced by
one-third.
Credit claimants and treatment of other subsidies
A lessee or operation may claim the credit in lieu of the
owner of the qualifying facility in the case of qualifying
open-loop biomass facilities originally placed in service on or
before the date of enactment and in the case of a closed-loop
biomass facilities modified to co-fire with coal, to co-fire
with other biomass, or to co-fire with coal and other biomass.
In addition, for all qualifying facilities, other than
closed-loop biomass facilities modified to co-fire with coal,
to co-fire with other biomass, or to co-fire with coal and
other biomass, any reduction in credit by reason of grants,
tax-exempt bonds, subsidized energy financing, and other
credits cannot exceed 50 percent. In the case of closed-loop
biomass facilities modified to co-fire with coal, to co-fire
with other biomass, or to co-fire with coal and other biomass,
there is no reduction in credit by reason of grants, tax-exempt
bonds, subsidized energy financing, and other credits.
No facility that previously claimed or currently claims
credit under section 45K of the Code (as amended by the
conference agreement) \3\ is a qualifying facility for purposes
of section 45.
---------------------------------------------------------------------------
\3\ The conference agreement modifies present-law section 29 as
described below and moves present-law section 29 to new Code section
45K.
---------------------------------------------------------------------------
Alternative minimum tax
In the case of qualifying facilities placed in service
after the date of enactment, the taxpayer may claim credit for
electricity production against both the taxpayer's regular tax
and the taxpayer's alternative minimum tax, if any, for
electricity produced during the first four years of production
measured from the date on which the facility is placed in
service.
GAO study
The conference agreement directs the Comptroller General
of the United States to conduct a study of the market viability
of producing electricity from resources qualifying for the
section 45 production credit (as amended by the conference
agreement). The conferees seek a comparison of the cost of
producing electricity from the various qualifying resources
compared to the cost of producing electricity from fossil fuels
(i.e., coal, oil, and natural gas) using the latest generation
of production technology currently in service in the United
States. The cost of producing electricity should be reported,
on a per kilowatt-hour basis, both as the incremental cost of
production from a facility and on a fully-amortized cost basis
assuming capital costs are amortized over the useful life of
the property. In the case of facilities using open-loop biomass
and municipal solid waste resources, the measurement of costs
should take into account the avoided costs of waste disposal
for which taxpayers otherwise would be responsible. The study
is to estimate the dollar value of the environmental impact of
producing electricity from qualifying resources compared to
fossil fuels. The Comptroller General is to report his findings
to the Committee on Ways and Means and Committee on Finance not
later than June 30, 2006.
Effective date.--The provision is effective for
electricity produced and sold from qualifying facilities after
the date of enactment.
3. Tax incentives for fuel cells (sec. 41003 of the House bill, secs.
2103 and 2104 of the Senate amendment, and sec. 48 and new sec.
25C of the Code)
PRESENT LAW
A nonrefundable, 10-percent business energy credit is
allowed for the cost of new property that is equipment (1) that
uses solar energy to generate electricity, to heat or cool a
structure, or to provide solar process heat, or (2) used to
produce, distribute, or use energy derived from a geothermal
deposit, but only, in the case of electricity generated by
geothermal power, up to the electric transmission stage.
The business energy tax credits are components of the
general business credit (sec. 38(b)(1)). The business energy
tax credits, when combined with all other components of the
general business credit, generally may not exceed for any
taxable year the excess of the taxpayer's net income tax over
the greater of (1) 25 percent of net regular tax liability
above $25,000 or (2) the tentative minimum tax. For credits
arising in taxable years beginning after December 31, 1997, an
unused general business credit generally may be carried back
one year and carried forward 20 years (sec. 39).
A taxpayer may exclude from income the value of any
subsidy provided by a public utility for the purchase or
installation of an energy conservation measure. An energy
conservation measure means any installation or modification
primarily designed to reduce consumption of electricity or
natural gas or to improve the management of energy demand with
respect to a dwelling unit (sec. 136).
There is no present-law credit for stationary fuel cell
power plant property.
HOUSE BILL
The provision provides a 10-percent credit for the
purchase of qualified fuel cell power plants for businesses and
individuals. A qualified fuel cell power plant is an integrated
system comprised of a fuel cell stack assembly and associated
balance of plant components that converts a fuel into
electricity using electrochemical means, and which has an
electricity-only generation efficiency of greater than 30
percent. The credit may not exceed $500 for each 0.5 kilowatt
of capacity. For individuals, the qualified fuel cell power
plant must be installed on or in connection with a dwelling
unit located in the United States and used by the taxpayer as a
residence. The credit is nonrefundable. The taxpayer's basis in
the property is reduced by the amount of the credit claimed.
Effective date.--The credit for businesses applies to
property placed in service after December 31, 2003, and before
January 1, 2007, under rules similar to rules of section 48(m)
of the Internal Revenue Code of 1986 (as in effect on the day
before the date of enactment of the Revenue Reconciliation Act
of 1990). The credit for individuals applies to expenditures
made after December 31, 2003, and before January 1, 2007.
SENATE AMENDMENT
The Senate amendment provides a 30-percent business
energy credit for the purchase of qualified fuel cell power
plants for businesses. A qualified fuel cell power plant is an
integrated system comprised of a fuel cell stack assembly and
associated balance of plant components that converts a fuel
into electricity using electrochemical means, and which has an
electricity-only generation efficiency of greater than 30
percent and generates at least 500 watts of electricity. The
credit for any fuel cell may not exceed $500 for each kilowatt
of capacity. The taxpayer's basis in the property is reduced by
the amount of the credit claimed.
The proposal also provides a 30-percent credit for
individuals for the purchase of qualified fuel cell power
plants. The credit for any fuel cell may not exceed $1,000 for
each kilowatt of capacity. The qualified fuel cell power plant
must be installed on or in connection with a dwelling unit
located in the United States and used by the taxpayer as a
principal residence.
Additionally, the Senate amendment provides a 10-percent
credit for the purchase of qualifying stationary microturbine
power plants. A qualified stationary microturbine power plant
is a system comprising a rotary engine that is actuated by the
aerodynamic reaction or impulse or both on radial or axial
curved full-circumferential-admission airfoils on a central
axial rotating spindle. Such system must have an electricity-
only generation efficiency of not less that 26 percent at
International Standard Organization conditions. The credit is
limited to the lesser of 10 percent of the basis of the
property or $200 for each kilowatt of capacity.
Effective date.--The credit for businesses applies to
property placed in service after December 31, 2002, and before
January 1, 2008 (January 1, 2007, in the case of
microturbines), under rules similar to rules of section 48(m)
of the Internal Revenue Code of 1986 (as in effect on the day
before the date of enactment of the Revenue Reconciliation Act
of 1990). The credit for individuals applies to expenditures
made after December 31, 2002, and before January 1, 2008.
CONFERENCE AGREEMENT
The conference agreement follows the House bill with the
modification that the credit rate is increased to 20 percent.
Effective date.--The provision applies to periods after
December 31, 2003, under rules similar to rules of section
48(m) of the Internal Revenue Code of 1986 (as in effect on the
day before the date of enactment of the Revenue Reconciliation
Act of 1990), for property placed in service before January 1,
2007. The credit for individuals applies to expenditures made
after December 31, 2003, and before January 1, 2007.
4. Energy efficient improvements to existing homes (secs. 41004 of the
House bill, sec. 2109 of the Senate amendment, and new sec. 25D
of the Code)
PRESENT LAW
A taxpayer may exclude from income the value of any
subsidy provided by a public utility for the purchase or
installation of an energy conservation measure. An energy
conservation measure means any installation or modification
primarily designed to reduce consumption of electricity or
natural gas or to improve the management of energy demand with
respect to a dwelling unit (sec. 136).
There is no present law credit for energy efficiency
improvements to existing homes.
HOUSE BILL
The provision provides a 20-percent nonrefundable credit
for the purchase of qualified energy efficiency improvements.
The maximum credit for a taxpayer with respect to the same
dwelling for all taxable years is $2,000. A qualified energy
efficiency improvement is any energy efficiency building
envelope component that is certified (in the case of
expenditures that exceed $1,000) to meet or exceed the
prescriptive criteria for such a component established by the
2000 International Energy Conservation Code (or, in the case of
metal roofs with appropriate pigmented coatings, meets the
Energy Star program requirements), and (1) that is installed in
or on a dwelling located in the United States; (2) owned and
used by the taxpayer as the taxpayer's principal residence; (3)
the original use of which commences with the taxpayer; and (4)
such component reasonably can be expected to remain in use for
at least five years.
Building envelope components are: (1) insulation
materials or systems which are specifically and primarily
designed to reduce the heat loss or gain for a dwelling; (2)
exterior windows (including skylights) and doors; and (3) metal
roofs with appropriate pigmented coatings which are
specifically and primarily designed to reduce the heat loss or
gain for a dwelling.
The taxpayer's basis in the property is reduced by the
amount of the credit. Special rules apply in the case of
condominiums and tenant-stockholders in cooperative housing
corporations.
Any unused credit may be carried forward to future years.
Effective date.--The credit is effective for qualified
energy efficiency improvements installed after December 31,
2003 and before January 1, 2007.
SENATE AMENDMENT
The provision provides a 10-percent nonrefundable credit
for the purchase of qualified energy efficiency improvements.
The maximum credit for a taxpayer with respect to the same
dwelling for all taxable years is $300. A qualified energy
efficiency improvement is any energy efficiency building
envelope component that is certified to meet or exceed the
prescriptive criteria for such a component established by the
2000 International Energy Conservation Code, or any combination
of energy efficiency measures that is certified to achieve at
least a 30 percentreduction in heating and cooling energy usage
for the dwelling and (1) that is installed in or on a dwelling located
in the United States; (2) that is owned and used by the taxpayer as the
taxpayer's principal residence; (3) the original use of which commences
with the taxpayer; and (4) such component can reasonably be expected to
remain in use for at least five years.
Building envelope components are: (1) insulation
materials or systems which are specifically and primarily
designed to reduce the heat loss or gain for a dwelling; and
(2) exterior windows (including skylights) and doors.
Homes must be certified according to a component-based
method or a performance-based method. The component-based
method is based on applicable energy-efficiency ratings,
including current product labeling requirements. The
performance-based method is based on a comparison of the
projected energy consumption of the dwelling in its original
condition and after the completion of energy efficiency
measures. The performance-based method of certification must be
conducted by an individual or organization recognized by the
Secretary for such purposes.
The certification process requires that energy savings to
the consumer be measured in terms of energy costs. To ensure
consistent and reasonable energy cost analyses, the Department
of Energy shall include in its rulemaking related to this bill
specific reference data to be used for qualification for the
credit.
The taxpayer's basis in the property is reduced by the
amount of the credit. Special rules apply in the case of
condominiums and tenant-stockholders in cooperative housing
corporations.
The credit is allowed against the regular and alternative
minimum tax.
Effective date.--The credit is effective for qualified
energy efficiency improvements installed on or after the date
of enactment and before January 1, 2006.
CONFERENCE AGREEMENT
The conference agreement generally follows the House bill
with the modification that the credit may not be carried
forward. Additionally, the efficiency is to be measured
relative to the 2000 IECC standards as supplemented and as in
effect on the date of enactment.
Effective date.--The credit is effective for qualified
energy efficiency improvements installed after December 31,
2003, and before January 1, 2007.
5. Energy efficient new homes (sec. 41005 of the House bill, sec. 2101
of the Senate amendment, and new sec. 45G of the Code)
PRESENT LAW
A nonrefundable, 10-percent business energy credit is
allowed for the cost of new property that is equipment (1) that
uses solar energy to generate electricity, to heat or cool a
structure, or to provide solar process heat, or (2) used to
produce, distribute, or use energy derived from a geothermal
deposit, but only, in the case of electricity generated by
geothermal power, up to the electric transmission stage.
The business energy tax credits are components of the
general business credit (sec. 38(b)(1)). The business energy
tax credits, when combined with all other components of the
general business credit, generally may not exceed for any
taxable year the excess of the taxpayer's net income tax over
the greater of (1) 25 percent of net regular tax liability
above $25,000 or (2) the tentative minimum tax. For credits
arising in taxable years beginning after December 31, 1997, an
unused general business credit generally may be carried back
one year and carried forward 20 years (sec. 39).
A taxpayer may exclude from income the value of any
subsidy provided by a public utility for the purchase or
installation of an energy conservation measure. An energy
conservation measure means any installation or modification
primarily designed to reduce consumption of electricity or
natural gas or to improve the management of energy demand with
respect to a dwelling unit (sec. 136).
There is no present-law credit for the construction of
new energy-efficient homes.
HOUSE BILL
The provision provides a credit to an eligible contractor
(up to $2,000 per dwelling) of an amount equal to the aggregate
adjusted bases of all energy-efficient property installed in a
qualified new energy-efficient home during construction.
The eligible contractor is the person who constructs the
home, or in the case of a manufactured home, the producer of
such home. Energy efficiency property is any energy-efficient
building envelope component (insulation materials, exterior
windows and doors, metal roofs with appropriate pigmented
coatings) and any energy-efficient heating or cooling
appliance.
To qualify as an energy-efficient new home, the home must
be: (1) a dwelling located in the United States; (2) the
principal residence of the person who acquires the dwelling
from the eligible contractor; (3) certified to have a level of
annual heating and cooling energy consumption that is at least
30 percent below the annual level of heating and cooling energy
consumption of a comparable dwelling constructed in accordance
with the standards of the 2000 International Energy
Conservation Code; and (4) with respect to the building
envelope alone, certified to have a level of annual heating and
cooling energy consumption that is 10 percent below the annual
level of heating and cooling energy consumption of a comparable
dwelling constructed in accordance with the standards of the
2000 International Energy Conservation Code.
Effective date.--The credit applies to homes whose
construction is substantially completed after December 31,
2003, and which are purchased during the period beginning on
January 1, 2003, and ending on December 31, 2006.
SENATE AMENDMENT
The proposal provides a credit to an eligible contractor
of an amount equal to the aggregate adjusted bases of all
energy-efficient property installed in a qualified new energy-
efficient home during construction. The credit cannot exceed
$1,250 ($2,000) in the case of a new home which has a projected
level of annual heating and cooling costs that is 30 percent
(50 percent) less than a comparable dwelling constructed in
accordance with Chapter 4 of the 2000 International Energy
Conservation Code.
The eligible contractor is the person who constructed the
home, or in the case of a manufactured home, the producer of
such home. Energy efficiency property is any energy-efficient
building envelope component (insulation materials or system
designed to reduce heat loss or gain, and exterior windows,
including skylights, and doors) and any energy-efficient
heating or cooling appliance that can, individually or in
combination with other components, meet the standards for the
home.
To qualify as an energy-efficient new home, the home must
be: (1) a dwelling located in the United States; (2) the
principal residence of the person who acquires the dwelling
from the eligible contractor; and (3) certified to have a
projected level of annual heating and cooling energy
consumption that is either 30-percent or 50-percent less than a
comparable dwelling constructed in accordance with Chapter 4 of
the 2000 International Energy Conservation Code. The home may
be certified according to a component-based method or an energy
performance based method. Manufactured homes that meet the
standards of the Department of Energy's Energy Star program are
deemed to satisfy the 30-percent energy efficiency standard.
The component-based method of certification will be based
on applicable energy-efficiency specifications or ratings,
including current product labeling requirements. The Secretary
will develop component-based packages that are equivalent in
energy performance to properties that qualify for the credit.
The performance-based method of certification will be
based on an evaluation of the home in reference to a home which
uses the same energy source and system heating type, and is
constructed in accordance with the Chapter 4 of the 2000
International Energy Conservation Code. The certification will
be provided by an individual recognized by the Secretary for
such purposes.
The certification process requires that energy savings to
the consumer be measured in terms of energy costs. To ensure
consistent and reasonable energy cost analyses, the Department
of Energy will include in its rulemaking related to this bill
specific reference data to be used for qualification for the
credit.
The credit will be part of the general business credit.
No credits attributable to energy efficient homes may be
carried back to any taxable year ending on or before the
effective date of the credit.
Effective date.--The credit applies to homes whose
construction is substantially completed after the date of
enactment and which are purchased during the period beginning
on the date of enactment and ending on December 31, 2007.
CONFERENCE AGREEMENT
The conference agreement generally follows the House bill
with modifications. The requirement that the qualified new
energy efficient home be used as the principal residence of the
person acquiring the home is modified to provide that the
contractor reasonably expect such home to be used as a
residence of the person who acquires the home from the
contractor. The credit amount is limited to $1,000 for new
homes that are 30 percent more efficient than the 2000 IECC
standards, as supplemented and as in effect on the date of
enactment. The credit amount is limited to $2,000 for new homes
that are 50 percent more efficient than the 2000 IECC
standards, as supplemented and as in effect on the date of
enactment. With respect to the building envelope alone, all
qualifying new homes must be at least 10 percent more efficient
than the 2000 IECC standard as supplemented and as in effect on
the date of enactment. Additionally, the conference agreement
includes the Senate amendment provision with respect to Energy
Star manufactured homes, though the credit is limited to
$1,000.
Certification requirements are to be met in accordance
with guidance prescribed by the Secretary of the Treasury. Such
guidance shall specify procedures and methods for calculating
energy and cost savings. It is expected that such guidance will
allow for third-party certification, but will also allow the
eligible contractor to meet the certification requirements
without necessarily involving a third-party certifier. It is
also expected that such guidance will provide sufficient
safeguards to ensure that only homes meeting the required
standards will obtain certification.
The certification shall be made in writing in a manner
which specifies the energy efficient building envelope
components and energy efficient heating or cooling equipment
installed and their respective energy efficiency performance.
In the case of homes qualifying under the Energy Star program,
the certification shall be accompanied by documentation as
required by the Administrator of the Environmental Protection
Agency under the Energy Star Labeled Homes program.
The credit is treated as part of the general business
credit and, under a special transition rule, may not be carried
back to a taxable year ending before or on the effective date
of the provision.
Effective date.--The credit applies to homes whose
construction is substantially completed after December 31,
2003, and which are purchased during the period beginning on
January 1, 2004, and ending on December 31, 2006.
6. Energy credit for combined heat and power system property (sec.
41006 of the House bill, sec. 2108 of the Senate amendment, and
sec. 48 of the Code)
PRESENT LAW
A nonrefundable, 10-percent business energy credit is
allowed for the cost of new property that is equipment (1) that
uses solar energy to generate electricity, to heat or cool a
structure, or to provide solar process heat, or (2) used to
produce, distribute, or use energy derived from a geothermal
deposit, but only, in the case of electricity generated by
geothermal power, up to the electric transmission stage.
The business energy tax credits are components of the
general business credit (sec. 38(b)(1)). The business energy
tax credits, when combined with all other components of the
general business credit, generally may not exceed for any
taxable year the excess of the taxpayer's net income tax over
the greater of (1) 25 percent of net regular tax liability
above $25,000 or (2) the tentative minimum tax. For credits
arising in taxable years beginning after December 31, 1997, an
unused general business credit generally may be carried back
one year and carried forward 20 years (sec. 39).
A taxpayer may exclude from income the value of any
subsidy provided by a public utility for the purchase or
installation of an energy conservation measure. An energy
conservation measure means any installation or modification
primarily designed to reduce consumption of electricity or
natural gas or to improve the management of energy demand with
respect to a dwelling unit (sec. 136).
There is no present-law credit for combined heat and
power (``CHP'') property.
HOUSE BILL
The provision provides a 10-percent credit for the
purchase of CHP property.
CHP property is property: (1) that uses the same energy
source for the simultaneous or sequential generation of
electrical power, mechanical shaft power, or both, in
combination with the generation of steam or other forms of
useful thermal energy (including heating and cooling
applications); (2) that has an electrical capacity of more than
50 kilowatts or a mechanical energy capacity of more than 67
horsepower or an equivalent combination of electrical and
mechanical energy capacities; (3) that produces at least 20
percent of its total useful energy in the form of thermal
energy and at least 20 percent in the form of electrical or
mechanical power (or a combination thereof); and (4) the energy
efficiency percentage of which exceeds 60 percent (70 percent
in the case of a system with an electrical capacity in excess
of 50 megawatts or a mechanical energy capacity in excess of
67,000 horsepower, or an equivalent combination of electrical
and mechanical capacities.)
CHP property does not include property used to transport
the energy source to the generating facility or to distribute
energy produced by the facility.
If a taxpayer is allowed a credit for CHP property, and
the property would ordinarily have a depreciation class life of
15 years or less, the depreciation period for the property is
treated as having a 22-year class life. The present-law carry
back rules of the general business credit generally apply
except that no credits attributable to combined heat and power
property may be carried back before the effective date of this
provision.
Effective date.--The credit applies to property placed in
service after December 31, 2003 and before January 1, 2007.
SENATE AMENDMENT
The Senate amendment is similar to the House bill.
However, for purposes of determining whether CHP property
includes technologies which generate electricity or mechanical
power using back-pressure steam turbines in place of existing
pressure-reducing valves, or which make use of waste heat from
industrial processes such as by using organic rankine,
stirling, or kalina heat engine systems, the energy output
requirements related to heat versus power described under (3),
above, and the energy efficiency requirements of (4), above,
may be disregarded.
Effective date.--The credit applies to property placed in
service after December 31, 2002 and before January 1, 2007.
CONFERENCE AGREEMENT
The conference agreement follows the House bill with
modifications. The first modification removes the minimum
system size requirement and limits the availability of the
credit to systems with capacity less than 15 megawatts or 2,000
horsepower. The second modification eliminates the extension of
the depreciation period from 15 to 22 years. The third
modification is that systems whose fuel source is at least 90
percent bagasse and that would qualify for the credit, but for
the failure to meet the efficiency standard, are eligible for a
credit that is reduced in proportion to the degree to which the
system fails to meet the efficiency standard. For example, a
system that would otherwise be required to meet the 60-percent
efficiency standard, but which only achieves 30-percent
efficiency, would be permitted a credit equal to one-half of
the otherwise allowable credit (i.e., a 5-percent credit).
The credit may not be carried back to a taxable year
ending before January 1, 2004.
Effective date.--The provision applies to periods after
December 31, 2003, in taxable years ending after such date,
under rules similar to rules of section 48(m) of the Internal
Revenue Code of 1986 (as in effect on the day before the date
of enactment of the Revenue Reconciliation Act of 1990), for
property placed in service before January 1, 2007.
7. Energy efficient appliances (sec. 2102 of the Senate amendment and
new sec. 45H of the Code)
PRESENT LAW
A nonrefundable, 10-percent business energy credit is
allowed for the cost of new property that is equipment: (1)
that uses solar energy to generate electricity, to heat or cool
a structure, or to provide solar process heat; or (2) used to
produce, distribute, or use energy derived from a geothermal
deposit, but only, in the case of electricity generated by
geothermal power, up to the electric transmission stage.
The business energy tax credits are components of the
general business credit (sec. 38(b)(1)). The business energy
tax credits, when combined with all other components of the
general business credit, generally may not exceed for any
taxable year the excess of the taxpayer's net income tax over
the greater of: (1) 25 percent of net regular tax liability
above $25,000 or (2) the tentative minimum tax. For credits
arising in taxable years beginning after December 31, 1997, an
unused general business credit generally may be carried back
one year and carried forward 20 years (sec. 39).
A taxpayer may exclude from income the value of any
subsidy provided by a public utility for the purchase or
installation of an energy conservation measure. An energy
conservation measure means any installation or modification
primarily designed to reduce consumption of electricity or
natural gas or to improve the management of energy demand with
respect to a dwelling unit (sec. 136).
There is no present-law credit for the manufacture of
energy-efficient appliances.
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment provides a credit for the production
of certain energy-efficient clothes washers and refrigerators.
The credit would equal $50 per appliance for energy-efficient
clothes washers produced with a modified energy factor
(``MEF'') of 1.26 or greater and for refrigerators produced
that consume 10 percent less kilowatt-hours per year than the
energy conservation standards promulgated by the Department of
Energy that took effect on July 1, 2001. The credit equals $100
for energy-efficient clothes washers produced with a MEF of
1.42 or greater (1.5 or greater for clothes washers produced
after 2004) and for refrigerators produced that consume 15
percent less kilowatt-hours per year than the energy
conservation standards promulgated by the Department of Energy
that took effect on July 1, 2001. A refrigerator must be an
automatic defrost refrigerator-freezer with an internal volume
of at least 16.5 cubic feet to qualify for the credit. A
clothes washer is any residential clothes washer, including a
residential style coin operated washer, that satisfies the
relevant efficiency standard.
For each category of appliances (i.e., clothes washers
that meet the lower MEF standard, washers that meet the higher
MEF standard, refrigerators that meet the 10 percent standard,
refrigerators that meet the 15 percent standard), only
production in excess of average production for each such
category during calendar years 1999-2001 would be eligible for
the credit. The taxpayer may not claim credits in excess of $30
million for all taxable years for appliances that qualify for
the $50 credit, and may not claim credits in excess of $30
million for all taxable years for appliances that qualify for
the $100 credit. Additionally, the credit allowed for all
appliances may not exceed two percent of the average annual
gross receipts of the taxpayer for the three taxable years
preceding the taxable year in which the credit is determined.
The credit will be part of the general business credit.
No credits attributable to energy-efficient appliances may be
carried back to taxable years ending before January 1, 2003.
Effective date.--The credit applies to appliances
produced after December 31, 2002, and prior to (1) January 1,
2005, in the case of refrigerators that only meet the 10
percent credit standard, or (2) January 1, 2007, in the case of
all other qualified energy-efficient appliances.
CONFERENCE AGREEMENT
The conference agreement generally follows the Senate
amendment with modifications. The $50 credit is eliminated for
clothes washers and refrigerators. A credit of $100 is allowed
for refrigerators that consume 15 percent (20 percent for
refrigerators produced after 2006) less kilowatt-hours per year
than the energy conservation standards promulgated by the
Department of Energy that took effect on July 1, 2001. A credit
of $100 is allowed for clothes washers with a MEF of 1.5 or
greater. A credit of $150 is allowed for refrigerators produced
prior to 2007 that consume 20 percent less kilowatt-hours per
year than the energy conservation standards promulgated by the
Department of Energy that took effect on July 1, 2001. The $30
million overall credit limitation for each of two separate
categories of appliances is replaced with a cap of $60 million
across all appliances combined.
The three prior years are the base period years for
calculation of the credit for any specific year. To qualify for
any credit, production must exceed 110 percent of the average
annual production in the base period years. Additionally, in
order to determine if production has exceeded the baseline, all
clothes washers and refrigerators are treated as a single
group, rather than separately by their credit-specific
efficiency standard. For example, if in the base period a
producer produced an average of 1000 refrigerators and clothes
washers combined that would have met the $100 credit standard,
and no refrigerators that would have met the $150 credit
standard, such producer would need to produce a combination of
at least 1100 (110 percent of base period average)
refrigerators or clothes washers that met the efficiency
standards in order to receive any tax credit. Thus, even though
the base period production of refrigerators meeting the $150
credit standard is zero, a producer would not be eligible to
receive a credit for production of such refrigerators unless a
combination of at least 1100 refrigerators or clothes washers
meeting any of the efficiency standards were produced. The
aggregate amount of production eligible for a credit is
allocated between the $100 and $150 credit categories in
proportion to the total production in each credit category.
Only production in the United States is eligible for credit and
only U.S. production is considered for the base-period
production levels.
The credit is treated as part of the general business
credit and, under a special transition rule, may not be carried
back to a taxable year ending before or on the effective date
of the provision.
Effective date.--The credit applies to appliances
produced after December 31, 2003, and before January 1, 2008.
8. Energy efficient commercial building deduction (sec. 2105 of Senate
amendment, and new sec. 179B of the Code)
PRESENT LAW
No special deduction is currently provided for expenses
incurred for energy-efficient commercial building property.
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment provides a deduction equal to
energy-efficient commercial building property expenditures made
by the taxpayer. Energy-efficient commercial building property
expenditures are defined as amounts paid or incurred for
energy-efficient commercial building property installed in
connection with the new construction or reconstruction of
property: (1) which is depreciable property, (2) which is
located in the United States, and (3) the construction or
erection of which is completed by the taxpayer. The deduction
is limited to an amount equal to the product of $2.25 and the
square footage of the property for which such expenditures were
made. The deduction is allowed in the taxable year in which the
construction of the building is completed.
Energy-efficient commercial building property means any
property that reduces total annual energy and power costs with
respect to the lighting, heating, cooling, ventilation, and hot
water supply systems of the building by 50 percent or more in
comparison to a reference building which meets the requirements
of a Standard 90.1-1999 of the American Society of Heating,
Refrigerating, and Air Conditioning Engineers and the
Illuminating Engineering Society of North America (``ASHRAE/
IESNA'').
Certain certification requirements must be met in order
to qualify for the deduction. The Secretary, in consultation
with the Secretary of Energy, is directed to promulgate
regulations that describe methods of calculating and verifying
energy and power costs, taking into consideration the
provisions of the 2001 California Nonresidential Alternative
Calculation Method Approval Manual. To allow proper
calculations of cost, the Secretary shall prescribe the costs
per unit of energy and power, such as kilowatt hour, kilowatt,
gallon of fuel oil, and cubic foot or Btu of natural gas, which
may be dependent on time of usage.
The Secretary shall promulgate procedures for the
inspection and testing for compliance of buildings that are
comparable, given the difference between commercial and
residential buildings, to the requirements in the Mortgage
Industry National Home Energy Rating Standards. Such procedures
are to be fuel neutral, such that the same energy efficiency
features shall qualify a building for the deduction under this
subsection regardless of whether the heating source is a gas or
oil furnace or an electric heat pump. Individuals qualified to
determine compliance shall only be those recognized by one or
more organizations certified by the Secretary for such
purposes.
When final regulations are adopted, such regulations
shall, with respect to methods of calculating and verifying
energy and power costs, take into consideration appropriate
energy savings from design methodologies and technologies not
otherwise credited in ASHRAE/IESNA Standard 90.1-1999 or in the
2001 California Nonresidential Alternative Calculation Method
Approval Manual.
For public property, such as schools, the Secretary will
issue regulations to allow the deduction to be allocated to the
person primarily responsible for designing the property in lieu
of the public entity owner.
The basis of the property is reduced by the amount of the
deduction allowed.
Effective date.--The Senate amendment is effective for
taxable years beginning after September 1, 2002, for plans
certified prior to December 31, 2007, whose construction is
completed on or before December 31, 2009.
CONFERENCE AGREEMENT
The conference agreement follows the Senate amendment
with modifications. The maximum deduction is limited to $1.50
per square foot, and energy efficiency is to be measured
relative to the Standard 90.1-2001 of the American Society of
Heating, Refrigerating, and Air Conditioning Engineers and the
Illuminating Engineering Society of North America, as in effect
on April 2, 2003. Additionally, with respect to public
property, no transfer of the deduction to the person primarily
responsible for designing the property is allowed.
In the case of a retrofitted or reconstructed building,
but not a new building placed in service after the date of
enactment, that does not meet the overall building requirement
of a 50-percent energy savings, a partial deduction is allowed
with respect to each separate building system that comprises
energy efficient property and which is certified by a qualified
professional as meeting or exceeding the applicable system-
specific savings targets established by the Secretary of the
Treasury. The applicable system-specific savings targets to be
established by the Secretary are those that would result in a
total annual energy savings with respect to the whole building
of 50 percent, if each of the separate systems met the system
specific target. The separate building systems are (1) the
lighting system, (2) the heating cooling and ventilation and
hot water systems, and (3) the building envelope. The maximum
allowable deduction is $0.50 per square foot for each separate
system.
