S.Amdt. 1425

TEXT OF AMENDMENTS

SA 1419. Ms. CANTWELL (for herself, Mr. Bingaman, Mrs. Feinstein, Mr.
Hollings, Mr. Wyden, Mrs. Boxer, Mrs. Murray, Mr. Harkin, and Mr.
Rockefeller) proposed an amendment to amendment SA 1412 proposed by Mr.
Domenici (for himself, Ms. Landrieu, Mr. Thomas, Ms. Murkowski, Mr.
Campbell, Mr. Smith, Mr. Alexander, Mr. Kyl, Mr. Nelson of Nebraska,
Mr. Hagel, Mr. Talent, Mr. Bunning, and Mr. Coleman) to the bill S. 14,
to enhance the energy security of the United States, and for other
purposes; as follows:

In the pending amendment,
Strike section 1172 and insert the following:

SEC. 1172. MARKET MANIPULATION.

(a) Prohibition.--Part II of the Federal Power Act (as
amended by section 1171) is amended by adding at the end the
following:

``SEC. 219. PROHIBITION ON MARKET MANIPULATION.

``It shall be unlawful for any person, directly or
indirectly, to use or employ, in connection with the purchase
or sale of electric energy or the purchase or sale of
transmission services subject to the jurisdiction of the
Commission, any manipulative or deceptive device or
contrivance in contravention of such regulations as the
Commission may promulgate as appropriate in the public
interest or for the protection of electric ratepayers.''.
(b) Rates Resulting From Market Manipulation.--Section
205(a) of the Federal Power Act (16 U.S.C. 824d(a)) is
amended by inserting after ``not just and reasonable'' the
following: ``or that result from a manipulative or deceptive
device or contrivance in violation of a regulation
promulgated under section 219''.
(c) Additional Remedy for Market Manipulation.--Section 206
of the Federal Power Act (16 U.S.C. 824e) is amended by
adding at the end the following:
``(e) Remedy for Market Manipulation.--If the Commission
finds that a public utility has knowingly employed any
manipulative or deceptive device or contrivance in violation
of a regulation promulgated under section 219, the Commission
shall, in addition to any other remedy available under this
Act, revoke the authority of the public utility to charge
market-based rates.''.
______

SA 1420. Mr. JEFFORDS submitted an amendment intended to be proposed
to amendment SA 1412 proposed by Mr. Domenici (for himself, Ms.
Landrieu, Mr. Thomas, Ms. Murkowski, Mr. Campbell, Mr. Smith, Mr.
Alexander,

[[Page S10298]]

Mr. Kyl, Mr. Nelson of Nebraska, Mr. Hagel, Mr. Talent, Mr. Bunning,
and Mr. Coleman) to the bill S. 14, to enhance the energy security of
the United States, and for other purposes; which was ordered to lie on
the table; as follows:

On page 19 strike line 6 through line 18 and insert:
(a) Net Metering.--
(1) Each electric utility shall make available upon request
net metering service to any electric consumer that the
electric utility serves.
(2) 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.
______

SA 1421. Mr. JEFFORDS submitted an amendment intended to be proposed
to amendment SA 1412 proposed by Mr. Domenici (for himself, Ms.
Landrieu, Mr. Thomas, Ms. Murkowski, Mr. Campbell, Mr. Smith, Mr.
Alexander, Mr. Kyl, Mr. Nelson of Nebraska, Mr. Hagel, Mr. Talent, Mr.
Bunning, and Mr. Coleman) to the bill S. 14, to enhance the energy
security of the United States, and for other purposes; which was
ordered to lie on the table; as follows:

At the appropriate place, insert the following:

Subtitle I--System Benefits

SEC. 1192. SYSTEM BENEFITS FUND.

(a) Definitions.--For purposes of this section:
(1) Administrator.--The term ``Administrator'' means the
Administrator of the Environmental Protection Agency.
(2) Board.--The term ``Board'' means the Board established
under this section.
(3) Commission.--The term ``Commission'' means the Federal
Energy Regulatory Commission.
(4) Fund.--The term ``Fund'' means the System Benefits
Trust Fund established by this section.
(5) Renewable Energy.--The term ``renewable energy'' means
electricity generated from wind, organic waste (excluding
incinerated municipal solid waste), or biomass (including
anaerobic digestion from farm systems and landfill gas
recovery) or a geothermal, solar thermal, or photovoltaic
source. For purposes of this paragraph, a farm system is an
electric generating facility that generates electric energy
from the anaerobic digestion of agricultural waste produced
by farming that is located on the farm where substantially
all of the waste used in produced.
(6) Secretary.--The term ``Secretary'' means the Secretary
of Energy.
(b) Board.--
(1) Establishment.--The Secretary shall establish a System
Benefits Trust Fund Board to carry out the functions and
responsibilities described in this section.
(2) Membership.--The Board shall be composed of--
(A) 1 representative of the Federal Energy Regulatory
Commission appointed by the Federal Energy Regulatory
Commission;
(B) 2 representatives of the Secretary of Energy appointed
by the Secretary of Energy;
(C) 2 persons nominated by the National Association of
Regulatory Utility Commissioners and appointed by the
Secretary;
(D) 1 person nominated by the National Association of State
Utility Consumer advocates and appointed by the Secretary;
(E) 1 person nominated by the National Association of State
Energy Officials and appointed by the Secretary;
(F) 1 person nominated by the National Energy Assistance
Directors' Association and appointed by the Secretary; and
(G) 1 representative of the Environmental Protection Agency
appointed by the Administrator.
(3) Chairperson.--The Secretary shall select a member of
the Board to serve as Chairperson of the Board.
(c) Establishment of Fund.--
(1) In general.--The Board shall establish an account or
accounts at one of more financial institutions, which account
or accounts shall be known as the System Benefits Trust Fund
consisting of amounts deposited in the fund under subsection
(d).
(2) Status of fund.--The wires charges collected under
subsection (e) and deposited in the Fund--
(A) shall not constitute funds of the United States;
(B) shall be held in trust by the Board solely for the
purposes stated in subsection (d); and
(C) shall not be available to meet any obligations of the
United States.
(d) Use of Funds.--
(1) Funding of state programs.--Amounts in the Fund shall
be used by the Board to provide matching funds to States and
Indian tribes for the support of State or tribal public
benefits programs relating to--
(A) energy conservation and efficiency;
(B) renewable energy sources;
(C) assisting low-income households in meeting their home
energy needs; or
(D) research and development in areas described in
subparagraphs (A) through (C).
(2) Distribution.--
(A) In general.--Except for amounts needed to pay costs of
the Board in carrying out its duties under this section, the
Board shall distribute all amounts in the Fund to States or
Indian tribes to fund public benefits programs under
paragraph (1).
(B) Funds share.--
(i) In general.--Subject to clause (iii), the Fund share of
a public benefits program funded under paragraph (1) shall be
50 percent.
(ii) Proportionate reduction.--To the extent that the
amount of matching funds requested by States and Indian
tribes exceeds the maximum projected revenues of the Fund,
the matching funds distributed to the States and Indian
tribes shall be reduced by an amount that is proportionate to
each State's annual consumption of electricity compared to
the Nation's aggregate annual consumption of electricity.
(iii) Additional state or Indian tribe funding.--A State or
Indian tribe may apply funds to public benefits programs in
addition to the amount of funds applied for the purpose of
matching the Fund share.
(3) Program Criteria.--The Board shall recommend
eligibility criteria for public benefits programs funded
under this section for approval by the Secretary of Energy.
(4) Application.--Not later than August 1 of each year
beginning in 2002, a State or Indian tribe seeking matching
funds for the following fiscal year shall file with the
Board, in such form as the Board may require, an
application--
(A) certifying that the funds will be used for an eligible
public benefits program;
(B) stating the amount of State or Indian tribe funds
earmarked for the program; and
(C) summarizing how System Benefit Trust Fund funds from
the previous calendar year (if any) were spent by the State
and what the State accomplished as a result of these
expenditures.
(e) Wires Charge.--
(1) Determination of Needed Funding.--Not later than August
1 of each year, the Board shall determine and inform the
Federal Energy Regulatory Commission of the aggregate amount
of wires charges that will be necessary to be paid into the
Fund to pay matching funds to States and Indian tribes and
pay the operating costs of the Board in the following fiscal
year.
(2) Imposition of Wires Charge.--
(A) In general.--Not later than December 15 of each year,
the Federal Energy Regulatory Commission shall impose a
nonbypassable, competitively neutral wires charge, to be paid
directly into the Fund by the operator of the wire, on
electricity carried through the wire (measured as it exits
the busbar at a generation facility, or, for electricity
generated outside the United States, at the point of delivery
to the wire operator's system) in interstate commerce.
(B) Amount.--The wires charge shall be set at a rate equal
to the lesser of
(i) 2.0 mills per kilowatt hour; or
(ii) a rate that is estimated to result in the collection
of an amount of wires charges that is as nearly as possible
equal to the amount of needed funding determined under
paragraph (1).
(3) Deposit in the fund.--The wires charge shall be paid by
the operator of the wire directly into the Fund at the end of
each month during the calendar year for distribution by the
Board under subsection (c).
(4) Penalties.--The Federal Energy Regulatory Commission
may assess against a wire operator that fails to pay a wires
charge as required by this subsection a civil penalty in an
amount equal to not more than the amount of the unpaid wires
charge.
(e) Auditing.--
(1) In general.--The Fund shall be audited annually by a
firm or independent certified public accountants in
accordance with generally accepted auditing standards.
(2) Access to records.--Representatives of the Secretary of
Energy and the Federal Energy Regulatory Commission shall
have access to all books, accounts, reports, files, and other
records pertaining to the Fund as necessary to facilitate and
verify the audit.
(3) Reports.--
(A) In general.--A report on each audit shall be submitted
to the Secretary of Energy, the Federal Energy Regulatory
Commission, and the Secretary of the Treasury, who shall
submit the report to the President and Congress not later
than 180 days after the close of the fiscal year.
(B) Requirements.--An audit report shall--
(i) set for the scope of the audit; and
(ii) include--
(I) a statement of assets and liabilities, capital, and
surplus or deficit;
(II) a surplus or deficit analysis;
(III) a statement of income and expenses;
(IV) any other information that may be considered necessary
to keep the President and Congress informed of the operations
and financial condition of the Fund; and
(V) any recommendations with respect to the Fund that the
Secretary of Energy or the Federal Energy Regulatory
Commission may have.
______

SA 1422. Mr. NELSON of Nebraska submitted an amendment intended to be
proposed to amendment SA 1412 proposed by Mr. Domenici (for himself,
Ms. Landrieu, Mr. Thomas, Ms. Murkowski, Mr. Campbell, Mr. Smith, Mr.
Alexander, Mr. Kyl, Mr. Nelson of Nebraska, Mr. Hagel, Mr. Talent, Mr.
Bunning, and Mr. Coleman) to the bill S. 14, to enhance the energy
security of

[[Page S10299]]

the United States, and for other purposes; which was ordered to lie on
the table; as follows:

At the appropriate place insert the following:
``(6) Electric utility.--The term `electric utility' does
not include--
``(A) the United States;
``(B) a State or political subdivision of a State;
``(C) an agency, authority, or instrumentality of the
United States, a State, or political subdivision of a State;
or
``(D) an electric cooperative.
______

SA 1423. Mr. VOINOVICH submitted an amendment intended to be proposed
by him to the bill S. 14, to enhance the energy security of the United
States, and for other purposes; which was ordered to lie on the table;
as follows:

On page 145, between lines 18 and 19, insert the following:

Subtitle D--Growth of Nuclear Energy

SEC. 4____. COMBINED LICENSE PERIODS.

Section 103c. of the Atomic Energy Act of 1954 (42 U.S.C.
2133(c)) is amended--
(1) by striking ``c. Each such'' and inserting the
following:
``c. License Period.--
``(1) In general.--Each such''; and
(2) by adding at the end the following:
``(2) Combined licenses.--In the case of a combined
construction and operating license issued under section
185(b), the duration of the operating phase of the license
period shall not be less than the duration of the operating
license if application had been made for separate
construction and operating licenses.''.

Subtitle E--NRC Regulatory Reform

SEC. 4____. ANTITRUST REVIEW.

(a) In General.--Section 105 of the Atomic Energy Act of
1954 (42 U.S.C. 2135) is amended by adding at the end the
following:
``d. Antitrust Laws.--
``(1) Notification.--Except as provided in paragraph (4),
when the Commission proposes to issue a license under section
103 or 104b., the Commission shall notify the Attorney
General of the proposed license and the proposed terms and
conditions of the license.
``(2) Action by the attorney general.--Within a reasonable
time (but not more than 90 days) after receiving notification
under paragraph (1), the Attorney General shall submit to the
Commission and publish in the Federal Register a
determination whether, insofar as the Attorney General is
able to determine, the proposed license would tend to create
or maintain a situation inconsistent with the antitrust laws.
``(3) Information.--On the request of the Attorney General,
the Commission shall furnish or cause to be furnished such
information as the Attorney General determines to be
appropriate or necessary to enable the Attorney General to
make the determination under paragraph (2).
``(4) Applicability.--This subsection shall not apply to
such classes or type of licenses as the Commission, with the
approval of the Attorney General, determines would not
significantly affect the activities of a licensee under the
antitrust laws.''.
(b) Conforming Amendment.--Section 105c. 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 under section 103 or 104b. that is filed
on or after the date of enactment of subsection d.''.

SEC. 4____. DECOMMISSIONING.

(a) Authority Over Former Licensees for Decommissioning
Funding.--Section 161i. 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 104b.,
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''.
(b) Treatment of Nuclear Reactor Financial Obligations.--
Section 523 of title 11, United States Code, is amended by
adding at the end the following:
``(f) Treatment of Nuclear Reactor Financial Obligations.--
Notwithstanding any other provision of this title--
``(1) any funds or other assets held by a licensee or
former licensee of the Nuclear Regulatory Commission, or by
any other person, to satisfy the responsibility of the
licensee, former licensee, or any other person to comply with
a regulation or order of the Nuclear Regulatory Commission
governing the decontamination and decommissioning of a
nuclear power reactor licensed under section 103 or 104b. of
the Atomic Energy Act of 1954 (42 U.S.C. 2133, 2134(b)) shall
not be used to satisfy the claim of any creditor in any
proceeding under this title, other than a claim resulting
from an activity undertaken to satisfy that responsibility,
until the decontamination and decommissioning of the nuclear
power reactor is completed to the satisfaction of the Nuclear
Regulatory Commission;
``(2) obligations of licensees, former licensees, or any
other person to use funds or other assets to satisfy a
responsibility described in paragraph (1) may not be
rejected, avoided, or discharged in any proceeding under this
title or in any liquidation, reorganization, receivership, or
other insolvency proceeding under Federal or State law; and
``(3) private insurance premiums and standard deferred
premiums held and maintained in accordance with section 170b.
of the Atomic Energy Act of 1954 (42 U.S.C. 2210(b)) shall
not be used to satisfy the claim of any creditor in any
proceeding under this title, until the indemnification
agreement executed in accordance with section 170c. of that
Act (42 U.S.C. 2210(c)) is terminated.''.

Subtitle F--NRC Personnel Crisis

SEC. 4____. 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. 4____. 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 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 safety skills.
(b) Authorization of Appropriations.--
(1) In general.--There are authorized to be appropriated to
carry out this section $1,000,000 for each of fiscal years
2004 through 2007.
(2) Availability.--Funds made available under paragraph (1)
shall remain available until expended.
______

SA 1424. Mr. GRASSLEY (for himself, Mr. Baucus, Mr. Domenici, and Mr.
Bingaman) submitted an amendment intended to be proposed by him to the
bill S. 14, to enhance the energy security of the United States, and
for other purposes; which was ordered to lie on the table; as follows:

At the end add the following:

DIVISION B--ENERGY TAX INCENTIVES

SECTION 1. SHORT TITLE; ETC.

(a) Short Title.--This division may be cited as the
``Energy Tax Incentives Act of 2003''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this division 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.
(c) Table of Contents.--The table of contents for this
division is as follows:

Sec. 1. Short title; etc.

TITLE I--RENEWABLE ELECTRICITY PRODUCTION TAX CREDIT

Sec. 101. Extension and expansion of credit for electricity produced
from certain renewable resources.

TITLE II--ALTERNATIVE MOTOR VEHICLES AND FUELS INCENTIVES

Sec. 201. Alternative motor vehicle credit.
Sec. 202. Modification of credit for qualified electric vehicles.
Sec. 203. Credit for installation of alternative fueling stations.
Sec. 204. Credit for retail sale of alternative fuels as motor vehicle
fuel.
Sec. 205. Small ethanol producer credit.
Sec. 206. Increased flexibility in alcohol fuels tax credit.
Sec. 207. Incentives for biodiesel.
Sec. 208. Alcohol fuel and biodiesel mixtures excise tax credit.
Sec. 209. Sale of gasoline and diesel fuel at duty-free sales
enterprises.

TITLE III--CONSERVATION AND ENERGY EFFICIENCY PROVISIONS

Sec. 301. Credit for construction of new energy efficient home.
Sec. 302. Credit for energy efficient appliances.
Sec. 303. Credit for residential energy efficient property.
Sec. 304. Credit for business installation of qualified fuel cells and
stationary microturbine power plants.
Sec. 305. Energy efficient commercial buildings deduction.
Sec. 306. Three-year applicable recovery period for depreciation of
qualified energy management devices.
Sec. 307. Three-year applicable recovery period for depreciation of
qualified water submetering devices.
Sec. 308. Energy credit for combined heat and power system property.
Sec. 309. Credit for energy efficiency improvements to existing homes.

TITLE IV--CLEAN COAL INCENTIVES

Subtitle A--Credit for Emission Reductions and Efficiency Improvements
in Existing Coal-Based Electricity Generation Facilities

Sec. 401. Credit for production from a qualifying clean coal technology
unit.

[[Page S10300]]

Subtitle B--Incentives for Early Commercial Applications of Advanced
Clean Coal Technologies

Sec. 411. Credit for investment in qualifying advanced clean coal
technology.
Sec. 412. Credit for production from a qualifying advanced clean coal
technology unit.

Subtitle C--Treatment of Persons Not Able To Use Entire Credit

Sec. 421. Treatment of persons not able to use entire credit.

TITLE V--OIL AND GAS PROVISIONS

Sec. 501. Oil and gas from marginal wells.
Sec. 502. Natural gas gathering lines treated as 7-year property.
Sec. 503. Expensing of capital costs incurred in complying with
Environmental Protection Agency sulfur regulations.
Sec. 504. Environmental tax credit.
Sec. 505. Determination of small refiner exception to oil depletion
deduction.
Sec. 506. Marginal production income limit extension.
Sec. 507. Amortization of delay rental payments.
Sec. 508. Amortization of geological and geophysical expenditures.
Sec. 509. Extension and modification of credit for producing fuel from
a nonconventional source.
Sec. 510. Natural gas distribution lines treated as 15-year property.
Sec. 511. Credit for Alaska natural gas.
Sec. 512. Certain Alaska natural gas pipeline property treated as 7-
year property.
Sec. 513. Arbitrage rules not to apply to prepayments for natural gas.

TITLE VI--ELECTRIC UTILITY RESTRUCTURING PROVISIONS

Sec. 601. Modifications to special rules for nuclear decommissioning
costs.
Sec. 602. Treatment of certain income of cooperatives.
Sec. 603. Sales or dispositions to implement Federal Energy Regulatory
Commission or State electric restructuring policy.

TITLE VII--ADDITIONAL PROVISIONS

Sec. 701. Extension of accelerated depreciation and wage credit
benefits on Indian reservations.
Sec. 702. Study of effectiveness of certain provisions by GAO.
Sec. 703. Repeal of 4.3-cent motor fuel excise taxes on railroads and
inland waterway transportation which remain in general
fund.
Sec. 704. Expansion of research credit.

TITLE VIII--REVENUE PROVISIONS

Subtitle A--Provisions Designed To Curtail Tax Shelters

Sec. 801. Penalty for failing to disclose reportable transaction.
Sec. 802. Accuracy-related penalty for listed transactions and other
reportable transactions having a significant tax
avoidance purpose.
Sec. 803. Tax shelter exception to confidentiality privileges relating
to taxpayer communications.
Sec. 804. Disclosure of reportable transactions.
Sec. 805. Modifications to penalty for failure to register tax
shelters.
Sec. 806. Modification of penalty for failure to maintain lists of
investors.
Sec. 807. Penalty on promoters of tax shelters.

Subtitle B--Provisions to Discourage Corporate Expatriation

Sec. 821. Tax treatment of inverted corporate entities.
Sec. 822. Excise tax on stock compensation of insiders in inverted
corporations.
Sec. 823. Reinsurance of United States risks in foreign jurisdictions.

Subtitle C--Other Revenue Provisions

Sec. 831. Extension of Internal Revenue Service user fees.
Sec. 832. Addition of vaccines against hepatitis A to list of taxable
vaccines.
Sec. 833. Individual expatriation to avoid tax.

TITLE I--RENEWABLE ELECTRICITY PRODUCTION TAX CREDIT

SEC. 101. 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) biomass (other than closed-loop biomass),
``(D) geothermal energy,
``(E) solar energy,
``(F) small irrigation power,
``(G) biosolids and sludge, and
``(H) 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) Biomass.--
``(A) In general.--The term `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.

``(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 installed capacity of which is less than 5
megawatts.
``(6) Biosolids and sludge.--The term `biosolids and
sludge' means the residue or solids removed in the treatment
of commercial, industrial, or municipal wastewater.
``(7) 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 Incentives 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) Biomass facility.--
``(A) In general.--In the case of a facility using biomass
(other than closed-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, is originally placed in service
after the date of the enactment of the Energy Tax Incentives
Act of 2003 and before January 1, 2007, and
``(ii) in the case of any other facility, is originally
placed in service before January 1, 2005.
``(B) Special rules for preeffective date facilities.--In
the case of any facility described in subparagraph (A)(ii)
which is placed in service before the date of the enactment
of such Act--
``(i) subsection (a)(1) shall be applied by substituting
`1.2 cents' for `1.5 cents', and
``(ii) the 5-year period beginning on January 1, 2004,
shall be substituted for the 10-year period in subsection
(a)(2)(A)(ii).
``(C) 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

[[Page S10301]]

credit allowable under subsection (a) shall be the lessee or
the operator of such facility.
``(4) Geothermal or solar energy facility.--
``(A) In general.--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 Incentives Act of 2003 and before
January 1, 2007.
``(B) Special rule.--In the case of any facility described
in subparagraph (A), 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).
``(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 Incentives Act of 2003 and
before January 1, 2007.
``(6) Biosolids and sludge facility.--In the case of a
facility using waste heat from the incineration of biosolids
and sludge 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 Incentives Act of 2003 and before January
1, 2007. Such term shall not include any property described
in section 48(a)(6) the basis of which is taken into account
for purposes of the energy credit under section 46.
``(7) Municipal solid waste facility.--
``(A) In general.--In the case of a facility or unit
incinerating municipal solid waste to produce electricity,
the term `qualified facility' means any facility or unit
owned by the taxpayer which is originally placed in service
after the date of the enactment of the Energy Tax Incentives
Act of 2003 and before January 1, 2007.
``(B) Special rule.--In the case of any facility or unit
described in subparagraph (A), the 5-year period beginning on
the date the facility or unit was originally placed in
service shall be substituted for the 10-year period in
subsection (a)(2)(A)(ii).
``(C) Credit eligibility.--In the case of any qualified
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.''.
(2) No credit for certain production.--Section 45(e)
(relating to definitions and special rules), as redesignated
by paragraph (1), is amended by striking paragraph (6) and
inserting the following new paragraph:
``(6) Operations inconsistent with solid waste disposal
act.--In the case of a qualified facility described in
subsection (d)(6)(A), subsection (a) shall not apply to
electricity produced at such facility during any taxable year
if, during a portion of such year, there is a certification
in effect by the Administrator of the Environmental
Protection Agency that such facility was permitted to operate
in a manner inconsistent with section 4003(d) of the Solid
Waste Disposal Act (42 U.S.C. 6943(d)).''.
(3) 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) Credit Rate for Electricity Produced From New
Facilities.--
(1) In general.--Section 45(a) is amended by adding at the
end the following new flush sentence:
``In the case of electricity produced after 2003 at any
qualified facility originally placed in service after the
date of the enactment of the Energy Tax Incentives Act of
2003, paragraph (1) shall be applied by substituting `1.8
cents' for `1.5 cents'.''.
(2) New rate not subject to inflation adjustment.--Section
45(b)(2) (relating to credit and phaseout adjustment based on
inflation) is amended by adding at the end the following new
sentence: ``This paragraph shall not apply to any amount
which is substituted for the 1.5 cent amount in subsection
(a) by reason of any provision of this section.''.
(d) Elimination of Certain Credit Reductions.--Section
45(b)(3)(A) (relating to credit reduced for grants, tax-
exempt bonds, subsidized energy financing, and other credits)
is amended--
(1) by striking clause (ii),
(2) by redesignating clauses (iii) and (iv) as clauses (ii)
and (iii),
(3) by inserting ``(other than proceeds of an issue of
State or local government obligations the interest on which
is exempt from tax under section 103, or any loan, debt, or
other obligation incurred under subchapter I of chapter 31 of
title 7 of the Rural Electrification Act of 1936 (7 U.S.C.
901 et seq.), as in effect on the date of the enactment of
the Energy Tax Incentives Act of 2003)'' after ``project'' in
clause (ii) (as so redesignated),
(4) 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).'', and
(5) by striking ``tax-exempt bonds,'' in the heading and
inserting ``certain''.
(e) Treatment of Persons Not Able To Use Entire Credit.--
Section 45(e) (relating to definitions and special rules), as
redesignated by subsection (b)(1), is amended by adding at
the end the following new paragraph:
``(8) Treatment of persons not able to use entire credit.--
``(A) Allowance of credit.--
``(i) In general.--Except as otherwise provided in this
subsection--

``(I) any credit allowable under subsection (a) with
respect to a qualified facility owned by a person described
in clause (ii) may be transferred or used as provided in this
paragraph, and
``(II) the determination as to whether the credit is
allowable shall be made without regard to the tax-exempt
status of the person.

``(ii) Persons described.--A person is described in this
clause if the person is--

``(I) an organization described in section 501(c)(12)(C)
and exempt from tax under section 501(a),
``(II) an organization described in section 1381(a)(2)(C),
``(III) a public utility (as defined in section
136(c)(2)(B)), which is exempt from income tax under this
subtitle,
``(IV) any State or political subdivision thereof, the
District of Columbia, any possession of the United States, or
any agency or instrumentality of any of the foregoing, or

``(V) any Indian tribal government (within the meaning of
section 7871) or any agency or instrumentality thereof.

``(B) Transfer of credit.--
``(i) In general.--A person described in subparagraph
(A)(ii) may transfer any credit to which subparagraph (A)(i)
applies through an assignment to any other person not
described in subparagraph (A)(ii). Such transfer may be
revoked only with the consent of the Secretary.
``(ii) Regulations.--The Secretary shall prescribe such
regulations as necessary to ensure that any credit described
in clause (i) is assigned once and not reassigned by such
other person.
``(iii) Transfer proceeds treated as arising from essential
government function.--Any proceeds derived by a person
described in subclause (III), (IV), or (V) of subparagraph
(A)(ii) from the transfer of any credit under clause (i)
shall be treated as arising from the exercise of an essential
government function.
``(C) Use of credit as an offset.--Notwithstanding any
other provision of law, in the case of a person described in
subclause (I), (II), or (V) of subparagraph (A)(ii), any
credit to which subparagraph (A)(i) applies may be applied by
such person, to the extent provided by the Secretary of
Agriculture, as a prepayment of any loan, debt, or other
obligation the entity has incurred under subchapter I of
chapter 31 of title 7 of the Rural Electrification Act of
1936 (7 U.S.C. 901 et seq.), as in effect on the date of the
enactment of the Energy Tax Incentives Act of 2003.
``(D) Credit not income.--Any transfer under subparagraph
(B) or use under subparagraph (C) of any credit to which
subparagraph (A)(i) applies shall not be treated as income
for purposes of section 501(c)(12).
``(E) Treatment of unrelated persons.--For purposes of
subsection (a)(2)(B), sales of electricity among and between
persons described in subparagraph (A)(ii) shall be treated as
sales between unrelated parties.''.
(f) 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 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 on or before such date of enactment.

TITLE II--ALTERNATIVE MOTOR VEHICLES AND FUELS INCENTIVES

SEC. 201. 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 new section:

``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 qualified hybrid motor vehicle credit
determined under subsection (c), and
``(3) the new qualified alternative fuel motor vehicle
credit determined under subsection (d).
``(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

[[Page S10302]]

cell motor vehicle placed in service by the taxpayer during
the taxable year is--
``(A) $4,000, 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) $20,000, 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.
``(2) Increase for fuel efficiency.--
``(A) In general.--The amount determined under paragraph
(1)(A) with respect to a new qualified fuel cell motor
vehicle which is a passenger automobile or light truck shall
be increased by--
``(i) $1,000, if such vehicle achieves at least 150 percent
but less than 175 percent of the 2002 model year city fuel
economy,
``(ii) $1,500, if such vehicle achieves at least 175
percent but less than 200 percent of the 2002 model year city
fuel economy,
``(iii) $2,000, if such vehicle achieves at least 200
percent but less than 225 percent of the 2002 model year city
fuel economy,
``(iv) $2,500, if such vehicle achieves at least 225
percent but less than 250 percent of the 2002 model year city
fuel economy,
``(v) $3,000, if such vehicle achieves at least 250 percent
but less than 275 percent of the 2002 model year city fuel
economy,
``(vi) $3,500, if such vehicle achieves at least 275
percent but less than 300 percent of the 2002 model year city
fuel economy, and
``(vii) $4,000, if such vehicle achieves at least 300
percent of the 2002 model year city fuel economy.
``(B) 2002 model year city fuel economy.--For purposes of
subparagraph (A), 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 clThe 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 clThe 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.
``(C) Vehicle inertia weight class.--For purposes of
subparagraph (B), 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.).
``(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 1 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--
``(i) for 2002 and later model vehicles, 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
``(ii) for 2004 and later model vehicles, has received a
certificate that such vehicle meets or exceeds the Bin 5 Tier
II emission level 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 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) In general.--The credit amount determined under this
paragraph shall be determined in accordance with the
following tables:
``(i) In the case of a new qualified hybrid motor vehicle
which is a passenger automobile, medium duty passenger
vehicle, or light truck and which provides the following
percentage of the maximum available power:

``If percentage of the maximum available power is:The credit amount is:
At least 4 percent but less than 10 percent.................$250 ....

At least 10 percent but less than 20 percent................$500 ....

At least 20 percent but less than 30 percent................$750 ....

At least 30 percent.......................................$1,000.....

``(ii) In the case of a new qualified hybrid motor vehicle
which is a heavy duty hybrid motor vehicle and which provides
the following percentage of the maximum available power:

``(I) If such vehicle has a gross vehicle weight rating of
not more than 14,000 pounds:

``If percentage of the maximum available power is:The credit amount is:
At least 20 percent but less than 30 percent..............$1,000 ....

At least 30 percent but less than 40 percent..............$1,750 ....

At least 40 percent but less than 50 percent..............$2,000 ....

At least 50 percent but less than 60 percent..............$2,250 ....

At least 60 percent.......................................$2,500.....

``(II) If such vehicle has a gross vehicle weight rating of
more than 14,000 but not more than 26,000 pounds:

``If percentage of the maximum available power is:The credit amount is:
At least 20 percent but less than 30 percent..............$4,000 ....

At least 30 percent but less than 40 percent..............$4,500 ....

At least 40 percent but less than 50 percent..............$5,000 ....

At least 50 percent but less than 60 percent..............$5,500 ....

At least 60 percent.......................................$6,000.....

``(III) If such vehicle has a gross vehicle weight rating
of more than 26,000 pounds:

``If percentage of the maximum available power is:The credit amount is:
At least 20 percent but less than 30 percent..............$6,000 ....

At least 30 percent but less than 40 percent..............$7,000 ....

At least 40 percent but less than 50 percent..............$8,000 ....

At least 50 percent but less than 60 percent..............$9,000 ....

At least 60 percent......................................$10,000.....

``(B) Increase for fuel efficiency.--
``(i) Amount.--The amount determined under subparagraph
(A)(i) with respect to a new qualified hybrid motor vehicle
which is a passenger automobile or light truck shall be
increased by--

``(I) $500, if such vehicle achieves at least 125 percent
but less than 150 percent of the 2002 model year city fuel
economy,
``(II) $1,000, if such vehicle achieves at least 150
percent but less than 175 percent of the 2002 model year city
fuel economy,
``(III) $1,500, if such vehicle achieves at least 175
percent but less than 200 percent of the 2002 model year city
fuel economy,
``(IV) $2,000, if such vehicle achieves at least 200
percent but less than 225 percent of the 2002 model year city
fuel economy,
``(V) $2,500, if such vehicle achieves at least 225 percent
but less than 250 percent of the 2002 model year city fuel
economy, and
``(VI) $3,000, if such vehicle achieves at least 250
percent of the 2002 model year city fuel economy.

``(ii) 2002 model year city fuel economy.--For purposes of
clause (i), the 2002 model year city fuel economy with
respect to a vehicle shall be determined on a gasoline gallon
equivalent basis as determined by the

[[Page S10303]]

Administrator of the Environmental Protection Agency using
the tables provided in subsection (b)(2)(B) with respect to
such vehicle.
``(C) Increase for accelerated emissions performance.--The
amount determined under subparagraph (A)(ii) with respect to
an applicable heavy duty hybrid motor vehicle shall be
increased by the increased credit amount determined in
accordance with the following tables:
``(i) In the case of a vehicle which has a gross vehicle
weight rating of not more than 14,000 pounds:

``If the model year is:                 The increased credit amount is:
2003......................................................$3,000 ....

2004......................................................$2,500 ....

2005......................................................$2,000 ....

2006......................................................$1,500.....

``(ii) In the case of a vehicle which has a gross vehicle
weight rating of more than 14,000 pounds but not more than
26,000 pounds:

``If the model year is:               46The increased credit amount is:
2003......................................................$7,750 ....

2004......................................................$6,500 ....

2005......................................................$5,250 ....

2006......................................................$4,000.....

``(iii) In the case of a vehicle which has a gross vehicle
weight rating of more than 26,000 pounds:

``If the model year is:                 The increased credit amount is:
2003.....................................................$12,000 ....

2004.....................................................$10,000 ....

2005......................................................$8,000 ....

2006......................................................$6,000.....

``(D) Definitions relating to credit amount.--
``(i) Applicable heavy duty hybrid motor vehicle.--For
purposes of subparagraph (C), the term `applicable heavy duty
hybrid motor vehicle' means a heavy duty hybrid motor vehicle
which is powered by an internal combustion or heat engine
which is certified as meeting the emission standards set in
the regulations prescribed by the Administrator of the
Environmental Protection Agency for 2007 and later model year
diesel heavy duty engines, or for 2008 and later model year
ottocycle heavy duty engines, as applicable.
``(ii) Maximum available power.--

``(I) Passenger automobile, medium duty passenger vehicle,
or light truck.--For purposes of subparagraph (A)(i), 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) Heavy duty hybrid motor vehicle.--For purposes of
subparagraph (A)(ii), 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. 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.

``(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 passenger automobile, medium
duty passenger vehicle, or light truck--

``(I) for 2002 and later model vehicles, 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
``(II) for 2004 and later model vehicles, has received a
certificate that such vehicle meets or exceeds the Bin 5 Tier
II emission level 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,

``(iii) which, in the case of a heavy duty hybrid motor
vehicle, 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,
``(iv) the original use of which commences with the
taxpayer,
``(v) which is acquired for use or lease by the taxpayer
and not for resale, and
``(vi) which is made by a manufacturer.
``(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.
``(4) Heavy duty hybrid motor vehicle.--For purposes of
this subsection, the term `heavy duty hybrid motor vehicle'
means a new qualified hybrid motor vehicle which has a gross
vehicle weight rating of more than 8,500 pounds. Such term
does not include a medium duty passenger vehicle.
``(d) 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 weighs
more than 14,000 pounds gross vehicle weight rating, the most
stringent standard available shall be such standard available
for certification on the date of the enactment of the Energy
Tax Incentives 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

[[Page S10304]]

alternative fuel and not more than 10 percent petroleum-based
fuel.
``(e) Application With Other Credits.--The credit allowed
under subsection (a) for any taxable year shall not exceed
the excess (if any) of--
``(1) the regular tax for the taxable year reduced by the
sum of the credits allowable under subpart A and sections 27,
29, and 30, over
``(2) the tentative minimum tax for the taxable year.
``(f) 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) City fuel economy.--The city fuel economy with
respect to any vehicle shall be measured in a manner which is
substantially similar to the manner city fuel economy is
measured in accordance with procedures under part 600 of
subchapter Q of chapter I of title 40, Code of Federal
Regulations, as in effect on the date of the enactment of
this section.
``(3) Other terms.--The terms `automobile', `passenger
automobile', `medium duty passenger vehicle', `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.).
``(4)  Reduction in basis.--For purposes of this subtitle,
the basis of any property for which a credit is allowable
under subsection (a) shall be reduced by the amount of such
credit so allowed (determined without regard to subsection
(e)).
``(5) No double benefit.--The amount of any deduction or
other credit allowable under this chapter--
``(A) for any incremental cost taken into account in
computing the amount of the credit determined under
subsection (d) shall be reduced by the amount of such credit
attributable to such cost, and
``(B) with respect to a vehicle described under subsection
(b) or (c), shall be reduced by the amount of credit allowed
under subsection (a) for such vehicle for the taxable year.
``(6) Property used by tax-exempt entities.--In the case of
a credit amount which is allowable with respect to a motor
vehicle which is acquired by an entity exempt from tax under
this chapter, the person which sells or leases such vehicle
to the entity shall be treated as the taxpayer with respect
to the vehicle for purposes of this section and the credit
shall be allowed to such person, but only if the person
clearly discloses to the entity at the time of any sale or
lease the specific amount of any credit otherwise allowable
to the entity under this section.
``(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 to not 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) Carryback and carryforward allowed.--
``(A) In general.--If the credit allowable under subsection
(a) for a taxable year exceeds the amount of the limitation
under subsection (e) for such taxable year (in this paragraph
referred to as the `unused credit year'), such excess shall
be a credit carryback to each of the 3 taxable years
preceding the unused credit year and a credit carryforward to
each of the 20 taxable years following the unused credit
year, except that no excess may be carried to a taxable year
beginning before the date of the enactment of this paragraph.
``(B) Rules.--Rules similar to the rules of section 39
shall apply with respect to the credit carryback and credit
carryforward under subparagraph (A).
``(11) Interaction with air quality and 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--
``(A) the applicable provisions of the Clean Air Act for
the applicable make and model year of the vehicle (or
applicable air quality provisions of State law in the case of
a State which has adopted such provision under a waiver under
section 209(b) of the Clean Air Act), and
``(B) the motor vehicle safety provisions of sections 30101
through 30169 of title 49, United States Code.
``(g) Regulations.--
``(1) In general.--Except as provided in paragraph (2), the
Secretary shall promulgate such regulations as necessary to
carry out the provisions of this section.
``(2) Coordination in prescription of certain
regulations.--The Secretary of the Treasury, in 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.
``(h) Termination.--This section shall not apply to any
property purchased after--
``(1) in the case of a new qualified fuel cell motor
vehicle (as described in subsection (b)), December 31, 2011,
and
``(2) in the case of any other property, December 31,
2006.''.
(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 30B(f)(4).''.
(2) Section 55(c)(2) is amended by inserting ``30B(e),''
after ``30(b)(3),''.
(3) Section 6501(m) is amended by inserting ``30B(f)(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 new item:

``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.

SEC. 202. MODIFICATION OF CREDIT FOR QUALIFIED ELECTRIC
VEHICLES.

(a) Amount of Credit.--
(1) In general.--Section 30(a) (relating to allowance of
credit) is amended by striking ``10 percent of''.
(2) Limitation of credit according to type of vehicle.--
Section 30(b) (relating to limitations) is amended--
(A) by striking paragraphs (1) and (2) and inserting the
following new paragraph:
``(1) Limitation according to type of vehicle.--The amount
of the credit allowed under subsection (a) for any vehicle
shall not exceed the greatest of the following amounts
applicable to such vehicle:
``(A) In the case of a vehicle with a gross vehicle weight
rating not exceeding 8,500 pounds--
``(i) except as provided in clause (ii) or (iii), $3,500,
``(ii) $6,000, if such vehicle is--

``(I) capable of a driving range of at least 100 miles on a
single charge of the vehicle's rechargeable batteries as
measured pursuant to the urban dynamometer schedules under
appendix I to part 86 of title 40, Code of Federal
Regulations, or
``(II) capable of a payload capacity of at least 1,000
pounds, and

``(iii) if such vehicle is a low-speed vehicle which
conforms to Standard 500 prescribed by the Secretary of
Transportation (49 C.F.R. 571.500), as in effect on the date
of the enactment of the Energy Tax Incentives Act of 2003,
the lesser of--

``(I) 10 percent of the manufacturer's suggested retail
price of the vehicle, or
``(II) $1,500.

``(B) In the case of a vehicle with a gross vehicle weight
rating exceeding 8,500 but not exceeding 14,000 pounds,
$10,000.
``(C) In the case of a vehicle with a gross vehicle weight
rating exceeding 14,000 but not exceeding 26,000 pounds,
$20,000.
``(D) In the case of a vehicle with a gross vehicle weight
rating exceeding 26,000 pounds, $40,000.'', and
(B) by redesignating paragraph (3) as paragraph (2).
(3) Conforming amendments.--
(A) Section 53(d)(1)(B)(iii) is amended by striking
``section 30(b)(3)(B)'' and inserting ``section
30(b)(2)(B)''.
(B) Section 55(c)(2), as amended by this Act, is amended by
striking ``30(b)(3)'' and inserting ``30(b)(2)''.
(b) Qualified Battery Electric Vehicle.--
(1) In general.--Section 30(c)(1)(A) (defining qualified
electric vehicle) is amended to read as follows:
``(A) which is--
``(i) operated solely by use of a battery or battery pack,
or
``(ii) powered primarily through the use of an electric
battery or battery pack using a flywheel or capacitor which
stores energy produced by an electric motor through
regenerative braking to assist in vehicle operation,''.
(2) Leased vehicles.--Section 30(c)(1)(C) is amended by
inserting ``or lease'' after ``use''.
(3) Conforming amendments.--
(A) Subsections (a), (b)(2), and (c) of section 30 are each
amended by inserting ``battery'' after ``qualified'' each
place it appears.
(B) The heading of subsection (c) of section 30 is amended
by inserting ``Battery'' after ``Qualified''.
(C) The heading of section 30 is amended by inserting
``battery'' after ``qualified''.
(D) The item relating to section 30 in the table of
sections for subpart B of part IV of subchapter A of chapter
1 is amended by inserting ``battery'' after ``qualified''.
(E) Section 179A(c)(3) is amended by inserting ``battery''
before ``electric''.
(F) The heading of paragraph (3) of section 179A(c) is
amended by inserting ``battery'' before ``electric''.
(c) Additional Special Rules.--Section 30(d) (relating to
special rules) is amended by adding at the end the following
new paragraphs:
``(5) No double benefit.--The amount of any deduction or
other credit allowable

[[Page S10305]]

under this chapter for any cost taken into account in
computing the amount of the credit determined under
subsection (a) shall be reduced by the amount of such credit
attributable to such cost.
``(6) Property used by tax-exempt entities.--In the case of
a credit amount which is allowable with respect to a vehicle
which is acquired by an entity exempt from tax under this
chapter, the person which sells or leases such vehicle to the
entity shall be treated as the taxpayer with respect to the
vehicle for purposes of this section and the credit shall be
allowed to such person, but only if the person clearly
discloses to the entity at the time of any sale or lease the
specific amount of any credit otherwise allowable to the
entity under this section.
``(7) Carryback and carryforward allowed.--
``(A) In general.--If the credit allowable under subsection
(a) for a taxable year exceeds the amount of the limitation
under subsection (b)(2) for such taxable year (in this
paragraph referred to as the `unused credit year'), such
excess shall be a credit carryback to each of the 3 taxable
years preceding the unused credit year and a credit
carryforward to each of the 20 taxable years following the
unused credit year, except that no excess may be carried to a
taxable year beginning before the date of the enactment of
this paragraph.
``(B) Rules.--Rules similar to the rules of section 39
shall apply with respect to the credit carryback and credit
carryforward under subparagraph (A).''.
(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. 203. CREDIT FOR INSTALLATION OF ALTERNATIVE FUELING
STATIONS.

(a) In General.--Subpart B of part IV of subchapter A of
chapter 1 (relating to foreign tax credit, etc.), as amended
by this Act, is amended by adding at the end the following
new section:

``SEC. 30C. CLEAN-FUEL VEHICLE REFUELING PROPERTY CREDIT.

``(a) Credit Allowed.--There shall be allowed as a credit
against the tax imposed by this chapter for the taxable year
an amount equal to 50 percent of the amount paid or incurred
by the taxpayer during the taxable year for the installation
of qualified clean-fuel vehicle refueling property.
``(b) Limitation.--The credit allowed under subsection
(a)--
``(1) with respect to any retail clean-fuel vehicle
refueling property, shall not exceed $30,000, and
``(2) with respect to any residential clean-fuel vehicle
refueling property, shall not exceed $1,000.
``(c) Year Credit Allowed.--Notwithstanding subsection (a),
no credit shall be allowed under subsection (a) with respect
to any qualified clean-fuel vehicle refueling property before
the taxable year in which the property is placed in service
by the taxpayer.
``(d) Definitions.--For purposes of this section--
``(1) Qualified clean-fuel vehicle refueling property.--The
term `qualified clean-fuel vehicle refueling property' has
the same meaning given such term by section 179A(d).
``(2) Residential clean-fuel vehicle refueling property.--
The term `residential clean-fuel vehicle refueling property'
means qualified clean-fuel vehicle refueling property which
is installed on property which is used as the principal
residence (within the meaning of section 121) of the
taxpayer.
``(3) Retail clean-fuel vehicle refueling property.--The
term `retail clean-fuel vehicle refueling property' means
qualified clean-fuel vehicle refueling property which is
installed on property (other than property described in
paragraph (2)) used in a trade or business of the taxpayer.
``(e) Application With Other Credits.--The credit allowed
under subsection (a) for any taxable year shall not exceed
the excess (if any) of--
``(1) the regular tax for the taxable year reduced by the
sum of the credits allowable under subpart A and sections 27,
29, 30, and 30B, over
``(2) the tentative minimum tax for the taxable year.
``(f) Basis Reduction.--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).
``(g) No Double Benefit.--
``(1) Coordination with other deductions and credits.--
Except as provided in paragraph (2), the amount of any
deduction or other credit allowable under this chapter for
any cost taken into account in computing the amount of the
credit determined under subsection (a) shall be reduced by
the amount of such credit attributable to such cost.
``(2) No deduction allowed under section 179a.--No
deduction shall be allowed under section 179A with respect to
any property with respect to which a credit is allowed under
subsection (a).
``(h) Refueling Property Installed for Tax-Exempt
Entities.--In the case of qualified clean-fuel vehicle
refueling property installed on property owned or used by an
entity exempt from tax under this chapter, the person which
installs such refueling property for the entity shall be
treated as the taxpayer with respect to the refueling
property for purposes of this section (and such refueling
property shall be treated as retail clean-fuel vehicle
refueling property) and the credit shall be allowed to such
person, but only if the person clearly discloses to the
entity in any installation contract the specific amount of
the credit allowable under this section.
``(i) Carryforward Allowed.--
``(1) In general.--If the credit allowable under subsection
(a) for a taxable year exceeds the amount of the limitation
under subsection (e) for such taxable year, such excess shall
be a credit carryforward to each of the 20 taxable years
following such taxable year.
``(2) Rules.--Rules similar to the rules of section 39
shall apply with respect to the credit carryforward under
paragraph (1).
``(j) Special Rules.--Rules similar to the rules of
paragraphs (4) and (5) of section 179A(e) shall apply.
``(k) Regulations.--The Secretary shall prescribe such
regulations as necessary to carry out the provisions of this
section.
``(l) 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,
2007.''.
(b) Modifications to Extension of Deduction for Certain
Refueling Property.--
(1) 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,
2007.''.
(2) Extension of phaseout.--Section 179A(b)(1)(B) is
amended--
(A) by striking ``calendar year 2004'' in clause (i) and
inserting ``calendar years 2004 and 2005 (calendar years 2004
through 2009 in the case of property relating to hydrogen)
'',
(B) by striking ``2005'' in clause (ii) and inserting
``2006 (calendar year 2010 in the case of property relating
to hydrogen)'', and
(C) by striking ``2006'' in clause (iii) and inserting
``2007 (calendar year 2011 in the case of property relating
to hydrogen)''.
(c) 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.''.
(d) Conforming Amendments.--
(1) Section 1016(a), 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 30C(f).''.
(2) Section 55(c)(2), as amended by this Act, is amended by
inserting ``30C(e),'' after ``30B(e),''.
(3) The table of sections for subpart B of part IV of
subchapter A of chapter 1, as amended by this Act, is amended
by inserting after the item relating to section 30B the
following new item:

``Sec. 30C. Clean-fuel vehicle refueling property credit.''.

(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. 204. CREDIT FOR RETAIL SALE OF ALTERNATIVE FUELS AS
MOTOR VEHICLE FUEL.

(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. CREDIT FOR RETAIL SALE OF ALTERNATIVE FUELS AS
MOTOR VEHICLE FUEL.

``(a) General Rule.--For purposes of section 38, the
alternative fuel retail sales credit for any taxable year is
the applicable amount for each gasoline gallon equivalent of
alternative fuel sold at retail by the taxpayer during such
year as a fuel to propel any qualified motor vehicle.
``(b) Definitions.--For purposes of this section--
``(1) Applicable amount.--The term `applicable amount'
means the amount determined in accordance with the following
table:

``In the case of any taxable year ending in--The applicable amount is--
2003...........................................................30 cents
2004...........................................................40 cents
2005 and 2006..................................................50 cents

``(2) Alternative fuel.--The term `alternative fuel' means
compressed natural gas, liquefied natural gas, liquefied
petroleum gas, hydrogen, or any liquid at least 85 percent of
the volume of which consists of methanol or ethanol.
``(3) Gasoline gallon equivalent.--The term `gasoline
gallon equivalent' means, with respect to any alternative
fuel, the amount (determined by the Secretary) of such fuel
having a Btu content of 114,000.
``(4) Qualified motor vehicle.--The term `qualified motor
vehicle' means any motor

[[Page S10306]]

vehicle (as defined in section 30(c)(2)) which meets any
applicable Federal or State emissions standards with respect
to each fuel by which such vehicle is designed to be
propelled.
``(5) Sold at retail.--
``(A) In general.--The term `sold at retail' means the
sale, for a purpose other than resale, after manufacture,
production, or importation.
``(B) Use treated as sale.--If any person uses alternative
fuel (including any use after importation) as a fuel to
propel any new qualified alternative fuel motor vehicle (as
defined in section 30B(d)(4)) before such fuel is sold at
retail, then such use shall be treated in the same manner as
if such fuel were sold at retail as a fuel to propel such a
vehicle by such person.
``(c) No Double Benefit.--The amount of any deduction or
other credit allowable under this chapter for any fuel taken
into account in computing the amount of the credit determined
under subsection (a) shall be reduced by the amount of such
credit attributable to such fuel.
``(d) 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
fuel sold at retail after December 31, 2006.''.
(b) Credit Treated as 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 alternative fuel retail sales credit determined
under section 40A(a).''.
(c) Transitional Rule.--Section 39(d) (relating to
transitional rules) is amended by adding at the end the
following new paragraph:
``(11) No carryback of section 40a credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the alternative fuel
retail sales credit determined under section 40A(a) may be
carried back to a taxable year ending on or before the date
of the enactment of such section.''.
(d) Clerical Amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 is amended by
inserting after the item relating to section 40 the following
new item:

``Sec. 40A. Credit for retail sale of alternative fuels as motor
vehicle fuel.''.

(e) Effective Date.--The amendments made by this section
shall apply to fuel sold at retail after the date of the
enactment of this Act, in taxable years ending after such
date.

SEC. 205. 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 rules for decrease in credits for taxable
year.--If the amount of the credit of a cooperative
organization determined under subsection (a)(3) for a taxable
year is less than the amount of such credit shown on the
return of the cooperative organization for such year, an
amount equal to the excess of--
``(i) such reduction, over
``(ii) the amount not apportioned to such patrons under
subparagraph (A) for the taxable year,

shall be treated as an increase in tax imposed by this
chapter on the organization. Such increase 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) Improvements to Small Ethanol Producer Credit.--
(1) 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''.
(2) Small ethanol producer credit not a passive activity
credit.--Clause (i) of section 469(d)(2)(A) is amended by
striking ``subpart D'' and inserting ``subpart D, other than
section 40(a)(3),''.
(3) Allowing credit against entire regular tax 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 small ethanol producer credit.--
``(A) In general.--In the case of the small ethanol
producer credit--
``(i) this section and section 39 shall be applied
separately with respect to the credit, and
``(ii) in applying paragraph (1) to the credit--

``(I) the amounts in subparagraphs (A) and (B) thereof
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 small
ethanol producer credit).

``(B) Small ethanol producer credit.--For purposes of this
subsection, the term `small ethanol producer credit' means
the credit allowable under subsection (a) by reason of
section 40(a)(3).''.
(B) Conforming amendments.--Subclause (II) of section
38(c)(2)(A)(ii) and subclause (II) of section 38(c)(3)(A)(ii)
are each amended by inserting ``or the small ethanol producer
credit'' after ``employee credit''.
(4) Small ethanol producer credit not added back to income
under section 87.--Section 87 (relating to income inclusion
of alcohol fuel credit) is amended to read as follows:

``SEC. 87. ALCOHOL FUEL CREDIT.

``Gross income includes an amount equal to the sum of--
``(1) the amount of the alcohol mixture credit determined
with respect to the taxpayer for the taxable year under
section 40(a)(1), and
``(2) the alcohol credit determined with respect to the
taxpayer for the taxable year under section 40(a)(2).''.
(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 the date of the
enactment of this Act.

SEC. 206. INCREASED FLEXIBILITY IN ALCOHOL FUELS TAX CREDIT.

(a) Alcohol Fuels Credit May Be Transferred.--Section 40
(relating to alcohol used as fuel) is amended by adding at
the end the following new subsection:
``(i) Credit May Be Transferred.--
``(1) In general.--A taxpayer may transfer any credit
allowable under paragraph (1) or (2) of subsection (a) with
respect to alcohol used in the production of ethyl tertiary
butyl ether through an assignment to a qualified assignee.
Such transfer may be revoked only with the consent of the
Secretary.
``(2) Qualified assignee.--For purposes of this subsection,
the term `qualified assignee' means any person who--
``(A) is liable for taxes imposed under section 4081,
``(B) is registered under section 4101, and
``(C) obtains a certificate from the taxpayer described in
paragraph (1) which identifies the amount of alcohol used in
such production.
``(3) Regulations.--The Secretary shall prescribe such
regulations as necessary to insure that any credit described
in paragraph (1) is claimed once and not reassigned by a
qualified assignee.''.
(b) Effective Date.--The amendment made by this section
shall apply on and after the date of the enactment of this
Act.

SEC. 207. INCENTIVES FOR BIODIESEL.

(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 inserting after section 40A the
following new section:

``SEC. 40B. 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 biodiesel mixture
credit.
``(b) Definition of Biodiesel Mixture 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 the sum of the products of
the biodiesel mixture rate for each qualified biodiesel
mixture and the number of gallons of such mixture of the
taxpayer for the taxable year.
``(B) Biodiesel mixture rate.--For purposes of subparagraph
(A), the biodiesel mixture rate for each qualified biodiesel
mixture shall be--
``(i) in the case of a mixture with only agri-biodiesel, 1
cent for each whole percentage point (not exceeding 20
percentage points) of agri-biodiesel in such mixture, and
``(ii) in the case of a mixture with recycled biodiesel, or
a combination of agri-biodiesel and recycled biodiesel, 0.5
cent for each whole percentage point (not exceeding 20
percentage points) of such biodiesel in such mixture.

[[Page S10307]]

``(2) Qualified biodiesel mixture.--
``(A) In general.--The term `qualified biodiesel mixture'
means a mixture of diesel fuel and biodiesel which--
``(i) is sold by the taxpayer producing such mixture to any
person for use as a fuel in a diesel-powered engine, or
``(ii) is used as a fuel in a diesel-powered engine by the
taxpayer producing such mixture.
``(B) Sale or use must be in trade or business, etc.--
``(i) In general.--The production of a qualified biodiesel
mixture shall be taken into account--

``(I) only if the sale or use described in subparagraph (A)
is in a trade or business of the taxpayer, and
``(II) for the taxable year in which such sale or use
occurs.

``(ii) Certification for agri-biodiesel.--Agri-biodiesel
used in the production of a qualified biodiesel mixture shall
be taken into account only if the taxpayer described in
subparagraph (A) obtains a certification from the producer of
the agri-biodiesel which identifies the product produced.
``(C) 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.
``(c) Coordination With Credit Against Excise Tax.--The
amount of the credit determined under this section with
respect to any agri-biodiesel shall, under regulations
prescribed by the Secretary, be properly reduced to take into
account any benefit provided with respect to such agri-
biodiesel solely by reason of the application of section 6426
or 6427(e).
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Biodiesel.--The term `biodiesel' means the monoalkyl
esters of long chain fatty acids for use in diesel-powered
engines 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. Such term shall
include esters derived from vegetable oils from corn,
soybeans, sunflower seeds, cottonseeds, canola, crambe,
rapeseeds, safflowers, flaxseeds, rice bran, and mustard
seeds, and from animal fats.
``(3) Recycled biodiesel.--The term `recycled biodiesel'
means biodiesel derived from nonvirgin vegetable oils or
nonvirgin animal fats.
``(4) Biodiesel mixture not used as a fuel, etc.--
``(A) Imposition of tax.--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 such 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 biodiesel mixture rate applicable under
subsection (b)(1)(B) and the number of gallons of the
mixture.
``(B) 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) as if such tax were imposed by section 4081
and not by this chapter.
``(5) 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
fuel sold after December 31, 2005.''.
(b) Credit Treated as 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 biodiesel fuels credit determined under section
40B(a).''.
(c) Conforming Amendments.--
(1) Section 39(d), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(12) No carryback of biodiesel fuels credit before
effective date.--No portion of the unused business credit for
any taxable year which is attributable to the biodiesel fuels
credit determined under section 40B may be carried back to a
taxable year ending on or before the date of the enactment of
section 40B.''.
(2) Section 196(c) is amended by striking ``and'' at the
end of paragraph (9), by striking the period at the end of
paragraph (10) and inserting ``, and'', and by adding at the
end the following new paragraph:
``(11) the biodiesel fuels credit determined under section
40B(a).''.
(3) 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 after the item relating to section 40A the
following new item:

``Sec. 40B. Biodiesel used as fuel.''.

(d) Effective Date.--The amendments made by this section
shall apply to fuel sold after the date of the enactment of
this Act, in taxable years ending after such date.

SEC. 208. 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 applicable amount for each
gallon of alcohol used by the taxpayer in producing an
alcohol fuel mixture.
``(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' is a mixture
which--
``(A) consists of alcohol and a taxable fuel, and
``(B) is sold for use or used as a fuel by the taxpayer
producing the 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 or use 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 of agri-biodiesel used by
the taxpayer in producing any qualified biodiesel mixture
containing only agri-biodiesel, except that the number of
gallons of agri-biodiesel taken into account in determining
the credit shall not exceed 1 gallon for each 5 gallons of
qualified biodiesel mixture produced.
``(2) Applicable amount.--For purposes of this subsection,
the applicable amount is $1.00.
``(3) Definitions.--Any term used in this subsection which
is also used in section 40B shall have the meaning given such
term by section 40B.
``(4) Termination.--This subsection shall not apply to any
sale or use 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 agri-biodiesel used in the production
of any alcohol fuel mixture or qualified biodiesel mixture,
respectively, and
``(B) any person--
``(i) separates such alcohol or agri-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 agri-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.''.
(b) Conforming Amendments.--
(1) Section 40(c) is amended by striking ``section 4081(c),
or section 4091(c)'' and inserting ``section 4091(c), section
6426, section 6427(e), or section 6427(f)''.
(2) Section 40(d)(4)(B) is amended by striking ``or
4081(c)''.
(3) 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''.
(4) 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''.
(5) Section 4041(b)(2)(B) is amended by striking ``a
substance other than petroleum or natural gas'' and inserting
``coal (including peat)''.
(6) Paragraph (1) of section 4041(k) is amended to read as
follows:
``(1) In general.--Under regulations prescribed by the
Secretary, in the case of the

[[Page S10308]]

sale or use of any liquid at least 10 percent of which
consists of alcohol (as defined in section 6426(b)(4)(A)),
the rate of the tax imposed by subsection (c)(1) shall be the
comparable rate under section 4091(c).''.
(7) Section 4081 is amended by striking subsection (c).
(8) Paragraph (2) of section 4083(a) is amended to read as
follows:
``(2) Gasoline.--The term `gasoline'--
``(A) includes any gasoline blend, other than qualified
methanol or ethanol fuel (as defined in section
4041(b)(2)(B)) or a denaturant of alcohol (as defined in
section 6426(b)(4)(A)), and
``(B) includes, to the extent prescribed in regulations--
``(i) any gasoline blend stock, and
``(ii) any product commonly used as an additive in
gasoline.

For purposes of subparagraph (B)(i), the term `gasoline blend
stock' means any petroleum product component of gasoline.''.
(9) Section 6427 is amended by inserting after subsection
(d) the following new subsection:
``(e) Gasoline, Diesel Fuel, and Kerosene Used to Produce
Certain Alcohol Fuel and Biodiesel Mixtures.--
``(1) In general.--Except as provided in subsection (k), if
any gasoline, diesel fuel, or kerosene on which tax was
imposed by section 4081 is used by any person in producing a
mixture described in section 6426 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
alcohol fuel mixture credit or the biodiesel mixture credit
with respect to such gasoline, diesel fuel, or kerosene.
``(2) Coordination with other repayment provisions.--No
amount shall be payable under paragraph (1) with respect to
any gasoline, diesel fuel, or kerosene with respect to which
an amount is payable under subsection (b), (d), or (l) or
under section 6416(b)(2), 6420, 6421, or 6426.
``(3) Termination.--This subsection shall not apply with
respect to--
``(A) any alcohol fuel mixture (as defined in section
6426(b)(3)) sold or used after December 31, 2010, and
``(B) any qualified biodiesel mixture (within the meaning
of section 6426(c)(1)) sold or used after December 31,
2005.''.
(10) Subsection (f) of section 6427 is amended to read as
follows:
``(f) Aviation Fuel Used to Produce Certain Alcohol
Fuels.--
``(1) In general.--Except as provided in subsection (k), if
any aviation fuel on which tax was imposed by section 4091 at
the regular tax rate is used by any person in producing a
mixture described in section 4091(c)(1)(A) 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 4091 determined
without regard to subsection (c) thereof.
``(B) Incentive tax rate.--The term `incentive tax rate'
means the aggregate rate of tax imposed by section 4091 with
respect to fuel described in subsection (c)(2) thereof.
``(3) Coordination with other repayment provisions.--No
amount shall be payable under paragraph (1) with respect to
any aviation fuel with respect to which an amount is payable
under subsection (d) or (l).
``(4) Termination.--This subsection shall not apply with
respect to any mixture sold or used after September 30,
2007.''.
(11) Paragraphs (1) and (2) of section 6427(i) are amended
by inserting ``(f),'' after ``(d),''.
(12) Section 6427(i)(3) is amended--
(A) by striking ``subsection (f)'' both places it appears
in subparagraph (A) and inserting ``subsection (e)'',
(B) by striking ``gasoline, diesel fuel, or kerosene used
to produce a qualified alcohol mixture (as defined in section
4081(c)(3))'' in subparagraph (A) and inserting ``a mixture
described in section 6426'',
(C) by striking ``subsection (f)(1)'' in subparagraph (B)
and inserting ``subsection (e)(1)'',
(D) 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)'', and
(E) by striking ``alcohol mixture'' in the heading and
inserting ``alcohol fuel and biodiesel mixture''.
(13) Section 6427(o) is amended--
(A) by striking paragraph (1) and inserting the following
new paragraph:
``(1) any tax is imposed by section 4081, and'',
(B) by striking ``such gasohol'' in paragraph (2) and
inserting ``the alcohol fuel mixture (as defined in section
6426(b)(3))'',
(C) by striking ``gasohol'' both places it appears in the
matter following paragraph (2) and inserting ``alcohol fuel
mixture'', and
(D) by striking ``Gasohol'' in the heading and inserting
``Alcohol Fuel Mixture''.
(14) 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.''.
(15) Section 9503(b)(4) is amended--
(A) by adding ``or'' at the end of subparagraph (C),
(B) by striking the comma at the end of subparagraph
(D)(iii) and inserting a period, and
(C) by striking subparagraphs (E) and (F).
(16) Section 9503(c)(2)(A)(i)(III) is amended by inserting
``(other than subsection (e) thereof)'' after ``section
6427''.
(17) Section 9503(e)(2) is amended by striking subparagraph
(B) and by redesignating subparagraphs (C), (D), and (E) as
subparagraphs (B), (C), and (D), respectively.
(18) 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.''.

(c) Effective Date.--The amendments made by this section
shall apply to fuel sold or used after September 30, 2003.
(d) Format for Filing.--The Secretary of the Treasury shall
describe the electronic format for filing claims described in
section 6427(i)(3)(B) of the Internal Revenue Code of 1986
(as amended by subsection (b)(12)(D)) not later than
September 30, 2003.

SEC. 209. SALE OF GASOLINE AND DIESEL FUEL AT DUTY-FREE SALES
ENTERPRISES.

(a) Prohibition.--Section 555(b) of the Tariff Act of 1930
(19 U.S.C. 1555(b)) is amended--
(1) by redesignating paragraphs (6) through (8) as
paragraphs (7) through (9), respectively; and
(2) by inserting after paragraph (5) the following:
``(6) Any gasoline or diesel fuel sold at a duty-free sales
enterprise shall be considered to be entered for consumption
into the customs territory of the United States.''.
(b) Construction.--The amendments made by this section
shall not be construed to create any inference with respect
to the interpretation of any provision of law as such
provision was in effect on the day before the date of
enactment of this Act.
(c) Effective date.--The amendments made by this section
shall take effect on the date of enactment of this Act.

TITLE III--CONSERVATION AND ENERGY EFFICIENCY PROVISIONS

SEC. 301. CREDIT FOR CONSTRUCTION OF NEW ENERGY EFFICIENT
HOME.

(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. 45G. NEW ENERGY EFFICIENT HOME CREDIT.

``(a) In General.--For purposes of section 38, in the case
of an eligible contractor, the credit determined under this
section for the taxable year is an amount equal to the
aggregate adjusted bases of all energy efficient property
installed in a qualifying new home during construction of
such home.
``(b) Limitations.--
``(1) Maximum credit.--
``(A) In general.--The credit allowed by this section with
respect to a qualifying new home shall not exceed--
``(i) in the case of a 30-percent home, $1,000, and
``(ii) in the case of a 50-percent home, $2,000.
``(B) 30- or 50-percent home.--For purposes of subparagraph
(A)--
``(i) 30-percent home.--The term `30-percent home' means--

``(I) a qualifying new home which is certified to have a
projected level of annual heating and cooling energy
consumption, measured in terms of average annual energy cost
to the homeowner, which is at least 30 percent less than the
annual level of heating and cooling energy consumption of a
qualifying new home constructed in accordance with the
standards of chapter 4 of the 2000 International Energy
Conservation Code, or
``(II) in the case of a qualifying new home which is a
manufactured home, a home which meets the applicable
standards required by the Administrator of the Environmental
Protection Agency under the Energy Star Labeled Homes
program.

``(ii) 50-percent home.--The term `50-percent home' means a
qualifying new home which would be described in clause (i)(I)
if 50 percent were substituted for 30 percent.
``(C) Prior credit amounts on same home taken into
account.--The amount of the credit otherwise allowable for
the taxable year with respect to a qualifying new home under
clause (i) or (ii) of subparagraph (A) shall be reduced by
the sum of the credits allowed under subsection (a) to any
taxpayer with respect to the home for all preceding 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 the rehabilitation credit
(as determined under section 47(a)) or to the energy credit
(as determined under section 48(a)), and
``(B) expenditures taken into account under section 25D,
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 qualifying new home,
or
``(B) in the case of a qualifying new home which is a
manufactured home, the manufactured home producer of such
home.

[[Page S10309]]

If more than 1 person is described in subparagraph (A) or (B)
with respect to any qualifying new 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 which can, individually or in combination
with other components, meet the requirements of this section.
``(3) Qualifying new home.--
``(A) In general.--The term `qualifying new home' means a
dwelling--
``(i) located in the United States,
``(ii) the construction of which is substantially completed
after the date of the enactment of this section, and
``(iii) the first use of which after construction is as a
principal residence (within the meaning of section 121).
``(B) Manufactured home included.--The term `qualifying new
home' includes a manufactured home conforming to Federal
Manufactured Home Construction and Safety Standards (24
C.F.R. 3280).
``(4) Construction.--The term `construction' includes
reconstruction and rehabilitation.
``(5) 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 qualifying new home when installed in or on such
home,
``(B) exterior windows (including skylights), and
``(C) exterior doors.
``(d) Certification.--
``(1) Method of certification.--
``(A) In general.--A certification described in subsection
(b)(1)(B) shall be determined either by a component-based
method or a performance-based method, or, in the case of a
qualifying new home which is a manufactured home, by a method
prescribed by the Administrator of the Environmental
Protection Agency under the Energy Star Labeled Homes
program.
``(B) Component-based method.--A component-based method is
a method which uses the applicable technical energy
efficiency specifications or ratings (including product
labeling requirements) for the energy efficient building
envelope component or energy efficient heating or cooling
equipment. The Secretary shall, in consultation with the
Administrator of the Environmental Protection Agency, develop
prescriptive component-based packages which are equivalent in
energy performance to properties which qualify under
subparagraph (C).
``(C) Performance-based method.--
``(i) In general.--A performance-based method is a method
which calculates projected energy usage and cost reductions
in the qualifying new home in relation to a new home--

``(I) heated by the same fuel type, and
``(II) constructed in accordance with the standards of
chapter 4 of the 2000 International Energy Conservation Code.

``(ii) Computer software.--Computer software shall be used
in support of a performance-based method certification under
clause (i). Such software shall meet procedures and methods
for calculating energy and cost savings in regulations
promulgated by the Secretary of Energy. Such regulations on
the specifications for software and verification protocols
shall be based on the 2001 California Residential Alternative
Calculation Method Approval Manual.
``(2) Provider.--A certification described in subsection
(b)(1)(B) shall be provided by--
``(A) in the case of a component-based method, a local
building regulatory authority, a utility, or a home energy
rating organization,
``(B) in the case of a performance-based method, an
individual recognized by an organization designated by the
Secretary for such purposes, or
``(C) in the case of a qualifying new home which is a
manufactured home, a manufactured home primary inspection
agency.
``(3) Form.--
``(A) In general.--A certification described in subsection
(b)(1)(B) shall be made in writing 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
``(i) in the case of a performance-based method,
accompanied by a written analysis documenting the proper
application of a permissible energy performance calculation
method to the specific circumstances of such qualifying new
home, and
``(ii) in the case of a qualifying new 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.
``(B) Form provided to buyer.--A form documenting the
energy efficient building envelope components and energy
efficient heating or cooling equipment installed and their
rated energy efficiency performance shall be provided to the
buyer of the qualifying new home. The form shall include
labeled R-value for insulation products, NFRC-labeled U-
factor and solar heat gain coefficient for windows,
skylights, and doors, labeled annual fuel utilization
efficiency (AFUE) ratings for furnaces and boilers, labeled
heating seasonal performance factor (HSPF) ratings for
electric heat pumps, and labeled seasonal energy efficiency
ratio (SEER) ratings for air conditioners.
``(C) Ratings label affixed in dwelling.--A permanent label
documenting the ratings in subparagraph (B) shall be affixed
to the front of the electrical distribution panel of the
qualifying new home, or shall be otherwise permanently
displayed in a readily inspectable location in such home.
``(4) Regulations.--
``(A) In general.--In prescribing regulations under this
subsection for performance-based certification methods, the
Secretary shall prescribe procedures for calculating annual
energy usage and cost reductions for heating and cooling and
for the reporting of the results. Such regulations shall--
``(i) provide that any calculation procedures be fuel
neutral such that the same energy efficiency measures allow a
qualifying new home to be eligible for the credit under this
section regardless of whether such home uses a gas or oil
furnace or boiler or an electric heat pump, and
``(ii) require that any computer software allow for the
printing of the Federal tax forms necessary for the credit
under this section and for the printing of forms for
disclosure to the homebuyer.
``(B) Providers.--For purposes of paragraph (2)(B), the
Secretary shall establish requirements for the designation of
individuals based on the requirements for energy consultants
and home energy raters specified by the Mortgage Industry
National Home Energy Rating Standards.
``(e) Application.--Subsection (a) shall apply to
qualifying new homes the construction of which is
substantially completed after the date of the enactment of
this section and purchased during the period beginning on
such date and ending on--
``(1) in the case of any 30-percent home, December 31,
2005, and
``(2) in the case of any 50-percent home, 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 (16), by striking the period at the end of
paragraph (17) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(18) the new energy efficient home credit determined
under section 45G(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) New Energy Efficient Home Expenses.--No deduction
shall be allowed for that portion of expenses for a
qualifying new home otherwise allowable as a deduction for
the taxable year which is equal to the amount of the credit
determined for such taxable year under section 45G(a).''.
(d) Limitation on Carryback.--Section 39(d) (relating to
transition rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(13) No carryback of new energy efficient home credit
before effective date.--No portion of the unused business
credit for any taxable year which is attributable to the
credit determined under section 45G may be carried back to
any taxable year ending on or before the date of the
enactment of such section.''.
(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 (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, as amended by this
Act, 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 homes the construction of which is
substantially completed after the date of the enactment of
this Act.

SEC. 302. 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.--
``(1) In general.--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 the amounts
determined under paragraph (2) for qualified energy efficient
appliances produced by the taxpayer during the calendar year
ending with or within the taxable year.
``(2) Amount.--The amount determined under this paragraph
for any category described in subsection (b)(2)(B) shall be
the product of the applicable amount for appliances in the
category and the eligible production for the category.
``(b) Applicable Amount; Eligible Production.--For purposes
of subsection (a)--
``(1) Applicable amount.--The applicable amount is--

[[Page S10310]]

``(A) $50, in the case of--
``(i) a clothes washer which is manufactured with at least
a 1.42 MEF, or
``(ii) a refrigerator which consumes at least 10 percent
less kilowatt hours per year than the energy conservation
standards for refrigerators promulgated by the Department of
Energy and effective on July 1, 2001,
``(B) $100, in the case of--
``(i) a clothes washer which is manufactured with at least
a 1.50 MEF, or
``(ii) a refrigerator which consumes at least 15 percent
(20 percent in the case of a refrigerator manufactured after
2006) less kilowatt hours per year than such energy
conservation standards, and
``(C) $150, in the case of a refrigerator manufactured
before 2007 which consumes at least 20 percent less kilowatt
hours per year than such energy conservation standards.
``(2) Eligible production.--
``(A) In general.--The eligible production of each category
of qualified energy efficient appliances is the excess of--
``(i) the number of appliances in such category which are
produced by the taxpayer during such calendar year, over
``(ii) the average number of appliances in such category
which were produced by the taxpayer during calendar years
2000, 2001, and 2002.
``(B) Categories.--For purposes of subparagraph (A), the
categories are--
``(i) clothes washers described in paragraph (1)(A)(i),
``(ii) clothes washers described in paragraph (1)(B)(i),
``(iii) refrigerators described in paragraph (1)(A)(ii),
``(iv) refrigerators described in paragraph (1)(B)(ii), and
``(v) refrigerators described in paragraph (1)(C).
``(c) Limitation on Maximum Credit.--
``(1) In general.--The amount of credit allowed under
subsection (a) with respect to a taxpayer for all taxable
years shall not exceed $60,000,000, of which not more than
$30,000,000 may be allowed with respect to the credit
determined by using the applicable amount under subsection
(b)(1)(A).
``(2) Limitation based on gross receipts.--The credit
allowed under subsection (a) with respect to a taxpayer for
the taxable year shall not 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 in 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.
``(d) Definitions.--For purposes of this section--
``(1) Qualified energy efficient appliance.--The term
`qualified energy efficient appliance' means--
``(A) a clothes washer described in subparagraph (A)(i) or
(B)(i) of subsection (b)(1), or
``(B) a refrigerator described in subparagraph (A)(ii),
(B)(ii), or (C) of subsection (b)(1).
``(2) Clothes washer.--The term `clothes washer' means a
residential clothes washer, including a residential style
coin operated washer.
``(3) Refrigerator.--The term `refrigerator' means an
automatic defrost refrigerator-freezer which has an internal
volume of at least 16.5 cubic feet.
``(4) MEF.--The term `MEF' means Modified Energy Factor (as
determined by the Secretary of Energy).
``(e) Special Rules.--
``(1) In general.--Rules similar to the rules of
subsections (c), (d), and (e) of section 52 shall apply for
purposes of this section.
``(2) Aggregation rules.--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 1
person for purposes of subsection (a).
``(f) Verification.--The taxpayer shall submit such
information or certification as the Secretary, in
consultation with the Secretary of Energy, determines
necessary to claim the credit amount under subsection (a).
``(g) Termination.--This section shall not apply--
``(1) with respect to refrigerators described in subsection
(b)(1)(A)(ii) produced after December 31, 2004, and
``(2) with respect to all other qualified energy efficient
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 (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) the energy efficient appliance credit determined
under section 45H(a).''.
(c) Limitation on Carryback.--Section 39(d) (relating to
transition rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(14) No carryback of energy efficient appliance credit
before effective date.--No portion of the unused business
credit for any taxable year which is attributable to the
energy efficient appliance credit determined under section
45H may be carried to a taxable year ending on or before the
date of the enactment of such section.''.
(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 new item:

``Sec. 45H. Energy efficient appliance credit.''.

(e) Effective Date.--The amendments made by this section
shall apply to appliances produced after the date of the
enactment of this Act, in taxable years ending after such
date.