In the case of system-specific partial deductions for
retrofitted or reconstructed buildings, in general no deduction
is allowed until the Secretary establishes system-specific
targets. However, in the case of lighting system retrofits,
until such time as the Secretary issues final regulations, the
system-specific energy savings target for the lighting system
is deemed to be met by a reduction in Lighting Power Density of
40 percent (50 percent in the case of a warehouse) of the
minimum requirements in Table 9.3.1.1 or Table 9.3.1.2 of
ASHRAE/IESNA Standard 90.1-2001. Also, in the case of a
lighting system that reduces lighting power density by 25
percent, a partial deduction of 25 cents per square foot is
allowed. A prorated partial deduction is allowed in the case of
a lighting system that reduces lighting power density between
25 percent and 40 percent. Certain lighting level and lighting
control requirements must also be met in order to qualify for
the partial lighting deductions.
The conference agreement provides that the Secretary
shall establish procedures for certifying eligibility to claim
the deduction. The Secretary shall include as part of the
certification process procedures for inspection and testing by
qualified individuals to ensure compliance of buildings with
energy savings plans and targets. Individuals qualified to
determine compliance shall only be those individuals who are
recognized by an organization certified by the Secretary for
such purposes.
The Secretary, in consultation with the Secretary of
Energy, is directed to promulgate regulations that describe
methods of calculating and verifying energy and power costs.
Additionally, the Secretary is directed to promulgate
regulations as necessary to take intoaccount new technologies
regarding energy efficiency and renewable energy for purposes of
determining energy efficiency and savings. Additionally, the Secretary
shall promulgate regulations for recapture of the deduction if the
deduction is taken pursuant to a plan to achieve the requisite energy
efficiency standard that is subsequently not fully implemented as
necessary to achieve such standard.
Effective date.--The provision is effective for property
placed in service after the date of enactment and on or before
December 31, 2007.
9. Three-year applicable recovery period for depreciation of qualified
energy management devices and qualified water submetering
devices (secs. 2107 and 2111 of the Senate amendment and sec.
168 of the Code)
PRESENT LAW
No special recovery period is currently provided for
depreciation of energy management devices or water submetering
devices.
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment provides a three-year recovery
period for qualified new or retrofitted energy management
devices placed in service by any taxpayer who is a supplier of
electric energy or natural gas or is a provider of electric
energy or natural gas services. A qualified energy management
device is any tangible property eligible for accelerated
depreciation under section 168 and which is acquired and used
by the taxpayer to enable consumers or others to manage their
purchase, sale, or use of electricity in response to energy
price and usage signals and which permits reading of energy
price and usage signals on at least a daily basis.
Additionally, the provision provides a three-year
recovery period for qualified new water submetering devices
placed in service by any taxpayer who is an eligible
resupplier. An eligible resupplier is any taxpayer who
purchases and installs qualified water submetering devices in
every unit in any multi-unit property. A qualified water
submetering device is any tangible property eligible for
accelerated depreciation under section 168 that enables
consumers to manage their purchase or use of water in response
to water price and usage signals and that permits reading of
water price and usage signals on at least a daily basis.
Effective date.--The provision is effective for any
qualified energy management device placed in service after the
date of enactment of the Act, and for any water submetering
device placed in service after the date of enactment of the Act
and prior to January 1, 2008.
CONFERENCE AGREEMENT
The conference agreement generally follows the Senate
amendment with respect to energy management devices, but with
modifications. The conference agreement provides a three-year
recovery period for qualified new energy management devices
placed in service by any taxpayer who is a supplier of electric
energy or is a provider of electric energy services. A
qualified energy management device is any meter or metering
device eligible for accelerated depreciation under section 168
and which is used by the taxpayer (1) to measure and record
electricity usage data on a time-differentiated basis in at
least 4 separate time segments per day, and (2) to provide such
data on at least a monthly basis to both consumers and the
taxpayer.
The conference agreement does not include the Senate
amendment provision related to water submetering devices.
Effective date.--The provision is effective for any
qualified energy management device placed in service after the
date of enactment and prior to January 1, 2008.
10. Allowance of deduction for qualified energy management devices and
qualified water submetering devices (secs. 2106 and 2110 of the
Senate amendment)
PRESENT LAW
No special deduction is currently provided for expenses
incurred for energy management devices or water submetering
devices.
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment provides a $30 deduction for each
qualified new or retrofitted energy management device placed in
service by any taxpayer who is a supplier of electric energy or
natural gas or is a provider of electric energy or natural gas
services. A qualified energy management device is any tangible
property eligible for accelerated depreciation under section
168 and which is acquired and used by the taxpayer to enable
consumers or others to manage their purchase, sale, or use of
electricity in response to energy price and usage signals and
which permits reading of energy price and usage signals on at
least a daily basis.
The deduction is not allowed to property used outside of
the United States. The taxpayer would have basis reduction for
such property equal to the deduction. Other rules apply.
In addition, the Senate amendment provides a $30
deduction for qualified water submetering devices. A qualified
water submetering device is any tangible property eligible for
accelerated depreciation under section 168 that enables
consumers to manage their purchase or use of water in response
to water price and usage signals and that permits reading of
water price and usage signals on at least a daily basis.
Effective date.--The provision is effective for any
qualified energy management device placed in service after the
date of enactment of the Act, and for any water submetering
device placed in service after the date of enactment of the Act
and prior to January 1, 2008.
CONFERENCE AGREEMENT
The conference agreement does not include the Senate
amendment.
11. Credit for electricity produced from advanced nuclear power
facilities (new sec. 45L of the Code)
PRESENT LAW
An income tax credit is allowed for the production of
electricity from either qualified wind energy, qualified
``closed-loop'' biomass, or qualified poultry waste facilities
(sec. 45). The amount of the credit is 1.5 cents per kilowatt-
hour (indexed for inflation) of electricity produced. The
amount of the credit is 1.8 cents per kilowatt-hour for 2003.
The credit is reduced for grants, tax-exempt bonds, subsidized
energy financing, and other credits.
HOUSE BILL
No provision.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement that a taxpayer producing
electricity at a qualifying advanced nuclear power facility may
claim a credit equal to 1.8 cents per kilowatt-hour of
electricity produced for the eight year period starting when
the facility is placed in service.\4\ The aggregate amount of
credit that a taxpayer may claim in any year during the eight-
year period is subject to limitation based on allocated
capacity and an annual limitation as described below.
---------------------------------------------------------------------------
\4\ The 1.8-cents credit amount is reduced, but not below zero, if
the annual average contract price per kilowatt-hour of electricity
generated from advanced nuclear power facilities in the preceding year
exceeds eight cents per kilowatt-hour. The eight-cent price comparison
level is indexed for inflation after 1992.
---------------------------------------------------------------------------
A qualifying advanced nuclear facility is an advanced
nuclear facility for which the taxpayer has received an
allocation of megawatt capacity from the Secretary and is
placed in service before January 1, 2021. The taxpayer may only
claim credit for production of electricity equal to the ratio
of the allocated capacity that the taxpayer receives from the
Secretary to the rated nameplate capacity of the taxpayer's
facility. For example, if the taxpayer receives an allocation
of 750 megawatts of capacity from the Secretary and the
taxpayer's facility has a rated nameplate capacity of 1,000
megawatts, then the taxpayer may claim three-quarters of the
otherwise allowable credit, or 1.35 cents per kilowatt-hour,
for each kilowatt-hour of electricity produced at the facility
(subject to the annual limitation described below). The
Secretary may allocate up to 6,000 megawatts of capacity.
A taxpayer operating a qualified facility may claim no
more than $125 million in tax credits per 1,000 megawatts of
allocated capacity in any one year of the eight-year credit
period. If the taxpayer operates a 1,350 megawatt rated
nameplate capacity system and has received an allocation from
the Secretary for 1,350 megawatts of capacity eligible for the
credit, the taxpayer's annual limitation on credits that may be
claimed is equal to 1.35 times $125 million, or $168.75
million. If the taxpayer operates a facility with a nameplate
rated capacity of 1,350 megawatts, but has received an
allocation from the Secretary for 750 megawatts of credit
eligible capacity, then the two limitations apply such that the
taxpayer may claim a credit equal to 1.35 cents per kilowatt-
hour of electricity produced (as described above) subject to an
annual credit limitation of $93.75 million in credits (three-
quarters of $125 million).
An advanced nuclear facility is any nuclear facility for
the production of electricity, the reactor design for which is
approved after the date of enactment. For this purpose, a
qualifying advanced nuclear facility is not any facility for
which a substantial similar design for a facility of comparable
capacity was approved on or before the date of enactment.
In addition, the credit allowable to the taxpayer is
reduced by reason of grants, tax-exempt bonds, subsidized
energy financing, and other credits, but such reduction cannot
exceed 50 percent of the otherwise allowable credit. The credit
is treated as part of the general business credit and, under a
special transition rule may not be carried back to a taxable
year ending before or on the effective date of the provision.
Effective date.--The provision is effective for
production in taxable years beginning after December 31, 2003.
B. Fuels and Alternative Motor Vehicles
1. Repeal certain excise taxes on rail diesel fuel and inland waterway
barge fuels (sec. 41008 of the House bill and secs. 4041, 4042,
6421, and 6427 of the Code)
PRESENT LAW
Under present law, diesel fuel used in trains is subject
to a 4.4-cents-per gallon excise tax. Revenues from 4.3 cents
per gallon of this excise tax are retained in the General Fund
of the Treasury. The remaining 0.1 cent per gallon is deposited
in the Leaking Underground Storage Tank (``LUST'') Trust Fund.
Similarly, fuels used in barges operating on the
designated inland waterways system are subject to a 4.3-cents-
per-gallon General Fund excise tax. This tax is in addition to
the 20.1-cents-per-gallon tax rates that are imposed on fuels
used in these barges to fund the Inland Waterways Trust Fund
and the Leaking Underground Storage Tank Trust Fund.
In both cases, the 4.3-cents-per-gallon excise tax rates
are permanent. The LUST tax is scheduled to expire after March
31, 2005.
HOUSE BILL
The 4.3-cents-per-gallon General Fund excise tax rate on
diesel fuel used in trains and fuels used in barges operating
on the designated inland waterways system is repealed. The 0.1
cent per gallon for the Leaking Underground Storage Tank
(``LUST'') Trust Fund is unchanged by the provision.
Effective date.--The provision is effective on January 1,
2004.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement follows the House bill.
2. Btu-based rate for diesel/water emulsion fuel (sec. 41009 of the
House bill and secs. 4081 and 6427 of the Code)
PRESENT LAW
A 24.3 cents per gallon excise tax is imposed on diesel
fuel to finance the Highway Trust Fund. Gasoline and most
special motor fuels are subject to tax at 18.3 cents per gallon
for the Trust Fund. The statutory rate for certain special
motor fuels is determined on an energy equivalent basis, as
follows:
Liquefied petroleum gas 13.6 cents per gallon.
(propane).
Liquefied natural gas.......... 11.9 cents per gallon.
Methanol derived from petroleum 9.15 cents per gallon.
or natural gas.
Compressed natural gas......... 48.54 cents per MCF.
No special tax rate is provided for diesel fuel blended
in a water emulsion fuel.
HOUSE BILL
A special tax rate of 19.7 cents per gallon is provided
for diesel fuel blended with water into a diesel/water emulsion
fuel to reflect the reduced Btu content per gallon resulting
from the water. Emulsion fuels eligible for the special rate
must consist of not more than 86 percent diesel fuel (and other
minor chemical additives to enhance combustion) and at least 14
percent water. Anyone who separates the diesel fuel from the
diesel-water fuel emulsion on which a reduced rate of tax was
imposed is treated as a refiner of the fuel and is liable for
the difference between the amount of tax on the latest removal
of the separated fuel and the amount of tax that was imposed on
any prior removal or entry of such fuel.
Effective date.--The provision applies to fuels removed
after September 30, 2003.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement follows the House bill except as
to the effective date.
Effective date.--The provision is effective January 1,
2004.
3. Modifications to small producer ethanol credit (sec. 2005 of the
Senate amendment and sec. 40 of the Code)
PRESENT LAW
Small producer credit
Present law provides several tax benefits for ethanol and
methanol produced from renewable sources (e.g., biomass) that
are used as a motor fuel or that are blended with other fuels
(e.g., gasoline) for such a use. In the case of ethanol, a
separate 10-cents-per-gallon credit is provided for small
producers, defined generally as persons whose production does
not exceed 15 million gallons per year and whose production
capacity does not exceed 30 million gallons per year. The small
producer credit is part of the alcohol fuels tax credit under
section 40 of the Code. The alcohol fuels tax credits are
includible in income. This credit, like tax credits generally,
may not be used to offset alternative minimum tax liability.
The credit is treated as ageneral business credit, subject to
the ordering rules and carryforward/carryback rules that apply to
business credits generally. The alcohol fuels tax credit is scheduled
to expire after December 31, 2007.
Taxation of cooperatives and their patrons
Under present law, cooperatives in essence are treated as
pass-through entities in that the cooperative is not subject to
corporate income tax to the extent the cooperative timely pays
patronage dividends. Under present law (sec. 38(d)(4)), the
only excess credits that may be passed through to cooperative
patrons are the rehabilitation credit (sec. 47), the energy
property credit (sec. 48(a)), and the reforestation credit
(sec. 48(b)).
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment makes several modifications to the
rules governing the small producer ethanol credit. First, the
provision liberalizes the definition of an eligible small
producer to include persons whose production capacity does not
exceed 60 million gallons. Second, the provision allows
cooperatives to elect to pass through the small ethanol
producer credits to its patrons. The credit is apportioned pro
rata among patrons of the cooperative on the basis of the
quantity or value of the business done with or for such patrons
for the taxable year. An election to pass through the credit is
made on a timely filed return for the taxable year and is
irrevocable for such taxable year.
Third, the provision repeals the rule that includes the
small producer credit in income of taxpayers claiming it.
Fourth, the provision allows the small producer credit to be
claimed against the alternative minimum tax. Finally, the
provision provides that the small producer ethanol credit is
not treated as derived from a passive activity under the Code
rules restricting credits and deductions attributable to such
activities.
Effective date.--The provision is effective for taxable
years beginning after date of enactment.
CONFERENCE AGREEMENT
The conference agreement generally follows the Senate
amendment except the small producer credit will continue to be
included in the income of taxpayers claiming it and no
exemption from the passive activity rules under the Code is
provided. With respect to the alternative minimum tax, the
conference agreement provides the same treatment given other
business related energy credits that are the subject of the
agreement as described below (see sec. 1347 of the Act).
Effective date.--The provision is effective for taxable
years beginning after December 31, 2003.
4. Transfer full amount of excise tax imposed on gasohol to the highway
trust fund (sec. 2006 of the Senate amendment)
PRESENT LAW
An 18.4 cents-per-gallon excise tax is imposed on
gasoline. The tax is imposed when the fuel is removed from a
refinery unless the removal is to a bulk transportation
facility (e.g., removal by pipeline or barge to a registered
terminal). In the case of gasoline removed in bulk by
registered parties, tax is imposed when the gasoline is removed
from the terminal facility, typically by truck (i.e., ``breaks
bulk''). If gasoline is sold to an unregistered party before it
is removed from a terminal, tax is imposed on that sale. When
the gasoline subsequently breaks bulk, a second tax is imposed.
The payor of the second tax may file a refund claim if it can
prove payment of the first tax. The party liable for payment of
the gasoline excise tax is called a ``position holder,''
defined as the owner of record inside the refinery or terminal
facility.
A 52-cents-per-gallon income tax credit is allowed for
ethanol used as a motor fuel (the ``alcohol fuels credit'').
The benefit of the alcohol fuels tax credit may be claimed as a
reduction in excise tax payments when the ethanol is blended
with gasoline (``gasohol''). The reduction is based on the
amount of ethanol contained in the gasohol. The excise tax
benefits apply to gasohol blends of 90 percent gasoline/10
percent ethanol, 92.3 percent gasoline/7.7 percent ethanol, or
94.3 percent gasoline/5.7 percent ethanol. The income tax
credit is based on the amount of alcohol contained in the
blended fuel.
In general, 18.3 cents per gallon of the gasoline excise
tax is deposited in the Highway Trust Fund and 0.1 cent per
gallon is deposited in the Leaking Underground Storage Tank
Trust Fund (the ``LUST'' rate). In the case of gasohol with
respect to which a reduced excise tax is paid, 2.5 cents per
gallon of the reduced tax is retained in the General Fund. The
balance of the reduced rate (less the LUST rate) is deposited
in the Highway Trust Fund.
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment transfers the 2.5 cents per gallon
of excise tax on gasohol that currently is retained in the
General Fund to the Highway Trust Fund.
Effective date.--The Senate amendment would be effective
for taxes imposed after September 30, 2003.
CONFERENCE AGREEMENT
The conference agreement does not include the Senate
amendment provision.
5. Incentives for biodiesel (sec. 2008 of the Senate amendment and new
sec. 40A of the Code)
PRESENT LAW
No income tax credit or excise tax rate reduction is
provided for biodiesel fuels under present law.
However, a 52-cents-per-gallon income tax credit (the
``alcohol fuels credit'') is allowed for ethanol and methanol
(derived from renewable sources) when the alcohol is used as a
highway motor fuel. The 52-cents-per-gallon rate is scheduled
to decline to 51 cents per gallon beginning in calendar year
2005. The benefit of this income tax credit may be claimed
through reductions in excise taxes paid on alcohol fuels. In
the case of alcohol blended with other fuels (e.g., gasoline),
the excise tax rate reductions are allowable only for blends of
90 percent gasoline/10 percent alcohol, 92.3 percent gasoline/
7.7 percent alcohol, or 94.3 percent gasoline/5.7 percent
alcohol. These present-law provisions are scheduled to expire
after 2007.
HOUSE BILL
No provision.
SENATE AMENDMENT
A new income tax credit is provided for biodiesel fuel
mixtures (``biodiesel V'' and ``biodiesel NV''). The structure
of the new credit is similar to structure of the present-law
alcohol fuels credit. Biodiesel V is derived from virgin
vegetable oils from corn, soybeans, sunflower seeds,
cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds,
rice bran, or mustard seeds, for use in diesel engines.
Biodiesel NV is derived from nonvirgin vegetable oils or animal
fats for use in diesel engines. Both biodiesel V and biodiesel
NV must meet the requirements of the Environmental Protection
Agency under section 211 of the Clean Air Act (42 U.S.C. 7545)
and the American Society of Testing and Materials D6751.
The per gallon biodiesel mixture credit rate for
biodiesel V equals one cent for each percentage point of
biodiesel in the fuels mixture, subject to a maximum credit of
20 cents per blended gallon of fuel. The per gallon biodiesel
mixture credit rate for biodiesel NV equals .5 cent for each
percentage point of biodiesel in the fuels mixture, subject to
a maximum credit of 20 cents per blended gallon of fuel. The
amount of the biodiesel fuel mixture credit is includible in
income. The credit cannot be carried back to a taxable year
beginning before January 1, 2003.
Mixtures of biodiesel V are subject to a reduced rate of
excise tax, which is coordinated with the income tax credit. An
excise tax reduction is not available for biodiesel NV.
The provision further provides for transfers to the
Highway Trust Fund from the funds of the Commodity Credit
Corporation of amounts equivalent to the reduction in receipts
to the Trust Fund resulting from the excise tax rate reduction
allowed under the provision.
Effective date.--The income tax provision is effective
for taxable years beginning after December 31, 2002, for fuel
sold before January 1, 2006. The excise tax provision is
effective for fuel sold after December 31, 2002, and before
January 1, 2006.
CONFERENCE AGREEMENT
The conference agreement generally follows S. 1548 as
ordered reported by the Committee on Finance on September 17,
2003, with respect to the income tax credit for biodiesel and
biodiesel mixtures. The conference agreement does not provide
for any reduced excise tax rate for mixtures of biodiesel,
including virgin biodiesel.
The provision provides a new income tax credit for
biodiesel and qualified biodiesel mixtures, the biodiesel fuels
credit. The biodiesel fuels credit is the sum of the biodiesel
mixture credit plus the biodiesel credit and is treated as a
general business credit. The amount of the biodiesel fuels
credit is includable in gross income. The biodiesel fuels
credit is coordinated to take into account benefits from the
excise tax credit for qualified biodiesel mixtures. The credit
is treated as part of the general business credit and, under a
special transition rule, may not be carried back to a taxable
year ending before or on the effective date of the provision.
The provision does not apply to fuel used or sold after
December 31, 2005.
Biodiesel may be taken into account for purposes of the
credit only if the taxpayer obtains a certification (in such
form and manner as prescribed by the Secretary) from the
producer of the biodiesel that identifies the product produced
and the percentage of biodiesel and agri-biodiesel in the
product. Biodiesel is monoalkyl esters of long chain fatty
acids derived from plant or animal matter that meet (1) the
registration requirements established by the Environmental
Protection Agency under section 211 of the Clean Air Act, and
(2) the requirements of the American Society of Testing and
Materials D6751. Agri-biodiesel is biodiesel derived from
virgin oils including esters derived from corn, soybeans,
sunflower seeds, cottonseeds, canola, crambe, rapeseeds,
safflowers, flaxseeds, rice bran, mustard seeds, or animal
fats.
Biodiesel mixture credit
The biodiesel mixture credit is 50 cents for each gallon
of biodiesel used by the taxpayer in the production of a
qualified biodiesel mixture. For agri-biodiesel, the credit is
$1.00 per gallon. A qualified biodiesel mixture is a mixture of
biodiesel and a taxable fuel that is (1) sold by the taxpayer
producing such mixture to any person for use as a fuel, or (2)
is used as a fuel by the taxpayer producing such mixture. The
sale or use must be in the trade or business of the taxpayer
and must be taken into account for the taxable year in which
such sale or use occurs. No credit is allowed with respect to
any casual off-farm production of a qualified biodiesel
mixture.
Biodiesel credit
The biodiesel credit is 50 cents for each gallon of 100
percent biodiesel that is not in a mixture and which during the
taxable year is (1) used by the taxpayer as a fuel in a trade
or business or (2) sold by the taxpayer at retail to a person
and placed in the fuel tank of suchperson's vehicle. The first
condition is not satisfied by a person who acquires the biodiesel in a
sale that satisfies the second condition. For agri-biodiesel, the
credit is $1.00 per gallon.
Later separation or failure to use as fuel
In a manner similar to the treatment of alcohol fuels, a
tax is imposed if a biodiesel fuels credit is claimed with
respect to biodiesel that is subsequently used for a purpose
for which the credit is not allowed or that is changed into a
substance that does not qualify for the credit. The first tax
applies if two conditions are satisfied. First, a biodiesel
mixture credit must have been allowed with respect to biodiesel
used in the production of a qualified mixture. Second, any
person either separates the biodiesel from the mixture or,
without separation, uses the mixture other than as a fuel. The
tax equals the applicable amount ($1.00 in the case of agri-
biodiesel or 50 cents in the case of other biodiesel)
multiplied by the number of gallons of biodiesel in such
mixture. The second tax applies if two conditions are
satisfied. First, a biodiesel credit must have been allowed
with respect to the retail sale of any biodiesel. Second, any
person mixes that biodiesel or uses it other than as a fuel.
The tax equals the applicable amount multiplied by the number
of gallons of biodiesel.
Effective date.--The biodiesel fuel income tax credit
provision is effective for fuel produced, and sold or used,
after December 31, 2003, in taxable years ending after such
date.
6. Alcohol and biodiesel excise tax credit and extension of alcohol
fuels income tax credit (secs. 40, 4101, 6427, 9503 and new
secs. 4104, and 6426 of the Code)
PRESENT LAW
Alcohol fuels income tax credit
The alcohol fuels credit is the sum of three credits: the
alcohol mixture credit, the alcohol credit, and the small
ethanol producer credit. Generally, the alcohol fuels credit
expires after December 31, 2007.\5\
---------------------------------------------------------------------------
\5\ The alcohol fuels credit is unavailable when, for any period
before January 1, 2008, the tax rates for gasoline and diesel fuels
drop to 4.3 cents per gallon.
---------------------------------------------------------------------------
A taxpayer (generally a petroleum refiner, distributor,
or marketer) who mixes ethanol with gasoline (or a special
fuel) \6\ is an ``ethanol blender.'' Ethanol blenders are
eligible for an income tax credit of 52 cents per gallon of
ethanol used in the production of a qualified mixture (the
``alcohol mixture credit''). A qualified mixture means a
mixture of alcohol and gasoline, (or of alcohol and a special
fuel) sold by the blender as fuel, or used as fuel by the
blender in producing the mixture. The term alcohol includes
methanol and ethanol but does not include (1) alcohol produced
from petroleum, natural gas, or coal (including peat), or (2)
alcohol with a proof of less than 150. Businesses also may
reduce their income taxes by 52 cents for each gallon of
ethanol (not mixed with gasoline or other special fuel) that
they sell at the retail level as vehicle fuel or use themselves
as a fuel in their trade or business (``the alcohol credit'').
The 52-cents-per-gallon income tax credit rate is scheduled to
decline to 51 cents per gallon during the period 2005 through
2007. For blenders using an alcohol other than ethanol, the
rate is 60 cents per gallon.\7\
---------------------------------------------------------------------------
\6\ A special fuel includes any liquid (other than gasoline) that
is suitable for use in an internal combustion engine.
\7\ In the case of any alcohol (other than ethanol) with a proof
that is at least 150 but less than 190, the credit is 45 cents per
gallon (the ``low-proof blender amount''). For ethanol with a proof
that is at least 150 but less than 190, the low-proof blender amount is
38.52 cents for sales or uses during calendar year 2003 and 2004, and
37.78 cents for calendar years 2005, 2006, and 2007.
---------------------------------------------------------------------------
A separate income tax credit is available for small
ethanol producers (the ``small ethanol producer credit''). A
small ethanol producer is defined as a person whose ethanol
production capacity does not exceed 30 million gallons per
year. The small ethanol producer credit is 10 cents per gallon
of ethanol produced during the taxable year for up to a maximum
of 15 million gallons.
The credits that comprise the alcohol fuels tax credit
are includible in income. The credit may not be used to offset
alternative minimum tax liability. The credit is treated as a
general business credit, subject to the ordering rules and
carryforward/carryback rules that apply to business credits
generally.
Excise tax reductions for alcohol mixture fuels
Generally, motor fuels tax rates are as follows:\8\
---------------------------------------------------------------------------
\8\ These rates include an additional 0.1 cent-per-gallon excise
tax to fund the Leaking Underground Storage Tank Trust Fund. See secs.
4041(d) and 4081(a)(2)(B). In addition, the basic fuel tax rate will
drop to 4.3 cents per gallon beginning on October 1, 2005.
Gasoline..................................... 18.4 cents per gallon.
Diesel fuel and kerosene..................... 24.4 cents per gallon.
Special motor fuels.......................... 18.4 cents per gallon generally.
Alcohol-blended fuels are subject to a reduced rate of
tax. The benefits provided by the alcohol fuels income tax
credit and the excise tax reduction are integrated such that
the alcohol fuels credit is reduced to take into account the
benefit of any excise tax reduction.
Gasohol
Registered ethanol blenders may forgo the full income tax
credit and instead pay reduced rates of excise tax on gasoline
that they purchase for blending with ethanol. Most of the
benefit of the alcohol fuels credit is claimed through the
excise tax system.
The reduced excise tax rates apply to gasohol upon its
removal or entry. Gasohol is defined as a gasoline/ethanol
blend that contains 5.7 percent ethanol, 7.7 percent ethanol,
or 10 percent ethanol. For the calendar year 2003, the
following reduced rates apply to gasohol:\9\
---------------------------------------------------------------------------
\9\ These rates include the additional 0.1 cent-per-gallon excise
tax to fund the Leaking Underground Storage Tank Trust Fund. These
special rates will terminate after September 30, 2007 (sec.
4081(c)(8)).
5.7 percent ethanol............ 15.436 cents per gallon.
7.7 percent ethanol............ 14.396 cents per gallon.
10.0 percent ethanol........... 13.200 cents per gallon.
Reduced excise tax rates also apply when gasoline is
being purchased for the production of ``gasohol.'' When
gasoline is purchased for blending into gasohol, the rates
above are multiplied by a fraction (e.g., 10/9 for 10-percent
gasohol) so that the increased volume of motor fuel will be
subject to tax. The reduced tax rates apply if the person
liable for the tax is registered with the IRS and (1) produces
gasohol with gasoline within 24 hours of removing or entering
the gasoline or (2) gasoline is sold upon its removal or entry
and such person has an unexpired certificate from the buyer and
has no reason to believe the certificate is false.\10\
---------------------------------------------------------------------------
\10\ Treas. Reg. sec. 48.4081-6(c). A certificate from the buyer
assures that the gasoline will be used to produce gasohol within 24
hours after purchase. A copy of the registrant's letter of registration
cannot be used as a gasohol blender's certificate.
---------------------------------------------------------------------------
Qualified methanol and ethanol fuels
Qualified methanol or ethanol fuel is any liquid that
contains at least 85 percent methanol or ethanol or other
alcohol produced from a substance other than petroleum or
natural gas. These fuels are taxed at reduced rates.\11\ The
rate of tax on qualified methanol is 12.35 cents per gallon.
The rate on qualified ethanol in 2003 and 2004 is 13.15 cents.
From January 1, 2005, through September 30, 2007, the rate of
tax on qualified ethanol is 13.25 cents.\12\
---------------------------------------------------------------------------
\11\ A 0.05-cent-per-gallon Leaking Underground Storage Tank Trust
Fund tax is imposed on such fuel. This provision expires on October 1,
2007 (sec. 4041(b)(2)).
\12\ These reduced rates terminate after September 30, 2007.
---------------------------------------------------------------------------
Alcohol produced from natural gas
A mixture of methanol, ethanol, or other alcohol produced
from natural gas that consists of at least 85 percent alcohol
is also taxed at reduced rates.\13\ For mixtures not containing
ethanol, the applicable rate of tax is 9.25 cents per gallon
before October 1, 2005. In all other cases, the rate is 11.4
cents per gallon. After September 31, 2005, the rate is reduced
to 2.15 cents per gallon when the mixture does not contain
ethanol and 4.3 cents per gallon in all other cases.
---------------------------------------------------------------------------
\13\ These rates include the additional 0.1 cent-per-gallon excise
tax to fund the Leaking Underground Storage Tank Trust Fund (sec.
4041(d)(1)).
---------------------------------------------------------------------------
Blends of alcohol and diesel fuel or special motor fuels
A reduced rate of tax applies to diesel fuel or kerosene
that is combined with alcohol as long as at least 10 percent of
the finished mixture is alcohol. If none of the alcohol in the
mixture is ethanol, the rate of tax is 18.4 cents per gallon.
For alcohol mixtures containing ethanol, the rate of tax in
2003 and 2004 is 19.2 cents per gallon and for 2005 through
September 30, 2007, the rate for ethanol mixtures is 19.3 cents
per gallon. Fuel removed or entered for use in producing a 10
percent diesel-alcohol fuel mixture (without ethanol), is
subject to a tax of 20.44 cents. The rate of tax for fuel
removed or entered to produce a 10 percent diesel-ethanol fuel
mixture is 21.333 cents per gallon for 2003 and 2004 and 21.444
cents per gallon for the period January 1, 2005, through
September 30, 2007.
Special motor fuel (nongasoline) mixtures with alcohol
also are taxed at reduced rates.
Aviation fuel
Noncommercial aviation fuel is subject to a tax of 21.9
cents per gallon.\14\ Fuel mixtures containing at least 10
percent alcohol are taxed at lower rates.\15\ In the case of 10
percent ethanol mixtures, any sale or use during 2003 and 2004,
the 21.9 cents is reduced by 13.2 cents (for a tax of 8.7 cents
per gallon), for 2005, 2006, and 2007 the reduction is 13.1
cents (for a tax of 8.8 cents per gallon) and is reduced by
13.4 cents in the case of any sale during 2008 or thereafter.
For mixtures not containing ethanol, the 21.9 cents is reduced
by 14 cents for a tax of 7.9 cents. These reduced rates expire
after September 30, 2007.\16\
---------------------------------------------------------------------------
\14\ This rate includes the additional 0.1 cent-per-gallon tax for
the Leaking Underground Storage Tank Trust fund.
\15\ Sec. 4041(k)(1) and 4091(c).
\16\ Sec. 4091(c)(1).
---------------------------------------------------------------------------
When aviation fuel is purchased for blending with
alcohol, the rates above are multiplied by a fraction (10/9) so
that the increased volume of aviation fuel will be subject to
tax.
Refunds and payments
If fully taxed gasoline (or other taxable fuel) is used
to produce a qualified alcohol mixture, the Code permits the
blender to file a claim for a quick excise tax refund. The
refund is equal to the difference between the gasoline (or
other taxable fuel) excise tax that was paid and the tax that
would have been paid by a registered blender on the alcohol
fuel mixture being produced. Generally, the IRS pays these
quick refunds within 20 days. Interest accrues if the refund is
paid more than 20 days after filing. A claim may be filed by
any person with respect togasoline, diesel fuel, or kerosene
used to produce a qualified alcohol fuel mixture for any period for
which $200 or more is payable and which is not less than one week.
Ethyl tertiary butyl ether (ETBE)
Ethyl tertiary butyl ether (``ETBE'') is an ether that is
manufactured using ethanol. Unlike ethanol, ETBE can be blended
with gasoline before the gasoline enters a pipeline because
ETBE does not result in contamination of fuel with water while
in transport. Treasury regulations provide that gasohol
blenders may claim the income tax credit and excise tax rate
reductions for ethanol used in the production of ETBE. The
regulations also provide a special election allowing refiners
to claim the benefit of the excise tax rate reduction even
though the fuel being removed from terminals does not contain
the requisite percentages of ethanol for claiming the excise
tax rate reduction.
Highway Trust Fund
With certain exceptions, the taxes imposed by section
4041 (relating to retail taxes on diesel fuels and special
motor fuels) and section 4081 (relating to tax on gasoline,
diesel fuel and kerosene) are credited to the Highway Trust
Fund. In the case of alcohol fuels, 2.5 cents per gallon of the
tax imposed is retained in the General Fund.\17\ In the case of
a taxable fuel taxed at a reduced rate upon removal or entry
prior to mixing with alcohol, 2.8 cents of the reduced rate is
retained in the General Fund.\18\
---------------------------------------------------------------------------
\17\ Sec. 9503(b)(4)(E).
\18\ Sec. 9503(b)(4)(F).
---------------------------------------------------------------------------
Biodiesel
If biodiesel is used in the production of blended taxable
fuel, the Code imposes tax on the removal or sale of the
blended taxable fuel.\19\ In addition, the Code imposes tax on
any liquid other than gasoline sold for use or used as a fuel
in a diesel-powered highway vehicle or diesel-powered train
unless tax was previously imposed and not refunded or
credited.\20\ If biodiesel that was not previously taxed or
exempt is sold for use or used as a fuel in a diesel-powered
highway vehicle or a diesel-powered train, tax is imposed.\21\
There are no reduced excise tax rates for biodiesel.
---------------------------------------------------------------------------
\19\ Sec. 4081(b); Rev. Rul. 2002-76, 2002-46 I.R.B. 841 (2002).
``Taxable fuels'' are gasoline, diesel and kerosene (sec. 4083).
Biodiesel, although suitable for use as a fuel in a diesel-powered
highway vehicle or diesel-powered train, contains less than four
percent normal paraffins and, therefore, is not treated as diesel fuel
under the applicable Treasury regulations. Treas. Reg. secs. 48.4081-
1(c)(2)(i) and (ii), and 48.4081-1(b); Rev. Rul. 2002-76, 2002-46
I.R.B. 841 (2002). As a result, biodiesel alone is not a taxable fuel
for purposes of section 4081. As noted above, however, tax is imposed
upon the removal or entry of blended taxable fuel made with biodiesel.
\20\ Sec. 4041. The tax imposed under section 4041 also will not
apply if an exemption from tax applies.
\21\ Rev. Rul. 2002-76, 2002-46 I.R.B. 841 (2002).
---------------------------------------------------------------------------
HOUSE BILL
No provision.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement creates two new excise tax
credits, the alcohol fuel mixture excise tax credit and the
biodiesel fuel mixture excise tax credit. The sum of these
credits may be taken against the tax imposed on taxable fuels
(by section 4081). The amount of fuel taxes transferred to the
Highway Trust Fund is not reduced by any excise tax credits
claimed. The conference agreement also extends the alcohol
fuels income tax credit (sec. 40) through December 31,
2010.\22\
---------------------------------------------------------------------------
\22\ The conference agreement contains several provisions found in
S. 1548 as ordered reported by the Committee on Finance on September
17, 2003. While similar to S. 1548, the conference agreement differs
from S. 1548 in several respects. Unlike S. 1548, the conference
agreement leaves in place the present-law reduced rate excise tax
structure. Also, the conference agreement does not eliminate the
requirement that 2.5 and 2.8 cents per gallon of the reduced rate of
excise tax be retained in the General Fund. In addition, the conference
agreement does not contain any provisions regarding payments with
respect to qualified alcohol and biodiesel fuel mixtures nor with
respect to alcohol and biodiesel used as a fuel.
---------------------------------------------------------------------------
Alcohol fuel mixture excise tax credit
The conference agreement provides for an excise tax
credit, the alcohol fuel mixture credit. The alcohol fuel
mixture credit is 52 cents for each gallon of alcohol used by a
person in producing an alcohol fuel mixture for sale or use in
a trade or business of the taxpayer. The credit declines to 51
cents per gallon after calendar year 2004. For mixtures not
containing ethanol (renewable source methanol), the credit is
60 cents per gallon.
For purposes of the alcohol fuel mixture credit, an
``alcohol fuel mixture'' is a mixture of alcohol and a taxable
fuel that is (1) sold for use or used as a fuel by the taxpayer
producing the mixture or (2) removed from the refinery by a
person producing the mixture. Alcohol for this purpose includes
methanol, ethanol, and alcohol gallon equivalents of ETBE or
other ethers produced from such alcohol. It does not include
alcohol produced from petroleum, natural gas,or coal (including
peat), or alcohol with a proof of less than 190 (determined without
regard to any added denaturants). Taxable fuel is gasoline, diesel, and
kerosene.\23\
---------------------------------------------------------------------------
\23\ Sec. 4083(a)(1). As under present law, dyed fuels are taxable
fuels that have been exempted from tax.
---------------------------------------------------------------------------
The excise tax credit is coordinated with the alcohol
fuels income tax credit and is available through December 31,
2010. In addition, any excise tax exemption for alcohol fuels
reduces the amount of the alcohol fuel excise tax credit.\24\
---------------------------------------------------------------------------
\24\ Rules similar to those found in section 40(c) regarding the
income tax credit for alcohol fuels apply.
---------------------------------------------------------------------------
Biodiesel mixture excise tax credit
The provision provides an excise tax credit for biodiesel
mixtures.\25\ The credit is 50 cents for each gallon of
biodiesel used by the taxpayer in producing a qualified
biodiesel mixture for sale or use in a trade or business of the
taxpayer. A qualified biodiesel mixture is a mixture of
biodiesel and taxable fuel that is (1) sold for use or used by
the taxpayer producing such mixture as a fuel, or (2) removed
from the refinery by a person producing the mixture. In the
case of agri-biodiesel, the amount of the credit is $1.00 per
gallon. The credit applies only if the taxpayer obtains a
certification (in such form and manner as prescribed by the
Secretary) from the producer of the biodiesel which identifies
the product produced and the percentage of biodiesel and agri-
biodiesel in the product.
---------------------------------------------------------------------------
\25\ The excise tax credit uses the same definitions as the
biodiesel fuels income tax credit.
---------------------------------------------------------------------------
The credit is not available for any sale, use or removal
for any period after December 31, 2005. This excise tax credit
is coordinated with the income tax credit for biodiesel such
that the credit for the same biodiesel cannot be claimed for
both income and excise tax purposes.
Later separation or mixture not used as fuel
Under certain circumstances, a tax is imposed if an
alcohol fuel mixture credit or biodiesel fuel mixture credit is
claimed with respect to alcohol or biodiesel used in the
production of any alcohol or biodiesel mixture, that is
subsequently used for a purpose for which the credit is not
allowed or changed into a substance that does not qualify for
the credit. The tax applies if two conditions are satisfied.
First, a credit must have been allowed with respect to alcohol
or biodiesel used in the production of a qualified mixture.
Second, any person either separates the alcohol or biodiesel
from the mixture or, without separation, uses the mixture other
than as a fuel. The tax equals the applicable amount multiplied
by the number of gallons of such alcohol or biodiesel.
Registration requirements
Under the provision, the Secretary shall require
registration of every person that produces biodiesel or
alcohol.
Information reporting for persons claiming certain tax benefits
The Secretary shall require any person claiming tax
benefits under certain sections relating to alcohol and
biodiesel fuels \26\ to file a quarterly return (in such manner
as the Secretary may prescribe) providing such information
relating to such benefits and the coordination of such benefits
as the Secretary may require to ensure the proper
administration and use of such benefits. With respect to
persons required to register with the Secretary, failure to
comply with these information-reporting requirements could
subject such a person to the denial, revocation or suspension
of registration.
---------------------------------------------------------------------------
\26\ These sections are sections 34, 40, 40A, 4041(b)(2), 4041(k),
4081(c), 6426, and 6427(f).
---------------------------------------------------------------------------
Refund claims
If fully taxed gasoline (or other taxable fuel) is used
to produce a qualified alcohol mixture, the Code permits the
blender to file a claim for a quick excise tax refund. For
claims filed after December 31, 2004, if such claims are not
paid within 45 days, the claim is to be paid with interest. In
the case of an electronic claim, if such claim is not paid
within 20 days, the claim is to be paid with interest. If
claims are filed electronically, the claimant may make a claim
for less than $200. The Secretary is to prescribe the
electronic format for filing claims not later than December 31,
2004.
Highway Trust Fund
The provision provides that the amount of fuel taxes to
be appropriated to the Highway Trust Fund shall be determined
without reduction for amounts equivalent to the excise tax
credits allowed for alcohol fuel mixtures and biodiesel
mixtures.
Effective date.--In general, the provisions are effective
for fuel sold, used, or removed after December 31, 2003. The
provisions relating to refund claims are effective for claims
filed after December 31, 2004.
7. Nonapplication of export exemption to delivery of fuel to motor
vehicles removed from United States (sec. 2504 of the Senate
amendment and secs. 4221, 4041, and 4081 of the Code)
PRESENT LAW
A manufacturer's excise tax is imposed upon
(1) The removal of any taxable fuel from a refinery
or terminal;
(2) The entry of any taxable fuel into the United
States for consumption, use or warehousing; or
(3) The sale of any taxable fuel to any person who
is not registered, unless there was a prior taxable
removal or entry.\27\
---------------------------------------------------------------------------
\27\ Sec. 4081(a)(1).
---------------------------------------------------------------------------
The term ``taxable fuel'' means gasoline, diesel fuel and
kerosene.
Special provisions under the Code provide for a refund of
tax to any person who sells gasoline to another for
exportation.\28\ Section 6421(c) provides ``If gasoline is sold
to any person for any purpose described in paragraph (2), (3),
(4), or (5) of section 4221(a), the Secretary shall pay
(without interest) to such person an amount equal to the
product of the number of gallons so sold multiplied by the rate
at which tax was imposed on such gasoline by section 4081.''
Section 4221 provides, in pertinent part, ``Under regulations
prescribed by the Secretary, no tax shall be imposed under this
chapter * * * on the sale by the manufacturer * * * of an
article--* * * for export, or for resale by the purchaser to a
second purchaser for export * * * but only if such exportation
or use is to occur before any other use. * * *''
---------------------------------------------------------------------------
\28\ Secs. 6421(c) and 4221(a)(2).
---------------------------------------------------------------------------
It is the IRS administrative position that the exemption
from manufacturers excise tax by reason of exportation does not
apply to the sale of motor fuel pumped into a fuel tank of a
vehicle that is to be driven, or shipped, directly out of the
United States.\29\
---------------------------------------------------------------------------
\29\ Rev. Rul. 69-150.
---------------------------------------------------------------------------
A duty-free sales facility that meets certain conditions
may sell and deliver for export from the customs territory of
the United States duty-free merchandise. Duty-free merchandise
is merchandise sold by a duty-free sales facility on which
neither Federal duty nor Federal tax has been assessed pending
exportation from the customs territory of the United States.
The statutes covering duty-free facilities do not contain any
limitation on what goods may qualify for duty-free treatment.
The United States Court of Federal Claims (``Claims
Court'') and a District Court in Michigan have taken different
positions on whether fuel sold from a duty-free facility and
placed into the tank of an automobile that is then driven out
of the country is exported fuel.\30\ Both cases involved the
same duty-free facility, which is near the Canadian border and
is configured in such a way that anyone leaving the facility
must depart the United States and enter into Canada. The
District Court agreed with the IRS position that such fuel is
not exported, while the Claims Court reached the opposite
conclusion. The Claims Court concluded that the act of
exportation began with the consumer's purchase and that the
fuel necessarily enters into the stream of exportation at the
moment it is placed into the fuel supply tank and the customer
drives into Canada.
---------------------------------------------------------------------------
\30\ See, Ammex Inc. v. United States, 52 Fed. Cl. 303 (2002) (on
cross-motions for summary judgment, the court found that plaintiff
established standing to proceed to trial pursuant to sec. 6421(c)
respecting its gasoline purchases only); and Ammex Inc. v. United
States, 2002 U.S. Dist. LEXIS 25771 (E.D. Mich. July 31, 2002)
(granting defendant's motion for summary judgment), reconsideration
denied, Ammex Inc. v. United States, 2002 U.S. Dist. LEXIS 22893 (E.D.
Mich. Oct. 22, 2002). Although the Claims Court ruled that Ammex had
standing to challenge the excise tax on gasoline, it subsequently held
that Ammex was not entitled to a payment pursuant to sec. 6421(c)
because it failed to prove at trial that it did not pass the tax on to
its customers. Ammex Inc. v. United States, 2003 U.S. Claims LEXIS 63
(Fed. Cl. Mar. 26, 2003).
---------------------------------------------------------------------------
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment amends section 555(b) of the Tariff
Act of 1930 (19 U.S.C. 1555(b)) to provide that gasoline or
diesel fuel sold at duty-free facilities are considered to be
entered for consumption into the United States and thus
ineligible for classification as duty-free merchandise.
Effective date.--The provision is effective on the date
of enactment.
CONFERENCE AGREEMENT
The conference agreement reaffirms the long-standing IRS
position taken in Rev. Rul. 69-150 and restates present law by
amending the Code definition of export to exclude the delivery
of a taxable fuel into a fuel tank of a motor vehicle that is
shipped or driven out of the United States. It also imposes a
tax on the sale of taxable fuel at a duty-free sales enterprise
unless there was a prior taxable removal, or entry of such
fuel.
Effective date.--The provision applies to sales or
deliveries made after the date of enactment.
8. Modification of credit for electric vehicles (sec. 41010 of the
House bill, sec. 2002 of Senate amendment, and sec. 30 of the
Code)
PRESENT LAW
A 10-percent tax credit is provided for the cost of a
qualified electric vehicle, up to a maximum credit of $4,000
(sec. 30). A qualified electric vehicle is a motor vehicle that
is powered primarily by an electric motor drawing current from
rechargeable batteries, fuel cells, or other portable sources
of electrical current, the original use of which commences with
the taxpayer, and that is acquired for use by the taxpayer and
not for resale. The full amount of the credit is available for
purchases prior to 2002. The credit phases down in the years
2004 through 2006, and is unavailable for purchases after
December 31, 2006. There is no carry forward or carryback of
the credit for electric vehicles.
HOUSE BILL
The House bill repeals the phased-down reduction in the
credit for years 2004, 2005, and 2006. Thus, the House bill
provides that a taxpayer may claim the full 10-percent credit
(up to a $4,000) maximum for the purchase of qualified electric
vehicles before January 1, 2007.
Effective date.--The House bill provision is effective
for property placed in service after the date of enactment.
SENATE AMENDMENT
The Senate amendment modifies the present-law credit for
electric vehicles to provide that the credit for qualifying
vehicles generally ranges between $3,500 and $40,000 depending
upon the weight of the vehicle and, for certain vehicles, the
driving range of the vehicle. In the case of property purchased
by tax-exempt persons, the seller may claim the credit. The
taxpayer would be ineligible for the deduction allowable under
present-law section 179A for a qualified battery electric
vehicle on which a credit is allowable. The provision also
extends the expiration date of the credit from December 31,
2004, to December 31, 2006, and would repeal the phase-out
schedule of present law. The taxpayer would be able to carry
forward unused credits for 20 years or carry unused credits
back for three years (but not carried back to taxable years
beginning before October 1, 2002).
Effective date.--The Senate amendment is effective for
property placed in service after September 30, 2002.
CONFERENCE AGREEMENT
The conference agreement follows the House bill.
9. Alternative motor vehicle credit (sec. 41011 of the House bill,
secs. 2001 and 2010 of Senate amendment, and new sec. 30B of
the Code)
PRESENT LAW
Certain costs of qualified clean-fuel vehicle may be
expensed and deducted when such property is placed in service
(sec. 179A). Qualified clean-fuel vehicle property includes
motor vehicles that use certain clean-burning fuels (natural
gas, liquefied natural gas, liquefied petroleum gas, hydrogen,
electricity and any other fuel at least 85 percent of which is
methanol, ethanol, any other alcohol or ether).\31\ The maximum
amount of the deduction is $50,000 for a truck or van with a
gross vehicle weight over 26,000 pounds or a bus with seating
capacities of at least 20 adults; $5,000 in the case of a truck
or van with a gross vehicle weight between 10,000 and 26,000
pounds; and $2,000 in the case of any other motor vehicle.
Qualified electric vehicles do not qualify for the clean-fuel
vehicle deduction. The deduction phases down in the years 2004
through 2006, and is unavailable for purchases after December
31, 2006.
---------------------------------------------------------------------------
\31\ A hybrid-electric vehicle may qualify as a clean-fuel vehicle
under present law.
---------------------------------------------------------------------------
HOUSE BILL
Clean-fuel vehicles
The House bill repeals the phased-down reduction in the
allowable deduction for years 2004, 2005, and 2006. Thus, the
provision provides that a taxpayer could claim a full deduction
for allowable costs of clean-fuel vehicles purchased before
January 1, 2007.
Fuel cell vehicles
The House bill provides a credit for the purchase of a
new qualified fuel cell motor vehicle. A qualifying fuel cell
vehicle is a motor vehicle that is propelled by power derived
from one or more cells which convert chemical energy directly
into electricity by combining oxygen with hydrogen fuel which
is stored on board the vehicle and may or may not require
reformation prior to use. In general the House bill provides
that the buyer claims the credit, unless the buyer is a tax-
exempt entity in which case the seller or lessor of the vehicle
may claim the credit. The provision permits unused credits to
be carried forward for up to 20 years. Qualified fuel cell
motor vehicles are vehicles placed in service before 2013.
The amount of credit for the purchase of a fuel cell
vehicle is determined by a base credit amount that depends upon
the weight class of the vehicle and, in the case of automobiles
or light trucks, an additional credit amount that depends upon
the rated fuel economy of the vehicle compared to a base fuel
economy. For these purposes the base fuel economy is the 2000
model year city fuel economy rating for vehicles of various
weight classes (see below). Table 1, below, shows the base
credit amounts.
TABLE 1.--BASE CREDIT AMOUNT FOR FUEL CELL VEHICLES
------------------------------------------------------------------------
Vehicle gross weight rating in pounds Credit amount
------------------------------------------------------------------------
Vehicle = 8,500...................................... $4,000
8,500 < vehicle = 14,000............................. 10,000
14,000 < vehicle = 26,000............................ 20,000
26,000 < vehicle..................................... 40,000
------------------------------------------------------------------------
Table 2, below, shows the additional credits for
automobiles or light trucks.
TABLE 2.--CREDIT FOR QUALIFYING FUEL CELL VEHICLES
[Percent of base fuel economy]
------------------------------------------------------------------------
If fuel economy of
the fuel cell
vehicle is:
Credit ---------------------
But less
At least than
------------------------------------------------------------------------
$1,000............................................ 150 175
$1,500............................................ 175 200
$2,000............................................ 200 225
$2,500............................................ 225 250
$3,000............................................ 250 275
$3,500............................................ 275 300
$4,000............................................ 300
------------------------------------------------------------------------
Advanced lean-burn technology motor vehicle
The House bill provides a credit for the purchase of a
new advanced lean burn technology motor vehicle. A qualifying
advanced lean burn technology motor vehicle must meet the
Environmental Protection Agency's Tier II bin 8 emissions
standards. In general the provision provides that the buyer
claims the credit, unless the buyer is a tax-exempt entity in
which case the seller or lessor of the vehicle may claim the
credit. The House bill permits unused credits to be carried
forward for up to 20 years. Qualified advanced lean burn
technology motor vehicles are vehicles placed in service before
2007. Table 3, below, shows the credits for the purchase of an
advanced lean burn technology motor vehicle.
TABLE 3.--CREDIT FOR QUALIFYING ADVANCED LEAN BURN TECHNOLOGY MOTOR
VEHICLES
[Percent of base fuel economy]
------------------------------------------------------------------------
If fuel economy of
the fuel cell
vehicle is:
Credit ---------------------
But less
At least than
------------------------------------------------------------------------
$500.............................................. 125 150
$1,000............................................ 150 175
$1,500............................................ 175 200
$2,000............................................ 200 225
$2,500............................................ 225 250
$3,000............................................ 250
------------------------------------------------------------------------
In addition to the credit amount shown in Table 3, an
advanced lean burn technology automobile or light truck may be
eligible for an additional credit of $250 if the vehicle
achieves an estimated lifetime fuel savings of at least 1,500
gallons of fuel and a further additional credit of $500 if the
vehicle achieves an estimated lifetime fuel savings of at least
2,500 gallons compared to a like conventional vehicle (using
the 2000 model year city fuel economy rating for the like
vehicle and assuming 120,000 miles driven).
Base fuel economy
The base fuel economy is the 2000 model year city fuel
economy for vehicles by inertia weight class by vehicle type.
The ``vehicle inertia weight class'' is that defined in
regulations prescribed by the Environmental Protection Agency
for purposes of Title II of the Clean Air Act.
Effective date.--The House bill provision is effective
for property placed in service after the date of enactment.
SENATE AMENDMENT
Section 179A
The Senate amendment extends the present-law deduction
through December 31, 2011, for hydrogen-related property and
through December 31, 2007, for all other vehicles. The Senate
amendment provides that the otherwise allowable deduction is
reduced by 25 percent in 2004 through 2009 for hydrogen-related
property and in 2004 and 2005 for all other vehicles. The
Senate amendment reduces the otherwise allowable deduction by
50 percent and 75 percent in 2010 and 2011 respectively in the
case of hydrogen-related property and in 2006 and 2007 for all
other vehicles.
Fuel cell motor vehicles
The Senate amendment provides a credit for the purchase
of qualified fuel cell motor vehicles. The base credit for the
purchase of new qualified fuel cell motor vehicles ranges
between $4,000 and $40,000 depending upon the weight class of
the vehicle. For automobiles and light trucks, the otherwise
allowable credit amount ($4,000) is increased by an amount from
$1,000 to $4,000 if the vehicle meets certain fuel economy
increases compared to a stated standard. Credit may not be
claimed for qualified fuel cell motor vehicles purchased after
December 31, 2011.
Hybrid motor vehicles
The Senate amendment provides a credit for the purchase
of qualified hybrid motor vehicles. The base credit for the
purchase of a new qualified hybrid motor vehicle ranges from
$250 to $10,000 depending upon the weight of the vehicle and
the maximum power available from the vehicle's rechargeable
energy storage system. For automobiles and light trucks, the
otherwise allowable credit amount ($250 to $1,000) is increased
by an amount from $500 to $3,000 if the vehicle meets certain
fuel economy increases. For heavy duty hybrid motor vehicles,
the otherwise allowable credit ($1,000 to $10,000) is increased
depending upon the vehicle's weight and provided the vehicle
meets certain 2007 (and beyond) emissions standards. The amount
of credit is increased by between $3,500 and $14,000 for
vehicles placed in service in 2002; is increased by between
$3,000 and $12,000 for vehicles placed in service in 2003, is
increased by between $2,500 and $10,000 for vehicles placed in
service in 2004, is increased bybetween $2,000 and $8,000 for
vehicles placed in service in 2005, and is increased by between $1,500
and $6,000 for vehicles placed in service in 2006. Credit may not be
claimed for qualified hybrid motor vehicles purchased after December
31, 2006.
Alternative fuel motor vehicles
The Senate amendment provides a credit for the purchase
of qualified alternative fuel motor vehicles. The base credit
for the purchase of a new alternative fuel motor vehicle equals
40 percent of the incremental cost of such vehicle. The
otherwise allowable credit for 40 percent of the incremental
cost is increased by an additional 30 percent of the
incremental cost of the vehicle if the vehicle meets certain
emissions standards. For computation of the credit, the
incremental cost of the vehicle may not exceed between $5,000
and $40,000 (resulting in a maximum total credit of between
$3,500 and $28,000) depending upon the weight of the vehicle.
For this purpose, incremental cost generally is defined as the
amount of the increase of the manufacturer's suggested retail
price of such a vehicle compared to the manufacturer's
suggested retail price of a comparable gasoline or diesel
model. Qualifying alternative fuel motor vehicles are vehicles
that operate only on qualifying alternative fuels and are
incapable of operating on gasoline or diesel (except in the
extent gasoline or diesel fuel is part of a qualified mixed
fuel). Qualifying alternative fuels are compressed natural gas,
liquefied natural gas, liquefied petroleum gas, hydrogen, and
any liquid mixture consisting of at least 85 percent methanol.
Taxpayers purchasing certain mixed-fuel vehicles also may
claim the alternative fuel motor vehicle credit, at a reduced
rate. A mixed-fuel vehicle is a vehicle with gross weight of
seven tons or more and is certified by the manufacturer as
being able to operate on a combination of alternative fuel and
a petroleum-based fuel. A qualifying mixed-fuel vehicle must
use at least 75 percent alternative fuel (a ``75/25 mixed-fuel
vehicle'') or 90 percent alternative fuel (a ``90/10 mixed-fuel
vehicle'') and be incapable of operating on a mixture
containing less than 75 percent alternative fuel in the case of
a 75/25 vehicle (less than 90 percent alternative fuel in the
case of a 90/10 vehicle). A taxpayer purchasing a 75/25 mixed-
fuel vehicle may claim 70 percent of the otherwise allowable
credit. A taxpayer purchasing a 90/10 mixed-fuel vehicle may
claim 90 percent of the otherwise allowable credit.
Credit may not be claimed for qualified alternative fuel
motor vehicles purchased after December 31, 2006. The
taxpayer's basis in the property is reduced by the amount of
credit claimed.
Provisions of general application
The Senate amendment provides that unused credits may be
carried forward for 20 years and three years (but not into
taxable years beginning before October 1, 2002).
If a tax-exempt person purchases or leases a qualifying
vehicle, the seller or lessor may claim the credit.
Effective date
The Senate amendment is effective for property placed in
service after September 30, 2002.
CONFERENCE AGREEMENT
Clean-fuel vehicles (section 179A)
The conference agreement follows the House bill with
respect to modifications to present-law section 179A.
Fuel cell vehicles
The conference agreement follows the House bill with
respect to providing a credit for the purchase of a new
qualified fuel cell motor vehicle, except the base-year for
fuel economy comparisons is modified as described below.
Hybrid motor vehicles
A qualifying hybrid vehicle is a motor vehicle that draws
propulsion energy from on-board sources of stored energy which
include both an internal combustion engine or heat engine using
combustible fuel and a rechargeable energy storage system
(e.g., batteries). A qualifying hybrid motor vehicle must be
placed in service before January 1, 2009.
In the case of an automobile or light truck (vehicles
weighing 8,500 pounds or less), the amount of credit for the
purchase of a hybrid vehicle is the sum of two components: a
fuel economy credit amount that varies with the rated fuel
economy of the vehicle compared to a 2002 model year standard
and a conservation credit based on the estimated lifetime fuel
savings of a qualifying vehicle compared to a comparable 2002
model year vehicle. A qualifying hybrid automobile or light
truck must have a maximum available power from the rechargeable
energy storage system of at least four percent. In addition,
the vehicle must meet or exceed certain EPA emissions
standards. For a vehicle with a gross vehicle weight rating of
6,000 pounds or less the applicable emissions standards are the
Bin 5 Tier II emissions standards. For a vehicle with a gross
vehicle weight rating greater than 6,000 pounds and less than
or equal to 8,500 pounds, the applicable emissions standards
are the Bin 8 Tier II emissions standards.
Table 4, below, shows the fuel economy credit available
to a hybrid passenger automobile or light truck whose fuel
economy (on a gasoline gallon equivalent basis) exceeds that of
a base fuel economy.
TABLE 4.--FUEL ECONOMY CREDIT
[Percent of base fuel economy]
------------------------------------------------------------------------
If fuel economy of
the hybrid vehicle
is:
Credit ---------------------
But less
At least than
------------------------------------------------------------------------
$400.............................................. 125 150
$800.............................................. 150 175
$1,200............................................ 175 200
$1,600............................................ 200 225
$2,000............................................ 225 250
$2,400............................................ 250
------------------------------------------------------------------------
Table 5, below, shows the conservation credit.
TABLE 5.--CONSERVATION CREDIT
------------------------------------------------------------------------
Conservation
Estimated lifetime fuel savings amount
------------------------------------------------------------------------
At least 1,200 but less than 1,800................... $250
At least 1,800 but less than 2,400................... 500
At least 2,400 but less than 3,000................... 750
At least 3,000....................................... 1,000
------------------------------------------------------------------------
In the case of a qualifying hybrid motor vehicle weighing
more than 8,500 pounds, the amount of credit is determined by
the estimated increase in fuel economy and the incremental cost
of the hybrid vehicle compared to a comparable vehicle powered
solely by a gasoline or diesel internal combustion engine and
that is comparable in weight, size, and use of the vehicle. For
a vehicle that achieves a fuel economy increase of at least 30
percent but less than 40 percent, the credit is equal to 20
percent of the incremental cost of the hybrid vehicle. For a
vehicle that achieves a fuel economy increase of at least 40
percent but less than 50 percent, the credit is equal to 30
percent of the incremental cost of the hybrid vehicle. For a
vehicle that achieves a fuel economy increase of 50 percent or
more, the credit is equal to 40 percent of the incremental cost
of the hybrid vehicle.