SEC. 303. 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 photovoltaic property
expenditures made by the taxpayer during such year,
``(2) 15 percent of the qualified solar water heating
property expenditures made by the taxpayer during such year,
``(3) 30 percent of the qualified fuel cell property
expenditures made by the taxpayer during such year,
``(4) 30 percent of the qualified wind energy property
expenditures made by the taxpayer during such year, and
``(5) the sum of the qualified Tier 2 energy efficient
building property expenditures made by the taxpayer during
such year.
``(b) Limitations.--
``(1) Maximum credit.--The credit allowed under subsection
(a) shall not exceed--
``(A) $2,000 for property described in paragraph (1), (2),
or (5) of subsection (d),
``(B) $500 for each 0.5 kilowatt of capacity of property
described in subsection (d)(4), and
``(C) for property described in subsection (d)(6)--
``(i) $75 for each electric heat pump water heater,
``(ii) $250 for each electric heat pump,
``(iii) $250 for each advanced natural gas, oil, or propane
furnace,
``(iv) $250 for each central air conditioner,
``(v) $75 for each natural gas, oil, or propane water
heater, and
``(vi) $250 for each geothermal heat pump.
``(2) Safety certifications.--No credit shall be allowed
under this section for an item of property unless--
``(A) in the case of solar water heating property, such
property is certified for performance and safety by the non-
profit Solar Rating Certification Corporation or a comparable
entity endorsed by the government of the State in which such
property is installed,
``(B) in the case of a photovoltaic property, a fuel cell
property, or a wind energy property, such property meets
appropriate fire and electric code requirements, and
``(C) in the case of property described in subsection
(d)(6), such property meets the performance and quality
standards, and the certification requirements (if any),
which--
``(i) have been prescribed by the Secretary by regulations
(after consultation with the Secretary of Energy or the
Administrator of the Environmental Protection Agency, as
appropriate),
``(ii) in the case of the energy efficiency ratio (EER)--

``(I) require measurements to be based on published data
which is tested by manufacturers at 95 degrees Fahrenheit,
and
``(II) do not require ratings to be based on certified data
of the Air Conditioning and Refrigeration Institute, and

``(iii) are in effect at the time of the acquisition of the
property.
``(c) Carryforward of Unused Credit.--If the credit
allowable under subsection (a) exceeds the limitation imposed
by section 26(a) for such taxable year reduced by the sum of
the credits allowable under this subpart (other than this
section and section 25D), such excess shall be carried to the
succeeding taxable year and added to the credit allowable
under subsection (a) for such succeeding taxable year.
``(d) 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 to heat water for use in a
dwelling unit located in the United States and used as a
residence by the taxpayer if at least half of the energy used
by such property for such purpose is derived from the sun.
``(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 located in the United
States and used as a residence by the taxpayer.
``(3) 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) solely because it constitutes a
structural component of the structure on which it is
installed.
``(4) Qualified fuel cell property expenditure.--The term
`qualified fuel cell property expenditure' means an
expenditure for qualified fuel cell property (as defined in
section 48(a)(4)) installed on or in connection with a
dwelling unit located in the United

[[Page S10311]]

States and used as a principal residence (within the meaning
of section 121) by the taxpayer.
``(5) 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 located in the United
States and used as a residence by the taxpayer.
``(6) Qualified tier 2 energy efficient building property
expenditure.--
``(A) In general.--The term `qualified Tier 2 energy
efficient building property expenditure' means an expenditure
for any Tier 2 energy efficient building property.
``(B) Tier 2 energy efficient building property.--The term
`Tier 2 energy efficient building property' means--
``(i) an electric heat pump water heater which yields an
energy factor of at least 1.7 in the standard Department of
Energy test procedure,
``(ii) an electric heat pump which has a heating seasonal
performance factor (HSPF) of at least 9, a seasonal energy
efficiency ratio (SEER) of at least 15, and an energy
efficiency ratio (EER) of at least 12.5,
``(iii) an advanced natural gas, oil, or propane furnace
which achieves at least 95 percent annual fuel utilization
efficiency (AFUE),
``(iv) a central air conditioner which has a seasonal
energy efficiency ratio (SEER) of at least 15 and an energy
efficiency ratio (EER) of at least 12.5,
``(v) a natural gas, oil, or propane water heater which has
an energy factor of at least 0.80 in the standard Department
of Energy test procedure, and
``(vi) a geothermal heat pump which has an energy
efficiency ratio (EER) of at least 21.
``(7) Labor costs.--Expenditures for labor costs properly
allocable to the onsite preparation, assembly, or original
installation of the property described in paragraph (1), (2),
(4), (5), or (6) and for piping or wiring to interconnect
such property to the dwelling unit shall be taken into
account for purposes of this section.
``(8) 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.
``(e) Special Rules.--For purposes of this section--
``(1) 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 (as the case may be) 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.
``(2) 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 his tenant-
stockholder's proportionate share (as defined in section
216(b)(3)) of any expenditures of such corporation.
``(3) 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.
``(4) 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.
``(5) 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.
``(6) 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)(5)(C)).
``(f) 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.
``(g) Termination.--The credit allowed under this section
shall not apply to expenditures after December 31, 2007.''.
(b) Credit Allowed Against Regular Tax and Alternative
Minimum Tax.--
(1) In general.--Section 25C(b), as added by subsection
(a), 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) Conforming amendments.--
(A) Section 25C(c), as added by subsection (a), is amended
by striking ``section 26(a) for such taxable year reduced by
the sum of the credits allowable under this subpart (other
than this section and section 25D)'' and inserting
``subsection (b)(3)''.
(B) Section 23(b)(4)(B) is amended by inserting ``and
section 25C'' after ``this section''.
(C) Section 24(b)(3)(B) is amended by striking ``23 and
25B'' and inserting ``23, 25B, and 25C''.
(D) Section 25(e)(1)(C) is amended by inserting ``25C,''
after ``25B,''.
(E) Section 25B(g)(2) is amended by striking ``section 23''
and inserting ``sections 23 and 25C''.
(F) Section 26(a)(1) is amended by striking ``and 25B'' and
inserting ``25B, and 25C''.
(G) Section 904(h) is amended by striking ``and 25B'' and
inserting ``25B, and 25C''.
(H) Section 1400C(d) is amended by striking ``and 25B'' and
inserting ``25B, and 25C''.
(c) Additional Conforming Amendments.--
(1) Section 23(c), as in effect for taxable years beginning
before January 1, 2004, is amended by striking ``section
1400C'' and inserting ``sections 25C and 1400C''.
(2) Section 25(e)(1)(C), as in effect for taxable years
beginning before January 1, 2004, is amended by inserting ``,
25C,'' after ``sections 23''.
(3) Section 1016(a), 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 25C(f), in the
case of amounts with respect to which a credit has been
allowed under section 25C.''.
(4) Section 1400C(d), as in effect for taxable years
beginning before January 1, 2004, is amended by inserting
``and section 25C'' after ``this section''.
(5) 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.''.
(d) Effective Dates.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to expenditures
after the date of the enactment of this Act, in taxable years
ending after such date.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to taxable years beginning after December 31,
2003.

SEC. 304. CREDIT FOR BUSINESS INSTALLATION OF QUALIFIED FUEL
CELLS AND STATIONARY MICROTURBINE POWER PLANTS.

(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 or qualified
microturbine property,''.
(b) Qualified Fuel Cell Property; Qualified Microturbine
Property.--Section 48(a) (relating to energy credit) is
amended by redesignating paragraphs (4) and (5) as paragraphs
(5) and (6), respectively, and by inserting after paragraph
(3) the following new paragraph:
``(4) Qualified fuel cell property; qualified microturbine
property.--For purposes of this subsection--
``(A) Qualified fuel cell property.--
``(i) In general.--The term `qualified fuel cell property'
means a fuel cell power plant which--

``(I) generates at least 0.5 kilowatt of electricity using
an electrochemical process, and
``(II) has an electricity-only generation efficiency
greater than 30 percent.

``(ii) Limitation.--In the case of qualified fuel cell
property placed in service during

[[Page S10312]]

the taxable year, the credit otherwise determined under
paragraph (1) for such year with respect to such property
shall not exceed an amount equal to $500 for each 0.5
kilowatt of capacity of such property.
``(iii) 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.
``(iv) Termination.--The term `qualified fuel cell
property' shall not include any property placed in service
after December 31, 2007.
``(B) Qualified microturbine property.--
``(i) In general.--The term `qualified microturbine
property' means a stationary microturbine power plant which--

``(I) has a capacity of less than 2,000 kilowatts, and
``(II) has an electricity-only generation efficiency of not
less than 26 percent at International Standard Organization
conditions.

``(ii) Limitation.--In the case of qualified microturbine
property placed in service during the taxable year, the
credit otherwise determined under paragraph (1) for such year
with respect to such property shall not exceed an amount
equal $200 for each kilowatt of capacity of such property.
``(iii) Stationary microturbine power plant.--The term
`stationary microturbine power plant' means an integrated
system comprised of a gas turbine engine, a combustor, a
recuperator or regenerator, a generator or alternator, and
associated balance of plant components which converts a fuel
into electricity and thermal energy. Such term also includes
all secondary components located between the existing
infrastructure for fuel delivery and the existing
infrastructure for power distribution, including equipment
and controls for meeting relevant power standards, such as
voltage, frequency, and power factors.
``(iv) Termination.--The term `qualified microturbine
property' shall not include any property placed in service
after December 31, 2006.''.
(c) Energy Percentage.--Section 48(a)(2)(A) (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, 30
percent, and
``(ii) in the case of any other energy property, 10
percent.''.
(d) Conforming Amendments.--
(A) Section 29(b)(3)(A)(i)(III) is amended by striking
``section 48(a)(4)(C)'' and inserting ``section
48(a)(5)(C)''.
(B) Section 48(a)(1) is amended by inserting ``except as
provided in subparagraph (A)(ii) or (B)(ii) of paragraph
(4),'' before ``the energy''.
(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, 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. 305. 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
for the taxable year in which a building is placed in service
by a taxpayer, an amount equal to the energy efficient
commercial building property expenditures made by such
taxpayer with respect to the construction or reconstruction
of such building for the taxable year or any preceding
taxable year.
``(b) Maximum Amount of Deduction.--The amount of energy
efficient commercial building property expenditures taken
into account under subsection (a) shall not exceed an amount
equal to the product of--
``(1) $2.25, and
``(2) the square footage of the building with respect to
which the expenditures are made.
``(c) Energy Efficient Commercial Building Property
Expenditures.--For purposes of this section--
``(1) In general.--The term `energy efficient commercial
building property expenditures' means amounts paid or
incurred for energy efficient property installed on or in
connection with the construction or reconstruction of a
building--
``(A) for which depreciation is allowable under section
167,
``(B) which is located in the United States, and
``(C) which is the type of structure to which the Standard
90.1-2001 of the American Society of Heating, Refrigerating,
and Air Conditioning Engineers and the Illuminating
Engineering Society of North America is applicable.
Such term includes expenditures for labor costs properly
allocable to the onsite preparation, assembly, or original
installation of the property.
``(2) Energy efficient property.--For purposes of paragraph
(1)--
``(A) In general.--The term `energy efficient property'
means any property which 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 building which meets
the minimum requirements of Standard 90.1-2001 of the
American Society of Heating, Refrigerating, and Air
Conditioning Engineers and the Illuminating Engineering
Society of North America, using methods of calculation
described in subparagraph (B) and certified by qualified
individuals as provided under paragraph (5).
``(B) Methods of calculation.--The Secretary, in
consultation with the Secretary of Energy, shall promulgate
regulations which describe in detail methods for calculating
and verifying energy and power costs.
``(C) Computer software.--
``(i) In general.--Any calculation described in
subparagraph (B) shall be prepared by qualified computer
software.
``(ii) Qualified computer software.--For purposes of this
subparagraph, the term `qualified computer software' means
software--

``(I) for which the software designer has certified that
the software meets all procedures and detailed methods for
calculating energy and power costs as required by the
Secretary,
``(II) which provides such forms as required to be filed by
the Secretary in connection with energy efficiency of
property and the deduction allowed under this section, and
``(III) which provides a notice form which summarizes the
energy efficiency features of the building and its projected
annual energy costs.

``(3) Allocation of deduction for public property.--In the
case of energy efficient commercial building property
expenditures made by a public entity with respect to the
construction or reconstruction of a public building, the
Secretary shall promulgate regulations under which the value
of the deduction with respect to such expenditures which
would be allowable to the public entity under this section
(determined without regard to the tax-exempt status of such
entity) may be allocated to the person primarily responsible
for designing the energy efficient property. Such person
shall be treated as the taxpayer for purposes of this
section.
``(4) Notice to owner.--Any qualified individual providing
a certification under paragraph (5) shall provide an
explanation to the owner of the building regarding the energy
efficiency features of the building and its projected annual
energy costs as provided in the notice under paragraph
(2)(C)(ii)(III).
``(5) Certification.--
``(A) In general.--The Secretary shall prescribe procedures
for the inspection and testing for compliance of buildings by
qualified individuals described in subparagraph (B). Such
procedures shall be--
``(i) comparable, given the difference between commercial
and residential buildings, to the requirements in the
Mortgage Industry National Home Energy Rating Standards, and
``(ii) fuel neutral such that the same energy efficiency
measures allow a building to be eligible for the credit under
this section regardless of whether such building uses a gas
or oil furnace or boiler or an electric heat pump.
``(B) 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. The Secretary may qualify a home energy
ratings organization, a local building regulatory authority,
a State or local energy office, a utility, or any other
organization which meets the requirements prescribed under
this paragraph.
``(C) Proficiency of qualified individuals.--The Secretary
shall consult with nonprofit organizations and State agencies
with expertise in energy efficiency calculations and
inspections to develop proficiency tests and training
programs to qualify individuals to determine compliance.
``(d) Basis Reduction.--For purposes of this subtitle, if a
deduction is allowed under this section with respect to any
energy efficient property, the basis of such property shall
be reduced by the amount of the deduction so allowed.
``(e) Regulations.--The Secretary shall promulgate such
regulations as necessary to take into account new
technologies regarding energy efficiency and renewable energy
for purposes of determining energy efficiency and savings
under this section.
``(f) Termination.--This section shall not apply with
respect to any energy efficient commercial building property
expenditures in connection with a building the construction
of which is not completed on or before December 31, 2009.''.
(b) Conforming Amendments.--
(1) Section 1016(a), as amended by this Act, 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(d).''.
(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:

[[Page S10313]]

``(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 taxable years beginning after the date of the
enactment of this Act.

SEC. 306. 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) 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. 307. THREE-YEAR APPLICABLE RECOVERY PERIOD FOR
DEPRECIATION OF QUALIFIED WATER SUBMETERING
DEVICES.

(a) In General.--Section 168(e)(3)(A) (defining 3-year
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 inserting ``, and'', and by adding
at the end the following new clause:
``(v) any qualified water submetering device.''.
(b) Definition of Qualified Water Submetering Device.--
Section 168(i) (relating to definitions and special rules),
as amended by this Act, is amended by inserting at the end
the following new paragraph:
``(16) Qualified water submetering device.--
``(A) In general.--The term `qualified water submetering
device' means any water submetering device which is placed in
service before January 1, 2008, by a taxpayer who is an
eligible resupplier with respect to the unit for which the
device is placed in service.
``(B) Water submetering device.--For purposes of this
paragraph, the term `water submetering device' means any
submetering device which is used by the taxpayer--
``(i) to measure and record water usage data, and
``(ii) to provide such data on at least a monthly basis to
both consumers and the taxpayer.
``(C) Eligible resupplier.--For purposes of subparagraph
(A), the term `eligible resupplier' means any taxpayer who
purchases and installs qualified water submetering devices in
every unit in any multi-unit property.''.
(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. 308. 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(a)
(relating to energy credit), as amended by this Act, is
amended by redesignating paragraphs (5) and (6) as paragraphs
(6) and (7), respectively, and by inserting after paragraph
(4) the following new paragraph:
``(5) Combined heat and power system property.--For
purposes of this subsection--
``(A) Combined heat and power system property.--The term
`combined heat and power system property' means property
comprising a system--
``(i) 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),
``(ii) which 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,
``(iii) 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),

``(iv) 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 energy
capacities), and
``(v) which is placed in service before January 1, 2007.
``(B) Special rules.--
``(i) Energy efficiency percentage.--For purposes of
subparagraph (A)(iv), 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 primary fuel source for the system.

``(ii) Determinations made on btu basis.--The energy
efficiency percentage and the percentages under subparagraph
(A)(iii) shall be determined on a Btu basis.
``(iii) 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.
``(iv) 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 this subsection if, with respect
to such property, the taxpayer uses a normalization method of
accounting.
``(II) Certain exception not to apply.--The matter
following paragraph (3)(D) shall not apply to combined heat
and power system property.

``(v) Nonapplication of certain rules.--For purposes of
determining if the term `combined heat and power system
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
rankin, stirling, or kalina heat engine systems, subparagraph
(A) shall be applied without regard to clauses (i), (iii),
and (iv) thereof.
``(C) Extension of depreciation recovery period.--If a
taxpayer is allowed a credit under this section for a
combined heat and power system property which has a class
life of 15 years or less under section 168, such property
shall be treated as having a 22-year class life for purposes
of section 168.''.
(c) Limitation on Carryback.--Section 39(d) (relating to
transition rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(15) No carryback of energy credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the energy credit with
respect to property described in section 48(a)(5) may be
carried back to a taxable year ending on or before the date
of the enactment of such section.''.
(d) Conforming Amendments.--
(A) Section 25C(e)(6), as added by this Act, is amended by
striking ``section 48(a)(5)(C)'' and inserting ``section
48(a)(6)(C)''.
(B) Section 29(b)(3)(A)(i)(III), as amended by this Act, is
amended by striking ``section 48(a)(5)(C)'' and inserting
``section 48(a)(6)(C)''.
(e) Effective Date.--The amendments made by this subsection
shall apply to property placed in service after the date of
the enactment of this Act, 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. 309. 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 10
percent of the amount paid or incurred by the taxpayer for
qualified energy efficiency improvements installed during
such taxable year.
``(b) Limitation.--The credit allowed by this section with
respect to a dwelling for any taxable year shall not exceed
$300, reduced (but not below zero) by the sum of the credits
allowed under subsection (a) to the taxpayer with respect to
the dwelling for all preceding taxable years.

[[Page S10314]]

``(c) Carryforward of Unused Credit.--If the credit
allowable under subsection (a) exceeds the limitation imposed
by section 26(a) for such taxable year reduced by the sum of
the credits allowable under this subpart (other than this
section) for such taxable year, such excess shall be carried
to the succeeding taxable year and added to the credit
allowable under subsection (a) for such succeeding taxable
year.
``(d) Qualified Energy Efficiency Improvements.--For
purposes of this section, the term `qualified energy
efficiency improvements' means any energy efficient building
envelope component which is certified to meet or exceed the
prescriptive criteria for such component in the 2000
International Energy Conservation Code, or any combination of
energy efficiency measures which are certified as achieving
at least a 30 percent reduction in heating and cooling energy
usage for the dwelling (as measured in terms of energy cost
to the taxpayer), if--
``(1) such component or combination of measures is
installed in or on a dwelling which--
``(A) is located in the United States,
``(B) has not been treated as a qualifying new home for
purposes of any credit allowed under section 45G, and
``(C) is owned and used by the taxpayer as the taxpayer's
principal residence (within the meaning of section 121),
``(2) the original use of such component or combination of
measures commences with the taxpayer, and
``(3) such component or combination of measures reasonably
can be expected to remain in use for at least 5 years.
``(e) Certification.--
``(1) Methods of certification.--
``(A) Component-based method.--The certification described
in subsection (d) for any component described in such
subsection shall be determined on the basis of applicable
energy efficiency ratings (including product labeling
requirements) for affected building envelope components.
``(B) Performance-based method.--
``(i) In general.--The certification described in
subsection (d) for any combination of measures described in
such subsection shall be--

``(I) determined by comparing the projected heating and
cooling energy usage for the dwelling to such usage for such
dwelling in its original condition, and
``(II) accompanied by a written analysis documenting the
proper application of a permissible energy performance
calculation method to the specific circumstances of such
dwelling.

``(ii) Computer software.--Computer software shall be used
in support of a performance-based method certification under
clause (i). Such software shall meet procedures and methods
for calculating energy and cost savings in regulations
promulgated by the Secretary of Energy. Such regulations on
the specifications for software and verification protocols
shall be based on the 2001 California Residential Alternative
Calculation Method Approval Manual.
``(2) Provider.--A certification described in subsection
(d) shall be provided by--
``(A) in the case of the method described in paragraph
(1)(A), by a third party, such as a local building regulatory
authority, a utility, a manufactured home primary inspection
agency, or a home energy rating organization, or
``(B) in the case of the method described in paragraph
(1)(B), an individual recognized by an organization
designated by the Secretary for such purposes.
``(3) Form.--A certification described in subsection (d)
shall be made in writing on forms which specify in readily
inspectable fashion the energy efficient components and other
measures and their respective efficiency ratings, and which
include a permanent label affixed to the electrical
distribution panel of the dwelling.
``(4) Regulations.--
``(A) In general.--In prescribing regulations under this
subsection for certification methods described in paragraph
(1)(B), the Secretary, after examining the requirements for
energy consultants and home energy ratings providers
specified by the Mortgage Industry National Home Energy
Rating Standards, shall prescribe procedures for calculating
annual energy usage and cost reductions for heating and
cooling and for the reporting of the results. Such
regulations shall--
``(i) provide that any calculation procedures be fuel
neutral such that the same energy efficiency measures allow a
dwelling to be eligible for the credit under this section
regardless of whether such dwelling uses a gas or oil furnace
or boiler or an electric heat pump, and
``(ii) require that any computer software allow for the
printing of the Federal tax forms necessary for the credit
under this section and for the printing of forms for
disclosure to the owner of the dwelling.
``(B) Providers.--For purposes of paragraph (2)(B), the
Secretary shall establish requirements for the designation of
individuals based on the requirements for energy consultants
and home energy raters specified by the Mortgage Industry
National Home Energy Rating Standards.
``(f) Definitions and Special Rules.--For purposes of this
section--
``(1) 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 for the qualified energy
efficiency improvements 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.
``(2) 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 paid his tenant-
stockholder's proportionate share (as defined in section
216(b)(3)) of the cost of qualified energy efficiency
improvements made by such corporation.
``(3) 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 paid the individual's
proportionate share of the cost of qualified energy
efficiency improvements made by 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.
``(4) 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 or a dwelling when installed in or on such dwelling,
``(B) exterior windows (including skylights), and
``(C) exterior doors.
``(5) Manufactured homes included.--For purposes of this
section, the term `dwelling' includes a manufactured home
which conforms to Federal Manufactured Home Construction and
Safety Standards (24 C.F.R. 3280).
``(g) 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.
``(h) Termination.--Subsection (a) shall not apply to
qualified energy efficiency improvements installed after
December 31, 2006.''.
(b) Credit Allowed Against Regular Tax and Alternative
Minimum Tax.--
(1) In general.--Section 25D(b), as added by subsection
(a), 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.''.
(2) Conforming amendments.--
(A) Section 25D(c), as added by subsection (a), is amended
by striking ``section 26(a) for such taxable year reduced by
the sum of the credits allowable under this subpart (other
than this section)'' and inserting ``subsection (b)(3)''.
(B) Section 23(b)(4)(B), as amended by this Act, is amended
by striking ``section 25C'' and inserting ``sections 25C and
25D''.
(C) Section 24(b)(3)(B), as amended by this Act, is amended
by striking ``and 25C'' and inserting ``25C, and 25D''.
(D) Section 25(e)(1)(C), as amended by this Act, is amended
by inserting ``25D,'' after ``25C,''.
(E) Section 25B(g)(2), as amended by this Act, is amended
by striking ``23 and 25C'' and inserting ``23, 25C, and
25D''.
(F) Section 26(a)(1), as amended by this Act, is amended by
striking ``and 25C'' and inserting ``25C, and 25D''.
(G) Section 904(h), as amended by this Act, is amended by
striking ``and 25C'' and inserting ``25C, and 25D''.
(H) Section 1400C(d), as amended by this Act, is amended by
striking ``and 25C'' and inserting ``25C, and 25D''.
(c) Additional Conforming Amendments.--
(1) Section 23(c), as in effect for taxable years beginning
before January 1, 2004, and as amended by this Act, is
amended by inserting ``, 25D,'' after ``sections 25C''.
(2) Section 25(e)(1)(C), as in effect for taxable years
beginning before January 1, 2004, and as amended by this Act,
is amended by inserting ``25D,'' after ``25C,''.
(3) 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'',

[[Page S10315]]

and by adding at the end the following new paragraph:
``(33) to the extent provided in section 25D(g), in the
case of amounts with respect to which a credit has been
allowed under section 25D.''.
(4) Section 1400C(d), as in effect for taxable years
beginning before January 1, 2004, and as amended by this Act,
is amended by striking ``section 25C'' and inserting
``sections 25C and 25D''.
(5) 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.''.
(d) Effective Dates.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to property
installed after the date of the enactment of this Act, in
taxable years ending after such date.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to taxable years beginning after December 31,
2003.

TITLE IV--CLEAN COAL INCENTIVES

Subtitle A--Credit for Emission Reductions and Efficiency Improvements
in Existing Coal-Based Electricity Generation Facilities

SEC. 401. CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN COAL
TECHNOLOGY UNIT.

(a) Credit for Production From a Qualifying Clean Coal
Technology Unit.--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 FROM A QUALIFYING CLEAN
COAL TECHNOLOGY UNIT.

``(a) General Rule.--For purposes of section 38, the
qualifying clean coal technology production credit of any
taxpayer for any taxable year is equal to--
``(1) the applicable amount of clean coal technology
production credit, multiplied by
``(2) the applicable percentage of the sum of--
``(A) the kilowatt hours of electricity, plus
``(B) each 3,413 Btu of fuels or chemicals,
produced by the taxpayer during such taxable year at a
qualifying clean coal technology unit, but only if such
production occurs during the 10-year period beginning on the
date the unit was returned to service after becoming a
qualifying clean coal technology unit.
``(b) Applicable Amount.--
``(1) In general.--For purposes of this section, the
applicable amount of clean coal technology production credit
is equal to $0.0034.
``(2) Inflation adjustment.--For calendar years after 2004,
the applicable amount of clean coal technology production
credit shall be adjusted by multiplying such amount by the
inflation adjustment factor for the calendar year in which
the amount is applied. If any amount as increased under the
preceding sentence is not a multiple of 0.01 cent, such
amount shall be rounded to the nearest multiple of 0.01 cent.
``(c) Applicable Percentage.--For purposes of this section,
with respect to any qualifying clean coal technology unit,
the applicable percentage is the percentage equal to the
ratio which the portion of the national megawatt capacity
limitation allocated to the taxpayer with respect to such
unit under subsection (e) bears to the total megawatt
capacity of such unit.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Qualifying clean coal technology unit.--The term
`qualifying clean coal technology unit' means a clean coal
technology unit of the taxpayer which--
``(A) on the date of the enactment of this section--
``(i) was a coal-based electricity generating steam
generator-turbine unit which was not a clean coal technology
unit, and
``(ii) had a nameplate capacity rating of not more than 300
megawatts,
``(B) becomes a clean coal technology unit as the result of
the retrofitting, repowering, or replacement of the unit with
clean coal technology during the 10-year period beginning on
the date of the enactment of this section,
``(C) is not receiving nor 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 Energy, and
``(D) receives an allocation of a portion of the national
megawatt capacity limitation under subsection (e).
``(2) Clean coal technology unit.--The term `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, integrated gasification
combined cycle, or any other technology, for the production
of electricity,
``(B) uses coal to produce 75 percent or more of its
thermal output as electricity,
``(C) has a design net heat rate of at least 500 less than
that of such unit as described in paragraph (1)(A),
``(D) has a maximum design net heat rate of not more than
9,500, and
``(E) meets the pollution control requirements of paragraph
(3).
``(3) 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 for the category
of source at the time of the retrofitting, repowering, or
replacement 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 retrofitting, repowering, or
replacement.
``(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.
``(4) 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 deg.F,
``(iv) temperature, wet bulb of 54 deg.F, and
``(v) relative humidity of 55 percent, and
``(D) if carbon capture controls have been installed with
respect to any qualifying 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.
``(5) HHV.--The term `HHV' means higher heating value.
``(6) Application of certain rules.--The rules of
paragraphs (3), (4), and (5) of section 45(d) shall apply.
``(7) Inflation adjustment factor.--
``(A) In general.--The term `inflation adjustment factor'
means, with respect to a calendar year, a fraction the
numerator of which is the GDP implicit price deflator for the
preceding calendar year and the denominator of which is the
GDP implicit price deflator for the calendar year 2003.
``(B) GDP implicit price deflator.--The term `GDP implicit
price deflator' means, for any calendar year, the most recent
revision of the implicit price deflator for the gross
domestic product as of June 30 of such calendar year as
computed by the Department of Commerce before October 1 of
such calendar year.
``(8) Noncompliance with pollution laws.--For purposes of
this section, a unit which is not in compliance with the
applicable State and Federal pollution prevention, control,
and permit requirements for any period of time shall not be
considered to be a qualifying clean coal technology unit
during such period.
``(e) National Limitation on the Aggregate Capacity of
Qualifying Clean Coal Technology Units.--
``(1) In general.--For purposes of this section, the
national megawatt capacity limitation for qualifying clean
coal technology units is 4,000 megawatts.
``(2) Allocation of limitation.--The Secretary shall
allocate the national megawatt capacity limitation for
qualifying clean coal technology units in such manner as the
Secretary may prescribe under the regulations under paragraph
(3).
``(3) 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--
``(A) to carry out the purposes of this subsection,
``(B) to limit the capacity of any qualifying clean coal
technology unit to which this section applies so that the
megawatt capacity allocated to any unit under this subsection
does not exceed 300 megawatts and the combined megawatt
capacity allocated to all such units when all such units are
placed in service during the 10-year period described in
subsection (d)(1)(B), does not exceed 4,000 megawatts,
``(C) to provide a certification process under which the
Secretary, in consultation with the Secretary of Energy,
shall approve and allocate the national megawatt capacity
limitation--
``(i) to encourage that units with the highest thermal
efficiencies, when adjusted for

[[Page S10316]]

the heat content of the design coal and site reference
conditions described in subsection (d)(4)(C), and
environmental performance, be placed in service as soon as
possible, and
``(ii) to allocate capacity to taxpayers which have a
definite and credible plan for placing into commercial
operation a qualifying 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 that the Secretary determines are
appropriate,

``(D) to allocate the national megawatt capacity limitation
to a portion of the capacity of a qualifying clean coal
technology unit if the Secretary determines that such an
allocation would maximize the amount of efficient production
encouraged with the available tax credits,
``(E) to set progress requirements and conditional
approvals so that capacity allocations for clean coal
technology units which become unlikely to meet the necessary
conditions for qualifying can be reallocated by the Secretary
to other clean coal technology units, and
``(F) to provide taxpayers with opportunities to correct
administrative errors and omissions with respect to
allocations and record keeping within a reasonable period
after discovery, taking into account the availability of
regulations and other administrative guidance from the
Secretary.''.
(b) Credit Treated as 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 (18), by striking the period at the end of
paragraph (19) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(20) the qualifying clean coal technology production
credit determined under section 45I(a).''.
(c) Transitional Rule.--Section 39(d) (relating to
transitional rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(16) No carryback of section 45i credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the qualifying clean
coal technology production credit determined under section
45I may be carried back to a taxable year ending on or before
the date of the enactment of such section.''.
(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 new item:

``Sec. 45I. Credit for production from a qualifying clean coal
technology unit.''.
(e) Effective Date.--The amendments made by this section
shall apply to production after the date of the enactment of
this Act, in taxable years ending after such date.

Subtitle B--Incentives for Early Commercial Applications of Advanced
Clean Coal Technologies

SEC. 411. CREDIT FOR INVESTMENT IN QUALIFYING ADVANCED CLEAN
COAL TECHNOLOGY.

(a) Allowance of Qualifying Advanced Clean Coal Technology
Unit Credit.--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 qualifying advanced clean coal technology unit
credit.''.
(b) Amount of Qualifying Advanced Clean Coal Technology
Unit Credit.--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. QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY UNIT
CREDIT.

``(a) In General.--For purposes of section 46, the
qualifying advanced clean coal technology unit credit for any
taxable year is an amount equal to 10 percent of the
applicable percentage of the qualified investment in a
qualifying advanced clean coal technology unit for such
taxable year.
``(b) Qualifying Advanced Clean Coal Technology Unit.--
``(1) In general.--For purposes of subsection (a), the term
`qualifying advanced clean coal technology unit' means an
advanced clean coal technology unit of the taxpayer--
``(A)(i) in the case of a unit first placed in service
after the date of the enactment of this section, the original
use of which commences with the taxpayer, or
``(ii) in the case of the retrofitting or repowering of a
unit first placed in service before such date of enactment,
the retrofitting or repowering of which is completed by the
taxpayer after such date, or
``(B) which is depreciable under section 167,
``(C) which has a useful life of not less than 4 years,
``(D) which is located in the United States,
``(E) which is not receiving nor 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 Energy,
``(F) which is not a qualifying clean coal technology unit,
and
``(G) which receives an allocation of a portion of the
national megawatt capacity limitation under subsection (f).
``(2) Special rule for sale-leasebacks.--For purposes of
subparagraph (A) of paragraph (1), in the case of a unit
which--
``(A) is originally placed in service by a person, and
``(B) is sold and leased back by such person, or is leased
to such person, within 3 months after the date such unit was
originally placed in service, for a period of not less than
12 years,
such unit shall be treated as originally placed in service
not earlier than the date on which such unit is used under
the leaseback (or lease) referred to in subparagraph (B). The
preceding sentence shall not apply to any property if the
lessee and lessor of such property make an election under
this sentence. Such an election, once made, may be revoked
only with the consent of the Secretary.
``(3) Noncompliance with pollution laws.--For purposes of
this subsection, a unit which is not in compliance with the
applicable State and Federal pollution prevention, control,
and permit requirements for any period of time shall not be
considered to be a qualifying advanced clean coal technology
unit during such period.
``(c) Applicable Percentage.--For purposes of this section,
with respect to any qualifying advanced clean coal technology
unit, the applicable percentage is the percentage equal to
the ratio which the portion of the national megawatt capacity
limitation allocated to the taxpayer with respect to such
unit under subsection (f) bears to the total megawatt
capacity of such unit.
``(d) Advanced Clean Coal Technology Unit.--For purposes of
this section--
``(1) In general.--The term `advanced clean coal technology
unit' means a new, retrofit, or repowering unit of the
taxpayer which--
``(A) 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, and
``(B) 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--
``(A) is placed in service after the date of the enactment
of this section and before January 1, 2013, and
``(B) 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--
``(A) is placed in service after the date of the enactment
of this section and before January 1, 2017, and
``(B) 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, which--
``(A) is placed in service after the date of the enactment
of this section and before January 1, 2017,
``(B) 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
``(C) 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
using any other technology for the production of electricity
which is placed in service after the date of the enactment of
this section and before January 1, 2017.
``(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.

[[Page S10317]]

``(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.
``(e) General Definitions.--Any term used in this section
which is also used in section 45I shall have the meaning
given such term in section 45I.
``(f) National Limitation on the Aggregate Capacity of
Advanced Clean Coal Technology Units.--
``(1) In general.--For purposes of subsection (b)(1)(G),
the national megawatt capacity limitation is--
``(A) for qualifying advanced clean coal technology units
using advanced pulverized coal or atmospheric fluidized bed
combustion technology, not more than 1,000 megawatts (not
more than 500 megawatts in the case of units placed in
service before 2009),
``(B) for such units using pressurized fluidized bed
combustion technology, not more than 500 megawatts (not more
than 250 megawatts in the case of units placed in service
before 2009),
``(C) for such units using integrated gasification combined
cycle technology, with or without fuel or chemical co-
production, not more than 2,000 megawatts (not more than 750
megawatts in the case of units placed in service before
2009), and
``(D) for such units using other technology for the
production of electricity, not more than 500 megawatts (not
more than 250 megawatts in the case of units placed in
service before 2009).
``(2) Allocation of limitation.--The Secretary shall
allocate the national megawatt capacity limitation for
qualifying advanced clean coal technology units in such
manner as the Secretary may prescribe under the regulations
under paragraph (3).
``(3) 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--
``(A) to carry out the purposes of this subsection and
section 45J,
``(B) to limit the capacity of any qualifying advanced
clean coal technology unit to which this section applies so
that the combined megawatt capacity of all such units to
which this section applies does not exceed 4,000 megawatts,
``(C) to provide a certification process described in
section 45I(e)(3)(C),
``(D) to carry out the purposes described in subparagraphs
(D), (E), and (F) of section 45I(e)(3), and
``(E) to reallocate capacity which is not allocated to any
technology described in subparagraphs (A) through (D) of
paragraph (1) because an insufficient number of qualifying
units request an allocation for such technology, to another
technology described in such subparagraphs in order to
maximize the amount of energy efficient production encouraged
with the available tax credits.
``(4) Selection criteria.--For purposes of this subsection,
the selection criteria for allocating the national megawatt
capacity limitation to qualifying advanced clean coal
technology units--
``(A) shall be established by the Secretary of Energy as
part of a competitive solicitation,
``(B) shall include primary criteria of minimum design net
heat rate, maximum design thermal efficiency, environmental
performance, and lowest cost to the Government, and
``(C) shall include supplemental criteria as determined
appropriate by the Secretary of Energy.
``(g) Qualified Investment.--For purposes of subsection
(a), the term `qualified investment' means, with respect to
any taxable year, the basis of a qualifying advanced clean
coal technology unit placed in service by the taxpayer during
such taxable year (in the case of a unit described in
subsection (b)(1)(A)(ii), only that portion of the basis of
such unit which is properly attributable to the retrofitting
or repowering of such unit).
``(h) Qualified Progress Expenditures.--
``(1) Increase in qualified investment.--In the case of a
taxpayer who has made an election under paragraph (5), the
amount of the qualified investment of such taxpayer for the
taxable year (determined under subsection (g) without regard
to this subsection) shall be increased by an amount equal to
the aggregate of each qualified progress expenditure for the
taxable year with respect to progress expenditure property.
``(2) Progress expenditure property defined.--For purposes
of this subsection, the term `progress expenditure property'
means any property being constructed by or for the taxpayer
and which it is reasonable to believe will qualify as a
qualifying advanced clean coal technology unit which is being
constructed by or for the taxpayer when it is placed in
service.
``(3) Qualified progress expenditures defined.--For
purposes of this subsection--
``(A) Self-constructed property.--In the case of any self-
constructed property, the term `qualified progress
expenditures' means the amount which, for purposes of this
subpart, is properly chargeable (during such taxable year) to
capital account with respect to such property.
``(B) Nonself-constructed property.--In the case of
nonself-constructed property, the term `qualified progress
expenditures' means the amount paid during the taxable year
to another person for the construction of such property.
``(4) Other definitions.--For purposes of this subsection--
``(A) Self-constructed property.--The term `self-
constructed property' means property for which it is
reasonable to believe that more than half of the construction
expenditures will be made directly by the taxpayer.
``(B) Nonself-constructed property.--The term `nonself-
constructed property' means property which is not self-
constructed property.
``(C) Construction, etc.--The term `construction' includes
reconstruction and erection, and the term `constructed'
includes reconstructed and erected.
``(D) Only construction of qualifying advanced clean coal
technology unit to be taken into account.--Construction shall
be taken into account only if, for purposes of this subpart,
expenditures therefor are properly chargeable to capital
account with respect to the property.
``(5) Election.--An election under this subsection may be
made at such time and in such manner as the Secretary may by
regulations prescribe. Such an election shall apply to the
taxable year for which made and to all subsequent taxable
years. Such an election, once made, may not be revoked except
with the consent of the Secretary.
``(i) Coordination With Other Credits.--This section shall
not apply to any property with respect to which the
rehabilitation credit under section 47 or the energy credit
under section 48 is allowed unless the taxpayer elects to
waive the application of such credit to such property.''.
(c) Recapture.--Section 50(a) (relating to other special
rules) is amended by adding at the end the following new
paragraph:
``(6) Special rules relating to qualifying advanced clean
coal technology unit.--For purposes of applying this
subsection in the case of any credit allowable by reason of
section 48A, the following rules shall apply:
``(A) General rule.--In lieu of the amount of the increase
in tax under paragraph (1), the increase in tax shall be an
amount equal to the investment tax credit allowed under
section 38 for all prior taxable years with respect to a
qualifying advanced clean coal technology unit (as defined by
section 48A(b)(1)) multiplied by a fraction the numerator of
which is the number of years remaining to fully depreciate
under this title the qualifying advanced clean coal
technology unit disposed of, and the denominator of which is
the total number of years over which such unit would
otherwise have been subject to depreciation. For purposes of
the preceding sentence, the year of disposition of the
qualifying advanced clean coal technology unit shall be
treated as a year of remaining depreciation.
``(B) Property ceases to qualify for progress
expenditures.--Rules similar to the rules of paragraph (2)
shall apply in the case of qualified progress expenditures
for a qualifying advanced clean coal technology unit under
section 48A, except that the amount of the increase in tax
under subparagraph (A) of this paragraph shall be substituted
for the amount described in such paragraph (2).
``(C) Application of paragraph.--This paragraph shall be
applied separately with respect to the credit allowed under
section 38 regarding a qualifying advanced clean coal
technology unit.''.
(d) Transitional Rule.--Section 39(d) (relating to
transitional rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(17) No carryback of section 48a credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the qualifying advanced
clean coal technology unit credit determined under section
48A may be carried back to a taxable year ending on or before
the date of the enactment of such section.''.
(e) Technical Amendments.--
(1) 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 qualifying advanced
clean coal technology unit attributable to any qualified
investment (as defined by section 48A(g)).''.
(2) Section 50(a)(4) is amended by striking ``and (2)'' and
inserting ``(2), and (6)''.
(3) Section 50(c) is amended by adding at the end the
following new paragraph:
``(6) Nonapplication.--Paragraphs (1) and (2) shall not
apply to any qualifying advanced clean coal technology unit
credit under section 48A.''.
(4) 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. Qualifying advanced clean coal technology unit credit.''.
(f) Effective Date.--The amendments made by this section
shall apply to periods after the date of the enactment of
this Act, 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. 412. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED
CLEAN COAL TECHNOLOGY UNIT.

(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:

[[Page S10318]]

``SEC. 45J. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED
CLEAN COAL TECHNOLOGY UNIT.

``(a) General Rule.--For purposes of section 38, the
qualifying advanced clean coal technology production credit
of any taxpayer for any taxable year is equal to--
``(1) the applicable amount of advanced clean coal
technology production credit, multiplied by
``(2) the applicable percentage (as determined under
section 48A(c)) of the sum of--
``(A) the kilowatt hours of electricity, plus
``(B) each 3,413 Btu of fuels or chemicals,
produced by the taxpayer during such taxable year at a
qualifying advanced clean coal technology unit, but only if
such production occurs during the 10-year period beginning on
the date the unit was originally placed in service (or
returned to service after becoming a qualifying advanced
clean coal technology unit).
``(b) Applicable Amount.--For purposes of this section--
``(1) In general.--Except as provided in paragraph (2), the
applicable amount of advanced clean coal technology
production credit with respect to production from a
qualifying advanced clean coal technology unit shall be
determined as follows:
``(A) If the qualifying advanced clean coal technology unit
is producing electricity only:
``(i) In the case of a unit originally placed in service
before 2009, if--

------------------------------------------------------------------------
The applicable
amount is:
---------------------
``The design net heat rate is:            For 1st 5   For 2d 5
years of   years of
such       such
service    service
------------------------------------------------------------------------
Not more than 8,500...............................    $.0060     $.0038
More than 8,500 but not more than 8,750...........    $.0025     $.0010
More than 8,750 but less than 8,900...............    $.0010    $.0010.
------------------------------------------------------------------------

``(ii) In the case of a unit originally placed in service
after 2008 and before 2013, if--

------------------------------------------------------------------------
The applicable
amount is:
---------------------
``The design net heat rate is:            For 1st 5   For 2d 5
years of   years of
such       such
service    service
------------------------------------------------------------------------
Not more than 7,770...............................    $.0105     $.0090
More than 7,770 but not more than 8,125...........    $.0085     $.0068
More than 8,125 but less than 8,500...............    $.0075    $.0055.
------------------------------------------------------------------------

``(iii) In the case of a unit originally placed in service
after 2012 and before 2017, if--

------------------------------------------------------------------------
The applicable
amount is:
---------------------
``The design net heat rate is:            For 1st 5   For 2d 5
years of   years of
such       such
service    service
------------------------------------------------------------------------
Not more than 7,380...............................    $.0140     $.0115
More than 7,380 but not more than 7,720...........    $.0120    $.0090.
------------------------------------------------------------------------

``(B) If the qualifying advanced clean coal technology unit
is producing fuel or chemicals:
``(i) In the case of a unit originally placed in service
before 2009, if--

------------------------------------------------------------------------
The applicable
amount is:
---------------------
``The unit design net thermal efficiency (HHV) is:  For 1st 5   For 2d 5
years of   years of
such       such
service    service
------------------------------------------------------------------------
Not less than 40.6 percent........................    $.0060     $.0038
Less than 40.6 but not less than 40 percent.......    $.0025     $.0010
Less than 40 but not less than 38.4 percent.......    $.0010    $.0010.
------------------------------------------------------------------------

``(ii) In the case of a unit originally placed in service
after 2008 and before 2013, if--

------------------------------------------------------------------------
The applicable
amount is:
---------------------
``The unit design net thermal efficiency (HHV) is:  For 1st 5   For 2d 5
years of   years of
such       such
service    service
------------------------------------------------------------------------
Not less than 43.6 percent........................    $.0105     $.0090
Less than 43.6 but not less than 42 percent.......    $.0085     $.0068
Less than 42 but not less than 40.2 percent.......    $.0075    $.0055.
------------------------------------------------------------------------

``(iii) In the case of a unit originally placed in service
after 2012 and before 2017, if--

------------------------------------------------------------------------
The applicable
amount is:
---------------------
``The unit design net thermal efficiency (HHV) is:  For 1st 5   For 2d 5
years of   years of
such       such
service    service
------------------------------------------------------------------------

Not less than 44.2 percent........................    $.0140     $.0115
Less than 44.2 but not less than 43.9 percent.....    $.0120    $.0090.
------------------------------------------------------------------------

``(2) Special rule for units qualifying for greater
applicable amount when placed in service.--If, at the time a
qualifying advanced clean coal technology unit is placed in
service, production from the unit would be entitled to a
greater applicable amount if such unit had been placed in
service at a later date, the applicable amount for such unit
shall be such greater amount.
``(c) Inflation Adjustment.--For calendar years after 2004,
each dollar amount in subsection (b)(1) shall be adjusted by
multiplying such amount by the inflation adjustment factor
for the calendar year in which the amount is applied. If any
amount as increased under the preceding sentence is not a
multiple of 0.01 cent, such amount shall be rounded to the
nearest multiple of 0.01 cent.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) In general.--Any term used in this section which is
also used in section 45I or 48A shall have the meaning given
such term in such section.
``(2) Applicable rules.--The rules of paragraphs (3), (4),
and (5) of section 45(d) shall apply.''.
(b) Credit Treated as 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 (19), by striking the period at the end of
paragraph (20) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(21) the qualifying advanced clean coal technology
production credit determined under section 45J(a).''.
(c) Transitional Rule.--Section 39(d) (relating to
transitional rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(18) No carryback of section 45j credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the qualifying advanced
clean coal technology production credit determined under
section 45J may be carried back to a taxable year ending on
or before the date of the enactment of such section.''.
(d) Denial of Double Benefit.--Section 29(d) (relating to
other definitions and special rules) is amended by adding at
the end the following new paragraph:
``(9) Denial of double benefit.--This section shall not
apply with respect to any qualified fuel the production of
which may be taken into account for purposes of determining
the credit under section 45J.''.
(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. 45J. Credit for production from a qualifying advanced clean coal
technology unit.''.
(f) Effective Date.--The amendments made by this section
shall apply to production after the date of the enactment of
this Act, in taxable years ending after such date.

Subtitle C--Treatment of Persons Not Able To Use Entire Credit

SEC. 421. TREATMENT OF PERSONS NOT ABLE TO USE ENTIRE CREDIT.

(a) In General.--Section 45I, as added by this Act, is
amended by adding at the end the following new subsection:
``(f) Treatment of Person Not Able To Use Entire Credit.--
``(1) Allowance of credits.--
``(A) In general.--Any credit allowable under this section,
section 45J, or section 48A with respect to a facility owned
by a person described in subparagraph (B) may be transferred
or used as provided in this subsection, and the determination
as to whether the credit is allowable shall be made without
regard to the tax-exempt status of the person.
``(B) Persons described.--A person is described in this
subparagraph if the person is--
``(i) an organization described in section 501(c)(12)(C)
and exempt from tax under section 501(a),
``(ii) an organization described in section 1381(a)(2)(C),
``(iii) a public utility (as defined in section
136(c)(2)(B)),
``(iv) any State or political subdivision thereof, the
District of Columbia, or any agency or instrumentality of any
of the foregoing,
``(v) any Indian tribal government (within the meaning of
section 7871) or any agency or instrumentality thereof, or
``(vi) the Tennessee Valley Authority.
``(2) Transfer of credit.--
``(A) In general.--A person described in clause (i), (ii),
(iii), (iv), or (v) of paragraph (1)(B) may transfer any
credit to which paragraph (1)(A) applies through an
assignment to any other person not described in paragraph
(1)(B). Such transfer may be revoked only with the consent of
the Secretary.
``(B) Regulations.--The Secretary shall prescribe such
regulations as necessary to ensure that any credit described
in subparagraph (A) is claimed once and not reassigned by
such other person.
``(C) Transfer proceeds treated as arising from essential
government function.--Any proceeds derived by a person
described in clause (iii), (iv), or (v) of paragraph (1)(B)
from the transfer of any credit under subparagraph (A) shall
be treated as arising

[[Page S10319]]

from the exercise of an essential government function.
``(3) Use of credit as an offset.--Notwithstanding any
other provision of law, in the case of a person described in
clause (i), (ii), or (v) of paragraph (1)(B), any credit to
which paragraph (1)(A) applies may be applied by such person,
to the extent provided by the Secretary of Agriculture, as a
prepayment of any loan, debt, or other obligation the entity
has incurred under subchapter I of chapter 31 of title 7 of
the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.),
as in effect on the date of the enactment of this section.
``(4) Use by tva.--
``(A) In general.--Notwithstanding any other provision of
law, in the case of a person described in paragraph
(1)(B)(vi), any credit to which paragraph (1)(A) applies may
be applied as a credit against the payments required to be
made in any fiscal year under section 15d(e) of the Tennessee
Valley Authority Act of 1933 (16 U.S.C. 831n-4(e)) as an
annual return on the appropriations investment and an annual
repayment sum.
``(B) Treatment of credits.--The aggregate amount of
credits described in paragraph (1)(A) with respect to such
person shall be treated in the same manner and to the same
extent as if such credits were a payment in cash and shall be
applied first against the annual return on the appropriations
investment.
``(C) Credit carryover.--With respect to any fiscal year,
if the aggregate amount of credits described paragraph (1)(A)
with respect to such person exceeds the aggregate amount of
payment obligations described in subparagraph (A), the excess
amount shall remain available for application as credits
against the amounts of such payment obligations in succeeding
fiscal years in the same manner as described in this
paragraph.
``(5) Credit not income.--Any transfer under paragraph (2)
or use under paragraph (3) of any credit to which paragraph
(1)(A) applies shall not be treated as income for purposes of
section 501(c)(12).
``(6) Treatment of unrelated persons.--For purposes of this
subsection, transfers among and between persons described in
clauses (i), (ii), (iii), (iv), and (v) of paragraph (1)(B)
shall be treated as transfers between unrelated parties.''.
(b) Effective Date.--The amendment made by this section
shall apply to production after the date of the enactment of
this Act, in taxable years ending after such date.

TITLE V--OIL AND GAS PROVISIONS

SEC. 501. 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 new
section:

``SEC. 45K. 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 crude 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.--
``(i) In general.--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.
``(ii) Inflation adjustment factor.--For purposes of clause
(i)--

``(I) In general.--The term `inflation adjustment factor'
means, with respect to a calendar year, a fraction the
numerator of which is the GDP implicit price deflator for the
preceding calendar year and the denominator of which is the
GDP implicit price deflator for the calendar year 2002.
``(II) GDP implicit price deflator.--The term `GDP implicit
price deflator' means, for any calendar year, the most recent
revision of the implicit price deflator for the gross
domestic product as of June 30 of such calendar year as
computed by the Department of Commerce before October 1 of
such calendar year.

``(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 29(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 domestic 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 equivalents.
``(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) Noncompliance with pollution laws.--Production from
any well during any period in which such well is not in
compliance with applicable Federal pollution prevention,
control, and permit requirements shall not be treated as
qualified crude oil production or qualified natural gas
production.
``(4) 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 equivalents, 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).
``(C) Barrel equivalent.--The term `barrel equivalent'
means, with respect to natural gas, a conversation ratio of
6,000 cubic feet of natural gas to 1 barrel of crude oil.
``(D) Domestic natural gas.--The term `domestic natural
gas' does not include Alaska natural gas (as defined in
section 45M(c)(1)).
``(d) Other Rules.--
``(1) Production attributable to the taxpayer.--In the case
of a qualified marginal well in which there is more than 1
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 29 for the
taxable year, no credit shall be allowable under this section
unless the taxpayer elects not to claim the credit under
section 29 with respect to the well.''.
(b) Credit Treated as 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 (20), by striking the period at the end of
paragraph (21) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(22) the marginal oil and gas well production credit
determined under section 45K(a).''.
(c) No Carryback of Marginal Oil and Gas Well Production
Credit Before Effective Date.--Section 39(d) (relating to
transition rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(19) No carryback of marginal oil and gas well production
credit before effective date.--No portion of the unused
business credit for any taxable year which is attributable to
the marginal oil and gas well production credit determined
under section 45K may be carried back to a taxable year
ending on or before the date of the enactment of such
section.''.
(d) Coordination With Section 29.--Section 29(a) (relating
to allowance of credit) is amended by striking ``There'' and
inserting ``At the election of the taxpayer, there''.
(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. 45K. Credit for producing oil and gas from marginal wells.''.

[[Page S10320]]

(f) Effective Date.--The amendments made by this section
shall apply to production in taxable years beginning after
the date of the enactment of this Act.

SEC. 502. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR
PROPERTY.

(a) In General.--Section 168(e)(3)(C) (defining 7-year
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.--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) Natural gas gathering line.--The term `natural gas
gathering line' means--
``(A) 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
certificated by the Federal Energy Regulatory Commission as
an interstate transmission pipeline,
``(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,
or
``(B) any other pipe, equipment, or appurtenances
determined to be a gathering line by the Federal Energy
Regulatory Commission.
(c) 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 (C)(i) the following new item:

``(C)(ii).........................................................10''.
(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. 503. 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 Expense.--
``(1) In general.--A small business refiner may elect to
treat any qualified capital costs as an expense which is not
chargeable to capital account. Any qualified cost which is so
treated shall be allowed as a deduction for the taxable year
in which the cost is paid or incurred.
``(2) Limitation.--
``(A) In general.--The aggregate costs which may be taken
into account under this subsection for any taxable year may
not exceed the applicable percentage of the qualified capital
costs paid or incurred for the taxable year.
``(B) Applicable percentage.--For purposes of subparagraph
(A)--
``(i) In general.--Except as provided in clause (ii), the
applicable percentage is 75 percent.
``(ii) Reduced percentage.--In the case of a small business
refiner with average daily refinery runs or average retained
production for the period described in subsection (b)(2) in
excess of 155,000 barrels, the percentage described in clause
(i) shall be reduced (but not below zero) by the product of--

``(I) such percentage (before the application of this
clause), and
``(II) the ratio of such excess to 50,000 barrels.

``(b) Definitions.--For purposes of this section--
``(1) Qualified capital costs.--The term `qualified capital
costs' means any costs which--
``(A) are otherwise chargeable to capital account, and
``(B) are paid or incurred for the purpose of complying
with the Highway Diesel Fuel Sulfur Control Requirement of
the Environmental Protection Agency, as in effect on the date
of the enactment of this section, with respect to a facility
placed in service by the taxpayer before such date.
``(2) Small business refiner.--The term `small business
refiner' means, with respect to any taxable year, a refiner
of crude oil--
``(A) which, within the refinery operations of the
business, employs not more than 1,500 employees on any day
during such taxable year, and
``(B) the average daily refinery run or average retained
production of which for the 1-year period ending on the date
of the enactment of this section did not exceed 205,000
barrels.
``(c) Coordination With Other Provisions.--Section 280B
shall not apply to amounts which are treated as expenses
under this section.
``(d) Basis Reduction.--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).
``(e) Controlled Groups.--For purposes of this section, all
persons treated as a single employer under subsection (b),
(c), (m), or (o) of section 414 shall be treated as a single
employer.''.
(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 inserting after subparagraph (I)
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(d).''.
(5) Section 1245(a), as amended by this Act, is amended by
inserting ``179C,'' after ``179B,'' both places it appears in
paragraphs (2)(C) and (3)(C).
(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. 504. ENVIRONMENTAL TAX CREDIT.

(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. 45L. ENVIRONMENTAL TAX CREDIT.

``(a) In General.--For purposes of section 38, the amount
of the environmental tax credit determined under this section
with respect to any small business refiner for any taxable
year is an amount equal to 5 cents for every gallon of low-
sulfur diesel fuel produced at a facility by such small
business refiner during such taxable year.
``(b) Maximum Credit.--
``(1) In general.--For any small business refiner, the
aggregate amount determined under subsection (a) for any
taxable year with respect to any facility shall not exceed
the applicable percentage of the qualified capital costs paid
or incurred by such small business refiner with respect to
such facility during the applicable period, reduced by the
credit allowed under subsection (a) with respect to such
facility for any preceding year.
``(2) Applicable percentage.--For purposes of paragraph
(1)--
``(A) In general.--Except as provided in subparagraph (B),
the applicable percentage is 25 percent.
``(B) Reduced percentage.--The percentage described in
subparagraph (A) shall be reduced in the same manner as under
section 179C(a)(2)(B)(ii).
``(c) Definitions.--For purposes of this section--
``(1) In general.--The terms `small business refiner' and
`qualified capital costs' have the same meaning as given in
section 179C.
``(2) Low-sulfur diesel fuel.--The term `low-sulfur diesel
fuel' means diesel fuel containing not more than 15 parts per
million of sulfur.
``(3) Applicable period.--The term `applicable period'
means, with respect to any facility, the period beginning on
the day after the date of the enactment of this section and
ending with 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.
``(4) Applicable epa regulations.--The term `applicable EPA
regulations' means the Highway Diesel Fuel Sulfur Control
Requirements of the Environmental Protection Agency, as in
effect on the date of the enactment of this section.
``(d) Certification.--
``(1) Required.--Not later than the date which is 30 months
after the first day of the first taxable year in which a
credit is allowed under this section with respect to a
facility, the small business refiner shall obtain a
certification from the Secretary, in 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, in 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.

[[Page S10321]]

``(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 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.
``(e) Controlled Groups.--For purposes of this section, all
persons treated as a single employer under subsection (b),
(c), (m), or (o) of section 414 shall be treated as a single
employer.
``(f) 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 quantity or 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 rules for decrease in credits for taxable
year.--If the amount of the credit of a cooperative
organization determined under subsection (a) for a taxable
year is less than the amount of such credit shown on the
return of the cooperative organization for such year, an
amount equal to the excess of--
``(A) such reduction, over
``(B) the amount not apportioned to such patrons under
paragraph (1) for the taxable year,
shall be treated as an increase in tax imposed by this
chapter on the organization. Such increase 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.--Section
38(b) (relating to current year business credit), as amended
by this Act, is amended by striking ``plus'' at the end of
paragraph (21), by striking the period at the end of
paragraph (22) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(23) in the case of a small business refiner, the
environmental tax credit determined under section 45L(a).''.
(c) Denial of Double Benefit.--Section 280C (relating to
certain expenses for which credits are allowable), as amended
by this Act, is amended by adding at the end the following
new subsection:
``(e) Environmental Tax 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 45L(a).''.
(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 new item:

``Sec. 45L. Environmental tax credit.''.
(e) 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. 505. 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 60,000 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. 506. MARGINAL PRODUCTION INCOME LIMIT EXTENSION.

Section 613A(c)(6)(H) (relating to temporary suspension of
taxable income limit with respect to marginal production) is
amended by striking ``2004'' and inserting ``2007''.

SEC. 507. 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. 508. 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 costs paid or incurred in taxable years
beginning after the date of the enactment of this Act.

SEC. 509. 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.--
``(1) Oil and gas.--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, notwithstanding subsection (f),
this section shall apply with respect to such fuels produced
at such well or facility before the close of the 3-year
period beginning on the date that such well is drilled or
such facility is placed in service.
``(2) Facilities producing fuels from agricultural and
animal waste.--
``(A) In general.--In the case of facility for producing
liquid, gaseous, or solid fuels from qualified agricultural
and animal wastes, including such fuels when used as
feedstocks, which was 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 before the close of the 3-year period beginning on
the date such facility is placed in service.
``(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.
``(3) Wells producing viscous oil.--
``(A) In general.--In the case of a well for producing
viscous oil which was 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
well before the close of the 3-year period beginning on the
date such well is placed in service.
``(B) Viscous oil.--The term `viscous oil' means heavy oil,
as defined in section 613A(c)(6), except that--
``(i) `22 degrees' shall be substituted for `20 degrees' in
applying subparagraph (F) thereof, and

[[Page S10322]]

``(ii) in all cases, the oil gravity shall be measured from
the initial well-head samples, drill cuttings, or down hole
samples.
``(C) Waiver of unrelated person requirement.--In the case
of viscous oil, the requirement under subsection (a)(2)(A) of
a sale to an unrelated person shall not apply to any sale to
the extent that the viscous oil is not consumed in the
immediate vicinity of the wellhead.
``(4) Facilities producing refined coal.--
``(A) In general.--In the case of a facility described in
subparagraph (C) for producing refined coal which was 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 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 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) Qualifying advanced clean coal technology units
excluded.--A facility described in this subparagraph shall
not include a qualifying advanced clean coal technology unit
(as defined in section 48A(b)).
``(5) Coalmine gas.--
``(A) In general.--This section shall apply to coalmine
gas--
``(i) captured or extracted by the taxpayer during the
period beginning after the date of the enactment of this
subsection and ending before January 1, 2007, 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 State and Federal pollution prevention, control,
and permit requirements.
``(6) 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 (2), (3), (4), or (5) 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 project shall
not exceed an average barrel-of-oil equivalent of 200,000
cubic feet of natural gas per day. Days before the date the
project is placed in service shall not be taken into account
in determining such average.
``(C) Credit amount.--The dollar amount applicable under
subsection (a)(1) shall be $3 (and the inflation adjustment
under subsection (b)(2) shall not apply to such amount).''.
(b) Clarification of Placed in Service Date for Certain
Landfill Gas Facilities.--Section 29(d) (relating to other
definitions and special rules) is amended by adding at the
end the following new paragraph:
``(9) Clarification of placed in service date for certain
landfill gas facilities.--
``(A) In general.--In the case of a landfill placed in
service on or before the date of the enactment of this
paragraph--
``(i) a facility for producing qualified fuel from such
landfill shall include all wells, pipes, and related
components used to collect landfill gas, and
``(ii) production of landfill gas from such landfill
attributable to wells, pipes, and related components placed
in service after such date of enactment shall be treated as
produced from a facility placed in service on the date such
wells, pipes, and related components were placed in service.
``(B) Landfill gas.--The term `landfill gas' means gas
described in subsection (c)(1)(B)(ii) and derived from the
biodegradation of municipal solid waste.''.
(c) Extension for certain fuel produced at existing
facilities.--Section 29(f)(2) (relating to application of
section) is amended by inserting ``(January 1, 2006, in the
case of any coke, coke gas, or natural gas and byproducts
produced by coal gasification from lignite in a facility
described in paragraph (1)(B))'' after ``January 1, 2003''.
(d) Study of Coalbed Methane.--
(1) In general.--The Secretary of the Treasury shall
conduct a study regarding the effect of section 29 of the
Internal Revenue Code of 1986 on the production of coalbed
methane.
(2) Contents of study.--The study under paragraph (1) shall
estimate the total amount of credits under section 29 of the
Internal Revenue Code of 1986 claimed annually and in the
aggregate which are related to the production of coalbed
methane since the date of the enactment of such section 29.
Such study shall report the annual value of such credits
allowable for coalbed methane compared to the average annual
wellhead price of natural gas (per thousand cubic feet of
natural gas). Such study shall also estimate the incremental
increase in production of coalbed methane which has resulted
from the enactment of such section 29, and the cost to the
Federal Government, in terms of the net tax benefits claimed,
per thousand cubic feet of incremental coalbed methane
produced annually and in the aggregate since such enactment.
(e) Effective Date.--The amendments made by this section
shall apply to fuel sold after the date of the enactment of
this Act, in taxable years ending after such date.

SEC. 510. NATURAL GAS DISTRIBUTION LINES TREATED AS 15-YEAR
PROPERTY.

(a) In General.--Section 168(e)(3)(E) (defining 15-year
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) (relating to special rule for certain property
assigned to classes), as amended by this Act, is amended by
adding after the item relating to subparagraph (E)(iii) the
following new item:

``(E)(iv).........................................................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.

SEC. 511. CREDIT FOR ALASKA NATURAL GAS.

(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. 45M. ALASKA NATURAL GAS.

``(a) In General.--For purposes of section 38, the Alaska
natural gas credit for any taxable year is an amount equal to
the product of--
``(1) the credit amount, and
``(2) Alaska natural gas the production of which is
attributable to the taxpayer.
``(b) Credit Amount.--For purposes of this section--
``(1) In general.--The credit amount is $0.52 per 1,000,000
Btu of Alaska natural gas.
``(2) Reduction as gas prices increase.--
``(A) In general.--The dollar amount under paragraph (1)
shall 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 $0.83, bears to
``(ii) $0.52.
``(B) Applicable reference price.--For purposes of this
paragraph--
``(i) In general.--The applicable reference price for any
calendar month in a taxable year is the reference price for
the calendar month in which production occurs.
``(ii) Reference price.--The term `reference price' means,
with respect to any calendar month, a published market price
for natural gas in United States dollars per 1,000,000 Btu
(reduced by any gas transportation costs and gas processing
costs as determined by the appropriate national regulatory
body for natural gas transportation) as determined under
regulations by the Secretary.
``(C) Inflation adjustment.--
``(i) In general.--In the case of any taxable year
beginning in a calendar year after 2003, each of the dollar
amounts contained in paragraph (1) and subparagraph (A) of
this paragraph shall be increased to an amount equal to such
dollar amount multiplied by the inflation adjustment factor
for such calendar year.
``(ii) Inflation adjustment factor.--For purposes of clause
(i)--

``(I) In general.--The term `inflation adjustment factor'
means, with respect to a calendar year, a fraction the
numerator of which is the GDP implicit price deflator for the
preceding calendar year and the denominator of which is the
GDP implicit price deflator for the calendar year 2002.
``(II) GDP implicit price deflator.--The term `GDP implicit
price deflator' means, for any calendar year, the most recent
revision of the implicit price deflator for the gross
domestic product as of June 30 of such calendar year as
computed by the Department

[[Page S10323]]

of Commerce before October 1 of such calendar year.

``(c) Alaska Natural Gas.--For purposes of this section--
``(1) In general.--The term `Alaska natural gas' means
natural gas entering the Alaska natural gas pipeline (as
defined in section 168(i)(18) (determined without regard to
subparagraph (B) thereof)) which is produced from a well--
``(A) located in the area of the State of Alaska lying
north of 64 degrees North latitude, determined by excluding
the area of the Alaska National Wildlife Refuge (including
the continental shelf thereof within the meaning of section
638(1)), and
``(B) pursuant to the applicable State and Federal
pollution prevention, control, and permit requirements from
such area (including the continental shelf thereof within the
meaning of section 638(1)).
``(2) Natural gas.--The term `natural gas' has the meaning
given such term by section 613A(e)(2).
``(d) Special Rules.--For purposes of this section--
``(1) Production attributable to the taxpayer.--
``(A) In general.--In the case of a well in which there is
more than 1 person or entity--
``(i) entitled to production of Alaska natural gas, or
``(ii) at the election of the taxpayer, entitled to the
value of production as either an operating interest owner or
a royalty interest owner,
the portion of such production attributable to such person or
entity shall be determined on the basis of the ratio which
the person's or entity's interest in the production or the
value of production bears to the aggregate of the interests
of all operating interest owners and royalty interest owners
in the production or the value of production.
``(B) Partnership properties.--In the case of a
partnership, for purposes of applying subparagraph (A),
production shall be attributable to its partners based on
each partner's distributive share of Alaska natural gas which
is produced from partnership properties and attributable to
the partnership or its partners under subparagraph (A).
``(2) 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) Application of Section.--This section shall apply to
Alaska natural gas during the period--
``(1) beginning with the later of--
``(A) January 1, 2010, or
``(B) the initial date for the interstate transportation of
such Alaska natural gas, and
``(2) ending with the date which is 15 years after the date
described in paragraph (1).''.
(b) Credit Treated as 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 (22), by striking the period at the end of
paragraph (23) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(24) The Alaska natural gas credit determined under
section 45M(a).''.
(c) Allowing Credit Against Entire Regular Tax and Minimum
Tax.--
(1) In general.--Section 38(c) (relating to limitation
based on amount of tax), as amended by this Act, is amended
by redesignating paragraph (5) as paragraph (6) and by
inserting after paragraph (4) the following new paragraph:
``(5) Special rules for alaska natural gas credit.--
``(A) In general.--In the case of the Alaska natural gas
credit--
``(i) this section and section 39 shall be applied
separately with respect to the credit, and
``(ii) in applying paragraph (1) to the credit--

``(I) the amounts in subparagraphs (A) and (B) thereof
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 Alaska
natural gas credit).

``(B) Alaska natural gas credit.--For purposes of this
subsection, the term `Alaska natural gas credit' means the
credit allowable under subsection (a) by reason of section
45M(a).''.
(2) Conforming amendments.--Subclause (II) of section
38(c)(2)(A)(ii), as amended by this Act, subclause (II) of
section 38(c)(3)(A)(ii), as amended by this Act, and
subclause (II) of section 38(c)(4)(A)(ii), as added by this
Act, are each amended by inserting ``or the Alaska natural
gas credit'' after ``producer credit''.
(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 new item:

``Sec. 45M. Alaska natural gas.''.

SEC. 512. CERTAIN ALASKA NATURAL GAS PIPELINE PROPERTY
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 Alaska natural gas pipeline, and''.
(b) Alaska Natural Gas Pipeline.--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:
``(18) Alaska natural gas pipeline.--The term `Alaska
natural gas pipeline' means the natural gas pipeline system
located in the State of Alaska which--
``(A) has a capacity of more than 500,000,000,000 Btu of
natural gas per day, and
``(B) is placed in service after December 31, 2014.
Such term includes the pipe, trunk lines, related equipment,
and appurtenances used to carry natural gas, but does not
include any gas processing plant.''.
(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)........................................................10''.
(d) Effective Date.--The amendments made by this section
shall apply to property placed in service after December 31,
2014, in taxable years ending after such date.

SEC. 513. ARBITRAGE RULES NOT TO APPLY TO PREPAYMENTS FOR
NATURAL GAS.

(a) In General.--Section 148(b) (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 or for a utility owned by a governmental unit if
the amount of gas permitted to be acquired under the contract
for 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 use by a business 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) Overall limitation.--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 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--

[[Page S10324]]

``(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.--Section 141(c)(2) (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) Effective Date.--The amendment made by this section
shall apply to obligations issued after the date of the
enactment of this Act.

TITLE VI--ELECTRIC UTILITY RESTRUCTURING PROVISIONS

SEC. 601. 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.--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.''.
(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.--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--
``(A) the transfer of such Fund shall not cause such Fund
to be disqualified from the application of this section, and
``(B) no amount shall be treated as distributed from such
Fund, or be includable in gross income, by reason of such
transfer.''.
(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 excess of the total nuclear decommissioning costs with
respect to such nuclear power plant over the portion of such
costs taken into account in determining the ruling amount in
effect immediately before the transfer.
``(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 or a corresponding amount was not included
in gross income. 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 transferee and not the transferor. The preceding
sentence shall not apply if the transferor is an entity
exempt from tax under this chapter.
``(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 Amendment.--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 the date of the
enactment of this Act.

SEC. 602. TREATMENT OF CERTAIN INCOME OF COOPERATIVES.

(a) Income From Open Access and Nuclear Decommissioning
Transactions.--
(1) In general.--Section 501(c)(12)(C) (relating to list of
exempt organizations) 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 open access transaction (other than income
received or accrued directly or indirectly from a member),
``(iii) from any nuclear decommissioning transaction,
``(iv) from any asset exchange or conversion transaction,
or
``(v) from the prepayment of any loan, debt, or obligation
made, insured, or guaranteed under the Rural Electrification
Act of 1936.''.
(2) Definitions and special rules.--Section 501(c)(12) is
amended by adding at the end the following new subparagraphs:
``(E) For purposes of subparagraph (C)(ii)--
``(i) The term `open access transaction' means any
transaction meeting the open access requirements of any of
the following subclauses with respect to a mutual or
cooperative electric company:

``(I) The provision or sale of electric transmission
service or ancillary services meets the open access
requirements of this subclause only if such services are
provided on a nondiscriminatory open access basis pursuant to
an open access transmission tariff filed with and approved by
FERC, including an acceptable reciprocity tariff, or under a
regional transmission organization agreement approved by
FERC.
``(II) The provision or sale of electric energy
distribution services or ancillary services meets the open
access requirements of this subclause only if such services
are provided on a nondiscriminatory open access basis to end-
users served by distribution facilities owned by the mutual
or cooperative electric company (or its members).
``(III) The delivery or sale of electric energy generated
by a generation facility meets the open access requirements
of this subclause only if such facility is directly connected
to distribution facilities owned by the mutual or cooperative
electric company (or its members) which owns the generation
facility, and such distribution facilities meet the open
access requirements of subclause (II).

``(ii) Clause (i)(I) shall apply in the case of a
voluntarily filed tariff only if the mutual or cooperative
electric company files a report with FERC within 90 days
after the date of the enactment of this subparagraph relating
to whether or not such company will join a regional
transmission organization.
``(iii) A mutual or cooperative electric company shall be
treated as meeting the open access requirements of clause
(i)(I) if a regional transmission organization controls the
transmission facilities.
``(iv) References to FERC in this subparagraph shall be
treated as including references to 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))) or references to the Rural Utilities
Service with respect to any other facility not subject to
FERC jurisdiction.
``(v) For purposes of this subparagraph--

``(I) The term `transmission facility' means an electric
output facility (other than a generation facility) which
operates at an electric voltage of 69 kilovolts or greater.
To the extent provided in regulations, such term includes any
output facility which FERC determines is a transmission
facility under standards applied by FERC under the Federal
Power Act (as in effect on the date of

[[Page S10325]]

the enactment of the Energy Tax Incentives Act of 2003).
``(II) The term `regional transmission organization'
includes an independent system operator.
``(III) The term `FERC' means the Federal Energy Regulatory
Commission.

``(F) 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) 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.--
Section 501(c)(12), 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 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 calendar year which includes the date of the
enactment of this subparagraph or, if later, at the election
of the mutual or cooperative electric company--
``(I) the first year that such electric company offers
nondiscriminatory open access, or
``(II) the first year in which at least 10 percent of such
electric company's sales are not to members of such electric
company.
``(viii) A company shall not fail to be treated as a mutual
or cooperative 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) In the case of a mutual or cooperative electric
company, income from any open access transaction 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.--
Section 512(b) (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. 603. 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.--For purposes of this subtitle, if a
taxpayer elects the application of this subsection to a
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
such ordinary income which is required to be included in
gross income for such taxable year (determined without regard
to this subsection),
shall be so recognized and included ratably over the 8-
taxable year period beginning with such taxable year.
``(2) Qualifying electric transmission transaction.--For
purposes of this subsection, the term `qualifying electric
transmission transaction' means any sale or other disposition
before January 1, 2008, of--
``(A) property used by the taxpayer 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.
``(3) Independent transmission company.--For purposes of
this subsection, the term `independent transmission company'
means--
``(A) a regional transmission organization 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) is not
a market participant within the meaning of such Commission's
rules applicable to regional transmission organizations, 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
regional transmission organization before the close of the
period specified in such authorization, but not later than
January 1, 2008, or
``(C) in the case of facilities subject to the exclusive
jurisdiction of the Public Utility Commission of Texas, a
person which is approved by that Commission as consistent
with Texas State law regarding an independent transmission
organization.
``(4) Election.--An election under paragraph (1), once
made, shall be irrevocable.
``(5) 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 amendment made by this section
shall apply to transactions occurring after the date of the
enactment of this Act.

TITLE VII--ADDITIONAL PROVISIONS

SEC. 701. EXTENSION OF ACCELERATED DEPRECIATION AND WAGE
CREDIT BENEFITS ON INDIAN RESERVATIONS.

(a) Special Recovery Period for Property on Indian
Reservations.--Section 168(j)(8) (relating to termination) is
amended by striking ``2004'' and inserting ``2005''.
(b) Indian Employment Credit.--Section 45A(f) (relating to
termination) is amended by striking ``2004'' and inserting
``2005''.

SEC. 702. STUDY OF EFFECTIVENESS OF CERTAIN PROVISIONS BY
GAO.

(a) Study.--The Comptroller General of the United States
shall undertake an ongoing analysis of--
(1) the effectiveness of the alternative motor vehicles and
fuel incentives provisions under title II and the
conservation and energy efficiency provisions under title
III, and
(2) the recipients of the tax benefits contained in such
provisions, including an identification of such recipients by
income and other appropriate measurements.
Such analysis shall quantify the effectiveness of such
provisions by examining and comparing the Federal
Government's forgone revenue to the aggregate amount of
energy actually conserved and tangible environmental benefits
gained as a result of such provisions.
(b) Reports.--The Comptroller General of the United States
shall report the analysis required under subsection (a) to
Congress not later than December 31, 2004, and annually
thereafter.

SEC. 703. 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.

[[Page S10326]]

(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. 704. EXPANSION OF RESEARCH CREDIT.

(a) Credit for Expenses Attributable to Certain
Collaborative Energy Research Consortia.--
(1) In general.--Section 41(a) (relating to credit for
increasing research activities) is amended by striking
``and'' at the end of paragraph (1), by striking the period
at the end of paragraph (2) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(3) 20 percent of the amounts paid or incurred by the
taxpayer in carrying on any trade or business of the taxpayer
during the taxable year (including as contributions) to an
energy research consortium.''.
(2) Energy research consortium defined.--Section 41(f)
(relating to special rules) is amended by adding at the end
the following new paragraph:
``(6) Energy research consortium.--
``(A) In general.--The term `energy research consortium'
means any organization--
``(i) which is--

``(I) described in section 501(c)(3) and is exempt from tax
under section 501(a) and is organized and operated primarily
to conduct energy research, or
``(II) organized and operated primarily to conduct energy
research in the public interest (within the meaning of
section 501(c)(3)),

``(ii) which is not a private foundation,
``(iii) to which at least 5 unrelated persons paid or
incurred during the calendar year in which the taxable year
of the organization begins amounts (including as
contributions) to such organization for energy research, and
``(iv) to which no single person paid or incurred
(including as contributions) during such calendar year an
amount equal to more than 50 percent of the total amounts
received by such organization during such calendar year for
energy research.
``(B) Treatment of persons.--All persons treated as a
single employer under subsection (a) or (b) of section 52
shall be treated as related persons for purposes of
subparagraph (A)(iii) and as a single person for purposes of
subparagraph (A)(iv).''.
(3) Conforming amendment.--Section 41(b)(3)(C) is amended
by inserting ``(other than an energy research consortium)''
after ``organization''.
(b) Repeal of Limitation on Contract Research Expenses Paid
to Small Businesses, Universities, and Federal
Laboratories.--Section 41(b)(3) (relating to contract
research expenses) is amended by adding at the end the
following new subparagraph:
``(D) Amounts paid to eligible small businesses,
universities, and federal laboratories.--
``(i) In general.--In the case of amounts paid by the
taxpayer to--

``(I) an eligible small business,
``(II) an institution of higher education (as defined in
section 3304(f)), or
``(III) an organization which is a Federal laboratory,

for qualified research which is energy research, subparagraph
(A) shall be applied by substituting `100 percent' for `65
percent'.
``(ii) Eligible small business.--For purposes of this
subparagraph, the term `eligible small business' means a
small business with respect to which the taxpayer does not
own (within the meaning of section 318) 50 percent or more
of--

``(I) in the case of a corporation, the outstanding stock
of the corporation (either by vote or value), and
``(II) in the case of a small business which is not a
corporation, the capital and profits interests of the small
business.

``(iii) Small business.--For purposes of this
subparagraph--

``(I) In general.--The term `small business' means, with
respect to any calendar year, any person if the annual
average number of employees employed by such person during
either of the 2 preceding calendar years was 500 or fewer.
For purposes of the preceding sentence, a preceding calendar
year may be taken into account only if the person was in
existence throughout the year.
``(II) Startups, controlled groups, and predecessors.--
Rules similar to the rules of subparagraphs (B) and (D) of
section 220(c)(4) shall apply for purposes of this clause.

``(iv) Federal laboratory.--For purposes of this
subparagraph, the term `Federal laboratory' has the meaning
given such term by section 4(6) of the Stevenson-Wydler
Technology Innovation Act of 1980 (15 U.S.C. 3703(6)), as in
effect on the date of the enactment of the Energy Tax
Incentives Act of 2003.''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after the date of the
enactment of this Act.

TITLE VIII--REVENUE PROVISIONS

Subtitle A--Provisions Designed To Curtail Tax Shelters

SEC. 801. PENALTY FOR FAILING TO DISCLOSE REPORTABLE
TRANSACTION.

(a) In General.--Part I of subchapter B of chapter 68
(relating to assessable penalties) is amended by inserting
after section 6707 the following new section:

``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE
TRANSACTION INFORMATION WITH RETURN OR
STATEMENT.

``(a) Imposition of Penalty.--Any person who fails to
include on any return or statement any information with
respect to a reportable transaction which is required under
section 6011 to be included with such return or statement
shall pay a penalty in the amount determined under subsection
(b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraphs (2) and
(3), the amount of the penalty under subsection (a) shall be
$50,000.
``(2) Listed transaction.--The amount of the penalty under
subsection (a) with respect to a listed transaction shall be
$100,000.
``(3) Increase in penalty for large entities and high net
worth individuals.--
``(A) In general.--In the case of a failure under
subsection (a) by--
``(i) a large entity, or
``(ii) a high net worth individual,
the penalty under paragraph (1) or (2) shall be twice the
amount determined without regard to this paragraph.
``(B) Large entity.--For purposes of subparagraph (A), the
term `large entity' means, with respect to any taxable year,
a person (other than a natural person) with gross receipts in
excess of $10,000,000 for the taxable year in which the
reportable transaction occurs or the preceding taxable year.
Rules similar to the rules of paragraph (2) and subparagraphs
(B), (C), and (D) of paragraph (3) of section 448(c) shall
apply for purposes of this subparagraph.
``(C) High net worth individual.--For purposes of
subparagraph (A), the term `high net worth individual' means,
with respect to a reportable transaction, a natural person
whose net worth exceeds $2,000,000 immediately before the
transaction.
``(c) Definitions.--For purposes of this section--
``(1) Reportable transaction.--The term `reportable
transaction' means any transaction with respect to which
information is required to be included with a return or
statement because, as determined under regulations prescribed
under section 6011, such transaction is of a type which the
Secretary determines as having a potential for tax avoidance
or evasion.
``(2) Listed transaction.--Except as provided in
regulations, the term `listed transaction' means a reportable
transaction which is the same as, or substantially similar
to, a transaction specifically identified by the Secretary as
a tax avoidance transaction for purposes of section 6011.
``(d) Authority To Rescind Penalty.--
``(1) In general.--The Commissioner of Internal Revenue may
rescind all or any portion of any penalty imposed by this
section with respect to any violation if--
``(A) the violation is with respect to a reportable
transaction other than a listed transaction,
``(B) the person on whom the penalty is imposed has a
history of complying with the requirements of this title,
``(C) it is shown that the violation is due to an
unintentional mistake of fact;
``(D) imposing the penalty would be against equity and good
conscience, and
``(E) rescinding the penalty would promote compliance with
the requirements of this title and effective tax
administration.
``(2) Discretion.--The exercise of authority under
paragraph (1) shall be at the sole discretion of the
Commissioner and may be delegated only to the head of the
Office of Tax Shelter Analysis. The Commissioner, in the
Commissioner's sole discretion, may establish a procedure to
determine if a penalty

[[Page S10327]]

should be referred to the Commissioner or the head of such
Office for a determination under paragraph (1).
``(3) No appeal.--Notwithstanding any other provision of
law, any determination under this subsection may not be
reviewed in any administrative or judicial proceeding.
``(4) Records.--If a penalty is rescinded under paragraph
(1), the Commissioner shall place in the file in the Office
of the Commissioner the opinion of the Commissioner or the
head of the Office of Tax Shelter Analysis with respect to
the determination, including--
``(A) the facts and circumstances of the transaction,
``(B) the reasons for the rescission, and
``(C) the amount of the penalty rescinded.
``(5) Report.--The Commissioner shall each year report to
the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate--
``(A) a summary of the total number and aggregate amount of
penalties imposed, and rescinded, under this section, and
``(B) a description of each penalty rescinded under this
subsection and the reasons therefor.
``(e) Penalty Reported to SEC.--In the case of a person--
``(1) which is required to file periodic reports under
section 13 or 15(d) of the Securities Exchange Act of 1934 or
is required to be consolidated with another person for
purposes of such reports, and
``(2) which--
``(A) is required to pay a penalty under this section with
respect to a listed transaction, or
``(B) is required to pay a penalty under section 6662A with
respect to any reportable transaction at a rate prescribed
under section 6662A(c),

the requirement to pay such penalty shall be disclosed in
such reports filed by such person for such periods as the
Secretary shall specify. Failure to make a disclosure in
accordance with the preceding sentence shall be treated as a
failure to which the penalty under subsection (b)(2) applies.
``(f) Coordination With Other Penalties.--The penalty
imposed by this section is in addition to any penalty imposed
under this title.''.
(b) Conforming Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by inserting after
the item relating to section 6707 the following:

``Sec. 6707A. Penalty for failure to include reportable transaction
information with return or statement.''.
(c) Effective Date.--The amendments made by this section
shall apply to returns and statements the due date for which
is after the date of the enactment of this Act.

SEC. 802. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS
AND OTHER REPORTABLE TRANSACTIONS HAVING A
SIGNIFICANT TAX AVOIDANCE PURPOSE.

(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662 the following new section:

``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERSTATEMENTS WITH RESPECT TO REPORTABLE
TRANSACTIONS.

``(a) Imposition of Penalty.--If a taxpayer has a
reportable transaction understatement for any taxable year,
there shall be added to the tax an amount equal to 20 percent
of the amount of such understatement.
``(b) Reportable Transaction Understatement.--For purposes
of this section--
``(1) In general.--The term `reportable transaction
understatement' means the sum of--
``(A) the product of--
``(i) the amount of the increase (if any) in taxable income
which results from a difference between the proper tax
treatment of an item to which this section applies and the
taxpayer's treatment of such item (as shown on the taxpayer's
return of tax), and
``(ii) the highest rate of tax imposed by section 1
(section 11 in the case of a taxpayer which is a
corporation), and
``(B) the amount of the decrease (if any) in the aggregate
amount of credits determined under subtitle A which results
from a difference between the taxpayer's treatment of an item
to which this section applies (as shown on the taxpayer's
return of tax) and the proper tax treatment of such item.

For purposes of subparagraph (A), any reduction of the excess
of deductions allowed for the taxable year over gross income
for such year, and any reduction in the amount of capital
losses which would (without regard to section 1211) be
allowed for such year, shall be treated as an increase in
taxable income.
``(2) Items to which section applies.--This section shall
apply to any item which is attributable to--
``(A) any listed transaction, and
``(B) any reportable transaction (other than a listed
transaction) if a significant purpose of such transaction is
the avoidance or evasion of Federal income tax.
``(c) Higher Penalty for Nondisclosed Listed and Other
Avoidance Transactions.--
``(1) In general.--Subsection (a) shall be applied by
substituting `30 percent' for `20 percent' with respect to
the portion of any reportable transaction understatement with
respect to which the requirement of section 6664(d)(2)(A) is
not met.
``(2) Rules applicable to compromise of penalty.--
``(A) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which paragraph (1)
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(B) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
subparagraph (A).
``(d) Definitions of Reportable and Listed Transactions.--
For purposes of this section, the terms `reportable
transaction' and `listed transaction' have the respective
meanings given to such terms by section 6707A(c).
``(e) Special Rules.--
``(1) Coordination with penalties, etc., on other
understatements.--In the case of an understatement (as
defined in section 6662(d)(2))--
``(A) the amount of such understatement (determined without
regard to this paragraph) shall be increased by the aggregate
amount of reportable transaction understatements for purposes
of determining whether such understatement is a substantial
understatement under section 6662(d)(1), and
``(B) the addition to tax under section 6662(a) shall apply
only to the excess of the amount of the substantial
understatement (if any) after the application of subparagraph
(A) over the aggregate amount of reportable transaction
understatements.
``(2) Coordination with other penalties.--
``(A) Application of fraud penalty.--References to an
underpayment in section 6663 shall be treated as including
references to a reportable transaction understatement.
``(B) No double penalty.--This section shall not apply to
any portion of an understatement on which a penalty is
imposed under section 6663.
``(3) Special rule for amended returns.--Except as provided
in regulations, in no event shall any tax treatment included
with an amendment or supplement to a return of tax be taken
into account in determining the amount of any reportable
transaction understatement if the amendment or supplement is
filed after the earlier of the date the taxpayer is first
contacted by the Secretary regarding the examination of the
return or such other date as is specified by the Secretary.
``(4) Cross reference.--

``For reporting of section 6662A(c) penalty to the Securities and
Exchange Commission, see section 6707A(e).''.
(b) Determination of Other Understatements.--Subparagraph
(A) of section 6662(d)(2) is amended by adding at the end the
following flush sentence:
``The excess under the preceding sentence shall be determined
without regard to items to which section 6662A applies.''.
(c) Reasonable Cause Exception.--
(1) In general.--Section 6664 is amended by adding at the
end the following new subsection:
``(d) Reasonable Cause Exception for Reportable Transaction
Understatements.--
``(1) In general.--No penalty shall be imposed under
section 6662A with respect to any portion of a reportable
transaction understatement if it is shown that there was a
reasonable cause for such portion and that the taxpayer acted
in good faith with respect to such portion.
``(2) Special rules.--Paragraph (1) shall not apply to any
reportable transaction understatement unless--
``(A) the relevant facts affecting the tax treatment of the
item are adequately disclosed in accordance with the
regulations prescribed under section 6011,
``(B) there is or was substantial authority for such
treatment, and
``(C) the taxpayer reasonably believed that such treatment
was more likely than not the proper treatment.
A taxpayer failing to adequately disclose in accordance with
section 6011 shall be treated as meeting the requirements of
subparagraph (A) if the penalty for such failure was
rescinded under section 6707A(d).
``(3) Rules relating to reasonable belief.--For purposes of
paragraph (2)(C)--
``(A) In general.--A taxpayer shall be treated as having a
reasonable belief with respect to the tax treatment of an
item only if such belief--
``(i) is based on the facts and law that exist at the time
the return of tax which includes such tax treatment is filed,
and
``(ii) relates solely to the taxpayer's chances of success
on the merits of such treatment and does not take into
account the possibility that a return will not be audited,
such treatment will not be raised on audit, or such treatment
will be resolved through settlement if it is raised.
``(B) Certain opinions may not be relied upon.--
``(i) In general.--An opinion of a tax advisor may not be
relied upon to establish the reasonable belief of a taxpayer
if--

``(I) the tax advisor is described in clause (ii), or
``(II) the opinion is described in clause (iii).

``(ii) Disqualified tax advisors.--A tax advisor is
described in this clause if the tax advisor--

``(I) is a material advisor (within the meaning of section
6111(b)(1)) who participates in the organization, management,
promotion, or sale of the transaction or who is related
(within the meaning of section 267(b) or 707(b)(1)) to any
person who so participates,

[[Page S10328]]

``(II) is compensated directly or indirectly by a material
advisor with respect to the transaction,
``(III) has a fee arrangement with respect to the
transaction which is contingent on all or part of the
intended tax benefits from the transaction being sustained,
or
``(IV) as determined under regulations prescribed by the
Secretary, has a continuing financial interest with respect
to the transaction.

``(iii) Disqualified opinions.--For purposes of clause (i),
an opinion is disqualified if the opinion--

``(I) is based on unreasonable factual or legal assumptions
(including assumptions as to future events),
``(II) unreasonably relies on representations, statements,
findings, or agreements of the taxpayer or any other person,
``(III) does not identify and consider all relevant facts,
or
``(IV) fails to meet any other requirement as the Secretary
may prescribe.''.

(2) Conforming amendment.--The heading for subsection (c)
of section 6664 is amended by inserting ``for Underpayments''
after ``Exception''.
(d) Conforming Amendments.--
(1) Subparagraph (C) of section 461(i)(3) is amended by
striking ``section 6662(d)(2)(C)(iii)'' and inserting
``section 1274(b)(3)(C)''.
(2) Paragraph (3) of section 1274(b) is amended--
(A) by striking ``(as defined in section
6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
(B) by adding at the end the following new subparagraph:
``(C) Tax shelter.--For purposes of subparagraph (B), the
term `tax shelter' means--
``(i) a partnership or other entity,
``(ii) any investment plan or arrangement, or
``(iii) any other plan or arrangement,
if a significant purpose of such partnership, entity, plan,
or arrangement is the avoidance or evasion of Federal income
tax.''.
(3) Section 6662(d) is amended--
(A) by striking subparagraphs (C) and (D) of paragraph (2),
and
(B) by adding at the end the following:
``(3) Secretarial list.--For purposes of this subsection,
section 6664(d)(2), and section 6694(a)(1), the Secretary may
prescribe a list of positions for which the Secretary
believes there is not substantial authority or there is no
reasonable belief that the tax treatment is more likely than
not the proper tax treatment. Such list (and any revisions
thereof) shall be published in the Federal Register or the
Internal Revenue Bulletin.''.
(4) Section 6664(c)(1) is amended by striking ``this part''
and inserting ``section 6662 or 6663''.
(5) Subsection (b) of section 7525 is amended by striking
``section 6662(d)(2)(C)(iii)'' and inserting ``section
1274(b)(3)(C)''.
(6)(A) The heading for section 6662 is amended to read as
follows:

``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERPAYMENTS.''.

(B) The table of sections for part II of subchapter A of
chapter 68 is amended by striking the item relating to
section 6662 and inserting the following new items:

``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements
with respect to reportable transactions.''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.

SEC. 803. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES
RELATING TO TAXPAYER COMMUNICATIONS.

(a) In General.--Section 7525(b) (relating to section not
to apply to communications regarding corporate tax shelters)
is amended to read as follows:
``(b) Section Not To Apply to Communications Regarding Tax
Shelters.--The privilege under subsection (a) shall not apply
to any written communication which is--
``(1) between a federally authorized tax practitioner and--
``(A) any person,
``(B) any director, officer, employee, agent, or
representative of the person, or
``(C) any other person holding a capital or profits
interest in the person, and
``(2) in connection with the promotion of the direct or
indirect participation of the person in any tax shelter (as
defined in section 1274(b)(3)(C)).''.
(b) Effective Date.--The amendment made by this section
shall apply to communications made on or after the date of
the enactment of this Act.

SEC. 804. DISCLOSURE OF REPORTABLE TRANSACTIONS.

(a) In General.--Section 6111 (relating to registration of
tax shelters) is amended to read as follows:

``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.

``(a) In General.--Each material advisor with respect to
any reportable transaction shall make a return (in such form
as the Secretary may prescribe) setting forth--
``(1) information identifying and describing the
transaction,
``(2) information describing any potential tax benefits
expected to result from the transaction, and
``(3) such other information as the Secretary may
prescribe.
Such return shall be filed not later than the date specified
by the Secretary.
``(b) Definitions.--For purposes of this section--
``(1) Material advisor.--
``(A) In general.--The term `material advisor' means any
person--
``(i) who provides any material aid, assistance, or advice
with respect to organizing, promoting, selling, implementing,
or carrying out any reportable transaction, and
``(ii) who directly or indirectly derives gross income in
excess of the threshold amount for such aid, assistance, or
advice.
``(B) Threshold amount.--For purposes of subparagraph (A),
the threshold amount is--
``(i) $50,000 in the case of a reportable transaction
substantially all of the tax benefits from which are provided
to natural persons, and
``(ii) $250,000 in any other case.
``(2) Reportable transaction.--The term `reportable
transaction' has the meaning given to such term by section
6707A(c).
``(c) Regulations.--The Secretary may prescribe regulations
which provide--
``(1) that only 1 person shall be required to meet the
requirements of subsection (a) in cases in which 2 or more
persons would otherwise be required to meet such
requirements,
``(2) exemptions from the requirements of this section, and
``(3) such rules as may be necessary or appropriate to
carry out the purposes of this section.''.
(b) Conforming Amendments.--
(1) The item relating to section 6111 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:

``Sec. 6111. Disclosure of reportable transactions.''.

(2)(A) So much of section 6112 as precedes subsection (c)
thereof is amended to read as follows:

``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS
MUST KEEP LISTS OF ADVISEES.

``(a) In General.--Each material advisor (as defined in
section 6111) with respect to any reportable transaction (as
defined in section 6707A(c)) shall maintain, in such manner
as the Secretary may by regulations prescribe, a list--
``(1) identifying each person with respect to whom such
advisor acted as such a material advisor with respect to such
transaction, and
``(2) containing such other information as the Secretary
may by regulations require.

This section shall apply without regard to whether a material
advisor is required to file a return under section 6111 with
respect to such transaction.''.
(B) Section 6112 is amended by redesignating subsection (c)
as subsection (b).
(C) Section 6112(b), as redesignated by subparagraph (B),
is amended--
(i) by inserting ``written'' before ``request'' in
paragraph (1)(A), and
(ii) by striking ``shall prescribe'' in paragraph (2) and
inserting ``may prescribe''.
(D) The item relating to section 6112 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:

``Sec. 6112. Material advisors of reportable transactions must keep
lists of advisees.''.

(3)(A) The heading for section 6708 is amended to read as
follows:

``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH
RESPECT TO REPORTABLE TRANSACTIONS.''.

(B) The item relating to section 6708 in the table of
sections for part I of subchapter B of chapter 68 is amended
to read as follows:

``Sec. 6708. Failure to maintain lists of advisees with respect to
reportable transactions.''.

(c) Effective Date.--The amendments made by this section
shall apply to transactions with respect to which material
aid, assistance, or advice referred to in section
6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as
added by this section) is provided after the date of the
enactment of this Act.

SEC. 805. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER
TAX SHELTERS.

(a) In General.--Section 6707 (relating to failure to
furnish information regarding tax shelters) is amended to
read as follows:

``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING
REPORTABLE TRANSACTIONS.

``(a) In General.--If a person who is required to file a
return under section 6111(a) with respect to any reportable
transaction--
``(1) fails to file such return on or before the date
prescribed therefor, or
``(2) files false or incomplete information with the
Secretary with respect to such transaction,

such person shall pay a penalty with respect to such return
in the amount determined under subsection (b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraph (2), the
penalty imposed under subsection (a) with respect to any
failure shall be $50,000.
``(2) Listed transactions.--The penalty imposed under
subsection (a) with respect to any listed transaction shall
be an amount equal to the greater of--
``(A) $200,000, or
``(B) 50 percent of the gross income derived by such person
with respect to aid, assistance, or advice which is provided
with respect to the listed transaction before the

[[Page S10329]]

date the return including the transaction is filed under
section 6111.

Subparagraph (B) shall be applied by substituting `75
percent' for `50 percent' in the case of an intentional
failure or act described in subsection (a).
``(c) Rescission Authority.--The provisions of section
6707A(d) (relating to authority of Commissioner to rescind
penalty) shall apply to any penalty imposed under this
section.
``(d) Reportable and Listed Transactions.--The terms
`reportable transaction' and `listed transaction' have the
respective meanings given to such terms by section
6707A(c).''.
(b) Clerical Amendment.--The item relating to section 6707
in the table of sections for part I of subchapter B of
chapter 68 is amended by striking ``tax shelters'' and
inserting ``reportable transactions''.
(c) Effective Date.--The amendments made by this section
shall apply to returns the due date for which is after the
date of the enactment of this Act.

SEC. 806. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN
LISTS OF INVESTORS.

(a) In General.--Subsection (a) of section 6708 is amended
to read as follows:
``(a) Imposition of Penalty.--
``(1) In general.--If any person who is required to
maintain a list under section 6112(a) fails to make such list
available upon written request to the Secretary in accordance
with section 6112(b)(1)(A) within 20 business days after the
date of the Secretary's request, such person shall pay a
penalty of $10,000 for each day of such failure after such
20th day.
``(2) Reasonable cause exception.--No penalty shall be
imposed by paragraph (1) with respect to the failure on any
day if such failure is due to reasonable cause.''.
(b) Effective Date.--The amendment made by this section
shall apply to requests made after the date of the enactment
of this Act.

SEC. 807. PENALTY ON PROMOTERS OF TAX SHELTERS.

(a) Penalty on Promoting Abusive Tax Shelters.--Section
6700(a) is amended by adding at the end the following new
sentence: ``Notwithstanding the first sentence, if an
activity with respect to which a penalty imposed under this
subsection involves a statement described in paragraph
(2)(A), the amount of the penalty shall be equal to 50
percent of the gross income derived (or to be derived) from
such activity by the person on which the penalty is
imposed.''.
(b) Effective Date.--The amendment made by this section
shall apply to activities after the date of the enactment of
this Act.

Subtitle B--Provisions to Discourage Corporate Expatriation

SEC. 821. TAX TREATMENT OF INVERTED CORPORATE ENTITIES.

(a) In General.--Subchapter C of chapter 80 (relating to
provisions affecting more than one subtitle) is amended by
adding at the end the following new section:

``SEC. 7874. RULES RELATING TO INVERTED CORPORATE ENTITIES.

``(a) Inverted Corporations Treated as Domestic
Corporations.--
``(1) In general.--If a foreign incorporated entity is
treated as an inverted domestic corporation, then,
notwithstanding section 7701(a)(4), such entity shall be
treated for purposes of this title as a domestic corporation.
``(2) Inverted domestic corporation.--For purposes of this
section, a foreign incorporated entity shall be treated as an
inverted domestic corporation if, pursuant to a plan (or a
series of related transactions)--
``(A) the entity completes after March 20, 2002, the direct
or indirect acquisition of substantially all of the
properties held directly or indirectly by a domestic
corporation or substantially all of the properties
constituting a trade or business of a domestic partnership,
``(B) after the acquisition at least 80 percent of the
stock (by vote or value) of the entity is held--
``(i) in the case of an acquisition with respect to a
domestic corporation, by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation, or
``(ii) in the case of an acquisition with respect to a
domestic partnership, by former partners of the domestic
partnership by reason of holding a capital or profits
interest in the domestic partnership, and
``(C) the expanded affiliated group which after the
acquisition includes the entity does not have substantial
business activities in the foreign country in which or under
the law of which the entity is created or organized when
compared to the total business activities of such expanded
affiliated group.

Except as provided in regulations, an acquisition of
properties of a domestic corporation shall not be treated as
described in subparagraph (A) if none of the corporation's
stock was readily tradeable on an established securities
market at any time during the 4-year period ending on the
date of the acquisition.
``(b) Preservation of Domestic Tax Base in Certain
Inversion Transactions To Which Subsection (a) Does Not
Apply.--
``(1) In general.--If a foreign incorporated entity would
be treated as an inverted domestic corporation with respect
to an acquired entity if either--
``(A) subsection (a)(2)(A) were applied by substituting
`after December 31, 1996, and on or before March 20, 2002'
for `after March 20, 2002' and subsection (a)(2)(B) were
applied by substituting `more than 50 percent' for `at least
80 percent', or
``(B) subsection (a)(2)(B) were applied by substituting
`more than 50 percent' for `at least 80 percent',

then the rules of subsection (c) shall apply to any inversion
gain of the acquired entity during the applicable period and
the rules of subsection (d) shall apply to any related party
transaction of the acquired entity during the applicable
period. This subsection shall not apply for any taxable year
if subsection (a) applies to such foreign incorporated entity
for such taxable year.
``(2) Acquired entity.--For purposes of this section--
``(A) In general.--The term `acquired entity' means the
domestic corporation or partnership substantially all of the
properties of which are directly or indirectly acquired in an
acquisition described in subsection (a)(2)(A) to which this
subsection applies.
``(B) Aggregation rules.--Any domestic person bearing a
relationship described in section 267(b) or 707(b) to an
acquired entity shall be treated as an acquired entity with
respect to the acquisition described in subparagraph (A).
``(3) Applicable period.--For purposes of this section--
``(A) In general.--The term `applicable period' means the
period--
``(i) beginning on the first date properties are acquired
as part of the acquisition described in subsection (a)(2)(A)
to which this subsection applies, and
``(ii) ending on the date which is 10 years after the last
date properties are acquired as part of such acquisition.
``(B) Special rule for inversions occurring before march
21, 2002.--In the case of any acquired entity to which
paragraph (1)(A) applies, the applicable period shall be the
10-year period beginning on January 1, 2003.
``(c) Tax on Inversion Gains May Not Be Offset.--If
subsection (b) applies--
``(1) In general.--The taxable income of an acquired entity
(or any expanded affiliated group which includes such entity)
for any taxable year which includes any portion of the
applicable period shall in no event be less than the
inversion gain of the entity for the taxable year.
``(2) Credits not allowed against tax on inversion gain.--
Credits shall be allowed against the tax imposed by this
chapter on an acquired entity for any taxable year described
in paragraph (1) only to the extent such tax exceeds the
product of--
``(A) the amount of the inversion gain for the taxable
year, and
``(B) the highest rate of tax specified in section
11(b)(1).

For purposes of determining the credit allowed by section 901
inversion gain shall be treated as from sources within the
United States.
``(3) Special rules for partnerships.--In the case of an
acquired entity which is a partnership--
``(A) the limitations of this subsection shall apply at the
partner rather than the partnership level,
``(B) the inversion gain of any partner for any taxable
year shall be equal to the sum of--
``(i) the partner's distributive share of inversion gain of
the partnership for such taxable year, plus
``(ii) income or gain required to be recognized for the
taxable year by the partner under section 367(a), 741, or
1001, or under any other provision of chapter 1, by reason of
the transfer during the applicable period of any partnership
interest of the partner in such partnership to the foreign
incorporated entity, and
``(C) the highest rate of tax specified in the rate
schedule applicable to the partner under chapter 1 shall be
substituted for the rate of tax under paragraph (2)(B).
``(4) Inversion gain.--For purposes of this section, the
term `inversion gain' means any income or gain required to be
recognized under section 304, 311(b), 367, 1001, or 1248, or
under any other provision of chapter 1, by reason of the
transfer during the applicable period of stock or other
properties by an acquired entity--
``(A) as part of the acquisition described in subsection
(a)(2)(A) to which subsection (b) applies, or
``(B) after such acquisition to a foreign related person.

The Secretary may provide that income or gain from the sale
of inventories or other transactions in the ordinary course
of a trade or business shall not be treated as inversion gain
under subparagraph (B) to the extent the Secretary determines
such treatment would not be inconsistent with the purposes of
this section.
``(5) Coordination with section 172 and minimum tax.--Rules
similar to the rules of paragraphs (3) and (4) of section
860E(a) shall apply for purposes of this section.
``(6) Statute of limitations.--
``(A) In general.--The statutory period for the assessment
of any deficiency attributable to the inversion gain of any
taxpayer for any pre-inversion year shall not expire before
the expiration of 3 years from the date the Secretary is
notified by the taxpayer (in such manner as the Secretary may
prescribe) of the acquisition described in subsection
(a)(2)(A) to which such gain relates and such deficiency may
be assessed before the expiration of such 3-year period
notwithstanding

[[Page S10330]]

the provisions of any other law or rule of law which would
otherwise prevent such assessment.
``(B) Pre-inversion year.--For purposes of subparagraph
(A), the term `pre-inversion year' means any taxable year
if--
``(i) any portion of the applicable period is included in
such taxable year, and
``(ii) such year ends before the taxable year in which the
acquisition described in subsection (a)(2)(A) is completed.
``(d) Special Rules Applicable to Related Party
Transactions.--
``(1) Annual application for agreements on return
positions.--
``(A) In general.--Each acquired entity to which subsection
(b) applies shall file with the Secretary an application for
an approval agreement under subparagraph (D) for each taxable
year which includes a portion of the applicable period. Such
application shall be filed at such time and manner, and shall
contain such information, as the Secretary may prescribe.
``(B) Secretarial action.--Within 90 days of receipt of an
application under subparagraph (A) (or such longer period as
the Secretary and entity may agree upon), the Secretary
shall--
``(i) enter into an agreement described in subparagraph (D)
for the taxable year covered by the application,
``(ii) notify the entity that the Secretary has determined
that the application was filed in good faith and
substantially complies with the requirements for the
application under subparagraph (A), or
``(iii) notify the entity that the Secretary has determined
that the application was not filed in good faith or does not
substantially comply with such requirements.
If the Secretary fails to act within the time prescribed
under the preceding sentence, the entity shall be treated for
purposes of this paragraph as having received notice under
clause (ii).
``(C) Failures to comply.--If an acquired entity fails to
file an application under subparagraph (A), or the acquired
entity receives a notice under subparagraph (B)(iii), for any
taxable year, then for such taxable year--
``(i) there shall not be allowed any deduction, or addition
to basis or cost of goods sold, for amounts paid or incurred,
or losses incurred, by reason of a transaction between the
acquired entity and a foreign related person,
``(ii) any transfer or license of intangible property (as
defined in section 936(h)(3)(B)) between the acquired entity
and a foreign related person shall be disregarded, and
``(iii) any cost-sharing arrangement between the acquired
entity and a foreign related person shall be disregarded.
``(D) Approval agreement.--For purposes of subparagraph
(A), the term `approval agreement' means a prefiling, advance
pricing, or other agreement specified by the Secretary which
contains such provisions as the Secretary determines
necessary to ensure that the requirements of sections 163(j),
267(a)(3), 482, and 845, and any other provision of this
title applicable to transactions between related persons and
specified by the Secretary, are met.
``(E) Tax court review.--
``(i) In general.--The Tax Court shall have jurisdiction
over any action brought by an acquired entity receiving a
notice under subparagraph (B)(iii) to determine whether the
issuance of the notice was an abuse of discretion, but only
if the action is brought within 30 days after the date of the
mailing (determined under rules similar to section 6213) of
the notice.
``(ii) Court action.--The Tax Court shall issue its
decision within 30 days after the filing of the action under
clause (i) and may order the Secretary to issue a notice
described in subparagraph (B)(ii).
``(iii) Review.--An order of the Tax Court under this
subparagraph shall be reviewable in the same manner as any
other decision of the Tax Court.
``(2) Modifications of limitation on interest deduction.--
In the case of an acquired entity to which subsection (b)
applies, section 163(j) shall be applied--
``(A) without regard to paragraph (2)(A)(ii) thereof, and
``(B) by substituting `25 percent' for `50 percent' each
place it appears in paragraph (2)(B) thereof.
``(e) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Rules for application of subsection (a)(2).--In
applying subsection (a)(2) for purposes of subsections (a)
and (b), the following rules shall apply:
``(A) Certain stock disregarded.--There shall not be taken
into account in determining ownership for purposes of
subsection (a)(2)(B)--
``(i) stock held by members of the expanded affiliated
group which includes the foreign incorporated entity, or
``(ii) stock of such entity which is sold in a public
offering or private placement related to the acquisition
described in subsection (a)(2)(A).
``(B) Plan deemed in certain cases.--If a foreign
incorporated entity acquires directly or indirectly
substantially all of the properties of a domestic corporation
or partnership during the 4-year period beginning on the date
which is 2 years before the ownership requirements of
subsection (a)(2)(B) are met with respect to such domestic
corporation or partnership, such actions shall be treated as
pursuant to a plan.
``(C) Certain transfers disregarded.--The transfer of
properties or liabilities (including by contribution or
distribution) shall be disregarded if such transfers are part
of a plan a principal purpose of which is to avoid the
purposes of this section.
``(D) Special rule for related partnerships.--For purposes
of applying subsection (a)(2) to the acquisition of a
domestic partnership, except as provided in regulations, all
partnerships which are under common control (within the
meaning of section 482) shall be treated as 1 partnership.
``(E) Treatment of certain rights.--The Secretary shall
prescribe such regulations as may be necessary--
``(i) to treat warrants, options, contracts to acquire
stock, convertible debt instruments, and other similar
interests as stock, and
``(ii) to treat stock as not stock.
``(2) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group as defined in
section 1504(a) but without regard to section 1504(b)(3),
except that section 1504(a) shall be applied by substituting
`more than 50 percent' for `at least 80 percent' each place
it appears.
``(3) Foreign incorporated entity.--The term `foreign
incorporated entity' means any entity which is, or but for
subsection (a)(1) would be, treated as a foreign corporation
for purposes of this title.
``(4) Foreign related person.--The term `foreign related
person' means, with respect to any acquired entity, a foreign
person which--
``(A) bears a relationship to such entity described in
section 267(b) or 707(b), or
``(B) is under the same common control (within the meaning
of section 482) as such entity.
``(5) Subsequent acquisitions by unrelated domestic
corporations.--
``(A) In general.--Subject to such conditions, limitations,
and exceptions as the Secretary may prescribe, if, after an
acquisition described in subsection (a)(2)(A) to which
subsection (b) applies, a domestic corporation stock of which
is traded on an established securities market acquires
directly or indirectly any properties of one or more acquired
entities in a transaction with respect to which the
requirements of subparagraph (B) are met, this section shall
cease to apply to any such acquired entity with respect to
which such requirements are met.
``(B) Requirements.--The requirements of the subparagraph
are met with respect to a transaction involving any
acquisition described in subparagraph (A) if--
``(i) before such transaction the domestic corporation did
not have a relationship described in section 267(b) or
707(b), and was not under common control (within the meaning
of section 482), with the acquired entity, or any member of
an expanded affiliated group including such entity, and
``(ii) after such transaction, such acquired entity--

``(I) is a member of the same expanded affiliated group
which includes the domestic corporation or has such a
relationship or is under such common control with any member
of such group, and
``(II) is not a member of, and does not have such a
relationship and is not under such common control with any
member of, the expanded affiliated group which before such
acquisition included such entity.

``(f) Regulations.--The Secretary shall provide such
regulations as are necessary to carry out this section,
including regulations providing for such adjustments to the
application of this section as are necessary to prevent the
avoidance of the purposes of this section, including the
avoidance of such purposes through--
``(1) the use of related persons, pass-through or other
noncorporate entities, or other intermediaries, or
``(2) transactions designed to have persons cease to be (or
not become) members of expanded affiliated groups or related
persons.''.
(b) Treatment of Agreements.--
(1) Confidentiality.--
(A) Treatment as return information.--Section 6103(b)(2)
(relating to return information) is amended by striking
``and'' at the end of subparagraph (C), by inserting ``and''
at the end of subparagraph (D), and by inserting after
subparagraph (D) the following new subparagraph:
``(E) any approval agreement under section 7874(d)(1) to
which any preceding subparagraph does not apply and any
background information related to the agreement or any
application for the agreement,''.
(B) Exception from public inspection as written
determination.--Section 6110(b)(1)(B) is amended by striking
``or (D)'' and inserting ``, (D), or (E)''.
(2) Reporting.--The Secretary of the Treasury shall include
with any report on advance pricing agreements required to be
submitted after the date of the enactment of this Act under
section 521(b) of the Ticket to Work and Work Incentives
Improvement Act of 1999 (Public Law 106-170) a report
regarding approval agreements under section 7874(d)(1) of the
Internal Revenue Code of 1986. Such report shall include
information similar to the information required with respect
to advance pricing agreements and shall be treated for
confidentiality purposes in the same manner as the reports on
advance pricing agreements are treated under section
521(b)(3) of such Act.
(c) Information Reporting.--The Secretary of the Treasury
shall exercise the Secretary's authority under the Internal
Revenue Code of 1986 to require entities involved

[[Page S10331]]

in transactions to which section 7874 of such Code (as added
by subsection (a)) applies to report to the Secretary,
shareholders, partners, and such other persons as the
Secretary may prescribe such information as is necessary to
ensure the proper tax treatment of such transactions.
(d) Conforming Amendment.--The table of sections for
subchapter C of chapter 80 is amended by adding at the end
the following new item:

``Sec. 7874. Rules relating to inverted corporate entities.''.

(e) Transition Rule for Certain Regulated Investment
Companies and Unit Investment Trusts.--Notwithstanding
section 7874 of the Internal Revenue Code of 1986 (as added
by subsection (a)), a regulated investment company, or other
pooled fund or trust specified by the Secretary of the
Treasury, may elect to recognize gain by reason of section
367(a) of such Code with respect to a transaction under which
a foreign incorporated entity is treated as an inverted
domestic corporation under section 7874(a) of such Code by
reason of an acquisition completed after March 20, 2002, and
before January 1, 2004.

SEC. 822. EXCISE TAX ON STOCK COMPENSATION OF INSIDERS IN
INVERTED CORPORATIONS.

(a) In General.--Subtitle D is amended by adding at the end
the following new chapter:

``CHAPTER 48--STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS

``Sec. 5000A. Stock compensation of insiders in inverted corporations
entities.

``SEC. 5000A. STOCK COMPENSATION OF INSIDERS IN INVERTED
CORPORATIONS.

``(a) Imposition of Tax.--In the case of an individual who
is a disqualified individual with respect to any inverted
corporation, there is hereby imposed on such person a tax
equal to 20 percent of the value (determined under subsection
(b)) of the specified stock compensation held (directly or
indirectly) by or for the benefit of such individual or a
member of such individual's family (as defined in section
267) at any time during the 12-month period beginning on the
date which is 6 months before the inversion date.
``(b) Value.--For purposes of subsection (a)--
``(1) In general.--The value of specified stock
compensation shall be--
``(A) in the case of a stock option (or other similar
right) or any stock appreciation right, the fair value of
such option or right, and
``(B) in any other case, the fair market value of such
compensation.
``(2) Date for determining value.--The determination of
value shall be made--
``(A) in the case of specified stock compensation held on
the inversion date, on such date,
``(B) in the case of such compensation which is canceled
during the 6 months before the inversion date, on the day
before such cancellation, and
``(C) in the case of such compensation which is granted
after the inversion date, on the date such compensation is
granted.
``(c) Tax To Apply Only If Shareholder Gain Recognized.--
Subsection (a) shall apply to any disqualified individual
with respect to an inverted corporation only if gain (if any)
on any stock in such corporation is recognized in whole or
part by any shareholder by reason of the acquisition referred
to in section 7874(a)(2)(A) (determined by substituting `July
10, 2002' for `March 20, 2002') with respect to such
corporation.
``(d) Exception Where Gain Recognized on Compensation.--
Subsection (a) shall not apply to--
``(1) any stock option which is exercised on the inversion
date or during the 6-month period before such date and to the
stock acquired in such exercise, and
``(2) any specified stock compensation which is sold,
exchanged, or distributed during such period in a transaction
in which gain or loss is recognized in full.
``(e) Definitions.--For purposes of this section--
``(1) Disqualified individual.--The term `disqualified
individual' means, with respect to a corporation, any
individual who, at any time during the 12-month period
beginning on the date which is 6 months before the inversion
date--
``(A) is subject to the requirements of section 16(a) of
the Securities Exchange Act of 1934 with respect to such
corporation or any member of the expanded affiliated group
which includes such corporation, or
``(B) would be subject to such requirements if such
corporation or member were an issuer of equity securities
referred to in such section.
``(2) Inverted corporation; inversion date.--
``(A) Inverted corporation.--The term `inverted
corporation' means any corporation to which subsection (a) or
(b) of section 7874 applies determined--
``(i) by substituting `July 10, 2002' for `March 20, 2002'
in section 7874(a)(2)(A), and
``(ii) without regard to subsection (b)(1)(A).
Such term includes any predecessor or successor of such a
corporation.
``(B) Inversion date.--The term `inversion date' means,
with respect to a corporation, the date on which the
corporation first becomes an inverted corporation.
``(3) Specified stock compensation.--
``(A) In general.--The term `specified stock compensation'
means payment (or right to payment) granted by the inverted
corporation (or by any member of the expanded affiliated
group which includes such corporation) to any person in
connection with the performance of services by a disqualified
individual for such corporation or member if the value of
such payment or right is based on (or determined by reference
to) the value (or change in value) of stock in such
corporation (or any such member).
``(B) Exceptions.--Such term shall not include--
``(i) any option to which part II of subchapter D of
chapter 1 applies, or
``(ii) any payment or right to payment from a plan referred
to in section 280G(b)(6).
``(4) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group (as defined in
section 1504(a) without regard to section 1504(b)(3)); except
that section 1504(a) shall be applied by substituting `more
than 50 percent' for `at least 80 percent' each place it
appears.
``(f) Special Rules.--For purposes of this section--
``(1) Cancellation of restriction.--The cancellation of a
restriction which by its terms will never lapse shall be
treated as a grant.
``(2) Payment or reimbursement of tax by corporation
treated as specified stock compensation.--Any payment of the
tax imposed by this section directly or indirectly by the
inverted corporation or by any member of the expanded
affiliated group which includes such corporation--
``(A) shall be treated as specified stock compensation, and
``(B) shall not be allowed as a deduction under any
provision of chapter 1.
``(3) Certain restrictions ignored.--Whether there is
specified stock compensation, and the value thereof, shall be
determined without regard to any restriction other than a
restriction which by its terms will never lapse.
``(4) Property transfers.--Any transfer of property shall
be treated as a payment and any right to a transfer of
property shall be treated as a right to a payment.
``(5) Other administrative provisions.--For purposes of
subtitle F, any tax imposed by this section shall be treated
as a tax imposed by subtitle A.
``(g) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''.
(b) Denial of Deduction.--
(1) In general.--Paragraph (6) of section 275(a) is amended
by inserting ``48,'' after ``46,''.
(2) $1,000,000 limit on deductible compensation reduced by
payment of excise tax on specified stock compensation.--
Paragraph (4) of section 162(m) is amended by adding at the
end the following new subparagraph:
``(G) Coordination with excise tax on specified stock
compensation.--The dollar limitation contained in paragraph
(1) with respect to any covered employee shall be reduced
(but not below zero) by the amount of any payment (with
respect to such employee) of the tax imposed by section 5000A
directly or indirectly by the inverted corporation (as
defined in such section) or by any member of the expanded
affiliated group (as defined in such section) which includes
such corporation.''.
(c) Conforming Amendments.--
(1) The last sentence of section 3121(v)(2)(A) is amended
by inserting before the period ``or to any specified stock
compensation (as defined in section 5000A) on which tax is
imposed by section 5000A''.
(2) The table of chapters for subtitle D is amended by
adding at the end the following new item:

``Chapter 48. Stock compensation of insiders in inverted
corporations.''.

(d) Effective Date.--The amendments made by this section
shall take effect on July 11, 2002; except that periods
before such date shall not be taken into account in applying
the periods in subsections (a) and (e)(1) of section 5000A of
the Internal Revenue Code of 1986, as added by this section.

SEC. 823. REINSURANCE OF UNITED STATES RISKS IN FOREIGN
JURISDICTIONS.

(a) In General.--Section 845(a) (relating to allocation in
case of reinsurance agreement involving tax avoidance or
evasion) is amended by striking ``source and character'' and
inserting ``amount, source, or character''.
(b) Effective Date.--The amendments made by this section
shall apply to any risk reinsured after April 11, 2002.

Subtitle C--Other Revenue Provisions

SEC. 831. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

(a) In General.--Chapter 77 (relating to miscellaneous
provisions) is amended by adding at the end the following new
section:

``SEC. 7528. INTERNAL REVENUE SERVICE USER FEES.

``(a) General Rule.--The Secretary shall establish a
program requiring the payment of user fees for--
``(1) requests to the Internal Revenue Service for ruling
letters, opinion letters, and determination letters, and
``(2) other similar requests.
``(b) Program Criteria.--
``(1) In general.--The fees charged under the program
required by subsection (a)--
``(A) shall vary according to categories (or subcategories)
established by the Secretary,
``(B) shall be determined after taking into account the
average time for (and difficulty

[[Page S10332]]

of) complying with requests in each category (and
subcategory), and
``(C) shall be payable in advance.
``(2) Exemptions, etc.--
``(A) In general.--The Secretary shall provide for such
exemptions (and reduced fees) under such program as the
Secretary determines to be appropriate.
``(B) Exemption for certain requests regarding pension
plans.--The Secretary shall not require payment of user fees
under such program for requests for determination letters
with respect to the qualified status of a pension benefit
plan maintained solely by 1 or more eligible employers or any
trust which is part of the plan. The preceding sentence shall
not apply to any request--
``(i) made after the later of--

``(I) the fifth plan year the pension benefit plan is in
existence, or
``(II) the end of any remedial amendment period with
respect to the plan beginning within the first 5 plan years,
or

``(ii) made by the sponsor of any prototype or similar plan
which the sponsor intends to market to participating
employers.
``(C) Definitions and special rules.--For purposes of
subparagraph (B)--
``(i) Pension benefit plan.--The term `pension benefit
plan' means a pension, profit-sharing, stock bonus, annuity,
or employee stock ownership plan.
``(ii) Eligible employer.--The term `eligible employer'
means an eligible employer (as defined in section
408(p)(2)(C)(i)(I)) which has at least 1 employee who is not
a highly compensated employee (as defined in section 414(q))
and is participating in the plan. The determination of
whether an employer is an eligible employer under
subparagraph (B) shall be made as of the date of the request
described in such subparagraph.
``(iii) Determination of average fees charged.--For
purposes of any determination of average fees charged, any
request to which subparagraph (B) applies shall not be taken
into account.
``(3) Average fee requirement.--The average fee charged
under the program required by subsection (a) shall not be
less than the amount determined under the following table:

Average
``Category                                                          fee
Employee plan ruling and opinion............................$250 ....

Exempt organization ruling..................................$350 ....

Employee plan determination.................................$300 ....

Exempt organization determination...........................$275 ....

Chief counsel ruling........................................$200.....

``(c) Termination.--No fee shall be imposed under this
section with respect to requests made after September 30,
2013.''.
(b) Conforming Amendments.--
(1) The table of sections for chapter 77 is amended by
adding at the end the following new item:

``Sec. 7528. Internal Revenue Service user fees.''.

(2) Section 10511 of the Revenue Act of 1987 is repealed.
(3) Section 620 of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is repealed.
(c) Limitations.--Notwithstanding any other provision of
law, any fees collected pursuant to section 7528 of the
Internal Revenue Code of 1986, as added by subsection (a),
shall not be expended by the Internal Revenue Service unless
provided by an appropriations Act.
(d) Effective Date.--The amendments made by this section
shall apply to requests made after the date of the enactment
of this Act.

SEC. 832. ADDITION OF VACCINES AGAINST HEPATITIS A TO LIST OF
TAXABLE VACCINES.

(a) In General.--Section 4132(a)(1) (defining taxable
vaccine) is amended by redesignating subparagraphs (I), (J),
(K), and (L) as subparagraphs (J), (K), (L), and (M),
respectively, and by inserting after subparagraph (H) the
following new subparagraph:
``(I) Any vaccine against hepatitis A.''.
(b) Conforming Amendment.--Section 9510(c)(1)(A) is amended
by striking ``October 18, 2000'' and inserting ``April 2,
2003''.
(c) Effective Date.--
(1) Sales, etc.--The amendments made by this section shall
apply to sales and uses on or after the first day of the
first month which begins more than 4 weeks after the date of
the enactment of this Act.
(2) Deliveries.--For purposes of paragraph (1) and section
4131 of the Internal Revenue Code of 1986, in the case of
sales on or before the effective date described in such
paragraph for which delivery is made after such date, the
delivery date shall be considered the sale date.

SEC. 843. INDIVIDUAL EXPATRIATION TO AVOID TAX.

(a) Expatriation To Avoid Tax.--
(1) In general.--Subsection (a) of section 877 (relating to
treatment of expatriates) is amended to read as follows:
``(a) Treatment of Expatriates.--
``(1) In general.--Every nonresident alien individual to
whom this section applies and who, within the 10-year period
immediately preceding the close of the taxable year, lost
United States citizenship shall be taxable for such taxable
year in the manner provided in subsection (b) if the tax
imposed pursuant to such subsection (after any reduction in
such tax under the last sentence of such subsection) exceeds
the tax which, without regard to this section, is imposed
pursuant to section 871.
``(2) Individuals subject to this section.--This section
shall apply to any individual if--
``(A) the average annual net income tax (as defined in
section 38(c)(1)) of such individual for the period of 5
taxable years ending before the date of the loss of United
States citizenship is greater than $122,000,
``(B) the net worth of the individual as of such date is
$2,000,000 or more, or
``(C) such individual fails to certify under penalty of
perjury that he has met the requirements of this title for
the 5 preceding taxable years or fails to submit such
evidence of such compliance as the Secretary may require.

In the case of the loss of United States citizenship in any
calendar year after 2003, such $122,000 amount shall be
increased by an amount equal to such dollar amount multiplied
by the cost-of-living adjustment determined under section
1(f)(3) for such calendar year by substituting `2002' for
`1992' in subparagraph (B) thereof. Any increase under the
preceding sentence shall be rounded to the nearest multiple
of $1,000.''.
(2) Revision of exceptions from alternative tax.--
Subsection (c) of section 877 (relating to tax avoidance not
presumed in certain cases) is amended to read as follows:
``(c) Exceptions.--
``(1) In general.--Subparagraphs (A) and (B) of subsection
(a)(2) shall not apply to an individual described in
paragraph (2) or (3).
``(2) Dual citizens.--
``(A) In general.--An individual is described in this
paragraph if--
``(i) the individual became at birth a citizen of the
United States and a citizen of another country and continues
to be a citizen of such other country, and
``(ii) the individual has had no substantial contacts with
the United States.
``(B) Substantial contacts.--An individual shall be treated
as having no substantial contacts with the United States only
if the individual--
``(i) was never a resident of the United States (as defined
in section 7701(b)),
``(ii) has never held a United States passport, and
``(iii) was not present in the United States for more than
30 days during any calendar year which is 1 of the 10
calendar years preceding the individual's loss of United
States citizenship.
``(3) Certain minors.--An individual is described in this
paragraph if--
``(A) the individual became at birth a citizen of the
United States,
``(B) neither parent of such individual was a citizen of
the United States at the time of such birth,
``(C) the individual's loss of United States citizenship
occurs before such individual attains age 18\1/2\, and
``(D) the individual was not present in the United States
for more than 30 days during any calendar year which is 1 of
the 10 calendar years preceding the individual's loss of
United States citizenship.''.
(3) Conforming amendment.--Section 2107(a) is amended to
read as follows:
``(a) Treatment of Expatriates.--A tax computed in
accordance with the table contained in section 2001 is hereby
imposed on the transfer of the taxable estate, determined as
provided in section 2106, of every decedent nonresident not a
citizen of the United States if the date of death occurs
during a taxable year with respect to which the decedent is
subject to tax under section 877(b).''.
(b) Special Rules for Determining When an Individual is no
Longer a United States Citizen or Long-Term Resident.--
Section 7701 (relating to definitions) is amended by
redesignating subsection (n) as subsection (o) and by
inserting after subsection (m) the following new subsection:
``(n) Special Rules for Determining When an Individual is
no Longer a United States Citizen or Long-Term Resident.--An
individual who would not (but for this subsection) be treated
as a citizen or resident of the United States shall continue
to be treated as a citizen or resident of the United States
until such individual--
``(1) gives notice of an expatriating act or termination of
residency (with the requisite intent to relinquish
citizenship or terminate residency) to the Secretary of State
or the Secretary of Homeland Security, and
``(2) provides a statement in accordance with section
6039G.''.
(c) Physical Presence in the United States for More Than 30
Days.--Section 877 (relating to expatriation to avoid tax) is
amended by adding at the end the following new subsection:
``(g) Physical Presence.--This section shall not apply to
any individual for any taxable year during the 10-year period
referred to in subsection (a) in which such individual is
present (within the meaning of section 7701(b)(7) without
regard to subparagraphs (B), (C), and (D) thereof) in the
United States for more than 30 days in the calendar year
ending in such taxable year, and such individual shall be
treated for purposes of this title as a citizen or resident
of the United States for such taxable year.''.
(d) Transfers Subject to Gift Tax.--Subsection (a) of
section 2501 (relating to taxable transfers) is amended by
adding at the end the following:
``(6) Transfers of certain stock.--
``(A) In general.--Paragraph (3) shall not apply to the
transfer of stock described in subparagraph (B) by any
individual to whom section 877(b) applies, and section
2511(a)

[[Page S10333]]

shall be applied without regard to whether such stock is
property which is situated within the United States.
``(B) Valuation.--For purposes of subparagraph (A), the
value of stock shall be determined as provided in section
2103, except that--
``(i) if the donor owned (within the meaning of section
958(a)) at the time of such transfer 10 percent or more of
the total combined voting power of all classes of stock
entitled to vote of a foreign corporation, and
``(ii) if such donor owned (within the meaning of section
958(a)), or is considered to have owned (by applying the
ownership rules of section 958(b)), at the time of such
transfer, more than 50 percent of--

``(I) the total combined voting power of all classes of
stock entitled to vote of such corporation, or
``(II) the total value of the stock of such corporation,

then the portion of the fair market value of the stock of
such foreign corporation transferred by such donor which is
included for purposes of subparagraph (A) shall be the amount
which bears the same ratio to such value as the fair market
value of any assets owned by such foreign corporation and
situated in the United States at the time of such transfer
bears to the total fair market value of all assets owned by
such foreign corporation at such time. For purposes of the
preceding sentence, a donor shall be treated as owning stock
of a foreign corporation at the time of such transfer if, at
such time, by trust or otherwise, within the meaning of
sections 2035 to 2038, inclusive, he owned such stock.''.
(e) Enhanced Information Reporting From Individuals Losing
United States Citizenship.--
(1) In general.--Subsection (a) of section 6039G is amended
to read as follows:
``(a) In General.--Notwithstanding any other provision of
law, any individual to whom section 877(b) applies for any
taxable year shall provide a statement for such taxable year
which includes the information described in subsection
(b).''.
(2) Information to be provided.--Subsection (b) of section
6039G is amended to read as follows:
``(b) Information To Be Provided.--Information required
under subsection (a) shall include--
``(1) the taxpayer's TIN,
``(2) the mailing address of such individual's principal
foreign residence,
``(3) the foreign country, in which such individual is
residing,
``(4) the foreign country of which such individual is a
citizen,
``(5) information detailing the income, assets, and
liabilities of such individual,
``(6) the number of days that the individual was present in
the United States during the taxable year, and
``(7) such other information as the Secretary may
prescribe.''.
(3) Increase in penalty.--Subsection (d) of section 6039G
is amended to read as follows:
``(d) Penalty.--If--
``(1) an individual is required to file a statement under
subsection (a) for any taxable year, and
``(2) fails to file such a statement with the Secretary on
or before the date such statement is required to be filed or
fails to include all the information required to be shown on
the statement or includes incorrect information,

such individual shall pay a penalty of $5,000 unless it is
shown that such failure is due to reasonable cause and not to
willful neglect.''.
(4) Conforming amendment.--Section 6039G is amended by
striking subsections (c), (f), and (g) and by redesignating
subsections (d) and (e) as subsection (c) and (d),
respectively.
(f) Effective Date.--The amendments made by this section
shall apply to individuals who expatriate after February 27,
2003.
______

SA 1425. Ms. CANTWELL submitted an amendment intended to be proposed
to amendment SA 1412 proposed by Mr. Domenici (for himself, Ms.
Landrieu, Mr. Thomas, Ms. Murkowski, Mr. Campbell, Mr. Smith, Mr.
Alexander, Mr. Kyl, Mr. Nelson of Nebraska, Mr. Hagel, Mr. Talent, Mr.
Bunning, and Mr. Coleman) to the bill S. 14, to enhance the energy
security of the United States, and for other purposes; which was
ordered to lie on the table; as follows:

Strike section 1141 and insert the following:

SEC. 1141. NET METERING.

(a) Adoption of Standard.--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.--
``(A) In general.--On the request of any electric consumer
served by an electric utility, the electric utility shall
make available to the electric consumer net metering as
provided in section 115(i).
``(B) Consideration by state regulatory authorities.--
Notwithstanding subsections (b) and (c) of section 112, not
later than 1 year after the date of enactment of this
paragraph, a State regulatory authority may consider and make
a determination concerning whether it is in the public
interest to decline to implement subparagraph (A) in the
State.
``(C) Incentives.--Nothing in this paragraph precludes a
State from establishing incentives to encourage on-site
generating facilities and net metering in addition to the
requirement under this subsection.
``(D) Reports.--Not later than 1 year after the date of
enactment of this paragraph and annually thereafter, the
Secretary shall submit to Congress a report that--
``(i) describes the status of implementation by the States
of subparagraph (A);
``(ii) contains a list of pre-approved systems and
equipment eligible for uniform interconnection treatment; and
``(iii) describes the public benefits that have been
derived from net metering and interconnection standards.''.
(b) Special Rules for Net Metering.--Section 115 of the
Public Utility Regulatory Policies Act of 1978 (16 U.S.C.
2625) is amended by adding at the end the following:
``(i) Net Metering.--
``(1) Definitions.--In this subsection:
``(A) Eligible on-site generating facility.--The term
`eligible on-site generating facility' means--
``(i) a facility on the site of a residential electric
consumer with a maximum generating capacity of 25 kilowatts
or less that is fueled by solar energy, wind energy, or fuel
cells; and
``(ii) a facility on the site of a commercial electric
consumer with a maximum generating capacity of 1000 kilowatts
or less that is fueled solely by a renewable energy resource,
landfill gas, or a high-efficiency system.
``(B) High efficiency system.--The term `high efficiency
system' means a system that is comprised of--
``(i) fuel cells; or
``(ii) combined heat and power.
``(C) Net metering service.--The term `net metering
service' means service to an electric consumer, as provided
in section 111(d)(11), 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.
``(D) Renewable energy resource.--The term `renewable
energy resource' means solar, wind, biomass, micro-freeflow-
hydro, or geothermal energy.
``(2) Net metering service.--For the purposes of
undertaking the consideration and making the determination
with respect to the standard concerning net metering
established by section 111(d)(11), the term `net metering
service' means a service provided in accordance with this
subsection.
``(3) Charges by an electric utility.--An electric
utility--
``(A) shall charge the owner or operator of an on-site
generating facility rates and charges that are identical to
those that would be charged other electric consumers of the
electric utility in the same rate class; and
``(B) shall not charge the owner or operator of an on-site
generating facility any additional standby, capacity,
interconnection, or other rate or charge.
``(4) Measurement of quantities.--An electric utility that
sells electric energy to the owner or operator of an on-site
generating facility shall measure the quantity of electric
energy produced by the on-site facility and the quantity of
electric energy consumed by the owner or operator of an on-
site generating facility during a billing period with a
single bi-directional meter or otherwise in accordance with
reasonable metering practices.
``(5) Quantity sold in excess of quantity supplied.--If the
quantity of electric energy sold by the electric utility to
an on-site generating facility exceeds the quantity of
electric energy supplied by the on-site generating facility
to the electric utility during the billing period, the
electric utility may bill the owner or operator for the net
quantity of electric energy sold, in accordance with
reasonable metering practices.
``(6) Quantity supplied in excess of quantity sold.--If the
quantity of electric energy supplied by the on-site
generating facility to the electric utility exceeds the
quantity of electric energy sold by the electric utility to
the on-site generating facility during the billing period--
``(A) the electric utility may bill the owner or operator
of the on-site generating facility for the appropriate
charges for the billing period in accordance with paragraph
(5); and
``(B) the owner or operator of the on-site generating
facility shall be credited for the excess kilowatt-hours
generated during the billing period with--
``(i) a kilowatt-hour credit appearing on the bill for the
following billing period; or
``(ii) a cash refund.
``(7) Compliance with standards.--An eligible on-site
generating facility and net metering system used by an
electric consumer shall meet all applicable safety,
performance, reliability, and interconnection standards
established by the National Electrical Code, the Institute of
Electrical and Electronics Engineers, and Underwriters
Laboratories.
``(8) Requirements.-- The Commission, after consideration
of all applicable safety, performance, reliability, and
interconnection standards established by the National
Electrical Code, the Institute of Electrical and Electronics
Engineers, and Underwriters Laboratories, and consultation
with State

[[Page S10334]]

regulatory authorities and unregulated electric utilities,
and after notice and opportunity for comment, shall
promulgate additional control, testing, and interconnection
requirements for on-site generating facilities and net
metering systems that the Commission determines are necessary
to protect public safety and system reliability.''.
______

SA 1426. Mr. LIEBERMAN submitted an amendment intended to be proposed
by him to the bill S. 14, to enhance the energy security of the United
States, and for other purposes; which was ordered to lie on the table;
as follows:

On page 203, between lines 5 and 6, insert the following:

SEC. 6____. NATIONWIDE MEDIA CAMPAIGN TO DECREASE OIL
CONSUMPTION.

(a) In General.--The Secretary of Energy, acting through
the Assistant Secretary for Energy Efficiency and Renewable
Energy (referred to in this section as the ``Secretary''),
shall develop and conduct a national media campaign for the
purpose of decreasing oil consumption in the United States
over the next decade.
(b) Contract With Entity.--The Secretary shall carry out
subsection (a) directly or through--
(1) contracts with 1 or more nationally recognized media
firms for the development and distribution of monthly
television, radio, and newspaper public service
announcements; or
(2) collective agreements with 1 or more nationally
recognized institutes, businesses, or nonprofit organizations
for the funding, development, and distribution of monthly
television, radio, and newspaper public service
announcements.
(c) Use of Funds.--
(1) In general.--Amounts made available to carry out this
section shall be used for the following:
(A) Advertising costs.--
(i) The purchase of media time and space.
(ii) Creative and talent costs.
(iii) Testing and evaluation of advertising.
(iv) Evaluation of the effectiveness of the media campaign.
(v) The negotiated fees for the winning bidder on requests
from proposals issued either by the Secretary for purposes
otherwise authorized in this section.
(vi) Entertainment industry outreach, interactive outreach,
media projects and activities, public information, news media
outreach, and corporate sponsorship and participation.
(B) Administrative costs.--Operational and management
expenses.
(2) Limitations.--In carrying out this section, the
Secretary shall allocate not less than 85 percent of funds
made available under subsection (e) for each fiscal year for
the advertising functions specified under paragraph (1)(A).
(d) Reports.--The Secretary shall annually submit to
Congress a report that describes--
(1) the strategy of the national media campaign and whether
specific objectives of the campaign were accomplished,
including--
(A) determinations concerning the rate of change of oil
consumption, in both absolute and per capita terms; and
(B) an evaluation that enables consideration whether the
media campaign contributed to reduction of oil consumption;
(2) steps taken to ensure that the national media campaign
operates in an effective and efficient manner consistent with
the overall strategy and focus of the campaign;
(3) plans to purchase advertising time and space;
(4) policies and practices implemented to ensure that
Federal funds are used responsibly to purchase advertising
time and space and eliminate the potential for waste, fraud,
and abuse; and
(5) all contracts or cooperative agreements entered into
with a corporation, partnership, or individual working on
behalf of the national media campaign.
(e) Authorization of Appropriations.--There is authorized
to be appropriated to carry out this section $100,000,000 for
each of fiscal years 2004 through 2008.
______

SA 1427. Mr. BAUCUS (for himself and Mr. Grassley) submitted an
amendment intended to be proposed to amendment SA 1424 submitted by Mr.
Grassley (for himself, Mr. Baucus, Mr. Domenici, and Mr. Bingaman) and
intended to be proposed to the bill S. 14, to enhance the energy
security of the United States, and for other purposes; which was
ordered to lie on the table; as follows:

On page 263, after line 18, insert:

SEC. ____. 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 new sentence: ``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 beginning after
the date of the enactment of this Act.
______

SA 1428. Mr. INHOFE (for himself and Mr. Reid) submitted an amendment
intended to be proposed by him to the bill S. 14, to enhance the energy
security of the United States, and for other purposes; which was
ordered to lie on the table; as follows:

On page 145, between lines 18 and 19, insert the following:

Subtitle D--Nuclear Infrastructure Security

SEC. 436. DEFINITIONS.

Section 11 of the Atomic Energy Act of 1954 (42 U.S.C.
2014) is amended--
(1) by redesignating subsection jj. as subsection ii.; and
(2) by adding at the end the following:
``jj. Designated Nuclear Facility.--The term `designated
nuclear facility' means a facility that the Commission
classifies as a designated nuclear facility under section
170C(b).
``kk. Private Security Force.--The term `private security
force', with respect to a designated nuclear facility, means
personnel hired or contracted by the licensee or certificate
holder of the designated nuclear facility to provide security
at the designated nuclear facility.''.

SEC. 436A. DESIGNATED NUCLEAR FACILITY SECURITY.

(a) In General.--Chapter 14 of the Atomic Energy Act of
1954 (42 U.S.C. 2201 et seq.) is amended by adding at the end
the following:

``SEC. 170C. PROTECTION OF DESIGNATED NUCLEAR FACILITIES.

``(a) Definitions.--In this section:
``(1) Certificate holder.--The term `certificate holder'
means the holder of a certificate of compliance issued by the
Commission under this Act.
``(2) Federal security coordinator.--The term `Federal
security coordinator' means a Federal security coordinator as
assigned under this Act.
``(3) Design basis threat.--The term `design basis threat'
means the threat components or capability of an adversary
against which a nuclear facility is responsible for defending
under regulations, orders, or other directives of the
Commission.
``(4) Licensee.--The term `licensee' means the holder of a
license issued by the Commission.
``(b) Classes of Designated Nuclear Facility.--
``(1) In general.--Not later than 18 months after the date
of enactment of this section, the Commission shall, by
regulation, establish classes of designated nuclear facility.
``(2) Classification.--The Commission shall classify
facilities licensed by the Commission or issued a certificate
by the Commission, including--
``(A) commercial nuclear power plants;
``(B) independent spent fuel storage installations;
``(C) decommissioned nuclear power plants;
``(D) fuel processing facilities;
``(E) gaseous diffusion facilities; and
``(F) any other facility that the Commission determines
should be classified as a designated nuclear facility.
``(3) Factors.--In determining whether to classify a
facility as a designated nuclear facility, the Commission
shall consider--
``(A) the nature or type of facility;
``(B) the nature or type of potential radiological release
from the facility; and
``(C) other factors relating to protecting public health
and safety, the environment, and the common defense and
security.
``(c) Security Examination.--
``(1) In general.--The Commission and the Secretary of
Homeland Security, in consultation with other agencies and
State and local governments as appropriate, shall examine--
``(A) potential threats to nuclear facilities, as
appropriate, including consideration of--
``(i) threats comparable to the events of September 11,
2001;
``(ii) cyber threats, chemical threats, and biological
threats;
``(iii) attacks on nuclear facilities by multiple
coordinated teams of a large number of individuals;
``(iv) attacks by several persons, including persons
employed at the nuclear facility, some of whom may have
sophisticated knowledge of the operations of the nuclear
facility;
``(v) attacks by individuals willing to commit suicide to
carry out the attacks;
``(vi) intrusions originating from water or from the air;
and
``(vii) fire, especially fire of a long duration;
``(B) classification of threats against nuclear facilities,
as appropriate, as--
``(i) a type of threat falling under the responsibilities
of the Federal Government, including an act by an enemy of
the United States, whether a foreign government or any other
person;
``(ii) a type of threat falling under the responsibility of
a State or local government; or
``(iii) a type of threat the defense against which should
be the responsibility of a licensee or certificate holder;
``(C) the national security response capability,
including--
``(i) identification of the obligations and authorities of
the United States for protection of areas (including
waterways, ports,

[[Page S10335]]

roadways, airspace, or facilities in the vicinity of a
nuclear facility) in the event of a terrorist threat or a
terrorist attack against a nuclear facility, as appropriate;
``(ii) identification of the Federal, State, and local
agencies responsible for carrying out the obligations and
authorities of the United States identified under clause (i);
and
``(iii) coordination between the Federal, State and local
agencies identified under clause (ii), the Commission, and
licensees or certificate holders of nuclear facilities, for
protection of nuclear facilities and adjacent areas in the
event of a terrorist threat or a terrorist attack;
``(D) coordination of Federal, State, and local security
efforts to protect against terrorist or other criminal
attacks at nuclear facilities, as appropriate;
``(E) 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, including--
``(i) matters relating to the adequacy of emergency
planning zones;
``(ii) matters relating to the adequacy and coordination of
Federal, State, and local emergency planning and other
measures; and
``(iii) matters relating to the adequacy of security plans
for those nuclear facilities;
``(F) the system of threat levels, consistent with the
Homeland Security Advisory System, used to categorize the
threats pertinent to nuclear facilities, as appropriate,
including--
``(i) procedures to ensure coordinated Federal, State, and
local responses to changing threat levels for those nuclear
facilities;
``(ii) monitoring of threats against those nuclear
facilities; and
``(iii) procedures to notify licensees and certificate
holders of those nuclear facilities of changes in threat
levels;
``(H) the hiring and training standards for members of
private security forces at nuclear facilities, as
appropriate;
``(I) the coordination of Federal resources to expedite and
improve the process of conducting background checks under
section 149;
``(J) the establishment by the Secretary of Homeland
Security of a program to provide technical assistance and
training for the National Guard, State law enforcement
agencies, and local law enforcement agencies to respond, as
appropriate, to threats against nuclear facilities, as
appropriate, including recommendations for the establishment
of a grant program to assist State and local governments in
carrying out any recommendations under paragraph (3); and
``(K) options for protecting spent fuel storage areas, such
as dry cask storage, and associated infrastructure.
``(2) Completion.--The Commission and the Secretary of
Homeland Security shall complete the security examination
under paragraph (1) not later than 1 year after the date of
enactment of this section.
``(3) Report.--Not later than 180 days after completion of
the security examination under paragraph (1), the Commission
and the Secretary of Homeland Security shall submit to the
President and Congress, in classified and unclassified form,
a report with recommendations and findings.
``(d) Revision of Design Basis Threats.--
``(1) In general.--Not later than 180 days after completion
of the report under subsection (c)(3), the Commission shall
by regulation revise the design basis threats promulgated
before the date of enactment of this section as the
Commission determines to be appropriate based on the security
examination.
``(2) Applicability.--A revised design basis threat under
paragraph (1) shall apply to such classes of designated
nuclear facility as the Commission determines to be
appropriate.
``(3) Protection of safeguards information.--
``(A) In general.--In promulgating any regulations under
this subsection, the Commission shall ensure protection of
information in accordance with chapter 12, section 181, and
any other applicable law.
``(B) Effect of section.--Nothing in this section
supersedes any law governing the disclosure of classified
information or safeguards information.
``(C) Reports to congress on withheld information.--
``(i) Report.--Not later than 60 days after the effective
date of the regulations required by this subsection, the
Commission shall submit to Congress a report, in classified
and unclassified form, describing any classified information,
safeguards information, or other information that the
Commission considered in promulgating the regulations but did
not make available to the public because of the sensitive
nature of the information.
``(ii) Orders to licensees or certificate holders.--
Periodically, but not less than once every 6 months, the
Commission shall submit to Congress a report, in classified
and unclassified form, identifying any orders or instructions
to operators, licensees, or certificate holders issued under
the regulations required by this subsection that were not
made public because of their classified content, safeguards
content, or sensitive content.
``(e) Threat Levels.--Not later than 150 days after the
date of submission of the report under subsection (c)(3), the
Commission shall establish a system for the determination of
threat levels pertinent to--
``(1) such classes of designated nuclear facility as the
Commission determines to be appropriate; and
``(2) materials subject to this Act as designated by the
Commission.
``(f) Security Plans.--
``(1) In general.--Pursuant to any action taken by the
Commission under subsection (d)(1) to revise a design basis
threat, not later than 30 days after the revised design basis
threat under subsection (d) becomes effective, the Commission
shall require each licensee or certificate holder of a
designated nuclear facility that is subject to the revised
design basis threat to--
``(A) revise the security plan of that designated nuclear
facility to ensure that that designated nuclear facility
protects against the appropriate design basis threats; and
``(B) submit the security plan to the Commission for
review.
``(2) Review schedule.--The Commission shall establish a
priority schedule for conducting reviews of security plans
based on--
``(A) the proximity of the designated nuclear facility to
large population areas; and
``(B) other critical factors identified by the Commission.
``(3) Upgrades to security.--The Commission shall ensure
that the licensee or certificate holder of each designated
nuclear facility that is subject to the revised design basis
threat makes any changes to security and the security plan
required from the Commission review on a schedule established
by the Commission, but not to exceed 18 months after
completion of the review.
``(g) Emergency Response Plans and Preparedness.--
``(1) In general.--The Commission and the Secretary of
Homeland Security, in consultation with other Federal, State,
and local government agencies, as appropriate, shall review
and update the requirements in effect on the date of
enactment of this section for on-site and off-site emergency
response plans and preparedness for response to an emergency
involving a designated nuclear facility in such classes of
designated nuclear facility as the Commission determines to
be appropriate to ensure that the requirements--
``(A) are adequate to protect public health and safety;
``(B) provide reasonable assurance that the plans can and
will be implemented; and
``(C) provide reasonable assurance that adequate protective
measures can and will be taken in the event of such an
emergency.
``(2) Requirements.--At a minimum, the updated requirements
applicable to a designated nuclear facility under paragraph
(1) shall provide for--
``(A) the establishment of, clear definition of, assignment
of, and assurance of the ability to carry out,
responsibilities of emergency response organizations and
personnel among the licensee or certificate holder, State and
local organizations, and other supporting organizations;
``(B) methods and procedures for the clear and prompt
notification of State and local response organizations and
the public by the licensee or certificate holder;
``(C) methods and procedures for prompt communication and
coordination among emergency response organizations and
personnel and the public;
``(D) dissemination of information to the public, including
pre-emergency education on a periodic basis and in the event
of an actual emergency;
``(E) adequate emergency facilities and equipment at and
around the designated nuclear facility;
``(F) the use of appropriate methods, systems, and
equipment for assessing and monitoring actual and potential
impacts of an emergency, including a radiological emergency;
``(G) a range of protective actions for the public,
including appropriate evacuation and sheltering and the
prophylactic use of potassium iodide;
``(H) means for controlling radiological exposures and
other hazardous exposures;
``(I) appropriate medical services;
``(J) recovery and reentry plans; and
``(K) radiological emergency response training.
``(3) Factors.--The updated requirements under paragraph
(1) shall address relevant factors, including--
``(A) population density, topography, land characteristics,
access routes, and jurisdictional boundaries;
``(B) unique aspects of an emergency resulting from a
terrorist attack;
``(C) available technology and technical innovations; and
``(D) other factors, as determined by the Commission or the
Secretary of Homeland Security.
``(4) Stakeholder involvement.--In updating requirements
under paragraph (1), the Commission and the Secretary of
Homeland Security shall include requirements for appropriate
stakeholder involvement in the planning and exercise process,
including the involvement of--
``(A) local governments;
``(B) large employers;
``(C) facilities such as schools, hospitals, nursing homes,
and prisons;
``(D) advocacy groups; and
``(E) other interested groups and individuals near a
designated nuclear facility.
``(5) Regulations.--
``(A) In general.--The Commission and the Secretary of
Homeland Security shall promulgate regulations implementing
this subsection not later than 180 days following the
completion of the report under subsection (c)(3).

[[Page S10336]]

``(B) Effective date.--The regulations shall take effect
not later than 90 days after the date of promulgation.
``(6) Reviews.--
``(A) In general.--Not later than 60 days after the
effective date of the regulations under paragraph (5), the
Commission, in coordination with the Secretary of Homeland
Security and, as appropriate, in consultation with other
Federal, State, and local government agencies, shall begin
reviewing on-site and off-site emergency response plans and
preparedness capabilities for compliance with the
regulations.
``(B) Review schedule.--The Commission, in coordination
with the Secretary of Homeland Security, shall establish a
priority schedule for conducting reviews of emergency
response plans and preparedness capabilities under
subparagraph (A) based on the relative vulnerability of the
designated nuclear facilities that are subject to the
regulations and the proximity of the designated nuclear
facilities to high population density areas.
``(C) Report.--The Commission, in coordination with the
Secretary of Homeland Security, shall submit to Congress a
report, in classified and unclassified form, describing the
results of each review conducted under subparagraph (A).
``(7) Effect of subsection.--Nothing in this subsection
limits the authority of the Commission or the Secretary of
Homeland Security to take other actions for protection of the
public health and safety, the environment, or the common
defense and security under any other authority of the
Commission or the Secretary of Homeland Security.
``(h) Employee Security.--
``(1) Review.--Not later than 180 days after the date of
enactment of this section, the Commission shall review and
update as appropriate the access and training standards for
employees of nuclear facilities.
``(2) Disqualification of individuals who present national
security risks.--The Commission shall establish
qualifications and procedures, in addition to fingerprinting
for criminal history record checks conducted under section
149, to ensure that no individual who presents a threat to
national security is employed at a designated nuclear
facility in such classes of designated nuclear facility as
the Commission determines to be appropriate.
``(i) Federal Security Coordinators.--
``(1) Regional offices.--Not later than 18 months after the
date of enactment of this section, 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 a designated nuclear facility in such classes
of designated nuclear facilities as the Commission determines
to be appropriate;
``(B) ensuring that a designated nuclear facility in such
classes of designated nuclear facility as the Commission
determines to be appropriate maintains security consistent
with the security plan in accordance with the appropriate
threat level; and
``(C) assisting in the coordination of security measures
among--
``(i) the private security force at a designated nuclear
facility in such classes of designated nuclear facilities as
the Commission determines to be appropriate; and
``(ii) Federal, State, and local authorities, as
appropriate.
``(3) Additional federal security coordinators.--
``(A) In general.--The Commission may assign an additional
Federal security coordinator, as the Commission considers
appropriate, to a Commission office on the site of a
designated nuclear facility.
``(B) Request by governor.--The Governor of any State that
contains a designated nuclear facility may request the
assignment of an additional Federal security coordinator to 1
or more designated nuclear facilities in that State.
``(j) National Security Capability.--
``(1) In general.--Not later than 18 months after the date
of enactment of this section, the President shall identify
the national security support capability to protect
designated nuclear facilities against terrorist threats and
attacks.
``(2) Elements.--The national security support capability
shall use capabilities of such Federal agencies identified in
the report under subsection (c)(3), or of other Federal,
State, and local agencies, as the President determines to be
appropriate.
``(3) Capabilities.--
``(A) In general.--The national security support capability
shall provide assistance to the private security force at
each designated nuclear facility in such classes of
designated nuclear facilities as the Commission determines to
be appropriate, appropriate State and local agencies
including emergency response and law enforcement agencies,
and where appropriate, the National Guard, in accordance with
the obligations and authorities of the United States, as
identified in the report to Congress required under
subsection (c)(3).
``(B) Coordination.--The President shall ensure that
effective coordination exists between Federal agencies, the
Commission, and State and local governments in planning and
deployment for prevention, deterrence, and response to actual
or potential terrorist attacks against such classes of
designated nuclear facility as the Commission considers
appropriate.
``(4) Training program.--
``(A) In general.--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.
``(B) Grants.--The President may provide grants to State
and local governments to assist in carrying out subparagraph
(A).
``(5) Authorization of appropriations.--There are
authorized to be appropriated such sums as are necessary to
carry out this subsection.
``(k) Classified Information.--Nothing in this section
supersedes any law governing the disclosure of classified
information or safeguards information.''.
(b) Fingerprinting for Criminal History Record Checks.--
Section 149 of the Atomic Energy Act of 1954 (42 U.S.C. 2169)
is amended--
(1) in subsection a.--
(A) 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--
``(i) each licensee, certificate holder, or applicant for a
license or certificate to operate a utilization facility
under section 103 or 104(b); and
``(ii) each licensee or applicant for a license to possess
or use 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;

to fingerprint each individual 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 identified by
the Commission under subparagraph (A)(ii); or

``(ii) is permitted access to safeguards information under
section 147.'';
(B) by striking ``All fingerprints'' and inserting the
following:
``(2) Submission to the attorney general.--All
fingerprints'';
(C) by striking ``The costs'' and inserting the following;
``(3) Costs.--The costs'';
(D) by striking ``Notwithstanding'' and inserting the
following:
``(4) Provision to licensee, certificate holder, or
applicant.--Notwithstanding''; and
(E) by striking ``licensee or applicant'' each place it
appears and inserting ``licensee, certificate holder, or
applicant for a license or certificate'';
(2) by redesignating subsection d. as subsection e.; and
(3) by inserting after subsection c. the following:
``d. Use of Other Biometric Methods.--Any requirement for a
person to conduct fingerprinting under this section may be
satisfied by using any other biometric method for
identification approved for use by the Attorney General.''.

SEC. 436B. OFFICE OF NUCLEAR SECURITY AND INCIDENT RESPONSE.

(a) In General.--Title II of the Energy Reorganization Act
of 1974 (42 U.S.C. 5841 et seq.) is amended by adding at the
end the following:

``SEC. 212. OFFICE OF NUCLEAR SECURITY AND INCIDENT RESPONSE.

``(a) Definitions.--In this section:
``(1) Certificate holder.--The term `certificate holder'
has the meaning given the term in section 170C(a) of the
Atomic Energy Act of 1954.
``(2) Designated nuclear facility.--The term `designated
nuclear facility' has the meaning given the term in section
11 of the Atomic Energy Act of 1954 (42 U.S.C. 2014).
``(3) Director.--The term `Director' means the Director of
Nuclear Security and Incident Response appointed under
subsection (c) to head the Office.
``(4) Licensee.--The term `licensee' has the meaning given
the term in section 170C(a) of the Atomic Energy Act of 1954.
``(5) Office.--The term `Office' means the Office of
Nuclear Security and Incident Response established by
subsection (b).
``(b) Establishment of Office.--There is established in the
Commission the Office of Nuclear Security and Incident
Response.
``(c) Director.--
``(1) Appointment.--The Commission may appoint and remove
from office a Director of Nuclear Security and Incident
Response.
``(2) Duties.--
``(A) In general.--The Director shall perform such
functions as the Commission delegates to the Director.
``(B) Functions.--The functions delegated to the Director
may include--
``(i) carrying out security, safeguards, and incident
responses relating to--

``(I) any facility subject to the jurisdiction of the
Commission under the Atomic Energy Act of 1954 (42 U.S.C.
2011 et seq.);
``(II) any property subject to the jurisdiction of the
Commission under the Atomic

[[Page S10337]]

Energy Act of 1954 (42 U.S.C. 2011 et seq.) that--

``(aa) is significant to the common defense and security;
or
``(bb) is being transported to or from a facility described
in clause (i); and

``(III) any other activity of a licensee or certificate
holder, subject to the requirements of the Atomic Energy Act
of 1954 (42 U.S.C. 2011 et seq.), that is significant to the
common defense and security;

``(ii) for a facility or material licensed or certified
under the Atomic Energy Act of 1954 (42 U.S.C. 2011 et
seq.)--

``(I) developing contingency plans for dealing with
threats, thefts, and sabotage; and
``(II) monitoring, reviewing, and evaluating security and
safeguards;

``(iii) recommending upgrades to internal accounting
systems for special nuclear and other materials licensed or
certified under the Atomic Energy Act of 1954 (42 U.S.C. 2011
et seq.); and
``(iv) developing and recommending standards and amendments
to the standards of the Commission relating to the duties
described in clauses (i) through (iii); and
``(E) carrying out such other duties of the Commission
regarding safeguards and physical security functions and
incident response functions as the Commission determines to
be appropriate.
``(3) Consultation.--In carrying out the duties under
paragraph (2), the Director shall, to the extent practicable,
consult and coordinate with other Federal agencies.
``(d) Security Response Evaluations.--
``(1) In general.--Not later than 1 year after the date of
enactment of this section, the Commission shall establish a
security response evaluation program to assess the ability of
each designated nuclear facility that is part of a class of
designated nuclear facilities that the Commission considers
appropriate to defend against threats in accordance with the
security plan for the designated nuclear facility.
``(2) Frequency of evaluations.--Not less than once every 3
years, the Commission shall conduct and document security
response evaluations at each designated nuclear facility that
is part of a class of designated nuclear facilities that the
Commission considers appropriate to assess the ability of the
private security force of the designated nuclear facility to
defend against applicable design basis threats.
``(3) Security exemption.--The Commission may suspend
activities under this section if the Commission determines
that the security response evaluations would compromise
security at any designated nuclear facility in accordance
with a heightened threat level.
``(4) Activities.--The security response evaluation shall
include force-on-force exercises that simulate the security
threats consistent with the design basis threats applicable
to the designated nuclear facility.
``(5) Performance criteria.--The Commission shall establish
performance criteria for judging the security response
evaluations.
``(6) Corrective action.--
``(A) In general.--When any of the performance criteria
established under paragraph (5) are not satisfied--
``(i) the licensee or certificate holder shall promptly
correct any defects in performance identified by the
Commission in the security response evaluation; and
``(ii) the Commission shall conduct an additional security
response evaluation within 9 months to confirm that the
licensee or certificate holder satisfies the performance
criteria established under paragraph (5).
``(B) 2 consecutive failures to satisfy performance
criteria.--
``(i) In general.--If a designated nuclear facility fails
to satisfy the performance criteria established under
paragraph (5) in 2 consecutive security response evaluations,
the Commission shall issue an order specifying the corrective
actions that must be taken by the licensee or certificate
holder of the designated nuclear facility.
``(ii) Failure to take corrective action.--If the licensee
or certificate holder of a designated nuclear facility does
not take the corrective action specified by the Commission
within 30 days after the date of issuance of an order under
clause (i), the Commission shall assess a civil penalty under
section 234 of the Atomic Energy Act of 1954 (42 U.S.C.
2282).
``(C) Effect.--Nothing in this paragraph limits any
enforcement authority of the Commission to take action in
response to deficiencies identified through security
evaluations.
``(7) Reports.--Not less often than once every year, the
Commission shall submit to Congress and the President a
report, in classified form and unclassified form, that
describes the results of each security response evaluation
under this paragraph for the previous year.
``(e) Emergency Response Exercises.--
``(1) In general.--Not less than once every 2 years, the
Commission, in coordination with the Secretary of Homeland
Security and, as appropriate, in consultation with other
Federal, State, and local response agencies and stakeholders,
shall observe and evaluate emergency response exercises to
determine whether--
``(A) on-site and off-site emergency response plans for,
and capabilities for response to an emergency involving, each
designated nuclear facility in such classes of designated
nuclear facility as the Commission determines to be
appropriate are adequate to protect public health and safety;
and
``(B) there is reasonable assurance that--
``(i) those plans and capabilities can and will be
implemented; and
``(ii) adequate protective measures can and will be taken
in the event of an emergency.
``(2) Assessment of ability to respond.--Exercises under
paragraph (1) shall assess the ability of Federal, State, and
local emergency response agencies and emergency response
personnel of a licensee or certificate holder to respond
adequately to an emergency involving the designated nuclear
facility.
``(3) High population density areas.--The Commission, in
coordination with the Secretary of Homeland Security and, as
appropriate, in consultation with other Federal, State, and
local agencies and stakeholders, may observe and evaluate
exercises more frequently at designated nuclear facilities
located in high population density areas.
``(4) Performance-based approach.--The Commission, in
cooperation with the Secretary of Homeland Security, shall
promptly establish performance criteria for use in evaluating
the results of the exercises under paragraph (1), including
criteria relating to--
``(A) response times and capabilities;
``(B) coordination and communication among response
personnel and organizations;
``(C) emergency equipment, public notification systems, and
communications networks;
``(D) feasible evacuation of individuals; and
``(E) other matters determined by the Commission or the
Secretary of Homeland Security.
``(5) Scenarios.--The evaluations under paragraph (1) shall
assess the ability of the emergency response plans to protect
public health and safety and provide reasonable assurance
that adequate protective measures can and will be taken in
responding to a broad range of accident scenarios,
including--
``(A) fast-breaking events that occur with little or no
warning;
``(B) radiological releases of significant magnitude;
``(C) significant spontaneous evacuations;
``(D) significant shadow evacuations;
``(E) terrorist attacks; and
``(F) other scenarios determined by the Commission or the
Secretary of Homeland Security.
``(6) Deficiencies.--
``(A) Notification.--The Commission, in coordination with
the Secretary of Homeland Security, shall promptly notify
licensees or certificate holders, the Governor of any State
that may be affected, and any other appropriate Federal,
State, or local agencies or stakeholders of any weaknesses or
deficiencies in an emergency response plan or in emergency
preparedness capabilities identified as the result of an
evaluation under paragraph (1).
``(B) Failure to correct.--If weaknesses or deficiencies in
emergency response plans or in preparedness capabilities are
not promptly corrected, the Commission shall take appropriate
action under section 107 or other enforcement authorities
available to the Commission to--
``(i) ensure adequate protection of public health and
safety; and
``(ii) provide reasonable assurance that plans can and will
be implemented and that adequate protective measures can and
will be taken in the event of an emergency.
``(7) Report.--Not less than once annually, the Commission
and the Secretary of Homeland Security shall submit to the
President and Congress a report, in classified and
unclassified form, that describes--
``(A) the results of each exercise evaluated in the
previous year; and
``(B) each revision of an emergency response plan or
emergency preparedness capabilities made under paragraph (6)
in the previous year that is substantive in nature.
``(8) Maintenance.--The Commission shall take such action
as is necessary to ensure that adequate emergency response
plans and capabilities are maintained during the intervals
between exercises.
``(9) Effect of subsection.--Nothing in this subsection
limits the authority of the Commission or the Secretary of
Homeland Security to take other actions for protection of the
public health and safety, the environment, or the common
defense and security under any other authority of the
Commission or the Secretary of Homeland Security.
``(f) Effect.--Nothing in this section limits any authority
of the Secretary of Energy relating to the security and
safeguarding of special nuclear materials, high-level
radioactive waste, and nuclear facilities resulting from all
activities under the jurisdiction of the Secretary.''.
(b) Conforming Amendments.--Title II of the Energy
Reorganization Act of 1974 is amended--
(1) in section 203(b) (42 U.S.C. 5843(b))--
(A) in paragraph (1), by striking ``licensing and
regulation involving'' and inserting ``licensing, regulation,
and, except as otherwise provided under section 212, carrying
out safety reviews, safeguards, and physical security of'';
and
(B) in paragraph (2), by striking ``and safeguards''; and
(2) in section 204(b) (42 U.S.C. 5844(b))--
(A) in paragraph (1)--
(i) by striking ``including'' and inserting ``not
including''; and
(ii) by striking ``and materials.'' and inserting ``and
materials, to the extent that the safeguards and security
functions are

[[Page S10338]]

delegated to the Office of Nuclear Security and Incident
Response under section 212.'';
(B) in paragraph (2)--
(i) by striking ``and safeguards''; and
(ii) by striking ``, as amended,'' and all that follows
through the period and inserting ``(42 U.S.C. 2011 et
seq.)''.