The credit is subject to certain maximum applicable
incremental cost amounts. For a qualifying hybrid motor vehicle
weighing more than 8,500 pounds but not more than 14,000
pounds, the maximum allowable incremental cost amount is
$7,500. For a qualifying hybrid motor vehicle weighing more
than 14,000 pounds but not more than 26,000 pounds, the maximum
allowable incremental cost amount is $15,000. For a qualifying
hybrid motor vehicle weighing more than 26,000 pounds, the
maximum allowable incremental cost amount is $30,000.
A qualifying hybrid motor vehicle weighing more than
8,500 pounds but not more than 14,000 pounds must have a
maximum available power from the rechargeable energy storage
system of at least 10 percent. A qualifying hybrid vehicle
weighing more than 14,000 pounds must have a maximum available
power from the rechargeable energy storage system of at least
15 percent.
The conferees recognize that these heavier hybrid
vehicles generally are trucks and vans. The fuel economy
performance of trucks and vans varies by the use of such
equipment. For example, used by a plumbing company generally
carry more weight than an otherwise identicalvan used by a
florist. Hence, the fuel economy performance of the plumbing vans
should be worse than that of the floral vans. In basing the credit for
these heavier hybrid vehicles on fuel economy, the conferees do not
intend that any fuel economy standards for such heavier vehicles be
promogulated. Rather, the conferees intend that the Secretary provide
guidance so that fuel economy increases may be assessed on a case-by-
case basis accounting for the intended use of the vehicles.
Advanced lean-burn technology motor vehicles
The conference agreement a credit for the purchase of a
new advanced lean burn technology motor vehicle. The amount of
credit for the purchase of an advanced lean burn technology
motor vehicle is the sum of two components: a fuel economy
credit amount that varies with the rated fuel economy of the
vehicle compared to a 2002 model year standard as described in
Table 4, above and a conservation credit based on the estimated
lifetime fuel savings of a qualifying vehicle compared to a
comparable 2002 model year vehicle as described in Table 5
above.
A qualifying advanced lean burn technology motor vehicle
that incorporates direct injection, achieves at least 125
percent of the 2002 model year city fuel economy, and 2004 and
later model vehicles meets or exceeds certain Environmental
Protection Agency emissions standards. For a vehicle with a
gross vehicle weight rating of 6,000 pounds or less the
applicable emissions standards are the Bin 5 Tier II emissions
standards. For a vehicle with a gross vehicle weight rating
greater than 6,000 pounds and less than or equal to 8,500
pounds, the applicable emissions standards are the Bin 8 Tier
II emissions standards. A qualifying advanced lean burn
technology motor vehicle must be placed in service before
January 1, 2009.
Limitation on number of qualified hybrid and advanced lean-burn
technology motor vehicles eligible for the credit
The conference agreement imposes a limitation on the
number of qualified hybrid motor vehicles and advanced lean-
burn technology motor vehicles sold by each manufacturer of
such vehicles that are eligible for the credit. Taxpayers may
claim the full amount of the allowable credit up to the end of
the first calendar quarter in which the manufacturer records
its sale of the 80,000th hybrid and advanced lean-burn
technology motor vehicle. Taxpayers may claim one half of the
otherwise allowable credit during the two calendar quarters
subsequent to the quarter after the manufacturer has recorded
its 80,000th such sale. In the third and fourth calendar
quarters subsequent to the quarter after the manufacturer has
recorded its 80,000th such sale, the taxpayer may claim one
quarter of the otherwise allowable credit.
Thus, summing the sales of qualifying hybrid motor
vehicles of all weight classes and all sales of qualifying
advanced lean-burn technology motor vehicles, if a manufacturer
records the sale of its 80,000th in February of 2006, taxpayers
purchasing such vehicles from the manufacturer may claim the
full amount of the credit on their purchases of qualifying
vehicles through June 20, 2006. For the period July 1, 2006,
through December 31, 2006, taxpayers may claim one half of the
otherwise allowable credit on purchases of qualifying vehicles
of the manufacturer. For the period January 1, 2007, through
June 30, 2007, taxpayers may claim one quarter of the otherwise
allowable credit on the purchases of qualifying vehicles of
themanufacturer. After June 30, 2007, no credit may be claimed for
purchases of hybrid motor vehicles or advanced lean-burn technology
motor vehicles sold by the manufacturer.
Alternative fuel motor vehicles
The credit for the purchase of a new alternative fuel
vehicle is 40 percent of the incremental cost of such vehicle,
plus an additional 30 percent if the vehicle meets certain
emissions standards, but not more than between $5,000 and
$40,000 depending upon the weight of the vehicle. Table 6,
below, shows the maximum permitted incremental cost for the
purpose of calculating the credit for alternative fuel vehicles
by vehicle weight class.
TABLE 6.--MAXIMUM ALLOWABLE INCREMENTAL COST FOR CALCULATION OF
ALTERNATIVE FUEL VEHICLE CREDIT
------------------------------------------------------------------------
Maximum allowable
Vehicle gross weight rating in pounds incremental cost
------------------------------------------------------------------------
Vehicle = 8,500...................................... $5,000
8,500 < vehicle = 14,000............................. 10,000
14,000 < vehicle = 26,000............................ 25,000
26,000 < vehicle..................................... 40,000
------------------------------------------------------------------------
Alternative fuels comprise compressed natural gas,
liquefied natural gas, liquefied petroleum gas, hydrogen, and
any liquid fuel that is at least 85 percent methanol.
Qualifying alternative fuel motor vehicles are vehicles that
operate only on qualifying alternative fuels and are incapable
of operating on gasoline or diesel (except in the extent
gasoline or diesel fuel is part of a qualified mixed fuel,
described below).
Certain mixed fuel vehicles, that is vehicles that use a
combination of an alternative fuel and a petroleum-based fuel,
are eligible for a reduced credit. If the vehicle operates on a
mixed fuel that is at least 75 percent alternative fuel, the
vehicle is eligible for 70 percent of the otherwise allowable
alternative fuel vehicle credit. If the vehicle operates on a
mixed fuel that is at least 90 percent alternative fuel, the
vehicle is eligible for 90 percent of the otherwise allowable
alternative fuel vehicle credit.
A qualifying alternative fuel vehicle (or mixed fuel
vehicle) must be placed in service before January 1, 2007.
Base fuel economy
The base fuel economy is the 2002 model year city fuel
economy for vehicles by inertia weight class by vehicle type.
The ``vehicle inertia weight class'' is that defined in
regulations prescribed by the Environmental Protection Agency
for purposes of Title II of the Clean Air Act.
Alternative minimum tax and credit carry forward or carry back
Taxpayers may claim credits with respect to purchases of
qualified vehicles against both their regular and alternative
minimum tax liabilities.
The conference agreement provides that credits allowable,
but unused in the current year, from the purchase of a
qualifying vehicle for business use may be carried back one
year and forward 20 years.\32\ Credit allowable with respect to
a vehicle purchased for personal use may only be claimed in the
year of purchase. The Secretary shall issue regulations under
which qualified vehicle sold at retail is display a notice
stating that the vehicle is a qualified vehicle and that the
buyer may not benefit from the credit allowed if the buyer has
insufficient tax liability to be offset by the allowable
credit.
---------------------------------------------------------------------------
\32\ The credit, however, is not made part of the general business
credit.
---------------------------------------------------------------------------
Effective date.--The provision is effective for property
placed in service after the date of enactment.
10. Modifications of deduction for refueling property (secs. 2003 and
2010 of Senate amendment and sec. 179A of the Code)
PRESENT LAW
Certain costs of qualified clean-fuel vehicle refueling
property may be expensed and deducted when such property is
placed in service (sec. 179A). Up to $100,000 of such property
at each location owned by the taxpayer may be expensed with
respect to that location. Natural gas, liquefied natural gas,
liquefied petroleum gas, hydrogen, electricity and any other
fuel at least 85 percent of which is methanol, ethanol, or any
other alcohol or ether comprise clean-burning fuels.
The deduction is unavailable for property placed in
service after December 31, 2006.
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment extends the present-law deduction to
property placed in service before January 1, 2008, and to
property placed in service before January 1, 2012, in the case
of hydrogen refueling property.
In addition, the Senate amendment provision permits
taxpayers to claim a 50-percent credit for the cost of
installing clean-fuel vehicle refueling property to be used in
a trade or business of the taxpayer or installed at the
principal residence of the taxpayer. In the case of retail
clean-fuel vehicle refueling property the allowable credit may
not exceed $30,000. In the case of residential clean-fuel
vehicle refueling property the allowable credit may not
exceed$1,000. The taxpayer's basis in the property is reduced by the
amount of the credit and the taxpayer may not claim deductions under
section 179A with respect to property for which the credit is claimed.
In the case of refueling property installed on property
owned or used by a tax-exempt person, the taxpayer that
installs the property may claim the credit. To be eligible for
the credit, the property must be placed in service before
January 1, 2007 (before January 1, 2012 in the hydrogen
refueling property). The credit allowable in the taxable year
cannot exceed the difference between the taxpayer's regular tax
(reduced by certain other credits) and the taxpayer's tentative
minimum tax. The taxpayer may carry forward unused credits for
20 years.
Effective date.--The Senate amendment is effective for
property placed in service after September 30, 2002.
CONFERENCE AGREEMENT
The conference agreement extends and modifies present-law
section 179A with respect to refueling property. The conference
agreement increases the present-law limitation of $100,000 of
qualifying expenses per refueling location of the taxpayer to
$150,000 per location. In addition, the conference agreement
modifies the definition of refueling property with respect to
hydrogen produced from another clean-burning fuel (i.e.,
natural gas, liquefied natural gas, liquefied petroleum gas,
any fuel at least 85 percent of which is one or more of
methanol, ethanol, or other alcohol or ether) such that
qualified refueling property included property for the
production of hydrogen fuel, in addition to property for the
storage and dispensing of hydrogen fuel, if such property is
located at the point where hydrogen fuel is delivered into the
fuel tank of a motor vehicle.
The conference agreement extends the placed in service
date for qualifying refueling property to property placed in
service prior to January 1, 2009 (January 1, 2012, in the case
of property related to hydrogen fuel).
Effective date.--The provision is effective for property
placed in service after the date of enactment.
11. Credit for retail sale of alternative motor vehicle fuels (secs.
2004 and 2010 of Senate amendment)
PRESENT LAW
There is no retail credit for the sale of alternative
motor vehicle fuels. However, a 52-cents-per-gallon income tax
credit is allowed for alcohol fuels for 2003 and 2004 (51 cents
for 2005-2007). The alcohol fuels credit may be claimed as a
reduction in excise tax payments. Such tax payments generally
are made before the retail level. In the case of ethanol, the
Code provides a separate 10-cents-per-gallon credit for small
producers.
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment permits taxpayers to claim a credit
equal to the gasoline gallon equivalent of 30 cents per gallon
of alternative fuel sold in 2002 and 2003, 40 cents per gallon
in 2004, and 50 cents per gallon thereafter. Qualifying
alternative fuels are compressed natural gas, liquefied natural
gas, liquefied petroleum gas, hydrogen, any liquid mixture
consisting of at least 85 percent methanol, and any liquid
mixture consisting of at least 85 percent ethanol. The credit
may be claimed for sales prior to January 1, 2007. Under the
provision, the credit is part of the general business credit.
Effective date.--The Senate amendment is effective for
fuel sold at retail after September 30, 2002.
CONFERENCE AGREEMENT
The conference agreement does not include the Senate
amendment provision.
II. RELIABILITY
A. Natural Gas Gathering Lines Treated as Seven-Year Property
(sec. 42001 of the House bill, sec. 2302 of the Senate amendment, and
sec. 168 of the Code)
PRESENT LAW
The applicable recovery period for assets placed in
service under the Modified Accelerated Cost Recovery System is
based on the ``class life of the property.'' The class lives of
assets placed in service after 1986 are generally set forth in
Revenue Procedure 87-56.\33\ Revenue Procedure 87-56 includes
two asset classes that could describe natural gas gathering
lines owned by nonproducers of natural gas. Asset class 46.0,
describing pipeline transportation, provides a class life of 22
years and a recovery period of 15 years. Asset class 13.2,
describing assets used in the exploration for and production of
petroleum and natural gas deposits, provides a class life of 14
years and a depreciation recovery period of seven years. The
uncertainty regarding the appropriate recovery period of
natural gas gathering lines has resulted in litigation between
taxpayers and the IRS. The 10th Circuit Court of Appeals and
the 6th Circuit Court of Appeals have held that natural gas
gathering lines owned by nonproducers falls within the scope of
Asset class 13.2 (i.e., seven-year recovery period).\34\ The
Tax Court has held that natural gas gathering lines owned by
nonproducers falls within the scope of Asset class 46.0 (i.e.,
15-year recovery period).\35\
---------------------------------------------------------------------------
\33\ 1987-2 C.B. 674 (as clarified and modified by Rev. Proc. 88-
22, 1988-1 C.B. 785).
\34\ Duke Energy v. Commissioner, 172 F.3d 1255 (10th Cir. 1999),
rev'g 109 T.C. 416 (1997). Saginaw Bay Pipeline Co. v. United States,
2003 FED App. 0259P (6th Cir.) rev'g 124 F. Supp. 2d 465 (E.D. Mich.
2001). See also True v. United States, 97-2 U.S. Tax Cas. (CCH) par.
50,946 (D. Wyo. 1997).
\35\ Clajon Gas Co., L.P. v. Commissioner, 119 T.C. 197 (2002).
---------------------------------------------------------------------------
HOUSE BILL
The House bill establishes a statutory 7-year recovery
period and a class life of 10 years for natural gas gathering
lines. In addition, the House bill provides that there is no
adjustment to the allowable amount of depreciation for purposes
of computing a taxpayer's alternative minimum taxable income
with respect to such property. A natural gas gathering line is
defined to include any pipe, equipment, and appurtenance that
is (1) determined to be a gathering line by the Federal Energy
Regulatory Commission, or (2) used to deliver natural gas from
the wellhead or a common point to the point at which such gas
first reaches (a) a gas processing plant, (b) an
interconnection with an interstate transmission line, (c) an
interconnection with an intrastate transmission line, or (d) a
direct interconnection with a local distribution company, a gas
storage facility, or an industrial consumer.
Effective date.--The provision is effective for property
placed in service after the date of enactment. No inference is
intended as to the proper treatment of natural gas gathering
lines placed in service before the date of enactment.
SENATE AMENDMENT
The Senate amendment is the same as the House bill,
except that it does not include the provision providing that
there is no adjustment to the allowable amount of depreciation
for purposes of computing a taxpayer's alternative minimum
taxable income with respect to natural gas gathering lines.
Effective date.--The provision is effective for property
placed in service after the date of enactment. No inference is
intended as to the proper treatment of natural gas gathering
lines placed in service before the date of enactment.
CONFERENCE AGREEMENT
The conference agreement follows the House bill with the
following modification. The conference agreement provides a
class life of 14 years for natural gas gathering lines (instead
of 10 years).
B. Natural Gas Distribution Lines Treated as Fifteen-Year Property
(sec. 42002 of the House bill, sec. 2311 of the Senate amendment, and
sec. 168 of the Code)
PRESENT LAW
The applicable recovery period for assets placed in
service under the Modified Accelerated Cost Recovery System is
based on the ``class life of the property.'' The class lives of
assets placed in service after 1986 are generally set forth in
Revenue Procedure 87-56.\36\ Natural gas distribution pipelines
are assigned a 20-year recovery period and a class life of 35
years.
---------------------------------------------------------------------------
\36\ 1987-2 C.B. 674 (as clarified and modified by Rev. Proc. 88-
22, 1988-1 C.B. 785).
---------------------------------------------------------------------------
HOUSE BILL
The House bill establishes a statutory 15-year recovery
period and a class life of 20 years for natural gas
distribution lines. In addition, the House bill provides that
there would be no adjustment to the allowable amount of
depreciation for purposes of computing a taxpayer's alternative
minimum taxable income with respect to such property.
Effective date.--The provision is effective for property
placed in service after the date of enactment.
SENATE AMENDMENT
The Senate amendment establishes a statutory 15-year
recovery period and a class life of 20 years for natural gas
distribution lines.
Effective date.--The provision is effective for property
placed in service after the date of enactment.
CONFERENCE AGREEMENT
The conference agreement follows the House bill with the
following modification. The conference agreement provides a
class life of 35 years for natural gas distribution lines
(instead of 20 years).
C. Transmission Property Treated as Fifteen-Year Property
(sec. 42003 of the House bill and sec. 168 of the Code)
PRESENT LAW
The applicable recovery period for assets placed in
service under the Modified Accelerated Cost Recovery System is
based on the ``class life of the property.'' The class lives of
assets placed in service after 1986 are generally set forth in
Revenue Procedure 87-56. Assets used in the transmission and
distribution of electricity for sale and related land
improvements are assigned a 20-year recovery period and a class
life of 30 years.
HOUSE BILL
The House bill establishes a statutory 15-year recovery
period and a class life of 20 years for certain assets used in
the transmission of electricity for sale and related land
improvements. For purposes of the provision, section 1245
property used in the transmission of electricity for sale at 69
kilovolts and above will qualify for the new recovery period.
In addition, the House bill provides that there would be no
adjustment to the allowable amount of depreciation for purposes
of computing a taxpayer's alternative minimum taxable income
with respect to such property.
Effective date.--The provision is effective for property
placed in service after the date of enactment.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement follows the House bill with the
following modifications. The conference agreement limits the
provision to property the original use \37\ of which commences
after the date of enactment and alters the class life of such
property to 30 years (instead of 20 years).
---------------------------------------------------------------------------
\37\ The term ``original use'' means the first use to which the
property is put, whether or not such use corresponds to the use of such
property by the taxpayer. It is intended that, when evaluating whether
property qualifies as ``original use,'' the factors used to determine
whether property qualified as ``new section 38 property'' for purposes
of the investment tax credit would apply. See Treasury Regulation 1.48-
2. Thus, it is intended that additional capital expenditures incurred
to recondition or rebuild acquired property (or owned property) would
satisfy the ``original use'' requirement. However, the cost of
reconditioned or rebuilt property acquired by the taxpayer would not
satisfy the ``original use'' requirement. For example, if on August 11,
2004, a taxpayer buys from RCM for $200,000 transmission lines that
have been previously used by RCM. Subsequent to the purchase, the
taxpayer makes an expenditure on the property of $50,000 of the type
that must be capitalized. Regardless of whether the $50,000 is added to
the basis of such property or is capitalized as a separate asset, such
amount would be treated as satisfying the ``original use'' requirement
and would be eligible for the reduced recovery period. No part of the
$200,000 purchase price qualifies for the reduced recovery period.
---------------------------------------------------------------------------
D. Expensing of Capital Costs Incurred for Production in Complying With
Environmental Protection Agency Sulfur Regulations for Small Refiners
(sec. 42004 of the House bill, sec. 2303 of the Senate amendment, and
new sec. 179C of the Code)
PRESENT LAW
Taxpayers generally may recover the costs of investments
in refinery property through annual depreciation deductions.
HOUSE BILL
The bill permits small business refiners to claim an
immediate deduction (i.e., expensing) for up to 75 percent of
the costs paid or incurred for the purpose of complying with
the Highway Diesel Fuel Sulfur Control Requirements of the
Environmental Protection Agency (``EPA'').
For these purposes a small business refiner is a taxpayer
who is within the business of refining petroleum products
employs not more than 1,500 employees directly in refining and
has less than 205,000 barrels per day (average) of total
refinery capacity. The deduction is reduced, pro rata, for
taxpayers with capacity in excess of 155,000 barrels per day.
Effective date.--The provision is effective for expenses
paid or incurred after March 31, 2003.
SENATE AMENDMENT
The Senate amendment generally is the same as the House
bill.
Effective date.--The provision is effective for expenses
paid or incurred after the date of enactment.
CONFERENCE AGREEMENT
The conference agreement generally follows the House bill
and the Senate amendment except with respect to the effective
date. The conference agreement also clarifies that qualifying
expenditures are those expenditures paid or incurred with
respect to a facility beginning January 1, 2003, and ending the
earlier of the date that is one year after the date on which
the taxpayer must comply with applicable EPA regulation or
December 31, 2009. In addition, with respect to the definition
of a small business refiner, the conferees intend that, in any
case in which refinery through-put or retained production of
the refinery differs substantially from its average daily
output of refined product, capacity be measured by reference to
the average daily output of refined product.
Effective date.--The provision is effective for expenses
paid or incurred after December 31, 2002.
E. Credit for Small Refiners for Production of Diesel Fuel in
Compliance With Environmental Protection Agency Sulfur Regulations for
Small Refiners
(sec. 42005 of the House bill, sec. 2304 of Senate amendment, and new
sec. 45I of the Code)
PRESENT LAW
Present law does not provide a credit for the production
of low-sulfur diesel fuel.
HOUSE BILL
The House bill provides that a small business refiner may
claim credit equal to five cents per gallon for each gallon of
low sulfur diesel fuel produced during the taxable year that is
in compliance with the Highway Diesel Fuel Sulfur Control
Requirements of the Environmental Protection Agency (``EPA'').
The total production credit claimed by the taxpayer is limited
to 25 percent of the capital costs incurred to come into
compliance with the EPA diesel fuel requirements. The
taxpayer's basis in such property is reduced by the amount of
production credit claimed.
For these purposes a small business refiner is a taxpayer
who is within the business of refining petroleum products
employs not more than 1,500 employees directly in refining and
has less than 205,000 barrels per day (average) of total
refinery capacity. The credit is reduced, pro rata, for
taxpayers with capacity in excess of 155,000 barrels per day.
Effective date.--The provision is effective for expenses
paid or incurred after March 31, 2003.
SENATE AMENDMENT
The Senate amendment generally is the same as the House.
In the case of a qualifying small business refiner that is
owned by a cooperative, the cooperative is allowed to elect to
pass any production credits to patrons of the organization.
Effective date.--The Senate amendment is effective on the
date of enactment.
CONFERENCE AGREEMENT
The conference agreement follows the House bill and the
Senate amendment. The conference agreement provides that a
small business refiner may claim credit equal to five cents per
gallon for each gallon of low sulfur diesel fuel produced
during the taxable year that is in compliance with the Highway
Diesel Fuel Sulfur Control Requirements of the Environmental
Protection Agency (``EPA''). The total production credit
claimed by the taxpayer is limited to 25 percent of the capital
costs incurred to come into compliance with the EPA diesel fuel
requirements. The taxpayer's basis in such property is reduced
by the amount of production credit claimed. In the case of a
qualifying small business refiner that is owned by a
cooperative, the cooperative is allowed to elect to pass any
production credits to patrons of the organization.
In addition, with respect to the definition of a small
business refiner, the conferees intend that, in any case where
refinery through-put or retained production of the refinery
differs substantially from its average daily output of refined
product, capacity be measured by reference to the average daily
output of refined product.
The conference agreement also clarifies that qualifying
expenditures are those expenditures paid or incurred with
respect to a facility beginning January 1, 2003 and ending the
earlier of the date that is one year after the date on which
the taxpayer must comply with applicable EPA regulation or
December 31, 2009.
Effective date.--The provision is effective for expenses
paid or incurred after December 31, 2002.
F. Determination of Small Refiner Exception to Oil Depletion Deduction
(sec. 42006 of the House bill, sec. 2305 of the Senate amendment, and
sec. 613A of the Code)
PRESENT LAW
Present law classifies oil and gas producers as
independent producers or integrated companies. The Code
provides numerous special tax rules for operations by
independent producers. One such rule allows independent
producers to claim percentage depletion deductions rather than
deducting the costs of their asset, a producing well, based on
actual production from the well (i.e., cost depletion).
A producer is an independent producer only if its
refining and retail operations are relatively small. For
example, an independent producer may not have refining
operations the runs from which exceed 50,000 barrels on any day
in the taxable year during which independent producer status is
claimed.
HOUSE BILL
The provision increases the current 50,000-barrel-per-day
limitation to 75,000. In addition, the provision changes the
refinery limitation on claiming independent producer status
from a limit based on actual daily production to a limit based
on average daily production for the taxable year. Accordingly,
the average daily refinery run for the taxable year may not
exceed 75,000 barrels. For this purpose, the taxpayer
calculates average daily production by dividing total
production for the taxable year by the total number of days in
the taxable year.
Effective date.--The provision is effective for taxable
years beginning after December 31, 2003.
SENATE AMENDMENT
The Senate amendment is similar to the House Bill except
the average daily refinery run may not exceed 60,000 barrels.
Effective date.--The Senate amendment is effective for
taxable years beginning after December 31, 2002.
CONFERENCE AGREEMENT
The conference agreement follows the House bill, except
the average daily refinery run for the taxable year may not
exceed 67,500 barrels.
Effective date.--The provision is effective for taxable
years ending after the date of enactment.
G. Sales or Dispositions To Implement Federal Energy Regulatory
Commission or State Electric Restructuring Policy
(sec. 42007 of the House bill, sec. 2404 of the Senate amendment, and
sec. 451 of the Code)
PRESENT LAW
Generally, a taxpayer recognizes gain to the extent the
sales price (and any other consideration received) exceeds the
seller's basis in the property. The recognized gain is subject
to current income tax unless the gain is deferred or not
recognized under a special tax provision.
HOUSE BILL
The House bill permits a taxpayer to elect to recognize
gain from a qualifying electric transmission transaction
ratably over an eight-year period beginning in the year of sale
if the amount realized from such sale is used to purchase
exempt utility property within the applicable period \38\ (the
``reinvestment property''). If the amount realized exceeds the
amount used to purchase reinvestment property, any realized
gain shall be recognized to the extent of such excess in the
year of the qualifying electric transmission transaction. Any
remaining realized gain is recognized ratably over the eight-
year period.
---------------------------------------------------------------------------
\38\ The applicable period for a taxpayer to reinvest the proceeds
is four years after the close of the taxable year in which the
qualifying electric transmission transaction occurs.
---------------------------------------------------------------------------
A qualifying electric transmission transaction is the
sale or other disposition of property used by the taxpayer in
the trade or business of providing electric transmission
services, or an ownership interest in such an entity, to an
independent transmission company prior to January 1, 2007. In
general, an independent transmission company is defined as: (1)
an independent transmission provider \39\ approved by the FERC;
(2) a person (i) who the FERC determines under section 203 of
the Federal Power Act (or by declaratory order) is not a
``market participant'' and (ii) whose transmission facilities
are placed under the operational control of a FERC-approved
independent transmission provider before the close of the
period specified in such authorization, but not later than
January 1, 2007; or (3) in the case of facilities subject to
the jurisdiction of the Public Utility Commission of Texas, (i)
a person which is approved by that Commission as consistent
with Texas State law regarding an independent transmission
organization, or (ii) a political subdivision, or affiliate
thereof, whose transmission facilities are under the
operational control of an organization described in (i).
---------------------------------------------------------------------------
\39\ For example, a regional transmission organization, an
independent system operator, or an independent transmission company.
---------------------------------------------------------------------------
Exempt utility property is defined as: (1) property used
in the trade or business of generating, transmitting,
distributing, or selling electricity or producing,
transmitting, distributing, or selling natural gas, or (2)
stock in a controlled corporation whose principal trade or
business consists of the activities described in (1).
If a taxpayer is a member of an affiliated group of
corporations filing a consolidated return, the provision
permits the reinvestment property to be purchased by any member
of the affiliated group (in lieu of the taxpayer).
If a taxpayer elects the application of the House bill,
then the statutory period for the assessment of any deficiency,
for any taxable year in which any part of the gain eligible for
the provision is realized, attributable to such gain shall not
expire prior to the expiration of three years from the date the
Secretary of the Treasury is notified by the taxpayer of the
reinvestment property or an intention not to reinvest.
An electing taxpayer is required to attach a statement to
that effect in the tax return for the taxable year in which the
transaction takes place in the manner as the Secretary shall
prescribe. The election shall be binding for that taxable year
and all subsequent taxable years.\40\ In addition, an electing
taxpayer is required to attach a statement that identifies the
reinvestment property in the manner as the Secretary shall
prescribe.
---------------------------------------------------------------------------
\40\ The provision also provides that the installment sale rules
shall not apply to any qualifying electric transmission transaction for
which a taxpayer elects the application of this provision.
---------------------------------------------------------------------------
Effective date.--The provision is effective for
transactions occurring after the date of enactment.
SENATE AMENDMENT
Similar to the House bill, but does not have a
reinvestment obligation.
Effective date.--The provision is effective for
transactions occurring after the date of enactment.
CONFERENCE AGREEMENT
The conference agreement follows the House bill.
H. Modification to Special Rules for Nuclear Decommissioning Costs
(sec. 42008 of the House bill, sec. 2402 of the Senate amendment, and
sec. 468A of the Code)
PRESENT LAW
Overview
Special rules dealing with nuclear decommissioning
reserve funds were adopted by Congress in the Deficit Reduction
Act of 1984 (``1984 Act''), when tax issues regarding the time
value of money were addressed generally. Under general tax
accounting rules, a deduction for accrual basis taxpayers is
deferred until there is economic performance for the item for
which the deduction is claimed. However, the 1984 Act contains
an exception under which a taxpayer responsible for nuclear
powerplant decommissioning may elect to deduct contributions
made to a qualified nuclear decommissioning fund for future
decommissioning costs. Taxpayers who do not elect this
provision are subject to general tax accounting rules.
Qualified nuclear decommissioning fund
A qualified nuclear decommissioning fund (a ``qualified
fund'') is a segregated fund established by a taxpayer that is
used exclusively for the payment of decommissioning costs,
taxes on fund income, management costs of the fund, and for
making investments. The income of the fund is taxed at a
reduced rate of 20 percent for taxable years beginning after
December 31, 1995.\41\
---------------------------------------------------------------------------
\41\ As originally enacted in 1984, a qualified fund paid tax on
its earnings at the top corporate rate and, as a result, there was no
present-value tax benefit of making deductible contributions to a
qualified fund. Also, as originally enacted, the funds in the trust
could be invested only in certain low risk investments. Subsequent
amendments to the provision have reduced the rate of tax on a qualified
fund to 20 percent and removed the restrictions on the types of
permitted investments that a qualified fund can make.
---------------------------------------------------------------------------
Contributions to a qualified fund are deductible in the
year made to the extent that these amounts were collected as
part of the cost of service to ratepayers (the ``cost of
service requirement'').\42\ Funds withdrawn by the taxpayer to
pay for decommissioning costs are included in the taxpayer's
income, but the taxpayer also is entitled to a deduction for
decommissioning costs as economic performance for such costs
occurs.
---------------------------------------------------------------------------
\42\ Taxpayers are required to include in gross income customer
charges for decommissioning costs (sec. 88).
---------------------------------------------------------------------------
Accumulations in a qualified fund are limited to the
amount required to fund decommissioning costs of a nuclear
powerplant for the period during which the qualified fund is in
existence (generally post-1984 decommissioning costs of a
nuclear powerplant). For this purpose, decommissioning costs
are considered to accrue ratably over a nuclear powerplant's
estimated useful life. In order to prevent accumulations of
funds over the remaining life of a nuclear powerplant in excess
of those required to pay future decommissioning costs of such
nuclear powerplant and to ensure that contributions to a
qualified fund are not deducted more rapidly than level funding
(taking into account an appropriate discount rate), taxpayers
must obtain a ruling from the IRS to establish the maximum
annual contribution that may be made to a qualified fund (the
``ruling amount''). In certain instances (e.g., change in
estimates), a taxpayer is required to obtain a new ruling
amount to reflect updated information.