SEC. 436C. GUARDING OF NUCLEAR FACILITIES, EQUIPMENT, AND
MATERIAL.

(a) Transporting of Short-Barreled Shotgun or Rifle.--
Section 922 of title 18, United States Code, is amended--
(1) in subsection (a)(4), by striking ``or licensed
collector,'' and inserting the following: ``licensed
collector, or a licensee or certificate holder under title I
of the Atomic Energy Act of 1954 (42 U.S.C. 2011 et seq.), or
an employee or contractor of such a licensee or certificate
holder, that holds the license or certificate for the purpose
of establishing and maintaining an on-site physical
protection system and security organization required by
Federal law or for the purpose of licensee-authorized or
certificate holder-authorized training or transportation of
nuclear material or equipment authorized under the Atomic
Energy Act of 1954 (42 U.S.C. 2011 et seq.),''; and
(2) in subsection (o)(2)--
(A) in subparagraph (A), by striking ``or'' at the end;
(B) in subparagraph (B), by striking the period at the end
and inserting ``; or''; and
(C) by adding at the end the following:
``(C) a transfer to a licensee or certificate holder under
title I of the Atomic Energy Act of 1954 (42 U.S.C. 2011 et
seq.) for purposes of establishing and maintaining an on-site
physical protection system and security organization required
by Federal law, or possession by an employee or contractor of
the licensee or certificate holder on-site for such purposes
or off-site for purposes of licensee-authorized or
certificate holder-authorized training or transportation of
nuclear materials or equipment authorized under the Atomic
Energy Act of 1954 (42 U.S.C. 2011 et seq.).''.
(b) Authorization for Importation of Firearm or
Ammunition.--Section 925(d)(1) of title 18, United States
Code, is amended--
(1) by inserting ``(A)'' before ``is being''; and
(2) by inserting after the semicolon the following: ``or
``(B) is being imported or brought in for transfer to a
licensee or certificate holder under title I of the Atomic
Energy Act of 1954 (42 U.S.C. 2011 et seq.) for purposes of
establishing and maintaining an on-site physical protection
system and security organization required by Federal law;''.
(c) Interstate Transportation of Firearms.--Section 926A of
title 18, United States Code, is amended--
(1) by striking ``Notwithstanding'' and inserting the
following:
``(a) In General.--Notwithstanding''; and
(2) by adding at the end the following:
``(b) Licensees and Certificate Holders of the Nuclear
Regulatory Commission.--Notwithstanding any other provision
of any law or any rule or regulation of a State or any
political subdivision of a State, a licensee or certificate
holder under title I of the Atomic Energy Act of 1954 (42
U.S.C. 2011 et seq.), or an employee or contractor of such a
licensee or certificate holder, that is not otherwise
prohibited by this chapter from transporting, shipping,
receiving, or possessing a firearm shall be entitled to
transport and possess a firearm for purposes of establishing
and maintaining an onsite physical protection system and
security organization required by Federal law, and for
purposes of licensee-authorized or certificate holder-
authorized training or transportation of nuclear material or
equipment authorized under the Atomic Energy Act of 1954 (42
U.S.C. 2011 et seq.).''.
(d) Importation of Firearms.--Section 5844 of the Internal
Revenue Code of 1986 (26 U.S.C. 5844) is amended--
(1) in paragraph (2), by striking ``or'' at the end;
(2) in paragraph (3), by inserting ``or'' after the
semicolon; and
(3) by inserting after paragraph (3) the following:
``(4) a machinegun or short-barreled shotgun being imported
or brought in for transfer to a licensee or certificate
holder under title I of the Atomic Energy Act of 1954 (42
U.S.C. 2011 et seq.) for purposes of establishing and
maintaining an on-site physical protection system and
security organization required by Federal law;''.
(e) Semiautomatic Assault Weapons; Large Capacity
Ammunition Feeding Devices.--Section 922 of title 18, United
States Code, is amended--
(1) in subsection (v)(4)(B)--
(A) by inserting ``or certificate holder'' after
``licensee'' each place that term appears;
(B) by inserting ``or certificate holder-authorized'' after
``licensee-authorized''; and
(C) by inserting ``or equipment'' after ``materials''; and
(2) in subsection (w)(3)(B)--
(A) by inserting ``or certificate holder'' after
``licensee'' each place that term appears;
(B) by inserting ``or certificate holder-authorized'' after
``licensee-authorized''; and
(C) by inserting ``or equipment'' after ``materials''.

SEC. 436D. SENSITIVE RADIOACTIVE MATERIAL SECURITY.

Chapter 14 of the Atomic Energy Act of 1954 (42 U.S.C. 2201
et seq.) (as amended by section 436A) is amended by adding at
the end the following:

``SEC. 170D. SENSITIVE RADIOACTIVE MATERIAL SECURITY.

``(a) Definitions.--In this section:
``(1) Sensitive radioactive material.--
``(A) In general.--The term `sensitive radioactive
material' means--
``(i) a material--

``(I) that is a source material, by-product material, or
special nuclear material; or
``(II) that is any other radioactive material (regardless
of whether the material is or has been licensed or otherwise
regulated under this Act) produced or made radioactive before
or after the date of enactment of this section; and

``(ii) that is in such a form or quantity or concentration
that the Commission determines should be classified as
`sensitive radioactive material' that warrants improved
security and protection against loss, theft, or sabotage.
``(B) Exclusion.--The term `sensitive radioactive material'
does not include nuclear fuel or spent nuclear fuel.
``(2) Security threat.--The term `security threat' means--
``(A) a threat of sabotage or theft of sensitive
radioactive material;
``(B) a threat of use of sensitive radioactive material in
a radiological dispersal device; and
``(C) any other threat of terrorist or other criminal
activity involving sensitive radioactive material that could
harm the health or safety of the public due primarily to
radiological properties of the sensitive radioactive
material, as determined by the Commission.
``(b) Duties.--
``(1) In general.--The Commission, in consultation with
Secretary of Homeland Security, Secretary of Energy, Director
of Central Intelligence, Director of the Federal Bureau of
Investigation, Director of the Customs Service, and
Administrator of the Environmental Protection Agency, shall--
``(A) evaluate the security of sensitive radioactive
material against security threats; and
``(B) recommend administrative and legislative actions to
be taken to provide an acceptable level of security against
security threats.
``(2) Considerations.--In carrying out paragraph (1), the
Commission shall consider actions, as appropriate to--
``(A) determine the radioactive materials that should be
classified as sensitive radioactive materials;
``(B) develop a classification system for sensitive
radioactive materials that--
``(i) is based on the potential for use by terrorists of
sensitive radioactive material and the extent of the threat
to public health and safety posed by that potential; and
``(ii) takes into account--

``(I) radioactivity levels of sensitive radioactive
material;
``(II) the dispersibility of sensitive radioactive
material;
``(III) the chemical and material form of sensitive
radioactive material;
``(IV) the need to maintain access by physicians and other
medical professionals to sensitive radioactive material and
pharmaceuticals containing sensitive radioactive material for
use in connection with medical diagnosis or treatment; and
``(V) other appropriate factors;

``(C) develop a national system for recovery of sensitive
radioactive material that is lost or stolen, taking into
account the classification system established under
subparagraph (B);
``(D) provide for the storage of sensitive radioactive
material that is not currently in use in a safe and secure
manner;
``(E) develop a national tracking system for sensitive
radioactive material, taking into account the classification
system established under subparagraph (B);
``(F) develop methods to ensure the return or proper
disposal of sensitive radioactive material;
``(G) consider export controls on sensitive radioactive
materials so that, to the extent feasible, exports from the
United States of sensitive radioactive materials are made to
foreign recipients that are willing and able to control the
sensitive radioactive materials in a manner that is not
inimical to the common defense and security of the United
States; and
``(H) establish procedures to improve the security of
sensitive radioactive material in use, transportation, and
storage.
``(3) Procedures to improve security.--The procedures to
improve the security of sensitive radioactive material under
paragraph (2)(H) may include--
``(A) periodic audits or inspections by the Commission to
ensure that sensitive radioactive material is properly
secured and can be fully accounted for;
``(B) evaluation by the Commission of security measures
taken by persons that possess sensitive radioactive material;
``(C) imposition of increased fines for violations of
regulations relating to security and safety measures
applicable to persons that possess sensitive radioactive
material;
``(D) conduct of background checks on individuals with
access to sensitive radioactive material;
``(E) measures to ensure the physical security of
facilities in which sensitive radioactive material is stored;
and

[[Page S10339]]

``(F) screening of shipments of sensitive radioactive
material to facilities that are particularly at risk for
sabotage to ensure that the shipments do not contain
explosives.
``(c) Report.--Not later than 1 year after the date of
enactment of this section, and not less frequently than once
every 3 years thereafter, the Commission shall submit to the
President and Congress a report in unclassified form (with a
classified annex, if necessary) describing the administrative
and legislative actions recommended under subsection (b)(1).
``(d) Administrative Action.--Not later than 60 days after
the date of submission of the report under subsection (c),
the Commission shall take such actions as are appropriate
to--
``(1) revise the system for licensing sensitive radioactive
materials; and
``(2) delegate the authority of the Commission to implement
regulatory programs and requirements to States that enter
into agreements with the Commission to perform inspections
and other functions on a cooperative basis as the Commission
considers appropriate.''.

SEC. 436E. UNAUTHORIZED INTRODUCTION OF DANGEROUS WEAPONS.

Section 229a. 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. 436F. SABOTAGE OF NUCLEAR FACILITIES OR FUEL.

Section 236a. of the Atomic Energy Act of 1954 (42 U.S.C.
2284(a)) is amended--
(1) in the first sentence, by striking ``or who
intentionally and willfully attempts'' and inserting ``or who
attempts or conspires'';
(2) in paragraph (2), by striking ``storage facility'' and
inserting ``storage, treatment, or disposal facility'';
(3) 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;
(4) 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 period at the end and inserting a
semicolon; and
(5) by inserting after paragraph (4) the following:
``(5) any production, utilization, waste storage, waste
treatment, waste disposal, uranium enrichment, 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;''.

SEC. 436G. EVALUATION OF ADEQUACY OF ENFORCEMENT PROVISIONS.

Not later than 90 days after the date of enactment of this
Act, the Attorney General and the Nuclear Regulatory
Commission shall submit to Congress a report that assesses
the adequacy of the criminal enforcement provisions in
chapter 18 of the Atomic Energy Act of 1954 (42 U.S.C. 221 et
seq.).

SEC. 436H. PROTECTION OF WHISTLEBLOWERS.

Section 211(a)(2) of the Energy Reorganization Act (42
U.S.C. 5851) 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.''.

SEC. 436I. TECHNICAL AND CONFORMING AMENDMENT.

The table of contents of the Atomic Energy Act of 1954 (42
U.S.C. prec. 2011) is amended by adding at the end of the
items relating to chapter 14 the following:

``Sec.
``170B. Uranium supply.
``170C. Protection of designated nuclear facilities.102. Section 102
head.
``170D. Sensitive radioactive material security.''.

SEC. 436J. AUTHORIZATION OF APPROPRIATIONS.

(a) In General.--There are authorized to be appropriated
such sums as are necessary to carry out the amendments made
by this title.
(b) Aggregate Amount of Charges.--Section 6101 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.''.
______

SA 1429. Mr. BREAUX submitted an amendment intended to be proposed by
him to the bill S. 14, to enhance the energy security of the United
States, and for other purposes; which was ordered to lie on the table;
as follows:

On page 89, line 24, insert ``(including roofing)'' after
``system''.
On page 91, line 11, strike ``and''.
On page 91, line 15, strike the period and insert ``,
and''.
On page 91, between lines 15 and 16, insert the following:

``(III) which has a roof which meets the requirements for
reflective roofs under the Energy Star program of the
Environmental Protection Agency.

On page 104, line 19, strike ``and''.
On page 104, between lines 19 and 20, insert the following:
``(5) 30 percent of the qualified energy efficient
reflective metal roof expenditures made by the taxpayer
during such year, and
On page 104, line 20, strike ``(5)'' and insert ``(6)''.
On page 106, line 5, strike ``or a wind energy property''
and insert ``a wind energy property, or a reflective metal
roof''.
On page 106, line 9, strike ``(d)(6)'' and insert
``(d)(7)''.
On page 108, between lines 22 and 23, insert the following:
``(6) Qualified energy efficient reflective metal roof
expenditure.--The term `qualified energy efficient reflective
metal roof expenditure' means an expenditure for pigmented
coated metal roofs which meet or exceed solar reflectivity
standards established for reflective roof products under the
Energy Star program of the Environmental Protection Agency
and which are installed on a dwelling unit located in the
United States and used as a residence by the taxpayer.
On page 108, line 23, strike ``(6)'' and insert ``(7)''.
On page 110, line 8, strike ``(7)'' and insert ``(8)''.
On page 110, line 11, strike ``or (6)'' and insert ``(6),
or (7)''.
On page 110, line 15, strike ``(8)'' and insert ``(9)''.
On page 139, line 8, insert ``, or, in the case of roofs,
in accordance with the requirements for reflective roof
products under the Energy Star program of the Environmental
Protection Agency'' before the comma.
On page 145, line 19, insert ``(including roofing)'' after
``system''.
______

SA 1430. Mr. BREAUX submitted an amendment intended to be proposed by
him to the bill S. 14, to enhance the energy security of the United
States, and for other purposes; which was ordered to lie on the table;
as follows:

At the end of title VII of Division B, insert the
following:

SEC. ____. CREDIT FOR ELECTRICITY PRODUCED FROM WIND ALLOWED
AGAINST REGULAR AND MINIMUM TAX.

(a) In General.--Subsection (c) of section 38 (relating to
limitation based on amount of tax), as amended by this Act,
is amended by redesignating paragraph (6) as paragraph (7)
and by inserting after paragraph (5) the following new
paragraph:
``(6) Special rules for credit for electricity produced
from wind.--
``(A) In general.--In the case of the wind electricity
credit--
``(i) this section and section 39 shall be applied
separately with respect to such credit, and
``(ii) in applying paragraph (1) to such credit--

``(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 wind
electricity credit).

``(B) Wind electricity credit.--For purposes of this
subsection, the term `wind electricity credit' means the
credit determined under sections 45 to the extent that such
credit is attributable to electricity produced--
``(i) at a facility using wind to produce electricity 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.--Subclause (II) of section
38(c)(2)(A)(ii), as amended by this Act, subclause (II) of
section 38(c)(3)(A)(ii), as amended by this Act, subclause
(II) of section 38(c)(4)(A)(ii), as added by this Act, and
subclause (II) of section 38(c)(5)(A)(ii), as added by this
Act, are each amended by inserting ``or the wind electricity
credit'' after ``Alaska natural gas 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.
______

SA 1431. Mr. GRASSLEY (for himself and Mr. Baucus) submitted an
amendment intended to be proposed by him

[[Page S10340]]

to the bill S. 14, to enhance the energy security of the United States,
and for other purposes; which was ordered to lie on the table; as
follows:

In division B, beginning on page 66, line 4, strike all
through page 67, line 9.
Beginning on page 67, line 16, strike all through page 69,
line 25, and insert the following:
``(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 diesel
fuel 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 with diesel fuel 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.--
``(A) In general.--Subject to subparagraph (B), 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'.
``(B) Certification for agri-biodiesel.--Subparagraph (A)
shall apply only if the taxpayer described in paragraph
(1)(A) or (2)(A) obtains a certification (in such form and
manner as prescribed by the Secretary) from the producer of
the agri-biodiesel which identifies the product produced.
On page 70, line 11, insert ``derived from plant or animal
matter'' after ``acids''.
On page 71, strike lines 1 through 3.
On page 71, line 4, strike ``(4)'' and insert ``(3)''.
On page 71, lines 17 through 19, strike ``biodiesel mixture
rate applicable under subsection (b)(1)(B)'' and insert
``rate applicable under subsection (b)(1)(A)''.
On page 72, line 3, strike ``(5)'' and insert ``(4)''.
On page 73, between lines 3 and 4, insert the following:
(2)(A) Section 87, as amended by this Act, is amended--
(i) by striking ``and'' at the end of paragraph (1),
(ii) by striking the period at the end of paragraph (2) and
inserting ``, and'',
(iii) by adding at the end the following new paragraph:
``(3) the biodiesel fuels credit determined with respect to
the taxpayer for the taxable year under section 40B(a).'',
and
(iv) by striking ``fuel credit'' in the heading and
inserting ``and biodiesel fuels credits''.
(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''.
On page 73, line 4, strike ``(2)'' and insert ``(3)''.
On page 73, line 11, strike ``(3)'' and insert ``(4)''.
On page 76, strike lines 1 through 11 and insert the
following:
``(1) In general.--For purposes of this section, the
biodiesel mixture credit is the product of the applicable
amount and the number of gallons of biodiesel used by the
taxpayer in producing any qualified biodiesel mixture.
``(2) Applicable amount.--
``(A) In general.--Except as provided in subparagraph (B),
the applicable amount is 50 cents.
``(B) Amount for agri-biodiesel.--
``(i) In general.--Subject to clause (ii), in the case of
any biodiesel which is agri-biodiesel, the applicable amount
is $1.00.
``(ii) Certification for agri-biodiesel.--Clause (i) shall
apply only if the taxpayer described in paragraph (1) obtains
a certification (in such form and manner as prescribed by the
Secretary) from the producer of the agri-biodiesel which
identifies the product produced.
On page 76, line 21, strike ``agri-biodiesel'' and insert
``biodiesel''.
On page 77, lines 1 and 2, strike ``agri-biodiesel'' and
insert ``biodiesel''.
On page 77, line 8, strike ``agri-biodiesel'' and insert
``biodiesel''.
On page 77, between lines 14 and 15, insert the following:
(b) Registration Requirement.--Section 4101(a) (relating to
registration) is amended by inserting ``and every person
producing biodiesel (as defined in section 40B(d)(1)) or
alcohol (as defined in section 6426(b)(4)(A))'' after
``4091''.
On page 77, line 15, strike ``(b)'' and insert ``(c)''.
Beginning on page 79, line 16, strike all through page 80,
line 17, and insert the following:
``(e) Alcohol or Biodiesel Used To Produce Alcohol Fuel and
Biodiesel Mixtures or Used as Fuels.--Except as provided in
subsection (k)--
``(1) Used to produce a mixture.--If any person produces a
mixture described in section 6426 in such person's trade or
business, the Secretary shall pay (without interest) to such
person an amount equal to the alcohol fuel mixture credit or
the biodiesel mixture credit with respect to such mixture.
``(2) Used as fuel.--If alcohol (as defined in section
40(d)(1)) or biodiesel (as defined in section 40B(d)(1)) or
agri-biodiesel (as defined in section 40B(d)(2)) which is not
in a mixture with a taxable fuel (as defined in section
4083(a)(1))--
``(A) is used by any person as a fuel in a trade or
business, or
``(B) is sold by any person at retail to another person and
placed in the fuel tank of such person's vehicle,

the Secretary shall pay (without interest) to such person an
amount equal to the alcohol credit (as determined under
section 40(b)(2)) or the biodiesel credit (as determined
under section 40B(b)(2)) with respect to such fuel.
``(3) Coordination with other repayment provisions.--No
amount shall be payable under paragraph (1) with respect to
any mixture with respect to which an amount is allowed as a
credit under section 6426.
``(4) Termination.--This subsection shall not apply with
respect to--
``(A) any alcohol fuel mixture (as defined in section
6426(b)(3)) or alcohol (as so defined) sold or used after
December 31, 2010, and
``(B) any qualified biodiesel mixture (within the meaning
of section 6426(c)(1)) or biodiesel (as so defined) or agri-
biodiesel (as so defined) sold or used after December 31,
2005.''.
On page 82, line 4, strike ``(e)'' and insert ``(e)(1)''.
On page 84, line 8, strike ``(c)'' and insert ``(d)''.
On page 84, line 11, strike ``(d)'' and insert ``(e)''.
Beginning on page 86, line 25, strike ``with the'' and all
that follows through page 87, line 2, and insert the
following: ``with the latest standards of chapter 4 of the
International Energy Conservation Code approved by the
Department of Energy before the construction of such
qualifying new home and any applicable Federal minimum
efficiency standards for equipment,''.
On page 88, between lines 11 and 12, insert the following:
``(3) Provider limitation.--Any eligible contractor who
directly or indirectly provides the guarantee of energy
savings under a guarantee-based method of certification
described in subsection (d)(1)(D) shall not be eligible to
receive the credit allowed by this section.
On page 89, line 2, insert ``or system'' after ``cooling
equipment''.
On page 90, line 10, strike ``or'' and insert a comma.
On page 90, line 11, insert ``or a guarantee-based
method,'' after ``method,''.
On page 91, strike lines 12 through 15 and insert the
following:

``(II) constructed in accordance with the latest standards
of chapter 4 of the International Energy Conservation Code
approved by the Department of Energy before the construction
of such qualifying new home and any applicable Federal
minimum efficiency standards for equipment.

On page 91, line 22, strike ``Such'' and all that follows
through page 92, line 2.
On page 92, between lines 2 and 3, insert the following:
``(D) Guarantee-based method.--
``(i) In general.--A guarantee-based method is a method
which guarantees in writing to the homeowner energy savings
of either 30 percent or 50 percent over the 2000
International Energy Conservation Code for heating and
cooling costs. The guarantee shall be provided for a minimum
of 2 years and shall fully reimburse the homeowner any
heating and cooling costs in excess of the guaranteed amount.
``(ii) Computer software.--Computer software shall be
selected by the provider to support the guarantee-based
method certification under clause (i). Such software shall
meet procedures and methods for calculating energy and cost
savings in regulations promulgated by the Secretary of
Energy.
On page 92, line 9, insert ``or a guarantee-based method''
after ``method''.
On page 94, line 13, insert ``and guarantee-based'' after
``based''.
On page 105, strike lines 6 through 19 and insert the
following:
``(C) for property described in subsection (d)(6)--
``(i) $150 for each electric heat pump water heater,
``(ii) $125 for each advanced natural gas, oil, propane
furnace, or hot water boiler,

[[Page S10341]]

``(iii) $150 for each advanced natural gas, oil, or propane
water heater,
``(iv) $50 for each natural gas, oil, or propane water
heater,
``(v) $50 for an advanced main air circulating fan,
``(vi) $150 for each advanced combination space and water
heating system,
``(vii) $50 for each combination space and water heating
system, and
``(viii) $250 for each geothermal heat pump.
On page 106, line 18, insert ``for property described in
subsection (d)(6)(B)(viii)'' after ``(EER)''.
On page 109, strike lines 12 through 17.
On page 109, line 18, strike ``(iii)'' and insert ``(ii)''.
On page 109, lines 18 and 19, strike ``or propane furnace''
and insert ``propane furnace, or hot water boiler''.
On page 109, strike lines 22 through 25.
On page 110, strike lines 1 through 7 and insert the
following:
``(iii) an advanced natural gas, oil, or propane water
heater which has an energy factor of at least 0.80 in the
standard Department of Energy test procedure,
``(iv) a natural gas, oil, or propane water heater which
has an energy factor of at least 0.65 but less than 0.80 in
the standard Department of Energy test procedure,
``(v) an advanced main air circulating fan used in a new
natural gas, propane, or oil-fired furnace, including main
air circulating fans that use a brushless permanent magnet
motor or another type of motor which achieves similar or
higher efficiency at half and full speed, as determined by
the Secretary,
``(vi) an advanced combination space and water heating
system which has a combined energy factor of at least 0.80
and a combined annual fuel utilization efficiency (AFUE) of
at least 78 percent in the standard Department of Energy test
procedure,
``(vii) a combination space and water heating system which
has a combined energy factor of at least 0.65 but less than
0.80 and a combined annual fuel utilization efficiency (AFUE)
of at least 78 percent in the standard Department of Energy
test procedure, and
``(viii) a geothermal heat pump which has an energy
efficiency ratio (EER) of at least 21.
On page 139, strike lines 7 and 8 and insert the following:
``meet or exceed the latest prescriptive criteria for such
component in the International Energy Conservation Code
approved by the Department of Energy before the installation
of such component,''.
On page 141, line 10, strike ``Such'' and all that follows
through line 15.
On page 141, line 19, strike ``by''.
On page 146, strike lines 17 through 19 and insert the
following:
(1) In general.--Section 25D(b), as added by subsection
(a), is amended--
(A) by striking ``The credit'' and inserting the following:
``(1) Dollar amount.--The credit'', and
(B) by adding at the end the following new paragraph:
On page 146, line 20, strike ``(3)'' and insert ``(2)''.
On page 147, line 9, strike ``(b)(3)'' and insert
``(b)(2)''.
On page 153, strike lines 13 and 14 and insert the
following:
``(B) uses an input of at least 75 percent coal to produce
at least 50 percent of its thermal output as electricity,
On page 157, line 2, strike ``section 45(d)'' and insert
``section 45(e)''.
On page 177, line 21, strike ``(2), and (6)'' and insert
``, (2), and (6)''.
On page 180, after line 10, strike ``40.6'' both places it
appears and insert ``40.2''.
On page 180, after line 10, strike ``40'' both places it
appears and insert ``39''.
On page 181, between lines 3 and 4, strike ``43.6'' both
places it appears and insert ``43.9''.
On page 181, between lines 6 and 7, strike ``44.2'' both
places it appears and insert ``46.3''.
On page 181, between lines 6 and 7, strike ``43.9'' and
insert ``44.2''.
On page 182, line 11, strike ``section 45(d)'' and insert
``section 45(e)''.
On page 198, line 25, insert ``with respect to any
facility'' after ``taxable year''.
On page 199, line 2, insert ``with respect to such
facility'' after ``taxable year''.
On page 199, line 9, strike ``a small business refiner''
and insert ``any facility''.
On page 200, line 16, insert ``for all facilities of the
taxpayer'' after ``of which ''.
On page 200, line 18, strike ``205,000'' and insert
``410,000''.
On page 219, line 24, insert ``, as amended by this Act,''
after ``rules)''.
On page 220, line 1, strike ``(9)'' and insert ``(10)''.
On page 222, strike lines 1 through 4 and insert the
following:
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to fuel sold
after the date of the enactment of this Act, in taxable years
ending after such date.
(2) Existing facilities.--The amendments made by subsection
(c) shall apply to fuel sold after December 31, 2002, in
taxable years ending after such date.
On page 227, line 1, strike ``the taxpayer'' and insert
``such person or entity''.
On page 227, beginning on line 10, strike ``operating'' and
all that follows through ``production.'' on line 12, and
insert the following: ``such persons or entities. Production
otherwise attributable to a United States tax-exempt person
or entity by reason of a royalty interest shall be
attributable to such person or entity with respect to whom
royalty-in-value production remains or to whom royalty-in-
kind production is sold.''.
On page 228, line 7, strike ``15 years'' and insert ``25
years''.
On page 231, strike lines 4 and 5 and insert the following:
``(B) is--
``(i) placed in service after December 31, 2012, or
``(ii) treated as placed in service on January 1, 2013, if
the taxpayer who places such system in service before January
1, 2013, elects such treatment.
On page 231, strike lines 14 through 17 and insert the
following:
``(d) 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.
On page 237, between lines 18 and 19, insert the following:

SEC. 514. EXTENSION OF ENHANCED OIL RECOVERY CREDIT TO
CERTAIN ALASKA 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 to construct a gas treatment plant which--
``(i) is located in the area of the United States (within
the meaning of section 638(1)) lying north of 64 degrees
North latitude,
``(ii) prepares Alaska natural gas (as defined in section
45M(c)(1)) for transportation through a pipeline with a
capacity of at least 2,000,000,000,000 Btu of natural gas per
day, and
``(iii) 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.
______

SA 1432. Mr. FRIST proposed an amendment to the bill S. 14, to
enhance the energy security of the United States, and for other
purposes; (instructions on pending motion to commit) as follows:

Strike all after the first word and insert in lieu thereof
the following:

SECTION 1. SHORT TITLE.

This Act may be cited as ``The Energy Policy Act of 2003''.

SEC. 2. TABLE OF CONTENTS.

The table of contents for this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.

TITLE I--OIL AND GAS

Subtitle A--Production Incentives

Sec. 101. Permanent authority to operate the Strategic Petroleum
Reserve and other energy programs.
Sec. 102. Study on inventory of petroleum and natural gas storage.
Sec. 103. Program on oil and gas royalties in kind.
Sec. 104. Marginal property production incentives.
Sec. 105. Comprehensive inventory of OCS oil and natural gas resources.
Sec. 106. Royalty relief for deep water production.
Sec. 107. Alaska offshore royalty suspension.
Sec. 108. Orphaned, abandoned, or idled wells on Federal lands.
Sec. 109. Incentives for natural gas production from deep wells in the
shallow waters of the Gulf of Mexico.
Sec. 110. Alternate energy-related uses on the Outer Continental Shelf.
Sec. 111. Coastal impact assistance.
Sec. 112. National Energy Resource Database.
Sec. 113. Oil and gas lease acreage limitation.
Sec. 114. Assessment of dependence of State of Hawaii on oil.

Subtitle B--Access to Federal Lands

Sec. 121. Office of Federal Energy Permit Coordination.
Sec. 122. Pilot Project to improve Federal permit coordination.
Sec. 123. Federal onshore leasing programs for oil and gas.
Sec. 124. Estimates of oil and gas resources underlying onshore Federal
lands.
Sec. 125. Split-Estate Federal oil and gas leasing and development
practices.
Sec. 126. Coordination of Federal agencies to establish priority energy
transmission rights-of-way.

Subtitle C--Alaska Natural Gas Pipeline

Sec. 131. Short title.
Sec. 132. Definitions.
Sec. 133. Issuance of certificate of public convenience and necessity.
Sec. 134. Environmental reviews.
Sec. 135. Pipeline expansion.
Sec. 136. Federal coordinator.
Sec. 137. Judicial review.
Sec. 138. State jurisdiction over in-state delivery of natural gas.
Sec. 139. Study of alternative means of construction.
Sec. 140. Clarification of ANGTA status and authorities.

[[Page S10342]]

Sec. 141. Sense of Congress.
Sec. 142. Participation of small business concerns.
Sec. 143. Alaska pipeline construction training program.
Sec. 144. Loan guarantee.
Sec. 145. Sense of Congress on natural gas demand.

TITLE II--COAL

Subtitle A--Clean Coal Power Initiative

Sec. 201. Authorization of appropriations.
Sec. 202. Project criteria.
Sec. 203. Reports.
Sec. 204. Clean Coal Centers of Excellence.

Subtitle B--Federal Coal Leases

Sec. 211. Repeal of the 160-acre limitation for coal leases.
Sec. 212. Mining plans.
Sec. 213. Payment of advance royalties under coal leases.
Sec. 214. Elimination of deadline for submission of coal lease
operation and reclamation plan.
Sec. 215. Application of amendments.

Subtitle C--Powder River Basin

Sec. 221. Resolution of Federal resource development conflicts in the
Powder River Basin.

TITLE III--INDIAN ENERGY

Sec. 301. Short title.
Sec. 302. Office of Indian energy policy and programs.
Sec. 303. Indian energy.

``TITLE XXVI--INDIAN ENERGY

``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. Federal Power Marketing Administrations.
``Sec. 2606. Indian mineral development review.
``Sec. 2607. Wind and hydropower feasibility study.
Sec. 304. Four Corners transmission line project.
Sec. 305. Energy efficiency in federally assisted housing.
Sec. 306. Consultation with Indian tribes.

TITLE IV--NUCLEAR

Subtitle A--Price-Anderson Amendments

Sec. 401. Short title.
Sec. 402. Extension of indemnification authority.
Sec. 403. Maximum assessment.
Sec. 404. Department of energy liability limit.
Sec. 405. Incidents outside the United States.
Sec. 406. Reports.
Sec. 407. Inflation adjustment.
Sec. 408. Treatment of modular reactors.
Sec. 409. Applicability.
Sec. 410. Civil penalties.

Subtitle B--Deployment of Commercial Nuclear Plants

Sec. 421. Short title.
Sec. 422. Definitions.
Sec. 423. Responsibilities of the Secretary of Energy.
Sec. 424. Limitations.
Sec. 425. Regulations.

Subtitle C--Advanced Reactor Hydrogen Co-Generation Project

Sec. 431. Project establishment.
Sec. 432. Project definition.
Sec. 433. Project management.
Sec. 434. Project requirements.
Sec. 435. Authorization of appropriations.

Subtitle D--Miscellaneous Matters

Sec. 441. Uranium sales and transfers.
Sec. 442. Decommissioning Pilot Program.

TITLE V--RENEWABLE ENERGY

Subtitle A--General Provisions

Sec. 501. Assessment of renewable energy resources.
Sec. 502. Renewable energy production incentive.
Sec. 503. Renewable energy on Federal lands.
Sec. 504. Federal purchase requirement.
Sec. 505. Insular area renewable and energy efficient plans.

Subtitle B--Hydroelectric Relicensing

Sec. 511. Alternative conditions and fishways.

Subtitle C--Geothermal Energy

Sec. 521. Competitive lease sale requirements.
Sec. 522. Geothermal leasing and permitting on Federal lands.
Sec. 523. Leasing and permitting on federal lands withdrawn for
military purposes.
Sec. 524. Reinstatement of leases terminated for failure to pay rent.
Sec. 525. Royalty reduction and relief.
Sec. 526. Royalty exemption for direct use of low temperature
geothermal energy resources.

Subtitle D--Biomass Energy

Sec. 531. Definitions.
Sec. 532. Biomass Commercial Utilization Grant Program.
Sec. 533. Improved Biomass Utilization Grant Program.
Sec. 534. Report.

TITLE VI--ENERGY EFFICIENCY

Subtitle A--Federal Programs

Sec. 601. Energy management requirements.
Sec. 602. Energy use measurement and accountability.
Sec. 603. Federal building performance standards.
Sec. 604. Energy savings performance contracts.
Sec. 605. Procurement of energy efficient products.
Sec. 606. Congressional building efficiency.
Sec. 607. Increased Federal use of recovered mineral components in
federally funded projects involving procurement of cement
or concrete.
Sec. 608. Utility energy service contracts.
Sec. 609. Study of energy efficiency standards.

Subtitle B--State and Local Programs

Sec. 611. Low Income Community Energy efficiency Pilot Program.
Sec. 612. Energy efficient public buildings.
Sec. 613. Energy Efficient Appliance Rebate Programs.

Subtitle C--Consumer Products

Sec. 621. Energy conservation standards for additional products.
Sec. 622. Energy labeling.
Sec. 623. Energy Star Program.
Sec. 624. HVAC Maintenance Consumer Education Program.

Subtitle D--Public Housing

Sec. 631. Capacity building for energy-efficient, affordable housing.
Sec. 632. Increase of CDBG public services cap for energy conservation
and efficiency activities.
Sec. 633. FHA mortgage insurance incentives for energy efficient
housing.
Sec. 634. Public housing capital fund.
Sec. 635. Grants for energy-conserving improvements for assisted
housing.
Sec. 636. North American Development Bank.
Sec. 637. Energy-efficient appliances.
Sec. 638. Energy efficiency standards.
Sec. 639. Energy strategy for HUD.

TITLE VII--TRANSPORTATION FUELS

Subtitle A--Alternative Fuel Programs

Sec. 701. Use of alternative fuels by dual-fueled vehicles.
Sec. 702. Fuel use credits.
Sec. 703. Neighborhood electric vehicles.
Sec. 704. Credits for medium and heavy duty dedicated vehicles.
Sec. 705. Alternative fuel infrastructure.
Sec. 706. Incremental cost allocation.
Sec. 707. Review of Alternative Fuel Programs.
Sec. 708. High occupancy vehicle exception.
Sec. 709. Alternate compliance and flexibility.

Subtitle B--Automobile Fuel Economy

Sec. 711. Automobile fuel economy standards.
Sec. 712. Dual-fueled automobiles.
Sec. 713. Federal fleet fuel economy.
Sec. 714. Railroad efficiency.
Sec. 715. Reduction of engine idling in heavy-use vehicles.

TITLE VIII--HYDROGEN

Subtitle A--Basic Research Programs

Sec. 801. Short Title.
Sec. 802. Matsunaga act amendment.
Sec. 803. Hydrogen transportation and fuel initiative.
Sec. 804. Interagency task force and coordination plan.
Sec. 805. Review by the national academies.

Subtitle B--Demonstration Programs

Sec. 811. Definitions.
Sec. 812. Hydrogen vehicle demonstration program.
Sec. 813. Stationary fuel cell demonstration program.
Sec. 814. Hydrogen demonstration programs in national parks.
Sec. 815. International demonstration program.
Sec. 816. Tribal stationary hybrid power demonstration.
Sec. 817. Distributed Generation Pilot Program.

Subtitle C--Federal Programs

Sec. 821. Public education and training.
Sec. 822. Hydrogen transition strategic planning.
Sec. 823. Minimum federal fleet requirement.
Sec. 824. Stationary fuel cell purchase requirement.
Sec. 825. Department of energy strategy.

TITLE IX--RESEARCH AND DEVELOPMENT

Sec. 901. Short title.
Sec. 902. Goals.
Sec. 903. Definitions.

Subtitle A--Energy Efficiency

Sec. 911. Energy efficiency.
Sec. 912. Next generation lighting initiative.
Sec. 913. National building performance initiative.
Sec. 914. Secondary electric vehicle battery use program.
Sec. 915. Energy efficiency science initiative.

Subtitle B--Distributed Energy and Electric Energy Systems

Sec. 921. Distributed energy and electric energy systems.
Sec. 922. Hybrid distributed power systems.
Sec. 923. High Power Density Industry Program.
Sec. 924. Micro-cogeneration energy technology.

[[Page S10343]]

Sec. 925. Distributed energy technology demonstration program.
Sec. 926. Office of electric transmission and distribution.
Sec. 927. Electric Transmission and Distribution Programs.

Subtitle C--Renewable Energy

Sec. 931. Renewable energy.
Sec. 932. Bioenergy Programs.
Sec. 933. Biodiesel Engine Testing Program.
Sec. 934. Concentrating Solar Power Research Program.
Sec. 935. Miscellaneous projects.

Subtitle D--Nuclear Energy

Sec. 941. Nuclear energy.
Sec. 942. Nuclear Energy Research Programs.
Sec. 943. Advanced fuel cycle initiative.
Sec. 944. University nuclear science and engineering support.
Sec. 945. Security of nuclear facilities.
Sec. 946. Alternatives to industrial radioactive sources.

Subtitle E--Fossil Energy

Sec. 951. Fossil energy.
Sec. 952. Oil and Gas Research Programs.
Sec. 953. Research and development for coal mining technologies.
Sec. 954. Coal and Related Technologies Program.
Sec. 955. Complex well technology testing facility.

Subtitle F--Science

Sec. 961. Science.
Sec. 962. United States participation in ITER.
Sec. 963. Spallation neutron source.
Sec. 964. Support for science and energy facilities and infrastructure.
Sec. 965. Catalysis Research Program.
Sec. 966. Nanoscale science and engineering research.
Sec. 967. Advanced scientific computing for energy missions.
Sec. 968. Genomes to Life Program.
Sec. 969. Fission and Fusion Energy Materials Research Program.
Sec. 970. Energy-Water Supply Technologies Program.

Subtitle G--Energy and Environment

Sec. 971. United States-Mexico energy technology cooperation.
Sec. 972. Coal technology loan.

Subtitle H--Management

Sec. 981. Availability of funds.
Sec. 982. Cost sharing.
Sec. 983. Merit review of proposals.
Sec. 984. External Technical Review of Departmental Programs.
Sec. 985. Improved coordination of technology transfer activities.
Sec. 986. Technology Infrastructure Program.
Sec. 987. Small business advocacy and assistance.
Sec. 988. Mobility of scientific and technical personnel.
Sec. 989. National Academy of Sciences Report.
Sec. 990. Outreach.
Sec. 991. Competitive award of management contracts.
Sec. 992. Reprogramming.
Sec. 993. Construction with other laws.
Sec. 994. Improved coordination and management of civilian science and
technology programs.
Sec. 995. Educational Programs in science and mathematics.
Sec. 996. Other transactions authority.
Sec. 997. Report on Research and Development Program Evaluation
Methodologies.

TITLE X--PERSONNEL AND TRAINING

Sec. 1001. Workforce trends and traineeship grants.
Sec. 1002. Research fellowships in energy research.
Sec. 1003. Training guidelines for electric energy industry personnel.
Sec. 1004. National center on energy management and building
technologies.
Sec. 1005. Improved access to energy-related scientific and technical
careers.
Sec. 1006. National power plant operations technology and education
center.
Sec. 1007. Federal mine inspectors.

TITLE XI--ELECTRICITY

Sec. 1101. Definitions.

Subtitle A--Reliability

Sec. 1111. Electric reliability standards.

Subtitle B--Regional Markets

Sec. 1121. Implementation date for proposed rulemaking for standard
market design.
Sec. 1122. Sense of the Congress on Regional Transmission
Organizations.
Sec. 1123. Federal utility participation in regional transmission
organizations.
Sec. 1124. Regional consideration of competitive wholesale markets.

Subtitle C--Improving Transmission Access and Protecting Service
Obligations

Sec. 1131. Service obligation security and parity.
Sec. 1132. Open non-discriminatory access.
Sec. 1133. Transmission infrastructure investment.

Subtitle D--Amendments to the Public Utility Regulatory Policies Act of
1978

Sec. 1141. Net metering.
Sec. 1142. Smart metering.
Sec. 1143. Adoption of additional standards.
Sec. 1144. Technical assistance.
Sec. 1145. Cogeneration and small power production purchase and sale
requirements.
Sec. 1146. Recovery of costs.

Subtitle E--Provisions Regarding the Public Utility Holding Company Act
of 1935

Sec. 1151. Definitions.
Sec. 1152. Repeal of the Public Utility Holding Company Act of 1935.
Sec. 1153. Federal access to books and records.
Sec. 1154. State access to books and records.
Sec. 1155. Exemption authority.
Sec. 1156. Affiliate transactions.
Sec. 1157. Applicability.
Sec. 1158. Effect on other regulations.
Sec. 1159. Enforcement.
Sec. 1160. Savings provisions.
Sec. 1161. Implementation.
Sec. 1162. Transfer of resources.
Sec. 1163. Effective date.
Sec. 1164. Conforming amendment to the Federal Power Act.

Subtitle F--Market Transparency, Anti-Manipulation and Enforcement

Sec. 1171. Market transparency rules.
Sec. 1172. Market manipulation.
Sec. 1173. Enforcement.
Sec. 1174. Refund effective date.

Subtitle G--Consumer Protections

Sec. 1181. Consumer privacy.
Sec. 1182. Unfair trade practices.
Sec. 1183. Definitions.

Subtitle H--Technical Amendments

Sec. 1191. Technical amendments.

TITLE I--OIL AND GAS

Subtitle A--Production Incentives

SEC. 101. 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--

``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. 6250(e)); 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 striking section 256(h) (42 U.S.C. 6276(h)) and
inserting--
``(g) Authorization of Appropriations.--There are
authorized to be appropriated to the Secretary such sums as
may be necessary to carry out this part, to remain available
until expended.'';
(2) by inserting before section 273 (42 U.S.C. 6283) the
following:

``Part C--Summer Fill and Fuel Budgeting Programs'';

(3) by striking section 273(e) (42 U.S.C. 6283(e));
relating to the expiration of summer fill and fuel budgeting
programs); and
(4) 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 amending the items relating to part D of title I to
read as follows:

``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) Northeast Home Heating Oil.--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)''.

SEC. 102. 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 U.S. demand for
petroleum and natural gas without

[[Page S10344]]

shortages or price spikes, when inventory levels are below
normal ranges.
(d) Report to Congress.--Not later than one year from
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. 103. PROGRAM ON OIL AND GAS ROYALTIES IN KIND.

(a) Applicability of Section.--Notwithstanding any other
provision of law, the provisions of this section shall apply
to all royalties-in-kind accepted by the Secretary (referred
to in this section as ``Secretary'') 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 mineral
leasing law beginning on the date of the enactment of this
Act through September 30, 2013.
(b) Terms and Conditions.--All royalty accruing to the
United States under any Federal oil or gas lease or permit
under the Mineral Leasing Act (30 U.S.C. 181 et seq.) or the
Outer Continental Shelf Lands Act (43 U.S.C. 1331 et seq.)
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) 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) Royalty production shall be placed in marketable
condition by the lessee at no cost to the United States.
(3) 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) 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 royalties taken in kind
that otherwise would be deposited to miscellaneous receipts,
without regard to fiscal year limitation, or may use 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) The Secretary may not use revenues from the sale of oil
and gas royalties taken in kind to pay for personnel, travel,
or other administrative costs of the Federal Government.
(6) Notwithstanding the provisions of paragraph 5, the
Secretary may use a portion of the revenues from the sale of
oil royalties 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 such 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 the
Secretary determines that receiving such royalties provides
benefits to the United States greater than or equal to those
likely to have been received had royalties been taken in
value.
(e) Report to Congress.--
(1) No later than September 30, 2005, the Secretary shall
provide a report to Congress that addresses--
(A) actions taken to develop business 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 business operation plans and
objectives.
(2) For each of the 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 subsections (h), the Secretary shall provide a report
to Congress describing--
(A) the methodology or methodologies used by the Secretary
to determine compliance with subsection (d) , including
performance standard for comparing amounts received by the
United States derived from such royalties-in-kind to amount
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 cost 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) 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 of the Interior shall deduct
amounts paid or deducted under subsections (b)(4) and (c),
and shall deposit such amounts to miscellaneous receipts.
(2) If 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 shall
consult--
(1) with a State before conducting a royalty-in-kind
program under this section within the State, and may delegate
management of any portion of the Federal royalty in-kind
program to such State except as otherwise prohibited by
Federal law; and
(2) 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) Provisions for Small Refineries.--
(1) If the Secretary determines that sufficient supplies of
crude oil are not available in the open market to refineries
not having 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) In disposing of oil under this subsection, the
Secretary may prorate such oil among such refineries in the
area in which the oil is produced.
(i) Disposition to Federal Agencies.--
(1) Any royalty oil or gas taken by the Secretary in kind
from onshore oil and gas leases may be sold at not less than
market price to any department or agency of the United
States.
(2) Any royalty oil or gas taken in kind from Federal oil
and gas leases 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) Preference for Federal Low-Income Energy Assistance
Programs.--In disposing of royalty oil or gas taken in kind
under this section, the Secretary may grant a preference to
any person, including any State or Federal agency, for the
purpose of providing additional resources to any Federal low-
income energy assistance program.

SEC. 104. MARGINAL PROPERTY PRODUCTION INCENTIVES.

(a) Marginal Property Defined.--Until such time as the
Secretary of the Interior issues rules under subsection (e)
that prescribe a different definition, for purposes of 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 three most
recent production months, including only those wells that
produce more than half the days in the three most recent
production months.
(b) Conditions for Reduction of Royalty Rate.--Until such
time as the Secretary of the Interior promulgates rules 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) 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) The reduced royalty rate under this subsection shall be
effective on the first day of the production month following
the date on which the applicable price standard prescribed in
subsection (b) is met.
(d) Termination of Reduced Royalty Rate.--A royalty rate
prescribed in subsection (d)(1)(A) shall terminate--
(1) on 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

[[Page S10345]]

(B) the property no longer qualifies as a marginal property
under subsection (a); and
(2) on 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
under subsection (a).
(e) Rules Prescribing Different Relief.--
(1) The Secretary of the Interior, after consultation with
the Secretary of Energy, may by rule 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) The Secretary of the Interior, after consultation with
the Secretary of Energy, and within 1 year after the date of
enactment of this Act, shall, by rule,--
(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) In promulgating rules under this subsection, the
Secretary of the Interior may consider--
(A) oil and gas prices and market trends;
(B) production costs;
(C) abandonment costs;
(D) Federal and State tax provisions and their effects on
production economics;
(E) other royalty relief programs; and
(F) other relevant matters.
(f) Savings Provision.--Nothing in this section shall
prevent a lessee from receiving royalty relief or a royalty
reduction pursuant to any other law or regulation that
provides more relief than the amounts provided by this
section.

SEC. 105. COMPREHENSIVE INVENTORY OF OCS OIL AND NATURAL GAS
RESOURCES.

(a) In General.--The Secretary of the Interior shall
conduct an inventory and analysis of oil and natural gas
resources beneath all of the waters of the United States
Outer Continental Shelf (``OCS''). The inventory and analysis
shall--
(1) use available data on oil and gas resources in areas
offshore of Mexico and Canada that will provide information
on trends of oil and gas accumulation in areas of the OCS;
(2) use any available technology, except drilling, but
including 3-D seismic technology to obtain accurate resource
estimates;
(3) analyze how resource estimates in OCS areas have
changed over time in regards to gathering geological and
geophysical data, initial exploration, or full field
development, including areas such as the deepwater and
subsalt areas in the Gulf of Mexico;
(4) estimate the effect that understated oil and gas
resource inventories have on domestic energy investments; and
(5) identify and explain how legislative, regulatory, and
administrative programs or processes restrict or impede the
development of identified resources and the extent that they
affect domestic supply, such as moratoria, lease terms and
conditions, operational stipulations and requirements,
approval delays by the federal government and coastal states,
and local zoning restrictions for onshore processing
facilities and pipeline landings.
(b) Reports.--The Secretary of Interior shall submit a
report to the Congress on the inventory of estimates and the
analysis of restrictions or impediments, together with any
recommendations, within six months of the date of enactment
of the section. The report shall be publically available and
updated at least every five years.

SEC. 106. 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 that 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 the 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 million barrels of oil equivalent for each lease in
water depths of 400 to 800 meters;
(2) 9 million barrels of oil equivalent for each lease in
water depths of 800 to 1,600 meters; and
(3) 12 million barrels of oil equivalent for each lease in
water depths greater than 1,600 meters.

SEC. 107. ALASKA OFFSHORE ROYALTY SUSPENSION.

Section 8(a)(3)(B) of the Outer Continental Shelf Lands Act
(43 U.S.C. 1337), is amended with the following: add ``and in
the Planning Areas offshore Alaska'' after ``West longitude''
and before ``the Secretary''.

SEC. 108. ORPHANED, ABANDONED OR IDLED WELLS ON FEDERAL
LANDS.

(a) In General.--The Secretary of the Interior, in
cooperation with the Secretary of Agriculture, shall
establish a program within 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 lands
administered by the land management agencies within the
Department of the Interior and Agriculture. The program
shall--
(1) include a means of ranking orphaned, abandoned, or
idled well 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.
(b) Cooperation and Consultations.--In carrying out this
program, the Secretary of the Interior shall work
cooperatively with the Secretary of Agriculture and the
States within which the Federal lands are located and consult
with the Secretary of Energy and the Interstate Oil and Gas
Compact Commission.
(c) Plan.--Within 1 year after the date of enactment of the
section, the Secretary of the Interior, in cooperation with
the Secretary of Agriculture, shall prepare a plan for
carrying out the program established under subsection (a) and
transmit copies of the plan to the Congress.
(d) Technical Assistance Program for Non-Federal Lands.--
(1) The Secretary of Energy shall establish a program to
provide technical assistance to the various 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 lands.
(2) The Secretary 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 abandoned oil or gas wells on State and
private lands.
(3) The program shall include--
(A) mechanisms to facilitate identification, if possible,
of the persons or other entities 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; and
(C) information and training programs on best practices for
remediation of different types of sites.
(e) Definition.--For purposes of this section, a well is
idled if it has been non-operational for 7 years and there is
no anticipated beneficial use of the well.
(f) Authorization.--To carry out this section there is
authorized to be appropriated to the Secretary of the
Interior $25,000,000 for each of the fiscal years 2004
through 2008. Of the amounts authorized, $5,000,000 is
authorized for activities under subsection (d).

SEC. 109. INCENTIVES FOR NATURAL GAS PRODUCTION FROM DEEP
WELLS IN THE SHALLOW WATERS OF THE GULF OF
MEXICO.

(a) Royalty Incentive Regulations.--Not later than 90 days
after enactment, the Secretary of the Interior shall
promulgate final regulations providing royalty incentives for
natural gas produced from deep wells, as defined by the
Secretary, on oil and gas leases issued under the Outer
Continental Shelf Lands Act (43 U.S.C. 1331 et seq.) and
issued prior to January 1, 2001, in shallow waters of the
Gulf of Mexico, wholly west of 87 degrees, 30 minutes West
longitude that are less than 200 meters deep.
(b) Royalty Incentive Regulations for Ultra-Deep Gas
Wells.--
(1) No later than 90 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 of the Interior shall promulgate new regulations
granting royalty relief suspension volumes of not less than
35 billion cubic feet with respect to the production of
natural gas from `ultra deep wells' on leases issued prior to
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. For purposes of this subsection, the
term `ultra deep wells' means wells 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.
(2) The Secretary shall not grant the royalty incentives
outlined in this subsection if the average annual NYMEX
natural gas price exceeds for one full calendar year the
threshold price of $5 per million Btu, adjusted from the year
2000 for inflation.
(3) This subsection shall have no force or effect after the
end of the 5-year period beginning on the date of the
enactment of this Act.

[[Page S10346]]

SEC. 110. 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 new
subsection:
``(p) Easements or Rights-of-way for Energy and Related
Purposes.--
``(1) The Secretary may grant an 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
when such activities--
``(A) support exploration, development, or production of
oil or natural gas, except that such easements or rights-of-
way shall not be granted in areas where oil and gas
preleasing, leasing and related activities are prohibited by
a Congressional moratorium or a withdrawal pursuant to
section 12 of this Act;
``(B) support transportation of oil or natural gas;
``(C) produce or support production, transportation, or
transmission of energy from sources other than oil and gas;
or
``(D) use facilities currently or previously used for
activities authorized under this Act.
``(2) The Secretary shall promulgate regulations to ensure
that activities authorized under this subsection are
conducted in a manner that provides for safety, protection of
the environment, conservation of the natural resources of the
outer Continental Shelf, appropriate coordination with other
Federal agencies, and a fair return to the Federal government
for any easement or right-of-way granted under this
subsection. Such regulations shall establish procedures for--
(A) public notice and comment on proposals to be permitted
pursuant to this subsection;
(B) consultation and review by State and local governments
that may be impacted by activities to be permitted pursuant
to this subsection;
(C) consideration of the coastal zone management program
being developed or administered by an affected coastal State
pursuant to section 305 or section 306 of the Coastal Zone
Management Act of 1972 (16 U.S.C. 1454, 1455); and
(D) consultation with the Secretary of Defense and other
appropriate agencies prior to the issuance of an easement or
right-of-way under this subsection concerning issues related
to national security and navigational obstruction.
(3) The Secretary shall require the holder of an 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 may deem necessary to protect the interests of the
United States.
``(4) This subsection shall not apply to any area within
the exterior boundaries of any unit of the National Park
System, National Wildlife Refuge System, or National Marine
Sanctuary System, or any National Monument.
``(5) Nothing in this subsection shall be construed to
amend or repeal, expressly by implication, the applicability
of any other law, including but not limited to, the Coastal
Zone Management Act (16 U.S.C. 1455 et seq.) or the National
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).''.
(b) Conforming Amendment.--The text of the heading for
section 8 of the Outer Continental Shelf Lands Act is amended
to read as follows: ``Leases, Easements, and Rights-of-Way on
the Outer Continental Shelf.''.

SEC. 111. COASTAL IMPACT ASSISTANCE.

The Outer Continental Shelf Lands Act (43 U.S.C. 1331 et
seq.) is amended by adding at the end:

``SEC. 32. COASTAL IMPACT ASSISTANCE FAIRNESS PROGRAM.

``(a) Definitions.--When used in this section:
``(1) The term `coastal political subdivision' means a
county, parish, or any equivalent subdivision of a Producing
Coastal State in all or part of which subdivision lies within
the coastal zone (as defined in section 304(1) of the Coastal
Zone Management Act (16 U.S.C. 1453(1))) and within a
distance of 200 miles from the geographic center of any
leased tract.
``(2) The term `coastal population' means the population of
all political subdivisions, as determined by the most recent
official data of the Census Bureau, contained in whole or in
part within the designated coastal boundary of a State as
defined in a State's coastal zone management program under
the Coastal Zone Management Act (16 U.S.C. 1451 et seq.).
``(3) The term `Coastal State' has the same meaning as
provided by subsection 304(4) of the Coastal Zone Management
Act (16 U.S.C. 1453(4)).
``(4) The term `coastline' has the same meaning as the term
`coast line' as defined in subsection 2(c) of the Submerged
Lands Act (43 U.S.C. 1301(c)).
``(5) The term `distance' means the minimum great circle
distance, measured in statute miles.
``(6) 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.
``(7) The term `Producing Coastal State' means a Coastal
State with a coastal seaward boundary within 200 miles from
the geographic center of a leased tract other than a leased
tract within any area of the Outer Continental Shelf where a
moratorium on new leasing was in effect as of January 1, 2002
unless the lease was issued prior to the establishment of
the moratorium and was in production on January 1, 2002.
``(8) The term `qualified Outer Continental Shelf revenues'
means all amounts received by the United States from each
leased tract or portion of a leased tract lying seaward of
the zone defined and governed by section 8(g) of this Act, or
lying within such zone but to which section 8(g) does not
apply, the geographic center of which lies within a distance
of 200 miles from any part of the coastline of any Producing
Coastal State, including bonus bids, rents, royalties
(including payments for royalties taken in kind and sold),
net profit share payments, and related late payment interest.
Such term shall only apply to leases issued after January 1,
2003 and revenues from existing leases that occurs after
January 1, 2003. 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 where a
moratorium on new leasing was in effect as of January 1,
2002, unless the lease was issued prior to the establishment
of the moratorium and was in production on January 1, 2002.
``(9) The term `Secretary' means the Secretary of
Interior.''
``(b) Authorization.--For fiscal years 2004 through 2009,
an amount equal to not more than 12.5 percent of qualified
Outer Continental Shelf revenues is authorized to be
appropriated for the purposes of this section.
``(c) Impact Assistance Payments to States and Political
Subdivisions.--The Secretary shall make payments from the
amounts available under this section to Producing Coastal
States with an approved Coastal Impact Assistance Plan, and
to coastal political subdivisions as follows:
``(1) Of the amounts appropriated, the allocation for each
Producing Coastal State shall be calculated based on the
ratio of qualified Outer Continental Shelf revenues generated
off the coastline of the Producing Coastal State to the
qualified Outer Continental Shelf revenues generated off the
coastlines of all Producing Coastal States for each fiscal
year. Where there is more than one Producing Coastal State
within 200 miles of a leased tract, the amount of each
Producing Coastal State's allocation for such leased tract
shall be inversely proportional to the distance between the
nearest point on the coastline of such State and the
geographic center of each leased tract or portion of the
leased tract (to the nearest whole mile) that is within 200
miles of that coastline, as determined by the Secretary.
``(2) Thirty-five percent of each Producing Coastal State's
allocable share as determined under paragraph (1) shall be
paid directly to the coastal political subdivisions by the
Secretary based on the following formula:
``(A) Twenty-five percent shall be allocated based on the
ratio of such coastal political subdivision's coastal
population to the coastal population of all coastal political
subdivisions in the Producing Coastal State.
``(B) Twenty-five percent shall be allocated based on the
ratio of such coastal political subdivision's coastline miles
to the coastline miles of a coastal political subdivision in
the Producing Coastal State except that for those coastal
political subdivisions in the State of Louisiana without a
coastline, the coastline for purposes of this element of the
formula shall be the average length of the coastline of the
remaining coastal subdivisions in the state.
``(C) Fifty percent shall be allocated based on the
relative distance of such coastal political subdivision from
any leased tract used to calculate the Producing Coastal
State's allocation using ratios that are inversely
proportional to the distance between the point in the coastal
political subdivision closest to the geographic center of
each leased tract or portion, as determined by the Secretary,
except that in the State of Alaska, the funds for this
element of the formula shall be divided equally among the two
closest coastal political subdivisions. For purposes of the
calculations under this subparagraph, a leased tract or
portion of a leased tract shall be excluded if the leased
tract or portion is located in a geographic area where a
moratorium on new leasing was in effect on January 1, 2002,
unless the lease was issued prior to the establishment of the
moratorium and was in production on January 1, 2002.
``(3) Any amount allocated to a Producing Coastal State or
coastal political subdivision but not disbursed because of a
failure to have an approved Coastal Impact Assistance Plan
under this section shall be allocated equally by the
Secretary among all other Producing Coastal States in a
manner consistent with this subsection except that the
Secretary shall hold in escrow such amount until the final
resolution of any appeal regarding the disapproval of a plan
submitted under this section. The Secretary may waive the
provisions of this paragraph and hold a Producing Coastal
State's allocable share in escrow if the Secretary determines
that such State is making a good faith effort to develop and
submit, or update, a Coastal Impact Assistance Plan.
``(4) For purposes of this subsection, calculations of
payments for fiscal years 2004

[[Page S10347]]

through 2006 shall be made using qualified Outer Continental
Shelf revenues received in fiscal year 2003, and calculations
of payments for fiscal years 2007 through 2009 shall be made
using qualified Outer Continental Shelf revenues received in
fiscal year 2006.
``(d) Coastal Impact Assistance Plan.--
``(1) The Governor of each Producing Coastal State shall
prepare, and submit to the Secretary, a Coastal Impact
Assistance Plan. The Governor shall solicit local input and
shall provide for public participation in the development of
the plan. The plan shall be submitted to the Secretary by
July 1, 2004. Amounts received by Producing Coastal States
and coastal political subdivisions may be used only for the
purposes specified in the Producing Coastal State's Coastal
Impact Assistance Plan.
``(2) The Secretary shall approve a plan under paragraph
(1) prior to disbursement of amounts under this section. The
Secretary shall approve the plan if the Secretary determines
that the plan is consistent with the uses set forth in
subsection (f) of this section and if the plan contains--
``(A) 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;
``(B) a program for the implementation of the plan which
describes how the amounts provided under this section will be
used;
``(C) a contact for each political subdivision and
description of how coastal political subdivisions will use
amounts provided under this section, including a
certification by the Governor that such uses are consistent
with the requirements of this section;
``(D) certification by the Governor that ample opportunity
has been accorded for public participation in the development
and revision of the plan; and
``(E) measures for taking into account other relevant
Federal resources and programs.
``(3) The Secretary shall approve or disapprove each plan
or amendment within 90 days of its submission.
``(4) Any amendment to the plan shall be prepared in
accordance with the requirements of this subsection and shall
be submitted to the Secretary for approval or disapproval.
``(e) Authorized Uses.--Producing Coastal States and
coastal political subdivisions shall use amounts provided
under this section, including any such amounts deposited in a
State or coastal political subdivision administered trust
fund dedicated to uses consistent with this subsection, in
compliance with Federal and State law and only for one or
more of the following purposes--
``(1) projects and activities for the conservation,
protection or restoration of coastal areas including
wetlands;
``(2) mitigating damage to fish, wildlife or natural
resources;
``(3) planning assistance and administrative costs of
complying with the provisions of this section;
``(4) implementation of federally approved marine, coastal,
or comprehensive conservation management plans; and
``(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 any expenditure made by a Producing Coastal
State or coastal political subdivision is not consistent with
the uses authorized in subsection (e) of this section, the
Secretary shall not disburse any further amounts under this
section to that Producing Coastal State or coastal political
subdivision until the amounts used for the inconsistent
expenditure have been repaid or obligated for authorized
uses.

SEC. 112. NATIONAL ENERGY RESOURCE DATABASE.

(a) Short Title.--This section may be cited as the
``National Energy Data Preservation Program Act of 2003''.
(b) Program.--The Secretary of the Interior (in this
section, referred to as ``Secretary'') shall carry out a
National Energy Data Preservation Program in accordance with
this section--
(1) to archive geologic, geophysical, and engineering data
and samples related to energy resources including oil, gas,
coal, and geothermal resources;
(2) to provide a national catalog of such archival
material; and
(3) to provide technical assistance related to the archival
material.
(c) Energy Data Archive System.--
(1) The Secretary shall establish, as a component of the
Program, an energy data archive system, which shall provide
for the storage, preservation, and archiving of subsurface,
and in limited cases surface, geological, geophysical and
engineering data and samples. The Secretary, in consultation
with the Association of American State Geologists and
interested members of the public, shall develop guidelines
relating to the energy data archive system, including the
types of data and samples to be preserved.
(2) The system shall be comprised of State agencies and
agencies within the Department of the Interior that maintain
geological and geophysical data and samples regarding energy
resources and 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) The Secretary may not designate a State agency as a
component of the energy data archive system unless it is the
agency that acts as the geological survey in the State.
(4) The energy data archive system shall provide for the
archiving of relevant subsurface data and samples obtained
during energy exploration and production operations on
Federal lands--
(A) in the most appropriate repository designated under
paragraph (2), with preference being given to archiving data
in the State in which the data was collected; and
(B) consistent with all applicable law and requirements
relating to confidentiality and proprietary data.
(5)(A) Subject to the availability of appropriations, the
Secretary shall provide financial assistance to a State
agency that is designated under paragraph (2) for providing
facilities to archive energy material.
(B) The Secretary, in consultation with the Association of
American State Geologists and interested members of the
public, shall establish procedures for providing assistance
under this paragraph. The procedures shall be designed to
ensure that such assistance primarily supports the expansion
of data and material archives and the collection and
preservation of new data and samples.
(d) National Catalog.--
(1) As soon as practicable after the date of the enactment
of this section, the Secretary shall develop and maintain, as
a component of the Program, a national catalog that
identifies--
(A) energy data and samples available in the energy data
archive system established under subsection (c);
(B) the repository for particular material in such system;
and (C) the means of accessing the material.
(2) The Secretary shall make the national catalog
accessible to the public on the site of the Survey on the
World Wide Web, consistent with all applicable requirements
related to confidentiality and proprietary data.
(3) The Secretary may carry out the requirements of this
subsection by contract or agreement with appropriate persons.
(e) Technical Assistance.--
(1) Subject to the availability of appropriations, as a
component of the Program, the Secretary shall provide
financial assistance to any State agency designated under
subsection (c)(2) to provide technical assistance to enhance
understanding, interpretation, and use of materials archived
in the energy data archive system established under
subsection (c).
(2) The Secretary, in consultation with the Association of
American State Geologists and interested members of the
public, shall develop a process, which shall involve the
participation of representatives of relevant Federal and
State agencies, for the approval of financial assistance to
State agencies under this subsection.
(f) Costs.--
(1) The Federal share of the cost of an activity carried
out with assistance under subsections (c) or (e) shall be no
more than 50 percent of the total cost of that activity.
(2) The Secretary--
(A) may accept private contributions of property and
services for technical assistance and archive activities
conducted under this section; and (B) may apply the value of
such contributions to the non-Federal share of the costs of
such technical assistance and archive activities.
(g) Reports.--
(1) Within year after the date of the enactment of this
Act, the Secretary shall submit an initial report to the
Congress setting forth a plan for the implementation of the
Program.
(2) Not later than 90 days after the end of the first
fiscal year beginning after the submission of the report
under paragraph (1) and after the end of each fiscal year
thereafter, the Secretary shall submit a report to the
Congress describing the status of the Program and evaluating
progress achieved during the preceding fiscal year in
developing and carrying out the Program.
(3) The Secretary shall consult with the Association of
American State Geologists and interested members of the
public in preparing the reports required by this subsection.
(h) Definitions.--As used in this section, the term:
(1) ``Association of American State Geologists'' means the
organization of the chief executives of the State geological
surveys.
(2) ``Secretary'' means the Secretary of the Interior
acting through the Director of the United States Geological
Survey.
(3) ``Program'' means the National Energy Data Preservation
Program carried out under this section.
(4) ``Survey'' means the United States Geological Survey.
(i) Maintenance of State Effort.--It is the intent of the
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) Authorization of Appropriations.--There is authorized
to be appropriated to the Secretary $30,000,000 for each of
fiscal years 2003 through 2007 for carrying out this section.

SEC. 113. OIL AND GAS LEASE ACREAGE LIMITATION.

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 sands area'' the following: ``as well as acreage
under any lease any portion of which has been committed to a
federally approved unit or cooperative plan or
communitization agreement,

[[Page S10348]]

or for which royalty, including compensatory royalty or
royalty-in-kind, was paid in the preceding calendar year,''.

SEC. 114. 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 affection 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
liquefied natural gas to displace residual fuel oil for
electric generation, including neighbor island opportunities,
and the effect of such displacement on the economic
relationship described in paragraph (2) including--
(A) the availability of supply;
(B) siting and facility configuration for onshore and
offshore liquefied 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 such 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 one 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,
as report detailing the findings, conclusions, and
recommendations resulting from the assessment.
(d) Appropriation.--The are authorized to be appropriated
such sums as are necessary to carry out this section.

Subtitle B--Access to Federal Lands

SEC. 121. OFFICE OF FEDERAL ENERGY PERMIT COORDINATION.

(a) Establishment.--The President shall establish the
Office of Federal Energy Permit Coordination (in this
section, referred to as ``Office'') within the Executive
Office of the President in the same manner and mission as the
White House Energy Projects Task Force established by
Executive Order 13212.
(b) Staffing.--The Office shall be staffed by functional
experts from relevant federal agencies and departments on a
nonreimbursable basis to carry out the mission of this
office.
(c) Reporting.--The Office shall provide an annual report
to Congress, detailing the activities put in place to
coordinate and expedite Federal decisions on energy projects.
The report shall list accomplishments in improving the
federal decision making process and shall include any
additional recommendations or systemic changes needed to
establish a more effective and efficient federal permitting
process.

SEC. 122. PILOT PROJECT TO IMPROVE FEDERAL PERMIT
COORDINATION.

(a) Creation of Pilot Project.--The Secretary of the
Interior (in this section, referred to as ``Secretary'')
shall establish a Federal Permit Streamlining Pilot Project.
The Secretary shall enter into a Memorandum of Understanding
with the Secretary of Agriculture, Administrator of the
Environmental Protection Agency, and the Chief of the Corps
of Engineers within 90 days after enactment of this Act. The
Secretary may also request that the Governors of Wyoming,
Montana, Colorado, and New Mexico be signatories to the
Memorandum of Understanding.
(b) Designation of Qualified Staff.--Once the Pilot Project
has been established by the Secretary, all Federal signatory
parties shall assign an employee on a nonreimbursable basis
to each of the field offices identified in section (c), who
has expertise in the regulatory issues pertaining to their
office, including, as applicable, particular expertise in
Endangered Species Act section 7 consultations and the
preparation of Biological Opinions, Clean Water Act 404
permits, Clean Air Act regulatory matters, planning under the
National Forest Management Act, and the preparation of
analyses under the National Environmental Policy Act.
Assigned staff shall report to the Bureau of Land Management
(BLM) Field Managers in the offices to which they are
assigned, and shall be responsible for all issues related to
the jurisdiction of their home office or agency, and
participate as part of the team of employees working on
proposed energy projects, planning, and environmental
analyses.
(c) Field Offices.--The following BLM Field Offices shall
serve as the Federal Permit Streamlining Pilot Project
offices:
(1) Rawlins, Wyoming;
(2) Buffalo, Wyoming;
(3) Miles City, Montana;
(4) Farmington, New Mexico;
(5) Carlsbad, New Mexico; and
(6) Glenwood Springs, Colorado.
(d) Reports.--The Secretary shall submit a report to the
Congress 3 years following the date of enactment of this
section, outlining the results of the Pilot Project to date
and including a recommendation to the President as to whether
the Pilot Project should be implemented nationwide.
(e) Additional Personnel.--The Secretary shall assign to
each of the BLM Field Offices listed in subsection (c) such
additional personnel as is necessary to ensure the effective
implementation of--
(1) the Pilot Project; and
(2) other programs administered by such offices, including
inspection and enforcement related to energy development on
federal lands, pursuant to the multiple use mandate of the
Federal Land Policy and Management Act of 1976 (43 U.S.C.
1701 et seq.).
(f) Savings Provision.--Nothing in this section shall
affect the operation of any federal or state law or any
delegation of authority made by a Secretary or head of an
Agency whose employees are participating in the program
provided for by this section.
(g) Authorization of Appropriations.--There are authorized
to be appropriated such sums as may be necessary to implement
this section.

SEC. 123. FEDERAL ONSHORE LEASING PROGRAMS FOR OIL AND GAS.

(a) Timely Action on Leases and Permits.--To ensure timely
action on oil and gas leases and applications for permits to
drill on lands otherwise available for leasing, the Secretary
of the Interior shall--
(1) ensure expeditious compliance with the requirements of
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
(3) improve the collection, storage, and retrieval of
information related to such leasing activities.
(b) Improved Enforcement.--The Secretary shall improve
inspection and enforcement of oil and gas activities,
including enforcement of terms and conditions in permits to
drill.
(c) Authorization of Appropriations.--For each of the
fiscal years 2004 through 2007, in addition to amounts
otherwise authorized to be appropriated for the purpose of
carrying out section 17 of the Mineral Leasing Act (30 U.S.C.
226), there are authorized to be appropriated to the
Secretary of the Interior--
(1) $40,000,000 for the purpose of carrying out paragraphs
(1) through (3) of subsection (a); and
(2) $20,000,000 for the purpose of carrying out subsection
(b).

SEC. 124. ESTIMATES OF OIL AND GAS RESOURCES UNDERLYING
ONSHORE FEDERAL LANDS.

Section 604 of the Energy Act of 2000 (42 U.S.C. 6217) is
amended by striking ``(a) In General'' and all thereafter and
inserting
``(a) In General.--The Secretary of the Interior, in
consultation with the Secretaries of Agriculture and Energy,
shall conduct an inventory of all onshore Federal lands and
take measures necessary to update and revise this inventory.
The inventory shall identify for all federal lands
``(1) the United States Geological Survey estimates of the
oil and gas resources underlying these lands;
``(2) the extent and nature of any restrictions or
impediments to the exploration, production and transportation
of such resources, including
``(A) existing land withdrawals and the underlying purpose
for each withdrawal;
``(B) restrictions or impediments affecting timeliness of
granting leases;
``(C) post-lease restrictions or impediments such as
conditions of approval, applications for permits to drill,
applicable environmental permits;
``(D) permits or restrictions associated with transporting
the resources; and
``(E) identification of the authority for each restriction
or impediment together with the impact on additional
processing or review time and potential remedies; and
``(3) the estimates of oil and gas resources not available
for exploration and production by virtue of the restrictions
identified above.
``(b) Reports.--The Secretary shall provide a progress
report to the Congress by October 1, 2006 and shall complete
the inventory by October 1, 2010.
``(c) Authorization of Appropriations.--There are
authorized to be appropriated such sums as may be necessary
to implement this section.

[[Page S10349]]

SEC. 125. 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
(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 the Congress no later than 180 days
after enactment of this section.

SEC. 126. COORDINATION OF FEDERAL AGENCIES TO ESTABLISH
PRIORITY ENERGY TRANSMISSION RIGHTS-OF-WAY.

(a) Definitions.--For purposes of this section:
(1) The term ``utility corridor'' means any linear strip of
land across Federal lands of approved width, but limited by
technological, environmental, and topographical factors for
use by a utility facility.
(2) The term ``Federal authorization'' means any
authorization required under Federal law in order to site a
utility facility, including but not limited to such permits,
special use authorizations, certifications, opinions, or
other approvals as may be required, issued by a Federal
agency.
(3) The term ``Federal lands'' means all lands owned by the
United States, except
(A) lands in the National Park System;
(B) lands held in trust for an Indian or Indian tribe; and
(C) lands on the Outer Continental Shelf.
(4) The term ``Secretary'' means the Secretary of Energy.
(5) The term ``utility facility'' means any privately,
publicly, or cooperatively owned line, facility, or system
(A) for the transportation of oil and natural gas, synthetic
liquid or gaseous fuels, any refined product produced
therefrom, or for transportation of products in support of
production, or for storage and terminal facilities in
connection therewith; or (B) for the generation, transmission
and distribution of electric energy.
(b) Utility Corridors.--
(1) No later than 24 months after the date of enactment of
this section, the Secretary of the Interior, with respect to
public lands, and the Secretary of Agriculture, with respect
to National Forest System lands, in consultation with the
Secretary, shall--
(A) designate utility corridors pursuant to section 503 of
the Federal Land Policy and Management Act (43 U.S.C. 1763)
in the eleven contiguous Western States, as identified in
section 103(o) of such Act (43 U.S.C. 1702(o)); and
(B) incorporate the utility corridors designated under
paragraph (A) into the relevant departmental and agency land
use and resource management plans or their equivalent.
(2) The Secretary shall coordinate with the affected
Federal agencies to jointly identify potential utility
corridors on Federal lands in the other States and jointly
develop a schedule for the designation, environmental review
and incorporation of such utility corridors into relevant
departmental and agency land use and resource management
plans or their equivalent.
(c) Federal Permit Coordination.--The Secretary, in
consultation with the Secretary of the Interior, the
Secretary of Agriculture, and the Secretary of Defense, shall
develop a memorandum of understanding (``MOU'') for the
purpose of coordinating all applicable Federal authorizations
and environmental reviews related to a proposed or existing
utility facility. To the maximum extent practicable under
applicable law, the Secretary shall coordinate the process
developed in the MOU 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 to ensure timely review and
permit decisions. The MOU shall provide for--
(1) the coordination among affected Federal agencies to
ensure that the necessary Federal authorizations are
conducted concurrently with applicable State siting processes
and are considered within a specific time frame to be
identified in the MOU;
(2) 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
(3) a process to expedite applications to construct or
modify utility facilities within utility corridors.