A qualified fund may be transferred in connection with
the sale, exchange or other transfer of the nuclear powerplant
to which it relates. If the transferee is a regulated public
utility and meets certain other requirements, the transfer will
be treated as a nontaxable transaction. No gain or loss will be
recognized on the transfer of the qualified fund and the
transferee will take the transferor's basis in the fund.\43\
The transferee is required to obtain a new ruling amount from
the IRS or accept a discretionary determination by the IRS.\44\
---------------------------------------------------------------------------
\43\ Treas. reg. sec. 1.468A-6.
\44\ Treas. reg. sec. 1.468A-6(f).
---------------------------------------------------------------------------
Nonqualified nuclear decommissioning funds
Federal and State regulators may require utilities to set
aside funds for nuclear decommissioning costs in excess of the
amount allowed as a deductible contribution to a qualified
fund. In addition, taxpayers may have set aside funds prior to
the effective date of the qualified fund rules.\45\ The
treatment of amounts set aside for decommissioning costs prior
to 1984 varies. Some taxpayers may have received no tax benefit
while others may have deducted such amounts or excluded such
amounts from income. Since 1984, taxpayers have been required
to include in gross income customer charges for decommissioning
costs (sec. 88), and a deduction has not been allowed for
amounts set aside to pay for decommissioning costs except
through the use of a qualified fund. Income earned in a
nonqualified fund is taxable to the fund's owner as it is
earned.
---------------------------------------------------------------------------
\45\ These funds are generally referred to as ``nonqualified
funds.''
---------------------------------------------------------------------------
HOUSE BILL
Repeal of cost of service requirement
The House bill repeals the cost of service requirement
for deductible contributions to a nuclear decommissioning fund.
Thus, all taxpayers, including unregulated taxpayers, are
allowed a deduction for amounts contributed to a qualified
fund.
Permit contributions to a qualified fund for pre-1984 decommissioning
costs
The House bill also repeals the limitation that a
qualified fund only accumulate an amount sufficient to pay for
a nuclear powerplant's decommissioning costs incurred during
the period that the qualified fund is in existence (generally
post-1984 decommissioning costs). Thus, any taxpayer is
permitted to accumulate an amount sufficient to cover the
present value of 100 percent of a nuclear powerplant's
estimated decommissioning costs in a qualified fund. TheHouse
bill does not change the requirement that contributions to a qualified
fund not be deducted more rapidly than level funding.
Exception to ruling amount for certain decommissioning costs
The House bill permits a taxpayer to make contributions
to a qualified fund in excess of the ruling amount in one
circumstance. Specifically, a taxpayer is permitted to
contribute up to the present value of the amount required to
fund a nuclear powerplant's decommissioning costs which under
present law section 468A(d)(2)(A) is not permitted to be
accumulated in a qualified fund (generally pre-1984
decommissioning costs).\46\ It is anticipated that an amount
that is permitted to be contributed under this special rule
shall be determined using the estimate of total decommissioning
costs used for purposes of determining the taxpayer's most
recent ruling amount. Any amount transferred to the qualified
fund under this special rule that has not previously been
deducted or excluded from gross income is allowed as a
deduction over the remaining useful life of the nuclear
powerplant.\47\ If a qualified fund that has received amounts
under this rule is transferred to another person, the
transferor will be permitted a deduction for any remaining
deductible amounts at the time of transfer.
---------------------------------------------------------------------------
\46\ The ability to transfer property into a qualified fund under
this special rule is available only to the extent the taxpayer has not
obtained a new ruling amount incorporating the repeal of the limitation
that a qualified fund only accumulate an amount sufficient to pay for
decommissioning costs of a nuclear powerplant incurred during the
period that the fund is in existence (generally post 1984
decommissioning costs).
\47\ A taxpayer recognizes no gain or loss on the contribution of
property to a qualified fund under this special rule. The qualified
fund will take a transferred (carryover) basis in such property.
Correspondingly, a taxpayer's deduction (over the estimated life of the
nuclear powerplant) is to be based on the adjusted tax basis of the
property contributed rather than the fair market value of such
property.
---------------------------------------------------------------------------
Contributions to a qualified fund after useful life of powerplant
The House bill also allows deductible contributions to a
qualified fund subsequent to the end of a nuclear powerplant's
estimated useful life. Such payments are permitted to the
extent they do not cause the assets of the qualified fund to
exceed the present value of the taxpayer's allocable share
(current or former) of the nuclear decommissioning costs of
such nuclear powerplant.
Clarify treatment of transfers of qualified funds
The House bill clarifies the Federal income tax treatment
of the transfer of a qualified fund. No gain or loss would be
recognized to the transferor or the transferee as a result of
the transfer of a qualified fund in connection with the
transfer of the power plant with respect to which such fund was
established.
Effective date.--The provision would be effective for
taxable years beginning after December 31, 2003.
SENATE AMENDMENT
Repeal of cost of service requirement
The Senate amendment repeals the cost of service
requirement for deductible contributions to a nuclear
decommissioning fund. Thus, all taxpayers, including
unregulated taxpayers, would be allowed a deduction for amounts
contributed to a qualified fund.
Clarify treatment of transfers of qualified funds and deductibility of
decommissioning costs
The Senate amendment clarifies the Federal income tax
treatment of the transfer of a qualified fund. No gain or loss
would be recognized to the transferor or the transferee (or the
qualified fund) as a result of the transfer of a qualified fund
in connection with the transfer of the power plant with respect
to which such fund was established. In addition, the Senate
amendment provides that all nuclear decommissioning costs are
deductible when paid or incurred.
Effective date.--The provision is effective for taxable
years beginning after December 31, 2002.
CONFERENCE AGREEMENT
The conference agreement follows the House bill with the
following modifications. The conference agreement clarifies
that, for purposes of the exception to ruling amount for
certain costs (generally pre-1984 decommissioning costs), only
the present value of total nuclear decommissioning costs with
respect to a nuclear powerplant previously excluded under
section 468A(d)(2)(A) may be contributed to a qualified fund.
For example, if $100 is the present value of the total
decommissioning costs of a nuclear powerplant, and if under
present law the qualified fund is only permitted to accumulate
(and has in fact accumulated) $75 of decommissioning costs over
such plant's estimated useful life (because the qualified fund
was not in existence during 25 percent of the estimated useful
life of the nuclear powerplant), a taxpayer could contribute
$25 to the qualified fund under this component of the
provision.
In addition, the Conference agreement provides that a
purchaser of an interest in a nuclear powerplant may elect to
treat certain amounts previously set aside for nuclear
decommissioning by the seller and transferred to the taxpayer
as part of the sale as if such amounts had been contributed to
a qualified fund immediately prior to the transfer.\48\ The
adjusted basis of such assets shall be the same as in the hands
of the seller. The election is available only if the seller of
the interest in the nuclear powerplant is a tax-exempt entity.
In addition, the maximum amount eligible for such treatment is
limited to the product of the present value of the estimated
nuclear decommissioning costs and the applicable percentage.
The ``applicable percentage'' is a fraction equal to the number
of years the powerplant has been in service over the estimated
useful life of such powerplant. A taxpayer shall make the
election in the manner prescribed by the Secretary by the due
date (including extensions of time) for its return of tax for
the year in which the acquisition occurs. In addition, a
taxpayer must request a new ruling amount from the IRS to be
eligible for this provision.
---------------------------------------------------------------------------
\48\ An election under this special rule shall be disregarded in
determining the Federal income tax treatment of the sale to the seller.
---------------------------------------------------------------------------
I. Treatment of Certain Income of Electric Cooperatives
(sec. 42009 of the House bill, secs. 2403 and 2406 of the Senate
amendment, and sec. 501 of the Code)
PRESENT LAW
In general
Under present law, an entity must be operated on a
cooperative basis in order to be treated as a cooperative for
Federal income tax purposes. Although not defined by statute or
regulation, the two principal criteria for determining whether
an entity is operating on a cooperative basis are: (1)
ownership of the cooperative by persons who patronize the
cooperative; and (2) return of earnings to patrons in
proportion to their patronage. The Internal Revenue Service
requires that cooperatives must operate under the following
principles: (1) subordination of capital in control over the
cooperative undertaking and in ownership of the financial
benefits from ownership; (2) democratic control by the members
of the cooperative; (3) vesting in and allocation among the
members of all excess of operating revenues over the expenses
incurred to generate revenues in proportion to their
participation in the cooperative (patronage); and (4) operation
at cost (not operating for profit or below cost).\49\
---------------------------------------------------------------------------
\49\ Announcement 96-24, ``Proposed Examination Guidelines
Regarding Rural Electric Cooperatives,'' 1996-16 I.R.B. 35.
---------------------------------------------------------------------------
In general, cooperative members are those who participate
in the management of the cooperative and who share in patronage
capital. As described below, income from the sale of electric
energy by an electric cooperative may be member or non-member
income to the cooperative, depending on the membership status
of the purchaser. A municipal corporation may be a member of a
cooperative.
For Federal income tax purposes, a cooperative generally
computes its income as if it were a taxable corporation, with
one exception--the cooperative may exclude from its taxable
income distributions of patronage dividends. In general,
patronage dividends are the profits of the cooperative that are
rebated to its patrons pursuant to a pre-existing obligation of
the cooperative to do so. The rebate must be made in some
equitable fashion on the basis of the quantity or value of
business done with the cooperative.
Except for tax-exempt farmers' cooperatives, cooperatives
that are subject to the cooperative tax rules of subchapter T
of the Code (sec. 1381, et seq.) are permitted a deduction for
patronage dividends from their taxable income only to the
extent of net income that is derived from transactions with
patrons who are members of the cooperative (sec. 1382). The
availability of such deductions from taxable income has the
effect of allowing the cooperative to be treated like a conduit
with respect to profits derived from transactions with patrons
who are members of the cooperative.
Cooperatives that qualify as tax-exempt farmers'
cooperatives are permitted to exclude patronage dividends from
their taxable income to the extent of all net income, including
net income that is derived from transactions with patrons who
are not members of the cooperative, provided the value of
transactions with patrons who are not members of the
cooperative does not exceed the value of transactions with
patrons who are members of the cooperative (sec. 521).
Taxation of electric cooperatives exempt from subchapter T
In general, the cooperative tax rules of subchapter T
apply to any corporation operating on a cooperative basis
(except mutual savings banks, insurance companies, other tax-
exempt organizations, and certain utilities), including tax-
exempt farmers' cooperatives (described in sec. 521(b)).
However, subchapter T does not apply to an organization that is
``engaged in furnishing electric energy, or providing telephone
service, to persons in rural areas'' (sec. 1381(a)(2)(C)).
Instead, electric cooperatives are taxed under rules that were
generally applicable to cooperatives prior to the enactment of
subchapter T in 1962. Under these rules, an electric
cooperative can exclude patronage dividends from taxable income
to the extent of all net income of the cooperative, including
net income derived from transactions with patrons who are not
members of the cooperative.\50\
---------------------------------------------------------------------------
\50\ See Rev. Rul. 83-135, 1983-2 C.B. 149.
---------------------------------------------------------------------------
Tax exemption of rural electric cooperatives
Section 501(c)(12) provides an income tax exemption for
rural electric cooperatives if at least 85 percent of the
cooperative's income consists of amounts collected from members
for the sole purpose of meeting losses and expenses of
providing service to its members. The IRS takes the position
that rural electric cooperatives also must comply with the
fundamental cooperative principles described above in order to
qualify for tax exemption under section 501(c)(12).\51\ The 85-
percent test is determined without taking into account any
income from qualified pole rentals and cancellation of
indebtedness income from the prepayment of a loan under
sections 306A, 306B, or 311 of the Rural Electrification Act of
1936 (as in effect on January 1, 1987). The exclusion for
cancellation of indebtedness income applies to such income
arising in 1987, 1988, or 1989 on debt that either originated
with, or is guaranteed by, the Federal Government.
---------------------------------------------------------------------------
\51\ Rev. Rul. 72-36, 1972-1 C.B. 151.
---------------------------------------------------------------------------
The receipt by a rural electric cooperative of
contributions in aid of construction and connection charges is
taken into account for purposes of applying the 85-percent
test.
Rural electric cooperatives generally are subject to the
tax on unrelated trade or business income under section 511.
Credit for producing fuel from a nonconventional source
Under present law, an income tax credit is allowed for
certain fuels produced from ``non-conventional sources'' and
sold to unrelated parties. The amount of the credit is equal to
$3 (generally adjusted for inflation) per barrel or BTU oil
barrel equivalent (sec. 29), subject to a phaseout. Qualified
fuels must be produced within the United States, and include:
oil produced from shale and tar sands; gas produced from
geopressured brine, Devonian shale, coal seams,tight formations
(``tight sands''), or biomass; and liquid, gaseous, or solid synthetic
fuels produced from coal (including lignite).
The credit applies to fuels produced from wells drilled
or facilities placed in service after December 31, 1979, and
before January 1, 1993. An exception extends the January 1,
1993 expiration date for facilities producing gas from biomass
and synthetic fuel from coal if the facility producing the fuel
is placed in service before July 1, 1998, pursuant to a binding
contract entered into before January 1, 1997.
The credit applies to qualified fuels produced and sold
before January 1, 2003 (in the case of non-conventional sources
subject to the January 1, 1993 expiration date) or January 1,
2008 (in the case of biomass gas and synthetic fuel facilities
eligible for the extension period).
HOUSE BILL
Treatment of income from open access transactions
The House bill provides that income received or accrued
by a rural electric cooperative (other than income received or
accrued directly or indirectly from a member of the
cooperative) from the provision or sale of electric energy
transmission services or ancillary services on a
nondiscriminatory open access basis under an independent
transmission provider agreement approved by FERC (including an
agreement providing for the transfer of control--but not
ownership--of transmission facilities) \52\ is excluded in
determining whether a rural electric cooperative satisfies the
85-percent test for tax exemption under section 501(c)(12).
---------------------------------------------------------------------------
\52\ Under this provision, references to FERC are treated as
including references to the Public Utility Commission of Texas.
---------------------------------------------------------------------------
For purposes of the 85-percent test, the House bill also
provides that income received or accrued by a rural electric
cooperative is treated as an amount collected from members for
the sole purpose of meeting losses and expenses if the income
is received or accrued indirectly from a member of the
cooperative, provided that such income is derived from a ``like
organization'' activity of the cooperative under present
law.\53\
---------------------------------------------------------------------------
\53\ See, e.g., Rev. Rul. 2002-54, 2002-37 I.R.B. 527; Rev. Rul.
83-170, 1983-2 C.B. 97; Rev. Rul. 65-201, 1965-2 C.B. 170.
---------------------------------------------------------------------------
Treatment of income from nuclear decommissioning transactions
The House bill provides that income received or accrued
by a rural electric cooperative from any ``nuclear
decommissioning transaction'' also is excluded in determining
whether a rural electric cooperative satisfies the 85-percent
test for tax exemption under section 501(c)(12). The term
``nuclear decommissioning transaction'' is defined as--
(1) Any transfer into a trust, fund, or instrument
established to pay any nuclear decommissioning costs if
the transfer is in connection with the transfer of the
cooperative's interest in a nuclear powerplant or
nuclear powerplant unit;
(2) Any distribution from a trust, fund, or
instrument established to pay any nuclear
decommissioning costs; or
(3) Any earnings from a trust, fund, or instrument
established to pay any nuclear decommissioning costs.
Treatment of income from asset exchange or conversion transactions
The House bill provides that gain realized by a tax-
exempt rural electric cooperative from a voluntary exchange or
involuntary conversion of certain property is excluded in
determining whether a rural electric cooperative satisfies the
85-percent test for tax exemption under section 501(c)(12).
This provision only applies to the extent that: (1) the gain
would qualify for deferred recognition under section 1031
(relating to exchanges of property held for productive use or
investment) or section 1033 (relating to involuntary
conversions); and (2) the replacement property that is acquired
by the cooperative pursuant to section 1031 or section 1033 (as
the case may be) constitutes property that is used, or to be
used, for the purpose of generating, transmitting,
distributing, or selling electricity or methane-based natural
gas.
Treatment of income from load loss transactions
Tax-exempt rural electric cooperatives.--The House bill
provides that income received or accrued by a tax-exempt rural
electric cooperative from a ``load loss transaction'' is
treated under 501(c)(12) as income collected from members for
the sole purpose of meeting losses and expenses of providing
service to its members. Therefore, income from load loss
transactions is treated as member income in determining whether
a rural electric cooperative satisfies the 85-percent test for
tax exemption under section 501(c)(12). The House bill also
provides that income from load loss transactions does not cause
a tax-exempt electric cooperative to fail to be treated for
Federal income tax purposes as a mutual or cooperative company
under the fundamental cooperative principles described above.
The term ``load loss transaction'' generally is defined
as any wholesale or retail sale of electric energy (other than
to a member of the cooperative) to the extent that the
aggregate amount of such sales during a seven-year period
beginning with the ``start-up year'' does not exceed the
reduction in the amount of sales of electric energy during such
period by the cooperative to members. The ``start-up year'' is
defined as the calendar year which includes the date of
enactment of this provision or, if later, at the election of
the cooperative: (1) the first year that the cooperative offers
nondiscriminatory open access; or (2) the first year in which
at least 10 percent of the cooperative's sales of electric
energy are to patrons who are not members of the cooperative.
The House bill also excludes income received or accrued
by rural electric cooperatives from load loss transactions from
the tax on unrelated trade or business income.
Taxable electric cooperatives.--The House bill provides
that the receipt or accrual of income from load loss
transactions by taxable electric cooperatives is treated as
income from patrons who are members of the cooperative. Thus,
income from a load loss transaction is excludible from the
taxable income of a taxable electric cooperative if the
cooperative distributes such income pursuant to a pre-existing
contract to distribute the income to a patron who is not
amember of the cooperative. The House bill also provides that income
from load loss transactions does not cause a taxable electric
cooperative to fail to be treated for Federal income tax purposes as a
mutual or cooperative company under the fundamental cooperative
principles described above.
Effective date
The House bill provision is effective for taxable years
beginning after the date of enactment.
SENATE AMENDMENT
Treatment of income from open access transactions
The Senate amendment provides that income received or
accrued by a rural electric cooperative from any ``open access
transaction'' (other than income received or accrued directly
or indirectly from a member of the cooperative) is excluded in
determining whether a rural electric cooperative satisfies the
85-percent test for tax exemption under section 501(c)(12). The
term ``open access transaction'' is defined as--
(1) The provision or sale of electric energy
transmission services or ancillary services on a
nondiscriminatory open access basis: (i) pursuant to an
open access transmission tariff filed with and approved
by the Federal Energy Regulatory Commission (``FERC'')
(including acceptable reciprocity tariffs), but only if
(in the case of a voluntarily filed tariff) the
cooperative files a report with FERC within 90 days of
enactment of this provision relating to whether or not
the cooperative will join a regional transmission
organization (``RTO''); or (ii) under an RTO agreement
approved by FERC (including an agreement providing for
the transfer of control--but not ownership--of
transmission facilities); \54\
---------------------------------------------------------------------------
\54\ Under this provision, references to FERC are treated as
including references to the Public Utility Commission of Texas or the
Rural Utilities Service.
---------------------------------------------------------------------------
(2) The provision or sale of electric energy
distribution services or ancillary services on a
nondiscriminatory open access basis to end-users served
by distribution facilities owned by the cooperative or
its members; or
(3) The delivery or sale of electric energy on a
nondiscriminatory open access basis, provided that such
electric energy is generated by a generation facility
that is directly connected to distribution facilities
owned by the cooperative (or its members) which owns
the generation facility.
For purposes of the 85-percent test, the Senate amendment
also provides that income received or accrued by a rural
electric cooperative from any ``open access transaction'' is
treated as an amount collected from members for the sole
purpose of meeting losses and expenses if the income is
received or accrued indirectly from a member of the
cooperative.
Treatment of income from nuclear decommissioning transactions
The Senate amendment provides that income received or
accrued by a rural electric cooperative from any ``nuclear
decommissioning transaction'' also is excluded in determining
whether a rural electric cooperative satisfies the 85-percent
test for tax exemption under section 501(c)(12). The term
``nuclear decommissioning transaction'' is defined as--
(1) Any transfer into a trust, fund, or instrument
established to pay any nuclear decommissioning costs if
the transfer is in connection with the transfer of the
cooperative's interest in a nuclear powerplant or
nuclear powerplant unit;
(2) Any distribution from a trust, fund, or
instrument established to pay any nuclear
decommissioning costs; or
(3) Any earnings from a trust, fund, or instrument
established to pay any nuclear decommissioning costs.
Treatment of income from asset exchange or conversion transactions
The Senate amendment provides that gain realized by a
tax-exempt rural electric cooperative from a voluntary exchange
or involuntary conversion of certain property is excluded in
determining whether a rural electric cooperative satisfies the
85-percent test for tax exemption under section 501(c)(12).
This provision only applies to the extent that: (1) the gain
would qualify for deferred recognition under section 1031
(relating to exchanges of property held for productive use or
investment) or section 1033 (relating to involuntary
conversions); and (2) the replacement property that is acquired
by the cooperative pursuant to section 1031 or section 1033 (as
the case may be) constitutes property that is used, or to be
used, for the purpose of generating, transmitting,
distributing, or selling electricity or natural gas.
Treatment of cancellation of indebtedness income from prepayment of
certain loans
The Senate amendment provides that income from the
prepayment of any loan, debt, or obligation of a tax-exempt
rural electric cooperative that is originated, insured, or
guaranteed by the Federal Government under the Rural
Electrification Act of 1936 is excluded in determining whether
the cooperative satisfies the 85-percent test for tax exemption
under section 501(c)(12).
Treatment of income from load loss transactions
Tax-exempt rural electric cooperatives.--The Senate
amendment provides that income received or accrued by a tax-
exempt rural electric cooperative from a ``load loss
transaction'' is treated under 501(c)(12) as income collected
from members for the sole purpose of meeting losses and
expenses of providing service to its members. Therefore, income
from load loss transactions is treated as member income in
determining whether a rural electric cooperative satisfies the
85-percent test for tax exemption under section 501(c)(12). The
bill also provides that income from load loss transactions does
not cause a tax-exempt electric cooperative to fail to be
treated for Federal income tax purposes as a mutual or
cooperative company under the fundamental cooperative
principles described above.
The term ``load loss transaction'' is generally defined
as any wholesale or retail sale of electric energy (other than
to a member of the cooperative) to the extent that the
aggregate amount of such sales during a seven-year period
beginning with the ``start-up year'' does not exceed the
reduction in the amount of sales of electric energy during such
period by the cooperative to members. The ``start-up year'' is
defined as the calendar year which includes the date of
enactment of this provision or, if later, at the election of
the cooperative: (1) the first year that the cooperative offers
nondiscriminatory open access; or (2) the first year in which
at least 10 percent of the cooperative's sales of electric
energy are to patrons who are not members of the cooperative.
The Senate amendment also excludes income received or
accrued by rural electric cooperatives from load loss
transactions from the tax on unrelated trade or business
income.
Taxable electric cooperatives.--The Senate amendment
provides that the receipt or accrual of income from load loss
transactions by taxable electric cooperatives is treated as
income from patrons who are members of the cooperative. Thus,
income from a load loss transaction is excludible from the
taxable income of a taxable electric cooperative if the
cooperative distributes such income pursuant to a pre-existing
contract to distribute the income to a patron who is not a
member of the cooperative. The Senate amendment also provides
that income from load loss transactions does not cause a
taxable electric cooperative to fail to be treated for Federal
income tax purposes as a mutual or cooperative company under
the fundamental cooperative principles described above.
Treatment of income from certain contributions in aid of construction
The Senate amendment excludes from the 85-percent test
for tax exemption under section 501(c)(12) the receipt by an
electric cooperative, before January 1, 2007, of any
contribution in aid of construction or connection charge (in
the form of money, property, capital or otherwise) that is
intended to facilitate the provision of electric service by the
cooperative for the purpose of the development, by the
recipient of such electric service, of qualified fuels from
nonconventional sources (within the meaning of section 29, as
modified elsewhere in the Senate amendment).
Effective date
The Senate amendment provision is effective for taxable
years beginning after the date of enactment.
CONFERENCE AGREEMENT
The conference agreement follows the House bill with the
following modifications:
Treatment of income from open access transactions
Income received or accrued by a rural electric
cooperative (other than income received or accrued directly or
indirectly from a member of the cooperative) from the provision
or sale of electric energy transmission services or ancillary
services on a nondiscriminatory open access basis under an open
access transmission tariff approved or accepted by FERC or
under an independent transmission provider agreement approved
or accepted by FERC (including an agreement providing for the
transfer of control--but not ownership--of transmission
facilities) \55\ is excluded in determining whether a rural
electric cooperative satisfies the 85-percent test for tax
exemption under section 501(c)(12).
---------------------------------------------------------------------------
\55\ Under this provision, references to FERC are treated as
including references to the Public Utility Commission of Texas.
---------------------------------------------------------------------------
In addition, income is excluded for purposes of the 85-
percent test if it is received or accrued by a rural electric
cooperative (other than income received or accrued directly or
indirectly from a member of the cooperative) from the provision
or sale of electric energy distribution services or ancillary
services, provided such services are provided on a
nondiscriminatory open access basis to distribute electric
energy not owned by the cooperative: (1) to end-users who are
served by distribution facilities not owned by the cooperative
or any of its members; or (2) generated by a generation
facility that is not owned or leased by the cooperative or any
of its members and that is directly connected to distribution
facilities owned by the cooperative or any of its members.
Treatment of income from load loss transactions
For purposes of this provision, the ``start-up year'' is
defined as the first year that the cooperative offers
nondiscriminatory open access or, if later and at the election
of the cooperative, the calendar year that includes the date of
enactment of this provision.
Effective date
The conference agreement provision is effective for
taxable years beginning after the date of enactment.
1. Exempt certain prepayments for natural gas from tax-exempt bond
arbitrage rules (sec. 3213 of the House bill and secs. 141 and
148 of the Code)
PRESENT LAW
Interest on bonds issued by States or local governments
to finance activities carried out or paid for by those entities
generally is exempt from income tax (sec. 103). Restrictions
are imposed on the ability of States or local governments to
invest the proceeds of these bonds for profit (the ``arbitrage
restrictions''). One such restriction limits the use of bond
proceeds to acquire ``investment-type property.'' The term
investment-type property includes the acquisition of property
in a transaction involving a prepayment. A prepayment can
produce prohibited arbitrage profits when the discount received
for prepaying the costs exceeds the yield on the tax-exempt
bonds. In general, prohibited prepayments include all
prepayments that are not customary in an industry by both
beneficiaries of tax-exempt bonds and other persons using
taxable financing for the same transaction.
On August 4, 2003, the Treasury Department issued final
regulations deeming to be customary, and not in violation of
the arbitrage rules, certain prepayments for natural gas
andelectricity. Generally, a qualified prepayment under the regulations
requires that 90 percent of the natural gas or electricity purchased
with the prepayment be used for a qualifying use. Generally, natural
gas is used for a qualifying use if it is to be (1) furnished to retail
gas customers of the issuing municipal utility who are located in the
natural gas service area of the issuing municipal utility, however, gas
used to produce electricity for sale is not included under this
provision (2) used by the issuing municipal utility to produce
electricity that will be furnished to retail electric service area
customers of the issuing utility, (3) used by the issuing municipal
utility to produce electricity that will be sold to a utility owned by
a governmental person and furnished to the service area retail electric
customers of the purchaser, (4) sold to a utility that is owned by a
governmental person if the requirements of (1), (2) or (3) are
satisfied by the purchasing utility (treating the purchaser as the
issuing utility) or (5) used to fuel the pipeline transportation of the
prepaid gas supply. Electricity is used for a qualifying use if it is
to be (1) furnished to retail service area electric customers of the
issuing municipal utility or (2) sold to a municipal utility and
furnished to retail electric customers of the purchaser who are located
in the electricity service area of the purchaser. Both governmental gas
and electric utilities may take advantage of this regulatory provision.
HOUSE BILL
In general
The provision creates a safe harbor exception to the
general rule that tax-exempt bond-financed prepayments violate
the arbitrage restrictions. The term ``investment type
property'' does not include a prepayment under a qualified
natural gas supply contract. The provision also provides that
such prepayments are not treated as private loans for purposes
of the private business tests.
Under the provision, a prepayment financed with tax-
exempt bond proceeds for the purpose of obtaining a supply of
natural gas for service area customers of a governmental
utility is not treated as the acquisition of investment-type
property. A contract is a qualified natural gas contract if the
volume of natural gas secured for any year covered by the
prepayment does not exceed the sum of (1) the average annual
natural gas purchased (other than for resale) by customers of
the utility within the service area of the utility (``retail
natural gas consumption'') during the testing period, and (2)
the amount of natural gas that is needed to fuel transportation
of the natural gas to the governmental utility. The testing
period is the 5-calendar-year period immediately preceding the
calendar year in which the bonds are issued. A retail customer
is one who does not purchase natural gas for resale. Natural
gas used to generate electricity by a governmental utility is
counted as retail natural gas consumption if the electricity
was sold to retail customers within the service area of the
governmental electric utility.
Adjustments
The volume of gas permitted by the general rule is
reduced by natural gas otherwise available on the date of
issuance. Specifically, the amount of natural gas permitted to
be acquired under a qualified natural gas contract for any
period is to be reduced by natural gas held by the utility on
the date of issuance of the bonds and natural gas that the
utility has a right to acquire for the prepayment period
(determined as of the date of issuance).\56\ For purposes of
the preceding sentence, applicable share means, with respect to
any period, the natural gas allocable to such period if the gas
were allocated ratably over the period to which the prepayment
relates.
---------------------------------------------------------------------------
\56\ For example, natural gas otherwise available on the date the
bonds are issued includes supply covered by other prepayment contracts
for the period, and supply held in storage or subject to an option to
purchase by such utility that is available for retail natural gas
consumption during the period covered by the prepayment. It does not
include supply that could be purchased on the open market during the
prepayment period.
---------------------------------------------------------------------------
For purposes of the safe harbor, if after the close of
the testing period and before the issue date of the bonds (1)
the government utility enters into a contract to supply natural
gas (other than for resale) for a commercial person for use at
a property within the service area of such utility and (2) the
gas consumption for such property was not included in the
testing period or the ratable amount of natural gas to be
supplied under the contract is significantly greater than the
ratable amount of gas supplied to such property during the
testing period, then the amount of gas permitted to be
purchased may be increased to accommodate the contract.
The average annual retail natural gas consumption
calculation for purposes of the safe harbor, however, is not to
exceed the annual amount of natural gas reasonably expected to
be purchased (other than for resale) by persons who are located
within the service area of such utility and who, as of the date
of issuance of the issue, are customers of such utility.
Intentional acts
The safe harbor does not apply if the utility engages in
intentional acts to render (1) the volume of natural gas
covered by the prepayment to be in excess of that needed for
retail natural gas consumption, and (2) the amount of natural
gas that is needed to fuel transportation of the natural gas to
the governmental utility.
Definition of service area
Service area is defined as (1) any area throughout which
the governmental utility provided (at all times during the
testing period) in the case of a natural gas utility, natural
gas transmission or distribution service, or in the case of an
electric utility, electric distribution service; (2) limited
areas contiguous to such areas, and (3) any area recognized as
the service area of the governmental utility under State or
Federal law. Contiguous areas are limited to any area within a
county contiguous to the area described in (1) in which retail
customers of the utility are located if such area is not also
served by another utility providing the same service.
Ruling request for higher prepayment amounts
Upon written request, the Secretary may allow an issuer
to prepay for an amount of gas greater than that allowed by the
safe harbor based on objective evidence of growth in gas
consumption or population that demonstrates that the amount
permitted by the exception is insufficient.
Effective date
The provision is effective for obligations issued after
the date of enactment.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement follows the House bill with a
conforming amendment. The conferees understand that a qualified
natural gas supply contract as defined in the conference
agreement is not nongovernmental output property for purposes
of subsection (d) of section 141. The conference agreement
provides that subsection (d) of section 141 does not apply to
prepayment contracts for natural gas or electricity that either
under the Treasury regulations or statutory safe harbor are not
investment-type property for purposes of the arbitrage rules
under section 148. No inference is intended regarding the
application of subsection 141(d) to prepayment contracts not
covered by the statutory safe harbor or Treasury regulations.
The conferees also recognize that a number of States have
created under State law joint action agencies that can serve as
purchasing agents for their member municipal gas utilities. The
conferees intend the provision to allow municipal utilities in
a State to participate in such buying arrangements as
established under State law, subject to the same limitations
that would apply if an individual utility were to purchase gas
directly. When acting on behalf of its municipal gas utility
members, the total amount of gas that can be purchased by a
joint action agency under the bill's exception to the arbitrage
rules is the aggregate of what each such member could purchase
for itself on a direct basis. Thus, with respect to qualified
natural gas supply contracts entered into by joint action
agencies for or on behalf of one or more member municipal
utilities, the requirements of the safe harbor are tested at
the individual municipal utility level based on the amount of
gas that would be allocated to such member during any year
covered by the contract.
III. PRODUCTION
A. Oil and Gas Provisions
1. Oil and gas production from marginal wells (sec. 43001 of the House
bill, sec. 2301 of the Senate amendment, and secs. 38, 39, and
new sec. 45J of the Code)
PRESENT LAW
There is no credit for the production of oil and gas from
marginal wells. The costs of such production may be recovered
under the Code's depreciation and depletion rules and in other
cases as a deduction for ordinary and necessary business
expenses.
HOUSE BILL
The provision would create a new, $3 per barrel credit
for the production of crude oil and a $0.50 credit per 1,000
cubic feet of qualified natural gas production. The maximum
amount of production on which credit could be claimed is 1,095
barrels or barrel equivalents. In both cases, the credit is
available only for production from a ``qualified marginal
well.'' The credit is not available to production occurring if
the reference price of oil exceeds $18 ($2.00 for natural gas).
The credit is reduced proportionately as for reference prices
between $15 and $18 ($1.67 and $2.00 for natural gas).
Reference prices are determined on a one-year look-back basis.
A qualified marginal well is defined as: (1) a well
production from which was marginal production for purposes of
the Code percentage depletion rules; or (2) a well that during
the taxable year had average daily production of not more than
25 barrel equivalents and produced water at a rate of not less
than 95 percent of total well effluent.
The credit is treated as part of the general business
credit; however, unused credits can be carried back for up to
10 years rather than the generally applicable carryback period
of one year.
Effective date.--The provision is effective for
production in taxable years beginning after December 31, 2003.
SENATE AMENDMENT
The Senate amendment is similar to the House bill, except
it does not permit the credit to be carried back beyond the
date of enactment and a marginal well that is not in compliance
with the applicable State and Federal pollution prevention,
control, and permit requirements for any period of time is not
considered a qualified marginal well during such period.
Effective date.--The Senate amendment is effective for
production in taxable years beginning after date of enactment.
CONFERENCE AGREEMENT
The conference agreement generally follows the House bill
except unused credits may be carried back only five years.
Effective date.--The provision is effective for
production in taxable years beginning after December 31, 2003.
2. Temporary suspension of limitation based on 65 percent of taxable
income and extension of suspension of taxable income limit with
respect to marginal production (sec. 43002 of the House bill,
sec. 2306 of the Senate amendment, and sec. 613A of the Code)
PRESENT LAW
In general
Depletion, like depreciation, is a form of capital cost
recovery. In both cases, the taxpayer is allowed a deduction in
recognition of the fact that an asset--in the case of depletion
for oil or gas interests, the mineral reserve itself--is being
expended in order to produce income. Certain costs incurred
prior to drilling an oil or gas property are recovered through
the depletion deduction. These include costs of acquiring the
lease or other interest in the property and geological and
geophysical costs (in advance of actual drilling).
Depletion is available to any person having an economic
interest in a producing property. An economic interest is
possessed in every case in which the taxpayer has acquired by
investment any interest in minerals in place, and secures, by
any form of legal relationship, income derived from the
extraction of the mineral, to which it must look for a return
of its capital.\57\ Thus, for example, both working interests
and royalty interests in an oil- or gas-producing property
constitute economic interests, thereby qualifying the interest
holders for depletion deductions with respect to the property.
A taxpayer who has no capital investment in the mineral deposit
does not possess an economic interest merely because it
possesses an economic or pecuniary advantage derived from
production through a contractual relation.
---------------------------------------------------------------------------
\57\ Treas. Reg. sec. 1.611-1(b)(1).
---------------------------------------------------------------------------
Cost depletion
Two methods of depletion are currently allowable under
the Internal Revenue Code (the ``Code''): (1) the cost
depletion method, and (2) the percentage depletion method
(secs. 611-613). Under the cost depletion method, the taxpayer
deducts that portion of the adjusted basis of the depletable
property which is equal to the ratio of units sold from that
property during the taxable year to the number of units
remaining as of the end of taxable year plus the number of
units sold during the taxable year. Thus, the amount recovered
under cost depletion may never exceed the taxpayer's basis in
the property.
Percentage depletion and related income limitations
The Code generally limits the percentage depletion method
for oil and gas properties to independent producers and royalty
owners.\58\ Generally, under the percentage depletion method 15
percent of the taxpayer's gross income from an oil- or gas-
producing property is allowed as a deduction in each taxable
year (sec. 613A(c)). The amount deducted generally may not
exceed 100 percent of the net income from that property in any
year (the ``net-income limitation'') (sec. 613(a)). The 100-
percent net-income limitation for marginal wells is suspended
for taxable years beginning after December 31, 1997, and before
January 1, 2004.
---------------------------------------------------------------------------
\58\ Sec. 613A.
---------------------------------------------------------------------------
Additionally, the percentage depletion deduction for all
oil and gas properties may not exceed 65 percent of the
taxpayer's overall taxable income (determined before such
deduction and adjusted for certain loss carrybacks and certain
trust distributions) (sec. 613A(d)(1)).\59\ Because percentage
depletion, unlike cost depletion, is computed without regard to
the taxpayer's basis in the depletable property, cumulative
depletion deductions may be greater than the amount expended by
the taxpayer to acquire or develop the property.
---------------------------------------------------------------------------
\59\ Amounts disallowed as a result of this rule may be carried
forward and deducted in subsequent taxable years, subject to the 65-
percent taxable income limitation for those years.
---------------------------------------------------------------------------
A taxpayer is required to determine the depletion
deduction for each oil or gas property under both the
percentage depletion method (if the taxpayer is entitled to use
this method) and the cost depletion method. If the cost
depletion deduction is larger, the taxpayer must utilize that
method for the taxable year in question (sec. 613(a)).
Limitation of oil and gas percentage depletion to independent producers
and royalty owners
Generally, only independent producers and royalty owners
(as contrasted to integrated oil companies) are allowed to
claim percentage depletion. Percentage depletion for eligible
taxpayers is allowed only with respect to up to 1,000 barrels
of average daily production of domestic crude oil or an
equivalent amount of domestic natural gas (sec. 613A(c)). For
producers of both oil and natural gas, this limitation applies
on a combined basis.
In addition to the independent producer and royalty owner
exception, certain sales of natural gas under a fixed contract
in effect on February 1, 1975, and certain natural gas from
geopressured brine,\60\ are eligible for percentage depletion,
at rates of 22 percent and 10 percent, respectively. These
exceptions apply without regard to the 1,000-barrel-per-day
limitation and regardless of whether the producer is an
independent producer or an integrated oil company.
---------------------------------------------------------------------------
\60\ This exception is limited to wells, the drilling of which
began between September 30, 1978, and January 1, 1984.
---------------------------------------------------------------------------
HOUSE BILL
The limit on percentage depletion deductions to no more
than 65 percent of the taxpayer's overall taxable income is
suspended for taxable years beginning after December 31, 2003,
and before January 1, 2007. The suspension of the 100-percent
net-income limitation for marginal wells is extended an
additional three years, through taxable years beginning before
January 1, 2007.
Effective date.--The provision is effective for taxable
years beginning after December 31, 2003.
SENATE AMENDMENT
The Senate amendment suspends only the 100-percent net-
income limitation for marginal wells through 2007.
Effective date.--The Senate amendment is effective on the
date of enactment.
CONFERENCE AGREEMENT
The conference agreement suspends the 100-percent net-
income limitation for marginal wells through December 31, 2004.
The conference agreement suspends the 65-percent-taxable-income
limitation through December 31, 2004.
Effective date.--The provision is effective for taxable
years beginning after December 31, 2003.
3. Delay rental payments (sec. 43003 of the House bill, sec. 2308 of
the Senate amendment, and sec. 167 of the Code)
PRESENT LAW
Present law generally requires costs associated with
inventory and property held for resale to be capitalized rather
than currently deducted as they are incurred. (sec. 263). Oil
and gas producers typically contract for mineral production in
exchange for royalty payments. If mineral production is
delayed, these contracts provide for ``delay rental payments''
as a condition of their extension. The Treasury Department has
taken the position that the uniform capitalization rules of
section 263A require delay rental payments to be capitalized.
HOUSE BILL
The House bill permits delay rental payments incurred in
connection with the development of oil or gas to be amortized
over two years. In the case of abandoned property, remaining
basis may no longer be recovered in the year of abandonment of
a property as all basis is recovered over the two-year
amortization period.
Effective date.--The House bill provision is effective
for amounts paid or incurred in taxable years after 2003. No
inference is intended from the prospective effective date of
this proposal as to the proper treatment of pre-effective date
delay rental payments.
SENATE AMENDMENT
The Senate amendment provides delay rental payments
incurred in connection with the development of oil or gas must
be amortized over two years.
Effective date.--The Senate amendment is effective for
amounts paid or incurred in taxable years after 2002.
CONFERENCE AGREEMENT
The conferees adopt a provision nearly identical to a
provision in S. 1149 as reported by the Senate Committee on
Finance on May 23, 2003. The provision allows delay rental
payments incurred in connection with the development of oil or
gas within the United States to be amortized over two years. In
the case of abandoned property, remaining basis may no longer
be recovered in the year of abandonment of a property as all
basis is recovered over the two-year amortization period.
Effective date.--The provision applies to delay rental
payments paid or incurred in taxable years beginning after the
date of enactment. No inference is intended from the
prospective effective date of this proposal as to the proper
treatment of pre-effective date delay rental payments.
4. Geological and geophysical costs (sec. 43004 of the House bill, sec.
2307 of the Senate amendment, and sec. 167 of the Code)
PRESENT LAW
Under present law, geological and geophysical
expenditures are costs incurred by a taxpayer for the purpose
of obtaining and accumulating data that will serve as the basis
for the acquisition and retention of mineral properties by
taxpayers exploring for minerals. Capital expenditures are not
currently deductible as ordinary and necessary expenses, but
are allocated to the cost of the property (sec. 263). Courts
have held that geological and geophysical costs are capital,
and therefore, are allocable to the cost of property acquired
or retained. The costs attributable to such exploration are
allocable to the cost of the property acquired or retained.
HOUSE BILL
The House Bill permits geological and geophysical costs
incurred in connection with domestic oil and gas exploration to
be amortized over two years. In the case of abandoned property,
remaining basis may no longer be recovered in the year of
abandonment of a property as all basis is recovered over the
two-year amortization period.
Effective date.--The House bill provision is effective
for costs paid or incurred in taxable years after 2003. No
inference is intended from the prospective effective date of
this proposal as to the proper treatment of pre-effective date
geological and geophysical costs.
SENATE AMENDMENT
The Senate Amendment provides that geological and
geophysical costs incurred in connection with domestic oil and
gas exploration to be amortized over two years.
Effective date.--The Senate amendment is effective for
costs paid or incurred in taxable years after 2002.
CONFERENCE AGREEMENT
The conferees adopt a provision nearly identical to a
provision in S. 1149 as reported by the Senate Committee on
Finance on May 23, 2003. The provision allows geological and
geophysical amounts incurred in connection with oil and gas
exploration in the United States to be amortized over two
years. In the case of abandoned property, remaining basis may
no longer be recovered in the year of abandonment of a property
as all basis is recovered over the two-year amortization
period.
Effective date.--The provision is effective for
geological and geophysical amounts paid or incurred in taxable
years beginning after the date of enactment. No inference is
intended from the prospective effective date of this proposal
as to the proper treatment of pre-effective date geological and
geophysical costs.
B. Extension and Modification of Credit for Producing Fuel From a Non-
Conventional Source
(sec. 43005 of the House bill, secs. 2309 and 2310 of the Senate
amendment, and sec. 29 and new section 45K of the Code)
PRESENT LAW
An income tax credit is allowed for certain fuels
produced from ``non-conventional sources'' and sold to
unrelated parties. The amount of the credit is equal to $3
(generally adjusted for inflation \61\) per barrel or Btu oil
barrel equivalent (sec. 29). Qualified fuels must be produced
within the United States, and include: oil produced from shale
and tar sands; gas produced from geopressured brine, Devonian
shale, coal seams, tight formations (``tight sands''), or
biomass; and liquid, gaseous, or solid synthetic fuels produced
from coal (including lignite).
---------------------------------------------------------------------------
\61\ The value of the section 29 credit for production in 2002 was
$6.35 per barrel of oil equivalent.
---------------------------------------------------------------------------
The credit applies to fuels produced from wells drilled
or facilities placed in service after December 31, 1979, and
before January 1, 1993. An exception extends the January 1,
1993 expiration date for facilities producing gas from biomass
and synthetic fuel from coal if the facility producing the fuel
is placed in service before July 1, 1998, pursuant to a binding
contract entered into before January 1, 1997.
The credit applies to qualified fuels produced and sold
before January 1, 2003 (in the case of non-conventional sources
subject to the January 1, 1993, expiration date) or January 1,
2008 (in the case of biomass gas and synthetic fuel facilities
eligible for the extension period).
HOUSE BILL
The House bill permits taxpayers to claim the section 29
credit for production of certain non-conventional fuels
produced at wells placed in service after April 1, 2003, and
before January 1, 2007. Qualifying fuels are oil from shale or
tar sands, and gas from geopressured brine, Devonian shale,
coal seams or a tight formation. The value of the credit is re-
based to $3.00 for production in 2003 and is indexed for
inflation commencing with the credit amount for 2004. The
credit may be claimed for production from the well for each of
the first four years of production, but not for any production
occurring after December 31, 2009.
The House bill further permits production from certain
existing wells (any well drilled after December 31, 1979, and
before January 1, 1993) to claim a credit equal to the newly
re-indexed value of $3.00 for production in 2003 after date of
enactment through 2006.
The House bill also permits landfill gas sold to a third
party from facilities placed in service after June 30, 1998,
and before January 1, 2007, to be eligible for five years of
credit from the later of the date of enactment or the date the
facility is placed in service. The amount of credit is $3.00
per barrel equivalent in 2003 and is indexed for inflation
commencing with the credit amount for 2004. In the case of a
landfill subject to the Environmental Protection Agency's 1996
New Source Performance Standards/Emissions Guidelines, the
amount of credit is $2.00 per barrel equivalent in 2003 and is
indexed for inflation commencing with the credit amount for
2004.
Under the House bill, the taxpayer may not claim any
credit for production in excess of a daily average \62\ of
200,000 cubic feet of gas, or barrel of oil equivalent (200,000
cubic feet is equivalent to 35.4 barrels of oil) from a
qualifying well or facility with respect to any production for
which credit can be claimed under the modifications described.
---------------------------------------------------------------------------
\62\ The daily average is computed as total production divided by
the total number of days the well or facility was in production during
the year.
---------------------------------------------------------------------------
The House bill adds section 29 to the list of general
business credits.
Effective date.--The House bill provision is effective
for fuel sold from qualifying wells and facilities after April
1, 2003.
SENATE AMENDMENT
Extension for certain non-conventional fuels
The Senate amendment provides a credit for production of
certain non-conventional fuels produced at wells placed in
service after the date of enactment and before January 1, 2005.
The amount of the credit is $3.00 (unindexed) per barrel or Btu
oil equivalent for three years of production commencing when
the facility is placed in service. Qualified fuels are oil from
shale or tar sands, and gas from geopressured brine, Devonian
shale, coal seams or a tight formation.
Extension and modification for ``refined coal''
The Senate amendment provides a credit for production of
``refined coal'' from facilities placed in service after the
date of enactment and before January 1, 2007. The amount of the
credit is $3.00 (unindexed) per barrel or Btu oil equivalent
for five years of production commencing when the facility is
placed in service. Refined coal is a qualifying liquid,
gaseous, or solid synthetic fuel produced from coal (including
lignite) or high-carbon fly ash, including such fuel used as a
feedstock. A qualifying fuel is a fuel that when burned emits
20 percent less SO2 and nitrogen oxides than the
burning of feedstock coal or comparable coal predominantly
available in the marketplace as of January 1, 2002, and if the
fuel sells at prices at least 50 percent greater than the
prices of the feedstock coal or comparable coal. However, no
fuel produced at a qualifying advanced clean coal facility (as
defined elsewhere) is a qualifying fuel.
Expansion for ``viscous oil''
The Senate amendment provides a credit for production of
certain viscous oil produced at wells placed in service after
the date of enactment and before January 1, 2005. ``Viscous
oil'' is domestic crude oil produced from any property if the
crude oil has a weighted average gravity of 22 degrees API or
less (corrected to 60 degrees Fahrenheit). The amount of the
credit for viscous oil is $3.00 per barrel or Btu equivalent
for three years of production commencing whenthe well is placed
in service. The Senate amendment provides that qualifying sales to
related parties for consumption not in the immediate vicinity of the
wellhead qualify for the credit.
Credit for coalmine methane gas
The Senate amendment provides a credit for production of
``coalmine methane gas'' captured or extracted from a coal mine
and sold after the date of enactment and before January 1,
2005. The amount of the credit is $3.00 (unindexed) per barrel
or Btu oil equivalent (51.7 cents per million Btu of heat value
in the gas) for gas utilized captured or sold, for three years
of production commencing when the facility is placed in
service. Qualifying coalmine methane gas is any methane gas
liberated during qualified mining operations or extracted up to
five years in advance of qualified mining operations as part of
a specific plan to mine a coal deposit. In the case of coalmine
methane gas that is captured in advance of qualified coal
mining operations, the credit is allowed only after the date
the coal extraction occurs in the immediate area where the
coalmine methane gas was removed.
Expansion for agricultural and animal wastes
The Senate amendment adds facilities producing liquid,
gaseous, or solid fuels, from agricultural and animal waste
placed in service after the date of enactment and before
January 1, 2005, to the list of qualified facilities for
purposes of the non-conventional fuel credit. The amount of the
credit is equal to $3.00 (unindexed) per barrel or Btu oil
barrel equivalent, for three years of production commencing on
the date the facility is placed in service. Agricultural and
animal waste includes by-products, packaging, and any materials
associated with processing, feeding, selling, transporting, or
disposal of agricultural or animal products or wastes,
including wood shavings, straw, rice hulls, and other bedding
for the disposition of manure.
Extension of credit for certain existing facilities
The Senate amendment extends the present-law credit
through December 31, 2004, for production from existing
facilities producing coke, coke gas, or natural gas and by-
products produced by coal gasification from lignite.
Study of coal bed methane gas
The Senate amendment provides that the Secretary of the
Treasury undertake a study of the effect of section 29 on the
production of coal bed methane. The Secretary's study is to be
made in conjunction with the study to be undertaken by the
Secretary of the Interior on the effects of coal bed methane
production on surface and water resources, as provided in
section 607 of the Energy Policy Act of 2002 (should that study
be required by law). The study should estimate the total amount
of credit claimed annually and in aggregate related to the
production of coal bed methane since the enactment of section
29. The study should report the annual value of the credit
allowable for coal bed methane compared to the average annual
wellhead price of natural gas (per thousand cubic feet of
natural gas). The study should estimate the incremental
increase in production of coal bed methane that has resulted
from the enactment of section 29. The study should also
estimate the cost to the Federal government, in terms of the
net tax benefits claimed, per thousand cubic feet of
incremental coal bed methane produced annually and in aggregate
since the enactment of section 29.
Effective date
The Senate amendment is effective for fuel sold after the
date of enactment.
CONFERENCE AGREEMENT
In general
The conferees follow the House bill structure and a
related provision in S. 1149 as reported by the Senate
Committee on Finance on May 23, 2003. In general, the provision
permits taxpayers to claim the section 29 credit for certain
new wells or facilities placed in service after date of
enactment and before January 1, 2007, and the provision also
permits taxpayers to claim the section 29 credit for certain
existing wells and facilities. For all qualifying wells and
facilities the value of the credit is $3.00 for production in
2003 and is indexed for inflation commencing with the credit
amount for 2004. The credit can be claimed for production for
each of the first four years of production, but not for any
production occurring after December 31, 2009. The amount of the
credit a taxpayer may claim with respect to any well or
facility is subject to the daily limit.
Extension of placed in service date for certain new facilities
For new facilities producing qualifying fuels that are
oil from shale or tar sands, and gas from geopressured brine,
Devonian shale, coal seams or a tight formation, the credit can
be claimed for production from such new facilities placed in
service after date of enactment and before January 1, 2007.
Credit may be claimed for production for each of the first four
years of production, but not for any production occurring after
December 31, 2009.
Extension of credit for existing oil and gas wells or facilities
The provision permits production from certain existing
wells (any well drilled after December 31, 1979, and before
January 1, 1993) to claim a credit equal to the newly re-
indexed value of $3.00 for production in 2003 after the date of
enactment through 2007.
Extension of credit for certain other existing wells or facilities
The provision extends the present-law credit through
2007, for production from existing facilities producing natural
gas and by-products produced by coal gasification from lignite.
Extension for landfill gas facilities
The provision permits landfill gas sold from facilities
placed in service after June 30, 1998, and before January 1,
2007, to be eligible for four years of credit from the later of
January 1, 2004, or the date such facility is placed in service
and ending on the earlier of the date that is four years after
the date such period began or December 31, 2009. In the case of
a landfill subject to the Environmental Protection Agency's
1996 New Source Performance Standards/Emissions Guidelines the
amount of credit is $2.00 per barrel equivalent in 2003 and is
indexed for inflation commencing with the credit amount for
2004.
Expansion for coke facilities
The provision permits a facility for producing coke or
coke gas which was placed in service before January 1, 1993, or
after June 30, 1998, or after the date of enactment and before
January 1, 2007, to claim a credit beginning on the later of
January 1, 2004, or the date such facility is placed in service
and ending the earlier of the date four years after such period
began or December 31, 2009. A facility currently claiming the
credit under section 29(g) may not claim any credit at the
$3.00 rate in the future.
Expansion for fuels from agricultural and animal waste
The provision adds facilities producing liquid, gaseous,
or solid fuels, from agricultural and animal waste placed in
service after the date of enactment and before January 1, 2007,
to the list of qualified facilities for purposes of the non-
conventional fuel credit. Taxpayers may claim the credit
beginning on the later of January 1, 2004, or the date such
facility is placed in service and ending the earlier of the
date which is four years after such date began or December 31,
2009. Agricultural and animal waste includes by-products,
packaging, and any materials associated with processing,
feeding, selling, transporting, or disposal of agricultural or
animal products or wastes. An example of transforming
agricultural and animal waste into qualifying fuels is through
the use of the thermal depolymerization process.
Expansion for ``refined coal''
The provision also expands section 29 to include certain
``refined coal'' as a qualified non-conventional fuel.
``Refined coal'' is a qualifying liquid, gaseous, or solid
synthetic fuel produced from coal (including lignite) from
facilities placed in service after date of enactment and before
January 1, 2008. Taxpayers may claim the credit for fuel
produced during the five-year period beginning on the date the
facility is placed in service and without being subject to the
general rule disallowing credit for production and sale after
December 31, 2009. A qualifying fuel is a fuel that when burned
emits 20 percent less nitrogen oxide and either sulfur dioxide
or mercury than the burning of feedstock coal or comparable
coal predominantly available in the marketplace as of January
1, 2003, and if the fuel sells at prices at least 50 percent
greater than the prices of the feedstock coal or comparable
coal. A facility qualifies if the taxpayer certifies (in such a
manner as the Secretary may prescribe) that the refined coal
meets these requirements. Refined coal also includes a
qualifying fuel derived from high-carbon fly ash. However, no
fuel produced at a qualifying advanced clean coal facility (as
defined elsewhere) would be a qualifying fuel.
The conferees intend that fuels made from coal using the
Fischer-Tropsch process would qualify as refined fuel provided
that such fuels satisfy the environmental and value tests
described above. The Fischer-Tropsch process for producing
diesel fuel can be separated into three main parts: (1) the
production of synthesis gas from the main feedstock; (2) the
catalytic reaction which converts the synthesis gas into
hydrocarbon components; and (3) the refining of these
hydrocarbon components into diesel fuel. Production of
synthesis gas is accomplished by reforming the feedstock
through partial oxidation reforming, autotherman reforming,\63\
or steam reforming.
---------------------------------------------------------------------------
\63\ Autotherman reforming can be accomplished with the use of
ambient air, enriched air, or pure oxygen.
---------------------------------------------------------------------------
Expansion for coalmine gas
In addition, the provision permits taxpayers to claim
credit for coalmine gas captured or extracted by the taxpayer
during the period beginning on the day after the date of
enactment and ending on December 31, 2006, and utilized as a
fuel source or sold by or on behalf of the taxpayer to an
unrelated person. The term ``coalmine gas'' means any methane
gas which is being liberated during qualified coal mining
operations or as a result of past qualified coal mining
operations, or which is captured 10 years in advance of
qualified coal mining operations as part of a specific plan to
mine a coal deposit. In the case of coalmine gas that is
captured in advance of qualified coal mining operations, the
credit is allowed only after the date the coal extraction
occurs in the immediate area where the coalmine gas was
removed. The capture or extraction of coalmine gas from coal
mining operations is required to be in compliance with
applicable Federal pollution prevention, control, and permit
requirements in order to qualify for the credit.
Daily limit
Under the provision, a taxpayer would not be able to
claim any credit for production in excess of a daily average
\64\ of 200,000 cubic feet of natural gas or barrel of oil
equivalent (200,000 cubic feet is equivalent to approximately
35.4 barrels of oil) of such gas with respect to any property
or facility for which credit can be claimed under the
modifications above.\65\ All facilities eligible for the $3.00
credit under the conference agreement are subject to this
limitation.
---------------------------------------------------------------------------
\64\ The daily average is computed as total production divided by
the total number of days the well or facility was in production during
the year. Days before the date the project is placed in service are not
taken into account in determining the daily average.
\65\ The conferees observe that the daily limit adopted in the
conference agreement is identical to the provision in H.R. 6 as passed
by the House of Representatives and in S. 1149 as reported by the
Senate Committee on Finance.
---------------------------------------------------------------------------
New phaseout adjustment
In the case of fuels sold after 2003, the dollar amount
is $3.00 (without regard to a phaseout adjustment). The new
phaseout is increased to $35.00.
General business credit
The provision adds section 29 to the list of general
business credits and relabels present section 29 of the Code as
new Code section 45K.
Effective date
The provision is effective for fuel produced and sold
from qualifying wells and facilities after December 31, 2003.
For application of the general business credit, the provision
is effective for taxable years ending after December 31, 2003.
C. Alternative Minimum Tax Provisions
1. Allow personal energy credits against the alternative minimum tax
(sec. 41007 of the House bill, secs. 2103(b) and 2109(b) of the
Senate amendment, and sec. 26 of the Code)
PRESENT LAW
With certain exceptions, for taxable years beginning
after December 31, 2003, nonrefundable personal credits may not
exceed the excess of the regular tax liability over the
tentative minimum tax.
The tentative minimum tax is an amount equal to specified
rates of tax imposed on the excess of the alternative minimum
taxable income over an exemption amount. To the extent the
tentative minimum tax exceeds the regular tax, a taxpayer is
subject to the alternative minimum tax.
HOUSE BILL
The House bill allows the personal energy credits added
by the bill to offset both the regular tax and the alternative
minimum tax. (The credits added by the House bill include the
credit for residential solar energy property, the credit for
qualified fuel cell power plants, and the credit for energy
efficient improvements to existing homes)
Effective date.--The provision is effective for taxable
years beginning after December 31, 2003.
SENATE AMENDMENT
The Senate amendment is the same as the House bill. (The
credits added by the Senate amendment include the credit for
residential energy efficient property and the credit for energy
efficient improvements to existing homes.)
Effective date.--The provision is effective for taxable
years beginning after December 31, 2003.
CONFERENCE AGREEMENT
The conference agreement follows the House bill and the
Senate amendment and allows the personal energy credits added
by the conference agreement (credits for residential energy
efficient property and energy efficiency improvements to
existing homes) to offset both the regular tax and the
alternative minimum tax.
Effective date.--The provision is effective for taxable
years beginning after December 31, 2003.
2. Increase tax limitation on use of business energy credits (secs.
43006 and 43008 of the House bill, secs. 2005(b)(3) and 2503(c)
of the Senate amendment, and sec. 38 of the Code)
PRESENT LAW
Generally, business tax credits may not exceed the excess
of the taxpayer's income tax liability over the tentative
minimum tax (or, if greater, 25 percent of the regular tax
liability). Credits in excess of the limitation may be carried
back one year and carried over for up to 20 years.
The tentative minimum tax is an amount equal to specified
rates of tax imposed on the excess of the alternative minimum
taxable income over an exemption amount. To the extent the
tentative minimum tax exceeds the regular tax, a taxpayer is
subject to the alternative minimum tax.
HOUSE BILL
The House bill treats the tentative minimum tax as being
zero for purposes of determining the tax liability limitation
with respect to (1) the business energy credits added by the
bill for construction of new energy efficient homes; for
production of low sulfur diesel fuel; and for oil and gas
production from marginal wells, (2) for taxable years beginning
in 2004 and 2005, the enhanced oil recovery credit, and (3) the
section 45 credit for electricity produced from a wind facility
(placed in service after the date of enactment) during the
first four years of production beginning on the date the
facility is placed in service.
Effective date.--The provision is effective for taxable
years ending after the date of enactment of the Act.
SENATE AMENDMENT
The Senate amendment allows the small ethanol producer
credit and the Alaska natural gas credit to be claimed against
the entire regular tax and alternative minimum tax; other
business energy credits are subject to the present law
limitation.
Effective date.--The provision is effective with
effective date of the respective credits.
CONFERENCE AGREEMENT
The conference agreement treats the tentative minimum tax
as being zero for purposes of determining the tax liability
limitation with respect to (1) the business energy credits
added by the bill for construction of new energy efficient
homes, energy efficient appliances, production of low sulfur
diesel fuel, and oil and gas production from marginal wells;
(2) for taxable years beginning after December 31, 2003, the
section 40 alcohol fuels credit; (3) for taxable years
beginning in 2004 and 2005, the section 43 enhanced oil
recovery credit; and (4) the section 45 credit for electricity
produced from a facility (placed in service after the date of
enactment) during the first four years of production beginning
on the date the facility is placed in service.