Subtitle C Alaska Natural Gas Pipeline

SEC. 131. SHORT TITLE.

This subtitle may be cited as the ``Alaska Natural Gas
Pipeline Act''.

SEC. 132. DEFINITIONS.

In this subtitle, the following definitions apply:
(1) 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) 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 either
(A) the Alaska Natural Gas Transportation Act of 1976 (15
U.S.C. 719 et seq.); or
(B) section 133.
(3) The term ``Alaska natural gas transportation system''
means the Alaska natural gas transportation project
authorized under the Alaska Natural Gas Transportation Act of
1976 and designated and described in section 2 of the
President's decision.
(4) The term ``Commission'' means the Federal Energy
Regulatory Commission.
(5) The term ``President's decision'' means the decision
and report to Congress on the Alaska natural gas
transportation system issued by the President on September
22, 1977, pursuant to section 7 of the Alaska Natural Gas
Transportation Act of 1976 (15 U.S.C. 719(e) and approved by
Public Law 95 158 (91 Stat.1268)).

SEC. 133. ISSUANCE OF CERTIFICATE OF PUBLIC CONVENIENCE AND
NECESSITY.

(a) Authority of the Commission.--Notwithstanding the
provisions of the Alaska Natural Gas Transportation Act of
1976 (15 U.S.C. 719 et seq.), the Commission may, pursuant to
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) 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) 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 such project to markets
in the contiguous United States.
(c) Expedited Approval Process.--The Commission shall issue
a final order granting or denying any application for a
certificate of public convenience and necessity under section
7(c) of the Natural Gas Act (15 U.S.C. 717f(c)) and this
section not more than 60 days after the issuance of the final
environmental impact statement for that project pursuant to
section 134.
(d) Prohibition on 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 lands within the
Prudhoe Bay oil and gas lease area may be granted for any
pipeline that follows a route that traverses--
(1) the submerged lands (as defined by the Submerged Lands
Act) 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.--Except where an expansion is ordered
pursuant to section 135, 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 governing the conduct of open
seasons for such project. Such procedures shall include the
criteria for and timing of any open seasons; promote
competition in the exploration, development, and production
of Alaska natural gas; and, for any open season for capacity
beyond the initial capacity, provide the opportunity for the
transportation of natural gas other than from the Prudhoe Bay
and Point Thompson units. The Commission shall issue such
regulations not later than 120 days after the date of
enactment of this Act.
(f) Projects in the Contiguous United States.--Applications
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 pursuant
to the Natural Gas Act. To the extent such pipeline
facilities include the expansion of any facility constructed
pursuant to the Alaska Natural Gas Transportation Act of
1976, the provisions of 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 it 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.--The Commission, upon the request
of the State of Alaska and after a hearing, may provide for
reasonable access to the Alaska natural gas transportation
project for the State of Alaska or its designee for the
transportation of the

[[Page S10350]]

State's royalty gas for local consumption needs within the
State; except that the rates of existing shippers of
subscribed capacity on such project shall not be increased as
a result of such access.
(i) Regulations.--The Commission may issue regulations to
carry out the provisions of this section.

SEC. 134. 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 133 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.--The Commission shall be
the lead agency for purposes of complying with the National
Environmental Policy Act of 1969, and shall be responsible
for preparing the 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 133. The
Commission shall prepare a single environmental statement
under this section, which shall consolidate the environmental
reviews of all Federal agencies considering any aspect of the
project.
(c) Other Agencies.--All Federal agencies considering
aspects of the construction and operation of an Alaska
natural gas transportation project under section 133 shall
cooperate with the Commission, and shall comply with
deadlines established by the Commission in the preparation of
the statement under this section. The statement prepared
under this section shall be used by all such agencies to
satisfy their responsibilities under section 102(2)(c) of the
National Environmental Policy Act of 1969 (42 U.S.C.
4332(2)(c)) with respect to such project.
(d) Expedited Process.--The Commission shall issue a draft
statement under this section not later than 12 months after
the Commission determines the application to be complete and
shall issue the final statement not later than 6 months after
the Commission issues the draft statement, unless the
Commission for good cause finds that additional time is
needed.

SEC. 135. PIPELINE EXPANSION.

(a) Authority.--With respect to any Alaska natural gas
transportation project, upon the request of one or more
persons and after giving notice and an opportunity for a
hearing, the Commission may order the expansion of such
project if it determines that such expansion is required by
the present and future public convenience and necessity.
(b) Requirements.--Before ordering an expansion, 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 as established do not require
existing shippers on the Alaska natural gas transportation
project to subsidize expansion shippers;
(3) find that the 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 then-effective tariff of the Alaska
natural gas transportation project;
(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 pursuant to this section shall
be null and void unless the person or persons requesting the
order executes a firm transportation agreement with the
Alaska natural gas transportation project within a reasonable
period of time as specified in such order.
(d) Limitation.--Nothing in this section shall be construed
to expand or otherwise affect any authorities of the
Commission with respect to any natural gas pipeline located
outside the State of Alaska.
(e) Regulations.--The Commission may issue regulations to
carry out the provisions of this section.

SEC. 136. 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.--The Office shall be headed by a
Federal Coordinator for Alaska Natural Gas Transportation
Projects, who shall--
(1) be appointed by the President, by and with the advice
and consent of the Senate;
(2) for a term equal to the period required to design,
permit and construction the project plus one year; and
(3) 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) All reviews conducted and actions taken by any Federal
officer or 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 set forth in
this subtitle.
(2) No Federal officer or agency shall have the authority
to include terms and conditions that are permitted, but not
required, by law on 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 terms and conditions would prevent or impair in any
significant respect the expeditious construction and
operation, or an expansion, of the project.
(3) Unless required by law, no Federal officer or 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 such action would prevent or
impair in any significant respect the expeditious
construction and operation of, or an expansion of, the
project.
(4) The Federal Coordinator's authority shall not include
the ability to override--
(A) the implementation or enforcement of regulations issued
by the Commission pursuant to Section 133(e); or
(B) an order by the Commission to expand the project
pursuant to Section 135.
(5) Nothing in this section shall give the Federal
Coordinator the authority to impose additional terms,
conditions or requirements beyond those imposed by the
Commission or any agency with respect to construction and
operation, or an expansion of, the project.
(e) State Coordination.--The Federal Coordinator shall
enter into a Joint Surveillance and Monitoring Agreement,
approved by the President and the Governor of Alaska, with
the State of Alaska similar to that in effect during
construction of the Trans-Alaska Oil Pipeline to monitor the
construction of the Alaska natural gas transportation
project. The Federal Government shall have primary
surveillance and monitoring responsibility where the Alaska
natural gas transportation project crosses Federal lands and
private lands, and the State government shall have primary
surveillance and monitoring responsibility where the Alaska
natural gas transportation project crosses State lands.
(f) Transfer of Federal Inspector Functions and
Authority.--Upon 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 of
Energy pursuant to section 3012(b) of Public Law 102-486 (15
U.S.C. 719e(b)), including all functions and authority
described and enumerated in the Reorganization Plan No. 1 of
1979 (44 Fed. Reg. 33,663), Executive Order No. 12142 of June
21, 1979 (44 Fed. Reg. 36,927), and section 5 of the
President's decision, shall be transferred to the Federal
Coordinator.

SEC. 137. JUDICIAL REVIEW.

(a) Exclusive Jurisdiction.--Except for review by the
Supreme Court of the United States 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
with respect to any action under this subtitle.
(b) Deadline for Filing Claim.--Claims 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 to ANGTA.--Section 10(c) of the Alaska
Natural Gas Transportation Act of 1976 (15 U.S.C. 719h) is
amended by inserting after paragraph (1) the following:
``(2) The United States Court of Appeals for the District
of Columbia Circuit shall set any action brought under this
section for expedited consideration, taking into account the
national interest described in section 2.''.

SEC. 138. STATE JURISDICTION OVER IN-STATE DELIVERY OF
NATURAL GAS.

(a) Local Distribution.--Any facility receiving natural gas
from the Alaska natural gas transportation project for
delivery to consumers within the State of Alaska shall be
deemed to be a local distribution facility within the meaning
of section 1(b) of the

[[Page S10351]]

Natural Gas Act (15 U.S.C. 717(b)), and therefore not subject
to the jurisdiction of the Commission.
(b) Additional Pipelines.--Nothing in this subtitle, except
as provided in section 133(d), shall preclude or affect a
future 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 of Alaska for consumption within or distribution
outside the State of Alaska.
(c) Rate Coordination.--Pursuant to the Natural Gas Act,
the Commission shall establish rates for the transportation
of natural gas on the Alaska natural gas transportation
project. In exercising such authority, the Commission,
pursuant to section 17(b) of the Natural Gas Act (15 U.S.C.
717p(b)), shall confer with the State of Alaska 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 of Alaska.

SEC. 139. 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 not later than 18 months after
the date of enactment of this Act, the Secretary of Energy
shall conduct a study of alternative approaches to the
construction and operation of the project.
(b) Scope of Study.--The study shall consider the
feasibility of establishing a Government corporation to
construct an Alaska natural gas transportation project, and
alternative means of providing Federal financing and
ownership (including alternative combinations of Government
and private corporate ownership) of the project.
(c) Consultation.--In conducting the study, the Secretary
of Energy shall consult with the Secretary of the Treasury
and the Secretary of the Army (acting through the Commanding
General of the Corps of Engineers).
(d) Report.--If the Secretary of Energy is required to
conduct a study under subsection (a), the Secretary shall
submit a report containing the results of the study, the
Secretary's recommendations, and any proposals for
legislation to implement the Secretary's recommendations to
Congress.

SEC. 140. CLARIFICATION OF ANGTA STATUS AND AUTHORITIES.

(a) Savings Clause.--Nothing in this subtitle affects 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. 719(g)) or any
Presidential findings or waivers issued in accordance with
that Act.
(b) Clarification of Authority To Amend Terms and
Conditions To Meet Current Project Requirements.--Any Federal
officer or 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. 719(g)) may add to,
amend, or abrogate any term or condition included in such
certificate, permit, right-of-way, lease, or other
authorization to meet current project requirements (including
the physical design, facilities, and tariff specifications),
so long as such action does not compel a 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 would otherwise prevent or
impair in any significant respect the expeditious
construction and initial operation of such transportation
system.
(c) Updated Environmental Reviews.--The Secretary of Energy
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. 141. SENSE OF CONGRESS.

It is the sense of Congress that an Alaska natural gas
transportation project will provide significant economic
benefits to the United States and Canada. In order to
maximize those benefits, Congress urges the sponsors of the
pipeline project to make every effort to use steel that is
manufactured or produced in North America and to negotiate a
project labor agreement to expedite construction of the
pipeline.

SEC. 142. PARTICIPATION OF SMALL BUSINESS CONCERNS.

(a) Sense of Congress.--It is the sense of Congress that an
Alaska natural gas transportation project will provide
significant economic benefits to the United States and
Canada. In order to maximize those benefits, Congress urges
the sponsors of the pipeline project to maximize the
participation of small business concerns in contracts and
subcontracts awarded in carrying out the project.
(b) Study.--
(1) The Comptroller General shall conduct a study on the
extent to which small business concerns participate in the
construction of oil and gas pipelines in the United States.
(2) Not later than 1 year after the date of enactment of
this Act, the Comptroller General shall transmit to Congress
a report containing the results of the study.
(3) The Comptroller General shall update the study at least
once every 5 years and transmit to Congress a report
containing the results of the update.
(4) After the date of completion of the construction of an
Alaska natural gas transportation project, this subsection
shall no longer apply.
(c) Small Business Concern Defined.--In this section, the
term ``small business concern'' has the meaning given such
term in section 3(a) of the Small Business Act (15 U.S.C.
632(a)).

SEC. 143. ALASKA PIPELINE CONSTRUCTION TRAINING PROGRAM.

(a) Establishment of Program.--The Secretary of Labor (in
this section referred to as the ``Secretary'') may make
grants to the Alaska Department of Labor and Workforce
Development to--
(1) develop a plan to train, through the workforce
investment system established in the State of Alaska under
the Workforce Investment Act of 1998 (112 Stat. 936 et seq.),
adult and dislocated workers, including Alaska Natives, in
urban and rural Alaska in the skills required to construct
and operate an Alaska gas pipeline system; and
(2) implement the plan developed pursuant to paragraph (1).
(b) Requirements for Planning Grants.--The Secretary may
make a grant under subsection (a)(1) only if--
(1) the Governor of Alaska certifies in writing to the
Secretary that there is a reasonable expectation that
construction of an Alaska gas pipeline will commence within 3
years after the date of such certification; and
(2) the Secretary of the Interior concurs in writing to the
Secretary with the certification made under paragraph (1).
(c) Requirements for Implementation Grants.--The Secretary
may make a grant under subsection (a)(2) only if--
(1) the Secretary has approved a plan developed pursuant to
subsection (a)(1);
(2) the Governor of Alaska requests the grant funds and
certifies in writing to the Secretary that there is a
reasonable expectation that the construction of an Alaska gas
pipeline system will commence within 2 years after the date
of such certification; and
(3) the Secretary of the Interior concurs in writing to the
Secretary with the certification made under paragraph (2)
after considering--
(A) the status of necessary State and Federal permits;
(B) the availability of financing for the pipeline project;
and
(C) other relevant factors and circumstances.
(d) Authorization of Appropriations.--There is authorized
to be appropriated to the Secretary such sums as may be
necessary, but not to exceed $20,000,000, to carry out this
section.

SEC. 144. LOAN GUARANTEES.

(a) Authority.--
(1) The Secretary may enter agreements with 1 or more
holders of a certificate of public convenience and necessity
issued under section 133(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
133(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

[[Page S10352]]

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, 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.
(5) The term ``Secretary'' means the Secretary of Energy.

SEC. 145. SENSE OF CONGRESS ON 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 McKenzie
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 McKenzie Delta project means it will most likely be
completed before the Alaska Natural Gas Pipeline.
(5) Lower 48 and Canadian natural gas production alone will
not be able to meet all domestic demand in the coming
decades.
(6) As a result, natural gas delivered from Alaska's North
Slope will not displace or reduce the commercial viability of
Canadian natural gas produced from the McKenzie Delta nor
production from the Lower 48.

TITLE II--COAL

Subtitle A--Clean Coal Power Initiative

SEC. 201. AUTHORIZATION OF APPROPRIATIONS.

Clean Coal Power Initiative.--There is authorized to be
appropriated to the Secretary of Energy (in this subtitle,
referred to as ``Secretary'') to carry out the activities
authorized by this subtitle $200,000,000 for each of the
fiscal years 2003 through 2011, to remain available until
expended.

SEC. 202. 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 operation or have been demonstrated as of the date of
the enactment of this Act.
(b) Technical Criteria for Gasification.--In allocating the
funds made available under section 201, the Secretary shall
ensure that at least 80 percent of the funds are used for
coal-based gasification technologies or coal-based projects
that include gasification combined cycle, gasification fuel
cells, gasification co-production, or hybrid gasification/
combustion. The Secretary shall set technical milestones
specifying emissions levels that coal gasification projects
must be designed to and reasonably expected to achieve. The
milestones shall get more restrictive through the life of the
program. The milestones shall be designed to achieve by 2020
coal gasification projects able to--
(1) remove 99 percent of sulfur dioxide;
(2) emit no more than .05 lbs of NOx per million BTU;
(3) achieve substantial reductions in mercury emissions;
and
(4) achieve a thermal efficiency of--
(A) 60 percent for coal of more than 9,000 Btu;
(B) 59 percent for coal of 7,000 to 9,000 Btu; and
(C) 57 percent for coal of less than 7,000 Btu.
(c) Technical Criteria for Other Projects.--For projects
not described in subsection (b), the Secretary shall set
technical milestones specifying emissions levels that the
projects must be designed to and reasonably expected to
achieve. The milestones shall get more restrictive through
the life of the program. The milestones shall be designed to
achieve by 2010 projects able to--
(1) remove 97 percent of sulfur dioxide;
(2) emit no more than .08 lbs of NOx per million BTU;
(3) achieve substantial reductions in mercury emissions;
and
(4) achieve a thermal efficiency of--
(A) 45 percent for coal of more than 9,000 Btu;
(B) 44 percent for coal of 7,000 to 9,000 Btu; and
(C) 42 percent for coal of less than 7,000 Btu.
(d) Existing Units.--In the case of projects at existing
units, in lieu of the thermal efficiency requirements set
forth in paragraphs (b)(4) and (c)(4), the projects 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.
(e) Permitted Uses.--In allocating funds made available in
this section, the Secretary may allocate funds to projects
that include, as part of the project, the separation and
capture of carbon dioxide.
(f) Consultation.--Before setting the technical milestones
under subsections (b) and (c), 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.
(g) Financial Criteria.--The Secretary shall not provide a
funding award under this title unless the recipient has
documented 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 for 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.
(h) Financial Assistance.--The Secretary shall provide
financial assistance to projects that meet the requirements
of this section 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; and
(3) demonstrate methods and equipment that are applicable
to 25 percent of the electricity generating facilities that
use coal as the primary feedstock as of the date of the
enactment of this Act.
(i) Federal Share.--The Federal share of the cost of a coal
or related technology project funded by the Secretary shall
not exceed 50 percent.
(j) Applicability.--No technology, or level of emission
reduction, shall be treated as adequately demonstrated for
purposes of section 111 of the Clean Air Act, achievable for
purposes of section 169 of that Act, or achievable in
practice for purposes of section 171 of that Act 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.

SEC. 203. REPORTS.

(a) Ten-Year Plan.--By September 30, 2004, the Secretary
shall transmit to Congress a report, with respect to section
202(a), a 10-year plan containing--
(1) a detailed assessment of whether the aggregate funding
levels provided under section 201 are 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

[[Page S10353]]

(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.
(b) Technical Milestones.--Not later than 1 year after the
date of the enactment of this Act, and once every 2 years
thereafter through 2011, the Secretary, in consultation with
other appropriate Federal agencies, shall transmit to the
Congress, a report describing--
(1) the technical milestones set forth in section 212 and
how those milestones ensure progress toward meeting the
requirements of subsections (b) and (c) of section 212; and
(2) the status of projects funded under this title.

SEC. 204. CLEAN COAL CENTERS OF EXCELLENCE.

As part of the program authorized in section 211, 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 can show the greatest potential
for advancing new clean coal technologies.

Subtitle B--Federal Coal Leases

SEC. 211. REPEAL OF THE 160-ACRE LIMITATION FOR COAL LEASES.

Section 3 of the Mineral Leasing Act (30 U.S.C. 203) is
amended by striking all the text in the first sentence after
``upon'' and inserting the following: ``a finding by the
Secretary that it (1) would be in the interest of the United
States, (2) would not displace a competitive interest in the
lands, and (3) would not include lands 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 lands or coal deposits contiguous
or cornering to those embraced in such lease, but in no event
shall the total area added by such modifications to an
existing coal lease exceed 320 acres, or add acreage larger
than that in the original lease.''.

SEC. 212. 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
forty years if the Secretary determines that the longer
period will ensure the maximum economic recovery of a coal
deposit, or the longer period is in the interest of the
orderly, efficient, or economic development of a coal
resource.''.

SEC. 213. PAYMENT OF ADVANCE ROYALTIES UNDER COAL LEASES.

Section 7(b) of the Mineral Leasing Act of 1920 (30 U.S.C.
207(b)) is amended by striking all after ``Secretary).''
through to ``a lease.'' and inserting: ``The aggregate number
of years during the period of any lease for which advance
royalties may be accepted in lieu of the condition of
continued operation shall not exceed twenty. 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 such lease to the extent that such advance royalties
have not been used to reduce production royalties for a prior
year.''.

SEC. 214. 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 by striking ``and not later than three years after
a lease is issued,''.

SEC. 215. APPLICATION OF AMENDMENTS.

The amendments made by this Act apply with respect to any
coal lease issued on or after the date of enactment of this
Act, and, with respect to any coal lease issued before the
date of enactment of this Act, upon the date of readjustment
of the lease as provided for by section 7(a) of the Mineral
Leasing Act, or upon request by the lessee, prior to such
date.

Subtitle C--Powder River Basin Shared Mineral Estates

SEC. 221. 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 enactment of this
Act, report to the 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.

TITLE III--INDIAN ENERGY

SEC. 301. SHORT TITLE.

This title may be cited as the ``Indian Tribal Energy
Development and Self-Determination Act of 2003''.

SEC. 302. 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 shall in accordance
with Federal policies promoting Indian self-determination and
the purposes of this Act, 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) electrify Indian tribal land and the homes of tribal
members.

``COMPREHENSIVE INDIAN ENERGY ACTIVITIES

``Sec. 218. (a) Indian Energy Education Planning and
Management Assistance.--
``(1) The Director shall establish programs within the
Office of Indian Energy Policy and Programs to assist Indian
tribes in meeting energy education, research and development,
planning, and management needs.
``(2) In carrying out this section, the Director may
provide grants, on a competitive basis, to an Indian tribe or
tribal consortium for use in carrying out--
``(A) energy, energy efficiency, and energy conservation
programs;
``(B) studies and other activities supporting tribal
acquisition 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
section.
``(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 may promulgate such regulations as the
Secretary determines are necessary to carry out this
subsection.
``(5) There is authorized to be appropriated to carry out
this section $20,000,000 for each of fiscal years 2004
through 2011.
``(b) Loan Guarantee Program.--
``(1) Subject to paragraph (3), the Secretary 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 guaranteed under this subsection shall be made
by--
``(A) a financial institution subject to examination by the
Secretary; or
``(B) an Indian tribe, from funds of the Indian tribe.
``(3) The aggregate outstanding amount guaranteed by the
Secretary at any time under this subsection shall not exceed
$2,000,000,000.
``(4) The Secretary may promulgate such regulations as the
Secretary 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 shall report to the Congress on
the financing requirements of Indian tribes for energy
development on Indian land.
``(c) 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; and
``(B) obtain less than prevailing market terms and
conditions.''.
(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.
``Sec. 218. Comprehensive Indian Energy Activities.''.
(2) Section 5315 of title 5, United States Code, is amended
by inserting ``Director, Office of Indian Energy Policy and
Programs,

[[Page S10354]]

Department of Energy.'' after ``Inspector General, Department
of Energy.''.

SEC. 303. INDIAN ENERGY.

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.
``(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;
``(ii) by an Indian tribe, subject to restriction by the
United States against alienation; or
``(iii) by a dependent Indian community; and
``(C) land conveyed to a Native Corporation under the
Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.).
``(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;
``(C) a former reservation in the State of Oklahoma;
``(D) a parcel of land owned by a Native Corporation under
the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et
seq.); and
``(E) 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).
``(5) 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).
``(6) 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.
``(7) The term `Program' means the Indian energy resource
development program established under section 2602(a).
``(8) The term `Secretary' means the Secretary of the
Interior.
``(9) The term `tribal consortium' means an organization
that consists of 2 or more entities, at least 1 of which is
an Indian tribe.
``(10) The term `tribal land' means any land or interests
in land owned by any Indian tribe, band, nation, pueblo,
community, rancheria, colony or other group, title to which
is held in trust by the United States or which is subject to
a restriction against alienation imposed by the United
States.
``(11) The term `vertical 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 facility), on or near Indian land to process,
refine, generate electricity from, or otherwise develop
energy resources on, Indian land.

``SEC. 2602. INDIAN TRIBAL ENERGY RESOURCE DEVELOPMENT.

``(a) In General.--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 Indian tribes and tribal consortia in achieving the
purposes of this title.
``(b) Grants and Loans.--In carrying out the Program, the
Secretary shall
``(1) provide development grants to Indian tribes and
tribal consortia for use in developing or obtaining the
managerial and technical capacity needed to develop energy
resources on Indian land;
``(2) provide grants to Indian tribes and tribal consortia
for use in carrying out projects to promote the vertical
integration of energy resources, and to process, use, or
develop those energy resources, on Indian land; and
``(3) provide low-interest loans to Indian tribes and
tribal consortia for use in the promotion of energy resource
development and vertical integration or energy resources on
Indian land.
``(c) Authorization of Appropriations.--There are
authorized to be appropriated to carry out this section such
sums as are necessary for each of fiscal years 2004 through
2014.

``SEC. 2603. INDIAN TRIBAL ENERGY RESOURCE REGULATION.

``(a) Grants.--The Secretary may provide to Indian tribes
and tribal consortia, on an annual basis, grants for use in
developing, administering, implementing, and enforcing tribal
laws (including regulations) governing the development and
management of energy resources on Indian land.
``(b) Use of Funds.--Funds from a grant provided under this
section may be used by an Indian tribe or tribal consortium
for--
``(1) the development of a tribal energy resource inventory
or tribal energy resource on Indian land;
``(2) the development of a feasibility study or other
report necessary to the development of energy resources on
Indian land;
``(3) the development and enforcement of tribal laws and
the development of technical infrastructure to protect the
environment under applicable law; or
``(4) 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.--To the maximum extent practicable,
the Secretary and the Secretary of Energy shall make
available to Indian tribes and tribal consortia scientific
and technical data for use in the development and management
of energy resources on Indian land.

``SEC. 2604. LEASES, BUSINESS AGREEMENTS, AND RIGHTS-OF-WAY
INVOLVING ENERGY DEVELOPMENT OR TRANSMISSION.

``(a) Leases and 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
development, including a lease or business agreement for--
``(A) exploration for, extraction of, processing of, or
other development of energy resources 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) a 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 in
accordance with 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 and
gas resources, 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 an annual trust asset
evaluation of the activities of the Indian tribe conducted in
accordance with the agreement).
``(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 specific 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 an annual trust asset
evaluation of the activities of the Indian tribe conducted in
accordance with the agreement).
``(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 under this section shall be valid unless the lease,
business agreement, or right-of-way is authorized in
accordance with tribal energy resource agreements approved by
the Secretary under subsection (e).
``(e) Tribal Energy Resource Agreements.--
``(1) On promulgation of regulations under paragraph (9),
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 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; and
``(ii) the tribal energy resource agreement includes
provisions that, with respect to a

[[Page S10355]]

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 consideration for the lease, business
agreement, or right-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 potential off-reservation impacts
associated with the lease, business agreement, or right-of-
way; and
``(XI) describe the remedies for breach of the lease,
agreement, or right-of-way.
``(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 any proposed lease,
business agreement, or right-of-way before tribal approval of
the lease, business agreement, or right-of-way (or any
amendment to or renewal 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 an
annual trust asset evaluation to monitor the performance of
the activities of the Indian tribe associated with the
development of energy resources on tribal land by the Indian
tribe; and
``(ii) in the case of a finding by the Secretary of
imminent jeopardy to a physical trust asset, provisions
authorizing the Secretary to reassume responsibility for
activities associated with the development of energy
resources on tribal land.
``(3) The Secretary shall provide notice and opportunity
for public comment on tribal energy resource agreements
submitted under paragraph (1).
``(4) If the Secretary disapproves a tribal energy resource
agreement submitted by an Indian tribe under paragraph (1),
the Secretary shall--
``(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 subsection (e)(9), 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
payment to be made directly to the Indian tribe,
documentation of those payments sufficient to enable the
Secretary to discharge the trust responsibility of the United
States as appropriate under applicable law.
``(6) The Secretary shall continue to have a trust
obligation to ensure that the rights of an Indian tribe are
protected in the event of a violation of the terms of any
lease, business agreement or right-of-way by any other party
to the lease, business agreement, or right-of-way.
``(7)(A) The United States shall not be liable for any loss
or injury sustained by any party (including an Indian tribe
or any member of an Indian tribe) to a lease, business
agreement, or right-of-way executed in accordance with tribal
energy resource agreements approved under this subsection.
``(B) On approval of a tribal energy resource agreement of
an Indian tribe under paragraph (1), the Indian tribe shall
be stopped from asserting a claim against the United States
on the grounds that the Secretary should not have approved
the Tribal energy resource agreement.
``(8)(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 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 subsection
(e)(9), 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
under this subsection.
``(C) If the Secretary determines that an Indian tribe is
not in compliance with a tribal energy resource agreement
approved under this subsection, the Secretary shall take such
action as is necessary to compel compliance, including--
``(i) suspending a lease, business agreement, or right-of-
way under this section until an Indian tribe is in compliance
with the approved tribal energy resource agreement; and
``(ii) rescinding approval of the tribal energy resource
agreement and reassuming the responsibility for approval of
any future leases, business agreements, or rights-of-way
associated with an energy pipeline or distribution line
described in subsections (a) and (b).
``(D) If the Secretary seeks to compel compliance of an
Indian tribe with an approved tribal energy resource
agreement under subparagraph (C)(ii), 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 violation together with the written determination; and
``(iii) before taking any action described in subparagraph
(C)(ii) 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)(i) An Indian tribe described in subparagraph (D)
shall retain all rights to appeal as provided in regulations
promulgated by the Secretary.
``(ii) The decision of the Secretary with respect to an
appeal described in clause (i), after any agency appeal
provided for by regulation, shall constitute a final agency
action.
``(9) Not later than 180 days after the date of enactment
of the Indian Tribal Energy Development and Self-
Determination Act of 2003, the Secretary shall promulgate
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; and
``(B) a process and requirements in accordance with which
an Indian tribe may--
``(i) voluntarily rescind an approved 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.
``(f) No Effect on Other Law.--Nothing in this section
affects the application of--
``(1) any Federal environmental 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.).

``SEC. 2605. 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 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

[[Page S10356]]

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 the 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 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 facilitate the use of Federal
power by Indian tribes.
``(f) Authorization of Appropriations.--There is authorized
to be appropriated to carry out this section $750,000, which
shall remain available until expended and shall not be
reimbursable.

``SEC. 2606. 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 the
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. 2607. WIND AND HYDROPOWER FEASIBILITY STUDY.

``(a) Study.--The Secretary, in coordination with the
Secretary of the Army and the Secretary of the Interior,
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 purchase requirements and projected
purchase requirements for firming and the patterns of
availability and use of firming energy;
``(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 this Act, 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 blend of 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
consortium 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) There is authorized to be appropriated to carry out
this section $500,000, to remain available until expended.
``(2) Costs incurred by the Secretary in carrying out this
section shall be nonreimbursable.''.

SEC. 304. 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 302 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. 305. 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. 306. CONSULTATION WITH INDIAN TRIBES.

In carrying out this Act and the amendments made by this
Act, 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 IV--NUCLEAR MATTERS

Subtitle A--Price-Anderson Act Amendments

SEC. 401. SHORT TITLE.

This subtitle may be cited as the ``Price-Anderson
Amendments Act of 2003''.

SEC. 402. EXTENSION OF INDEMNIFICATION AUTHORITY.

(a) Indemnification of Nuclear Regulatory Commission
Licensees.--Section 170c. 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'';
(2) by striking ``licenses issued between August 30, 1954,
and December 31, 2003'' and inserting ``licenses issued after
August 30, 1954''; and
(3) by striking ``With respect to any production or
utilization facility for which a construction permit is
issued between August 30, 1954, and December 31, 2003, the
requirements of this subsection shall apply to any license
issued for such facility subsequent to December 31, 2003.''
(b) Indemnification of Department of Energy Contractors.--
Section 170d.(1)(A) of the Atomic Energy Act of 1954 (42
U.S.C. 2210(d)(1)(A)) is amended by striking ``, until
December 31, 2004,''.
(c) Indemnification of Nonprofit Educational
Institutions.--Section 170k. of the Atomic Energy Act of 1954
(42 U.S.C. 2210(k)) is amended--
(1) by striking ``licenses issued between August 30, 1954,
and August 1, 2002'' and replacing it with ``licenses issued
after August 30, 1954''; and
(2) by striking ``With respect to any production or
utilization facility for which a construction permit is
issued between August 30, 1954, and August 1, 2002, the
requirements of this subsection shall apply to any license
issued for such facility subsequent to August 1, 2002.''

SEC. 403. 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
``$94,000,000''; 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 ``July 1,
2003''; and
(C) by striking ``such date of enactment'' and inserting
``July 1, 2003''.

SEC. 404. DEPARTMENT OF ENERGY LIABILITY LIMIT.

(a) Indemnification of Department of Energy Contractors.--
Section 170d. 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

[[Page S10357]]

of the contractor as are approved by the Secretary.''.
(b) Contract Amendments.--Section 170d. 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 170e.(1)(B) of the Atomic
Energy Act of 1954 (42 U.S.C. 2210(e)(1)(B)) is amended by:
(1) striking ``the maximum amount of financial protection
required under subsection b. or''; and
(2) striking ``paragraph (3) of subsection d., whichever
amount is more'' and inserting ``paragraph (2) of subsection
d.''.

SEC. 405. INCIDENTS OUTSIDE THE UNITED STATES.

(a) Amount of Indemnification.--Section 170d.(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 170e.(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. 406. REPORTS.

Section 170p. of the Atomic Energy Act of 1954 (42 U.S.C.
2210(p)) is amended by striking ``August 1, 1998'' and
inserting ``August 1, 2013''.

SEC. 407. INFLATION ADJUSTMENT.

Section 170t. 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 adding 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. 408. TREATMENT OF MODULAR REACTORS.

Section 170b. 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. 409. APPLICABILITY.

The amendments made by sections 403, 404, and 405 do not
apply to a nuclear incident that occurs before the date of
the enactment of this Act.

SEC. 410. CIVIL PENALTIES.

(a) Repeal of Automatic Remission.--Section 234Ab.(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 one-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 occurring under a contract entered into before the date
of enactment of this section.

Subtitle B--Deployment of New Nuclear Plants

SEC. 421. SHORT TITLE.

This subtitle may be cited as the ``Nuclear Energy Finance
Act of 2003.''

SEC. 422. DEFINITIONS.

For purposes of this subtitle:
(1) The term ``advanced reactor design'' means a nuclear
reactor that enhances safety, efficiency, proliferation
resistance, or waste reduction compared to commercial nuclear
reactors in use in the United States on the date of enactment
of this Act.
(2) The term ``eligible project costs'' means all costs
incurred by a project developer that are reasonably related
to the development and construction of a project under this
subtitle, including costs resulting from regulatory or
licensing delays.
(3) The term ``financial assistance'' means a loan
guarantee, purchase agreement, or any combination of the
foregoing.
(4) The term ``loan guarantee'' means any guarantee or
other pledge by the Secretary to pay all or part of the
principal and interest on a loan or other debt obligation
issued by a project developer and funded by a lender.
(5) The term ``project'' means any commercial nuclear power
facility for the production of electricity that uses one or
more advanced reactor designs.
(6) The term ``project developer'' means an individual,
corporation, partnership, joint venture, trust, or other
entity that is primarily liable for payment of a project's
eligible costs.
(7) The term ``purchase agreement'' means a contract to
purchase the electric energy produced by a project under this
subtitle.
(8) The term ``Secretary'' means the Secretary of Energy.

SEC. 423. RESPONSIBILITIES OF THE SECRETARY.

(a) Financial Assistance.--Subject to the requirements of
the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.),
the Secretary may, subject to appropriations, make available
to project developers for eligible project costs such
financial assistance as the Secretary determines is necessary
to supplement private-sector financing for projects if he
determines that such projects are needed to contribute to
energy security, fuel or technology diversity, or clean air
attainment goals. The Secretary shall prescribe such terms
and conditions for financial assistance as the Secretary
deems necessary or appropriate to protect the financial
interests of the United States.
(b) Requirements.--Approval criteria for financial
assistance shall include--
(1) the creditworthiness of the project;
(2) the extent to which financial assistance would
encourage public-private partnerships and attract private-
sector investment;
(3) the likelihood that financial assistance would hasten
commencement of the project; and,
(4) any other criteria the Secretary deems necessary or
appropriate.
(c) Confidentiality.--The Secretary shall protect the
confidentiality of any information that is certified by a
project developer to be commercially sensitive.
(d) Full Faith and Credit.--All financial assistance
provided by the Secretary under this subtitle shall be
general obligations of the United States backed by its full
faith and credit.

SEC. 424. LIMITATIONS.

(a) Financial Assistance.--The total financial assistance
per project provided by this subtitle shall not exceed fifty
percent of eligible project costs.
(b) Generation.--The total electrical generation capacity
of all projects provided by this subtitle shall not exceed
8,400 megawatts.

SEC. 425. REGULATIONS.

Not later than 12 months from the date of enactment of this
Act, the Secretary shall issue regulations to implement this
subtitle.

Subtitle C--Advanced Reactor Hydrogen Co-Generation Project ,

SEC. 431. PROJECT ESTABLISHMENT.

The Secretary is directed to establish an Advanced Reactor
Hydrogen Co-Generation Project.

SEC. 432. PROJECT DEFINITION.

The project shall conduct the research, development,
design, construction, and operation of a hydrogen production
co-generation testbed 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
testbed 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. 433. 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 program,
providing the site for the reactor construction, shall be the
Idaho National Engineering and Environmental Laboratory
(``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. 434. PROJECT REQUIREMENTS.

(a) Research and Development.--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.
(1) The project shall utilize, where appropriate, extensive
reactor test capabilities resident at INEEL.
(2) The project shall be designed to explore technical,
environmental, and economic feasibility of alternative
approaches for reactor-based hydrogen production.

[[Page S10358]]

(3) The industrial lead for the project must be a United
States-based company.
(b) International Collaboration.--The Secretary shall seek
international cooperation, participation, and financial
contribution in this program.
(1) The project 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.
(2) International activities shall be coordinated with the
Generation IV International Forum.
(3) 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 demonstration 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 why this date is not feasible.
(f) Waiver of Construction Timelines.--The Secretary is
authorized to conduct the Advanced Reactor Hydrogen Co-
Generation Project without the constraints of DOE Order 413.3
as deemed necessary to meet the specified operational date.
(g) Competition.--The Secretary may fund up to two teams
for up to one 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
demonstration facility. Utilization of domestic university-
based testbeds shall be encouraged to provide educational
opportunities for student development.
(i) Role of Nuclear Regulatory Commission.--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.--A comprehensive project plan shall be
developed no later than April 30, 2004. The project plan
shall be updated annually with each annual budget submission.

SEC. 435. 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
reactor construction:
(1) For fiscal year 2004, $35,000,000;
(2) For each of fiscal years 2005-2008, $150,000,000; and
(3) For fiscal years beyond 2008, such funds as are needed
are authorized to be appropriated.
(b) Reactor Construction.--The following sum is authorized
to be appropriated to the Secretary for all project-related
construction activities, to be available until expended,
$500,000,000.

Subtitle D--Miscellaneous Matters

SEC. 441. URANIUM SALES AND TRANSFERS.

Section 3112 of the USEC Privatization Act (42 U.S.C.
2297h-10) is amended by striking subsections (d) and (e) and
inserting the following:
``(d)(1)(A) The aggregate annual deliveries of uranium in
any form (including natural uranium concentrates, natural
uranium hexafluoride, enriched uranium, and depleted uranium)
sold or transferred for commercial nuclear power end uses by
the United States Government shall not exceed 3,000,000
pounds U<inf>3</inf>O<inf>8</inf> equivalent per year through
calendar year 2009. Such aggregate annual deliveries shall
not exceed 5,000,000 pounds U<inf>3</inf>O<inf>8</inf>
equivalent per year in calendar years 2010 and 2011. Such
aggregate annual deliveries shall not exceed 7,000,000 pounds
U<inf>3</inf>O<inf>8</inf> equivalent in calendar year 2012.
Such aggregate annual deliveries shall not exceed 10,000,000
pounds U<inf>3</inf>O<inf>8</inf> equivalent per year in
calendar year 2013 and each year thereafter. Any sales or
transfers by the United States Government to commercial end
users shall be limited to long-term contracts of no less than
3 years duration.
``(B) The recovery and extraction of the uranium component
from contaminated uranium bearing materials from United
States Government sites by commercial entities shall be the
preferred method of making uranium available under this
subsection. The uranium component contained in such
contaminated materials shall be counted against the annual
maximum deliveries set forth in this section, provided that
uranium is sold to end users.
``(C) Sales or transfers of uranium by the United States
Government for the following purposes are exempt from the
provisions of this paragraph--
``(i) sales or transfers provided for under existing law
for use by the Tennessee Valley Authority in relation to the
Department of Energy's high-enriched uranium or tritium
programs;
``(ii) sales or transfers to the Department of Energy
research reactor sales program;
``(iii) the transfer of up to 3,293 metric tons of uranium
to the United States Enrichment Corporation to replace
uranium that the Secretary transferred, prior to
privatization of the United States Enrichment Corporation in
July 1998, to the Corporation on or about June 30, 1993,
April 20, 1998, and May 18, 1998, and that does not meet
commercial specifications;
``(iv) the sale or transfer of any uranium for emergency
purposes in the event of a disruption in supply to end users
in the United States;
``(v) the sale or transfer of any uranium in fulfillment of
the United States Government's obligations to provide
security of supply with respect to implementation of the
Russian HEU Agreement; and
``(vi) the sale or transfer of any enriched uranium for use
in an advanced commercial nuclear power plant in the United
States with nonstandard fuel requirements.
``(D) The Secretary may transfer or sell enriched uranium
to any person for national security purposes, as determined
by the Secretary.
``(2) Except as provided in subsections (b) and (c), and in
paragraph (1)(B), clauses (i) through (iii) of paragraph
(1)(C), and paragraph (1)(D) of this subsection, no sale or
transfer of uranium in any form shall be made by the United
States Government unless--
``(A) the President determines that the material is not
necessary for national security needs;
``(B) the price paid to the Secretary, if the transaction
is a sale, will not be less than the fair market value of the
material, as determined at the time that such material is
contracted for sale;
``(C) prior to any sale or transfer, the Secretary solicits
the written views of the Department of State and the National
Security Council with regard to whether such sale or transfer
would have any adverse effect on national security interests
of the United States, including interests related to the
implementation of the Russian HEU Agreement; and
``(D) neither the Department of State nor the National
Security Council objects to such sale or transfer.

The Secretary shall endeavor to determine whether a sale or
transfer is permitted under this paragraph within 30 days.
The Secretary's determinations pursuant to this paragraph
shall be made available to interested members of the public
prior to authorizing any such sale or transfer.
``(3) Within 1 year after the date of enactment of this
subsection and annually thereafter the Secretary shall
undertake an assessment for the purpose of reviewing
available excess Government uranium inventories, and
determining, consistent with the procedures and limitations
established in this subsection, the level of inventory to be
sold or transferred to end users.
``(4) Within 5 years after the date of enactment of this
subsection and biennially thereafter the Secretary shall
report to the Congress on the implementation of this
subsection. The report shall include a discussion of 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.
``(5) For purposes of this subsection, the term `United
States Government' does not include the Tennessee Valley
Authority.''.

SEC. 442. DECOMMISSIONING PILOT PROGRAM.

(a) Pilot Program.--The Secretary 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 is authorized
to be appropriated to carry out this section $16,000,000.

TITLE V--RENEWABLE ENERGY

Subtitle A--General Provisions

SEC. 501. ASSESSMENT OF RENEWABLE ENERGY RESOURCES.

(a) Resource Assessment.--Not later than 6 months after the
date of enactment of this title, 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 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 title, and each year thereafter,
the Secretary

[[Page S10359]]

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. 502. 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 the 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 of
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. 503. RENEWABLE ENERGY ON FEDERAL LANDS.

(a) Report.--Within 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 report
to the Congress recommendations on opportunities to develop
renewable energy on public lands under the jurisdiction of
the Secretary of the Interior and National Forest System
lands under the jurisdiction of the Secretary of Agriculture.
The report shall include--
(1) 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; and
(2) an analysis of--
(A) the use of rights-of-way, leases, or other methods to
develop renewable energy on such lands;
(B) the anticipated benefits of grants, loans, tax credits,
or other provisions to promote renewable energy development
on such lands; and
(C) any issues that the Secretary of the Interior or the
Secretary of Agriculture have encountered in managing
renewable energy projects on such lands, or believe are
likely to arise in relation to the development of renewable
energy on such lands;
(3) 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 Defense that
would be suitable for development for renewable energy, and
any recommended statutory and regulatory mechanisms for such
development; and
(4) any recommendations pertaining to the issues addressed
in the report.
(b) National Academy of Sciences Study.--
(1) Not later than 90 days after the date of the enactment
of this section, 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 (tidal 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) The results of the study shall be transmitted to the
Congress within 24 months after the date of the enactment of
this section.

SEC. 504. 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, and
(3) not less than 7.5 percent in fiscal year 2011 and each
fiscal year thereafter.
(b) Definition.--For purposes of this section--
(1) 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; or
(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) the term ``renewable energy'' means electric energy
generated from solar, wind, biomass, 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 the Congress on the progress of the Federal
Government in meeting the goals established by this section.

SEC. 505. INSULAR AREA RENEWABLE AND ENERGY EFFICIENCY PLANS.

The Secretary of Energy shall update the energy surveys,
estimates, and assessments for the insular areas of Puerto
Rico, the Virgin Islands, Guam, American Samoa, the
Commonwealth of the Northern Mariana Islands, the Republic of
the Marshall Islands, the Federated States of Micronesia, and
the Republic of Palau undertaken pursuant to section 604 of
Public Law 96-597 (48 U.S.C. 1492) and revise the
comprehensive energy plan for the insular areas to reduce
reliance on energy imports and increase use of renewable
energy resources and energy efficiency opportunities. The
update and revision shall by undertaken in consultation with
the Secretary of the Interior and the chief executive officer
of each insular area and shall be completed and submitted to
Congress and to the chief executive officer of each insular
area by December 31, 2005.

Subtitle B--Hydroelectric Licensing

SEC. 511. 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 agency trial-type hearing of any
disputed issues of material fact, with respect to such
conditions.''.
(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 agency
trial-type hearing of any disputed issues of material fact,
with respect to such fishways.''.
(c) Alternative Conditions and Prescriptions.--Part I of
the Federal Power Act (16

[[Page S10360]]

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 concerned 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 adequately protect 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. The alternative may include a fishway or an
alternative to 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 of the fish resources 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 not adequately protect the fish resources. The Secretary
shall submit the advisory and the Secretary's final written
determination into the record of the Commission's
proceeding.''.

Subtitle C--Geothermal Energy

SEC. 521. COMPETITIVE LEASE SALE REQUIREMENTS.

(a) In General.--Section 4 of the Geothermal Steam Act of
1970 (30 U.S.C. 1003) is amended by striking the text and
inserting the following:
``(a) Nominations.--The Secretary shall accept nominations
at any time from companies and individuals of lands to be
leased 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 in which there are nominations pending under
subsection (a) where 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 the
competitive lease sale.''.
(b) Pending Lease Applications.--It shall be a priority for
the Secretary of the Interior and, with respect to National
Forest lands, the Secretary of Agriculture, to ensure timely
completion of administrative actions necessary to conduct
competitive lease sales for lands with pending applications
for geothermal leasing as of the date of enactment of this
section where such lands are otherwise available for leasing.

SEC. 522. 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 the 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 known geothermal resources areas 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 processing.
(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. 523. LEASING AND PERMITTING ON FEDERAL LANDS WITHDRAWN
FOR MILITARY PURPOSES.

Not later than 1 year after the date of the enactment of
this Act, the Secretary of the Interior and the Secretary of
Defense, in consultation with interested states, counties,
representatives of the geothermal industry, and interested
members of the public, shall submit to the Congress a joint
report concerning leasing and permitting activities for
geothermal energy on Federal lands withdrawn for military
purposes. Such report shall--
(1) describe any differences, including differences in
royalty structure and revenue sharing with states and
counties, 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) identify procedures for 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; and
(3) provide recommendations for legislative or
administrative actions that could facilitate program
administration, including a common royalty structure.

SEC. 524. REINSTATEMENT OF LEASES TERMINATED FOR FAILURE TO
PAY RENT.

Section 5(c) of the Geothermal Steam Act of 1970 (30 U.S.C.
1004(c)), is amended in the last sentence by inserting ``or
was inadvertent,'' after ``reasonable diligence,''.

SEC. 525. ROYALTY REDUCTION AND RELIEF.

(a) Rulemaking.--Within one year after the date of
enactment of this Act, the Secretary shall promulgate a final
regulation providing a methodology for determining the

[[Page S10361]]

amount or value of the steam for purposes of calculating the
royalty due to be paid on such production pursuant to section
5 of the Geothermal Steam Act of 1970 (30 U.S.C. 1004). The
final regulation shall provide for a simplified methodology
for calculating the royalty. In undertaking the rulemaking,
the Secretary shall consider the use of a percent of revenue
method and shall ensure that the final rule will result in
the same level of royalty revenues as the regulation in
effect on the date of enactment of this provision.
(b) Low Temperature Direct Use.--Notwithstanding the
provisions of section 5(a) of the Geothermal Steam Act of
1979 (30 U.S.C. 1004(a)), with respect to the direct use of
low temperature geothermal resources for purposes other than
the generation of electricity, the Secretary shall establish
a schedule of fees and collect fees pursuant to such schedule
in lieu of royalties based upon the total amount of
geothermal resources used. The schedule of fees shall ensure
that there is a fair return to the public for the use of the
low temperature geothermal resource. With the consent of the
lessee, the Secretary may modify the terms of a lease in
existence on the date of enactment of this Act in order to
reflect the provisions of this subsection.

Subtitle D--Biomass Energy

SEC. 531. DEFINITIONS.

For the purposes of this subtitle:
(1) The term ``eligible operation'' means a facility that
is located within the boundaries of an eligible community and
uses biomass from federal or Indian lands as a raw material
to produce electric energy, sensible heat, transportation
fuels, or substitutes for petroleum-based products.
(2) The term ``biomass'' means pre-commercial thinnings of
trees and woody plants, or non-merchantable material, from
preventative treatments to reduce hazardous fuels, or reduce
or contain disease or insect infestations.
(3) The term ``green ton'' means 2,000 pounds of biomass
that has not been mechanically or artificially dried.
(4) The term ``Secretary'' means--
(A) with respect to lands within the National Forest
System, the Secretary of Agriculture; or
(B) with respect to Federal lands under the jurisdiction of
the Secretary of the Interior and Indian lands, the Secretary
of the Interior.
(5) The term ``eligible community'' means any Indian
Reservation, or any county, town, township, municipality, or
other similar unit of local government that has a population
of not more than 50,000 individuals and is determined by the
Secretary to be located in an area near federal of Indian
lands which is at significant risk of catastrophic wildfire,
disease, or insect infestation or which suffers from disease
or insect infestation.
(6) 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)).
(7) The term ``person'' includes--
(A) an individual;
(B) a community;
(C) an Indian tribe;
(D) a small business or a corporation that is incorporated
in the United States; or
(E) a nonprofit organization.

SEC. 532. BIOMASS COMMERCIAL UTILIZATION GRANT PROGRAM.

(a) In General.--The Secretary may make grants to any
person that owns or operates an eligible operation to offset
the costs incurred to purchase biomass for use by such
eligible operation with priority given to operations using
biomass from the highest risk areas.
(b) Limitation.--No grant provided under this subsection
shall be paid at a rate that exceeds $20 per green ton of
biomass delivered.
(c) Records.--Each grant recipient shall keep such records
as the Secretary 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 the Secretary, the
grant recipient shall provide the Secretary reasonable access
to examine the inventory and records of any eligible
operation receiving grant funds.
(d) Authorization of Appropriations.--For the purposes of
this section, there are authorized to be appropriated
$12,500,000 each to the Secretary of the Interior and the
Secretary of Agriculture for each fiscal year from 2004
through 2008, to remain available until expended.

SEC. 533. IMPROVED BIOMASS UTILIZATION GRANT PROGRAM.

(a) In General.--The Secretary may make grants to persons
in eligible communities to offset the costs of developing or
researching proposals to improve the use of biomass or add
value to biomass utilization.
(b) Selection.--Grant recipients shall be selected based on
the potential for the proposal to--
(1) develop affordable thermal or electric energy resources
for the benefit of an eligible community;
(2) provide opportunities for the creation or expansion of
small businesses within an eligible community;
(3) create new job opportunities within an eligible
community, and
(4) reduce the hazardous fuels from the highest risk areas.
(c) Limitation.--No grant awarded under this subsection
shall exceed $500,000.
(d) Authorization of Appropriations.--For the purposes of
this section, there are authorized to be appropriated
$12,500,000 each to the Secretary of the Interior and the
Secretary of Agriculture for each fiscal year from 2004
through 2008, to remain available until expended.

SEC. 534. REPORT.

Not later than 3 years after the date of enactment of this
subtitle, the Secretary of the Interior and the Secretary of
Agriculture shall jointly submit to the Congress a report
that describes the interim results of the programs authorized
under this subtitle.

Subtitle E.--General Provisions Relating to Renewable Fuels

SEC. 534. RENEWABLE CONTENT OF GASOLINE.

(a) In General.--Section 211 of the Clean Air Act (42
U.S.C. 7545) is amended--
(1) by redesignating subsection (o) as subsection (r); and
(2) by inserting after subsection (n) the following:
``(o) Renewable Fuel Program.--
``(1) Definitions.--In this section:
``(A) Cellulosic biomass ethanol.--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;
``(vi) fibers;
``(vii) animal wastes and other waste materials; and
``(viii) 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--

``(I) cellulosic biomass ethanol; and
``(II) biodiesel (as defined in section 312(f) of the
Energy Policy Act of 1992 (42 U.S.C. 13220(f))).

``(C) Small refinery.--The term `small refinery' means a
refinery for which the average aggregate daily crude oil
throughput for a 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) Regulations.--
``(i) In general.--Not later than 1 year after the date of
enactment of this paragraph, the Administrator shall
promulgate regulations to ensure that gasoline sold or
introduced into commerce in the United States (except in
Alaska and Hawaii), on an annual average basis, contains the
applicable volume of renewable fuel determined in accordance
with subparagraph (B).
``(ii) Provisions of regulations.--Regardless of the date
of promulgation, the regulations promulgated under clause
(i)--

``(I) shall contain compliance provisions applicable to
refiners, blenders, distributors, and importers, as
appropriate, to ensure that the requirements of this
paragraph are met; but
``(II) shall not--

``(aa) restrict cases in geographic areas in which
renewable fuel may be used; or
``(bb) impose any per-gallon obligation for the use of
renewable fuel.
``(iii) Requirement in case of failure to promulgate
regulations.--If the Administrator does not promulgate
regulations under clause (i), the percentage of renewable
fuel in gasoline sold or dispensed to consumers in the United
States, on a volume basis, shall be 1.8 percent for calendar
year 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
``Calendar year:                                         renewable fuel
(in billions of gallons):
2005.........................................................2.6 ....

2006.........................................................2.9 ....

2007.........................................................3.2 ....

2008.........................................................3.5 ....

2009.........................................................3.9 ....

2010.........................................................4.3 ....

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) 5,000,000,000 gallons of renewable fuel; bears to
``(bb) the number of gallons of gasoline sold or introduced
into commerce in calendar year 2012.
``(3) Applicable percentages.--
``(A) Provision of estimate of volumes of gasoline sales.--
Not later than October 31

[[Page S10362]]

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 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
calendar years 2005 through 2012, based on the estimate
provided under subparagraph (A), the Administrator of the
Environmental Protection Agency 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 on
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 (9).
``(4) Cellulosic biomass ethanol.--For the purpose of
paragraph (2), 1 gallon of cellulosic biomass ethanol shall
be considered to be the equivalent of 1.5 gallons of
renewable fuel.
``(5) Credit program.--
``(A) In general.--The regulations promulgated under
paragraph (2)(A) shall provide--
``(i) 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);
``(ii) for the generation of an appropriate amount of
credits for biodiesel; and
``(iii) for the generation of credits by small refineries
in accordance with paragraph (9)(C).
``(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) Duration of credits.--A credit generated under this
paragraph shall be valid to show compliance--
``(i) subject to clause (ii), for the calendar year in
which the credit was generated or the following calendar
year; or
``(ii) if the Administrator promulgates regulations under
paragraph (6), for the calendar year in which the credit was
generated or any of the following 2 calendar years.
``(D) Inability to generate or purchase sufficient
credits.--The regulations promulgated under paragraph (2)(A)
shall include provisions allowing any person that is unable
to generate or purchase sufficient credits to meet the
requirements of paragraph (2) to carry forward a renewable
fuel deficit on condition that the person, in the calendar
year following the year in which the renewable fuel deficit
is created--
``(i) achieves compliance with the renewable fuel
requirement under paragraph (2); and
``(ii) generates or purchases additional renewable fuel
credits to offset the renewable fuel deficit of the previous
year.
``(6) Seasonal variations in renewable fuel use.--
``(A) Study.--For each of calendar years 2005 through 2012,
the Administrator of the Energy Information Administration
shall conduct a study of renewable fuel blending to determine
whether there are excessive seasonal variations in the use of
renewable fuel.
``(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 of the Environmental
Protection Agency shall promulgate regulations to ensure that
35 percent or more of the quantity of renewable fuel
necessary to meet the requirements of paragraph (2) is used
during each of the 2 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
fuel necessary to meet the requirements of paragraph (2) has
been used during 1 of the 2 periods specified in subparagraph
(D) of the calendar year; and
``(ii) a pattern of excessive seasonal variation described
in clause (i) will continue in subsequent calendar years.
``(D) Periods.--The 2 periods referred to in this paragraph
are--
``(i) April through September; and
``(ii) January through March and October through December.
``(E) Exclusion.--Renewable fuel blended or consumed in
calendar year 2005 in a State that has received a waiver
under section 209(b) shall not be included in the study under
subparagraph (A).
``(7) Waivers.--
``(A) In general.--The Administrator, in consultation with
the Secretary of Agriculture and the Secretary of Energy, may
waive the requirements of paragraph (2) in whole or in part
on petition by 1 or more States by reducing the national
quantity of renewable fuel required under paragraph (2)--
``(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 requirements 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.
``(8) Study and waiver for initial year of program.--
``(A) In general.--Not later than 180 days after the date
of enactment of this paragraph, the Secretary of Energy shall
conduct for the Administrator a study assessing whether the
renewable fuel requirement under paragraph (2) will likely
result in significant adverse impacts on consumers in 2005,
on a national, regional, or State basis.
``(B) Required evaluations.--The study shall evaluate
renewable fuel--
``(i) supplies and prices;
``(ii) blendstock supplies; and
``(iii) supply and distribution system capabilities.
``(C) Recommendations by the secretary.--Based on the
results of the study, the Secretary of Energy shall make
specific recommendations to the Administrator concerning
waiver of the requirements of paragraph (2), in whole or in
part, to prevent any adverse impacts described in
subparagraph (A).
``(D) Waiver.--
``(i) In general.--Not later than 270 days after the date
of enactment of this paragraph, the Administrator shall, if
and to the extent recommended by the Secretary of Energy
under subparagraph (C), waive, in whole or in part, the
renewable fuel requirement under paragraph (2) by reducing
the national quantity of renewable fuel required under
paragraph (2) in calendar 2005.
``(ii) No effect on waiver authority.--Clause (i) does not
limit the authority of the Administrator to waive the
requirements of paragraph (2) in whole, or in part, under
paragraph (7).
``(9) Small refineries.--
``(A) Temporary exemption.--
``(i) In general.--The requirements of paragraph (2) shall
not apply to small refineries until calendar year 2011.
``(ii) Extension of exemption.--

``(I) Study by secretary of energy.--Not later than
December 31, 2007, the Secretary of Energy shall conduct for
the Administrator a study to determine whether compliance
with the requirements of paragraph (2) would impose a
disproportionate economic hardship on small refineries.
``(II) Extension of exemption.--In the case of a small
refinery that the Secretary of Energy determines under
subclause (I) would be subject to a disproportionate economic
hardship if required to comply with paragraph (2), the
Administrator shall extend the exemption under clause (i) for
the small refinery for a period of not less than 2 additional
years.

``(B) Petitions based on disproportionate economic
hardship.--
``(i) Extension of exemption.--A small refinery may at any
time petition the Administrator for an extension of the
exemption under subparagraph (A) for the reason of
disproportionate economic hardship.
``(ii) Evaluation of petitions.--In evaluating a petition
under clause (i), the Administrator, in consultation with the
Secretary of Energy, shall consider the findings of the study
under subparagraph (A)(ii) and other economic factors.
``(iii) 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 date of receipt of the petition.
``(C) Credit program.--If a small refinery notifies the
Administrator that the small refinery waives the exemption
under subparagraph (A), the regulations promulgated under
paragraph (2)(A) shall provide for the generation of credits
by the small refinery under paragraph (5) beginning in the
calendar year following the date of notification.
``(D) Opt-in for small refineries.--A small refinery shall
be subject to the requirements of paragraph (2) if the small
refinery notifies the Administrator that the small refinery
waives the exemption under subparagraph (A).

[[Page S10363]]

``(10) Ethanol market concentration analysis.--
``(A) Analysis.--
``(i) In general.--Not later than 180 days after the date
of enactment of this paragraph, 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).
``(p) Renewable Fuel Safe Harbor.--
``(1) In general.--
``(A) Safe harbor.--Notwithstanding any other provision of
Federal or State law, no renewable fuel (as defined in
subsection (o)(1)) used or intended to be used as a motor
vehicle fuel, nor any motor vehicle fuel containing renewable
fuel, shall be deemed to be defective in design or
manufacture by reason of the fact that the fuel is, or
contains, renewable fuel, if--
``(i) the fuel does not violate a control or prohibition
imposed by the Administrator under this section; and
``(ii) the manufacturer of the fuel is in compliance with
all requests for information under subsection (b).
``(B) Safe harbor not applicable.--In any case in which
subparagraph (A) does not apply to a quantity of fuel, the
existence of a design defect or manufacturing defect with
respect to the fuel shall be determined under otherwise
applicable law.
``(2) Exception.--This subsection does not apply to ethers.
``(3) Applicability.--This subsection applies with respect
to all claims filed on or after the date of enactment of this
subsection.''.
(b) Penalties and Enforcement.--Section 211(d) of the Clean
Air Act (42 U.S.C. 7545(d)) is amended--
(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)''; and
(2) in the first sentence of paragraph (2), by striking
``and (n)'' each place it appears and inserting ``(n), and
(o)''.
(c) Exclusion From Ethanol Waiver.--Section 211(h) of the
Clean Air Act (42 U.S.C. 7545(h)) is amended--
(1) by redesignating paragraph (5) as paragraph (6); and
(2) by inserting after paragraph (4) the following:
``(5) Exclusion from ethanol waiver.--
``(A) Promulgation of regulations.--Upon notification,
accompanied by supporting documentation, from the Governor of
a State that the Reid vapor pressure limitation established
by paragraph (4) will increase emissions that contribute to
air pollution in any area in the State, the Administrator
shall, by regulation, apply, in lieu of the Reid vapor
pressure limitation established by paragraph (4), the Reid
vapor pressure limitation established by paragraph (1) to all
fuel blends containing gasoline and 10 percent denatured
anhydrous ethanol that are sold, offered for sale, dispensed,
supplied, offered for supply, transported, or introduced into
commerce in the area during the high ozone season.
``(B) Deadline for promulgation.--The Administrator shall
promulgate regulations under subparagraph (A) not later than
90 days after the date of receipt of a notification from a
Governor under that subparagraph.
``(C) Effective date.--
``(i) In general.--With respect to an area in a State for
which the Governor submits a notification under subparagraph
(A), the regulations under that subparagraph shall take
effect on the later of--

``(I) the first day of the first high ozone season for the
area that begins after the date of receipt of the
notification; or
``(II) 1 year after the date of receipt of the
notification.

``(ii) Extension of effective date based on determination
of insufficient supply.--

``(I) In general.--If, after receipt of a notification with
respect to an area from a Governor of a State under
subparagraph (A), the Administrator determines, on the
Administrator's own motion or on petition of any person and
after consultation with the Secretary of Energy, that the
promulgation of regulations described in subparagraph (A)
would result in an insufficient supply of gasoline in the
State, the Administrator, by regulation--

``(aa) shall extend the effective date of the regulations
under clause (i) with respect to the area for not more than 1
year; and
``(bb) may renew the extension under item (aa) for 2
additional periods, each of which shall not exceed 1 year.

``(II) Deadline for action on petitions.--The Administrator
shall act on any petition submitted under subclause (I) not
later than 180 days after the date of receipt of the
petition.''.

SEC. 535. RENEWABLE FUEL.

(a) In General.--The Clean Air Act is amended by inserting
after section 211 (42 U.S.C. 7411) the following:

``SEC. 212. RENEWABLE FUEL.

``(a) Definitions.--In this section:
``(1) Municipal solid waste.--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).
``(2) RFG state.--The term `RFG State' means a State in
which is located 1 or more covered areas (as defined in
section 211(k)(10)(D)).
``(3) Secretary.--The term `Secretary' means the Secretary
of Energy.
``(b) Survey of Renewable Fuel Market.--
``(1) Survey and report.--Not later than December 1, 2006,
and annually thereafter, the Administrator 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.--
``(A) In general.--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.
``(B) Reliance on existing requirements.--To avoid
duplicative requirements, in carrying out subparagraph (A),
the Administrator shall rely, to the maximum extent
practicable, on reporting and recordkeeping requirements in
effect on the date of enactment of this section.
``(3) Confidentiality.--Activities carried out under this
subsection shall be conducted in a manner designed to protect
confidentiality of individual responses.
``(c) Commercial Byproducts From Municipal Solid Waste Loan
Guarantee Program.--
``(1) Establishment of program.--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 into fuel
ethanol and other commercial byproducts.
``(2) Requirements.--The Secretary may provide a loan
guarantee under paragraph (1) to an applicant 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.
``(4) Criteria.--In selecting recipients of loan guarantees
from among applicants, the Secretary shall give preference to
proposals that--
``(A) meet all applicable 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 limited availability of land for waste disposal;
or
``(ii) a high level of demand for fuel ethanol or other
commercial byproducts of the facility.
``(5) Maturity.--A loan guaranteed under paragraph (1)
shall have a maturity of not more than 20 years.
``(6) Terms and conditions.--The loan agreement for a loan
guaranteed under paragraph (1) shall provide that no
provision of the loan agreement may be amended or waived
without the consent of the Secretary.
``(7) Assurance of repayment.--The Secretary shall require
that an applicant for a loan guarantee under paragraph (1)
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.
``(8) Guarantee fee.--The recipient of a loan guarantee
under paragraph (1) 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.
``(9) Full faith and credit.--
``(A) In general.--The full faith and credit the United
States is pledged to the payment of all guarantees made under
this subsection.
``(B) Conclusive evidence.--Any guarantee made by the
Secretary under this subsection shall be conclusive evidence
of the eligibility of the loan for the guarantee with respect
to principal and interest.

[[Page S10364]]

``(C) Validity.--The validity of the guarantee shall be
incontestable in the hands of a holder of the guaranteed
loan.
``(10) Reports.--Until each guaranteed loan under this
subsection has been repaid in full, the Secretary shall
annually submit to Congress a report on the activities of the
Secretary under this subsection.
``(11) Authorization of appropriations.--There are
authorized to be appropriated such sums as are necessary to
carry out this subsection.
``(12) Termination of authority.--The authority of the
Secretary to issue a new loan guarantee under paragraph (1)
terminates on the date that is 10 years after the date of
enactment of this section.
``(d) Authorization of Appropriations for Resource
Center.--There is 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.
``(e) Renewable Fuel Production Research and Development
Grants.--
``(1) In general.--The Administrator 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.
``(4) Authorization of appropriations.--There is authorized
to be appropriated to carry out this subsection $25,000,000
for each of fiscal years 2004 through 2008.
``(f) Cellulosic Biomass Ethanol Conversion Assistance--
``(1) In general.--The Secretary may provide grants to
merchant producers of cellulosic biomass ethanol in the
United States to assist the producers in building eligible
production facilities described in paragraph (2) for the
production of cellulosic biomass 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 feedstocks derived from
agricultural residues or municipal solid waste.
``(3) Authorization of appropriations.--There is authorized
to be appropriated to carry out this subsection--
``(A) $100,000,000 for fiscal year 2004;
``(B) $250,000,000 for fiscal year 2005; and
``(C) $400,000000 for fiscal year 2006.''.
(b) Conforming Amendment.--The table of contents for the
Clean Air Act (42 U.S.C. 7401 prec.) is amended by inserting
after the item relating to section 211 the following:

``212. Renewable fuels.''.

SEC. 536. SURVEY OF RENEWABLE FUELS CONSUMPTION.

Section 205 of the Department of Energy Organization Act
(42 U.S.C. 7135) is amended by adding at the end the
following:
``(m) Survey of Renewable Fuels Consumption.--
``(1) In general.--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 consumption in the
motor vehicle fuels market in the United States monthly, and
in a manner designed to protect the confidentiality of
individual responses.
``(2) Elements of survey.--In conducting the survey, the
Administrator shall collect information retrospectively to
1998, on a national basis and a regional basis, including--
``(A) the quantity of renewable fuels produced;
``(B) the cost of production;
``(C) the cost of blending and marketing;
``(D) the quantity of renewable fuels blended;
``(E) the quantity of renewable fuels imported; and
``(F) market price data.''.

Subtitle F--Federal Reformulated Fuels

SEC. 537. SHORT TITLE.

This subtitle may be cited as the ``Federal Reformulated
Fuels Act of 2003''.

SEC. 538. LEAKING UNDERGROUND STORAGE TANKS.

(a) Use of LUST Funds for Remediation of Contamination From
Ether Fuel Additives.--Section 9003(h) of the Solid Waste
Disposal Act (42 U.S.C. 6991b(h)) is amended--
(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 inserting ``and section 9010'' before ``if''; and
(2) by adding at the end the following:
``(12) Remediation of contamination from ether fuel
additives.--
``(A) In general.--The Administrator and the States may use
funds made available under section 9013(1) to carry out
corrective actions with respect to a release of methyl
tertiary butyl ether or other ether fuel additive that
presents a threat to human health, welfare, or the
environment.
``(B) Applicable authority.--Subparagraph (A) shall be
carried out--
``(i) in accordance with paragraph (2), except that a
release with respect to which a corrective action is carried
out under subparagraph (A) shall not be required to be from
an underground storage tank; and
``(ii) in the case of a State, in accordance with a
cooperative agreement entered into by the Administrator and
the State under paragraph (7).''.
(b) Release Prevention and Compliance.--Subtitle I of the
Solid Waste Disposal Act (42 U.S.C. 6991 et seq.) is amended
by striking section 9010 and inserting the following:

``SEC. 9010. RELEASE PREVENTION AND COMPLIANCE.

``Funds made available under section 9013(2) from the
Leaking Underground Storage Tank Trust Fund may be used for
conducting inspections, or for issuing orders or bringing
actions under this subtitle--
``(1) by a State (pursuant to section 9003(h)(7)) acting
under--
``(A) a program approved under section 9004; or
``(B) State requirements regulating underground storage
tanks that are similar or identical to this subtitle, as
determined by the Administrator; and
``(2) by the Administrator, acting under this subtitle or a
State program approved under section 9004.

``SEC. 9011. AUTHORIZATION OF APPROPRIATIONS.

``In addition to amounts made available under section
2007(f), there are authorized to be appropriated from the
Leaking Underground Storage Tank Trust Fund, notwithstanding
section 9508(c)(1) of the Internal Revenue Code of 1986--
``(1) to carry out section 9003(h)(12), $200,000,000 for
fiscal year 2003, to remain available until expended; and
``(2) to carry out section 9010--
``(A) $50,000,000 for fiscal year 2003; and
``(B) $30,000,000 for each of fiscal years 2004 through
2008.''.
(c) Technical Amendments.--(1) Section 1001 of the Solid
Waste Disposal Act (42 U.S.C. prec. 6901) is amended by
striking the item relating to section 9010 and inserting the
following:

``Sec. 9010. Release prevention and compliance.
``Sec. 9011. Authorization of appropriations.''.
(2) Section 9001(3)(A) of the Solid Waste Disposal Act (42
U.S.C. 6991(3)(A)) is amended by striking ``sustances'' and
inserting ``substances''.
(3) Section 9003(f)(1) of the Solid Waste Disposal Act (42
U.S.C. 6991b(f)(1)) is amended by striking ``subsection (c)
and (d) of this section'' and inserting ``subsections (c) and
(d)''.
(4) Section 9004(a) of the Solid Waste Disposal Act (42
U.S.C. 6991c(a)) is amended in the second sentence by
striking ``referred to'' and all that follows and inserting
``referred to in subparagraph (A) or (B), or both, of section
9001(2).''.
(5) Section 9005 of the Solid Waste Disposal Act (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''.

SEC. 539. RESTRICTIONS ON THE USE OF MTBE.

(a) Findings.--Congress finds that--
(1) since 1979, methyl tertiary butyl ether (referred to in
this section 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 oxygenate
standard, Congress was aware that--
(A) significant use of MTBE could result from the adoption
of that standard; and
(B) the use of MTBE would likely be important to the cost-
effective implementation of that standard;
(4) Congress is aware that gasoline and its component
additives have leaked from storage tanks, with consequences
for water quality;
(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) when leaked or spilled into the environment, MTBE may
cause serious problems of drinking water quality;
(7) in recent years, MTBE has been detected in water
sources throughout the United States;
(8) MTBE can be detected by smell and taste at low
concentrations;

[[Page S10365]]

(9) while small quantities of MTBE can render water
supplies unpalatable, the precise human health effects of
MTBE consumption at low levels are yet unknown as of the date
of enactment of this Act;
(10) in the report entitled ``Achieving Clean Air and Clean
Water: The Report of the Blue Ribbon Panel on Oxygenates in
Gasoline'' and dated September 1999, Congress was urged--
(A) to eliminate the fuel oxygenate standard;
(B) to greatly reduce use of MTBE; and
(C) to maintain the environmental performance of
reformulated gasoline;
(11) Congress has--
(A) reconsidered the relative value of MTBE in gasoline;
and
(B) decided to eliminate use of MTBE as a fuel additive;
(12) the timeline for elimination of use of MTBE as a fuel
additive must be established in a manner that achieves an
appropriate balance among the goals of--
(A) environmental protection;
(B) adequate energy supply; and
(C) reasonable fuel prices; and
(13) 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 (42 U.S.C. 7401 et seq.); and
(B) for the purpose of mitigating any fuel supply problems
that may result from elimination of a widely-used fuel
additive.
(b) Purposes.--The purposes of this section are--
(1) to eliminate use of MTBE as a fuel oxygenate; and
(2) to provide assistance to merchant producers of MTBE in
making the transition from producing MTBE to producing other
fuel additives.
(c) Authority for Water Quality Protection From Fuels.--
Section 211(c) of the Clean Air Act (42 U.S.C. 7545(c)) is
amended--
(1) in paragraph (1)(A)--
(A) by inserting ``fuel or fuel additive or'' after
``Administrator any''; and
(B) by striking ``air pollution which'' and inserting ``air
pollution, or water pollution, that'';
(2) in paragraph (4)(B), by inserting ``or water quality
protection,'' after ``emission control,''; and
(3) by adding at the end the following:
``(5) Restrictions on use of mtbe.--
``(A) In general.--Subject to subparagraph (E), not later
than 4 years after the date of enactment of this paragraph,
the use of methyl tertiary butyl ether in motor vehicle fuel
in any State other than a State described in subparagraph (C)
is prohibited.
``(B) Regulations.--The Administrator shall promulgate
regulations to effect the prohibition in subparagraph (A).
``(C) States that authorize use.--A State described in this
subparagraph is a State that submits to the Administrator a
notice that the State authorizes use of methyl tertiary butyl
ether 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 subparagraph (C).
``(E) Trace quantities.--In carrying out subparagraph (A),
the Administrator may allow trace quantities of methyl
tertiary butyl ether, not to exceed 0.5 percent by volume, to
be present in motor vehicle fuel in cases that the
Administrator determines to be appropriate.
``(6) 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 in the United States to assist
the producers in the conversion of eligible production
facilities described in subparagraph (C) to the production
of--
``(i) iso-octane or alkylates, unless the Administrator, in
consultation with the Secretary of Energy, determines that
transition assistance for the production of iso-octane or
alkylates is inconsistent with the criteria specified in
subparagraph (B); and
``(ii) any other fuel additive that meets the criteria
specified in subparagraph (B).
``(B) Criteria.--The criteria referred to in subparagraph
(A) are that--
``(i) use of the fuel additive is consistent with this
subsection;
``(ii) the Administrator has not determined that the fuel
additive may reasonably be anticipated to endanger public
health or the environment;
``(iii) the fuel additive has been registered and tested,
or is being tested, in accordance with the requirements of
this section; and
``(iv) the fuel additive will contribute to replacing
quantities of motor vehicle fuel rendered unavailable as a
result of paragraph (5).
``(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 methyl tertiary butyl ether for consumption
in nonattainment areas during the period--

``(I) beginning on the date of enactment of this paragraph;
and
``(II) ending on the effective date of the prohibition on
the use of methyl tertiary butyl ether under paragraph (5).

``(D) Authorization of appropriations.--There is authorized
to be appropriated to carry out this paragraph $250,000,000
for each of fiscal years 2004 through 2007.''.
(d) No Effect on Law Concerning State Authority.--The
amendments made by subsection (c) have no effect on the law
in effect on the day before the date of enactment of this Act
concerning the authority of States to limit the use of methyl
tertiary butyl ether in motor vehicle fuel.

SEC. 540. 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--
(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); and
(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); and
(II) by redesignating clause (iii) as clause (ii).

(2) Applicability.--The amendments made by paragraph (1)
apply--
(A) in the case of a State that has received a waiver under
section 209(b) of the Clean Air Act (42 U.S.C. 7543(b)),
beginning on the date of enactment of this Act; and
(B) in the case of any other State, beginning 270 days
after the date of enactment of this 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--
(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,''; and
(2) by adding at the end the following:
``(B) Maintenance of toxic air pollutant emissions
reductions from reformulated gasoline.--
``(i) Definition of padd.--In this subparagraph the term
`PADD' means a Petroleum Administration for Defense District.
``(ii) Regulations concerning emissions of toxic air
pollutants.--Not later than 270 days after the date of
enactment of this subparagraph, the Administrator shall
establish by regulation, for each refinery or importer (other
than a refiner or importer in a State that has received a
waiver under section 209(b) with respect to gasoline produced
for use in that State), standards for toxic air pollutants
from use of the reformulated gasoline produced or distributed
by the refiner or importer that maintain the reduction of the
average annual aggregate emissions of toxic air pollutants
for reformulated gasoline produced or distributed by the
refiner or importer during calendar years 1999 and 2000 (as
determined on the basis of data collected by the
Administrator with respect to the refiner or importer).
``(iii) Standards applicable to specific refineries or
importers.--

``(I) Applicability of standards.--For any calendar year,
the standards applicable to a refiner or importer under
clause (ii) shall apply to the quantity of gasoline produced
or distributed by the refiner 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 refiner 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
refiner or importer that is in excess of the quantity subject
to subclause (I) shall be subject to standards for emissions
of 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

[[Page S10366]]

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 refiner
or importer shall meet the standards applicable under clause
(iii)(I) beginning not later than April 1 of the calendar
year following publication of the report under subclause (I)
and in each calendar year thereafter.
``(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) Commingling.--
(1) In general.--Section 211(k) of the Clean Air Act (42
U.S.C. 7545(k)) is amended by adding at the end the
following:
``(11) Commingling.--The regulations under paragraph (1)
shall permit the commingling at a retail station of
reformulated gasoline containing ethanol and reformulated
gasoline that does not contain ethanol if, each time such
commingling occurs--
``(A) the retailer notifies the Administrator before the
commingling, identifying the exact location of the retail
station and the specific tank in which the commingling will
take place; and
``(B) the retailer certifies that the reformulated gasoline
resulting from the commingling will meet all applicable
requirements for reformulated gasoline, including content and
emission performance standards.
(d) 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.
(e) Savings Clause.--
(1) In general.--Nothing in this section or any amendment
made by this section affects or prejudices any legal claim or
action with respect to regulations promulgated by the
Administrator before the date of enactment of this Act
regarding--
(A) emissions of toxic air pollutants from motor vehicles;
or
(B) the adjustment of standards applicable to a specific
refinery or importer made under those regulations.
(2) Adjustment of standards.--
(A) Applicability.--The Administrator may apply any
adjustments to the standards applicable to a refinery or
importer under subparagraph (B)(iii)(I) of section 211(k)(1)
of the Clean Air Act (as added by subsection (b)(2)), except
that--
(i) the Administrator shall revise the adjustments to be
based only on calendar years 1999 and 2000;
(ii) 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 and 2000; and
(iii) in the case of an adjustment based on toxic air
pollutant emissions from reformulated gasoline significantly
below the national annual average emissions of toxic air
pollutants from all reformulated gasoline--

(I) the Administrator may revise the adjustment to take
account of the scope of the prohibition on methyl tertiary
butyl ether imposed by paragraph (5) of section 211(c) of the
Clean Air Act (as added by section 203(c)); and
(II) any such adjustment shall require the refiner or
importer, to the maximum extent practicable, to maintain the
reduction achieved during calendar years 1999 and 2000 in the
average annual aggregate emissions of toxic air pollutants
from reformulated gasoline produced or distributed by the
refiner or importer.

SEC. 541. PUBLIC HEALTH AND ENVIRONMENTAL IMPACTS OF FUELS
AND FUEL ADDITIVES.

Section 211(b) of the Clean Air Act (42 U.S.C. 7545(b)) is
amended--
(1) in paragraph (2)--
(A) by striking ``may also'' and inserting ``shall, on a
regular basis,''; and
(B) by striking subparagraph (A) and inserting the
following:
``(A) to conduct tests to determine potential public health
and environmental effects of the fuel or additive (including
carcinogenic, teratogenic, or mutagenic effects); and''; and
(2) by adding at the end the following:
``(4) Study on certain fuel additives and blendstocks.--
``(A) In general.--Not later than 2 years after the date of
enactment of this paragraph, the Administrator shall--
``(i) conduct a study on the effects on public health
(including the effects on children, pregnant women, minority
or low-income communities, and other sensitive populations),
air quality, and water resources of increased use of, and the
feasibility of using as substitutes for methyl tertiary butyl
ether in gasoline--

``(I) ethyl tertiary butyl ether;
``(II) tertiary amyl methyl ether;
``(III) di-isopropyl ether;
``(IV) tertiary butyl alcohol;
``(V) other ethers and heavy alcohols, as determined by
then Administrator;
``(VI) ethanol;
``(VII) iso-octane; and
``(VIII) alkylates; and

``(ii) conduct a study on the effects on public health
(including the effects on children, pregnant women, minority
or low-income communities, and other sensitive populations),
air quality, and water resources of the adjustment for
ethanol-blended reformulated gasoline to the volatile organic
compounds performance requirements that are applicable under
paragraphs (1) and (3) of section 211(k); and
``(iii) submit to the Committee on Environment and Public
Works of the Senate and the Committee on Energy and Commerce
of the House of Representatives a report describing the
results of the studies under clauses (i) and (ii).
``(B) Contracts for study.--In carrying out this paragraph,
the Administrator may enter into 1 or more contracts with
nongovernmental entities such as--
``(i) the national energy laboratories; and
``(ii) institutions of higher education (as defined in
section 101 of the Higher Education Act of 1965 (20 U.S.C.
1001)).''.