Effective date.--The provision is effective for taxable
years ending after the date of enactment of the Act.
3. Intangible drilling costs (IDCs) (sec. 43007 of the House bill and
sec. 57 of the Code)
PRESENT LAW
Taxpayers who pay or incur intangible drilling or
development costs (``IDCs'') in the development of domestic oil
or gas production may elect to either expense or capitalize
these amounts. If an election to expense IDCs is made, the
taxpayer deducts the amount of the IDCs as an expense in the
taxable year the cost is paid or incurred.
The difference between the amount of a taxpayer's IDC
deduction and the amount which would have been currently
deductible had IDCs been capitalized and recovered over a 10-
year period is an item of tax preference for the alternative
minimum tax (``AMT'') to the extent that this amount exceeds 65
percent of the taxpayer's net income from oil and gas
properties for the taxable year. This preference applies to
taxpayers other than integrated oil companies only to the
extent that the failure to apply the preference would result in
a reduction of the taxpayer's alternative minimum taxable
income by more than 40 percent.
HOUSE BILL
The bill repeals the AMT preference for intangible
drilling costs for oil and gas wells for taxpayers other than
integrated oil companies.
Effective date.--The provision applies to taxable years
beginning after December 31, 2003, and beginning before January
1, 2006.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement follows the House bill.
D. Clean Coal Incentives
1. Credit for production from a clean coal technology unit (secs. 2201
and 2221 of Senate amendment)
PRESENT LAW
Present law does not provide a production credit for
electricity generated at units that use coal as a fuel.
However, an income tax credit is allowed for the production of
electricity from either qualified wind energy, qualified
``closed-loop'' biomass, or qualified poultry waste units
placed in service prior to January 1, 2002 (sec. 45). The
credit allowed equals 1.5 cents per kilowatt-hour of
electricity sold. The 1.5-cent figure is indexed for inflation
and equals 1.8 cents for 2002. The credit is allowable for
production during the 10-year period after a unit is originally
placed in service. The production tax credit is a component of
the general business credit (sec. 38(b)(1)).
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment provides a production credit for
electricity produced from certain units that have been
retrofitted, repowered, or replaced with a clean coal
technology within ten years of the date of enactment. The value
of the credit is 0.34 cents per kilowatt-hour of electricity
produced and is indexed for inflation occurring after 2002 with
the first potential adjustment in 2004.
A qualifying clean coal technology unit must meet certain
capacity standards, thermal efficiency standards, and emissions
standards for SO2, nitrous oxides, particulate
emissions, and source emissions standards as provided in the
Clean Air Act. To be a qualified clean coal technology unit,
the taxpayer must receive a certificate from the Secretary of
the Treasury. The Secretary may grant certificates to units
only to the point that 4,000 megawatts of electricity
production capacity qualifies for the credit. However, no
qualifying unit would be eligible if the unit's capacity
exceeded 300 megawatts.
Certain persons (public utilities, electric cooperatives,
Indian tribes, and the Tennessee Valley Authority) are eligible
to obtain certifications from the Secretary for these credits
and sell, trade, or assign the credit to any taxpayer. However,
any credit sold, traded, or assigned may only be sold, traded,
or assigned once. Subsequent trades are not permitted.
Effective date.--The Senate amendment is effective for
electricity sold after the date of enactment.
CONFERENCE AGREEMENT
The conference agreement does not include the Senate
amendment provision.
2. Investment credit for clean coal technology units (secs. 2211 and
2221 of Senate amendment and new sec. 48A of the Code)
PRESENT LAW
Present law does not provide an investment credit for
electricity generating units that use coal as a fuel. However,
a nonrefundable, 10-percent investment tax credit (``business
energy credit'') is allowed for the cost of new property that
is equipment (1) that uses solar energy to generate
electricity, to heat or cool a structure, or to provide solar
process heat, or (2) that is used to produce, distribute, or
use energy derived from a geothermal deposit, but only, in the
case of electricity generated by geothermal power, up to the
electric transmission stage (sec. 48). The business energy tax
credit is a component of the general business credit (sec.
38(b)(1)).
HOUSE BILL
No provision.
SENATE AMENDMENT
In general
The Senate amendment provides a 10-percent investment tax
credit for qualified investments in advanced clean coal
technology units. Certain persons (public utilities, electric
cooperatives, Indian tribes, and the Tennessee Valley
Authority) will be eligible to obtain certifications from the
Secretary of the Treasury (as described below) for these
credits and sell, trade, or assign the credit to any taxpayer.
However, any credit sold, traded, or assigned may only be sold,
traded, or assigned once. Subsequent trades are not permitted.
Qualifying advanced clean coal technology units
Qualifying advanced clean coal technology units must
utilize advanced pulverized coal or atmospheric fluidized bed
combustion technology, pressurized fluidized bed combustion
technology, integrated gasification combined cycle technology,
or some other technology certified by the Secretary of Energy.
Any qualifying advanced clean coal technology unit must meet
certain capacity standards, thermal efficiency standards, and
emissions standards for SO2, nitrous oxides,
particulate emissions, and source emissions standards as
provided in the Clean Air Act. In addition, a qualifying
advanced clean coal technology unit must meet certain carbon
emissions requirements.
If the advanced clean coal technology unit is an advanced
pulverized coal or atmospheric fluidized bed combustion
technology unit, a pressurized fluidized bed combustion
technology unit, or an integrated gasification combined cycle
technology unit and if the unit uses a design coal with a heat
content of not more than 9,000 Btu per pound, the unit must
have a carbon emission rate less than 0.60 pound of carbon per
kilowatt hour of electricity produced. If the advanced clean
coal technology unit is an advanced pulverized coal or
atmospheric fluidized bed combustion technology unit, a
pressurized fluidized bed combustion technology unit, or an
integrated gasification combined cycle technology unit and if
the unit uses a design coal with a heat content greater than
9,000 Btu per pound, the unit must have a carbon emission rate
lessthan 0.54 pound of carbon per kilowatt hour of electricity
produced. In the case of an advanced clean coal technology unit that
uses another eligible technology and if the unit uses a design coal
with a heat content of not more than 9,000 Btu per pound, the unit must
have a carbon emission rate less than 0.51 pound of carbon per kilowatt
hour of electricity produced. In the case of an advanced clean coal
technology unit that uses another eligible technology and if the unit
uses a design coal with a heat content greater than 9,000 Btu per
pound, the unit must have a carbon emission rate less than 0.459 pound
of carbon per kilowatt hour of electricity produced.
Allocation of credits
To be a qualified investment in advanced clean coal
technology, the taxpayer must receive a certificate from the
Secretary of the Treasury. The Secretary may grant certificates
to investments only to the point that 4,000 megawatts of
electricity production capacity qualifies for the credit. From
the potential pool of 4,000 megawatts of capacity, not more
than 1,000 megawatts in total and not more than 500 megawatts
in years prior to 2009 shall be allocated to units using
advanced pulverized coal or atmospheric fluidized bed
combustion technology. From the potential pool of 4,000
megawatts of capacity, not more than 500 megawatts in total and
not more than 250 megawatts in years prior to 2009 shall be
allocated to units using pressurized fluidized bed combustion
technology. From the potential pool of 4,000 megawatts of
capacity, not more than 2,000 megawatts in total and not more
than 1,000 megawatts in years prior to 2009 and not more than
1,500 megawatts in year prior to 2013 shall be allocated to
units using integrated gasification combined cycle technology,
with or without fuel or chemical co-production. From the
potential pool of 4,000 megawatts of capacity, not more than
500 in total and not more than 250 megawatts in years prior to
2009 shall be allocated to any other technology certified by
the Secretary of Energy.
Effective date
The Senate amendment is effective for property placed in
service after the date of enactment.
CONFERENCE AGREEMENT
In general
The conference establishes an investment tax credit for
qualified clean coal property. The credit amount is 15 percent
for property placed in service in connection with any basic
clean coal technology unit and 17.5 percent for property placed
in service in connection with any advanced clean coal
technology unit. Qualifying clean coal property is section 1245
property installed in connection with an existing coal-based
unit for the production of electricity as part of a conversion
to a basic or advanced clean coal technology unit, or is
installed in connection with a new advanced clean coal
technology unit. Qualifying property must be placed in service
after December 31, 2003, and if part of a basic clean coal
technology unit before January 1, 2014. If the qualifying
property is placed in service as part of an advanced clean coal
technology unit, it must be placed in service prior to January
1, 2017.
The total amount of clean coal property eligible for the
credit is subject to a national megawatt limitation (detailed
below). To be eligible to claim the credit, the taxpayer must
receive an allocation of megawatt capacity from the Secretary.
The amount of credit the taxpayer may claim with respect to
clean coal property is the otherwise allowable credit amount
multiplied by the ratio of the national megawatt capacity
limitation allocated to the taxpayer over the total nameplate
capacity of the taxpayer's unit.
In addition, the credit allowable to the taxpayer is
reduced by reason of grants, tax-exempt bonds, subsidized
energy financing, and other credits, but such reduction cannot
exceed 50 percent of the otherwise allowable credit. The credit
is treated as part of the general business credit and, under a
special transition rule may not be carried back to a taxable
year ending before or on the effective date of the provision.
Basic clean coal technology units
A qualifying clean coal technology unit is a unit using
clean coal technology (including advanced pulverized coal or
atmospheric fluidized bed combustion, pressurized fluidized bed
combustion, and integrated gasification combined cycle) for the
production of electricity. The unit must use at least 75
percent coal to produce at least 50 percent of its thermal
output as electricity. In addition, the unit must meet certain
capacity standards, thermal efficiency standards, and emissions
standards for SO2, nitrous oxides, particulate
emissions, and source emissions standards as provided in the
Clean Air Act. In addition, a qualifying clean coal technology
unit cannot be a unit that is receiving or is scheduled to
receive funding under the Clean Coal Technology Program, the
Power Plant Improvement Initiative, or the Clean Coal Power
Initiative administered by the Secretary of the Department of
Energy. Lastly, to be a qualified clean coal technology unit,
the taxpayer must receive a certificate from the Secretary of
the Treasury. The Secretary may grant certificates to units
only to the point that 4,000 megawatts of electricity
production capacity qualifies for the credit. However, no
qualifying unit is eligible if the unit's rated nameplate
capacity prior to January 1, 2004, exceeded 300 megawatts. The
maximum eligible allocation to any qualifying unit may not
exceed 300 megawatts.
Advanced clean coal technology units
A qualifying advanced clean coal technology unit is a
unit using: (1) advanced pulverized coal or atmospheric
fluidized bed combustion technology; (2) qualifying pressurized
fluidized bed combustion technology; (3) integrated
gasification combined cycle technology; or (4) other qualifying
technology.
(1) A qualifying advanced pulverized coal or atmospheric
fluidized bed combustion technology unit is a unit placed in
service after the date of enactment and before 2013 and having
a design net heat rate of not more than 8,500 Btu (8,900 Btu if
the unit is placed in service before 2009).
(2) A qualifying pressurized fluidized bed combustion
technology unit is a unit placed in service after the date of
enactment and before 2017 and having a design net heat rate of
not more than 7,720 Btu (8,900 Btu if the unit is placed in
service before 2009 and 8,500 Btu if the unit is placed in
service after 2008 and before 2013).
(3) A qualifying integrated gasification combined cycle
technology unit, with or without fuel or chemical co-
production, is a unit placed in service after the date of
enactment and before 2017 and having a design net heat rate of
not more than 7,720 Btu (8,900 Btu if the unit is placed in
service before 2009 and 8,500 Btu if the unit is placed in
service after 2008 and before 2013).
(4) An other qualifying technology unit is a unit that
uses any other technology and satisfies the design net heat
rates of a qualifying advanced pulverized coal or atmospheric
fluidized bed combustion technology unit.
Any qualifying advanced clean coal technology unit must
meet certain capacity standards, thermal efficiency standards,
and emissions standards for SO2 nitrous oxides,
particulate emissions, and source emissions standards as
provided in the Clean Air Act. A qualifying advanced clean coal
technology unit must use at least 75 percent coal to produce at
least 50 percent of its thermal output as electricity. In
addition, a qualifying advanced clean coal technology unit must
meet certain carbon emissions requirements. For units using
design coal with a heat content of not more than 9,000 Btu per
pound, the carbon emission rate must be less than 0.60 pound of
carbon per kilowatt hour (0.51 if the unit qualifies as an
other technology unit). For units using design coal with a heat
content in excess of 9,000 Btu per pound, the carbon emission
rate must be less than 0.54 pound of carbon per kilowatt hour
(0.459 if the unit qualifies as an other technology unit).
To be a qualified investment in advanced clean coal
technology, the taxpayer must receive a certificate from the
Secretary of the Treasury. The Secretary may grant certificates
to investments only to the point that 6,000 megawatts of
electricity production capacity qualifies for the credit. From
the potential pool of 6,000 megawatts of capacity, not more
than 1,500 megawatts in total and not more than 750 megawatts
in years prior to 2009 shall be allocated to units using
advanced pulverized coal or atmospheric fluidized bed
combustion technology. From the potential pool of 6,000
megawatts of capacity, not more than 750 megawatts in total and
not more than 375 megawatts in years prior to 2009 shall be
allocated to units using pressurized fluidized bed combustion
technology. From the potential pool of 6,000 megawatts of
capacity, not more than 3,000 megawatts in total and not more
than 1,250 megawatts in years prior to 2009 shall be allocated
to units using integrated gasification combined cycle
technology, with or without fuel or chemical co-production.
From the potential pool of 6,000 megawatts of capacity, not
more than 750 in total and not more than 375 megawatts in years
prior to 2009 shall be allocated to any other technology unit.
Effective date.--The provision is effective for property
placed in service after the date of enactment.
3. Credit for production from advanced clean coal technology (secs.
2212 and 2221 of Senate amendment)
PRESENT LAW
Present law does not provide a production credit for
electricity generated at units that use coal as a fuel.
However, an income tax credit is allowed for the production of
electricity from either qualified wind energy, qualified
``closed-loop'' biomass, or qualified poultry waste units
placed in service prior to January 1, 2002 (sec. 45). The
credit allowed equals 1.5 cents per kilowatt-hour of
electricity sold. The 1.5-cent figure is indexed for inflation
and equals 1.8 cents for 2002. The credit is allowable for
production during the 10-year period after a unit is originally
placed in service. The production tax credit is a component of
the general business credit (sec. 38(b)(1)).
HOUSE BILL
No provision.
SENATE AMENDMENT
In general
The Senate amendment creates a production credit for
electricity produced from any qualified advanced clean coal
technology electricity generation unit that qualifies for the
investment credit for qualifying clean coal technology units,
as described above. Certain persons (public utilities, electric
cooperatives, Indian tribes, and the Tennessee Valley
Authority) will be eligible to obtain certifications from the
Secretary of the Treasury (as described below) for each of
these credits and sell, trade, or assign the credit to any
taxpayer. However, any credit sold, traded, or assigned may
only be sold, traded, or assigned once. Subsequent trades are
not permitted.
Value of production credit for electricity produced from qualifying
advanced clean coal technology
The taxpayer may claim a production credit on the sum of
each kilowatt-hour of electricity produced and the heat value
of other fuels or chemicals produced by the taxpayer at the
unit.\66\ The taxpayer may claim the production credit for the
10-year period commencing with the date the qualifying unit is
placed in service (or the date on which a conventional unit was
retrofitted or repowered). The value of the credit varies
depending upon the year the unit is placed in service, whether
the unit produces solely electricity or electricity and fuels
or chemicals, and the rated thermal efficiency of the unit. In
addition, the value of the credit is reduced for the second
five years of eligible production. The maximum value of the
production credit from any qualifying unit during the first
five years of production is $0.014 per kilowatt-hour and the
minimum value is $0.001. During the second five years of
production from a qualifying unit, the maximum value of the
production credit is $0.0115 and the minimum value is $0.001.
The value of the credit is indexed for inflation occurring
after 2002 with the first potential adjustment in 2004.
---------------------------------------------------------------------------
\66\ Each 3,413 Btu of heat content of the fuel or chemical is
treated as equivalent to one kilowatt-hour of electricity.
---------------------------------------------------------------------------
Effective date
The Senate amendment is effective for electricity sold
after the date of enactment.
CONFERENCE AGREEMENT
The conference agreement does not include the Senate
amendment provision.
4. Amortization of pollution control facilities (sec. 169 of the Code)
PRESENT LAW
In general, a taxpayer may elect to recover the cost of
any certified pollution control facility over a period of 60
months.\67\ A certified pollution control facility is defined
as a new, identifiable treatment facility which (1) is used in
an existing plant in operation before January 1, 1976, to abate
or control water or atmospheric pollution or contamination by
removing, altering, disposing, storing, or preventing the
creation or emission of pollutants, contaminants, wastes or
heat; and (2) which does which does not lead to a significant
increase in output or capacity, a significant extension of
useful life, or a significant reduction in total operating
costs for such plant or other property (or any unit thereof),
or a significant alteration in the nature of a manufacturing
production process or facility. Certification is required by
appropriate State and Federal authorities that the facility
comply with appropriate standards.
---------------------------------------------------------------------------
\67\ Sec. 169. For purposes of the alternative minimum tax, such
property is recovered using the straight-line method over its general
recovery period (for property placed in service prior to 1999 and after
1986 such property is recovered using the alternative system of
depreciation contained in section 168(g)).
---------------------------------------------------------------------------
For a pollution control facility with a useful life
greater than 15 years, only the basis attributable to the first
15 years is eligible to be amortized over a 5-year period.\68\
The remaining basis is depreciable under the regular rules for
depreciation. In addition, a corporate taxpayer must reduce the
amount of basis eligible for the 60-month recovery by 20
percent.\69\ Such reduction is depreciable under the regular
rules for depreciation.
---------------------------------------------------------------------------
\68\ The amount attributable to the first 15 years is equal to an
amount which bears the same ratio to the portion of the adjusted basis
of such facility, which would be eligible for amortization but for the
application of this rule, as 15 bears to the number of years of useful
life of such facility.
\69\ Sec. 291(a)(5).
---------------------------------------------------------------------------
HOUSE BILL
No provision.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement expands the ability to recover
certified pollution control facilities over 60 months by
repealing the requirement that only a certified pollution
control facility used in connection with a plant in operation
before January 1, 1976 qualify. Thus, a certified pollution
control facility used in connection with a plant or other
property that began operation after January 1, 1976, will
generally be eligible for recovery over 60 months.\70\ In
addition, the conference agreement shortens the recovery period
for a certified pollution control facility used in connection
with a plant or other property in operation before January 1,
1976, to 36 months (from 60 months) if no allocation is made
under section 48A(f) (as added by another provision of the
conference agreement). The conference agreement does not alter
the present law limitation on the benefits of the provision for
corporate taxpayers and pollution control facilities with a
useful life greater than 15 years.
---------------------------------------------------------------------------
\70\ In the case of a facility used in connection with a plant or
other property to which an amount is allocated under section 48A(f) (as
added by another provision in the conference agreement) the 60-month
amortization period only applies if such plant or other property was in
operation before January 1, 1976.
---------------------------------------------------------------------------
Effective date.--The provision applies to facilities
placed in service after the date of enactment.
5. Eligible integrated gasification combined cycle technology unit
treated as five-year property (sec. 168 of the Code)
PRESENT LAW
The applicable recovery period for assets placed in
service under the Modified Accelerated Cost Recovery System is
based on the ``class life of the property.'' The class lives of
assets placed in service after 1986 are generally set forth in
Revenue Procedure 87-56.\71\ Electric utility steam production
plant property, which includes combustion turbines operated in
a combined cycle with a conventional steam unit, is assigned a
20-year recovery period and a class life of 28 years.
---------------------------------------------------------------------------
\71\ 1987-2 C.B. 674 (as clarified and modified by Rev. Proc. 88-
22, 1988-1 C.B. 785).
---------------------------------------------------------------------------
HOUSE BILL
No provision.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement establishes a statutory 5-year
recovery period and a class life of 20 years for an eligible
integrated gasification combined cycle technology unit that
receives an allocation of the clean coal technology credit.\72\
An eligible integrated gasification combined cycle technology
unit is defined as a clean coal technology unit using
integrated gasification combined cycle technology, with or
without fuel or chemical co-production, which meets a certain
design heat rate and net thermal efficiency.\73\
---------------------------------------------------------------------------
\72\ Section 48A as added by another provision of the conference
agreement.
\73\ The design heat rate and net thermal efficiency standards are
defined in section 48A(e)(4)(A) and (B) as added by another provision
of the conference agreement.
---------------------------------------------------------------------------
Effective date.--The provision is effective for property
placed in service after the date of enactment.
E. High Volume Natural Gas Provisions
1. High volume natural gas pipe treated as seven-year property (sec.
168 of the Code)
PRESENT LAW
The applicable recovery period for assets placed in
service under the Modified Accelerated Cost Recovery System is
based on the ``class life of the property.'' The class lives of
assets placed in service after 1986 are generally set forth in
Revenue Procedure 87-56.\74\ Asset class 46.0, describing
assets used in the private, commercial, and contract carrying
of petroleum, gas and other products by means of pipes and
conveyors, are assigned a class life of 22 years and a recovery
period of 15 years.
---------------------------------------------------------------------------
\74\ 1987-2 C.B. 674 (as clarified and modified by Rev. Proc. 88-
22, 1988-1 C.B. 785).
---------------------------------------------------------------------------
HOUSE BILL
No provision.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement establishes a statutory seven-
year recovery period and a class life of 22 years for any high
volume natural gas pipe the original use \75\ of which
commences after the date of enactment. High volume natural gas
pipe is defined as a pipe which has an interior diameter at
least 42 inches and which is part of a natural gas pipeline
system. Such property includes any related equipment and
appurtenances used in connection with such pipe. In addition,
the conference agreement provides that there is no adjustment
to the allowable amount of depreciation for purposes of
computing a taxpayer's alternative minimum taxable income with
respect to such property.
---------------------------------------------------------------------------
\75\ The term ``original use'' means the first use to which the
property is put, whether or not such use corresponds to the use of such
property by the taxpayer. It is intended that, when evaluating whether
property qualifies as ``original use,'' the factors used to determine
whether property qualified as ``new section 38 property'' for purposes
of the investment tax credit would apply. See Treasury Regulation 1.48-
2. Thus, it is intended that additional capital expenditures incurred
to recondition or rebuild acquired property (or owned property) would
satisfy the ``original use'' requirement. However, the cost of
reconditioned or rebuilt property acquired by the taxpayer would not
satisfy the ``original use'' requirement. For example, if on April 13,
2004, a taxpayer buys from ACM for $20,000,000 a 42-inch natural gas
pipeline that has been previously used by ACM. Subsequent to the
purchase, the taxpayer makes an expenditure on the property of
$5,000,000 for new 42-inch pipe that is required to be capitalized.
Regardless of whether the $5,000,000 is added to the basis of such
property or is capitalized as a separate asset, such amount would be
treated as satisfying the ``original use'' requirement and would be
eligible for the reduced recovery period. No part of the $20,000,000
purchase price qualifies for the reduced recovery period.
---------------------------------------------------------------------------
Effective date.--The provision is effective for property
placed in service on or after the date of enactment.
2. Credit for production of Alaska natural gas (sec. 2503 of Senate
amendment)
PRESENT LAW
Present law does not provide a credit for conventional
production of natural gas or delivery of fuels to a pipeline.
However, certain fuels produced from ``non-conventional
sources'' and sold to unrelated parties are eligible for an
income tax credit equal to $3 (generally adjusted for
inflation) per barrel or BTU oil barrel equivalent (sec. 29).
Qualified fuels must be produced within the United States.
Qualified fuels include:
(1) Gas produced from geopressured brine, Devonian
shale, coal seams, tight formations (``tight sands''),
or biomass; and
(2) Liquid, gaseous, or solid synthetic fuels
produced from coal (including lignite).
In general, the credit is available only with respect to
fuels produced from wells drilled or facilities placed in
service after December 31, 1979, and before January 1, 1993. An
exception extends the January 1, 1993 expiration date for
facilities producing gas from biomass and synthetic fuel from
coal if the facility producing the fuel is placed in service
before July 1, 1998, pursuant to a binding contract entered
into before January 1, 1997.
The credit may be claimed for qualified fuels produced
and sold before January 1, 2003 (in the case of non-
conventional sources subject to the January 1, 1993 expiration
date) or January 1, 2008 (in the case of biomass gas and
synthetic fuel facilities eligible for the extension period).
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment provides a credit per million
British thermal units (Btu) of natural gas for Alaska natural
gas entering a pipeline during the 15-year period beginning the
later of January 1, 2010 or the initial date for the interstate
transportation of Alaska natural gas. Taxpayers may claim the
credit against both the regular and minimum tax.
The credit amount for any month is the excess of $3.25
(indexed for inflation) per million Btu of natural gas over the
average monthly price for that month for Alaska natural gas at
theAECO C Hub in Alberta, Canada. Inflation adjustments in the
$3.25 amount will be made by reference to changes in the GDP implicit
price deflator for changes occurring after the first year in which the
credit may be claimed.
If in any month commencing three years after the first
year in which the credit may be claimed the average monthly
price for that month for Alaska natural gas at the AECO C Hub
in Alberta, Canada, exceeds $4.875 (indexed for inflation) per
million Btu, any prior credits claimed are recaptured by
increasing the taxpayer's tax liability by the lesser of the
excess of the average monthly price for that month for Alaska
natural gas at the AECO C Hub over $4.875 (indexed for
inflation) per million Btu or the aggregate amount of credit
claimed for Alaska natural gas in all prior years.
Alaska natural gas is any gas derived from an area of the
State of Alaska lying north of 64 degrees North latitude
generally from the area known as the ``North Slope of Alaska,''
but not including the Alaska National Wildlife Refuge.
Effective date.--The provision is effective on the date
of enactment.
CONFERENCE AGREEMENT
The conference agreement does not include the Senate
amendment provision.
3. Enhanced oil recovery credit for certain gas processing facilities
(sec. 43 of the Code)
PRESENT LAW
The taxpayer may claim a credit equal to 15 percent of
enhanced oil recovery costs. Qualified enhanced oil recovery
costs include costs of depreciable tangible property that is
part of an enhanced oil recovery project, intangible drilling
and development costs with respect to an enhanced oil recovery
project, and tertiary injectant expenses incurred with respect
to an enhanced oil recovery project. The credit is phased out
when oil prices exceed a threshold amount.
HOUSE BILL
No provision.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement provides that expenses in
connection with the construction of any qualifying natural gas
processing plant capable of processing one trillion British
thermal units of natural gas into a natural gas pipeline system
on a daily basis are qualified enhanced oil recovery costs
eligible for the enhanced oil recovery credit. A qualifying
natural gas processing plant also must produce carbon dioxide
for re-injection into a producing oil or gas field.
Effective date.--The provision is effective for costs
paid or incurred in taxable years beginning after 2003.
IV. ADDITIONAL PROVISIONS
A. Extension of Tax Incentives for Energy-Related Businesses on Indian
Reservations
(sec. 2501 of the Senate amendment and sec. 168 of the Code)
PRESENT LAW
The following tax incentives are available for businesses
within Indian reservations.
Accelerated depreciation
With respect to certain property used in connection with
the conduct of a trade or business within an Indian
reservation, depreciation deductions under section 168(j) are
determined using shorter recovery periods.
``Qualified Indian reservation property'' eligible for
accelerated depreciation includes property which is (1) used by
the taxpayer predominantly in the active conduct of a trade or
business within an Indian reservation, (2) not used or located
outside the reservation on a regular basis, (3) not acquired
(directly or indirectly) by the taxpayer from a person who is
related to the taxpayer, and (4) described in the recovery-
period table above. In addition, property is not ``qualified
Indian reservation property'' if it is placed in service for
purposes of conducting gaming activities. Certain ``qualified
infrastructure property'' may be eligible for the accelerated
depreciation even if located outside an Indian reservation.
The depreciation deduction allowed for regular tax
purposes is also allowed for purposes of the alternative
minimum tax. The accelerated depreciation is available with
respect to property placed in service on or after January 1,
1994, and before December 31, 2004.
Indian employment credit
In general, a credit against income tax liability is
allowed to employers for the first $20,000 of qualified wages
and qualified employee health insurance costs paid or incurred
by the employer with respect to certain employees (sec. 45A).
The credit is equal to 20 percent of the excess of eligible
employee qualified wages and health insurance costs during the
current year over the amount of such wages and costs incurred
by the employer during 1993. The credit is an incremental
credit, such that an employer's current-year qualified wages
and qualified employee health insurance costs (up to $20,000
per employee) are eligible for the credit only to the extent
that the sum of such costs exceeds the sum of comparable costs
paid during 1993. No deduction is allowed for the portion of
the wages equal to the amount of the credit.
The wage credit is available for wages paid or incurred
on or after January 1, 1994, in taxable years that begin before
December 31, 2004.
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment extends the accelerated depreciation
incentive to property placed in service before January 1, 2006,
and the Indian employment credit incentive to taxable years
beginning before January 1, 2006.
Effective date.--The provision is effective on the date
of enactment.
CONFERENCE AGREEMENT
The conference agreement extends the accelerated
depreciation incentive for property placed in service before
January 1, 2006, as part of a facility for: (1) The generation
or transmission of electricity (including any qualified energy
resource as defined in section 45(c) for purposes of the credit
for electricity produced from certain renewable resources), (2)
an oil or gas well, (3) the transmission or refining of oil or
gas, or (4) the production of any qualified fuel (as defined
for purposes of the credit for producing fuel from a
nonconventional source).
Effective date.--The provision is effective on the date
of enactment.
B. GAO Study
(sec. 2502 of the Senate amendment)
PRESENT LAW
Present law does not require study of the present law
provisions relating to clean fuel vehicles and electric
vehicles.
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment directs the Comptroller General to
undertake an ongoing analysis of the effectiveness of the tax
credits allowed to alternative motor vehicles and the tax
credits allowed to various alternative fuels under Title II of
the bill and the tax credits and enhanced deductions allowed
for energy conservation and efficiency under Title III of the
bill. The studies should estimate the energy savings and
reductions in pollutants achieved from taxpayer utilization of
these provisions. The studies should estimate the dollar value
of the benefits of reduced energy consumption and reduced air
pollution in comparison to estimates of the revenue cost of
these provisions to the U.S. Treasury. The studies should
include an analysis of the distribution of the taxpayers who
utilize these provisions by income and other relevant
characteristics.
The bill directs the Comptroller General to submit annual
reports to Congress beginning not later than December 31, 2002.
Effective date.--The provision is effective on the date
of enactment.
CONFERENCE AGREEMENT
The conference agreement does not include the Senate
amendment provision.
C. Treatment of Certain Dispositions of Dairy Property To Implement
Bovine Tuberculosis Eradication Program
(sec. 2505 of the Senate amendment)
PRESENT LAW
Generally, a taxpayer may elect not to recognize gain
with respect to property that is involuntarily converted if the
taxpayer acquires within an applicable period (generally the
period ending two years after the end of the taxable year in
which the first gain on the conversion is realized) property
similar or related in service or use.
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment extends involuntary conversion
treatment to qualified dispositions of dairy property pursuant
to the bovine tuberculosis eradication program. Treats any
property acquired and held by the taxpayer either for
productive use in a trade or business or for investment as
property similar or related in use to the converted property.
Extend the applicable acquisition period from two to four years
and permits replacement property to be acquired from related
parties. In addition to deferring gain, the provision also
permits an ordinary loss equal to the adjusted basis of the
converted property.