SEC. 542. ANALYSES OF MOTOR VEHICLE FUEL CHANGES.

Section 211 of the Clean Air Act (42 U.S.C. 7545) (as
amended by section 5__1(a)) is amended by inserting after
subsection (p) the following:
``(q) 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 paragraph, 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 the Reliable Fuels
Act.
``(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 2006.''.

SEC. 543. ADDITIONAL OPT-IN AREAS UNDER REFORMULATED GASOLINE
PROGRAM.

Section 211(k)(6) of the Clean Air Act (42 U.S.C.
7545(k)(6)) is amended--
(1) by striking ``(6) Opt-in areas.--(A) Upon'' and
inserting the following:
``(6) Opt-in areas.--
``(A) Classified areas.--
``(i) In general.--Upon'';
(2) in subparagraph (B), by striking ``(B) If'' and
inserting the following:
``(ii) Effect of insufficient domestic capacity to produce
reformulated gasoline.--If'';
(3) in subparagraph (A)(ii) (as redesignated by paragraph
(2))--
(A) in the first sentence, by striking ``subparagraph (A)''
and inserting ``clause (i)''; and
(B) in the second sentence, by striking ``this paragraph''
and inserting ``this subparagraph''; and
(4) by adding at the end the following:
``(B) Ozone transport region.--
``(i) Application of prohibition.--

``(I) In general.--On application of the Governor of a
State in the ozone transport region established by section
184(a), the Administrator, not later than 180 days after the
date of receipt of the application, shall apply the
prohibition specified in paragraph (5) to any area in the
State (other than an area classified as a marginal, moderate,
serious, or severe ozone nonattainment area under subpart 2
of part D of title I) unless the Administrator determines
under clause (iii) that there is insufficient capacity to
supply reformulated gasoline.
``(II) Publication of application.--As soon as practicable
after the date of receipt of an application under subclause
(I), the Administrator shall publish the application in the
Federal Register.

``(ii) Period of applicability.--Under clause (i), the
prohibition specified in paragraph (5) shall apply in a
State--

``(I) commencing as soon as practicable but not later than
2 years after the date of approval by the Administrator of
the application of the Governor of the State; and
``(II) ending not earlier than 4 years after the
commencement date determined under subclause (I).

``(iii) Extension of commencement date based on
insufficient capacity.--

``(I) In general.--If, after receipt of an application from
a Governor of a State under

[[Page S10367]]

clause (i), the Administrator determines, on the
Administrator's own motion or on petition of any person,
after consultation with the Secretary of Energy, that there
is insufficient capacity to supply reformulated gasoline, the
Administrator, by regulation--

``(aa) shall extend the commencement date with respect to
the State under clause (ii)(I) for not more than 1 year; and
``(bb) may renew the extension under item (aa) for 2
additional periods, each of which shall not exceed 1 year.

``(II) Deadline for action on petitions.--The Administrator
shall act on any petition submitted under subclause (I) not
later than 180 days after the date of receipt of the
petition.''.

SEC. 544. FEDERAL ENFORCEMENT OF STATE FUELS REQUIREMENTS.

Section 211(c)(4)(C) of the Clean Air Act (42 U.S.C.
7545(c)(4)(C)) is amended--
(1) by striking ``(C) A State'' and inserting the
following:
``(C) Authority of state to control fuels and fuel
additives for reasons of necessity.--
``(i) In general.--A State''; and
(2) by adding at the end the following:
``(ii) Enforcement by the administrator.--In any case in
which a State prescribes and enforces a control or
prohibition under clause (i), the Administrator, at the
request of the State, shall enforce the control or
prohibition as if the control or prohibition had been adopted
under the other provisions of this section.''.

SEC. 545. FUEL SYSTEM REQUIREMENTS HARMONIZATION STUDY.

(a) Study.--
(1) In general.--The Administrator of the Environmental
Protection Agency 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 the consumer;
(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 (including the protection of children,
pregnant women, minority or low-income communities, and other
sensitive populations);
(C) the effect of Federal, State, and local motor vehicle
fuel regulations, including multiple motor vehicle fuel
requirements, on--
(i) domestic refiners;
(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, refiners, and fuel handling
facilities;
(E) the feasibility of developing national or regional
motor vehicle fuel slates for the 48 contiguous States that,
while protecting and improving air quality at the national,
regional, and local levels, 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; and
(F) the feasibility of providing incentives, and the need
for the development of national standards necessary, to
promote cleaner burning motor vehicle fuel.
(b) Report.--
(1) In general.--Not later than June 1, 2007, the
Administrator of the Environmental Protection Agency 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 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, the
Administrator of the Environmental Protection Agency and the
Secretary of Energy shall consult with--
(A) the Governors of the States;
(B) automobile manufacturers;
(C) State and local air pollution control regulators;
(D) public health experts;
(E) motor vehicle fuel producers and distributors; and
(F) the public.

TITLE VI--ENERGY EFFICIENCY

Subtitle A--Federal Programs

SEC. 601. ENERGY MANAGEMENT REQUIREMENTS.

(a) Energy Reduction Goals.--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 2000, 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.''.....

(b) Effective Date.--The energy reduction goals and
baseline established in paragraph (1) of section 543(a) of
the National Energy Conservation Policy Act, as amended by
subsection (a) of this section, supersede all previous goals
and baselines under such paragraph, and related reporting
requirements.
(c) Review of Energy Performance Requirements.--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, 2011, 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
2022.''.
(d) 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.''.
(e) 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''; and
(2) by striking ``a finding of impracticability'' and
inserting ``the exclusion''.
(f) 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).''.
(g) Retention of Energy 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 Savings.--An agency may retain
any funds appropriated to that agency for energy
expenditures, at buildings subject to the requirements of
section 543(a) and (b), that are not made because of energy
savings. Except as otherwise provided by law, such funds may
be used only for energy efficiency or unconventional and
renewable energy resources projects.''.
(h) 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''.
(i) 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).''.

[[Page S10368]]

SEC. 602. 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, 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 one 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.--No 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. 603. 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 2000 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, if 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
most recent version of 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.
``(B) Additional revisions.--Not later than 1 year after
the date of approval of amendments to ASHRAE Standard 90.1 or
the 2000 International Energy Conservation Code, 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. 604. ENERGY SAVINGS PERFORMANCE CONTRACTS.

(a) Permanent Extension.--Section 801(c) of the National
Energy Conservation Policy Act (42 U.S.C. 8287(c)) is
repealed.
(b) Replacement Facilities.--Section 801(a) of the National
Energy Conservation Policy Act (42 U.S.C. 8287(a)) is amended
by adding at the end the following new paragraph:
``(3)(A) In the case of an energy savings contract or
energy savings performance contract providing for energy
savings through the construction and operation of one or more
buildings or facilities to replace one or more existing
buildings or facilities, benefits ancillary to the purpose of
such contract under paragraph (1) may include savings
resulting from reduced life-cycle costs of operation and
maintenance at such replacement buildings or facilities when
compared with costs of operation and maintenance at the
buildings or facilities being replaced, established through a
methodology set forth in the contract.
``(B) Notwithstanding paragraph (2)(B), aggregate annual
payments by an agency under an energy savings contract or
energy savings performance contract referred to in
subparagraph (A) may take into account (through the
procedures developed pursuant to this section) savings
resulting from reduced costs of operation and maintenance as
described in that subparagraph.''.
(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) a reduction in the cost of energy or water, 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--
``(i) the lease or purchase of operating equipment,
improvements, altered operation and maintenance, or technical
services;
``(ii) the increased efficient use of existing energy
sources by co-generation or heat recovery, excluding any co-
generation process for other than a federally owned building
or buildings or other federally owned facilities; or
``(iii) the increased efficient use of existing water
sources; or
``(B) in the case of a replacement building or facility
described in section 801(a)(3), a reduction in the cost of
energy, from a base cost established through a methodology
set forth in the contract, that would otherwise be utilized
in one or more existing federally owned buildings or other
federally owned facilities by reason of the construction and
operation of the replacement building or facility.''.
(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 which provides
for--
``(A) 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 one or
more locations; or
``(B) energy savings through the construction and operation
of one or more buildings or facilities to replace one or more
existing buildings or facilities. Such contracts shall, with
respect to an agency facility that is a public building as
such term is defined in section 13(1) of the Public Buildings
Act of 1959 (40 U.S.C. 612(1)), be in compliance with the
prospectus requirements and procedures of section 7 of the
Public Buildings Act of 1959 (40 U.S.C. 606).''.
(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(4) (42 U.S.C. 8259(4)); or
``(B) a water conservation measure that improves water
efficiency, 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) Pilot Program for Non-building Applications.--
(1) The Secretary of Defense, and the heads of other
interested Federal agencies, are authorized to enter into up
to 10 energy savings performance contracts 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 non-building applications, provided that the
aggregate payments to be made by the Federal government under
such contracts shall not exceed $100,000,000.
(2) The Secretary of Energy, in consultation with the
Secretary of Defense and the heads of other interested
Federal agencies, shall select projects that demonstrate the
applicability and benefits of energy savings performance
contracting to a range of non-building applications.
(3) For the purposes of this subsection:
(A) The term ``non-building application'' means--

[[Page S10369]]

(i) any class of vehicles, devices, or equipment that is
transportable under its own power by land, sea, or air that
consumes energy from any fuel source for the purpose of such
transportability, or to maintain a controlled environment
within such vehicle, device, or equipment; or
(ii) any Federally owned equipment used to generate
electricity or transport water.
(B) 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.
(4) Not later than 3 years after the date of enactment of
this section, the Secretary of Energy shall report to the
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.).
(5) Section 546(c)(3) of the National Energy Conservation
Policy Act (42 U.S.C. 8256) is amended by striking the word
``facilities'', and inserting the words ``facilities,
equipment and vehicles'', in lieu thereof.
(g) Review.--Within 180 days after the date of the
enactment of this section, 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 the
Committee on Energy and Commerce of the House of
Representatives and the Committee on Energy and Natural
Resources of the Senate, 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.

SEC. 605. PROCUREMENT OF ENERGY EFFICIENT PRODUCTS.

Part 3 of title V of the National Energy Conservation
Policy Act is amended by adding at the end the following:

``SEC. 552. FEDERAL PROCUREMENT OF ENERGY EFFICIENT PRODUCTS.

``(a) Definitions.--In this section:
``(1) The term `Energy Star product' means a product that
is rated for energy efficiency under an Energy Star program.
``(2) The term `Energy Star program' means the program
established by section 324A of the Energy Policy and
Conservation Act.
``(3) 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) 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 an Energy Star product or 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) Designation of Electric Motors.--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 within 120 days after the date of the enactment of
this section, after considering the recommendations of
associated electric motor manufacturers and energy efficiency
groups.
``(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 in section
1(b) of the National Energy Conservation Policy Act (42
U.S.C. 8201 note) is amended by inserting after the item
relating to the end of the items relating to part 3 of title
V the following:

``Sec. 552. Federal procurement of energy efficient products.''.

SEC. 606. CONGRESSIONAL BUILDING EFFICIENCY.

(a) In General.--Part 3 of title V of the National Energy
Conservation Policy Act is further amended by adding at the
end:

``SEC. 553. CONGRESSIONAL BUILDING EFFICIENCY.

``(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 the
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 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 in
section 1(b) 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. 553. Energy and water savings measures in congressional
buildings.''.
(c) Repeal.--Section 310 of the Legislative Branch
Appropriations Act, 1999 (40 U.S.C. 166i), 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.--There are authorized to be appropriated
to the Architect of the Capitol to carry out subsection (d),
not more than $2,000,000 for fiscal year 2004.

SEC. 607. 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:

``SEC. 6005. INCREASED USE OF RECOVERED MINERAL COMPONENT IN
FEDERALLY FUNDED PROJECTS INVOLVING PROCUREMENT
OF CEMENT OR CONCRETE.

``(a) Definitions.--In this section:
``(1) Agency head.--The term `agency head' means--

[[Page S10370]]

``(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
fuller 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
the Committee on Appropriations and Committee on Environment
and Public Works of the Senate and the Committee on
Appropriations, Committee on Energy and Commerce, and
Committee on Transportation and Infrastructure of the House
of Representatives 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, within 1 year of the release of the report
in accordance with subsection (c)(3), take additional actions
authorized under this section 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.''.

SEC. 608. UTILITY ENERGY SERVICE CONTRACTS.

Section 546(c)(1) of the National Energy Conservation
Policy Act (42 U.S.C. 8256(c)) is amended to read as follows:
``(1) Agencies are authorized and encouraged to participate
in programs, including utility energy services contracts,
conducted by gas, water and electric utilities and generally
available to customers of such utilities, for the purposes of
increased energy efficiency, water conservation or the
management of electricity demand.''.

SEC. 609. STUDY OF ENERGY EFFICIENCY STANDARDS.

The Secretary of Energy shall contract with the National
Academy of Sciences for a study, to be completed within one
year of enactment of this section, 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 of the Academy to the
Congress.

Subtitle B--State and Local Programs

SEC. 611. 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.), which is recognized
as eligible for the special 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 fiscal year 2004 and each
fiscal year thereafter through fiscal year 2006.

SEC. 612. 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 chapter 8 of the 2000 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 such sums as may be necessary for each of
fiscal years 2003 through 2012. Not more than 30 percent of
appropriated funds shall be used for administration.

SEC. 613. ENERGY EFFICIENT APPLIANCE REBATE PROGRAMS.

(a) Definitions.--In this section:
(1) The term ``eligible State'' means a State that meets
the requirements of subsection (b).

[[Page S10371]]

(2) The term ``Energy Star program'' means the program
established by section 324A of the Energy Policy and
Conservation Act.
(3) The term ``residential Energy Star product'' means a
product for a residence that is rated for energy efficiency
under the Energy Star program.
(4) 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).
(5) 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) 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) 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 carry out this section $50,000,000 for
each of the fiscal years 2004 through 2008.

Subtitle C--Consumer Products

SEC. 621. 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 subparagraph (30)(S), by striking the period and
adding at the end the following: ``but does not include any
lamps specifically designed to be used for special purpose
applications, and also does not include any lamp not
described in subparagraph (D) that is excluded by the
Secretary, by rule.''; and
(2) by adding at the end the following:
``(32) The term `battery charger' means a device that
charges batteries for consumer products.
``(33) The term `commercial refrigerator, freezer and
refrigerator-freezer' means a refrigerator, freezer or
refrigerator-freezer that--
``(A) is not a consumer product regulated under this Act;
and
``(B) incorporates 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
`low-voltage dry-type transformer' means a transformer that--
``(i) has an input voltage of 600 volts or less;
``(ii) is air-cooled;
``(iii) does not use oil as a coolant; and
``(iv) is rated for operation at a frequency of 60 Hertz.
``(B) The term `low-voltage dry-type 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 testing transformers, 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 the transformer is
designed for a special application and the application of
standards to the transformer would not result in significant
energy savings.
``(37)(A) Except as provided in subsection (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 15 percent more than
the lowest voltage tap;
``(ii) transformers, such as those commonly known as drive
transformers, rectifier transformers, autotransformers,
Uninterruptible Power System transformers, impedance
transformers, harmonic transformers, regulating transformers,
sealed and nonventilating transformers, machine tool
transformers, welding transformers, grounding transformers,
or testing transformers, 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 the transformer is
designed for a special application, is unlikely to be used in
general purpose applications, and the application of
standards to the transformer would not result in significant
energy savings.
``(38) The term `standby mode' means the lowest amount of
electric power used by a household appliance when not
performing its active functions, 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 `transformer' means a device consisting of
two or more coils of insulated wire that transfers
alternating current by electromagnetic induction from one
coil to another to change the original voltage or current
value.
``(41) 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.
``(42) 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.''
(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 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.
``(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 within 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

[[Page S10372]]

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) Standby Mode 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 of standby mode and test procedures for
the standby mode power use of battery chargers and external
power supplies. In establishing these test procedures, the
Secretary shall consider, among other factors, existing test
procedures used for measuring energy consumption in standby
mode 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 standby mode
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
promulgated 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 standby energy
use that--
``(i) meets the criteria 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) Designation of additional covered products.--
``(A) Not later than 180 days after the date of enactment
of this subsection, the Secretary shall publish for public
comment and public hearing a notice to determine whether any
non-covered products should be designated as covered products
for the purpose of instituting a rulemaking under this
section to determine whether an energy conservation standard
restricting standby mode energy consumption, should be
promulgated; except that any restriction on standby mode
energy consumption shall be limited to major sources of such
consumption.
``(B) In making the determinations pursuant to subparagraph
(A) of whether to designate new covered products and
institute rulemakings, the Secretary shall, among other
relevant factors and in addition to the criteria in section
322(b), consider--
``(i) standby mode power consumption compared to overall
product energy consumption; and
``(ii) the priority and energy savings potential of
standards which may be promulgated under this subsection
compared to other required rulemakings under this section and
the available resources of the Department to conduct such
rulemakings.
``(C) Not later than 1 year after the date of enactment of
this subsection, the Secretary shall issue a determination of
any new covered products for which he intends to institute
rulemakings on standby mode pursuant to this section and he
shall state the dates by which he intends to initiate those
rulemakings.
``(3) 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 which 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, the criteria for
non-covered products in subparagraph (B) of paragraph (2) of
this subsection.
``(4) Rulemaking.--
``(A) Any rulemaking instituted under this subsection or
for covered products under this section which restricts
standby mode power consumption shall be subject to the
criteria and procedures for issuing energy conservation
standards set forth in this section and the criteria set
forth in subparagraph (B) of paragraph (2) of this
subsection.
``(B) No standard can be proposed for new covered products
or covered products in a standby mode unless the Secretary
has promulgated applicable test procedures for each product
pursuant to section 323.
``(C) The provisions of section 327 shall apply to new
covered products which are subject to the rulemakings for
standby mode after a final rule has been issued.
``(5) Effective date.--Any standard promulgated under this
subsection shall be applicable to products manufactured or
imported 3 years after the date of promulgation.
``(6) 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, which are designed to reduce standby
mode energy use.
``(v) Suspended Ceiling Fans, Vending Machines, and
Commercial Refrigerators, Freezers and Refrigerator-
Freezers.--The Secretary shall within 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 (l) and (m). 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) Distribution Transformers.--The efficiency of low
voltage dry-type 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 paragraph, 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 three years after the date of enactment of
the Energy Policy Act of 2003 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 CFLs, 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 CFLs. The Secretary may, by rule,
revise these requirements or establish other requirements
considering energy savings, cost effectiveness, and consumer
satisfaction.
``(cc) Effective Date.--The provisions of section 327 shall
apply--
``(1) to products for which standards are to be set
pursuant to subsection (v) of this section 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 set pursuant to subsection (v) for that product
takes effect; and
``(2) to products for which standards are set in
subsections (w) through (bb) of this section on the date of
enactment of the Energy Policy Act of 2003, except that any
state or local standards prescribed or enacted prior to the
date of enactment of the Energy Policy Act of 2003 shall not
be preempted until the standards set in subsections (w)
through (bb) take effect.''.

SEC. 622. ENERGY LABELING.

(a) Rulemaking on Effectiveness of Consumer Product
Labeling.--Paragraph (2) of section 324(a) 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 within 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

[[Page S10373]]

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 Act.''.

SEC. 623. 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
two 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 the comments of interested parties in
establishing a new Energy Star product category,
specifications, or criteria, or in revising a product
category, and upon adoption of a new or revised product
category, specifications, or criteria, publish a notice of
any changes in product categories, specifications or criteria
along with an explanation of such changes, and, where
appropriate, responses to comments submitted by interested
parties; and
``(5) unless waived or reduced by mutual agreement between
the Administrator, the Secretary, and the affected parties,
provide not less than 12 months lead time prior to
implementation of changes in product categories,
specifications, or criteria as may be adopted pursuant to
this section.''.
(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. 624. 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,
within 180 days of 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 business 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 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.''.

Subtitle D--Public Housing

SEC. 631. 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. 632. 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. 633. 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 and indented paragraph
beginning after subparagraph (B)(iii) (relating to solar
energy systems)--
(1) by inserting ``or paragraph (10)'' before the first
comma; and
(2) 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 second 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) of the
National Housing Act (12 U.S.C. 1715k(d)(3)(B)(iii)) is
amended 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.--The proviso at the
end of section 231(c)(2) of the National Housing Act (12
U.S.C. 1715v(c)(2)) 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. 634. 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
generations, advanced energy savings technologies, including
renewable energy generation, and other such retrofits.''.

SEC. 635. 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 Multi-family 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.''.

[[Page S10374]]

SEC. 636. 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. 637. 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 Policy and
Conservation Act (as amended by this Act), unless the
purchase of energy-efficient appliances is not cost-effective
to the agency.

SEC. 638. 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,
2003'';
(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
``2000 International Energy Conservation Code'';
(2) in subsection (b)--
(A) by striking ``1 year after the date of the enactment of
the Energy Policy Act of 1992'' and inserting ``September 30,
2003''; and
(B) by striking ``CABO'' and all that follows through
``1989'' and inserting ``the 2000 International Energy
Conservation Code''; and
(3) in subsection (c)--
(A) in the heading, by striking ``MODEL ENERGY CODE'' and
inserting ``INTERNATIONAL ENERGY CONSERVATION CODE''; and
(B) by striking ``CABO'' and all that follows through
``1989'' and inserting ``the 2000 International Energy
Conservation Code''.

SEC. 639. 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
one 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 two
years thereafter on progress in implementing the strategy.

TITLE VII--TRANSPORTATION FUELS

Subtitle A--Alternative Fuel 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 where--
``(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
the 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. FUEL USE CREDITS.

(a) In General.--Section 312 of the Energy Policy Act of
1992 (42 U.S.C. 13220) is amended to read as follows:

``SEC. 312. FUEL USE CREDITS.

``(a) Allocation.--
``(1) The Secretary shall allocate one credit under this
section to a fleet or covered person for each qualifying
volume of alternative fuel or biodiesel purchased for use in
an on-road motor vehicle operated by the fleet that weighs
more than 8,500 pounds gross vehicle weight rating.
``(2) No credits shall be allocated under this section for
purchase of an alternative fuel or biodiesel that is required
by Federal or State law.
``(3) A fleet or covered person seeking a credit under this
section shall provide written documentation to the Secretary
supporting the allocation of a credit to such fleet or
covered person under this section.
``(b) Use.--At the request of a fleet or covered person
allocated a credit under subsection (a), the Secretary shall,
for the year in which the purchase of a qualifying volume is
made, treat that purchase as the acquisition of one
alternative fueled vehicle the fleet or covered person is
required to acquire under this title, title IV, or title V.
``(c) Treatment.--A credit provided to a fleet or covered
person under this section shall be considered a credit under
section 508.
``(d) Issuance of Rule.--Not later than 6 months after the
date of enactment of this section, the Secretary shall issue
a rule establishing procedures for the implementation of this
section.
``(e) Definitions.--For the purposes of this section
``(1) the term `biodiesel' means a diesel fuel substitute
produced from non-petroleum 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; and
``(2) the term `qualifying volume' means--
``(A) in the case of biodiesel, when used as a component of
fuel containing at least 20 percent biodiesel by volume, 450
gallons, or if the Secretary determines by rule that the
average annual alternative fuel use in light duty vehicles by
fleets and covered persons exceeds 450 gallons or gallon
equivalents, the amount of such average annual alternative
fuel use; or
``(B) in the case of an alternative fuel, the amount of
such fuel determined by the Secretary to have an equivalent
energy content to the amount of biodiesel defined as a
qualifying volume pursuant to subparagraph (A).''.
(b) Table of Contents Amendment.--The table of contents of
the Energy Policy Act of 1992 is amended by adding at the end
of the items relating to title III the following new item:

``Sec. 312. Fuel use credits.''

SEC. 703. NEIGHBORHOOD ELECTRIC VEHICLES.

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) by striking ``and'' at the end of paragraph (13);
(3) by striking the period at the end of paragraph (14) and
inserting ``; and''; and
(4) by adding at the end the following:
``(15) the term `neighborhood electric vehicle' means a
motor vehicle--
``(A) which meets the definition of a low-speed vehicle, as
such term is defined in part 571 of title 49, Code of Federal
Regulations;
``(B) which meets the definition of a zero-emission
vehicle, as such term is defined in section 86.1702-99 of
title 40, Code of Federal Regulations;
``(C) which meets the requirements of Federal Motor Vehicle
Safety Standard No. 500; and
``(D) which has a top speed of not greater than 25 miles
per hour.''.

SEC. 704. 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) 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.
``(B) The term `heavy duty dedicated vehicle' means a
dedicated vehicle that has a gross vehicle weight rating of
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. 705. ALTERNATIVE FUEL INFRASTRUCTURE.

Section 508 of the Energy Policy Act of 1992 (42 U.S.C.
13258) is further amended by adding at the end the following:
``(f) Credit for Investment in Alternative Fuel
Infrastructure.--
``(1) Definitions.--In this subsection, the term
`qualifying infrastructure' means--
``(A) equipment required to refuel or recharge alternative
fueled vehicles;

[[Page S10375]]

``(B) facilities or equipment required to maintain, repair,
or operate alternative fueled vehicles;
``(C) such other activities 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 purposes 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.''.

SEC. 706. 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. 707. REVIEW OF ALTERNATIVE FUEL PROGRAMS.

(a) In General.--Not later than 1 year after the date of
enactment of this section, the Secretary 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 the development of alternative fueled vehicle
technology, its availability in the market, and the cost of
light duty motor vehicles that are alternative fueled
vehicles.
(b) Topics.--As part of such study, 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 amount, by type, of alternative fuel actually used
in alternative fueled vehicles acquired by fleets or covered
persons;
(3) the amount of petroleum displaced by the use of
alternative fuels in alternative fueled vehicles acquired by
fleets or covered persons;
(4) the cost of compliance with vehicle acquisition
requirements by fleets or covered persons; and
(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.
(c) Report.--Upon completion of the study, the Secretary
shall submit to the Congress a report that describes the
results of the study conducted under this section 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.). Such study
shall be updated on a regular basis as deemed necessary by
the Secretary.

SEC. 708. HIGH OCCUPANCY VEHICLE EXCEPTION.

Notwithstanding section 102(a)(1) 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 such
vehicle is a dedicated vehicle (as defined in section 301 of
the Energy Policy Act of 1992 (42 U.S.C. 13211)).

SEC. 709. ALTERNATIVE COMPLIANCE AND FLEXIBILITY.

(a) Alternative Compliance.--Title V of the Energy Policy
Act of 1992 is amended by adding at the end the following:

``SEC. 515. ALTERNATIVE COMPLIANCE.

``(a) Application for Waiver.--Any covered person subject
to the requirements of section 501 and any State subject to
the requirement of 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 of
petroleum that would result from compliance with section 501
or 507(o); and
``(2) is in compliance with all applicable vehicle emission
standards established by the Administrator under the Clean
Air Act.
``(c) Revocation of Waiver.--The Secretary shall revoke any
waiver granted under this section if the State or covered
person fails to comply with the requirements of subsection
(b).''.
(b) Credit for Hybrid Vehicles, Dedicated Alternative Fuel
Vehicles, and Infrastructure.--Section 507 of the Energy
Policy Act of 1992 (42 U.S.C. 13258) (as amended by section
705) is amended by adding at the end the following:
``(r) Credits for New Qualified Hybrid Motor Vehicles.--
``(1) Definitions.--In this subsection:
``(A) 2000 model year city fuel efficiency.--The term `2000
model year city fuel efficiency', with respect to a motor
vehicle, means fuel efficiency determined in accordance with
the following tables:
``(i) In the case of a passenger automobile:

The 2000 model year city
``If vehicle inertia weight class is:               fuel efficiency is:
1,500 or 43.7 mpg
38.3 mpg
34.1 mpg
30.7 mpg
27.9 mpg
25.6 mpg
22.0 mpg
19.3 mpg
17.2 mpg
15.5 mpg
14.1 mpg
12.9 mpg
11.9 mpg
7,000 to 11.1 mpg.
``(ii) In the case of a light truck:

The 2000 model year city
``If vehicle inertia weight class is:               fuel efficiency is:
1,500 or 37.6 mpg
33.7 mpg
30.6 mpg
28.0 mpg
25.9 mpg
24.1 mpg
21.3 mpg
19.0 mpg
17.3 mpg
15.8 mpg
14.6 mpg
13.6 mpg
12.8 mpg
7,000 to 12.0 mpg.

``(B) Administrator.--The term `Administrator' means the
Administrator of the Environmental Protection Agency.
``(C) Energy storage device.--The term `energy storage
device' means an onboard rechargeable energy storage system
or similar storage device.
``(D) Fuel efficiency.--The term `fuel efficiency' means
the percentage increased fuel efficiency specified in table 1
in paragraph (2)(C) over the average 2000 model year city
fuel efficiency of vehicles in the same weight class.
``(E) Maximum available power.--The term `maximum available
power', with respect to a new qualified hybrid motor vehicle
that is a passenger vehicle or light truck, means the
quotient obtained by dividing--
``(i) the maximum power available from the electrical
storage device of the new qualified hybrid motor vehicle,
during a standard 10-second pulse power or equivalent test;
by
``(ii) the sum of--

``(I) the maximum power described in clause (i); and
``(II) the net power of the internal combustion or heat
engine, as determined in accordance with standards
established by the Society of Automobile Engineers.

``(F) Motor vehicle.--The term `motor vehicle' has the
meaning given the term in section 216 of the Clean Air Act
(42 U.S.C. 7550).
``(G) New qualified hybrid motor vehicle.--The term `new
qualified hybrid motor vehicle' means a motor vehicle that--
``(i) draws propulsion energy from both--

``(I) an internal combustion engine (or heat engine that
uses combustible fuel); and
``(II) an energy storage device;

``(ii) in the case of a passenger automobile or light
truck--

``(I) in the case of a 2001 or later model vehicle,
receives a certificate of conformity under the Clean Air Act
(42 U.S.C. 7401 et seq.) and produces emissions at a level
that is at or below the standard established by a qualifying
California standard described in section 243(e)(2) of the
Clean Air Act (42 U.S.C. 7583(e)(2)) for that make and model
year; and
``(II) in the case of a 2004 or later model vehicle, is
certified by the Administrator as producing emissions at a
level that is at or below the level established for Bin 5
vehicles in the Tier 2 regulations promulgated by the
Administrator under section 202(i) of the Clean Air Act (42
U.S.C. 7521(i)) for that make and model year vehicle; and

``(iii) employs a vehicle braking system that recovers
waste energy to charge an energy storage device.
``(H) Vehicle inertia weight class.--The term `vehicle
inertia weight class' has the meaning given the term in
regulations promulgated by the Administrator for purposes of
the administration of title II of the Clean Air Act (42
U.S.C. 7521 et seq.).
``(2) Allocation.--
``(A) In general.--The Secretary shall allocate a partial
credit to a fleet or covered person under this title if the
fleet or person acquires a new qualified hybrid motor vehicle
that is eligible to receive a credit under each of the tables
in subparagraph (C).
``(B) Amount.--The amount of a partial credit allocated
under subparagraph (A) for a vehicle described in that
subparagraph shall be equal to the sum of--
``(i) the partial credits determined under table 1 in
subparagraph (C); and
``(ii) the partial credits determined under table 2 in
subparagraph (C).
``(C) Tables.--The tables referred to in subparagraphs (A)
and (B) are as follows:

``Table 1

``Partial credit for increased fuel efficiency:       Amount of credit:
At least 125% but less than 150% of 2000 model year city fuel
efficiency................................................0.14 ....

[[Page S10376]]

At least 150% but less than 175% of 2000 model year city fuel
efficiency................................................0.21 ....

At least 175% but less than 200% of 2000 model year city fuel
efficiency................................................0.28 ....

At least 200% but less than 225% of 2000 model year city fuel
efficiency................................................0.35 ....

At least 225% but less than 250% of 2000 model year city fuel
efficiency................................................0.50.....

``Table 2

``Partial credit for `Maximum Available Power':       Amount of credit:
At least 5% but less than 10%..............................0.125 ....

At least 10% but less than 20%.............................0.250 ....

At least 20% but less than 30%.............................0.375 ....

At least 30% or more.......................................0.500.....

``(D) 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
qualified hybrid motor 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.
``(3) Regulations.--The Secretary shall promulgate
regulations under which any Federal fleet that acquires a new
qualified hybrid motor vehicle will receive partial credits
determined under the tables contained in paragraph (2)(C) for
purposes of meeting the requirements of section 303.
``(s) Credit for Substantial Contribution Towards Use of
Dedicated Vehicles in Noncovered Fleets.--
``(1) Definitions.--In this subsection:
``(A) Dedicated vehicle.--The term `dedicated vehicle'
includes--
``(i) a light, medium, or heavy duty vehicle; and
``(ii) a neighborhood electric vehicle.
``(B) Medium or heavy duty vehicle.--The term `medium or
heavy duty vehicle' includes a vehicle that--
``(i) operates solely on alternative fuel; and
``(ii)(I) in the case of a medium duty vehicle, has a gross
vehicle weight rating of more than 8,500 pounds but not more
than 14,000 pounds; or
``(II) in the case of a heavy duty vehicle, has a gross
vehicle weight rating of more than 14,000 pounds.
``(C) Substantial contribution.--The term `substantial
contribution' (equal to 1 full credit) means not less than
$15,000 in cash or in kind services, as determined by the
Secretary.
``(2) Issuance of credits.--The Secretary shall issue a
credit to a fleet or covered person under this title if the
fleet or person makes a substantial contribution toward the
acquisition and use of dedicated vehicles by a person that
owns, operates, leases, or otherwise controls a fleet that is
not covered by this title.
``(3) Multiple credits for medium and heavy duty dedicated
vehicles.--The Secretary shall issue 2 full credits to a
fleet or covered person under this title if the fleet or
person acquires a medium or 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.
``(5) Limitation.--Per vehicle credits acquired under this
subsection shall not exceed the per vehicle credits allowed
under this section to a fleet for qualifying vehicles in each
of the weight categories (light, medium, or heavy duty).
``(t) Credit for Substantial Investment in Alternative Fuel
Infrastructure.--
``(1) Definitions.--In this section, 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;
``(C) training programs, educational materials, or other
activities necessary to provide information regarding the
operation, maintenance, or benefits associated with
alternative fueled vehicles; and
``(D) such other activities 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 purposes of credits under this
subsection--
``(A) 1 credit shall be equal to a minimum investment of
$25,000 in cash or in kind services, 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.''.
(c) Lease Condensate Fuels.--Section 301 of the Energy
Policy Act of 1992 (42 U.S.C. 13211) 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 ``liquified
petroleum gas;'';
(2) in paragraph (15), by inserting ``mixtures containing
50 percent or more by volume of lease condensate or fuels
extracted from lease condensate;'' after ``liquified
petroleum gas;''; and
(3) by adding at the end the following:
``(16) the term `lease condensate' means a mixture,
primarily of pentanes and heavier hydrocarbons, which is
recovered as a liquid from natural gas in lease separation
facilities.''.

Subtitle B--Automobile Fuel Economy

SEC. 711. AUTOMOBILE FUEL ECONOMY STANDARDS.

(a) Title 49 Amendment.--Section 32902(f) of title 49,
United States Code, is amended to read as follows:
``(f) Considerations.--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 motor
vehicle and passenger safety; and
``(6) the effects of compliance with average fuel economy
standards on levels of employment in the United States.''.
(b) Clarification of Authority.--Section 32902(b) of title
49, United States Code, is amended by inserting before the
period at the end the following: ``or such other number as
the Secretary prescribes under subsection (c)''.
(c) Environmental Assessment.--When issuing final
regulations setting forth increased average fuel economy
standards under section 32902(a) or section 32902(c) of title
49, United States Code, the Secretary of Transportation shall
also issue an environmental assessment of the effects of the
increased standards on the environment under the National
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
(d) Authorization of Appropriations.--For the purposes of
this section, there are authorized to be appropriated to the
Secretary of Transportation $5,000,000 for each of fiscal
years 2004 through 2008.

SEC. 712. DUAL-FUELED AUTOMOBILES.

(a) Manufacturing Incentives.--Section 32905 of title 49,
United States Code, is amended--
(1) in subsections (b) and (d), by striking ``1993-2004''
and inserting ``1993-2008'';
(2) in subsection (f), by striking ``2001'' and inserting
``2005'';
(3) in subsection (f)(1), by striking ``2004'' and
inserting ``2008''; and
(4) in subsection (g), by striking ``September 30, 2000''
and inserting ``September 30, 2004''.
(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. 713. FEDERAL FLEET FUEL ECONOMY.

Section 32917 of title 49, United States Code, is amended
to read as follows:

``Sec. 32917. Standards for executive agency automobiles

``(a) Baseline Average Fuel Economy.--The head of each
executive agency shall determine, for all automobiles in the
agency's fleet of automobiles that were leased or bought as a
new vehicle in fiscal year 1999, the average fuel economy for
such automobiles. For the purposes of this section, the
average fuel economy so determined shall be the baseline
average fuel economy for the agency's fleet of automobiles.
``(b) Increase of Average Fuel Economy.--The head of an
executive agency shall manage the procurement of automobiles
for that agency in such a manner that not later than
September 30, 2005, the average fuel economy of the new
automobiles in the agency's fleet of automobiles is not less
than 3 miles per gallon higher than the baseline average fuel
economy determined under subsection (a) for that fleet.
``(c) Calculation of Average Fuel Economy.--Average fuel
economy shall be calculated for the purposes of this section
in accordance with guidance which the Secretary of
Transportation shall prescribe for the implementation of this
section.
``(d) Definitions.--In this section:
``(1) The term `automobile' does not include any vehicle
designed for combat-related missions, law enforcement work,
or emergency rescue work.
``(2) The term `executive agency' has the meaning given
that term in section 105 of title 5.
``(3) The term `new automobile', with respect to the fleet
of automobiles of an executive agency, means an automobile
that is leased for at least 60 consecutive days or bought, by
or for the agency, after September 30, 1999.''.

[[Page S10377]]

SEC. 714. RAILROAD EFFICIENCY.

(a) Establishment.--The Secretary of Energy, in cooperation
with the Secretary of Transportation and the Administrator of
the Environmental Protection Agency, shall establish a cost-
shared, public-private research partnership to develop and
demonstrate railroad locomotive technologies that increase
fuel economy, reduce emissions, and lower costs of operation.
Such partnership shall involve the Federal Government,
railroad carriers, locomotive manufacturers and equipment
suppliers, and the Association of American Railroads.
(b) Authorization of Appropriations.--For the purposes of
this section, there are authorized to be appropriated to the
Secretary of Energy $25,000,000 for fiscal year 2004,
$35,000,000 for fiscal year 2005, and $50,000,000 for fiscal
year 2006.

SEC. 715. REDUCTION OF ENGINE IDLING IN HEAVY-DUTY VEHICLES.

(a) Identification.--Not later than 180 days after the date
of enactment of this section, the Secretary of Energy, in
consultation with the Secretary of Transportation and the
Administrator of the Environmental Protection Agency, shall
commence a study to analyze the potential fuel savings and
emissions reductions resulting from use of idling reduction
technologies as they are applied to heavy-duty vehicles. Upon
completion of the study, the Secretary of Energy shall, by
rule, certify those idling reduction technologies with the
greatest economic or technical feasibility and the greatest
potential for fuel savings and emissions reductions, and
publish a list of such certified technologies in the Federal
Register.
(b) Vehicle Weight Exemption.--Section 127(a) of Title 23,
United States Code, is amended by adding at the end the
following: ``In order to promote reduction of fuel use and
emissions due to engine idling, the maximum gross vehicle
weight limit and the axle weight limit for any motor vehicle
equipped with an idling reduction technology certified by the
U.S. Department of Energy will be increased by an amount
necessary to compensate for the additional weight of the
idling reduction system, provided that the weight increase
shall be no greater than 400 pounds.''
(c) Definitions.--For the purposes of this section:
(1) The term ``idling reduction technology'' means a device
or system of devices utilized to reduce long-duration idling
of a vehicle.
(2) The term ``heavy-duty vehicle'' means a vehicle that
has a gross vehicle weight rating greater than 8,500 pounds
and is powered by a diesel engine.
(3) The term ``long-duration idling'' means the operation
of a main drive engine, for a period greater than 30
consecutive minutes, where the main drive engine is not
engaged in gear. Such term does not apply to routine
stoppages associated with traffic movement or congestion.

SEC. 716. PROVISION NOT TO TAKE EFFECT.

Section 711 shall not take effect.

SEC. 717. 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 desirability of reducing United States dependence
on imported oil.
``(6) The effects of the average fuel economy standards on
motor vehicle and passenger safety.
``(7) The effects of increased fuel economy on air quality.
``(8) The adverse effects of average fuel economy standards
on the relative competitiveness of manufacturers.
``(9) The effects of compliance with average fuel economy
standards on levels of employment in the United States.
``(10) The cost and lead time necessary for the
introduction of the necessary new technologies.
``(11) The potential for advanced technology vehicles, such
as hybrid and fuel cell vehicles, to contribute to the
achievement of significant reductions in fuel consumption.
``(12) The extent to which the necessity for vehicle
manufacturers to incur near-term costs to comply with the
average fuel economy standards adversely affects the
availability of resources for the development of advanced
technology for the propulsion of motor vehicles.
``(13) The report of the National Research Council that is
entitled `Effectiveness and Impact of Corporate Average Fuel
Economy Standards', issued in January 2002.''.

SEC. 718. INCREASED FUEL ECONOMY STANDARDS.

(a) New Regulations Required.--
(1) Non-passenger automobiles.--
(A) Requirement for new regulations.--The Secretary of
Transportation shall issue, under section 32902 of title 49,
United States Code, new regulations setting forth increased
average fuel economy standards for non-passenger automobiles.
The regulations shall be determined on the basis of the
maximum feasible average fuel economy levels for the non-
passenger automobiles, taking into consideration the matters
set forth in subsection (f) of such section. The new
regulations under this paragraph shall apply for model years
after the 2007 model year, subject to subsection (b).
(B) Time for issuing regulations.--The Secretary of
Transportation shall issue the final regulations under
subparagraph (A) not later than April 1, 2006.
(2) Passenger automobiles.--
(A) Requirement for new regulations.--The Secretary of
Transportation shall issue, under section 32902 of title 49,
United States Code, new regulations setting forth increased
average fuel economy standards for passenger automobiles,
taking into consideration the matters set forth in subsection
(f) of such section.
(B) Time for issuing regulations.--The Secretary of
Transportation shall issue the final regulations under
subparagraph (A) not later than 2\1/2\ years after the date
of the enactment of this Act.
(b) Phased Increases.--The regulations issued pursuant to
subsection (a) shall specify standards that take effect
successively over several vehicle model years not exceeding
15 vehicle model years.
(c) Clarification of Authority To Amend Passenger
Automobile Standard.--Section 32902(b) of title 49, United
States Code, is amended by inserting before the period at the
end the following: ``or such other number as the Secretary
prescribes under subsection (c)''.
(d) Environmental Assessment.--When issuing final
regulations setting forth increased average fuel economy
standards under section 32902(a) or section 32902(c) of title
49, United States Code, the Secretary of Transportation shall
also issue an environmental assessment of the effects of the
increased standards on the environment under the National
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
(e) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary of Transportation
$5,000,000 for each of fiscal years 2004 through 2008 for
carrying out this section and for administering the
regulations issued pursuant to this section.

SEC. 719. EXPEDITED PROCEDURES FOR CONGRESSIONAL INCREASE IN
FUEL ECONOMY STANDARDS.

(a) Condition for Applicability.--If the Secretary of
Transportation fails to issue final regulations with respect
to non-passenger automobiles under section 719 or fails to
issue final regulations with respect to passenger automobiles
under such section, on or before the date by which such final
regulations are required by such section to be issued,
respectively, then this section shall apply with respect to a
bill described in subsection (b).
(b) Bill.--A bill referred to in this subsection is a bill
that satisfies the following requirements:
(1) Introduction.--The bill is introduced by one or more
Members of Congress not later than 60 days after the date
referred to in subsection (a).
(2) Title.--The title of the bill is as follows: ``A bill
to establish new average fuel economy standards for certain
motor vehicles.''.
(3) Text.--The bill provides after the enacting clause only
the text specified in subparagraph (A) or (B) or any
provision described in subparagraph (C), as follows:
(A) Non-passenger automobiles.--In the case of a bill
relating to a failure timely to issue final regulations
relating to non-passenger automobiles, the following text:
``That, section 32902 of title 49, United States Code, is
amended by adding at the end the following new subsection:
`` `(__) Non-passenger automobiles.--The average fuel
economy standard for non-passenger automobiles manufactured
by a manufacturer in a model year after model year ____ shall
be ____ miles per gallon.' '', the first blank space being
filled in with a subsection designation, the second blank
space being filled in with the number of a year, and the
third blank space being filled in with a number.
(B) Passenger automobiles.--In the case of a bill relating
to a failure timely to issue final regulations relating to
passenger automobiles, the following text:
``That, section 32902(b) of title 49, United States Code, is
amended to read as follows:
`` `(b) Passenger Automobiles.--Except as provided in this
section, the average fuel economy standard for passenger
automobiles manufactured by a manufacturer in a model year
after model year ____ shall be ____ miles per gallon.' '',
the first blank space being filled in with the number of a
year and the second blank space being filled in with a
number.
(C) Substitute text.--Any text substituted by an amendment
that is in order under subsection (c)(3).
(c) Expedited Procedures.--A bill described in subsection
(b) shall be considered in a House of Congress in accordance
with the procedures provided for the consideration of joint
resolutions in paragraphs (3) through (8) of section 8066(c)
of the Department of Defense Appropriations Act, 1985 (as
contained in section 101(h) of Public Law 98-473; 98 Stat.
1936), with the following exceptions:
(1) References to resolution.--The references in such
paragraphs to a resolution shall be deemed to refer to the
bill described in subsection (b).

[[Page S10378]]

(2) Committees of jurisdiction.--The committees to which
the bill is referred under this subsection shall--
(A) in the Senate, be the Committee on Commerce, Science,
and Transportation; and
(B) in the House of Representatives, be the Committee on
Energy and Commerce.
(3) Amendments.--
(A) Amendments in order.--Only four amendments to the bill
are in order in each House, as follows:
(i) Two amendments proposed by the majority leader of that
House.
(ii) Two amendments proposed by the minority leader of that
House.
(B) Form and content.--To be in order under subparagraph
(A), an amendment shall propose to strike all after the
enacting clause and substitute text that only includes the
same text as is proposed to be stricken except for one or
more different numbers in the text.
(C) Debate, et cetera.--Subparagraph (B) of section
8066(c)(5) of the Department of Defense Appropriations Act,
1985 (98 Stat. 1936) shall apply to the consideration of each
amendment proposed under this paragraph in the same manner as
such subparagraph (B) applies to debatable motions.

Subtitle C--Advanced Clean Vehicles

SEC. 731. HYBRID VEHICLES RESEARCH AND DEVELOPMENT.

(a) Rechargeable Energy Storage Systems and Other
Technologies.--The Secretary of Energy shall accelerate
research and development 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.
(b) Authorization of Appropriations.--Funds are hereby
authorized to be appropriated for each of fiscal years 2004,
2005, and 2006 in the amount $50,000,000 for research and
development activities under this section.

SEC. 732. DIESEL FUELED VEHICLES RESEARCH AND DEVELOPMENT.

(a) Diesel Combustion and After Treatment Technologies.--
The Secretary of Energy shall accelerate research and
development directed toward the improvement of diesel
combustion and after treatment technologies for use in diesel
fueled motor vehicles.
(b) Goals.--The Secretary shall carry out subsection (a)
with a view to achieving the following goals:
(1) Compliance with certain emission standards by 2010.--
Developing and demonstrating diesel technologies that, not
later than 2010, meet the following standards:
(A) Tier-2 emission standards.--The tier 2 emission
standards.
(B) Heavy-duty emission standards of 2007.--The heavy-duty
emission standards of 2007.
(2) Post-2010 highly efficient technologies.--Developing
the next generation of low emissions, high efficiency diesel
engine technologies, including homogeneous charge compression
ignition technology.
(c) Authorization of Appropriations.--Funds are hereby
authorized to be appropriated for each of fiscal years 2004,
2005, and 2006 in the amount of $75,000,000 for research and
development of advanced combustion engines and advanced
fuels.

SEC. 733. PROCUREMENT OF ALTERNATIVE FUELED PASSENGER
AUTOMOBILES.

(a) Vehicle Fleets Not Covered by Requirement in Energy
Policy Act of 1992.--The head of each agency of the executive
branch shall coordinate with the Administrator of General
Services to ensure that only alternative fueled vehicles are
procured by or for each agency fleet of passenger automobiles
that is not in a fleet of vehicles to which section 303 of
the Energy Policy Act of 1992 (42 U.S.C. 13212) applies.
(b) Waiver Authority.--The head of an agency, in
consultation with the Administrator, may waive the
applicability of the policy regarding the procurement of
alternative fueled vehicles in subsection (a) to--
(1) the procurement for such agency of any vehicles
described in subparagraphs (A) through (F) of section
303(b)(3) of the Energy Policy Act of 1992 (42 U.S.C.
13212(b)(3)); or
(2) a procurement of vehicles for such agency if the
procurement of alternative fueled vehicles cannot meet the
requirements of the agency for vehicles due to insufficient
availability of the alternative fuel used to power such
vehicles.
(c) Applicability to Procurements After Fiscal Year 2004.--
This subsection applies with respect to procurements of
alternative fueled vehicles in fiscal year 2005 and
subsequent fiscal years.

SEC. 734. PROCUREMENT OF HYBRID LIGHT DUTY TRUCKS.

(a) Vehicle Fleets Not Covered by Requirement in Energy
Policy Act of 1992.--
(1) Hybrid vehicles.--The head of each agency of the
executive branch shall coordinate with the Administrator of
General Services to ensure that only hybrid vehicles are
procured by or for each agency fleet of light duty trucks
that is not in a fleet of vehicles to which section 303 of
the Energy Policy Act of 1992 (42 U.S.C. 13212) applies.
(2) Waiver authority.--The head of an agency, in
consultation with the Administrator, may waive the
applicability of the policy regarding the procurement of
hybrid vehicles in paragraph (1) to that agency to the extent
that the head of that agency determines necessary--
(A) to meet specific requirements of the agency for
capabilities of light duty trucks;
(B) to procure vehicles consistent with the standards
applicable to the procurement of fleet vehicles for the
Federal Government;
(C) to adjust to limitations on the commercial availability
of light duty trucks that are hybrid vehicles; or
(D) to avoid the necessity of procuring a hybrid vehicle
for the agency when each of the hybrid vehicles available for
meeting the requirements of the agency has a cost to the
United States that exceeds the costs of comparable nonhybrid
vehicles by a factor that is significantly higher than the
difference between--
(i) the real cost of the hybrid vehicle to retail
purchasers, taking into account the benefit of any tax
incentives available to retail purchasers for the purchase of
the hybrid vehicle; and
(ii) the costs of the comparable nonhybrid vehicles to
retail purchasers.
(3) Applicability to procurements after fiscal year 2004.--
This subsection applies with respect to procurements of light
duty trucks in fiscal year 2005 and subsequent fiscal years.
(b) Inapplicability to Department of Defense.--This section
does not apply to the Department of Defense, which is subject
to comparable requirements under section 318 of the National
Defense Authorization Act for Fiscal Year 2002 (Public Law
107-107; 115 Stat. 1055; 10 U.S.C. 2302 note).

SEC. 735. DEFINITIONS.

In this subtitle:
(1) Alternative fueled vehicle.--The term ``alternative
fueled vehicle'' means--
(A) an alternative fueled vehicle, as defined in section
301(3) of the Energy Policy Act of 1992 (42 U.S.C. 13211(3));
(B) a motor vehicle that operates on a blend of fuel that
is at least 20 percent (by volume) biodiesel, as defined in
section 312(f) of the Energy Policy Act of 1992 (42 U.S.C.
13220(f)); and
(C) a motor vehicle that operates on a blend of fuel that
is at least 20 percent (by volume) bioderived hydrocarbons
(including aliphatic compounds) produced from agricultural
and animal waste.
(2) Heavy-duty emission standards of 2007.--The term
``heavy-duty emission standards of 2007'' means the motor
vehicle emission standards promulgated by the Administrator
of the Environmental Protection Agency on January 18, 2001,
under section 202 of the Clean Air Act to apply to heavy-duty
vehicles of model years beginning with the 2007 vehicle model
year.
(3) Hybrid vehicle.--The term ``hybrid vehicle'' means--
(A) a motor vehicle that draws propulsion energy from on
board sources of stored energy that are both--
(i) an internal combustion or heat engine using combustible
fuel; and
(ii) a rechargeable energy storage system; and
(B) any other vehicle that is defined as a hybrid vehicle
in regulations prescribed by the Secretary of Energy for the
administration of title III of the Energy Policy Act of 1992.
(4) Motor vehicle.--The term ``motor vehicle'' means any
vehicle that is manufactured primarily for use on public
streets, roads, and highways (not including a vehicle
operated exclusively on a rail or rails) and that has at
least four wheels.
(5) Tier 2 emission standards defined.--The term ``tier 2
emission standards'' means the motor vehicle emission
standards promulgated by the Administrator of the
Environmental Protection Agency on February 10, 2000, under
section 202 of the Clean Air Act (42 U.S.C. 7521) to apply to
passenger automobiles, light trucks, and larger passenger
vehicles of model years after the 2003 vehicle model year.
(6) Terms defined in epa regulations.--The terms
``passenger automobile'' and ``light truck'' 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.).

TITLE VIII--HYDROGEN

Subtitle A--Basic Research Programs

SEC. 801. SHORT TITLE.

This subtitle may be cited as the ``George E. Brown, Jr.
and Robert S. Walker Hydrogen Future Act of 2003''.

SEC. 802. MATSUNAGA ACT AMENDMENT.

The Spark M. Matsunaga Hydrogen Research, Development, and
Demonstration Act of 1990 (42 U.S.C. 12401 et seq.) is
amended by striking sections 102 through 109 and inserting
the following:

``SEC. 102. DEFINITIONS.

``In this Act--
``(1) the term `advisory committee' means the Hydrogen and
Fuel Cell Technical Advisory Committee established under
section 107;
``(2) the term `Department' means the Department of Energy;
``(3) the term `fuel cell' means a device that directly
converts the chemical energy of a fuel into electricity by an
electrochemical process;
``(4) the term `infrastructure' means the equipment,
systems, or facilities used to produce, distribute, deliver,
or store hydrogen; and
``(5) the term `Secretary' means the Secretary of Energy.

[[Page S10379]]

``SEC. 103. HYDROGEN RESEARCH AND DEVELOPMENT.

``(a) In General.--The Secretary shall conduct a research
and development program on technologies related to the
production, distribution, storage, and use of hydrogen
energy, fuel cells, and related infrastructure.
``(b) Goal.--The goal of such program shall be to enable
the safe, economic, and environmentally sound use of hydrogen
energy, fuel cells, and related infrastructure for
transportation, commercial, industrial, residential, and
electric power generation applications.
``(c) Focus.--In carrying out activities under this
section, the Secretary shall focus on critical technical
issues including, but not limited to--
``(1) the production of hydrogen from diverse energy
sources, with emphasis on cost-effective production from
renewable energy sources;
``(2) the delivery of hydrogen, including safe delivery in
fueling stations and use of existing hydrogen pipelines;
``(3) the storage of hydrogen, including storage of
hydrogen in surface transportation;
``(4) fuel cell technologies for transportation, stationary
and portable applications, with emphasis on cost-reduction of
fuel cell stacks; and
``(5) the use of hydrogen energy and fuel cells, including
use in--
``(A) isolated villages, islands, and areas in which other
energy sources are not available or are very expensive; and
``(B) foreign markets, particularly where an energy
infrastructure is not well developed.
``(d) Codes and Standards.--The Secretary shall facilitate
the development of domestic and international codes and
standards and seek to resolve other critical regulatory and
technical barriers preventing the introduction of hydrogen
energy and fuel cells into the marketplace.
``(e) Solicitation.--The Secretary shall carry out the
research and development activities authorized under this
section through solicitation of proposals, and evaluation
using competitive merit review.
``(f) Cost Sharing.--The Secretary shall require a
commitment from non-Federal sources of at least 20 percent of
the cost of proposed research and development projects. The
Secretary may reduce or eliminate the cost sharing
requirement--
``(1) if the Secretary determines that the research and
development is of a basic or fundamental nature, or
``(2) for technical analyses, outreach activities, and
educational programs that the Secretary does not expect to
result in a marketable product.

``SEC. 104. DEMONSTRATION PROGRAMS.

``(a) Requirement.--In conjunction with activities
conducted under section 103, the Secretary shall conduct
demonstrations of hydrogen energy and fuel cell technologies
in order to evaluate the commercial potential of such
technologies.
``(b) Solicitation.--The Secretary shall carry out the
demonstrations authorized under this section through
solicitation of proposals, and evaluation using competitive
merit review.
``(c) Cost Sharing.--The Secretary shall require a
commitment from non-Federal sources of at least 50 percent of
the costs directly relating to a demonstration project under
this section. The Secretary may reduce such non-Federal
requirement if the Secretary determines that the reduction is
appropriate considering the technological risks involved in
the project.

``SEC. 105. TECHNOLOGY TRANSFER.

``The Secretary shall conduct programs to--
``(1) transfer critical hydrogen energy and fuel cell
technologies to the private sector in order to promote wider
understanding of such technologies and wider use of research
progress under this Act;
``(2) accelerate wider application of hydrogen energy and
fuel cell technologies in foreign countries in order to
increase the global market for the technologies and foster
global development without harmful environmental effects;
``(3) foster the exchange of generic, nonproprietary
information and technology developed pursuant to this Act,
among industry, academia, and the Federal agencies; and
``(4) inventory and assess the technical and commercial
viability of technologies related to production,
distribution, storage, and use of hydrogen energy and fuel
cells.

``SEC. 106. COORDINATION AND CONSULTATION.

``The Secretary shall have overall management
responsibility for carrying out programs under this Act. In
carrying out such programs, the Secretary--
``(1) shall establish a central point for the coordination
of all hydrogen energy and fuel cell research, development,
and demonstration activities of the Department;
``(2) in carrying out the Secretary's authorities pursuant
to this Act, shall consult with other Federal agencies as
appropriate, and may obtain the assistance of any Federal
agency, on a reimbursable basis or otherwise and with the
consent of such agency; and
``(3) shall attempt to ensure that activities under this
Act do not unnecessarily duplicate any available research and
development results or displace or compete with privately
funded hydrogen and fuel cell energy activities.

``SEC. 107. ADVISORY COMMITTEE.

``(a) Establishment.--There is hereby established the
Hydrogen and Fuel Cell Technical Advisory Committee, to
advise the Secretary on the programs under this Act.
``(b) Membership.--The advisory committee shall be
comprised of not fewer than 12 nor more than 25 members
appointed by the Secretary based on their technical and other
qualifications from domestic industry, automakers,
universities, professional societies, Federal laboratories,
financial institutions, and environmental and other
organizations as the Secretary deems appropriate. The
advisory committee shall have a chairperson, who shall be
elected by the members from among their number.
``(c) Terms.--Members of the advisory committee shall be
appointed for terms of 3 years, with each term to begin not
later than 3 months after the date of enactment of the Energy
Policy Act of 2003, except that one-third of the members
first appointed shall serve for 1 year, and one-third of the
members first appointed shall serve for 2 years, as
designated by the Secretary at the time of appointment.
``(d) Review.--The advisory committee shall review and make
any necessary recommendations to the Secretary on--
``(1) implementation and conduct of programs under this
Act;
``(2) economic, technological, and environmental
consequences of the deployment of technologies related to
production, distribution, storage, and use of hydrogen
energy, and fuel cells;
``(3) means for resolving barriers to implementing hydrogen
and fuel cell technologies; and
``(4) the coordination plan and any updates thereto
prepared by the Secretary pursuant to section 108.
``(e) Response.--The Secretary shall consider any
recommendations made by the advisory committee, and shall
provide a response to the advisory committee within 30 days
after receipt of such recommendations. Such response shall
either describe the implementation of the advisory
committee's recommendations or provide an explanation of the
reasons that any such recommendations will not be
implemented.
``(f) Support.--The Secretary shall provide such staff,
funds and other support as may be necessary to enable the
advisory committee to carry out its functions. In carrying
out activities pursuant to this section, the advisory
committee may also obtain the assistance of any Federal
agency, on a reimbursable basis or otherwise and with the
consent of such agency.

``SEC. 108. COORDINATION PLAN.

``(a) Plan.--The Secretary, in consultation with other
Federal agencies, shall prepare and maintain on an ongoing
basis a comprehensive plan for activities under this Act.
``(b) Development.--In developing such plan, the Secretary
shall--
``(1) consider the guidance of the National Hydrogen Energy
Roadmap published by the Department in November 2002 and any
updates thereto;
``(2) consult with the advisory committee; and
``(3) consult with interested parties from domestic
industry, automakers, universities, professional societies,
Federal laboratories, financial institutions, and
environmental and other organizations as the Secretary deems
appropriate.
``(c) Contents.--At a minimum, the plan shall provide--
``(1) an assessment of the effectiveness of the programs
authorized under this Act, including a summary of
recommendations of the advisory committee for improvements in
such programs;
``(2) a description of proposed research, development, and
demonstration activities planned by the Department for the
next five years;
``(3) a description of the role Federal laboratories,
institutions of higher education, small businesses, and other
private sector firms are expected to play in such programs;
``(4) cost and performance milestones that will be used to
evaluate the programs for the next five years;
``(5) any significant technical, regulatory, and other
hurdles that stand in the way of achieving such cost and
performance milestones, and how the programs will address
those hurdles; and
(6) to the extent practicable, an analysis of Federal,
State, local, and private sector hydrogen research,
development, and demonstration activities to identify areas
for increased intergovernmental and private-public sector
collaboration.
``(d) Report.--Not later than January 1, 2005, and
biennially thereafter, the Secretary shall transmit to
Congress the comprehensive plan developed for the programs
authorized under this Act, or any updates thereto.

``SEC. 109. AUTHORIZATION OF APPROPRIATIONS.

``There are authorized to be appropriated to carry out the
purposes of this Act--
``(1) such sums as may be necessary for fiscal years 1992
through 2003;
``(2) $105,000,000 for fiscal year 2004;
``(3) $150,000,000 for fiscal year 2005;
``(4) $175,000,000 for fiscal year 2006;
``(5) $200,000,000 for fiscal year 2007; and
``(6) $225,000,000 for fiscal year 2008.''.

SEC. 803. HYDROGEN TRANSPORTATION AND FUEL INITIATIVE.

(a) Vehicle Technologies.--The Secretary shall carry out a
research, development, demonstration, and commercial
application program on advanced hydrogen-powered vehicle
technologies. Such program shall address--

[[Page S10380]]

(1) engine and emission control systems;
(2) energy storage, electric propulsion, and hybrid
systems;
(3) automotive materials;
(4) hydrogen-carrier fuels; and
(5) other advanced vehicle technologies.
(b) Hydrogen Fuel Initiative.--In coordination with the
program authorized in subsection (a), the Secretary of
Energy, in partnership with the private sector, shall conduct
a research, development, demonstration and commercial
application program designed to enable the rapid and
coordinated introduction of hydrogen-fueled vehicles and
associated infrastructure into commerce. Such program shall
address--
(1) production of hydrogen from diverse energy resources,
including--
(A) renewable energy resources;
(B) fossil fuels, in conjunction with carbon capture and
sequestration;
(C) hydrogen-carrier fuels; and
(D) nuclear energy;
(2) delivery of hydrogen or hydrogen-carrier fuels,
including--
(A) transmission by pipeline and other distribution
methods; and
(B) safe, convenient, and economic refueling of vehicles,
either at central refueling stations or through distributed
on-site generation;
(3) storage of hydrogen or hydrogen-carrier fuels,
including development of materials for safe and economic
storage in gaseous, liquid or solid forms at refueling
facilities or onboard vehicles;
(4) development of advanced vehicle technologies, such as
efficient fuel cells and direct hydrogen combustion engines,
and related component technologies such as advanced materials
and control systems; and
(5) development of necessary codes, standards, and safety
practices to accompany the production, distribution, storage
and use of hydrogen or hydrogen-carrier fuels in
transportation.
(c) Matsunaga Act.--In carrying out programs and projects
under subsections (a) and (b), the Secretary shall ensure
that such programs and projects are consistent with, and do
not unnecessarily duplicate, activities carried out under the
programs authorized under the Spark M. Matsunaga Hydrogen
Research, Development, and Demonstration Act of 1990 (42
U.S.C. 12401 et seq.).
(d) Advisory Committee.--The Hydrogen and Fuel Cell
Technical Advisory Committee authorized under section 107 of
the Spark M. Matsunaga Hydrogen Research, Development, and
Demonstration Act of 1990 (42 U.S.C. 12408), as amended in
this title, shall also advise the Secretary on the programs
and activities carried out under this section.
(e) Solicitation.--The Secretary shall carry out the
programs authorized under this section through solicitation
of proposals, and evaluation using competitive merit review.
(f) Cost Sharing.--The Secretary shall require a commitment
from non-Federal sources of at least 50 percent of the costs
directly relating to a demonstration project under this
section. The Secretary may reduce such non-Federal
requirement if the Secretary determines that the reduction is
appropriate considering the technological risks involved in
the project.
(g) Authorization of Appropriations.--For the purposes of
this section, there are authorized to be appropriated to the
Secretary--
(1) for activities pursuant to subsection (a), to remain
available until expended--
(A) $100,000,000 for each of fiscal years 2004 and 2005;
(B) $110,000,000 for each of fiscal years 2006 and 2007;
and
(C) $120,000,000 for fiscal year 2008; and
(2) for activities pursuant to subsection (b), to remain
available until expended--
(A) $125,000,000 for fiscal year 2004;
(B) $150,000,000 for fiscal year 2005;
(C) $175,000,000 for fiscal year 2006; and
(D) $200,000,000 for each of fiscal years 2007 and 2008.

SEC. 804. INTERAGENCY TASK FORCE AND COORDINATION PLAN.

(a) Establishment.--Not later than 120 days after the date
of enactment of this Act, the Secretary shall establish an
interagency task force to coordinate Federal hydrogen and
fuel cell energy activities.
(b) Composition.--The task force shall be chaired by a
designee of the Secretary, and shall include representatives
of--
(1) the Office of Science and Technology Policy;
(2) the Department of Transportation;
(3) the Department of Defense;
(4) the Department of Commerce (including the National
Institute for Standards and Technology);
(5) the Environmental Protection Agency;
(6) the National Aeronautics and Space Administration;
(7) the Department of State; and
(8) other Federal agencies as the Director considers
appropriate.
(c) Coordination Plan.--The task force shall prepare a
comprehensive coordination plan for Federal hydrogen and fuel
cell energy activities, which shall include a summary of such
activities.
(d) Report.--Not later than one year after it is
established, the task force shall report to Congress on the
coordination plan in subsection (c) and on the interagency
coordination of Federal hydrogen and fuel cell energy
activities.

SEC. 805. REVIEW BY THE NATIONAL ACADEMIES.

Not later than two years after the date of enactment of
this Act, and every four years thereafter, the Secretary
shall enter into a contract with the National Academies. Such
contract shall require the National Academies to perform a
review of the progress made through Federal hydrogen and fuel
cell energy programs and activities, including the need for
modified or additional programs, and to report to the
Congress on the results of such review. There are authorized
to be appropriated to the Secretary such sums as may be
necessary to carry out the requirements of this section.

Subtitle B--Demonstration Programs

SEC. 811. DEFINITIONS.

For the purposes of this subtitle and subtitle C--
(1) the term ``fuel cell'' means a device that directly
converts the chemical energy of a fuel into electricity by an
electrochemical process;
(2) the term ``hydrogen-carrier fuel'' means any
hydrocarbon fuel that is capable of being thermochemically
processed or otherwise reformed to produce hydrogen;
(3) the term ``infrastructure'' means the equipment,
systems, or facilities used to produce, distribute, deliver,
or store hydrogen or hydrogen-carrier fuels;
(4) 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)); and
(5) the term ``Secretary'' means the Secretary of Energy.

SEC. 812. HYDROGEN VEHICLE DEMONSTRATION PROGRAM.

(a) In General.--The Secretary shall establish a program
for demonstration and commercial application of hydrogen-
powered vehicles and associated hydrogen fueling
infrastructure in a variety of transportation-related
applications, including--
(1) fuel cell vehicles in light-duty vehicle fleets;
(2) heavy-duty fuel cell on-road and off-road vehicles,
including mass transit buses;
(3) use of hydrogen-powered vehicles and hydrogen fueling
infrastructure (including multiple hydrogen refueling
stations) along major transportation routes or in entire
regions; and
(4) other similar projects as the Secretary may deem
necessary to contribute to the rapid demonstration and
deployment of hydrogen-based technologies in widespread use
for transportation.
(b) Eligibility.--Federal, state, tribal, and local
governments, academic and other non-profit organizations,
private entities, and consortia of these entities shall be
eligible for these projects.
(c) Selection.--In selecting projects under this section,
the Secretary shall--
(1) consult with Federal, State, local and private fleet
managers to identify potential projects where hydrogen-
powered vehicles may be placed into service;
(2) identify not less than 10 sites at which to carry out
projects under this program, 2 of which must be based at
Federal facilities; and
(3) select projects based on the following factors--
(A) geographic diversity;
(B) a diverse set of operating environments, duty cycles,
and likely weather conditions;
(C) the interest and capability of the participating
agencies, entities, or fleets;
(D) the availability and appropriateness of potential sites
for refueling infrastructure and for maintenance of the
vehicle fleet;
(E) the existence of traffic congestion in the area
expected to be served by the hydrogen-powered vehicles;
(F) proximity to non-attainment areas as defined in section
171 of the Clean Air Act (42 U.S.C. 7501); and
(G) such other criteria as the Secretary determines to be
appropriate in order to carry out the purposes of the
program.
(d) Infrastructure.--In funding projects under this
section, the Secretary shall also support the installation of
refueling infrastructure at sites necessary for success of
the project, giving preference to those infrastructure
projects that include co-production of both--
(1) hydrogen for use in transportation; and
(2) electricity that can be consumed on site.
(e) Operation and Maintenance Period.--Vehicles purchased
for projects under this section shall be operated and
maintained by the participating agencies or entities in
regular duty cycles for a period of not less than 12 months.
(f) Training and Technical Support.--In funding proposals
under this section, the Secretary shall also provide funding
for training and technical support as may be necessary to
assure the success of such projects, including training and
technical support in--
(1) the installation, operation, and maintenance of fueling
infrastructure;
(2) the operation and maintenance of fuel cell vehicles;
and
(3) data collection necessary to monitor project
performance.
(g) Cost-sharing.--Except as otherwise provided, the
Secretary shall require a commitment from non-Federal sources
of at least 50 percent of the costs directly relating to a
demonstration project under this section. The Secretary may
reduce such non-Federal requirement if the Secretary
determines that the reduction is appropriate considering the
technological risks involved in the project.
(h) Authorization of Appropriations.--For the purposes of
this section, there are

[[Page S10381]]

authorized to be appropriated to the Secretary $50,000,000
for each of fiscal years 2006 through 2010, to remain
available until expended.

SEC. 813. STATIONARY FUEL CELL DEMONSTRATION PROGRAM.

(a) In General.--The Secretary shall establish a program
for demonstration and commercial application of hydrogen fuel
cells in stationary applications, including--
(1) fuel cells for use in residential and commercial
buildings;
(2) portable fuel cells, including auxiliary power units in
trucks;
(3) small form and micro fuel cells of 20 watts or less;
(4) distributed generation systems with fuel cells using
renewable energy; and
(5) other similar projects as the Secretary may deem
necessary to contribute to the rapid demonstration and
deployment of hydrogen-based technologies in widespread use.
(b) Competitive Evaluation.--Proposals submitted in
response to solicitations issued pursuant to this section
shall be evaluated on a competitive basis using peer review.
The Secretary is not required to make an award under this
section in the absence of a meritorious proposal.
(c) Preference.--The Secretary shall give preference, in
making an award under this section, to proposals that--
(1) are submitted jointly from consortia that include two
or more participants from institutions of higher education,
industry, State, tribal, or local governments, and Federal
laboratories; and
(2) reflect proven experience and capability with
technologies relevant to the projects proposed.
(d) Training and Technical Support.--In funding proposals
under this section, the Secretary shall also provide funding
for training and technical support as may be necessary to
assure the success of such projects, including training and
technical support in the installation, operation, and
maintenance of fuel cells and the collection of data to
monitor project performance.
(e) Cost-sharing.--Except as otherwise provided, the
Secretary shall require a commitment from non-Federal sources
of at least 50 percent of the costs directly relating to a
demonstration project under this section. The Secretary may
reduce such non-Federal requirement if the Secretary
determines that the reduction is appropriate considering the
technological risks involved in the project.
(f) Authorization of Appropriations.--For the purposes of
this section, there are authorized to be appropriated to the
Secretary $50,000,000 for each of fiscal years 2006 through
2010, to remain available until expended.

SEC. 814. HYDROGEN DEMONSTRATION PROGRAMS IN NATIONAL PARKS.

(a) Study.--Not later than 1 year after the date of
enactment of this section, the Secretary of the Interior and
the Secretary of Energy shall jointly study and report to
Congress on--
(1) the energy needs and uses at National Parks; and
(2) the potential for fuel cell and other hydrogen-based
technologies to meet such energy needs in--
(A) stationary applications, including power generation,
combined heat and power for buildings and campsites, and
standby and backup power systems; and
(B) transportation-related applications, including support
vehicles, passenger vehicles and heavy-duty trucks and buses.
(b) Pilot Projects.--Based on the results of the study
conducted under subsection (a), the Secretary of the Interior
shall fund not fewer than 3 pilot projects in national parks
to provide for demonstration of fuel cells or other hydrogen-
based technologies in those applications where the greatest
potential for such use in National Parks has been identified.
Such pilot projects shall be geographically distributed
throughout the United States.
(c) Definition.--For the purpose of this section, the term
``National Parks'' means those areas of land and water now or
hereafter administered by the Secretary of the Interior
through the National Park Service for park, monument,
historic, parkway, recreational, or other purposes.
(d) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary of the Interior
$1,000,000 for fiscal year 2004, and $15,000,000 for fiscal
year 2005, to remain available until expended.

SEC. 815. INTERNATIONAL DEMONSTRATION PROGRAM.

(a) In General.--The Secretary, in consultation with the
Administrator of the U.S. Agency for International
Development, shall conduct demonstrations of fuel cells and
associated hydrogen fueling infrastructure in countries other
than the United States, particularly in areas where an energy
infrastructure is not already well developed.
(b) Eligible Technologies.--The program may demonstrate--
(1) fuel cell vehicles in light-duty vehicle fleets;
(2) heavy-duty fuel cell on-road and off-road vehicles;
(3) stationary fuel cells in residential and commercial
buildings; or
(4) portable fuel cells, including auxiliary power units in
trucks.
(c) Participants.--
(1) Eligibility.--Foreign nations, non-profit
organizations, and private companies shall be eligible for
these pilot projects.
(2) Cooperation.--Eligible entities may perform the
projects in cooperation with United States non-profit
organizations and private companies.
(3) Cost-sharing.--The Secretary may require a commitment
from participating private companies and from participating
foreign countries.
(d) Authorization of Appropriations.--For activities
conducted under this section, there are authorized to be
appropriated to the Secretary $25,000,000 for each of fiscal
years 2006 through 2010, to remain available until expended.

SEC. 816. TRIBAL STATIONARY HYBRID POWER DEMONSTRATION.

(a) In General.--Not later than 1 year after the date of
enactment of this Act, the Secretary, in cooperation with
Indian tribes, shall develop and transmit to Congress a
strategy for a demonstration and commercial application
program to develop hybrid distributed power systems on Indian
lands that combine--
(1) one renewable electric power generating technology of 2
megawatts or less located near the site of electric energy
use; and
(2) fuel cell power generation suitable for use in
distributed power systems.
(b) Definition.--For the purposes of this section, the
terms ``Indian tribe'' and ``Indian land'' have the meaning
given such terms under Title XXVI of the Energy Policy Act of
1992 (25 U.S.C. 3501 et seq.), as amended by this Act.
(c) Authorization of Appropriations.--For activities under
this section, there are authorized to be appropriated to the
Secretary of Energy $1,000,000 for fiscal year 2005, and
$5,000,000 for each of fiscal years 2006 through 2008.

SEC. 817. DISTRIBUTED GENERATION PILOT PROGRAM.

(a) Establishment.--The Secretary shall support a
demonstration program to develop, deploy, and commercialize
distributed generation systems to significantly reduce the
cost of producing hydrogen from renewable energy for use in
fuel cells. Such program shall provide the necessary
infrastructure to test these distributed generation
technologies at pilot scales in a real-world environment.
(b) Authorization of Appropriations.--There are authorized
to be appropriated to the Secretary of Energy, to remain
available until expended, for the purposes of carrying out
this section--
(1) $10,000,000 for fiscal year 2004;
(2) $15,000,000 for fiscal year 2005; and
(3) $20,000,000 for each of fiscal years 2006 through 2008.

Subtitle C--Federal Programs

SEC. 821. PUBLIC EDUCATION AND TRAINING.

(a) Education.--The Secretary shall conduct a public
education program designed to increase public interest in and
acceptance of hydrogen energy and fuel cell technologies.
(b) Training.--The Secretary shall conduct a program to
promote university-based training in critical skills for
research in, production of, and use of hydrogen energy and
fuel cell technologies. Such program may include research
fellowships at institutions of higher education, centers of
excellence in critical technologies, internships in industry,
and such other measures as the Secretary deems appropriate.
(c) Authorization of Appropriations.--For activities
pursuant to this section, there are authorized to be
appropriated to the Secretary $7,000,000 for each of fiscal
years 2004 through 2008.

SEC. 822. HYDROGEN TRANSITION STRATEGIC PLANNING.

(a) In General.--Not later than September 30, 2004, the
head of each federal agency with annual outlays of greater
than $20,000,000 shall submit to the Director of the Office
of Management and Budget and to the Congress a hydrogen
transition strategic plan containing a comprehensive
assessment of how the transition to a hydrogen-based economy
could assist the mission, operation and regulatory program of
the agency.
(b) Contents.--At a minimum, each plan shall contain--
(1) a description of areas within the agency's control
where using hydrogen and/or fuel cells could benefit the
operation of the agency, assist in the implementation of its
regulatory functions or enhance the agency's mission; and
(2) a description of any agency management practices,
procurement policies, regulations, policies, or guidelines
that may inhibit the agency's transition to use of fuel cells
and hydrogen as an energy source.
(c) Duration and Revision.--The strategic plan shall cover
a period of not less than the five years following the fiscal
year in which it is submitted, and shall be updated and
revised at least every three years.

SEC. 823. MINIMUM FEDERAL FLEET REQUIREMENT.

(a) Section 303(b) of the Energy Policy Act of 1992 (42
U.S.C. 13212(b)) is amended by adding at the end the
following:
``(4) Hydrogen vehicles.--
``(A) Of the number of vehicles acquired under paragraph
(1)(D) by a Federal fleet of 100 or more vehicles, not less
than--
``(i) 5 percent in fiscal years 2006 and 2007;
``(ii) 10 percent in fiscal years 2008 and 2009;
``(iii) 15 percent in fiscal years 2010 and 2011; and
``(iv) 20 percent in fiscal years 2012 and thereafter,

shall be hydrogen-powered vehicles that meet standards for
performance, reliability, cost, and maintenance established
by the Secretary.

[[Page S10382]]

``(B) The Secretary may establish a lesser percentage, or
waive the requirement under subparagraph (A) for any fiscal
year entirely, if hydrogen-powered vehicles meeting the
standards set by the Secretary pursuant to subparagraph (A)
are not available at a purchase price that is less than 150
percent of the purchase price of other comparable alternative
fueled vehicles.
``(C) The Secretary may by rule, delay the implementation
of the requirements under subparagraph (A) in the event that
the Secretary determines that hydrogen-powered vehicles are
not commercially or economically available, or that fuel for
such vehicles is not commercially or economically available.
``(D) The Secretary, in consultation with the Administrator
of General Services, may for reasons of refueling
infrastructure use and cost optimization, elect to allocate
the acquisitions necessary to achieve the requirements in
subparagraph (A) to certain Federal fleets in lieu of
requiring each Federal fleet to achieve the requirements in
subparagraph (A).''.
(b) Refueling.--Section 304 of the Energy Policy Act of
1992 (42 U.S.C. 13213) is amended--
(1) by redesignating subsection (b) as subsection (c);
(2) in the second sentence of subsection (a), by striking
``If publicly'' and inserting the following:
``(b) Commercial Arrangements.--
``(1) In general.--If publicly''; and
(3) in subsection (b) (as designated by paragraph (2)), by
adding at the end the following:
``(2) Mandatory arrangements.--
``(A) In general.--In a case in which publicly available
fueling facilities are not convenient or accessible to the
locations of 2 or more Federal fleets for which hydrogen-
powered vehicles are required to be purchased under section
303(b)(4), the Federal agency for which the Federal fleets
are maintained (or the Federal agencies for which the Federal
fleets are maintained, acting jointly under a memorandum of
agreement providing for cost sharing) shall enter into a
commercial arrangement as provided in paragraph (1).
``(B) Sunset.--Subparagraph (A) ceases to be effective at
the end of fiscal year 2013.''.