Finally, the provision allows expensing for amounts paid
or incurred by the taxpayer to convert any real property into
unimproved land pursuant to the bovine tuberculosis eradication
program.
Effective date.--Effective for dispositions made and
amounts received in taxable years beginning after May 22, 2001,
but shall not apply to dispositions made after December 31,
2006.
CONFERENCE AGREEMENT
The conference agreement does not include the Senate
amendment provision.
D. Expand Exemption From Aviation Fuels Excise Taxes for Aerial
Applicators
(sec. 2506 of the Senate amendment)
PRESENT LAW
Excise taxes are imposed on aviation gasoline (19.4 cents
per gallon) and jet fuel (21.9 cents per gallon) (secs. 4081
and 4091). Fuel used on a farm for farming purposes is exempt
from tax. Aerial applicators (crop dusters) are allowed to
claim the exemption on behalf of farm owners and operators,
e.g., in the case of aviation gasoline if the owners or
operators give written consent to the aerial applicators. This
exemption applies only to fuel consumed in the airplane while
operating over the farm, i.e., fuel consumed traveling to and
from the farm is not exempt.
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment expands the present-law exception to
include fuel used between farms and base airfields, and
provides that the aerial applicator is the exclusive party
entitled to the refund.
Effective date.--The provision is effective for fuel use
and air transportation after December 31, 2001 and before
January 1, 2003.
CONFERENCE AGREEMENT
The conference agreement does not include the Senate
amendment provision.
E. Modification of Rural Airport Definition
(sec. 2507 of the Senate amendment)
PRESENT LAW
Most domestic air passenger transportation is subject to
a two-part excise tax. First, an ad valorem tax is imposed at
the rate of 7.5 percent of the amount paid for the
transportation. Second, a flight segment tax of $3.00 per
segment is imposed. The flight segment component of the tax
does not apply to segments to or from qualified ``rural
airports.'' A rural airport is defined as an airport that (1)
in the second preceding calendar year had fewer than 100,000
commercial passenger departures, and (2) either (a) is not
located within 75 miles of another airport that had more than
100,000 such departures in that year, or (b) is eligible for
payments under the Federal ``essential air service'' program.
HOUSE BILL
No provision.
SENATE AMENDMENT
The provision expands the definition of qualified rural
airport to include an airport that (1) is not connected by
paved roads to another airport and (2) had fewer that 100,000
passengers departing by air during the second preceding
calendar year.
Effective date.--The provision is effective for calendar
years beginning after 2002.
CONFERENCE AGREEMENT
The conference agreement does not include the Senate
amendment provision.
F. Exempt Transportation by Seaplane From Ticket Taxes
(sec. 2508 of the Senate amendment)
PRESENT LAW
Most domestic air passenger transportation is subject to
a two-part excise tax. First, an ad valorem tax is imposed at
the rate of 7.5 percent of the amount paid for the
transportation. Second, a flight segment tax of $3.00 per
segment is imposed. Noncommercial aviation is subject to a
higher fuel excise tax, but not the ticket tax.
Commercial aviation also is subject to a 4.4-cents-per-
gallon fuels excise tax.
HOUSE BILL
No provision.
SENATE AMENDMENT
The Senate amendment exempts seaplane flights from the
taxes on transportation of persons and property by air.
Effective date.--The provision is effective for calendar
years beginning after 2002.
CONFERENCE AGREEMENT
The conference agreement does not include the Senate
amendment provision.
G. Credit for Taxpayers Owning Commercial Power Takeoff Vehicles
(sec. 2009 of the Senate amendment)
PRESENT LAW
If gasoline is used in an off-highway business use, the
ultimate purchaser of the gasoline is entitled to a credit or
refund of excise taxes paid in respect of the gasoline.\76\ No
credit or payment may be claimed in respect of gasoline used in
a commercial highway vehicle solely by reason of the fact that
the propulsion motor in the vehicle also is used for a purpose
other than to propel the vehicle.\77\ Thus, if the propulsion
motor of a highway vehicle also operates special equipment,
such as a mixing unit on a concrete mixer or a pump for
discharging fuel from a tank truck, by means of a power takeoff
or power transfer, no credit or payment may be claimed in
respect of the gasoline used to operate the special equipment,
even though the special equipment is mounted on the highway
vehicle.\78\
---------------------------------------------------------------------------
\76\ Sec. 6421(a).
\77\ Treas. Reg. sec. 48.6421-1(d)(2).
\78\ Id.
---------------------------------------------------------------------------
If the highway vehicle is equipped with a separate motor
to operate the special equipment, credit or refund payment may
be claimed in respect of gasoline used in the separate motor.
For example, if a separate motor is used to operate a
refrigeration unit, pump, generator or mixing unit, the
ultimate purchaser could seek a refund with respect to the
gasoline used in that separate motor. If the gasoline used in a
separate motor is drawn from the same tank as the one which
supplies gasoline for the propulsion of the highway vehicle,
the determination as to the quantity of gasoline used in the
separate motor operating the special equipment is based on
operating experience and supported by records.\79\
---------------------------------------------------------------------------
\79\ Treas. Reg. sec. 48.6421-1(d)(3).
---------------------------------------------------------------------------
HOUSE BILL
No provision.
SENATE AMENDMENT
The provision provides a yearly $250-per-vehicle income
tax credit to business owners of certain highway vehicles that
consume fuel for both transportation and in non-transportation-
related equipment, using a single motor. Specifically, the
provision covers vehicles (1) designed to engage in the daily
collection of refuse or recyclables from homes or businesses
and is equipped with a mechanism under which the vehicles
propulsion engine provides the power to operate a load
compactor, (``refuse collection trucks'') or (2) designed to
deliver ready mixed concrete on a daily basis and is equipped
with a mechanism under which the vehicles propulsion engine
provides the power to operate a mixer drum to agitate and mix
the product en route to the delivery site (``concrete
mixers''). Governmental vehicles and those owned by tax-exempt
organizations are not eligible for the credit. The credit
expires after the calendar year 2004.
The provision further requires that by January 1, 2005,
the Treasury provide by regulation a method for exempting
refuse collection trucks and concrete mixers from the fuels
excise tax on fuel used to power equipment attached to these
vehicles.
Effective date.--The provision is effective for taxable
years beginning after the date of enactment through 2004.
CONFERENCE AGREEMENT
The conference agreement does not contain the Senate
amendment provision.
H. Payment of Dividends on Stock of Cooperatives Without Reducing
Patronage Dividends
(sec. 1388 of the Code)
PRESENT LAW
Under present law, cooperatives generally are entitled to
deduct or exclude amounts distributed as patronage dividends in
accordance with Subchapter T of the Code. In general, patronage
dividends are comprised of amounts that are paid to patrons (1)
on the basis of the quantity or value of business done with or
for patrons, (2) under a valid and enforceable obligation to
pay such amounts that was in existence before the cooperative
received the amounts paid, and (3) which are determined by
reference to the net earnings of the cooperative from business
done with or for patrons.
Treasury Regulations provide that net earnings are
reduced by dividends paid on capital stock or other proprietary
capital interests (referred to as the ``dividend allocation
rule'').\80\ The dividend allocation rule has been interpreted
to require that such dividends be allocated between a
cooperative's patronage and nonpatronage operations, with the
amount allocated to the patronage operations reducing the net
earnings available for the payment of patronage dividends.
---------------------------------------------------------------------------
\80\ Treas. Reg. sec. 1.1388-1(a)(1).
---------------------------------------------------------------------------
HOUSE BILL
No provision.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement provides a special rule for
dividends on capital stock of a cooperative. To the extent
provided in organizational documents of the cooperative,
dividends on capital stock do not reduce patronage income and
do not prevent the cooperative from being treated as operating
on a cooperative basis.
Effective date.--The conference agreement provision is
effective for distributions made in taxable years ending after
the date of enactment.
I. Distributions From Publicly Traded Partnerships Treated as
Qualifying Income of Regulated Investment Company
(secs. 851 and 469(k) of the Code)
PRESENT LAW
Treatment of regulated investment companies
A regulated investment company (``RIC'') generally is
treated as a conduit for Federal income tax purposes. In
computing its taxable income, a RIC deducts dividends paid to
its shareholders to achieve conduit treatment (sec. 852(b)). In
order to qualify for conduit treatment, a RIC must be a
domestic corporation that, at all times during the taxable
year, is registered under the Investment Company Act of 1940 as
a management company or as a unit investment trust, or has
elected to be treated as a business development company under
that Act (sec. 851(a)). In addition, the corporation must elect
RIC status, and must satisfy certain other requirements (sec.
851(b)).
One of the RIC qualification requirements is that at
least 90 percent of the RIC's gross income is derived from
dividends, interest, payments with respect to securities loans,
and gains from the sale or other disposition of stock or
securities or foreign currencies, or other income (including
but not limited to gains from options, futures, or forward
contracts) derived with respect to its business of investing in
such stock, securities, or currencies (sec. 851(b)(2)). Income
derived from a partnership is treated as meeting this
requirement only to the extent such income is attributable to
items of income of the partnership that would meet the
requirement if realized by the RIC in the same manner as
realized by the partnership (the ``look-through'' rule for
partnership income) (sec. 851(b)). Under present law, no
distinction is made under this rule between a publicly traded
partnership (that is treated as a partnership for Federal tax
purposes) and any other partnership.
The RIC qualification rules include limitations on the
ownership of assets and on the composition of the RIC's assets
(sec. 851(b)(3)). Under the ownership limitation, at least 50
percent of the value of the RIC's total assets must be
represented by cash, government securities and securities of
other RICs, and other securities; however, in the case of such
other securities, the RIC may invest no more than 5 percent of
the value of the total assets of the RIC in the securities of
any one issuer, and may hold no more than 10 percent of the
outstanding voting securities of any one issuer. Under the
limitation on the composition of the RIC's assets, no more than
25 percent of the value of the RIC's total assets may be
invested in the securities of any one issuer (other than
Government securities), or in securities of two or more
controlled issuers in the same or similar trades or businesses.
These limitations generally are applied at the end of each
quarter (sec. 851(d)).
Treatment of publicly traded partnerships
Under present law, a publicly traded partnership is
defined as a partnership, interests in which are traded on an
established securities market, or are readily tradable on a
secondary market (or the substantial equivalent thereof). In
general, a publicly traded partnership is treated as a
corporation (sec. 7704(a)), but an exception to corporate
treatment is provided if 90 percentor more of its gross income
is interest, dividends, real property rents, or certain other types of
qualifying income (sec. 7704(c) and (d)).
A special rule for publicly traded partnerships applies
under the passive loss rules. The passive loss rules limit
deductions and credits from passive trade or business
activities (sec. 469). Deductions attributable to passive
activities, to the extent they exceed income from passive
activities, generally may not be deducted against other income.
Deductions and credits that are suspended under these rules are
carried forward and treated as deductions and credits from
passive activities in the next year. The suspended losses from
a passive activity are allowed in full when a taxpayer disposes
of his entire interest in the passive activity to an unrelated
person. The special rule for publicly traded partnerships
provides that the passive loss rules are applied separately
with respect to items attributable to each publicly traded
partnership (sec. 469(k)). Thus, income or loss from the
publicly traded partnership is treated as separate from income
or loss from other passive activities.
HOUSE BILL
No provision.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement includes a provision that
modifies the 90 percent test with respect to income of a RIC to
include income derived from an interest in certain publicly
traded partnerships. The provision also modifies the
lookthrough rule for partnership income of a RIC so that it
applies only to income from a partnership other than such
publicly traded partnerships.
The provision provides that the limitation on ownership
and the limitation on composition of assets that apply to other
investments of a RIC also apply to RIC investments in such
publicly traded partnership interests.
A publicly traded partnership to which the provision
applies is a publicly traded partnership described in section
7704(b) other than one that would satisfy the 90-percent gross
income requirements for publicly traded partnerships if
qualifying income included only income that is qualifying
income described in section 851(b)(2)(A) for a RIC (i.e.,
income that is derived from dividends, interest, payments with
respect to securities loans, and gains from the sale or other
disposition of stock or securities or foreign currencies, or
other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to its
business of investing in such stock, securities, or
currencies).
The provision provides that the special rule for publicly
traded partnerships under the passive loss rules (requiring
separate treatment) applies to a RIC holding an interest in
such a publicly traded partnership, with respect to items
attributable to the interest in the publicly traded
partnership.
The conferees intend that the provision not be used to
avoid tax on the partnership's income in the hands of the
mutual fund shareholders that would be subject to tax (e.g.,
unrelated business income tax) or to withholding (e.g.,
withholding on foreign partners) if they held the partnership
interest directly. The conferees expect that guidance issued by
the Treasury Department with respect to the provision will
provide rules that carry out this intent.
Effective date.--The provision is effective for taxable
years beginning after the date of enactment.
J. Suspension of Duties on Ceiling Fans (Chapter 99, II of the
Harmonized Tariff Schedule of the United States)
PRESENT LAW
A 4.7-percent ad valorem customs duty is collected on
imported ceiling fans from all sources.
HOUSE BILL
No provision.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement suspends the present customs
duty applicable to ceiling fans through December 31, 2005.
Effective date.--The provision is effective on the
fifteenth day after the date of enactment.
K. Suspension of Duties on Nuclear Steam Generators (Chapter 99, II of
the Harmonized Tariff Schedule of the United States)
PRESENT LAW
Nuclear steam generators, as classified under heading
9902.84.02 of the Harmonized Tariff Schedule of the United
States, enter the United States duty free until December 31,
2006. After December 31, 2006, the duty on nuclear steam
generators returns to the column 1 rate of 5.2 percent under
subheading 8402.11.00 of the Harmonized Tariff Schedule of the
United States.
HOUSE BILL
No provision.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement extends the present-law
suspension of customs duty applicable to nuclear steam
generators through December 31, 2008.
Effective date.--The provision is effective on the
fifteenth day after the date of enactment.
L. Suspension of Duties on Nuclear Reactor Vessel Heads (Chapter 99, II
of the Harmonized Tariff Schedule of the United States)
PRESENT LAW
According to section 5202 of the Trade Act of 2002,
nuclear vessel heads are classified under subheading 8401.40.00
of the Harmonized Tariff Schedule of the United States and
enter the United States with a column 1 duty rate of 3.3
percent.
HOUSE BILL
No provision.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement temporarily suspends the present
customs duty applicable to nuclear reactor vessel heads for
column 1 countries through December 31, 2007.
Effective date.--The provision is effective on the date
of enactment.
M. Brownfields Demonstration Program for Qualified Green Building and
Sustainable Design Projects
(secs. 142 and 146 of the Code)
PRESENT LAW
Tax-exempt bonds
In general
Interest on debt incurred by States or local governments
is excluded from income if the proceeds of the borrowing are
used to carry out governmental functions of those entities or
the debt is repaid with governmental funds (section 103).
Interest on bonds that nominally are issued by States or local
governments, but the proceeds of which are used (directly or
indirectly) by a private person and payment of which is derived
from funds of such a private person is taxable unless the
purpose of the borrowing is approved specifically in the Code
or in a non-Code provision of a revenue Act. These bonds are
called ``private activity bonds.'' The term ``private person''
includes the Federal Government and all other individuals and
entities other than States or local governments.
Private activities eligible for financing with tax-exempt
private activity bonds
Present law includes several exceptions permitting States
or local governments to act as conduits providing tax-exempt
financing for private activities. Both capital expenditures and
limited working capital expenditures of charitable
organizations described in section 501(c)(3) of the Code may be
financed with tax-exempt bonds (``qualified 501(c)(3) bonds'').
States or local governments may issue tax-exempt
``exempt-facility bonds'' to finance property for certain
private businesses. Business facilities eligible for this
financing include transportation (airports, ports, local mass
commuting, and high speed intercity rail facilities); privately
owned and/or privately operated public works facilities
(sewage, solid waste disposal, local district heating or
cooling, and hazardous waste disposal facilities); privately
owned and/or operated low-income rental housing; \81\ and
certain private facilities for the local furnishing of
electricity or gas. A further provision allows tax-exempt
financing for ``environmental enhancements of hydro-electric
generating facilities.'' Tax-exempt financing also is
authorized for capital expenditures for small manufacturing
facilities and land and equipment for first-time farmers
(``qualified small-issue bonds''), local redevelopment
activities (``qualified redevelopment bonds''), and eligible
empowerment zone and enterprise community businesses. Tax-
exempt private activity bonds also may be issued to finance
limited non-business purposes: certain student loans and
mortgage loans for owner-occupied housing (``qualified mortgage
bonds'' and ``qualified veterans' mortgage bonds'').
---------------------------------------------------------------------------
\81\ Residential rental projects must satisfy low-income tenant
occupancy requirements for a minimum period of 15 years.
---------------------------------------------------------------------------
With the exception of qualified 501(c)(3) bonds, private
activity bonds may not be issued to finance working capital
requirements of private businesses. In most cases, the
aggregate volume of tax-exempt private activity bonds that may
be issued in a State is restricted by annual volume limits.
Several additional restrictions apply to the issuance of
tax-exempt bonds. First, private activity bonds (other than
qualified 501(c)(3) bonds) may not be advance refunded.
Governmental bonds and qualified 501(c)(3) bonds may be advance
refunded one time. An advance refunding occurs when the
refunded bonds are not retired within 90 days of issuance of
the refunding bonds.
Issuance of private activity bonds is subject to
restrictions on use of proceeds for the acquisition of land and
existing property, use of proceeds to finance certain specified
facilities (e.g., airplanes, skyboxes, other luxury boxes,
health club facilities, gambling facilities, and liquor stores)
and use of proceeds to pay costs of issuance (e.g., bond
counsel and underwriter fees). Additionally, the term of the
bonds generally may not exceed 120 percent of the economic life
of the property being financed and certain public approval
requirements (similar to requirements that typically apply
under State law to issuance of governmental debt) apply under
Federal law to issuance of private activity bonds. Present and
prior law precludes substantial users of property financed with
private activity bonds from owning the bonds to prevent their
deducting tax-exempt interest paid to themselves. Finally,
owners of most private-activity-bond-financed property are
subject to special ``change-in-use'' penalties if the use of
the bond-financed property changes to a use that is not
eligible for tax-exempt financing while the bonds are
outstanding.
HOUSE BILL
No provision.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The bill creates a new category of tax-exempt bonds, the
qualified green building and sustainable design project bond. A
qualified green building and sustainable design project bond is
defined as any bond issued as part of an issue that finances a
project designated by the Secretary, after consultation with
the Administrator of the Environmental Protection Agency (the
``Administrator'') as a green building and sustainable design
project that meets the following requirements: (1) at least 75
percent of the square footage of the commercial buildings that
are part of the project is registered for the U.S. Green
Building Council's LEED certification and is reasonably
expected (at the time of designation) to meet such
certification; \82\ (2) the project includes a brownfield site;
\83\ (3) the project receives at least $5 million dollars in
specific State or local resources; and (4) the project includes
at least one million square feet of building or 20 acres of
land.
---------------------------------------------------------------------------
\82\ The LEED (``Leadership in Energy and Environmental Design'')
Green Building Rating System is a voluntary, consensus-based national
standard for developing high-performance sustainable buildings.
Registration is the first step toward LEED certification. Actual
certification requires that the applicant project satisfy all
prerequisites and receive a minimum number of points to attain a LEED
rating level. Commercial buildings, as defined by standard building
codes are eligible for certification. Commercial occupancies include,
but are not limited to, offices, retail and service establishments,
institutional buildings (e.g., libraries, schools, museums, churches,
etc.), hotels, and residential buildings of four or more habitable
stories. .
\83\ For this purpose a brownfield site is defined by section
101(39) of the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (42 U.S.C. 9601), including a site described in
subparagraph (D)(ii)(II)(aa) (relating to a site that is contaminated
by petroleum or a petroleum product excluded from the definition of
``hazardous substance'' under section 101).
---------------------------------------------------------------------------
Each project must be nominated by a State or local
government within 180 days of enactment of this Act and such
State or local government must provide written assurances that
the project will satisfy certain eligibility criteria. Within
60 days after the end of the application period, the Secretary,
after consultation with the Administrator, will designate the
qualified green building and sustainable design projects. At
least one of the projects must be in or within a ten-mile
radius of an empowerment zone (as defined under section 1391 of
the Code) and at least one must be in a rural State.\84\ A
project shall not be designated if such project includes a
stadium or arena for professional sports exhibitions or games.
---------------------------------------------------------------------------
\84\ The term ``rural State'' means any State that has (1) a
population of less than 4.5 million according to the 2000 census; (2) a
population density of less than 150 people per square mile according to
the 2000 census; and (3) increased in population by less than half the
rate of the national increase between the 1990 and 2000 censuses.
---------------------------------------------------------------------------
The Secretary, after consultation with the Administrator,
shall also ensure that, in the aggregate, the projects
designated shall: (1) reduce electric consumption by more than
150 megawatts annually as compared to conventional
construction; (2) reduce daily sulfur dioxide emissions by at
least 10 tons compared to coal generation power; (3) expand by
75 percent the domestic solar photovoltaic market in the United
States (measured in megawatts) as compared to the expansion of
that market from 2001 to 2002; and (4) use at least 25
megawatts of fuel cell energy generation.
Each application shall contain for each project a
description of: (1) amount of electric consumption reduced as
compared to conventional construction; (2) the amount of sulfur
dioxide daily emissions reduced compared to coal generation;
(3) the amount of gross installed capacity of the project's
solar photovoltaic capacity measured in megawatts; and (4) the
amount, measured in megawatts, of the project's fuel cell
energy generation. Each project application must also
demonstrate that: (1) at least 75 percent of the square footage
of the commercial buildings that are part of the project is
registered for the U.S. Green Building Council's LEED
certification and is reasonably expected (at the time of
designation) to meet such certification; (2)the project
includes a brownfield site (as defined above); (3) the project receives
at least $5 million dollars in specific State or local resources; (4)
the project includes at least one million square feet of building or at
least 20 acres of land; (5) the project is projected to provide
permanent employment of at least 1500 full time equivalents (150 full
time equivalents in rural States) when completed and construction
employment of at least 1000 full time equivalents (100 full time
equivalents in rural States); \85\ and (6) the net benefit of the
qualified green building and sustainable design project tax-exempt
financing provided will be allocated for (i) the purchase,
construction, integration or other use of energy efficiency, renewable
energy and sustainable design features of the project, (ii) compliance
with LEED certification standards, and/or (iii) the purchase,
remediation, foundation construction, and preparation of the brownfield
site. Not later than 30 days after the completion of the project, each
project must certify to the Secretary that the net benefit of the tax-
exempt financing was used for the purposes described.
---------------------------------------------------------------------------
\85\ The application is to include an independent analysis that
describes the project's economic impact, including the amount of
projected employment.
---------------------------------------------------------------------------
Qualified green building and sustainable design project
bonds are not subject to the State bond volume limitations.
There is a national limitation of $2 billion of bonds. The
Secretary may allocate, in the aggregate, no more than $2
billion of bonds to qualified green building and sustainable
design projects.
Any asset financed with qualified green building and
sustainable design project bonds is ineligible for any credit
or deduction established or extended under the Energy Tax
Policy Act of 2003. In addition, each issuer shall maintain, on
behalf of each project, an interest bearing reserve account
equal to one percent of the net proceeds of any qualified green
building and sustainable design project bond issued for such
project. Not later than five years after the date of issuance,
the Secretary, after consultation with the Administrator, shall
determine whether the project financed with such bonds has
substantially complied requirements and commitments described
in the project application for designation, including
certification. If the Secretary, after such consultation,
certifies that the project has substantially complied with
requirements and commitments, amounts in the reserve account,
including all interest, shall be released to the project. If
the Secretary determines that the project has not substantially
complied with such requirements and commitments, amounts in the
reserve account, including all interest, shall be paid to the
United States Treasury.
Qualified green building and sustainable design project
bonds may be currently refunded if certain conditions are met,
but cannot be advance refunded.
Effective date.--The provisions are effective for bonds
issued after the date of enactment and before October 1, 2009.
V. TAX COMPLEXITY ANALYSIS
Section 4022(b) of the Internal Revenue Service Reform
and Restructuring Act of 1998 (the ``IRS Reform Act'') requires
the Joint Committee on Taxation (in consultation with the
Internal Revenue Service and the Department of the Treasury) to
provide a tax complexity analysis. The complexity analysis is
required for all legislation reported by the Senate Committee
on Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the Internal Revenue Code
(the ``Code'') and has widespread applicability to individuals
or small businesses.
The staff of the Joint Committee on Taxation has
determined that a complexity analysis is not required under
section 4022(b) of the IRS Reform Act because the bill contains
no provisions that amend the Internal Revenue Code and that
have ``widespread applicability'' to individuals or small
businesses.
TITLE XIV--MISCELLANEOUS PROVISIONS
Title XIV of the conference report provides funding for
the power cost equalization program in Alaska, and authorizes
assistance to rural communities for electric generation,
transmission, and distribution upgrades and improvements. It
establishes a coastal reinvestment program to assist coastal
states in mitigating the impacts of offshore development, and
allows lessees due compensation under the Oil Pollution Act of
1980 to withhold royalty payments for production from a covered
lease tract in the outer Continental Shelf under certain
circumstances. The report provides for changes in the
composition, operation, and duties of the Tennessee Valley
Authority board of directors, authorizes the continued
operation of certain electric transmission facilities,
reinstates a regulation for downwind ozone nonattainment areas,
authorizes States to provide energy production incentives, and
directs the Administrator of the Environmental Protection
Agency to establish criteria for the use of granular mine
tailings.
TITLE XV--ETHANOL
Title XV of the conference report establishes a renewable
fuels standard requiring that 5.0 billion gallons of renewable
fuels be introduced into the marketplace by 2012. It bans the
use of MTBE in motor fuels after December 31, 2104, and
authorizes transition assistance to aid manufacturers in
converting production to other fuel additives. The title
requires a National Academy of Sciences report on the use of
MTBE to be completed by May 31, 2013, and provides opportunity
for a Presidential determination concerning restrictions on the
use of MTBE by June 30, 2013. It also provides limited
liability protection for MTBE, fuels using MTBE, ethanol, and
fuels using ethanol, for defective product claims. The title
also makes changes to provisions related to leaking underground
storage tanks, including requiring at least 80 percent of all
dollars appropriated from the LUST Trust Fund to be sent to the
States for operating leaking underground tanks programs. It
requires onsite inspections of underground storage tanks every
3 years after a brief period for the State to update its
backlog. The title also prohibits Federal facilities from
exempting themselves from compliance with all Federal, State,
and local underground tank laws.
TITLE XVI--STUDIES
Title XVI of the conference report authorizes a variety
of studies on issues such as petroleum and natural gas
supplies, coal bed methane, telecommuting, oil bypass
filtration, and the Low-Income Home Energy Assistance Program.
From the Committee on Energy and Commerce, for
consideration of the House bill and the Senate
amendment, and modifications committed to
conference:
Billy Tauzin,
Michael Bilirakis,
Joe Barton,
Fred Upton,
Cliff Stearns,
Paul Gillmor,
John Shimkus,
From the Committee on Agriculture, for
consideration of secs. 30203, 30308, 30212,
Title III of Division C, secs. 30604, 30901,
and 30903 of the House bill and secs. 265, 301,
604, 941-948, 950, 1103, 1221, 1311-1313, and
2008 of the Senate amendment, and modifications
committed to conference:
Bob Goodlatte,
Frank D. Lucas,
Charles W. Stenholm,
From the Committee on Armed Services, for
consideration of secs. 11005, 11010, 14001-
14007, 14009-14015, 21805 and 21806 of the
House bill and secs. 301, 501-507, 509, 513,
809, 821, 914, 920, 1401, 1407-1409, 1411,
1801, and 1803 of the Senate amendment, and
modifications committed to conference:
Duncan Hunter,
Curt Weldon,
From the Committee on Education and the
Workforce, for consideration of secs. 11021,
12014, 14033, and 30406 of the House bill and
secs. 715, 774, 901, 903, 1505, and 1507 of the
Senate amendment, and modifications committed
to conference:
Sam Johnson,
From the Committee on Financial Services, for
consideration of Division G of the House bill
and secs. 931-940 and 950 of the Senate
amendment and modifications committed to
conference:
Robert W. Ney,
From the Committee on Government Reform, for
consideration of secs. 11002, 11005, 11006,
11010, 11011, 14025, 14033, and 22002 of the
House bill and secs. 263, 805, 806, 914-916,
918, 920, 1406, and 1410 of the Senate
amendment, and modifications committed to
conference:
Tom Davis,
Tim Murphy,
From the Committee on the Judiciary, for
consideration of secs. 12008, 12401, 14014,
14026, 14027, 14028, 14033, 16012, 16045,
16084, 30101, 30210, and 30408 of the House
bill and secs. 206, 209, 253, 531-532, 708,
767, 783, and 1109 of the Senate amendment, and
modifications committed to conference:
Lamar Smith,
From the Committee on Resources, for
consideration of secs. 12005, 12007, 12011,
12101, 13001, 21501, 21521-21530, Division C,
and sec. 60009 of the House bill and secs. 201,
265, 272, 301, 401-407, 602-606, 609, 612, 705,
707, 712, 721, 1234, 1351-1352, 1704, and 1811
of the Senate amendment, and modifications
committed to conference:
Richard Pombo,
Barbara Cubin,
Provided that Mr. Kind is appointed in lieu of
Mr. Rahall for consideration of Title IV of
Division C of the House bill, and modifications
committed to conference:
From the Committee on Science, for
consideration of secs. 11009, 11025, 12301-
12312, 14001-14007, 14009-14015, 14029, 15021-
15024, 15031-15034, 15041, 15045, Division B,
sec 30301, Division E, and Division F of the
House bill and secs. 501-507, 509, 513-516,
770-772, 807-809, 814-816, 824, 832, 1001-1022,
Title XI, Title XII, Title XIII, Title XIV,
secs. 1501, 1504-1505, Title XVI, and secs.
1801-1805 of the Senate amendment, and
modifications committed to conference:
Judy Biggert,
Ralph M. Hall,
Provided that Mr. Costello is appointed in lieu
of Mr. Hall of Texas for consideration of
Division E of the House bill, and modifications
committed to conference:
Jerry Costello,
Provided that Mr. Lampson is appointed in lieu
of Mr. Hall of Texas for consideration of sec.
21708 and Division F of the House bill, and
secs. 824 and 1223 of the Senate amendment and
modifications committed to conference:
Nick Lampson,
From the Committee on Transportation and
Infrastructure, for consideration of secs.
11001-11004, 11006, 11009-110011, 12001-12012,
12014, 12401, 12403, 13001, 13201, 13202,
15021-15024, 15031-15034, 15041, 15043, 15051,
16012, 16021, 16022, 16023, 16031, 16081,
16082, 16092, 23001-23004, 30407, 30410, and
30901 of the House bill and secs. 102, 201,
205, 301, 701-783, 812, 814, 816, 823, 911-916,
918-920, 949, 1214, 1261-1262, and 1351-1352 of
the Senate amendment, and modifications
committed to conference:
Don Young,
Thomas Petri,
From the Committee on Ways and Means, for
consideration of Division D of the House bill
and Division H and I of the Senate amendment,
and modifications committed to conference:
William Thomas,
Jim McCrery,
Managers on the Part of the House.
Pete V. Domenici,
Don Nickles,
Larry E. Craig,
Ben Nighthorse Campbell,
Craig Thomas,
Chuck Grassley,
Trent Lott,
Byron L. Dorgan,
Managers on the Part of the Senate.