SEC. 824. STATIONARY FUEL CELL PURCHASE REQUIREMENT.

(a) Requirement.--The President, acting through the
Secretary of Energy, shall seek to ensure that, to the extent
economically practicable and technically feasible, of the
total amount of electric energy the Federal Government
consumes during any fiscal year, the following amounts shall
be generated by fuel cells--
(1) not less than 1 percent in fiscal years 2006 through
2008;
(2) not less than 2 percent in fiscal years 2009 and 2010;
and
(3) not less than 3 percent in fiscal year 2011 and each
fiscal year thereafter.
(b) Compliance.--In complying with the requirements of
subsection (a), Federal agencies are encouraged to--
(1) use innovative purchasing practices;
(2) use fuel cells at the site of electricity usage and in
combined heat and power applications; and
(3) use fuel cells in stand alone power functions, such as
but not limited to battery power and backup power.
(c) Definitions.--For purposes of this section--
(1) the term ``fuel cells'' means an integrated system
comprised of a fuel cell stack assembly and balance of plant
components that converts a fuel into electricity using an
electrochemical means; and
(2) the term ``electrical energy'' includes on and off grid
power, including premium power applications, standby power
applications and electricity generation.
(d) Authorization of Appropriations.--For the purposes of
this section, there are authorized to be appropriated to the
Secretary of Energy $30,000,000 for fiscal year 2004,
$70,000,000 for fiscal year 2005, and $100,000,000 for each
of fiscal years 2006 and thereafter.

SEC. 825. DEPARTMENT OF ENERGY STRATEGY.

Not later than 1 year after the date of enactment of this
Act, the Secretary shall publish and transmit to Congress a
plan identifying critical technologies, enabling strategies
and applications, technical targets, and associated
timeframes that support the commercialization of hydrogen-
fueled fuel cell vehicles.

TITLE IX--RESEARCH AND DEVELOPMENT

SEC. 901. SHORT TITLE.

This Title may be cited as the ``Energy Research,
Development, Demonstration, and Commercial Application Act of
2003''.

SEC. 902. GOALS.

(a) In General.--In order to achieve the purposes of this
title, the Secretary shall conduct a balanced set of programs
of energy research, development, demonstration, and
commercial application, 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 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;
and
(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.--Nothing in subsection (a) or the
annually published goals creates any new authority for any
Federal agency, or may be used by a Federal agency to support
the establishment of regulatory standards or regulatory
requirements.

SEC. 903. DEFINITIONS.

For purposes of this title:
(1) The term ``Department'' means the Department of Energy.
(2) 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) 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) 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) The term ``nonmilitary energy laboratory'' means the
laboratories listed in (4) with the exclusion of (4)(G),
(4)(H), and (4)(N).
(6) The term ``Secretary'' means the Secretary of Energy.
(7) 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. 911. 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; and
(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 912--
(A) for fiscal year 2004, $20,000,000; and
(B) for fiscal year 2005, $30,000,000.
(2) For activities under section 914--
(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 915--
(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.
(c) Extended Authorization.--There are authorized to be
appropriated to the Secretary for activities under section
912, $50,000,000 for each of fiscal years 2006 through 2013.
(d) None of the funds authorized to be appropriated under
this section may be used for--
(1) the promulgation and implementation of energy
efficiency regulations;
(2) the Weatherization Assistance Program under part A of
title IV of the Energy Conservation and Production Act;
(3) the State Energy Program under part D of title III of
the Energy Policy and Conservation Act; or
(4) the Federal Energy Management Program under part 3 of
title V of the National Energy Conservation Policy Act.

SEC. 912. NEXT GENERATION LIGHTING INITIATIVE.

(a) In General.--The Secretary shall carry out a Next
Generation Lighting Initiative in

[[Page S10383]]

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;
cost-competitive and have less environmental impact.
(c) Industry Alliance.--The Secretary shall, within 3
months from the date of enactment of this section,
competitively select an Industry Alliance to represent
participants who 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) 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) 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) The information and roadmaps under (2) shall be
available to the public.
(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) Cost Sharing.--The Secretary shall require cost sharing
according to 42 U.S.C. 13542.
(g) Intellectual Property.--The Secretary may require, in
accordance with the authorities provided in 35 U.S.C.
202(a)(ii), 42 U.S.C. 2182 and 42 U.S.C. 5908, that for any
new invention from subsection (d)--
(1) that the Industry Alliance members who are active
participants in research, development and demonstration
activities related to the advanced solid-state lighting
technologies that are the subject of this legislation shall
be granted first option to negotiate with the invention
owner, at least in the field of solid-state lighting, non-
exclusive licenses and royalties on terms that are reasonable
under the circumstances;
(2) that the invention owner must offer to negotiate
licenses with the Industry Alliance participants cited in
(1), in good faith, for at least 1 year after U.S. patents
are issued on any such new invention; and
(3) such other terms as the Secretary determines are
required to promote accelerated commercialization of
inventions made under the Initiative.
(h) 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.
(i) Definitions.--As used in this section:
(1) The term ``advanced solid-state lighting'' means a
semiconducting device package and delivery system that
produces white light using externally applied voltage.
(2) The term ``research'' includes basic research on the
technologies, materials and manufacturing processes required
for white light emitting diodes.
(3) The term ``Industry Alliance'' means an entity selected
by the Secretary under subsection (c).
(4) 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. 913. 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 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.--The Director of the Office of
Science and Technology Policy shall establish an advisory
committee to--
(1) analyze and provide recommendations on potential
private sector roles and participation in the Initiative; and
(2) review and provide recommendations on the plan
described in subsection (c).
(f) Construction.--Nothing in this section provides any
Federal agency with new authority to regulate building
performance.

SEC. 914. SECONDARY ELECTRIC VEHICLE BATTERY USE PROGRAM.

(a) Definitions.--For purposes of this section:
(1) 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.
(2) 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.
(b) Program.--The Secretary shall establish and conduct a
research, development, demonstration, and commercial
application program for the secondary use of batteries. Such
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 the enactment of this Act, 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) 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
once the Department is in receipt of appropriated funds.
(2) In selecting proposals, the Secretary shall consider
diversity of battery type, geographic and climatic diversity,
and life-cycle environmental effects of the approaches.
(3) No one project selected under this section shall
receive more than 25 percent of the funds authorized for this
Program.
(4) 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) 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; and
(2) the proposer provide at least 50 percent of the costs
associated with the proposal.

SEC. 915. 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 the 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.

Subtitle B--Distributed Energy and Electric Energy Systems

SEC. 921. DISTRIBUTED ENERGY AND ELECTRIC ENERGY SYSTEMS.

(a) In General.--
(1) 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:
(A) for fiscal year 2004, $190,000,000;
(B) for fiscal year 2005, $200,000,000;
(C) for fiscal year 2006, $220,000,000;
(D) for fiscal year 2007, $240,000,000; and
(E) for fiscal year 2008, $260,000,000.
(2) For the Initiative in subsection 927(e), there are
authorized to be appropriated--
(A) for fiscal year 2004, $15,000,000;
(B) for fiscal year 2005, $20,000,000;

[[Page S10384]]

(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.
(b) Micro-Cogeneration Energy Technology.--From amounts
authorized under subsection (a), $20,000,000 for each of
fiscal years 2004 and 2005 shall be available for activities
under section 924.

SEC. 922. HYBRID DISTRIBUTED POWER SYSTEMS.

Not later than 1 year after the date of enactment of this
Act, the Secretary shall develop and transmit to the Congress
a strategy for a comprehensive research, development,
demonstration, and commercial application program to develop
hybrid distributed power systems that combine--
(1) one 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.

SEC. 923. 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. 924. 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 the use of small-
scale combined heat and power in residential heating
appliances, the use of excess power to operate other
appliances within the residence and supply of excess
generated power to the power grid.

SEC. 925. DISTRIBUTED ENERGY TECHNOLOGY DEMONSTRATION
PROGRAM.

The Secretary, within the sums authorized under section
921(a)(1), 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. 926. 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 is amended by inserting the following after
section 217 (42 U.S.C. 7144d):

``OFFICE OF ELECTRIC TRANSMISSION AND DISTRIBUTION.

``Sec. 218. (a) There is established within the Department
an Office of Electric Transmission and Distribution. This
Office shall be headed by a Director, who 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) The Director shall--
``(1) coordinate and develop a comprehensive, multi-year
strategy to improve the Nation's electricity transmission and
distribution;
``(2) ensure that the recommendations of the Secretary's
National Transmission Grid Study are implemented;
``(3) carry out the research, development, and
demonstration functions;
``(4) grant authorizations for electricity import and
export;
``(5) perform other electricity transmission and
distribution-related functions assigned by the Secretary; 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 Act
is amended by inserting after the item relating to section
217 the following new item:

``218.  Office of Electric Transmission and Distribution.''.

(2) Section 5315 of title 5, United States Code, is amended
by inserting ``Director, Office of Electric Transmission and
Distribution, Department of Energy.'' after ``Inspector
General, Department of Energy.''.

SEC. 927. ELECTRIC TRANSMISSION AND DISTRIBUTION PROGRAMS.

(a) Demonstration Program.--The Secretary, acting through
the Director of the Office of Electric Transmission and
Distribution, shall establish a comprehensive research,
development, and demonstration program to ensure the
reliability, efficiency, and environmental integrity of
electrical transmission and distribution systems. This
program shall include--
(1) advanced energy and energy storage technologies,
materials, and systems, giving priority to new transmission
technologies, including 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 shall 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 of infrastructure
technologies.
(e) Power Delivery Research Initiative.--The Secretary
shall establish a research, development and demonstration
initiative specifically focused on power delivery utilizing
components incorporating high temperature superconductivity.
(1) Goals of this Initiative shall be to--
(A) establish world-class 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.
(2) 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.
(f) Transmission and Distribution Grid Planning and
Operations Initiative.--The Secretary shall establish a
research, development and demonstration initiative
specifically focused on tools needed to plan, operate and
expand the transmission and distribution grids in the
presence of competitive market mechanisms for energy, load
demand, customer response and ancillary services. Goals of
this Initiative shall be to--
(1) develop and utilize a geographically distributed
Center, consisting of research universities and national
laboratories, with expertise and facilities to develop the
underlying theory and software for power system application,
and to assure commercial development in partnership with
software vendors and utilities;
(2) provide technical leadership in engineering and
economic analysis for reliability and efficiency of power
systems planning and operations in the presence of
competitive markets for electricity;
(3) model, simulate and experiment with new market
mechanisms and operating practices to understand and optimize
such new methods before actual use; and
(4) provide technical support and technology transfer to
electric utilities and other participants in the domestic
electric industry and marketplace.

Subtitle C--Renewable Energy

SEC. 931. 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:

[[Page S10385]]

(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; and
(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 932:
(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; and
(5) for fiscal year 2008, $192,000,000.
(c) Biodiesel Engine Testing.--From amounts authorized
under subsection (a), $5,000,000 is authorized to be
appropriated in each of fiscal years 2004 and 2008 to carry
out section 933.
(d) Concentrating Solar Power.--From amounts authorized
under subsection (a), the following sums are authorized to be
appropriated to carry out section 934:
(1) for fiscal year 2004, $20,000,000;
(2) for fiscal year 2005, $40,000,000; and
(3) for each of fiscal years 2006, 2007 and 2008,
$50,000,000.
(e) Limits on Use of Funds.--
(1) None of the funds authorized to be appropriated under
this section may be used for Renewable Support and
Implementation.
(2) 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.
(f) Consultation.--In carrying out this section, 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. 932. BIOENERGY PROGRAMS.

(a) In General.--The Secretary shall conduct a program of
research, development, demonstration, and commercial
application for bioenergy, including--
(1) biopower energy systems;
(2) biofuels;
(3) bioproducts;
(4) integrated biorefineries that may produce biopower,
biofuels and bioproducts;
(5) cross-cutting research and development in feedstocks;
and
(6) economic analysis.
(b) Biofuels and Bioproducts.--The goals of the biofuels
and bioproducts programs shall be to develop, in partnership
with industry--
(1) advanced biochemical and thermo-chemical conversion
technologies capable of making fuels from cellulosic
feedstocks that are price-competitive with gasoline or diesel
in either internal combustion engines or fuel cell-powered
vehicles; and
(2) advanced biotechnology processes capable of making
biofuels and bioproducts with emphasis on development of
biorefinery technologies using enzyme-based processing
systems.
(c) Definition.--For purposes of (b), the term ``cellulosic
feedstock'' means any portion of a crop not normally used in
food production or any non-food crop grown for the purpose of
producing biomass feedstock.

SEC. 933. BIODIESEL ENGINE TESTING PROGRAM.

(a) In General.--Not later that 180 days after 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 study shall provide for testing to
determine the impact of biodiesel on current and future
emission control technologies, with emphasis on--
(1) the impact of biodiesel on emissions warranty, in-use
liability, and anti-tampering 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, the Secretary shall provide an interim report to
Congress on the findings of this study, 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) Definition.--For purposes of this section, the term
``biodiesel'' means a diesel fuel substitute produced from
non-petroleum 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. 934. CONCENTRATING SOLAR POWER RESEARCH 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
co-generation 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 thermo-chemical cycles for hydrogen
production at the temperatures attainable with concentrating
solar power;
(3) evaluation of materials issues for the thermo-chemical
cycles in (2);
(4) system architectures and economics studies; and
(5) coordination with activities in the Advanced Reactor
Hydrogen Co-generation Project on high temperature materials,
thermo-chemical cycle and economic issues.
(b) Assessment.--In carrying out the program under this
section, the Secretary is directed to 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 DOE-funded reviews of that
report and provide an assessment of the potential impact of
this 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 section, the Secretary shall provide a
report to Congress on the economic and technical potential
for electricity or hydrogen production, with or without co-
generation, with concentrating solar power, including the
economic and technical feasibility of potential construction
of a pilot demonstration facility suitable for commercial
production of electricity and/or hydrogen from concentrating
solar power.

SEC. 935. MISCELLANEOUS PROJECTS.

The Secretary shall conduct research, development,
demonstration, and commercial application programs for--
(1) ocean energy, including wave energy;
(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; and
(3) renewable energy technologies for cogeneration of
hydrogen and electricity.

Subtitle D--Nuclear Energy

SEC. 941. 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, $305,000,000;
(3) for fiscal year 2006, $330,000,000;
(4) for fiscal year 2007, $355,000,000; and
(5) for fiscal year 2008, $495,000,000.
(b) Nuclear Infrastructure Support.--The following sums are
authorized to be appropriated to the Secretary for activities
under section 942(f):
(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; and
(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 943--
(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 944--
(A) for fiscal year 2004, $33,000,000;
(B) for fiscal year 2005, $37,900,000;
(C) for fiscal year 2006, $43,600,000;
(D) for fiscal year 2007, $50,100,000; and
(E) for fiscal year 2008, $56,000,000.
(3) For activities under section 946, for each of fiscal
years 2004 through 2008, $6,000,000.
(d) None of the funds authorized under this section may be
used for decommissioning the Fast Flux Test Facility.

SEC. 942. NUCLEAR ENERGY RESEARCH 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. The Program shall
include--
(1) utilization of the expertise and capabilities of
industry, universities, and National Laboratories in
evaluation of advanced nuclear fuel cycles and fuels testing;
(2) consideration of a variety of reactor designs suitable
for both developed and developing nations;

[[Page S10386]]

(3) participation of international collaborators in
research, development, and design efforts as appropriate; and
(4) encouragement for university and industry
participation.
(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) Reactor Production of Hydrogen.--The Secretary shall
carry out research to examine designs for high-temperature
reactors capable of producing large-scale quantities of
hydrogen using thermo-chemical processes.
(f) 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 the Congress for fiscal year
2006. Such strategy shall provide a cost-effective means
for--
(1) maintaining existing facilities and infrastructure, as
needed;
(2) closing unneeded facilities;
(3) making facility upgrades and modifications; and
(4) building new facilities.

SEC. 943. 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 which 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 this
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. 944. 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 Offices of Nuclear
Energy, Science and Technology and Civilian Radioactive Waste
Management. The Secretary shall support communication and
outreach related to nuclear science, engineering and nuclear
waste management.
(c) Maintaining University Research and Training Reactors
and Associated Infrastructure.--Activities under this section
may include--
(1) converting research 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 training reactors as part of a student training
program; and
(3) providing funding 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 reactor at an institution of higher education used
in the research project.

SEC. 945. SECURITY OF NUCLEAR FACILITIES.

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 nuclear facilities
from natural phenomena and the security of nuclear facilities
from deliberate attacks.

SEC. 946. ALTERNATIVES TO INDUSTRIAL RADIOACTIVE SOURCES.

(a) Survey.--Not later than August 1, 2004, the Secretary
shall provide to the Congress results of a survey of
industrial applications of large radioactive sources. The
survey shall--
(1) consider well-logging sources as one class of
industrial sources;
(2) include information on current domestic and
international Department, Department of Defense, State
Department and commercial programs to manage and dispose of
radioactive sources; and
(3) discuss available disposal options for currently
deployed or future sources and, if deficiencies are noted for
either deployed or future sources, recommend legislative
options that Congress may consider to remedy identified
deficiencies.
(b) Plan.--In conjunction with the survey in subsection
(a), the Secretary shall establish a research and development
program to develop alternatives to such sources that reduce
safety, environmental, or proliferation risks to either
workers using the sources or the public. Miniaturized
particle accelerators for well-logging or other industrial
applications and portable accelerators for production of
short-lived radioactive materials at an industrial site shall
be considered as part of the research and development
efforts. Details of the program plan shall be provided to the
Congress by August 1, 2004.

Subtitle E--Fossil Energy

SEC. 951. 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
subtitle:
(1) for fiscal year 2004, $523,000,000;
(2) for fiscal year 2005, $542,000,000;
(3) for fiscal year 2006, $558,000,000;
(4) for fiscal year 2007, $585,000,000; and
(5) for fiscal year 2008, $600,000,000.
(b) Allocations.--From amounts authorized under subsection
(a), the following sums are authorized:
(1) For activities under section 952(b)(2), $28,000,000 for
each of the fiscal years 2004 through 2008.
(2) For activities under section 953--
(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 954, to remain available
until expended--
(A) for fiscal year 2004, $200,000,000;
(B) for fiscal year 2005, $210,000,000; and
(C) for fiscal year 2006, $220,500,000.
(4) For the Office of Arctic Energy under section 3197 of
the Floyd D. Spence National Defense Authorization Act for
Fiscal Year 2001 (Public Law 106-398), $25,000,000 for each
of fiscal years 2004 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 (Public Law 106-398),
$25,000,000 for each of fiscal years 2009 through 2012.
(d) Limits on Use of Funds.--
(1) None of the funds authorized under this section may be
used for Fossil Energy Environmental Restoration or Import/
Export Authorization.
(2) 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. 952. 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 shale; and
(7) related environmental research.
(b) Fuel Cells.--
(1) 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) The demonstrations shall include fuel cell proton
exchange membrane 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 the 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 the 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) The Secretary shall establish a national center or
consortium of excellence in clean

[[Page S10387]]

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) The center or consortium will conduct a program of
research, development, demonstration and commercial
application on integrating the following six 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;
and
(F) education on energy and power generation issues.

SEC. 953. RESEARCH AND DEVELOPMENT FOR COAL MINING
TECHNOLOGIES.

(a) Establishment.--The Secretary shall carry out a program
for 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 form 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 coal bed electromagnetic wave
imaging and techniques for horizontal drilling 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. 954. COAL AND RELATED TECHNOLOGIES PROGRAM.

(a) In General.--In addition to the program authorized
under Title II of this Act, the Secretary of Energy shall
conduct a program of technology research, development and
demonstration and commercial application for coal and power
systems, including programs to facilitate 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; and
(8) advanced coal-related research.
(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 of Energy 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 section, 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 section and every four 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 Title II of this Act.

SEC. 955. COMPLEX WELL TECHNOLOGY TESTING FACILITY.

The Secretary of Energy, 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.

Subtitle F--Science

SEC. 961. 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 967(c)(2)(D), and including basic
energy sciences, advanced scientific and 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, $4,586,000,000;
(4) for fiscal year 2007, $5,000,000,000; and
(5) For fiscal year 2008, $5,400,000,000.
(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 section 962--
(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 965--
(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 966--
(A) for fiscal year 2004, $270,000,000;
(B) for fiscal year 2005, $290,000,000;
(C) for fiscal year 2006, $310,000,000;
(D) for fiscal year 2007, $330,000,000; and
(E) for fiscal year 2008, $375,000,000.
(5) For activities under subsection 966(c), from the
amounts authorized under subparagraph (4)--
(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 968--
(A) for fiscal year 2004, $100,000,000;
(B) for fiscal year 2005, $170,000,000;
(C) for fiscal year 2006, $325,000,000;
(D) for fiscal year 2007, $415,000,000; and
(E) for fiscal year 2008, $455,000,000.
(7) For construction and ancillary equipment of the Genomes
to Life User Facilities under section 968(d), of funds
authorized under (6)--
(A) for fiscal year 2004, $16,000,000;
(B) for fiscal year 2005, $70,000,000;
(C) for fiscal year 2006, $175,000,000;
(D) for fiscal year 2007, $215,000,000; and
(E) for fiscal year 2008, $205,000,000.
(8) For activities in the Water Supply Technologies Program
under section 970, $30,000,000 for each of fiscal years 2004
through 2008.
(c) In addition to the funds authorized under subsection
(b)(1), the following sums are authorized for construction
costs associated with the ITER project under section 962--
(1) for fiscal year 2006, $55,000,000;
(2) for fiscal year 2007, $95,000,000; and
(3) for fiscal year 2008, $115,000,000.

SEC. 962. UNITED STATES PARTICIPATION IN ITER.

(a) Participation.--
(1) The Secretary of Energy is authorized to undertake full
scientific and technological cooperation in the International
Thermonuclear Experimental Reactor project (referred to in
this title as ``ITER'').
(2) In the event that ITER fails to go forward within a
reasonable period of time, the Secretary shall send to
Congress a plan, including costs and schedules, for
implementing the domestic burning plasma experiment known as
the Fusion Ignition Research Experiment. Such a plan shall be
developed with full consultation with the Fusion Energy
Sciences Advisory Committee and be reviewed by the National
Research Council.
(3) It is the intent of Congress that such sums shall be
largely for work performed in the United States and that such
work contributes the maximum amount possible to the U.S.
scientific and technological base.
(b) Planning.--
(1) Not later than 180 days of 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 goals
of this section. 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;

[[Page S10388]]

(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) Such plan shall also address the status of and, to the
degree possible, costs and schedules for--
(A) in coordination with the program in section 969, 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. 963. SPALLATION NEUTRON SOURCE.

(a) Definition.--For the purposes of this section, the term
``Spallation Neutron Source'' means Department Project 9909E
09334, 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) Authorization of Appropriations.--The total amount
obligated by the Department, including prior year
appropriations, for the Spallation Neutron Source may 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. 964. 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) The Secretary shall prepare and transmit, along with
the President's budget request to the Congress for fiscal
year 2006, a report containing the strategy developed under
subsection (a).
(2) 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 ten-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. 965. CATALYSIS RESEARCH 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 sub-nanometer
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 this
program, 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 three 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. 966. NANOSCALE SCIENCE AND ENGINEERING RESEARCH.

(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 this 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;
and
(4) coordinate research and development activities with
other DOE programs, industry and other Federal agencies.
(c) Nanoscience and Nanoengineering Research Centers and
Major Instrumentation.--
(1) 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) 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 under paragraph (1) may include electron
microcharacterization facilities, microlithography
facilities, scanning probe facilities, and related
instrumentation.
(4) The Secretary shall encourage collaborations among DOE
programs, institutions of higher education, laboratories, and
industry at facilities under this subsection.

SEC. 967. 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 DOE 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) 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--

[[Page S10389]]

(1) the Accelerated Strategic Computing Initiative of the
National Nuclear Security Administration; and
(2) other national efforts related to advanced scientific
computing for science and engineering.

SEC. 968. GENOMES TO LIFE PROGRAM.

(a) Establishment.--The Secretary shall carry out a program
of research, development, demonstration, and commercial
application, to be known as the Genomes to Life Program, in
systems biology and proteomics consistent with the
Department's statutory authorities.
(b) Planning.--
(1) The Secretary shall prepare a program plan describing
how knowledge and capabilities would be developed by the
program and applied to Department missions relating to energy
security, environmental cleanup, and national security.
(2) The program plan will be developed in consultation with
other relevant Department technology programs.
(3) The program plan shall focus science and technology on
long-term goals, including--
(A) contributing to U.S. independence from foreign energy
sources, including production of hydrogen;
(B) converting carbon dioxide to organic carbon;
(C) advancing environmental cleanup;
(D) providing the science and technology for new
biotechnology industries; and
(E) improving national security and combating bioterrorism.
(4) The program plan shall establish specific short-term
goals and update these goals with the Secretary's annual
budget submission.
(c) Program Execution.--In carrying out the program under
this Act, the Secretary shall--
(1) support individual investigators and multidisciplinary
teams of investigators;
(2) subject to subsection (d), develop, plan, construct,
acquire, or operate special equipment or facilities for the
use of investigators conducting research, development,
demonstration, or commercial application in systems biology
and proteomics;
(3) support technology transfer activities to benefit
industry and other users of systems biology and proteomics;
and
(4) coordinate activities by the Department with industry
and other federal agencies.
(d) Genomes to Life User Facilities and Ancillary
Equipment.--
(1) Within the funds authorized to be appropriated pursuant
to this Act, the amounts specified under section 961(b)(7)
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) Projects under paragraph (1) may include--
(A) the identification and characterization of multiprotein
complexes;
(B) characterization of gene regulatory networks;
(C) characterization of the functional repertoire of
complex microbial communities in their natural environments
at the molecular level; and
(D) development of computational methods and capabilities
to advance understanding of complex biological systems and
predict their behavior.
(3) 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.
(4) 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.

SEC. 969. 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. 970. ENERGY-WATER SUPPLY TECHNOLOGIES PROGRAM.

(a) Establishment.--There is established within the Office
of Science, Office of Biological and Environmental Research,
the ``Energy-Water Supply Technologies Program,'' to study
energy-related issues associated with water resources and
municipal waterworks and to study water supply issues related
to energy production.
(b) Definitions.--
(1) The term ``Foundation'' means the American Water Works
Association Research Foundation.
(2) 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).
(3) The term ``Program'' means the Water Supply
Technologies Program established by section 970(a).
(c) Program Areas.--The program shall conduct research and
development, including--
(1) arsenic removal under subsection (d);
(2) desalination research program under subsection (e);
(3) the water and energy sustainability program under
subsection (f); and
(4) other energy-intensive water supply and treatment
technologies and other technologies selected by the
Secretary.
(d) Arsenic Removal Program.--
(1) As soon as practicable after the date of enactment of
this Act, the Secretary shall enter into a contract with the
Foundation to utilize the facilities, institutions and
relationships established in the ``Consolidated
Appropriations Resolution, 2003'' as described in Senate
Report 107-220 that will carry out a research program to
develop and demonstrate innovative arsenic removal
technologies.
(2) In carrying out the arsenic removal program, the
Foundation shall, to the maximum extent practicable, conduct
research on means of--
(A) reducing energy costs incurred in using arsenic removal
technologies;
(B) minimizing materials, operating, and maintenance costs
incurred in using arsenic removal technologies; and
(C) minimizing any quantities of waste (especially
hazardous waste) that result from use of arsenic removal
technologies.
(3) The Foundation shall carry out peer-reviewed research
and demonstration projects to develop and demonstrate water
purification technologies.
(4) In carrying out the arsenic removal program--
(A) demonstration projects will be implemented with
municipal water system partners to demonstrate the
applicability of innovative arsenic removal technologies in
areas with different water chemistries representative of
areas across the United States with arsenic levels near or
exceeding EPA guidelines; and
(B) not less than 40 percent of the funds of the Department
used for demonstration projects under the arsenic removal
program shall be expended on projects focused on needs of and
in partnership with rural communities or Indian tribes.
(5) The Foundation shall develop evaluations of cost
effectiveness of arsenic removal technologies used in the
program and an education, training, and technology transfer
component for the program.
(6) The Secretary shall consult with the Administrator of
the Environmental Protection Agency to ensure that activities
under the arsenic removal program are coordinated with
appropriate programs of the Environmental Protection Agency
and other federal agencies, state programs and academia.
(7) Not later than 1 year after the date of commencement of
the arsenic removal program, and annually thereafter, the
Secretary shall submit to Congress a report on the results of
the arsenic removal program.
(e) Desalination Program.--
(1) The Secretary, in cooperation with the Commissioner of
Reclamation, shall carry out a desalination research program
in accordance with the desalination technology progress plan
developed in 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) The desalination program shall--
(A) draw on the national laboratory partnership established
with the Bureau of Reclamation to develop the January 2003
national Desalination and Water Purification Technology
Roadmap for next-generation desalination technology;
(B) focus on research relating to, and development and
demonstration of, technologies that are appropriate for use
in desalinating brackish groundwater, wastewater and other
saline water supplies; disposal of residual brine or salt;
and
(C) consider the use of renewable energy sources.
(3) Under the desalination program, funds made available
may be used for construction projects, including completion
of the National Desalination Research Center for brackish
groundwater and ongoing facility operational costs.
(4) The Secretary and the Commissioner of Reclamation shall
jointly establish a steering committee for the desalination
program. The steering committee shall be jointly chaired by 1
representative from this Program and 1 representative from
the Bureau of Reclamation.
(f) Water and Energy Sustainability Program.--
(1) The Secretary shall carry out a research program to
develop understanding and technologies to assist in ensuring
that sufficient quantities of water are available to meet
present and future requirements.
(2) Under this program and in collaboration with other
programs within the Department including those within the
Offices of Fossil Energy and Energy Efficiency and Renewable
Energy, the Secretary of the Interior, Army Corps of
Engineers, Environmental Protection Agency, Department of
Commerce, Department of Defense, state agencies, non-
governmental agencies and

[[Page S10390]]

academia, the Secretary shall assess the current state of
knowledge and program activities concerning--
(A) future water resources needed to support energy
production within the United States including but not limited
to the water needs for hydropower and thermo-electric power
generation;
(B) future energy resources needed to support development
of water purification and treatment including desalination
and long-distance water conveyance;
(C) reuse and treatment of water produced as a by-product
of oil and gas extraction;
(D) use of impaired and non-traditional water supplies for
energy production and other uses; and
(E) technologies to reduce water use in energy production.
(3) In addition to the assessments in (2), the Secretary
shall--
(A) develop a research plan defining the scientific and
technology development needs and activities required to
support long-term water needs and planning for energy
sustainability, use of impaired water for energy production
and other uses, and reduction of water use in energy
production;
(B) carry out the research plan required under (A)
including development of numerical models, decision analysis
tools, economic analysis tools, databases, planning
methodologies and strategies;
(C) implement at least three planning demonstration
projects using the models, tools and planning approaches
developed under subparagraph (B) and assess the viability of
these tools at the scale of river basins with at least one
demonstration involving an international border; and
(D) transfer these tools to other federal agencies, state
agencies, non-profit organizations, industry and academia for
use in their energy and water sustainability efforts.
(4) 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 describes
the research elements described under paragraph (2), and
makes recommendations for a management structure that
optimizes use of Federal resources and programs.
(g) Cost Sharing.--
(1) Research projects under this section shall not require
cost-sharing.
(2) Each demonstration project carried out under the
Program shall be carried out on a cost-shared basis, as
determined by the Secretary.
(3) With respect to a demonstration project, the Secretary
may accept in-kind contributions, and waive the cost-sharing
requirement in appropriate circumstances.

Subtitle G--Energy and Environment

SEC. 971. 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 which 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. 972. 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.

Subtitle H--Management

SEC. 981. AVAILABILITY OF FUNDS.

Funds authorized to be appropriated to the Department under
this title shall remain available until expended.

SEC. 982. 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. Cost sharing is not required for
research and development of a basic or fundamental nature.
(b) Demonstration and Commercial Application.--Except as
otherwise provided in this subtitle, the Secretary shall
require at least 50 percent of the costs directly and
specifically related to any demonstration or commercial
application project under this subtitle 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.

SEC. 983. 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. 984. EXTERNAL TECHNICAL REVIEW OF DEPARTMENTAL PROGRAMS.

(a) National Energy Research and Development Advisory
Boards.--
(1) The Secretary shall establish one 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) 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) Utilization of Existing Committees.--The Secretary
shall continue to use the scientific program advisory
committees chartered under the Federal Advisory Committee Act
by the Office of Science to oversee research and development
programs under that Office.
(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 semi-annually 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 902, 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 902, 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 the Congress reports
containing the results of all such reviews and assessments.

SEC. 985. 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 coordinate the activities of the Technology
Transfer Working Group, shall oversee the expenditure of
funds allocated to the Technology Transfer Working Group, and
shall 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.

SEC. 986. 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

[[Page S10391]]

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 one 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 3109205 0918(e) of the Federal
Acquisition Regulations 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 towards 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) 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) 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; and
(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) 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) 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. 987. 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 in procurement and collaborative
research 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 concern's 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) 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) 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 is authorized
to be appropriated to the Secretary for activities under this
section $5,000,000 for each of fiscal years 2004 through
2008.

SEC. 988. MOBILITY OF SCIENTIFIC AND TECHNICAL PERSONNEL.

Not later than 2 years after the date of enactment of this
section, the Secretary shall transmit a report to the
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 inter-laboratory exchange of
scientific and technical personnel.

SEC. 989. 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 research,
development, demonstration, and commercial application cycle
for 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) report to the Congress on recommendations developed as
a result of the study.

SEC. 990. 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, facility planners and
managers, State and local governments, and other entities.

SEC. 991. 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 the
Congress a report notifying the Congress of the waiver and
setting forth the reasons for the

[[Page S10392]]

waiver at least 60 days prior to the date of the award of
such a contract.

SEC. 992. 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 the Congress a
report explaining how such amounts will be distributed among
the authorizations contained in this title.
(b) Prohibition.--
(1) 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 the Congress a report described in
subsection (c) and a period of 30 days has elapsed after such
committees receive the report.
(2) 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. 993. 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. 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. 994. IMPROVED COORDINATION AND MANAGEMENT OF CIVILIAN
SCIENCE AND TECHNOLOGY PROGRAMS.

(a) Effective Top-Level Coordination of Research and
Development Programs.--Section 202(b) of the Department of
Energy Organization Act (42 U.S.C. 7132(b)) is amended to
read as follows:
``(b)(1) There shall be in the Department an Under
Secretary for Energy and Science, who shall be appointed by
the President, by and with the advice and consent of the
Senate. The Under Secretary shall be compensated at the rate
provided for at level III of the Executive Schedule under
section 5314 of title 5, United States Code.
``(2) The Under Secretary for Energy and Science shall be
appointed from among persons who--
``(A) have extensive background in scientific or
engineering fields; and
``(B) are well qualified to manage the civilian research
and development programs of the Department of Energy.
``(3) The Under Secretary for Energy and Science shall--
``(A) serve as the Science and Technology Advisor to the
Secretary;
``(B) monitor the Department's research and development
programs in order to advise the Secretary with respect to any
undesirable duplication or gaps in such programs;
``(C) advise the Secretary with respect to the well-being
and management of the multipurpose laboratories under the
jurisdiction of the Department;
``(D) advise the Secretary with respect to education and
training activities required for effective short- and long-
term basic and applied research activities of the Department;
``(E) advise the Secretary with respect to grants and other
forms of financial assistance required for effective short-
and long-term basic and applied research activities of the
Department; and
``(F) exercise authority and responsibility over Assistant
Secretaries carrying out energy research and development and
energy technology functions under sections 203 and 209, as
well as other elements of the Department assigned by the
Secretary.''.
(b) Reconfiguration of Position of Director of the Office
of Science.--
(1) Section 209 of the Department of Energy Organization
Act (41 U.S.C. 7139) is amended to read as follows:

``office of science

``Sec. 209. (a) There shall be within the Department an
Office of Science, to be headed by an Assistant Secretary for
Science, who shall be appointed by the President, by and with
the advice and consent of the Senate, and who shall be
compensated at the rate provided for level IV of the
Executive Schedule under section 5315 of title 5, United
States Code.
``(b) The Assistant Secretary for Science shall be in
addition to the Assistant Secretaries provided for under
section 203 of this Act.
``(c) It shall be the duty and responsibility of the
Assistant Secretary for Science to carry out the fundamental
science and engineering research functions of the Department,
including the responsibility for policy and management of
such research, as well as other functions vested in the
Secretary which he may assign to the Assistant Secretary.''.
(2) Notwithstanding section 3345(b)(1) of title 5, United
States Code, the President may designate the Director of the
Office of Science immediately prior to the effective date of
this Act to act in the office of the Assistant Secretary of
Energy for Science until the office is filled as provided in
section 209 of the Department of Energy Organization Act, as
amended by paragraph (1). While so acting, such person shall
receive compensation at the rate provided by this Act for the
office of Assistant Secretary for Science.
(c) Additional Assistant Secretary Position To Enable
Improved Management of Nuclear Energy Issues.--
(1) Section 203(a) of the Department of Energy Organization
Act (42 U.S.C. 7133(a)) is amended by striking ``There shall
be in the Department six Assistant Secretaries'' and
inserting ``Except as provided in section 209, there shall be
in the Department seven Assistant Secretaries''.
(2) It is the sense of the Congress that the leadership for
departmental missions in nuclear energy should be at the
Assistant Secretary level.
(d) Technical and Conforming Amendments.--
(1) Section 202 of the Department of Energy Organization
Act (42 U.S.C. 7132) is further amended by adding the
following at the end:
``(d) There shall be in the Department an Under Secretary,
who shall be appointed by the President, by and with the
advice and consent of the Senate, and who shall perform such
functions and duties as the Secretary shall prescribe,
consistent with this section. The Under Secretary shall be
compensated at the rate provided for level III of the
Executive Schedule under section 5314 of title 5, United
States Code.
``(e) There shall be in the Department a General Counsel,
who shall be appointed by the President, by and with the
advice and consent of the Senate, and who shall perform such
functions and duties as the Secretary shall prescribe. The
General Counsel shall be compensated at the rate provided for
level IV of the Executive Schedule under section 5315 of
title 5, United States Code.''.
(2) Section 5314 of title 5, United States Code, is amended
by striking ``Under Secretaries of Energy (2)'' and inserting
``Under Secretaries of Energy (3)''.
(3) Section 5315 of title 5, United States Code, is amended
by--
(A) striking ``Director, Office of Science, Department of
Energy.''; and
(B) striking ``Assistant Secretaries of Energy (6)'' and
inserting ``Assistant Secretaries of Energy (8)''.
(4) 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. 995. EDUCATIONAL PROGRAMS IN SCIENCE AND MATHEMATICS.

(a) Section 3165a of the Department of Energy Science
Education Enhancement Act (42 U.S.C. 7381a) is amended by
adding at the end:
``(14) Support competitive events for students, under
supervision of teachers, designed to encourage student
interest and knowledge in science and mathematics.''.
(b) Section 3169 of the Department of Energy Science
Education Enhancement Act (42 U.S.C. 7381e), as redesignated
by this Act, is amended by inserting before the period: ``;
and $40,000,000 for each of fiscal years 2004 through
2008.''.

SEC. 996. 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).
``(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 determines the use of a standard contract,
grant, or cooperative agreement for the project is not
feasible or appropriate.

[[Page S10393]]

``(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 to the party submitting the information entering
into a transaction under paragraph (1); 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 section, the Secretary shall prescribe guidelines for
using other transactions authorized by the amendment under
subsection (a). 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.''.

SEC. 997. 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.

TITLE X--PERSONNEL AND TRAINING

SEC. 1001. WORKFORCE TRENDS AND TRAINEESHIP GRANTS.

(a) Workforce Trends.--
(1) The Secretary of Energy (in this title referred to as
the ``Secretary''), in consultation with the Secretary of
Labor and utilizing statistical data collected by the
Secretary of Labor, shall monitor trends in the workforce of
skilled technical personnel supporting energy technology
industries, including renewable energy industries, companies
developing and commercializing devices to increase energy
efficiency, the oil and gas industry, the nuclear power
industry, the coal industry, and other industrial sectors as
the Secretary may deem appropriate.
(2) The Secretary shall report to the Congress whenever the
Secretary determines that significant national shortfalls of
skilled technical personnel in one or more energy industry
segments are forecast or have occurred.
(b) Traineeship Grants for Skilled Technical Personnel.--
The Secretary, in consultation with the Secretary of Labor,
may establish grant programs in the appropriate offices of
the Department of Energy to enhance training of skilled
technical personnel for which a shortfall is determined under
subsection (a).
(c) Definition.--For purposes of this section, the term
``skilled technical personnel'' means journey and apprentice
level workers who are enrolled in or have completed a State
or federally recognized apprenticeship program and other
skilled workers in energy technology industries.
(d) Authorization of Appropriations.--For the purposes of
this section, there are authorized to be appropriated to the
Secretary $20,000,000 for each of fiscal years 2004 through
2008, to remain available until expended.

SEC. 1002. RESEARCH FELLOWSHIPS IN ENERGY RESEARCH.

(a) Postdoctoral Fellowships.--The Secretary shall
establish a program of fellowships to encourage outstanding
young scientists and engineers to pursue postdoctoral
research appointments in energy research and development at
institutions of higher education of their choice.
(b) Distinguished Senior Research Fellowships.--The
Secretary shall establish a program of fellowships to allow
outstanding senior researchers in energy research and
development and their research groups to explore research and
development topics of their choosing for a fixed period of
time. Awards under this program shall be made on the basis of
past scientific or technical accomplishment and promise for
continued accomplishment during the period of support, which
shall not be less than 3 years.
(c) Authorization of Appropriations.--For the purposes of
this section, there are authorized to be appropriated to the
Secretary $40,000,000 for each of fiscal years 2004 through
2008, to remain available until expended.

SEC. 1003. TRAINING GUIDELINES FOR ELECTRIC ENERGY INDUSTRY
PERSONNEL.

The Secretary of Labor, in consultation with the Secretary
of Energy 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. 1004. NATIONAL CENTER ON ENERGY MANAGEMENT AND BUILDING
TECHNOLOGIES.

The Secretary shall support the establishment of a National
Center on Energy Management and Building Technologies, to
carry out research, education, and training activities to
facilitate the improvement of energy efficiency and indoor
air quality in industrial, commercial, and residential
buildings. The National Center shall be established by--
(1) recognized representatives of employees in the heating,
ventilation, and air-conditioning industry;
(2) contractors that install and maintain heating,
ventilation, and air-conditioning systems and equipment;
(3) manufacturers of heating, ventilation, and air-
conditioning systems and equipment;
(4) representatives of the advanced building envelope
industry, including design, windows, lighting, and insulation
industries; and
(5) other entities as the Secretary may deem appropriate.

SEC. 1005. 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 Under-represented
Groups.--In carrying out a program under subsection (a), the
Secretary shall give priority to activities that are designed
to encourage students from under-represented 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 903(5) 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 903(8) of the Energy Policy Act of 2003.
``(5) Tribal college.--The term `tribal college' has the
meaning given the term `tribally controlled college or
university' in section 2(a) of the Tribally Controlled
College or University Assistance Act of 1978 (25 U.S.C.
1801(a)).
``(b) Education Partnership.--The Secretary shall direct
the Director of each National Laboratory, and may direct 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 this section, the Secretary shall submit to the
Congress a report on the activities carried out under this
section.''.

[[Page S10394]]

SEC. 1006. 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 electric power generation plants.
(b) Role.--The Center shall provide both training and
continuing education relating to 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 on-
site as well as Internet-based training.

SEC. 1007. FEDERAL MINE INSPECTORS.

In light of projected retirements of Federal mine
inspectors and the need for additional personnel, the
Secretary of Labor shall hire, train, and deploy such
additional skilled Federal mine inspectors as necessary to
ensure the availability of skilled and experienced
individuals and to maintain the number of Federal mine
inspectors at or above the levels authorized by law or
established by regulation.

TITLE XI--ELECTRICITY

SEC. 1101. 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' means any person or Federal or
State agency (including any municipality) that sells electric
energy; such term includes the Tennessee Valley Authority and
each Federal power marketing agency;''.
(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' means an entity, including
any entity described in section 201(f), that owns or operates
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.--At the end of section (3) of
the Federal Power Act, add the following:
``(26) `unregulated transmitting utility' means an entity
that--
``(A) owns or operates facilities used for the transmission
of electric energy in interstate commerce, and
``(B) is an entity described in section 201(f);
``(27) `electric cooperative' means a cooperatively owned
electric utility;
``(28) `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 non-discriminatory access
to such facilities; and
``(29) `Independent System Operator' or `ISO' means an
entity used for the transmission of electric energy and which
has been 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 non-
discriminatory access to such facilities.''.
(d) Additional Modifications.--
(1) Section 210(b)(2) of the Federal Power Act (16 U.S.C.
824(b)(2)) is amended by striking ``The'' the first time it
appears and inserting, ``Notwithstanding section 201(f),
the''.
(2) Section 201(f) of the Federal Power Act (16 U.S.C.
824(f)) is amended by adding after ``political subdivision of
a state,'' ``an electric cooperative that has financing under
the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.)
or sells less than 4,000,000 megawatt hours of electricity
per year,''.
(e) For the purposes of this title, the term ``Commission''
means the Federal Energy Regulatory Commission.

Subtitle A--Reliability

SEC. 1111. ELECTRIC RELIABILITY STANDARDS.

(a) Part II of the Federal Power Act (16 U.S.C. 824 et
seq.) is amended by adding at the end the following:

``electric reliability

``SEC. 215. (a) For the 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 components and the design of planned additions
or modifications to such components 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
components or to construct new transmission capacity or
generation capacity.
``(4) The term `reliable operation' means operating the
components 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
components.
``(5) The term `Interconnection' means a geographic area in
which the operation of bulkpower system components is
synchronized such that the failure of one 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 portion of the system within their control.
``(6) The term `transmission organization' means an RTO 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) 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 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. 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) Following the issuance of a Commission rule under
subsection (b), any person may submit an application to the
Commission for certification as the Electric Reliability
Organization. The Commission may certify one such ERO if the
Commission determines that such ERO--
``(1) has the ability to develop and enforce, subject to
subsection (d)(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 bulkpower 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)(1) The ERO 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 ERO 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 ERO 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 ERO 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 ERO 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) 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,

[[Page S10395]]

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)(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 establish 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 an independent
board, a balanced stakeholder board, or 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) The ERO 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) The ERO shall conduct periodic assessments of the
reliability and adequacy of the bulkpower system in North
America.
``(h) 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)(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 ERO 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, may
stay the effectiveness of any State action, pending the
Commission's issuance of a final order.
``(j) The Commission shall establish a regional advisory
body on the petition of at least two-thirds of the States
within a region that have more than one-half of their
electric load served within the region. A regional advisory
body shall be composed of one 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 ERO, 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) The provisions of this section do not apply to Alaska
or Hawaii.''.
(b) The electric reliability organization certified by the
Commission under section 215(c) of the Federal Power Act and
any regional entity delegated enforcement authority pursuant
to section 215(e) of the Federal Power Act are not
departments, agencies, or instrumentalities of the United
States Government.

Subtitle B--Regional Markets

SEC. 1121. IMPLEMENTATION DATE FOR PROPOSED RULEMAKING ON
STANDARD MARKET DESIGN.

The Commission's proposed rulemaking entitled ``Remedying
Undue Discrimination through Open Access Transmission Service
and Standard Electricity Market Design'' (Docket No. RM01-12-
[000) is remanded to the Commission for reconsideration. No
final rule pursuant to the proposed rulemaking, including any
rule or order of general applicability within the scope of
the proposed rulemaking, may be issued before July l, 2005.
Any final rule issued by the Commission pursuant to the
proposed rulemaking, including any rule or order of general
applicability within the scope of the proposed rulemaking,
shall be preceded by a notice of proposed rulemaking issued
after the date of enactment of this Act and an opportunity
for public comment.

SEC. 1122. SENSE OF THE 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 independently
administered Regional Transmission Organizations (``RTO'')
that have operational or functional control of facilities
used for the transmission of electric energy in interstate
commerce and do not own or have a financial interest in
generation facilities used to supply electric energy for sale
at wholesale.

SEC. 1123. PARTICIPATION IN REGIONAL TRANSMISSION
ORGANIZATIONS. .

Nothing in this Act authorizes the Commission to require a
transmitting utility to transfer control or operational
control of its transmitting facilities to an RTO or any other
Commission-approved organization designated to provide non-
discriminatory transmission access.

SEC. 1124. FEDERAL UTILITY PARTICIPATION IN REGIONAL
TRANSMISSION ORGANIZATIONS.

(a) Definitions.--For purposes of this section:
(1) The term ``appropriate Federal regulatory authority''
means--

[[Page S10396]]

(A) with respect to a Federal power marketing agency, 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) The term ``Federal utility'' means a Federal power
marketing agency or the Tennessee Valley Authority.
(3) 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.--
(1) 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 a Regional
Transmission Organization (``RTO''), as defined in the
Federal Power Act. Such contract, agreement or arrangement
shall be voluntary and include--
(A) 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;
(B) provisions for monitoring and oversight by the Federal
utility of the RTO fulfillment of the terms and conditions of
the contract, agreement or other arrangement, including a
provision that may provide for the resolution of disputes
through arbitration or other means with the RTO or with other
participants, notwithstanding the obligations and limitations
of any other law regarding arbitration; and
(C) a provision that allows the Federal utility to withdraw
from the RTO and terminate the contract, agreement, or other
arrangement in accordance with its terms.
(2) Neither this section, actions taken pursuant to it, nor
any other transaction of a Federal utility using an RTO shall
serve to confer upon the 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) Any statutory provision requiring or authorizing a
Federal utility to transmit, electric power, or to construct,
operate, or maintain its transmission system shall not 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) 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.

SEC. 1125. REGIONAL CONSIDERATION OF COMPETITIVE WHOLESALE
MARKETS.

(a) State Regulatory Authorities.--Not later than 90 days
after the date of enactment of this Act, the Commission shall
convene regional discussions with State regulatory
authorities, as defined in section 3(21) of the Federal Power
Act. The regional discussions should address whether
wholesale electric markets in each region are working
effectively to provide reliable service to electric consumers
in the region at the lowest reasonable cost. Priority should
be given to discussions in regions that do not have, as of
the date of enactment of this Act, a Regional Transmission
Organization (``RTO'') or an Independent System Operator
(``ISO''s, as defined in the Federal Power Act. The regional
discussions shall consider--
(1) the need for an RTO or other organizations in the
region to provide nondiscriminatory transmission access and
generation interconnection;
(2) a process for regional planning of transmission
facilities with State regulatory authority participation and
for consideration of multi-state projects;
(3) a means for ensuring that costs for all electric
consumers, as defined in section 3(5) of the Public Utility
Regulatory Policies Act of 1978 (16 U.S.C. 2602(5)), and
buyers of wholesale energy or capacity are reasonable and
economically efficient;
(4) a means for ensuring that all electric consumers, as
defined in section 3(5) of the Public Utility Regulatory
Policies Act of 1978 (16 U.S.C. 2602(5)), within the region
maintain their ability to use the existing transmission
system without incurring unreasonable additional costs in
order to expand the transmission system for new customers;
(5) whether the integrated transmission and electric power
supply system can and should be operated in a manner that
schedules and economically prioritizes all available electric
generation resources, so as to minimize the costs of electric
energy to all consumers (``economic dispatch'') and maintain
system reliability;
(6) a means to provide transparent price signals to promote
proper location and utilization of generation and the
efficient expansion of transmission in a manner that does not
result in collection of transmission rents that do not
relieve congestion;
(7) eliminating in a reasonable manner, consistent with
applicable State and Federal law, multiple, cumulative
charges for transmission service across successive locations
within a region (``pancaked rates'');
(8) resolution of seams issues with neighboring regions and
inter-regional coordination;
(9) a means of providing information electronically to
potential users of the transmission system;
(10) implementation of a market monitor for the region with
State regulatory authority and Commission oversight and
establishment of rules and procedures that ensure that State
regulatory authorities are provided access to market
information and that provides for expedited consideration by
the Commission of any complaints concerning exercise of
market power and the operation of wholesale markets;
(11) a process by which to phase-in any proposed RTO or
other organization designated to provide non-discriminatory
transmission access, including the formulation of
transmission pricing methodologies, so as to best meet the
needs of a region, and, if relevant, shall take into account
the special circumstances that may be found in the Western
Interconnection related to the existence of transmission
congestion, the existence of significant hydroelectric
capacity, the participation of unregulated transmitting
utilities, and the distances between generation and load;
(12) the need to submit regional studies, within one year
of enactment of this Act, to the Commission outlining
possible methodologies that will ensure that the amount of
energy produced in any region will be equal to at least 50
percent of the amount of energy consumed in that region by
2013;
(13) the potential value of developing a uniform system-
wide average rate for transmission pricing as a way to
enhance the efficiency and reliability of the transmission
grid; and
(14) a timetable to meet the objectives of this section.
(b) Report.--Not later than 1 year after the date of
enactment of this Act, the Commission shall report to
Congress on the progress made in addressing the issues in
subsection (a) of this section in discussions with the
States.
(c) Savings.--Nothing in this section shall affect any
discussions between the Commission and State or other retail
regulatory authorities that are on-going prior to enactment
of this Act.

Subtitle C--Improving Transmission Access and Protecting Service
Obligations

SEC. 1131. SERVICE OBLIGATION SECURITY AND PARITY.

Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is
amended by adding at the end the following:

``service obligation security and parity

``Sec. 216. (a)(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 one 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
one 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, at its election,
equivalent tradeable 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 tradeable 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 tradeable 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) Nothing in this section shall affect any methodology,
approved by the Commission prior to the date of enactment of
this section, for the allocation of transmission rights by an
RTO or ISO that has been authorized by the Commission to
allocate transmission rights.
``(c) 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.
``(d) Nothing in this section shall provide a basis for
abrogating any contract or service

[[Page S10397]]

agreement for firm transmission service or rights in effect
as of the date of the enactment of this subsection.
``(e) 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 one 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 one or more of the foregoing, or a
corporation which is wholly owned, directly or indirectly, by
any one or more of the foregoing, competent to carry on the
business of developing, transmitting, utilizing or
distributing power.
``(5) A transmitting utility that is a water district or
water agency to which section 201 (f) applies and that has a
right under state law to provide water shall be treated as a
load-serving entity. Such water district or water agency's
right to provide water should be treated as a service
obligation.
``(f) Nothing in the section shall apply to an entity
located in an area referred to in section 212(k)(2)(A).
``(g) This section does not authorize the Commission to
take any action not otherwise within its jurisdiction under
other provisions of this Act.''

SEC. 1132. OPEN NON-DISCRIMINATORY ACCESS.

Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is
amended by inserting after section 211 (16 U.S.C. 824j) the
following:

``OPEN ACCESS BY UNREGULATED TRANSMITTING UTILITIES

``Sec. 211A. (a) 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) 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) The requirements of subsection (a) shall not apply to
facilities used in local distribution.
``(d) If an unregulated transmitting utility exempted
pursuant to subsection (b) no longer meets any of the
criteria for exemption, the exemption shall expire.
``(e) 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) 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) The provision of transmission services under
subsection (a) does not preclude a request for transmission
services under section 211.
``(h) The Commission may not require a State or
municipality to take action under this section that
constitutes a private business use for purposes of section
141 of the Internal Revenue Code of 1986 (26 U.S.C. 141).
``(i) Nothing in this Act 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 organization
designated to provide non-discriminatory transmission
access.''.

SEC. 1133. 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:

``participant funding

``Sec. 217. (a) In General.--Not later than 180 days after
the date of enactment of this section, the Commission shall
promulgate final regulations establishing transmission
pricing policies applicable to all public utilities
associated with the construction of new interstate
transmission facilities and expansion, modification, or
upgrading of existing interstate transmission facilities
(``transmission expansion'').
``(b) Contents.--Consistent with section 205, the
regulation under subsection (a) shall, to the maximum extent
practicable--
``(1) promote economic capital investment in efficient
transmission systems;
``(2) encourage the construction and use of transmission
facilities and generation facilities that reduce risk and
provide just and reasonable rates to consumers;
``(3) encourage improved operation of generation and
transmission facilities and deployment of transmission
technologies designed to increase capacity and efficiency of
existing networks; and
``(4) ensure that the costs of any transmission expansion
are assigned or allocated in a fair manner, meaning that
those who benefit from the transmission expansion pay an
appropriate share of the associated costs.
``(c) Plan.----
``(1) In General.--An RTO or ISO may submit to the
Commission a plan containing the criteria for determining the
person or persons who will be required to pay for any
transmission expansion. Nothing herein diminishes or alters
the rights of individual members of an RTO or ISO under the
Act.
``(2) Requirements.--The Commission shall approve a plan
submitted under paragraph (1) if the Commission determines
that the plan--
``(A) meets all the requirements of this Act and is
consistent with the regulation promulgated under subsection
(a);
``(B) specifies the method or methods by which costs may be
allocated or assigned. Such methods may include, but are not
limited to:
``(i) directly assigned;
``(ii) participant funded; or
``(iii) rolled into regional or sub-regional rates; and
``(C) ensures that the party or parties who pay for
facilities necessary for the transmission expansion receive
appropriate compensation for those facilities, considering
among other factors the economic benefits associated with the
transmission expansion.
``(3) Deference.--In exercising its jurisdiction under this
section, the Commission shall give substantial deference to
the comments filed with the Commission by State regulatory
authorities, other appropriate State officials, and
stakeholders of the RTO or ISO.
``(4) Effect of section.--Nothing in this section shall
affect an RTO or ISO's allocation methodology for
transmission expansion approved by the Commission prior to
the date of enactment of this section.''.

Subtitle D--Amendments to the Public Utility Regulatory Policies Act of
1978

SEC. 1141. NET METERING.

(a) Adoption of Standard.--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.--
``(A) Each electric utility shall make available upon
request net metering service to any electric consumer that
the electric utility serves.
``(B) 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.
``(C) Notwithstanding subsections (b) and (c) of section
112, each State regulatory authority shall consider and make
a determination concerning whether it is appropriate to
implement the standard set out in subparagraph (A) not later
than 1 year after the date of enactment of this paragraph.''.
(b) Special Rules for Net Metering.--Section 115 of the
Public Utility Regulatory Policies Act of 1978 (16 U.S.C.
2625) is further amended by adding at the end the following:
``(i) Net Metering.--In undertaking the consideration and
making the determination under section 111 with respect to
the standard concerning net metering established by section
111(d)(11), the term net metering service shall mean a
service provided in accordance with the following standards:
``(1) An electric utility--
``(A) shall charge the owner or operator of an on-site
generating facility rates and charges that are identical to
those that would be charged other electric consumers of the
electric utility in the same rate class; and
``(B) shall not charge the owner or operator of an on-site
generating facility any additional standby, capacity,
interconnection, or other rate or charge.
``(2) An electric utility that sells electric energy to the
owner or operator of an on-site generating facility shall
measure the quantity of electric energy produced by the on-
site facility and the quantity of electric energy consumed by
the owner or operator of an on-site generating facility
during a billing period in accordance with reasonable
metering practices.
``(3) If the quantity of electric energy sold by the
electric utility to an on-site generating facility exceeds
the quantity of electric energy supplied by the on-site
generating facility to the electric utility during the
billing period, the electric utility may bill the owner or
operator for the net quantity of electric energy sold, in
accordance with reasonable metering practices.
``(4) If the quantity of electric energy supplied by the
on-site generating facility to the electric utility exceeds
the quantity of electric energy sold by the electric utility
to the on-site generating facility during the billing
period--
``(A) the electric utility may bill the owner or operator
of the on-site generating facility for the appropriate
charges for the billing period in accordance with paragraph
(2); and
``(B) the owner or operator of the on-site generating
facility. shall be credited for the excess kilowatt-hours
generated during the

[[Page S10398]]

billing period, with the kilowatt-hour credit appearing on
the bill for the following billing period.
``(5) An eligible on-site generating facility and net
metering system used by an electric consumer shall meet all
applicable safety, performance, reliability, and
interconnection standards established by the National
Electrical Code, the Institute of Electrical and Electronics
Engineers, and Underwriters Laboratories.
``(6) The Commission, after consultation with State
regulatory authorities and unregulated electric utilities and
after notice and opportunity for comment, may adopt, by rule,
additional control and testing requirements for on-site
generating facilities and net metering systems that the
Commission determines are necessary to protect public safety
and system reliability. ``(7) For purposes of this
subsection--
``(A) The term `eligible on-site generating facility' means
a facility on the site of a residential electric consumer
with a maximum generating capacity of 10 kilowatts or less
that is fueled by solar energy, wind energy, or fuel cells;
or a facility on the site of a commercial electric consumer
with a maximum generating capacity of 500 kilowatts or less
that is fueled solely by a renewable energy resource,
landfill gas, or a high efficiency system.
``(B) The term `renewable energy resource' means solar,
wind, biomass, or geothermal energy.
``(C) The term `high efficiency system' means fuel cells or
combined heat and power.
``(D) 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.''.

SEC. 1142. 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:
``(12) Time-based metering and communications.--
``(A) 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 in the 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.
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 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 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 that 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 12
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 by adding at
the end the following:
``(j) Time-based Metering and Communications.--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 Polices 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. 2643) 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 the 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) 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) The Secretary of Energy shall provide technical
assistance to States and regional organizations formed by two
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; and
``(C) developing plans and programs to use demand response
to respond to peak demand or emergency needs.
``(3) 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.''.

SEC. 1143. ADOPTION OF ADDITIONAL STANDARDS.

(a) Adoption of Standards.--Section 113(b) of the Public
Utility Regulatory Policies Act of 1978 (16 U.S.C. 2623(b))
is amended by adding at the end the following:
``(6) Each electric utility shall provide distributed
generation, combined heat and power, and district heating and
cooling systems competitive access to the local distribution
grid and competitive pricing of service, and shall use
simplified standard contracts for the interconnection of
generating facilities that have a power production capacity
of 250 kilowatts or less.
``(7) No electric utility may refuse to interconnect a
generating facility with the distribution facilities of the
electric utility if the owner or operator of the generating
facility complies with technical standards adopted by the
State regulatory authority and agrees to pay the costs
established by such State regulatory authority.
``(8) Each electric utility shall develop a plan to
minimize dependence on one 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.
``(9) Each electric utility shall develop and implement a
10-year plan to increase the efficiency of its fossil fuel
generation.''.
(b) Time for Adopting Standards.--Section 113 of the Public
Utility Regulatory Policies Act of 1978 (16 U.S.C. 2623) is
further amended by adding at the end the following:
``(d) Special Rule.--For purposes of implementing
paragraphs (6), (7), (8), and (9) of subsection (b), any
reference contained in this section to the date of enactment
of the

[[Page S10399]]

Public Utility Regulatory Policies Act of 1978 shall be
deemed to be a reference to the date of enactment of this
subsection.''.

SEC. 1144. TECHNICAL ASSISTANCE.

Section 132(c) of the Public Utility Regulatory Policies
Act of 1978 (16 U.S.C. 2642(c)) is amended to read as
follows:
``(c) Technical Assistance for Certain Responsibilities.--
The Secretary may provide such technical assistance as
determined appropriate to assist State regulatory authorities
and electric utilities in carrying out their responsibilities
under section 111(d)(11) and paragraphs (6), (7), (8), and
(9) of section 113(b).''.

SEC. 1145. 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 promulgate 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 promulgated 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) Rules for existing facilities.--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) 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) 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 E--Provisions Regarding the Public Utility Holding Company Act
of 1935

This subtitle may be cited as the ``Public Utility Holding
Company Act of 2003.''

SEC. 1151. DEFINITIONS.

For the purposes of this subtitle:
(1) 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.

[[Page S10400]]

(2) The term ``associate company'' of a company means any
company in the same holding company system with such company.
(3) The term ``Commission'' means the Federal Energy
Regulatory Commission.
(4) 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) 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) 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-5, 79z-5b), as those sections
existed on the day before the effective date of this
subtitle.
(7) 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) 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 one 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) The tenn ``holding company system'' means a holding
company, together with its subsidiary companies.
(10) The term ``jurisdictional rates'' means rates
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) 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) The term ``person'' means an individual or company.
(13) 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) The term ``public-utility company'' means an electric
utility company or a gas utility company.
(15) 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) 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 one 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) 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. 1152. REPEAL OF THE PUBLIC UTILITY HOLDING COMPANY ACT
OF 1935.

The Public Utility Holding Company Act of 1935 (15 U.S.C.
79a et seq.) is repealed, effective 12 months after the date
of enactment of this Act.

SEC. 1153. 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 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. 1154. 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, and 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, a holding
company or any associate company or affiliate thereof,
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) Effect on State Law.--Nothing in this section shall
preempt applicable State law concerning the provision of
books, accounts, memoranda, or other records, or in any way
limit the rights of any State to obtain books, accounts,
memoranda, or other records, under Federal law, contract, or
otherwise.
(c) 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. 1155. EXEMPTION AUTHORITY.

(a) Rulemaking.--Not later than 90 days after the date of
enactment of this title, the Commission shall promulgate a
final rule to exempt from the requirements of section 1153
any person that is a holding company, solely with respect to
one 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.--If, upon application or upon its own
motion, 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 company or
natural gas company, or if the Commission finds that any
class of transactions is not relevant to the jurisdictional
rates of a public-utility company, the Commission shall
exempt such person or transaction from the requirements of
section 1153.

SEC. 1156. AFFILIATE TRANSACTIONS.

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, public utility, or natural
gas company from an associate company.

SEC. 1157. APPLICABILITY.

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), or (3) acting as such in the course
of such officer, agent, or employee's official duty.

SEC. 1158. 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. 1159. 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. 1160. SAVINGS PROVISIONS.

(a) In General.--Nothing in this subtitle 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

[[Page S10401]]

of this Act, if that person continues to comply with the
terms 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.) (including section
301 of that Act) or the Natural Gas Act (15 U.S.C. 717 et
seq.) (including section 8 of that Act).

SEC. 1161. IMPLEMENTATION.

Not later than 12 months after the date of enactment of
this title, the Commission shall--
(1) promulgate such regulations as may be necessary or
appropriate to implement this subtitle; 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. 1162. 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. 1163. EFFECTIVE DATE.

This subtitle shall take effect 12 months after the date of
enactment of this title.

SEC. 1164. CONFORMING AMENDMENT TO THE FEDERAL POWER ACT.

Section 318 of the Federal Power Act (16 U.S.C. 825q) is
repealed.

SUBTITLE F--MARKET TRANSPARENCY, ANTI-MANIPULATION AND
ENFORCEMENT

SEC. 1171. 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:

``MARKET TRANSPARENCY RULES

``Sec. 218. (a) 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. 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. The
Commission shall have authority to obtain such information
from any electric and transmitting utility, including any
entity described in section 201(f).
``(b) 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 an entity described
in section 212(k)(2)(B) with respect to transactions for the
purchase or sale of wholesale electric energy and
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) 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.''.

SEC. 1172. 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:

``PROHIBITION ON FILING FALSE INFORMATION

``Sec. 219. It shall be a violation of this Act for any
person or any other entity (including entities described in
section 201(f)) knowingly and willfully to 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 any governmental entity with
the intent to manipulate the data being compiled by such
governmental entity.

``PROHIBITION ON ROUND TRIP TRADING

``Sec. 220. (a) It shall be a violation of this Act for any
person or any other entity (including entities described in
section 201(f)) knowingly and willfully to enter into any
contract or other arrangement to execute a `round trip trade'
for the purchase or sale of electric energy at wholesale.
``(b) 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 the
intent to deceptively affect reported revenues, trading
volumes, or prices.''.

SEC. 1173. MARKET TRANSPARENCY.

(a) In General.--It shall be a violation of the Commodity
Exchange Act (7 U.S.C. 1 et seq.) for a person or entity to
knowingly report or manipulate any information relating to
the price, quantity, sale or purchase, and counter party of
any agreement, contract or transaction related to natural gas
or electricity in interstate commerce, which the person or
entity knew to be false at the time of reporting to any
governmental entity or any person or entity engaged in the
business of collecting and disseminating information.
(b) Clarification of Existing CFTC Authority.--Section 9 of
the Commodity Exchange Act (7 U.S.C. 13) is amended by
designating subsection (f) as subsection (e), and adding:
``(f) Commission Administrative and Civil Authority.--The
Commission may bring administrative or civil action 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). This applies to any
action pending on or commenced after the date of enactment of
the Energy Policy Act of 2003.''.
(c) Fraud Authority.--Section 4b of the Commodity Exchange
Act (7 U.S.C. 6b) is amended by striking subsection (a) and
inserting the following:
``(a) Prohibition.--It shall be unlawful for any person,
directly or indirectly in or in connection with any account,
or any offer to enter into, the entry into, or the
confirmation of the execution of, any agreement contract, or
transaction subject to regulation or this Act--
``(1) to cheat or defraud or attempt to cheat or defraud
any person;
``(2) to willfully make or cause to be made to any person
any false report or statement, or to willfully enter or cause
to be entered for any person any false record;
``(3) to willfully deceive or attempt to deceive any person
by any means whatsoever; or
``(4) except as permitted in written rules of a designated
contract market or registered derivative transaction
execution facility which the agreement, contract, or
transaction is traded and executed--
``(A) to bucket an order;
``(B) to fill an order by offsetting against 1 or more
orders of another person; or
``(C) willfully and knowingly, for or on behalf of any
other person and without the prior consent of such person, to
become--
``(i) the buyer with respect to any selling order of the
person; or
``(ii) the seller with respect to any buying order of the
person.''
(d) Technical Corrections.--Section 8(e) of the Commodity
Exchange Act (7 U.S.C. 12(e) is amended by adding at the end
the following:
``Any request by any Federal, State or foreign government
department, agency, or political subdivision, or foreign
futures authority, 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 and electricity) within
the exclusive jurisdiction of the Commission shall be
directed to the Commission.''.
(e) Authorization.--There are authorized to be appropriated
to the Commission for fiscal year 2004 such sums as may be
necessary to carry out the additional responsibilities and
obligations of the Commission under this section.

SEC. 1174. ENFORCEMENT.

(a) Complaints.--Section 306 of the Federal Power Act (16
U.S.C. 825e) is amended by--
(1) inserting ``electric utility,'' after ``Any person,'';
and
(2) inserting ``, transmitting utility,'' after
``licensee'' each place it appears.
(b) Investigations.--Section 307(a) of the Federal Power
Act (16 U.S.C. 825f(a)) is amended by inserting ``or
transmitting utility'' after ``any person'' in the first
sentence.
(c) Review of Commission Orders.--Section 313(a) of the
Federal Power Act (16 U.S.C. 8251) is amended by inserting
``electric utility,'' after ``Any person,'' in the first
sentence.
(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
``five 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--
(1) in subsections (a) and (b), by striking ``section 211,
212, 213, or 214'' each place it appears and inserting ``Part
II''; and
(2) in subsection (b), by striking ``$10,000'' and
inserting ``$1,000,000''.

[[Page S10402]]

(f) General Penalties.--Section 21 of the Natural Gas Act
(15 U.S.C. 717t) is amended--
(1) in subsection (a), by striking ``$5,000'' and inserting
``$1,000,000'', and by striking ``two years'' and inserting
``five years''; and
(2) in subsection (b), by striking ``$500'' and inserting
``$50,000''.

SEC. 1175. REFUND EFFECTIVE DATE.

Section 206(b) of the Federal Power Act (16 U.S.C. 824e(b))
is amended by--
(1) 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) striking ``60 days after'' in the third sentence and
inserting ``of'';
(3) striking ``expiration of such 60-day period'' in the
third sentence and inserting ``publication date''; and
(4) 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.''.

Subtitle G--Consumer Protections

SEC. 1181. ELECTRIC UTILITY MERGERS.

(a) Section 203(a) of the Federal Power Act (16 U.S.C.
824(b)) 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
persons, by any means whatsoever, or
``(C) purchase, acquire, or take any security of any other
public utility of a value in excess of $10,000,000.
``(2) No holding company in a holding company system that
includes an electric utility company shall purchase, acquire,
or take any security of, or, by any means whatsoever,
directly or indirectly, merge or consolidate with an electric
utility company, a gas utility company, or a holding company
in a holding company system that includes a public-utility
company of value in excess of $10,000,000 without first
having secured an order of the Commission authorizing it to
do so.
``(3) Upon 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 not impair the ability of the Commission or the
ability of a State commission having jurisdiction following
the completion of the transaction over any public utility
that is a party to the transaction or an associate company of
any party to the transaction to protect the interests of
consumers or the public,
``(D) will not 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
``(E) 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 within 90 days
after the conclusion of the hearing or opportunity to comment
under paragraph (4). If the Commission does not act within 90
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
one or more orders tolling the time for acting on the
application.
``(6) For purposes of this subsection, the terms
``associate company'', ``electric utility company'', ``gas
utility company'', ``holding company'', ``holding company
system'', and ``public-utility company'' 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.

SEC. 1182. MARKET-BASED POLICY.

Within six months of the enactment of this section, the
Commission shall issue a policy statement establishing the
conditions under which public utilities may charge market-
based rates for the sale of electric energy subject to the
jurisdiction of the Commission. Such policy statement should
consider consumer protections and market power, as well as
any other factors the Commission may deem necessary, to
ensure that such rates are just and reasonable.

SEC. 1183. INTER-AGENCY REVIEW OF COMPETITION IN THE
WHOLESALE AND RETAIL MARKETS FOR ELECTRIC
ENERGY.

(a) Task Force.--There is established an inter-agency task
force, to be known as the ``Electric Energy Market
Competition Task Force'' (referred to in this section as the
``task force''), which shall consist of--
(1) one member each from--
(A) the Department of Justice, to be appointed by the
Attorney General of the United States;
(B) the Federal Energy Regulatory Commission, to be
appointed by the chairman of that Commission;
(C) the Federal Trade Commission, to be appointed by the
chairman of that Commission;
(D) the Department of Energy, to be appointed by the
Secretary of Energy; and (E) the Rural Utilities Service, to
be appointed by the Secretary of Agriculture.
(b) Study and Report.--
(1) Study.--The task force shall perform a study and
analysis of competition within the wholesale and retail
market for electric energy in the United States.
(2) Report.--
(A) Final report.--Not later than 1 year after the
effective date of this subtitle, the task force shall submit
a final report of its findings under paragraph (1) to the
Congress.
(B) Public comment.--At least 60 days before submission of
a final report to the Congress under subparagraph (A), the
task force shall publish a draft report in the Federal
Register to provide for public comment.
(c) Consultation.--In performing the study required by this
section, the task force shall consult with and solicit
comments from its advisory members, the States,
representatives of the electric power industry, and the
public.

SEC. 1184. CONSUMER PRIVACY.

The Federal Trade Commission shall issue rules protecting
the privacy of electric consumers from the disclosure of
consumer information in connection with the sale or delivery
of electric energy to a retail electric consumer. 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.

SEC. 1185. UNFAIR TRADE PRACTICES.

(a) Slamming.--The Federal Trade Commission shall issue
rules prohibiting the change of selection of an electric
utility except with the informed consent of the electric
consumer or if determined by the appropriate State regulatory
authority to be necessary to prevent loss of service.
(b) Cramming.--The Federal Trade Commission shall issue
rules prohibiting the sale of goods and services to an
electric consumer unless expressly authorized by law or the
electric consumer.
(c) 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.

SEC. 1186. DEFINITIONS.

For purposes of this subtitle--
(1) 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) the term ``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--Technical Amendments

SEC. 1191. TECHNICAL AMENDMENTS.

(a) Section 211(c) of the Federal Power Act (16 U.S.C.
824j(c)) is amended by--
(1) striking ``(2)'';
(2) striking ``(A)'' and inserting ``(1)''
(3) striking ``(B)'' and inserting ``(2)''; and
(4) striking ``termination of modification'' and inserting
``termination or modification''.
(b) Section 211(d)(1) of the Federal Power Act (16 U.S.C.
824j(d)) is amended by striking ``electric utility'' the
second time it appears and inserting ``transmitting
utility''.
(c) Section 315(c) of the Federal Power Act (16 U.S.C.
825n(c)) is amended by striking ``subsection'' and inserting
``section''.

DIVISION B--ENERGY TAX INCENTIVES

SECTION 1. SHORT TITLE; ETC.

(a) Short Title.--This division may be cited as the
``Energy Tax Incentives Act of 2003''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this division 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.
(c) Table of Contents.--The table of contents for this
division is as follows:

Sec. 1. Short title; etc.

[[Page S10403]]

TITLE I--RENEWABLE ELECTRICITY PRODUCTION TAX CREDIT

Sec. 101. Extension and expansion of credit for electricity produced
from certain renewable resources.

TITLE II--ALTERNATIVE MOTOR VEHICLES AND FUELS INCENTIVES

Sec. 201. Alternative motor vehicle credit.
Sec. 202. Modification of credit for qualified electric vehicles.
Sec. 203. Credit for installation of alternative fueling stations.
Sec. 204. Credit for retail sale of alternative fuels as motor vehicle
fuel.
Sec. 205. Small ethanol producer credit.
Sec. 206. Incentives for biodiesel.
Sec. 207. Alcohol fuel and biodiesel mixtures excise tax credit.
Sec. 208. Sale of gasoline and diesel fuel at duty-free sales
enterprises.

TITLE III--CONSERVATION AND ENERGY EFFICIENCY PROVISIONS

Sec. 301. Credit for construction of new energy efficient home.
Sec. 302. Credit for energy efficient appliances.
Sec. 303. Credit for residential energy efficient property.
Sec. 304. Credit for business installation of qualified fuel cells and
stationary microturbine power plants.
Sec. 305. Energy efficient commercial buildings deduction.
Sec. 306. Three-year applicable recovery period for depreciation of
qualified energy management devices.
Sec. 307. Three-year applicable recovery period for depreciation of
qualified water submetering devices.
Sec. 308. Energy credit for combined heat and power system property.
Sec. 309. Credit for energy efficiency improvements to existing homes.

TITLE IV--CLEAN COAL INCENTIVES

Subtitle A--Credit for Emission Reductions and Efficiency Improvements
in Existing Coal-Based Electricity Generation Facilities

Sec. 401. Credit for production from a qualifying clean coal technology
unit.

Subtitle B--Incentives for Early Commercial Applications of Advanced
Clean Coal Technologies

Sec. 411. Credit for investment in qualifying advanced clean coal
technology.
Sec. 412. Credit for production from a qualifying advanced clean coal
technology unit.

Subtitle C--Treatment of Persons Not Able To Use Entire Credit

Sec. 421. Treatment of persons not able to use entire credit.

TITLE V--OIL AND GAS PROVISIONS

Sec. 501. Oil and gas from marginal wells.
Sec. 502. Natural gas gathering lines treated as 7-year property.
Sec. 503. Expensing of capital costs incurred in complying with
Environmental Protection Agency sulfur regulations.
Sec. 504. Environmental tax credit.
Sec. 505. Determination of small refiner exception to oil depletion
deduction.
Sec. 506. Marginal production income limit extension.
Sec. 507. Amortization of delay rental payments.
Sec. 508. Amortization of geological and geophysical expenditures.
Sec. 509. Extension and modification of credit for producing fuel from
a nonconventional source.
Sec. 510. Natural gas distribution lines treated as 15-year property.
Sec. 511. Credit for Alaska natural gas.
Sec. 512. Certain Alaska natural gas pipeline property treated as 7-
year property.
Sec. 513. Arbitrage rules not to apply to prepayments for natural gas.
Sec. 514. Extension of enhanced oil recovery credit to certain Alaska
facilities.

TITLE VI--ELECTRIC UTILITY RESTRUCTURING PROVISIONS

Sec. 601. Modifications to special rules for nuclear decommissioning
costs.
Sec. 602. Treatment of certain income of cooperatives.
Sec. 603. Sales or dispositions to implement Federal Energy Regulatory
Commission or State electric restructuring policy.

TITLE VII--ADDITIONAL PROVISIONS

Sec. 701. Extension of accelerated depreciation and wage credit
benefits on Indian reservations.
Sec. 702. Study of effectiveness of certain provisions by GAO.
Sec. 703. Repeal of 4.3-cent motor fuel excise taxes on railroads and
inland waterway transportation which remain in general
fund.
Sec. 704. Expansion of research credit.

TITLE VIII--REVENUE PROVISIONS

Subtitle A--Provisions Designed To Curtail Tax Shelters

Sec. 801. Penalty for failing to disclose reportable transaction.
Sec. 802. Accuracy-related penalty for listed transactions and other
reportable transactions having a significant tax
avoidance purpose.
Sec. 803. Tax shelter exception to confidentiality privileges relating
to taxpayer communications.
Sec. 804. Disclosure of reportable transactions.
Sec. 805. Modifications to penalty for failure to register tax
shelters.
Sec. 806. Modification of penalty for failure to maintain lists of
investors.
Sec. 807. Penalty on promoters of tax shelters.

Subtitle B--Provisions to Discourage Corporate Expatriation

Sec. 821. Tax treatment of inverted corporate entities.
Sec. 822. Excise tax on stock compensation of insiders in inverted
corporations.
Sec. 823. Reinsurance of United States risks in foreign jurisdictions.

Subtitle C--Other Revenue Provisions

Sec. 831. Extension of Internal Revenue Service user fees.
Sec. 832. Addition of vaccines against hepatitis A to list of taxable
vaccines.
Sec. 833. Individual expatriation to avoid tax.

TITLE I--RENEWABLE ELECTRICITY PRODUCTION TAX CREDIT

SEC. 101. 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) biomass (other than closed-loop biomass),
``(D) geothermal energy,
``(E) solar energy,
``(F) small irrigation power,
``(G) biosolids and sludge, and
``(H) 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) Biomass.--
``(A) In general.--The term `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.

``(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 installed capacity of which is less than 5
megawatts.
``(6) Biosolids and sludge.--The term `biosolids and
sludge' means the residue or solids removed in the treatment
of commercial, industrial, or municipal wastewater.
``(7) 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.--

[[Page S10404]]

``(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 Incentives 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) Biomass facility.--
``(A) In general.--In the case of a facility using biomass
(other than closed-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, is originally placed in service
after the date of the enactment of the Energy Tax Incentives
Act of 2003 and before January 1, 2007, and
``(ii) in the case of any other facility, is originally
placed in service before January 1, 2005.
``(B) Special rules for preeffective date facilities.--In
the case of any facility described in subparagraph (A)(ii)
which is placed in service before the date of the enactment
of such Act--
``(i) subsection (a)(1) shall be applied by substituting
`1.2 cents' for `1.5 cents', and
``(ii) the 5-year period beginning on January 1, 2004,
shall be substituted for the 10-year period in subsection
(a)(2)(A)(ii).
``(C) 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.--
``(A) In general.--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 Incentives Act of 2003 and before
January 1, 2007.
``(B) Special rule.--In the case of any facility described
in subparagraph (A), 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).
``(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 Incentives Act of 2003 and
before January 1, 2007.
``(6) Biosolids and sludge facility.--In the case of a
facility using waste heat from the incineration of biosolids
and sludge 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 Incentives Act of 2003 and before January
1, 2007. Such term shall not include any property described
in section 48(a)(6) the basis of which is taken into account
for purposes of the energy credit under section 46.
``(7) Municipal solid waste facility.--
``(A) In general.--In the case of a facility or unit
incinerating municipal solid waste to produce electricity,
the term `qualified facility' means any facility or unit
owned by the taxpayer which is originally placed in service
after the date of the enactment of the Energy Tax Incentives
Act of 2003 and before January 1, 2007.
``(B) Special rule.--In the case of any facility or unit
described in subparagraph (A), the 5-year period beginning on
the date the facility or unit was originally placed in
service shall be substituted for the 10-year period in
subsection (a)(2)(A)(ii).
``(C) Credit eligibility.--In the case of any qualified
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.''.
(2) No credit for certain production.--Section 45(e)
(relating to definitions and special rules), as redesignated
by paragraph (1), is amended by striking paragraph (6) and
inserting the following new paragraph:
``(6) Operations inconsistent with solid waste disposal
act.--In the case of a qualified facility described in
subsection (d)(6)(A), subsection (a) shall not apply to
electricity produced at such facility during any taxable year
if, during a portion of such year, there is a certification
in effect by the Administrator of the Environmental
Protection Agency that such facility was permitted to operate
in a manner inconsistent with section 4003(d) of the Solid
Waste Disposal Act (42 U.S.C. 6943(d)).''.
(3) 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) Credit Rate for Electricity Produced From New
Facilities.--
(1) In general.--Section 45(a) is amended by adding at the
end the following new flush sentence:
``In the case of electricity produced after 2003 at any
qualified facility originally placed in service after the
date of the enactment of the Energy Tax Incentives Act of
2003, paragraph (1) shall be applied by substituting `1.8
cents' for `1.5 cents'.''.
(2) New rate not subject to inflation adjustment.--Section
45(b)(2) (relating to credit and phaseout adjustment based on
inflation) is amended by adding at the end the following new
sentence: ``This paragraph shall not apply to any amount
which is substituted for the 1.5 cent amount in subsection
(a) by reason of any provision of this section.''.
(d) Elimination of Certain Credit Reductions.--Section
45(b)(3)(A) (relating to credit reduced for grants, tax-
exempt bonds, subsidized energy financing, and other credits)
is amended--
(1) by striking clause (ii),
(2) by redesignating clauses (iii) and (iv) as clauses (ii)
and (iii),
(3) by inserting ``(other than proceeds of an issue of
State or local government obligations the interest on which
is exempt from tax under section 103, or any loan, debt, or
other obligation incurred under subchapter I of chapter 31 of
title 7 of the Rural Electrification Act of 1936 (7 U.S.C.
901 et seq.), as in effect on the date of the enactment of
the Energy Tax Incentives Act of 2003)'' after ``project'' in
clause (ii) (as so redesignated),
(4) 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).'', and
(5) by striking ``tax-exempt bonds,'' in the heading and
inserting ``certain''.
(e) Treatment of Persons Not Able To Use Entire Credit.--
Section 45(e) (relating to definitions and special rules), as
redesignated by subsection (b)(1), is amended by adding at
the end the following new paragraph:
``(8) Treatment of persons not able to use entire credit.--
``(A) Allowance of credit.--
``(i) In general.--Except as otherwise provided in this
subsection--

``(I) any credit allowable under subsection (a) with
respect to a qualified facility owned by a person described
in clause (ii) may be transferred or used as provided in this
paragraph, and
``(II) the determination as to whether the credit is
allowable shall be made without regard to the tax-exempt
status of the person.

``(ii) Persons described.--A person is described in this
clause if the person is--

``(I) an organization described in section 501(c)(12)(C)
and exempt from tax under section 501(a),
``(II) an organization described in section 1381(a)(2)(C),
``(III) a public utility (as defined in section
136(c)(2)(B)), which is exempt from income tax under this
subtitle,
``(IV) any State or political subdivision thereof, the
District of Columbia, any possession of the United States, or
any agency or instrumentality of any of the foregoing, or

``(V) any Indian tribal government (within the meaning of
section 7871) or any agency or instrumentality thereof.

``(B) Transfer of credit.--
``(i) In general.--A person described in subparagraph
(A)(ii) may transfer any credit to which subparagraph (A)(i)
applies through an assignment to any other person not
described in subparagraph (A)(ii). Such transfer may be
revoked only with the consent of the Secretary.
``(ii) Regulations.--The Secretary shall prescribe such
regulations as necessary to ensure that any credit described
in clause (i) is assigned once and not reassigned by such
other person.
``(iii) Transfer proceeds treated as arising from essential
government function.--Any proceeds derived by a person
described in subclause (III), (IV), or (V) of subparagraph
(A)(ii) from the transfer of any credit under clause (i)
shall be treated as arising from the exercise of an essential
government function.
``(C) Use of credit as an offset.--Notwithstanding any
other provision of law, in the case of a person described in
subclause (I), (II), or (V) of subparagraph (A)(ii), any
credit to which subparagraph (A)(i) applies may be applied by
such person, to the extent provided by the Secretary of
Agriculture, as a prepayment of any loan, debt, or other
obligation the entity has incurred under subchapter I of
chapter 31 of title 7 of the Rural Electrification Act of
1936 (7 U.S.C. 901 et seq.), as in effect on the date of the
enactment of the Energy Tax Incentives Act of 2003.

[[Page S10405]]

``(D) Credit not income.--Any transfer under subparagraph
(B) or use under subparagraph (C) of any credit to which
subparagraph (A)(i) applies shall not be treated as income
for purposes of section 501(c)(12).
``(E) Treatment of unrelated persons.--For purposes of
subsection (a)(2)(B), sales of electricity among and between
persons described in subparagraph (A)(ii) shall be treated as
sales between unrelated parties.''.
(f) 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 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 on or before such date of enactment.

TITLE II--ALTERNATIVE MOTOR VEHICLES AND FUELS INCENTIVES

SEC. 201. 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 new section:

``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 qualified hybrid motor vehicle credit
determined under subsection (c), and
``(3) the new qualified alternative fuel motor vehicle
credit determined under subsection (d).
``(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 is--
``(A) $4,000, 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) $20,000, 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.
``(2) Increase for fuel efficiency.--
``(A) In general.--The amount determined under paragraph
(1)(A) with respect to a new qualified fuel cell motor
vehicle which is a passenger automobile or light truck shall
be increased by--
``(i) $1,000, if such vehicle achieves at least 150 percent
but less than 175 percent of the 2002 model year city fuel
economy,
``(ii) $1,500, if such vehicle achieves at least 175
percent but less than 200 percent of the 2002 model year city
fuel economy,
``(iii) $2,000, if such vehicle achieves at least 200
percent but less than 225 percent of the 2002 model year city
fuel economy,
``(iv) $2,500, if such vehicle achieves at least 225
percent but less than 250 percent of the 2002 model year city
fuel economy,
``(v) $3,000, if such vehicle achieves at least 250 percent
but less than 275 percent of the 2002 model year city fuel
economy,
``(vi) $3,500, if such vehicle achieves at least 275
percent but less than 300 percent of the 2002 model year city
fuel economy, and
``(vii) $4,000, if such vehicle achieves at least 300
percent of the 2002 model year city fuel economy.
``(B) 2002 model year city fuel economy.--For purposes of
subparagraph (A), 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 clThe 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 clThe 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.
``(C) Vehicle inertia weight class.--For purposes of
subparagraph (B), 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.).
``(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 1 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--
``(i) for 2002 and later model vehicles, 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
``(ii) for 2004 and later model vehicles, has received a
certificate that such vehicle meets or exceeds the Bin 5 Tier
II emission level 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 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) In general.--The credit amount determined under this
paragraph shall be determined in accordance with the
following tables:
``(i) In the case of a new qualified hybrid motor vehicle
which is a passenger automobile, medium duty passenger
vehicle, or light truck and which provides the following
percentage of the maximum available power:

``If percentage of the maximum
available power is:                             The credit amount is:
At least 4 percent but less than 10 percent.................$250 ....

At least 10 percent but less than 20 percent................$500 ....

At least 20 percent but less than 30 percent................$750 ....

At least 30 percent.......................................$1,000.....

``(ii) In the case of a new qualified hybrid motor vehicle
which is a heavy duty hybrid motor vehicle and which provides
the following percentage of the maximum available power:

``(I) If such vehicle has a gross vehicle weight rating of
not more than 14,000 pounds:

[[Page S10406]]

``If percentage of the maximum
available power is:                             The credit amount is:
At least 20 percent but less than 30 percent..............$1,000 ....

At least 30 percent but less than 40 percent..............$1,750 ....

At least 40 percent but less than 50 percent..............$2,000 ....

At least 50 percent but less than 60 percent..............$2,250 ....

At least 60 percent.......................................$2,500.....

``(II) If such vehicle has a gross vehicle weight rating of
more than 14,000 but not more than 26,000 pounds:

``If percentage of the maximum
available power is:                             The credit amount is:
At least 20 percent but less than 30 percent..............$4,000 ....

At least 30 percent but less than 40 percent..............$4,500 ....

At least 40 percent but less than 50 percent..............$5,000 ....

At least 50 percent but less than 60 percent..............$5,500 ....

At least 60 percent.......................................$6,000.....

``(III) If such vehicle has a gross vehicle weight rating
of more than 26,000 pounds:

``If percentage of the maximum
available power is:                             The credit amount is:
At least 20 percent but less than 30 percent..............$6,000 ....

At least 30 percent but less than 40 percent..............$7,000 ....

At least 40 percent but less than 50 percent..............$8,000 ....

At least 50 percent but less than 60 percent..............$9,000 ....

At least 60 percent......................................$10,000.....

``(B) Increase for fuel efficiency.--
``(i) Amount.--The amount determined under subparagraph
(A)(i) with respect to a new qualified hybrid motor vehicle
which is a passenger automobile or light truck shall be
increased by--

``(I) $500, if such vehicle achieves at least 125 percent
but less than 150 percent of the 2002 model year city fuel
economy,
``(II) $1,000, if such vehicle achieves at least 150
percent but less than 175 percent of the 2002 model year city
fuel economy,
``(III) $1,500, if such vehicle achieves at least 175
percent but less than 200 percent of the 2002 model year city
fuel economy,
``(IV) $2,000, if such vehicle achieves at least 200
percent but less than 225 percent of the 2002 model year city
fuel economy,
``(V) $2,500, if such vehicle achieves at least 225 percent
but less than 250 percent of the 2002 model year city fuel
economy, and
``(VI) $3,000, if such vehicle achieves at least 250
percent of the 2002 model year city fuel economy.

``(ii) 2002 model year city fuel economy.--For purposes of
clause (i), the 2002 model year city fuel economy with
respect to a vehicle shall be determined on a gasoline gallon
equivalent basis as determined by the Administrator of the
Environmental Protection Agency using the tables provided in
subsection (b)(2)(B) with respect to such vehicle.
``(C) Increase for accelerated emissions performance.--The
amount determined under subparagraph (A)(ii) with respect to
an applicable heavy duty hybrid motor vehicle shall be
increased by the increased credit amount determined in
accordance with the following tables:
``(i) In the case of a vehicle which has a gross vehicle
weight rating of not more than 14,000 pounds:

The increased credit amount is:
2003......................................................$3,000 ....

2004......................................................$2,500 ....

2005......................................................$2,000 ....

2006......................................................$1,500.....

``(ii) In the case of a vehicle which has a gross vehicle
weight rating of more than 14,000 pounds but not more than
26,000 pounds:

The increased credit amount is:
2003......................................................$7,750 ....

2004......................................................$6,500 ....

2005......................................................$5,250 ....

2006......................................................$4,000.....

``(iii) In the case of a vehicle which has a gross vehicle
weight rating of more than 26,000 pounds:

The increased credit amount is:
2003.....................................................$12,000 ....

2004.....................................................$10,000 ....

2005......................................................$8,000 ....

2006......................................................$6,000.....

``(D) Definitions relating to credit amount.--
``(i) Applicable heavy duty hybrid motor vehicle.--For
purposes of subparagraph (C), the term `applicable heavy duty
hybrid motor vehicle' means a heavy duty hybrid motor vehicle
which is powered by an internal combustion or heat engine
which is certified as meeting the emission standards set in
the regulations prescribed by the Administrator of the
Environmental Protection Agency for 2007 and later model year
diesel heavy duty engines, or for 2008 and later model year
ottocycle heavy duty engines, as applicable.
``(ii) Maximum available power.--

``(I) Passenger automobile, medium duty passenger vehicle,
or light truck.--For purposes of subparagraph (A)(i), 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) Heavy duty hybrid motor vehicle.--For purposes of
subparagraph (A)(ii), 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. 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.

``(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 passenger automobile, medium
duty passenger vehicle, or light truck--

``(I) for 2002 and later model vehicles, 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
``(II) for 2004 and later model vehicles, has received a
certificate that such vehicle meets or exceeds the Bin 5 Tier
II emission level 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,

``(iii) which, in the case of a heavy duty hybrid motor
vehicle, 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,
``(iv) the original use of which commences with the
taxpayer,
``(v) which is acquired for use or lease by the taxpayer
and not for resale, and
``(vi) which is made by a manufacturer.
``(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.
``(4) Heavy duty hybrid motor vehicle.--For purposes of
this subsection, the term `heavy duty hybrid motor vehicle'
means a new qualified hybrid motor vehicle which has a gross
vehicle weight rating of more than 8,500 pounds. Such term
does not include a medium duty passenger vehicle.
``(d) 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 weighs
more than 14,000 pounds gross vehicle weight rating, the most
stringent standard available shall be such standard available
for certification on the date of the enactment of the Energy
Tax Incentives 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,

[[Page S10407]]

``(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.
``(e) Application With Other Credits.--The credit allowed
under subsection (a) for any taxable year shall not exceed
the excess (if any) of--
``(1) the regular tax for the taxable year reduced by the
sum of the credits allowable under subpart A and sections 27,
29, and 30, over
``(2) the tentative minimum tax for the taxable year.
``(f) 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) City fuel economy.--The city fuel economy with
respect to any vehicle shall be measured in a manner which is
substantially similar to the manner city fuel economy is
measured in accordance with procedures under part 600 of
subchapter Q of chapter I of title 40, Code of Federal
Regulations, as in effect on the date of the enactment of
this section.
``(3) Other terms.--The terms `automobile', `passenger
automobile', `medium duty passenger vehicle', `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.).
``(4)  Reduction in basis.--For purposes of this subtitle,
the basis of any property for which a credit is allowable
under subsection (a) shall be reduced by the amount of such
credit so allowed (determined without regard to subsection
(e)).
``(5) No double benefit.--The amount of any deduction or
other credit allowable under this chapter--
``(A) for any incremental cost taken into account in
computing the amount of the credit determined under
subsection (d) shall be reduced by the amount of such credit
attributable to such cost, and
``(B) with respect to a vehicle described under subsection
(b) or (c), shall be reduced by the amount of credit allowed
under subsection (a) for such vehicle for the taxable year.
``(6) Property used by tax-exempt entities.--In the case of
a credit amount which is allowable with respect to a motor
vehicle which is acquired by an entity exempt from tax under
this chapter, the person which sells or leases such vehicle
to the entity shall be treated as the taxpayer with respect
to the vehicle for purposes of this section and the credit
shall be allowed to such person, but only if the person
clearly discloses to the entity at the time of any sale or
lease the specific amount of any credit otherwise allowable
to the entity under this section.
``(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 to not 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) Carryback and carryforward allowed.--
``(A) In general.--If the credit allowable under subsection
(a) for a taxable year exceeds the amount of the limitation
under subsection (e) for such taxable year (in this paragraph
referred to as the `unused credit year'), such excess shall
be a credit carryback to each of the 3 taxable years
preceding the unused credit year and a credit carryforward to
each of the 20 taxable years following the unused credit
year, except that no excess may be carried to a taxable year
beginning before the date of the enactment of this paragraph.
``(B) Rules.--Rules similar to the rules of section 39
shall apply with respect to the credit carryback and credit
carryforward under subparagraph (A).
``(11) Interaction with air quality and 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--
``(A) the applicable provisions of the Clean Air Act for
the applicable make and model year of the vehicle (or
applicable air quality provisions of State law in the case of
a State which has adopted such provision under a waiver under
section 209(b) of the Clean Air Act), and
``(B) the motor vehicle safety provisions of sections 30101
through 30169 of title 49, United States Code.
``(g) Regulations.--
``(1) In general.--Except as provided in paragraph (2), the
Secretary shall promulgate such regulations as necessary to
carry out the provisions of this section.
``(2) Coordination in prescription of certain
regulations.--The Secretary of the Treasury, in 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.
``(h) Termination.--This section shall not apply to any
property purchased after--
``(1) in the case of a new qualified fuel cell motor
vehicle (as described in subsection (b)), December 31, 2011,
and
``(2) in the case of any other property, December 31,
2006.''.
(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 30B(f)(4).''.
(2) Section 55(c)(2) is amended by inserting ``30B(e),''
after ``30(b)(3),''.
(3) Section 6501(m) is amended by inserting ``30B(f)(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 new item:

``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.

SEC. 202. MODIFICATION OF CREDIT FOR QUALIFIED ELECTRIC
VEHICLES.

(a) Amount of Credit.--
(1) In general.--Section 30(a) (relating to allowance of
credit) is amended by striking ``10 percent of''.
(2) Limitation of credit according to type of vehicle.--
Section 30(b) (relating to limitations) is amended--
(A) by striking paragraphs (1) and (2) and inserting the
following new paragraph:
``(1) Limitation according to type of vehicle.--The amount
of the credit allowed under subsection (a) for any vehicle
shall not exceed the greatest of the following amounts
applicable to such vehicle:
``(A) In the case of a vehicle with a gross vehicle weight
rating not exceeding 8,500 pounds--
``(i) except as provided in clause (ii) or (iii), $3,500,

[[Page S10408]]

``(ii) $6,000, if such vehicle is--

``(I) capable of a driving range of at least 100 miles on a
single charge of the vehicle's rechargeable batteries as
measured pursuant to the urban dynamometer schedules under
appendix I to part 86 of title 40, Code of Federal
Regulations, or
``(II) capable of a payload capacity of at least 1,000
pounds, and

``(iii) if such vehicle is a low-speed vehicle which
conforms to Standard 500 prescribed by the Secretary of
Transportation (49 C.F.R. 571.500), as in effect on the date
of the enactment of the Energy Tax Incentives Act of 2003,
the lesser of--

``(I) 10 percent of the manufacturer's suggested retail
price of the vehicle, or
``(II) $1,500.

``(B) In the case of a vehicle with a gross vehicle weight
rating exceeding 8,500 but not exceeding 14,000 pounds,
$10,000.
``(C) In the case of a vehicle with a gross vehicle weight
rating exceeding 14,000 but not exceeding 26,000 pounds,
$20,000.
``(D) In the case of a vehicle with a gross vehicle weight
rating exceeding 26,000 pounds, $40,000.'', and
(B) by redesignating paragraph (3) as paragraph (2).
(3) Conforming amendments.--
(A) Section 53(d)(1)(B)(iii) is amended by striking
``section 30(b)(3)(B)'' and inserting ``section
30(b)(2)(B)''.
(B) Section 55(c)(2), as amended by this Act, is amended by
striking ``30(b)(3)'' and inserting ``30(b)(2)''.
(b) Qualified Battery Electric Vehicle.--
(1) In general.--Section 30(c)(1)(A) (defining qualified
electric vehicle) is amended to read as follows:
``(A) which is--
``(i) operated solely by use of a battery or battery pack,
or
``(ii) powered primarily through the use of an electric
battery or battery pack using a flywheel or capacitor which
stores energy produced by an electric motor through
regenerative braking to assist in vehicle operation,''.
(2) Leased vehicles.--Section 30(c)(1)(C) is amended by
inserting ``or lease'' after ``use''.
(3) Conforming amendments.--
(A) Subsections (a), (b)(2), and (c) of section 30 are each
amended by inserting ``battery'' after ``qualified'' each
place it appears.
(B) The heading of subsection (c) of section 30 is amended
by inserting ``Battery'' after ``Qualified''.
(C) The heading of section 30 is amended by inserting
``battery'' after ``qualified''.
(D) The item relating to section 30 in the table of
sections for subpart B of part IV of subchapter A of chapter
1 is amended by inserting ``battery'' after ``qualified''.
(E) Section 179A(c)(3) is amended by inserting ``battery''
before ``electric''.
(F) The heading of paragraph (3) of section 179A(c) is
amended by inserting ``battery'' before ``electric''.
(c) Additional Special Rules.--Section 30(d) (relating to
special rules) is amended by adding at the end the following
new paragraphs:
``(5) No double benefit.--The amount of any deduction or
other credit allowable under this chapter for any cost taken
into account in computing the amount of the credit determined
under subsection (a) shall be reduced by the amount of such
credit attributable to such cost.
``(6) Property used by tax-exempt entities.--In the case of
a credit amount which is allowable with respect to a vehicle
which is acquired by an entity exempt from tax under this
chapter, the person which sells or leases such vehicle to the
entity shall be treated as the taxpayer with respect to the
vehicle for purposes of this section and the credit shall be
allowed to such person, but only if the person clearly
discloses to the entity at the time of any sale or lease the
specific amount of any credit otherwise allowable to the
entity under this section.
``(7) Carryback and carryforward allowed.--
``(A) In general.--If the credit allowable under subsection
(a) for a taxable year exceeds the amount of the limitation
under subsection (b)(2) for such taxable year (in this
paragraph referred to as the `unused credit year'), such
excess shall be a credit carryback to each of the 3 taxable
years preceding the unused credit year and a credit
carryforward to each of the 20 taxable years following the
unused credit year, except that no excess may be carried to a
taxable year beginning before the date of the enactment of
this paragraph.
``(B) Rules.--Rules similar to the rules of section 39
shall apply with respect to the credit carryback and credit
carryforward under subparagraph (A).''.
(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. 203. CREDIT FOR INSTALLATION OF ALTERNATIVE FUELING
STATIONS.

(a) In General.--Subpart B of part IV of subchapter A of
chapter 1 (relating to foreign tax credit, etc.), as amended
by this Act, is amended by adding at the end the following
new section:

``SEC. 30C. CLEAN-FUEL VEHICLE REFUELING PROPERTY CREDIT.

``(a) Credit Allowed.--There shall be allowed as a credit
against the tax imposed by this chapter for the taxable year
an amount equal to 50 percent of the amount paid or incurred
by the taxpayer during the taxable year for the installation
of qualified clean-fuel vehicle refueling property.
``(b) Limitation.--The credit allowed under subsection
(a)--
``(1) with respect to any retail clean-fuel vehicle
refueling property, shall not exceed $30,000, and
``(2) with respect to any residential clean-fuel vehicle
refueling property, shall not exceed $1,000.
``(c) Year Credit Allowed.--Notwithstanding subsection (a),
no credit shall be allowed under subsection (a) with respect
to any qualified clean-fuel vehicle refueling property before
the taxable year in which the property is placed in service
by the taxpayer.
``(d) Definitions.--For purposes of this section--
``(1) Qualified clean-fuel vehicle refueling property.--The
term `qualified clean-fuel vehicle refueling property' has
the same meaning given such term by section 179A(d).
``(2) Residential clean-fuel vehicle refueling property.--
The term `residential clean-fuel vehicle refueling property'
means qualified clean-fuel vehicle refueling property which
is installed on property which is used as the principal
residence (within the meaning of section 121) of the
taxpayer.
``(3) Retail clean-fuel vehicle refueling property.--The
term `retail clean-fuel vehicle refueling property' means
qualified clean-fuel vehicle refueling property which is
installed on property (other than property described in
paragraph (2)) used in a trade or business of the taxpayer.
``(e) Application With Other Credits.--The credit allowed
under subsection (a) for any taxable year shall not exceed
the excess (if any) of--
``(1) the regular tax for the taxable year reduced by the
sum of the credits allowable under subpart A and sections 27,
29, 30, and 30B, over
``(2) the tentative minimum tax for the taxable year.
``(f) Basis Reduction.--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).
``(g) No Double Benefit.--
``(1) Coordination with other deductions and credits.--
Except as provided in paragraph (2), the amount of any
deduction or other credit allowable under this chapter for
any cost taken into account in computing the amount of the
credit determined under subsection (a) shall be reduced by
the amount of such credit attributable to such cost.
``(2) No deduction allowed under section 179a.--No
deduction shall be allowed under section 179A with respect to
any property with respect to which a credit is allowed under
subsection (a).
``(h) Refueling Property Installed for Tax-Exempt
Entities.--In the case of qualified clean-fuel vehicle
refueling property installed on property owned or used by an
entity exempt from tax under this chapter, the person which
installs such refueling property for the entity shall be
treated as the taxpayer with respect to the refueling
property for purposes of this section (and such refueling
property shall be treated as retail clean-fuel vehicle
refueling property) and the credit shall be allowed to such
person, but only if the person clearly discloses to the
entity in any installation contract the specific amount of
the credit allowable under this section.
``(i) Carryforward Allowed.--
``(1) In general.--If the credit allowable under subsection
(a) for a taxable year exceeds the amount of the limitation
under subsection (e) for such taxable year, such excess shall
be a credit carryforward to each of the 20 taxable years
following such taxable year.
``(2) Rules.--Rules similar to the rules of section 39
shall apply with respect to the credit carryforward under
paragraph (1).
``(j) Special Rules.--Rules similar to the rules of
paragraphs (4) and (5) of section 179A(e) shall apply.
``(k) Regulations.--The Secretary shall prescribe such
regulations as necessary to carry out the provisions of this
section.
``(l) 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,
2007.''.
(b) Modifications to Extension of Deduction for Certain
Refueling Property.--
(1) 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,
2007.''.
(2) Extension of phaseout.--Section 179A(b)(1)(B) is
amended--
(A) by striking ``calendar year 2004'' in clause (i) and
inserting ``calendar years 2004 and 2005 (calendar years 2004
through 2009 in the case of property relating to hydrogen)
'',
(B) by striking ``2005'' in clause (ii) and inserting
``2006 (calendar year 2010 in the case of property relating
to hydrogen)'', and
(C) by striking ``2006'' in clause (iii) and inserting
``2007 (calendar year 2011 in the case of property relating
to hydrogen)''.
(c) Incentive for Production of Hydrogen at Qualified
Clean-Fuel Vehicle Refueling Property.--Section 179A(d)
(defining qualified clean-fuel vehicle refueling

[[Page S10409]]

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.''.
(d) Conforming Amendments.--
(1) Section 1016(a), 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 30C(f).''.
(2) Section 55(c)(2), as amended by this Act, is amended by
inserting ``30C(e),'' after ``30B(e),''.
(3) The table of sections for subpart B of part IV of
subchapter A of chapter 1, as amended by this Act, is amended
by inserting after the item relating to section 30B the
following new item:

``Sec. 30C. Clean-fuel vehicle refueling property credit.''.
(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. 204. CREDIT FOR RETAIL SALE OF ALTERNATIVE FUELS AS
MOTOR VEHICLE FUEL.

(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. CREDIT FOR RETAIL SALE OF ALTERNATIVE FUELS AS
MOTOR VEHICLE FUEL.

``(a) General Rule.--For purposes of section 38, the
alternative fuel retail sales credit for any taxable year is
the applicable amount for each gasoline gallon equivalent of
alternative fuel sold at retail by the taxpayer during such
year as a fuel to propel any qualified motor vehicle.
``(b) Definitions.--For purposes of this section--
``(1) Applicable amount.--The term `applicable amount'
means the amount determined in accordance with the following
table:

``In the case of any taxable year ending in--The applicable amount is--
2003........................................................30 cents
2004........................................................40 cents
2005 and 2006...............................................50 cents.
``(2) Alternative fuel.--The term `alternative fuel' means
compressed natural gas, liquefied natural gas, liquefied
petroleum gas, hydrogen, or any liquid at least 85 percent of
the volume of which consists of methanol or ethanol.
``(3) Gasoline gallon equivalent.--The term `gasoline
gallon equivalent' means, with respect to any alternative
fuel, the amount (determined by the Secretary) of such fuel
having a Btu content of 114,000.
``(4) Qualified motor vehicle.--The term `qualified motor
vehicle' means any motor vehicle (as defined in section
30(c)(2)) which meets any applicable Federal or State
emissions standards with respect to each fuel by which such
vehicle is designed to be propelled.
``(5) Sold at retail.--
``(A) In general.--The term `sold at retail' means the
sale, for a purpose other than resale, after manufacture,
production, or importation.
``(B) Use treated as sale.--If any person uses alternative
fuel (including any use after importation) as a fuel to
propel any new qualified alternative fuel motor vehicle (as
defined in section 30B(d)(4)) before such fuel is sold at
retail, then such use shall be treated in the same manner as
if such fuel were sold at retail as a fuel to propel such a
vehicle by such person.
``(c) No Double Benefit.--The amount of any deduction or
other credit allowable under this chapter for any fuel taken
into account in computing the amount of the credit determined
under subsection (a) shall be reduced by the amount of such
credit attributable to such fuel.
``(d) 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
fuel sold at retail after December 31, 2006.''.
(b) Credit Treated as 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 alternative fuel retail sales credit determined
under section 40A(a).''.
(c) Transitional Rule.--Section 39(d) (relating to
transitional rules) is amended by adding at the end the
following new paragraph:
``(11) No carryback of section 40a credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the alternative fuel
retail sales credit determined under section 40A(a) may be
carried back to a taxable year ending on or before the date
of the enactment of such section.''.
(d) Clerical Amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 is amended by
inserting after the item relating to section 40 the following
new item:

``Sec. 40A. Credit for retail sale of alternative fuels as motor
vehicle fuel.''.
(e) Effective Date.--The amendments made by this section
shall apply to fuel sold at retail after the date of the
enactment of this Act, in taxable years ending after such
date.

SEC. 205. 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 rules for decrease in credits for taxable
year.--If the amount of the credit of a cooperative
organization determined under subsection (a)(3) for a taxable
year is less than the amount of such credit shown on the
return of the cooperative organization for such year, an
amount equal to the excess of--
``(i) such reduction, over
``(ii) the amount not apportioned to such patrons under
subparagraph (A) for the taxable year,
shall be treated as an increase in tax imposed by this
chapter on the organization. Such increase 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) Improvements to Small Ethanol Producer Credit.--
(1) 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''.
(2) Small ethanol producer credit not a passive activity
credit.--Clause (i) of section 469(d)(2)(A) is amended by
striking ``subpart D'' and inserting ``subpart D, other than
section 40(a)(3),''.
(3) Allowing credit against entire regular tax 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 small ethanol producer credit.--
``(A) In general.--In the case of the small ethanol
producer credit--
``(i) this section and section 39 shall be applied
separately with respect to the credit, and
``(ii) in applying paragraph (1) to the credit--

``(I) the amounts in subparagraphs (A) and (B) thereof
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 small
ethanol producer credit).

``(B) Small ethanol producer credit.--For purposes of this
subsection, the term `small ethanol producer credit' means
the credit allowable under subsection (a) by reason of
section 40(a)(3).''.
(B) Conforming amendments.--Subclause (II) of section
38(c)(2)(A)(ii) and subclause (II) of section 38(c)(3)(A)(ii)
are each amended by inserting ``or the small ethanol producer
credit'' after ``employee credit''.
(4) Small ethanol producer credit not added back to income
under section 87.--Section 87 (relating to income inclusion
of alcohol fuel credit) is amended to read as follows:

``SEC. 87. ALCOHOL FUEL CREDIT.

``Gross income includes an amount equal to the sum of--
``(1) the amount of the alcohol mixture credit determined
with respect to the taxpayer for the taxable year under
section 40(a)(1), and
``(2) the alcohol credit determined with respect to the
taxpayer for the taxable year under section 40(a)(2).''.
(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

[[Page S10410]]

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 the date of the
enactment of this Act.

SEC. 206. INCENTIVES FOR BIODIESEL.

(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 inserting after section 40A the
following new section:

``SEC. 40B. 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 diesel
fuel 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 with diesel fuel 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.--
``(A) In general.--Subject to subparagraph (B), 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'.
``(B) Certification for agri-biodiesel.--Subparagraph (A)
shall apply only if the taxpayer described in paragraph
(1)(A) or (2)(A) obtains a certification (in such form and
manner as prescribed by the Secretary) from the producer of
the agri-biodiesel which identifies the product produced.
``(c) Coordination With Credit Against Excise Tax.--The
amount of the credit determined under this section with
respect to any agri-biodiesel shall, under regulations
prescribed by the Secretary, be properly reduced to take into
account any benefit provided with respect to such agri-
biodiesel solely by reason of the application of section 6426
or 6427(e).
``(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 for use in diesel-powered engines 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. Such term shall
include esters derived from vegetable oils from corn,
soybeans, sunflower seeds, cottonseeds, canola, crambe,
rapeseeds, safflowers, flaxseeds, rice bran, and mustard
seeds, and from animal fats.
``(3) Biodiesel mixture not used as a fuel, etc.--
``(A) Imposition of tax.--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 such 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 the mixture.
``(B) 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) 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
fuel sold after December 31, 2005.''.
(b) Credit Treated as 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 biodiesel fuels credit determined under section
40B(a).''.
(c) Conforming Amendments.--
(1) Section 39(d), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(12) No carryback of biodiesel fuels credit before
effective date.--No portion of the unused business credit for
any taxable year which is attributable to the biodiesel fuels
credit determined under section 40B may be carried back to a
taxable year ending on or before the date of the enactment of
section 40B.''.
(2)(A) Section 87, as amended by this Act, is amended--
(i) by striking ``and'' at the end of paragraph (1),
(ii) by striking the period at the end of paragraph (2) and
inserting ``, and'',
(iii) by adding at the end the following new paragraph:
``(3) the biodiesel fuels credit determined with respect to
the taxpayer for the taxable year under section 40B(a).'',
and
(iv) by striking ``FUEL CREDIT'' in the heading and
inserting ``AND BIODIESEL FUELS CREDITS''.
(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''.
(3) Section 196(c) is amended by striking ``and'' at the
end of paragraph (9), by striking the period at the end of
paragraph (10) and inserting ``, and'', and by adding at the
end the following new paragraph:
``(11) the biodiesel fuels credit determined under section
40B(a).''.
(4) 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 after the item relating to section 40A the
following new item:

``Sec. 40B. Biodiesel used as fuel.''.
(d) Effective Date.--The amendments made by this section
shall apply to fuel sold after the date of the enactment of
this Act, in taxable years ending after such date.

SEC. 207. 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 applicable amount for each
gallon of alcohol used by the taxpayer in producing an
alcohol fuel mixture.
``(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' is a mixture
which--
``(A) consists of alcohol and a taxable fuel, and
``(B) is sold for use or used as a fuel by the taxpayer
producing the 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 or use 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 of biodiesel used by the
taxpayer in producing any qualified biodiesel mixture.
``(2) Applicable amount.--
``(A) In general.--Except as provided in subparagraph (B),
the applicable amount is 50 cents.
``(B) Amount for agri-biodiesel.--

[[Page S10411]]

``(i) In general.--Subject to clause (ii), in the case of
any biodiesel which is agri-biodiesel, the applicable amount
is $1.00.
``(ii) Certification for agri-biodiesel.--Clause (i) shall
apply only if the taxpayer described in paragraph (1) obtains
a certification (in such form and manner as prescribed by the
Secretary) from the producer of the agri-biodiesel which
identifies the product produced.
``(3) Definitions.--Any term used in this subsection which
is also used in section 40B shall have the meaning given such
term by section 40B.
``(4) Termination.--This subsection shall not apply to any
sale or use 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 qualified biodiesel mixture,
respectively, and
``(B) any person--
``(i) separates such 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.''.
(b) Registration Requirement.--Section 4101(a) (relating to
registration) is amended by inserting ``and every person
producing biodiesel (as defined in section 40B(d)(1)) or
alcohol (as defined in section 6426(b)(4)(A))'' after
``4091''.
(c) Conforming Amendments.--
(1) Section 40(c) is amended by striking ``section 4081(c),
or section 4091(c)'' and inserting ``section 4091(c), section
6426, section 6427(e), or section 6427(f)''.
(2) Section 40(d)(4)(B) is amended by striking ``or
4081(c)''.
(3) 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''.
(4) 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''.
(5) Section 4041(b)(2)(B) is amended by striking ``a
substance other than petroleum or natural gas'' and inserting
``coal (including peat)''.
(6) Paragraph (1) of section 4041(k) is amended to read as
follows:
``(1) In general.--Under regulations prescribed by the
Secretary, in the case of the sale or use of any liquid at
least 10 percent of which consists of alcohol (as defined in
section 6426(b)(4)(A)), the rate of the tax imposed by
subsection (c)(1) shall be the comparable rate under section
4091(c).''.
(7) Section 4081 is amended by striking subsection (c).
(8) Paragraph (2) of section 4083(a) is amended to read as
follows:
``(2) Gasoline.--The term `gasoline'--
``(A) includes any gasoline blend, other than qualified
methanol or ethanol fuel (as defined in section
4041(b)(2)(B)) or a denaturant of alcohol (as defined in
section 6426(b)(4)(A)), and
``(B) includes, to the extent prescribed in regulations--
``(i) any gasoline blend stock, and
``(ii) any product commonly used as an additive in
gasoline.
For purposes of subparagraph (B)(i), the term `gasoline blend
stock' means any petroleum product component of gasoline.''.
(9) Section 6427 is amended by inserting after subsection
(d) the following new subsection:
``(e) Alcohol or Biodiesel Used To Produce Alcohol Fuel and
Biodiesel Mixtures or Used as Fuels.--Except as provided in
subsection (k)--
``(1) Used to produce a mixture.--If any person produces a
mixture described in section 6426 in such person's trade or
business, the Secretary shall pay (without interest) to such
person an amount equal to the alcohol fuel mixture credit or
the biodiesel mixture credit with respect to such mixture.
``(2) Used as fuel.--If alcohol (as defined in section
40(d)(1)) or biodiesel (as defined in section 40B(d)(1)) or
agri-biodiesel (as defined in section 40B(d)(2)) which is not
in a mixture with a taxable fuel (as defined in section
4083(a)(1))--
``(A) is used by any person as a fuel in a trade or
business, or
``(B) is sold by any person at retail to another person and
placed in the fuel tank of such person's vehicle,
the Secretary shall pay (without interest) to such person an
amount equal to the alcohol credit (as determined under
section 40(b)(2)) or the biodiesel credit (as determined
under section 40B(b)(2)) with respect to such fuel.
``(3) Coordination with other repayment provisions.--No
amount shall be payable under paragraph (1) with respect to
any mixture with respect to which an amount is allowed as a
credit under section 6426.
``(4) Termination.--This subsection shall not apply with
respect to--
``(A) any alcohol fuel mixture (as defined in section
6426(b)(3)) or alcohol (as so defined) sold or used after
December 31, 2010, and
``(B) any qualified biodiesel mixture (within the meaning
of section 6426(c)(1)) or biodiesel (as so defined) or agri-
biodiesel (as so defined) sold or used after December 31,
2005.''.
(10) Subsection (f) of section 6427 is amended to read as
follows:
``(f) Aviation Fuel Used to Produce Certain Alcohol
Fuels.--
``(1) In general.--Except as provided in subsection (k), if
any aviation fuel on which tax was imposed by section 4091 at
the regular tax rate is used by any person in producing a
mixture described in section 4091(c)(1)(A) 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 4091 determined
without regard to subsection (c) thereof.
``(B) Incentive tax rate.--The term `incentive tax rate'
means the aggregate rate of tax imposed by section 4091 with
respect to fuel described in subsection (c)(2) thereof.
``(3) Coordination with other repayment provisions.--No
amount shall be payable under paragraph (1) with respect to
any aviation fuel with respect to which an amount is payable
under subsection (d) or (l).
``(4) Termination.--This subsection shall not apply with
respect to any mixture sold or used after September 30,
2007.''.
(11) Paragraphs (1) and (2) of section 6427(i) are amended
by inserting ``(f),'' after ``(d),''.
(12) Section 6427(i)(3) is amended--
(A) by striking ``subsection (f)'' both places it appears
in subparagraph (A) and inserting ``subsection (e)(1)'',
(B) by striking ``gasoline, diesel fuel, or kerosene used
to produce a qualified alcohol mixture (as defined in section
4081(c)(3))'' in subparagraph (A) and inserting ``a mixture
described in section 6426'',
(C) by striking ``subsection (f)(1)'' in subparagraph (B)
and inserting ``subsection (e)(1)'',
(D) 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)'', and
(E) by striking ``alcohol mixture'' in the heading and
inserting ``alcohol fuel and biodiesel mixture''.
(13) Section 6427(o) is amended--
(A) by striking paragraph (1) and inserting the following
new paragraph:
``(1) any tax is imposed by section 4081, and'',
(B) by striking ``such gasohol'' in paragraph (2) and
inserting ``the alcohol fuel mixture (as defined in section
6426(b)(3))'',
(C) by striking ``gasohol'' both places it appears in the
matter following paragraph (2) and inserting ``alcohol fuel
mixture'', and
(D) by striking ``Gasohol'' in the heading and inserting
``Alcohol Fuel Mixture''.
(14) 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.''.
(15) Section 9503(b)(4) is amended--
(A) by adding ``or'' at the end of subparagraph (C),
(B) by striking the comma at the end of subparagraph
(D)(iii) and inserting a period, and
(C) by striking subparagraphs (E) and (F).
(16) Section 9503(c)(2)(A)(i)(III) is amended by inserting
``(other than subsection (e) thereof)'' after ``section
6427''.
(17) Section 9503(e)(2) is amended by striking subparagraph
(B) and by redesignating subparagraphs (C), (D), and (E) as
subparagraphs (B), (C), and (D), respectively.
(18) 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.''.
(d) Effective Date.--The amendments made by this section
shall apply to fuel sold or used after September 30, 2003.
(e) Format for Filing.--The Secretary of the Treasury shall
describe the electronic format for filing claims described in
section 6427(i)(3)(B) of the Internal Revenue Code of 1986
(as amended by subsection (b)(12)(D)) not later than
September 30, 2003.

SEC. 208. SALE OF GASOLINE AND DIESEL FUEL AT DUTY-FREE SALES
ENTERPRISES.

(a) Prohibition.--Section 555(b) of the Tariff Act of 1930
(19 U.S.C. 1555(b)) is amended--
(1) by redesignating paragraphs (6) through (8) as
paragraphs (7) through (9), respectively; and
(2) by inserting after paragraph (5) the following:
``(6) Any gasoline or diesel fuel sold at a duty-free sales
enterprise shall be considered to be entered for consumption
into the customs territory of the United States.''.

[[Page S10412]]

(b) Construction.--The amendments made by this section
shall not be construed to create any inference with respect
to the interpretation of any provision of law as such
provision was in effect on the day before the date of
enactment of this Act.
(c) Effective date.--The amendments made by this section
shall take effect on the date of enactment of this Act.

TITLE III--CONSERVATION AND ENERGY EFFICIENCY PROVISIONS

SEC. 301. CREDIT FOR CONSTRUCTION OF NEW ENERGY EFFICIENT
HOME.

(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. 45G. NEW ENERGY EFFICIENT HOME CREDIT.

``(a) In General.--For purposes of section 38, in the case
of an eligible contractor, the credit determined under this
section for the taxable year is an amount equal to the
aggregate adjusted bases of all energy efficient property
installed in a qualifying new home during construction of
such home.
``(b) Limitations.--
``(1) Maximum credit.--
``(A) In general.--The credit allowed by this section with
respect to a qualifying new home shall not exceed--
``(i) in the case of a 30-percent home, $1,000, and
``(ii) in the case of a 50-percent home, $2,000.
``(B) 30- or 50-percent home.--For purposes of subparagraph
(A)--
``(i) 30-percent home.--The term `30-percent home' means--

``(I) a qualifying new home which is certified to have a
projected level of annual heating and cooling energy
consumption, measured in terms of average annual energy cost
to the homeowner, which is at least 30 percent less than the
annual level of heating and cooling energy consumption of a
qualifying new home constructed in accordance with the latest
standards of chapter 4 of the International Energy
Conservation Code approved by the Department of Energy before
the construction of such qualifying new home and any
applicable Federal minimum efficiency standards for
equipment, or
``(II) in the case of a qualifying new home which is a
manufactured home, a home which meets the applicable
standards required by the Administrator of the Environmental
Protection Agency under the Energy Star Labeled Homes
program.

``(ii) 50-percent home.--The term `50-percent home' means a
qualifying new home which would be described in clause (i)(I)
if 50 percent were substituted for 30 percent.
``(C) Prior credit amounts on same home taken into
account.--The amount of the credit otherwise allowable for
the taxable year with respect to a qualifying new home under
clause (i) or (ii) of subparagraph (A) shall be reduced by
the sum of the credits allowed under subsection (a) to any
taxpayer with respect to the home for all preceding 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 the rehabilitation credit
(as determined under section 47(a)) or to the energy credit
(as determined under section 48(a)), and
``(B) expenditures taken into account under section 25D,
47, or 48(a) shall not be taken into account under this
section.
``(3) Provider limitation.--Any eligible contractor who
directly or indirectly provides the guarantee of energy
savings under a guarantee-based method of certification
described in subsection (d)(1)(D) shall not be eligible to
receive the credit allowed by this section.
``(c) Definitions.--For purposes of this section--
``(1) Eligible contractor.--The term `eligible contractor'
means--
``(A) the person who constructed the qualifying new home,
or
``(B) in the case of a qualifying new 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 qualifying new 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, meet the requirements of
this section.
``(3) Qualifying new home.--
``(A) In general.--The term `qualifying new home' means a
dwelling--
``(i) located in the United States,
``(ii) the construction of which is substantially completed
after the date of the enactment of this section, and
``(iii) the first use of which after construction is as a
principal residence (within the meaning of section 121).
``(B) Manufactured home included.--The term `qualifying new
home' includes a manufactured home conforming to Federal
Manufactured Home Construction and Safety Standards (24
C.F.R. 3280).
``(4) Construction.--The term `construction' includes
reconstruction and rehabilitation.
``(5) 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 qualifying new home when installed in or on such
home,
``(B) exterior windows (including skylights), and
``(C) exterior doors.
``(d) Certification.--
``(1) Method of certification.--
``(A) In general.--A certification described in subsection
(b)(1)(B) shall be determined either by a component-based
method, a performance-based method, or a guarantee-based
method, or, in the case of a qualifying new home which is a
manufactured home, by a method prescribed by the
Administrator of the Environmental Protection Agency under
the Energy Star Labeled Homes program.
``(B) Component-based method.--A component-based method is
a method which uses the applicable technical energy
efficiency specifications or ratings (including product
labeling requirements) for the energy efficient building
envelope component or energy efficient heating or cooling
equipment. The Secretary shall, in consultation with the
Administrator of the Environmental Protection Agency, develop
prescriptive component-based packages which are equivalent in
energy performance to properties which qualify under
subparagraph (C).
``(C) Performance-based method.--
``(i) In general.--A performance-based method is a method
which calculates projected energy usage and cost reductions
in the qualifying new home in relation to a new home--

``(I) heated by the same fuel type, and
``(II) constructed in accordance with the latest standards
of chapter 4 of the International Energy Conservation Code
approved by the Department of Energy before the construction
of such qualifying new home and any applicable Federal
minimum efficiency standards for equipment.

``(ii) Computer software.--Computer software shall be used
in support of a performance-based method certification under
clause (i). Such software shall meet procedures and methods
for calculating energy and cost savings in regulations
promulgated by the Secretary of Energy.
``(D) Guarantee-based method.--
``(i) In general.--A guarantee-based method is a method
which guarantees in writing to the homeowner energy savings
of either 30 percent or 50 percent over the 2000
International Energy Conservation Code for heating and
cooling costs. The guarantee shall be provided for a minimum
of 2 years and shall fully reimburse the homeowner any
heating and cooling costs in excess of the guaranteed amount.
``(ii) Computer software.--Computer software shall be
selected by the provider to support the guarantee-based
method certification under clause (i). Such software shall
meet procedures and methods for calculating energy and cost
savings in regulations promulgated by the Secretary of
Energy.
``(2) Provider.--A certification described in subsection
(b)(1)(B) shall be provided by--
``(A) in the case of a component-based method, a local
building regulatory authority, a utility, or a home energy
rating organization,
``(B) in the case of a performance-based method or a
guarantee-based method, an individual recognized by an
organization designated by the Secretary for such purposes,
or
``(C) in the case of a qualifying new home which is a
manufactured home, a manufactured home primary inspection
agency.
``(3) Form.--
``(A) In general.--A certification described in subsection
(b)(1)(B) shall be made in writing 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
``(i) in the case of a performance-based method,
accompanied by a written analysis documenting the proper
application of a permissible energy performance calculation
method to the specific circumstances of such qualifying new
home, and
``(ii) in the case of a qualifying new 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.
``(B) Form provided to buyer.--A form documenting the
energy efficient building envelope components and energy
efficient heating or cooling equipment installed and their
rated energy efficiency performance shall be provided to the
buyer of the qualifying new home. The form shall include
labeled R-value for insulation products, NFRC-labeled U-
factor and solar heat gain coefficient for windows,
skylights, and doors, labeled annual fuel utilization
efficiency (AFUE) ratings for furnaces and boilers, labeled
heating seasonal performance factor (HSPF) ratings for
electric heat pumps, and labeled seasonal energy efficiency
ratio (SEER) ratings for air conditioners.
``(C) Ratings label affixed in dwelling.--A permanent label
documenting the ratings in subparagraph (B) shall be affixed
to the front of the electrical distribution panel of the
qualifying new home, or shall be otherwise permanently
displayed in a readily inspectable location in such home.

[[Page S10413]]

``(4) Regulations.--
``(A) In general.--In prescribing regulations under this
subsection for performance-based and guarantee-based
certification methods, the Secretary shall prescribe
procedures for calculating annual energy usage and cost
reductions for heating and cooling and for the reporting of
the results. Such regulations shall--
``(i) provide that any calculation procedures be fuel
neutral such that the same energy efficiency measures allow a
qualifying new home to be eligible for the credit under this
section regardless of whether such home uses a gas or oil
furnace or boiler or an electric heat pump, and
``(ii) require that any computer software allow for the
printing of the Federal tax forms necessary for the credit
under this section and for the printing of forms for
disclosure to the homebuyer.
``(B) Providers.--For purposes of paragraph (2)(B), the
Secretary shall establish requirements for the designation of
individuals based on the requirements for energy consultants
and home energy raters specified by the Mortgage Industry
National Home Energy Rating Standards.
``(e) Application.--Subsection (a) shall apply to
qualifying new homes the construction of which is
substantially completed after the date of the enactment of
this section and purchased during the period beginning on
such date and ending on--
``(1) in the case of any 30-percent home, December 31,
2005, and
``(2) in the case of any 50-percent home, 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 (16), by striking the period at the end of
paragraph (17) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(18) the new energy efficient home credit determined
under section 45G(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) New Energy Efficient Home Expenses.--No deduction
shall be allowed for that portion of expenses for a
qualifying new home otherwise allowable as a deduction for
the taxable year which is equal to the amount of the credit
determined for such taxable year under section 45G(a).''.
(d) Limitation on Carryback.--Section 39(d) (relating to
transition rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(13) No carryback of new energy efficient home credit
before effective date.--No portion of the unused business
credit for any taxable year which is attributable to the
credit determined under section 45G may be carried back to
any taxable year ending on or before the date of the
enactment of such section.''.
(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 (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, as amended by this
Act, 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 homes the construction of which is
substantially completed after the date of the enactment of
this Act.

SEC. 302. 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.--
``(1) In general.--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 the amounts
determined under paragraph (2) for qualified energy efficient
appliances produced by the taxpayer during the calendar year
ending with or within the taxable year.
``(2) Amount.--The amount determined under this paragraph
for any category described in subsection (b)(2)(B) shall be
the product of the applicable amount for appliances in the
category and the eligible production for the category.
``(b) Applicable Amount; Eligible Production.--For purposes
of subsection (a)--
``(1) Applicable amount.--The applicable amount is--
``(A) $50, in the case of--
``(i) a clothes washer which is manufactured with at least
a 1.42 MEF, or
``(ii) a refrigerator which consumes at least 10 percent
less kilowatt hours per year than the energy conservation
standards for refrigerators promulgated by the Department of
Energy and effective on July 1, 2001,
``(B) $100, in the case of--
``(i) a clothes washer which is manufactured with at least
a 1.50 MEF, or
``(ii) a refrigerator which consumes at least 15 percent
(20 percent in the case of a refrigerator manufactured after
2006) less kilowatt hours per year than such energy
conservation standards, and
``(C) $150, in the case of a refrigerator manufactured
before 2007 which consumes at least 20 percent less kilowatt
hours per year than such energy conservation standards.
``(2) Eligible production.--
``(A) In general.--The eligible production of each category
of qualified energy efficient appliances is the excess of--
``(i) the number of appliances in such category which are
produced by the taxpayer during such calendar year, over
``(ii) the average number of appliances in such category
which were produced by the taxpayer during calendar years
2000, 2001, and 2002.
``(B) Categories.--For purposes of subparagraph (A), the
categories are--
``(i) clothes washers described in paragraph (1)(A)(i),
``(ii) clothes washers described in paragraph (1)(B)(i),
``(iii) refrigerators described in paragraph (1)(A)(ii),
``(iv) refrigerators described in paragraph (1)(B)(ii), and
``(v) refrigerators described in paragraph (1)(C).
``(c) Limitation on Maximum Credit.--
``(1) In general.--The amount of credit allowed under
subsection (a) with respect to a taxpayer for all taxable
years shall not exceed $60,000,000, of which not more than
$30,000,000 may be allowed with respect to the credit
determined by using the applicable amount under subsection
(b)(1)(A).
``(2) Limitation based on gross receipts.--The credit
allowed under subsection (a) with respect to a taxpayer for
the taxable year shall not 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 in 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.
``(d) Definitions.--For purposes of this section--
``(1) Qualified energy efficient appliance.--The term
`qualified energy efficient appliance' means--
``(A) a clothes washer described in subparagraph (A)(i) or
(B)(i) of subsection (b)(1), or
``(B) a refrigerator described in subparagraph (A)(ii),
(B)(ii), or (C) of subsection (b)(1).
``(2) Clothes washer.--The term `clothes washer' means a
residential clothes washer, including a residential style
coin operated washer.
``(3) Refrigerator.--The term `refrigerator' means an
automatic defrost refrigerator-freezer which has an internal
volume of at least 16.5 cubic feet.
``(4) MEF.--The term `MEF' means Modified Energy Factor (as
determined by the Secretary of Energy).
``(e) Special Rules.--
``(1) In general.--Rules similar to the rules of
subsections (c), (d), and (e) of section 52 shall apply for
purposes of this section.
``(2) Aggregation rules.--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 1
person for purposes of subsection (a).
``(f) Verification.--The taxpayer shall submit such
information or certification as the Secretary, in
consultation with the Secretary of Energy, determines
necessary to claim the credit amount under subsection (a).
``(g) Termination.--This section shall not apply--
``(1) with respect to refrigerators described in subsection
(b)(1)(A)(ii) produced after December 31, 2004, and
``(2) with respect to all other qualified energy efficient
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 (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) the energy efficient appliance credit determined
under section 45H(a).''.
(c) Limitation on Carryback.--Section 39(d) (relating to
transition rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(14) No carryback of energy efficient appliance credit
before effective date.--No portion of the unused business
credit for any taxable year which is attributable to the
energy efficient appliance credit determined under section
45H may be carried to a taxable year ending on or before the
date of the enactment of such section.''.
(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 new item:

``Sec. 45H. Energy efficient appliance credit.''.

(e) Effective Date.--The amendments made by this section
shall apply to appliances produced after the date of the
enactment of this Act, in taxable years ending after such
date.

[[Page S10414]]

SEC. 303. 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 photovoltaic property
expenditures made by the taxpayer during such year,
``(2) 15 percent of the qualified solar water heating
property expenditures made by the taxpayer during such year,
``(3) 30 percent of the qualified fuel cell property
expenditures made by the taxpayer during such year,
``(4) 30 percent of the qualified wind energy property
expenditures made by the taxpayer during such year, and
``(5) the sum of the qualified Tier 2 energy efficient
building property expenditures made by the taxpayer during
such year.
``(b) Limitations.--
``(1) Maximum credit.--The credit allowed under subsection
(a) shall not exceed--
``(A) $2,000 for property described in paragraph (1), (2),
or (5) of subsection (d),
``(B) $500 for each 0.5 kilowatt of capacity of property
described in subsection (d)(4), and
``(C) for property described in subsection (d)(6)--
``(i) $150 for each electric heat pump water heater,
``(ii) $125 for each advanced natural gas, oil, propane
furnace, or hot water boiler,
``(iii) $150 for each advanced natural gas, oil, or propane
water heater,
``(iv) $50 for each natural gas, oil, or propane water
heater,
``(v) $50 for an advanced main air circulating fan,
``(vi) $150 for each advanced combination space and water
heating system,
``(vii) $50 for each combination space and water heating
system, and
``(viii) $250 for each geothermal heat pump.
``(2) Safety certifications.--No credit shall be allowed
under this section for an item of property unless--
``(A) in the case of solar water heating property, such
property is certified for performance and safety by the non-
profit Solar Rating Certification Corporation or a comparable
entity endorsed by the government of the State in which such
property is installed,
``(B) in the case of a photovoltaic property, a fuel cell
property, or a wind energy property, such property meets
appropriate fire and electric code requirements, and
``(C) in the case of property described in subsection
(d)(6), such property meets the performance and quality
standards, and the certification requirements (if any),
which--
``(i) have been prescribed by the Secretary by regulations
(after consultation with the Secretary of Energy or the
Administrator of the Environmental Protection Agency, as
appropriate),
``(ii) in the case of the energy efficiency ratio (EER) for
property described in subsection (d)(6)(B)(viii)--

``(I) require measurements to be based on published data
which is tested by manufacturers at 95 degrees Fahrenheit,
and
``(II) do not require ratings to be based on certified data
of the Air Conditioning and Refrigeration Institute, and

``(iii) are in effect at the time of the acquisition of the
property.
``(c) Carryforward of Unused Credit.--If the credit
allowable under subsection (a) exceeds the limitation imposed
by section 26(a) for such taxable year reduced by the sum of
the credits allowable under this subpart (other than this
section and section 25D), such excess shall be carried to the
succeeding taxable year and added to the credit allowable
under subsection (a) for such succeeding taxable year.
``(d) 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 to heat water for use in a
dwelling unit located in the United States and used as a
residence by the taxpayer if at least half of the energy used
by such property for such purpose is derived from the sun.
``(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 located in the United
States and used as a residence by the taxpayer.
``(3) 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) solely because it constitutes a
structural component of the structure on which it is
installed.
``(4) Qualified fuel cell property expenditure.--The term
`qualified fuel cell property expenditure' means an
expenditure for qualified fuel cell property (as defined in
section 48(a)(4)) installed on or in connection with a
dwelling unit located in the United States and used as a
principal residence (within the meaning of section 121) by
the taxpayer.
``(5) 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 located in the United
States and used as a residence by the taxpayer.
``(6) Qualified tier 2 energy efficient building property
expenditure.--
``(A) In general.--The term `qualified Tier 2 energy
efficient building property expenditure' means an expenditure
for any Tier 2 energy efficient building property.
``(B) Tier 2 energy efficient building property.--The term
`Tier 2 energy efficient building property' means--
``(i) an electric heat pump water heater which yields an
energy factor of at least 1.7 in the standard Department of
Energy test procedure,
``(ii) an advanced natural gas, oil, propane furnace, or
hot water boiler which achieves at least 95 percent annual
fuel utilization efficiency (AFUE),
``(iii) an advanced natural gas, oil, or propane water
heater which has an energy factor of at least 0.80 in the
standard Department of Energy test procedure,
``(iv) a natural gas, oil, or propane water heater which
has an energy factor of at least 0.65 but less than 0.80 in
the standard Department of Energy test procedure,
``(v) an advanced main air circulating fan used in a new
natural gas, propane, or oil-fired furnace, including main
air circulating fans that use a brushless permanent magnet
motor or another type of motor which achieves similar or
higher efficiency at half and full speed, as determined by
the Secretary,
``(vi) an advanced combination space and water heating
system which has a combined energy factor of at least 0.80
and a combined annual fuel utilization efficiency (AFUE) of
at least 78 percent in the standard Department of Energy test
procedure,
``(vii) a combination space and water heating system which
has a combined energy factor of at least 0.65 but less than
0.80 and a combined annual fuel utilization efficiency (AFUE)
of at least 78 percent in the standard Department of Energy
test procedure, and
``(viii) a geothermal heat pump which has an energy
efficiency ratio (EER) of at least 21.
``(7) Labor costs.--Expenditures for labor costs properly
allocable to the onsite preparation, assembly, or original
installation of the property described in paragraph (1), (2),
(4), (5), or (6) and for piping or wiring to interconnect
such property to the dwelling unit shall be taken into
account for purposes of this section.
``(8) 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.
``(e) Special Rules.--For purposes of this section--
``(1) 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 (as the case may be) 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.
``(2) 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 his tenant-
stockholder's proportionate share (as defined in section
216(b)(3)) of any expenditures of such corporation.
``(3) 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.
``(4) 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.

[[Page S10415]]

``(5) 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.
``(6) 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)(5)(C)).
``(f) 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.
``(g) Termination.--The credit allowed under this section
shall not apply to expenditures after December 31, 2007.''.
(b) Credit Allowed Against Regular Tax and Alternative
Minimum Tax.--
(1) In general.--Section 25C(b), as added by subsection
(a), 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) Conforming amendments.--
(A) Section 25C(c), as added by subsection (a), is amended
by striking ``section 26(a) for such taxable year reduced by
the sum of the credits allowable under this subpart (other
than this section and section 25D)'' and inserting
``subsection (b)(3)''.
(B) Section 23(b)(4)(B) is amended by inserting ``and
section 25C'' after ``this section''.
(C) Section 24(b)(3)(B) is amended by striking ``23 and
25B'' and inserting ``23, 25B, and 25C''.
(D) Section 25(e)(1)(C) is amended by inserting ``25C,''
after ``25B,''.
(E) Section 25B(g)(2) is amended by striking ``section 23''
and inserting ``sections 23 and 25C''.
(F) Section 26(a)(1) is amended by striking ``and 25B'' and
inserting ``25B, and 25C''.
(G) Section 904(h) is amended by striking ``and 25B'' and
inserting ``25B, and 25C''.
(H) Section 1400C(d) is amended by striking ``and 25B'' and
inserting ``25B, and 25C''.
(c) Additional Conforming Amendments.--
(1) Section 23(c), as in effect for taxable years beginning
before January 1, 2004, is amended by striking ``section
1400C'' and inserting ``sections 25C and 1400C''.
(2) Section 25(e)(1)(C), as in effect for taxable years
beginning before January 1, 2004, is amended by inserting ``,
25C,'' after ``sections 23''.
(3) Section 1016(a), 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 25C(f), in the
case of amounts with respect to which a credit has been
allowed under section 25C.''.
(4) Section 1400C(d), as in effect for taxable years
beginning before January 1, 2004, is amended by inserting
``and section 25C'' after ``this section''.
(5) 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.''.
(d) Effective Dates.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to expenditures
after the date of the enactment of this Act, in taxable years
ending after such date.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to taxable years beginning after December 31,
2003.

SEC. 304. CREDIT FOR BUSINESS INSTALLATION OF QUALIFIED FUEL
CELLS AND STATIONARY MICROTURBINE POWER PLANTS.

(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 or qualified
microturbine property,''.
(b) Qualified Fuel Cell Property; Qualified Microturbine
Property.--Section 48(a) (relating to energy credit) is
amended by redesignating paragraphs (4) and (5) as paragraphs
(5) and (6), respectively, and by inserting after paragraph
(3) the following new paragraph:
``(4) Qualified fuel cell property; qualified microturbine
property.--For purposes of this subsection--
``(A) Qualified fuel cell property.--
``(i) In general.--The term `qualified fuel cell property'
means a fuel cell power plant which--

``(I) generates at least 0.5 kilowatt of electricity using
an electrochemical process, and
``(II) has an electricity-only generation efficiency
greater than 30 percent.

``(ii) Limitation.--In the case of qualified fuel cell
property placed in service during the taxable year, the
credit otherwise determined under paragraph (1) for such year
with respect to such property shall not exceed an amount
equal to $500 for each 0.5 kilowatt of capacity of such
property.
``(iii) 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.
``(iv) Termination.--The term `qualified fuel cell
property' shall not include any property placed in service
after December 31, 2007.
``(B) Qualified microturbine property.--
``(i) In general.--The term `qualified microturbine
property' means a stationary microturbine power plant which--

``(I) has a capacity of less than 2,000 kilowatts, and
``(II) has an electricity-only generation efficiency of not
less than 26 percent at International Standard Organization
conditions.

``(ii) Limitation.--In the case of qualified microturbine
property placed in service during the taxable year, the
credit otherwise determined under paragraph (1) for such year
with respect to such property shall not exceed an amount
equal $200 for each kilowatt of capacity of such property.
``(iii) Stationary microturbine power plant.--The term
`stationary microturbine power plant' means an integrated
system comprised of a gas turbine engine, a combustor, a
recuperator or regenerator, a generator or alternator, and
associated balance of plant components which converts a fuel
into electricity and thermal energy. Such term also includes
all secondary components located between the existing
infrastructure for fuel delivery and the existing
infrastructure for power distribution, including equipment
and controls for meeting relevant power standards, such as
voltage, frequency, and power factors.
``(iv) Termination.--The term `qualified microturbine
property' shall not include any property placed in service
after December 31, 2006.''.
(c) Energy Percentage.--Section 48(a)(2)(A) (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, 30
percent, and
``(ii) in the case of any other energy property, 10
percent.''.
(d) Conforming Amendments.--
(A) Section 29(b)(3)(A)(i)(III) is amended by striking
``section 48(a)(4)(C)'' and inserting ``section
48(a)(5)(C)''.
(B) Section 48(a)(1) is amended by inserting ``except as
provided in subparagraph (A)(ii) or (B)(ii) of paragraph
(4),'' before ``the energy''.
(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, 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. 305. 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
for the taxable year in which a building is placed in service
by a taxpayer, an amount equal to the energy efficient
commercial building property expenditures made by such
taxpayer with respect to the construction or reconstruction
of such building for the taxable year or any preceding
taxable year.
``(b) Maximum Amount of Deduction.--The amount of energy
efficient commercial building property expenditures taken
into account under subsection (a) shall not exceed an amount
equal to the product of--
``(1) $2.25, and
``(2) the square footage of the building with respect to
which the expenditures are made.
``(c) Energy Efficient Commercial Building Property
Expenditures.--For purposes of this section--
``(1) In general.--The term `energy efficient commercial
building property expenditures' means amounts paid or
incurred for energy efficient property installed on or in
connection with the construction or reconstruction of a
building--
``(A) for which depreciation is allowable under section
167,
``(B) which is located in the United States, and
``(C) which is the type of structure to which the Standard
90.1-2001 of the American Society of Heating, Refrigerating,
and Air

[[Page S10416]]

Conditioning Engineers and the Illuminating Engineering
Society of North America is applicable.
Such term includes expenditures for labor costs properly
allocable to the onsite preparation, assembly, or original
installation of the property.
``(2) Energy efficient property.--For purposes of paragraph
(1)--
``(A) In general.--The term `energy efficient property'
means any property which 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 building which meets
the minimum requirements of Standard 90.1-2001 of the
American Society of Heating, Refrigerating, and Air
Conditioning Engineers and the Illuminating Engineering
Society of North America, using methods of calculation
described in subparagraph (B) and certified by qualified
individuals as provided under paragraph (5).
``(B) Methods of calculation.--The Secretary, in
consultation with the Secretary of Energy, shall promulgate
regulations which describe in detail methods for calculating
and verifying energy and power costs.
``(C) Computer software.--
``(i) In general.--Any calculation described in
subparagraph (B) shall be prepared by qualified computer
software.
``(ii) Qualified computer software.--For purposes of this
subparagraph, the term `qualified computer software' means
software--

``(I) for which the software designer has certified that
the software meets all procedures and detailed methods for
calculating energy and power costs as required by the
Secretary,
``(II) which provides such forms as required to be filed by
the Secretary in connection with energy efficiency of
property and the deduction allowed under this section, and
``(III) which provides a notice form which summarizes the
energy efficiency features of the building and its projected
annual energy costs.

``(3) Allocation of deduction for public property.--In the
case of energy efficient commercial building property
expenditures made by a public entity with respect to the
construction or reconstruction of a public building, the
Secretary shall promulgate regulations under which the value
of the deduction with respect to such expenditures which
would be allowable to the public entity under this section
(determined without regard to the tax-exempt status of such
entity) may be allocated to the person primarily responsible
for designing the energy efficient property. Such person
shall be treated as the taxpayer for purposes of this
section.
``(4) Notice to owner.--Any qualified individual providing
a certification under paragraph (5) shall provide an
explanation to the owner of the building regarding the energy
efficiency features of the building and its projected annual
energy costs as provided in the notice under paragraph
(2)(C)(ii)(III).
``(5) Certification.--
``(A) In general.--The Secretary shall prescribe procedures
for the inspection and testing for compliance of buildings by
qualified individuals described in subparagraph (B). Such
procedures shall be--
``(i) comparable, given the difference between commercial
and residential buildings, to the requirements in the
Mortgage Industry National Home Energy Rating Standards, and
``(ii) fuel neutral such that the same energy efficiency
measures allow a building to be eligible for the credit under
this section regardless of whether such building uses a gas
or oil furnace or boiler or an electric heat pump.
``(B) 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. The Secretary may qualify a home energy
ratings organization, a local building regulatory authority,
a State or local energy office, a utility, or any other
organization which meets the requirements prescribed under
this paragraph.
``(C) Proficiency of qualified individuals.--The Secretary
shall consult with nonprofit organizations and State agencies
with expertise in energy efficiency calculations and
inspections to develop proficiency tests and training
programs to qualify individuals to determine compliance.
``(d) Basis Reduction.--For purposes of this subtitle, if a
deduction is allowed under this section with respect to any
energy efficient property, the basis of such property shall
be reduced by the amount of the deduction so allowed.
``(e) Regulations.--The Secretary shall promulgate such
regulations as necessary to take into account new
technologies regarding energy efficiency and renewable energy
for purposes of determining energy efficiency and savings
under this section.
``(f) Termination.--This section shall not apply with
respect to any energy efficient commercial building property
expenditures in connection with a building the construction
of which is not completed on or before December 31, 2009.''.
(b) Conforming Amendments.--
(1) Section 1016(a), as amended by this Act, 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(d).''.
(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 taxable years beginning after the date of the
enactment of this Act.

SEC. 306. 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) 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. 307. THREE-YEAR APPLICABLE RECOVERY PERIOD FOR
DEPRECIATION OF QUALIFIED WATER SUBMETERING
DEVICES.

(a) In General.--Section 168(e)(3)(A) (defining 3-year
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 inserting ``, and'', and by adding
at the end the following new clause:
``(v) any qualified water submetering device.''.
(b) Definition of Qualified Water Submetering Device.--
Section 168(i) (relating to definitions and special rules),
as amended by this Act, is amended by inserting at the end
the following new paragraph:
``(16) Qualified water submetering device.--
``(A) In general.--The term `qualified water submetering
device' means any water submetering device which is placed in
service before January 1, 2008, by a taxpayer who is an
eligible resupplier with respect to the unit for which the
device is placed in service.
``(B) Water submetering device.--For purposes of this
paragraph, the term `water submetering device' means any
submetering device which is used by the taxpayer--
``(i) to measure and record water usage data, and
``(ii) to provide such data on at least a monthly basis to
both consumers and the taxpayer.
``(C) Eligible resupplier.--For purposes of subparagraph
(A), the term `eligible resupplier' means any taxpayer who
purchases and installs qualified water submetering devices in
every unit in any multi-unit property.''.
(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. 308. 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(a)
(relating to energy credit), as amended by this Act, is
amended by redesignating paragraphs (5) and (6) as paragraphs
(6) and (7), respectively, and by

[[Page S10417]]

inserting after paragraph (4) the following new paragraph:
``(5) Combined heat and power system property.--For
purposes of this subsection--
``(A) Combined heat and power system property.--The term
`combined heat and power system property' means property
comprising a system--
``(i) 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),
``(ii) which 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,
``(iii) 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),

``(iv) 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 energy
capacities), and
``(v) which is placed in service before January 1, 2007.
``(B) Special rules.--
``(i) Energy efficiency percentage.--For purposes of
subparagraph (A)(iv), 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 primary fuel source for the system.

``(ii) Determinations made on btu basis.--The energy
efficiency percentage and the percentages under subparagraph
(A)(iii) shall be determined on a Btu basis.
``(iii) 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.
``(iv) 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 this subsection if, with respect
to such property, the taxpayer uses a normalization method of
accounting.
``(II) Certain exception not to apply.--The matter
following paragraph (3)(D) shall not apply to combined heat
and power system property.

``(v) Nonapplication of certain rules.--For purposes of
determining if the term `combined heat and power system
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
rankin, stirling, or kalina heat engine systems, subparagraph
(A) shall be applied without regard to clauses (i), (iii),
and (iv) thereof.
``(C) Extension of depreciation recovery period.--If a
taxpayer is allowed a credit under this section for a
combined heat and power system property which has a class
life of 15 years or less under section 168, such property
shall be treated as having a 22-year class life for purposes
of section 168.''.
(c) Limitation on Carryback.--Section 39(d) (relating to
transition rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(15) No carryback of energy credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the energy credit with
respect to property described in section 48(a)(5) may be
carried back to a taxable year ending on or before the date
of the enactment of such section.''.
(d) Conforming Amendments.--
(A) Section 25C(e)(6), as added by this Act, is amended by
striking ``section 48(a)(5)(C)'' and inserting ``section
48(a)(6)(C)''.
(B) Section 29(b)(3)(A)(i)(III), as amended by this Act, is
amended by striking ``section 48(a)(5)(C)'' and inserting
``section 48(a)(6)(C)''.
(e) Effective Date.--The amendments made by this subsection
shall apply to property placed in service after the date of
the enactment of this Act, 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. 309. 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 10
percent of the amount paid or incurred by the taxpayer for
qualified energy efficiency improvements installed during
such taxable year.
``(b) Limitation.--The credit allowed by this section with
respect to a dwelling for any taxable year shall not exceed
$300, reduced (but not below zero) by the sum of the credits
allowed under subsection (a) to the taxpayer with respect to
the dwelling for all preceding taxable years.
``(c) Carryforward of Unused Credit.--If the credit
allowable under subsection (a) exceeds the limitation imposed
by section 26(a) for such taxable year reduced by the sum of
the credits allowable under this subpart (other than this
section) for such taxable year, such excess shall be carried
to the succeeding taxable year and added to the credit
allowable under subsection (a) for such succeeding taxable
year.
``(d) Qualified Energy Efficiency Improvements.--For
purposes of this section, the term `qualified energy
efficiency improvements' means any energy efficient building
envelope component which is certified to meet or exceed the
latest prescriptive criteria for such component in the
International Energy Conservation Code approved by the
Department of Energy before the installation of such
component, or any combination of energy efficiency measures
which are certified as achieving at least a 30 percent
reduction in heating and cooling energy usage for the
dwelling (as measured in terms of energy cost to the
taxpayer), if--
``(1) such component or combination of measures is
installed in or on a dwelling which--
``(A) is located in the United States,
``(B) has not been treated as a qualifying new home for
purposes of any credit allowed under section 45G, and
``(C) is owned and used by the taxpayer as the taxpayer's
principal residence (within the meaning of section 121),
``(2) the original use of such component or combination of
measures commences with the taxpayer, and
``(3) such component or combination of measures reasonably
can be expected to remain in use for at least 5 years.
``(e) Certification.--
``(1) Methods of certification.--
``(A) Component-based method.--The certification described
in subsection (d) for any component described in such
subsection shall be determined on the basis of applicable
energy efficiency ratings (including product labeling
requirements) for affected building envelope components.
``(B) Performance-based method.--
``(i) In general.--The certification described in
subsection (d) for any combination of measures described in
such subsection shall be--

``(I) determined by comparing the projected heating and
cooling energy usage for the dwelling to such usage for such
dwelling in its original condition, and
``(II) accompanied by a written analysis documenting the
proper application of a permissible energy performance
calculation method to the specific circumstances of such
dwelling.

``(ii) Computer software.--Computer software shall be used
in support of a performance-based method certification under
clause (i). Such software shall meet procedures and methods
for calculating energy and cost savings in regulations
promulgated by the Secretary of Energy.
``(2) Provider.--A certification described in subsection
(d) shall be provided by--
``(A) in the case of the method described in paragraph
(1)(A), a third party, such as a local building regulatory
authority, a utility, a manufactured home primary inspection
agency, or a home energy rating organization, or
``(B) in the case of the method described in paragraph
(1)(B), an individual recognized by an organization
designated by the Secretary for such purposes.
``(3) Form.--A certification described in subsection (d)
shall be made in writing on forms which specify in readily
inspectable fashion the energy efficient components and other
measures and their respective efficiency ratings, and which
include a permanent label affixed to the electrical
distribution panel of the dwelling.
``(4) Regulations.--
``(A) In general.--In prescribing regulations under this
subsection for certification methods described in paragraph
(1)(B), the Secretary, after examining the requirements for
energy consultants and home energy ratings providers
specified by the Mortgage Industry National Home Energy
Rating Standards, shall prescribe procedures for calculating
annual energy usage and cost reductions for heating and
cooling and for the reporting of the results. Such
regulations shall--
``(i) provide that any calculation procedures be fuel
neutral such that the same energy efficiency measures allow a
dwelling to be eligible for the credit under this section
regardless of whether such dwelling uses a gas or oil furnace
or boiler or an electric heat pump, and
``(ii) require that any computer software allow for the
printing of the Federal tax forms necessary for the credit
under this section and for the printing of forms for
disclosure to the owner of the dwelling.

[[Page S10418]]

``(B) Providers.--For purposes of paragraph (2)(B), the
Secretary shall establish requirements for the designation of
individuals based on the requirements for energy consultants
and home energy raters specified by the Mortgage Industry
National Home Energy Rating Standards.
``(f) Definitions and Special Rules.--For purposes of this
section--
``(1) 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 for the qualified energy
efficiency improvements 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.
``(2) 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 paid his tenant-
stockholder's proportionate share (as defined in section
216(b)(3)) of the cost of qualified energy efficiency
improvements made by such corporation.
``(3) 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 paid the individual's
proportionate share of the cost of qualified energy
efficiency improvements made by 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.
``(4) 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 or a dwelling when installed in or on such dwelling,
``(B) exterior windows (including skylights), and
``(C) exterior doors.
``(5) Manufactured homes included.--For purposes of this
section, the term `dwelling' includes a manufactured home
which conforms to Federal Manufactured Home Construction and
Safety Standards (24 C.F.R. 3280).
``(g) 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.
``(h) Termination.--Subsection (a) shall not apply to
qualified energy efficiency improvements installed after
December 31, 2006.''.
(b) Credit Allowed Against Regular Tax and Alternative
Minimum Tax.--
(1) In general.--Section 25D(b), as added by subsection
(a), is amended--
(A) by striking ``The credit'' and inserting the following:
``(1) Dollar amount.--The credit'', and
(B) by adding at the end the following new paragraph:
``(2) 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.''.
(2) Conforming amendments.--
(A) Section 25D(c), as added by subsection (a), is amended
by striking ``section 26(a) for such taxable year reduced by
the sum of the credits allowable under this subpart (other
than this section)'' and inserting ``subsection (b)(2)''.
(B) Section 23(b)(4)(B), as amended by this Act, is amended
by striking ``section 25C'' and inserting ``sections 25C and
25D''.
(C) Section 24(b)(3)(B), as amended by this Act, is amended
by striking ``and 25C'' and inserting ``25C, and 25D''.
(D) Section 25(e)(1)(C), as amended by this Act, is amended
by inserting ``25D,'' after ``25C,''.
(E) Section 25B(g)(2), as amended by this Act, is amended
by striking ``23 and 25C'' and inserting ``23, 25C, and
25D''.
(F) Section 26(a)(1), as amended by this Act, is amended by
striking ``and 25C'' and inserting ``25C, and 25D''.
(G) Section 904(h), as amended by this Act, is amended by
striking ``and 25C'' and inserting ``25C, and 25D''.
(H) Section 1400C(d), as amended by this Act, is amended by
striking ``and 25C'' and inserting ``25C, and 25D''.
(c) Additional Conforming Amendments.--
(1) Section 23(c), as in effect for taxable years beginning
before January 1, 2004, and as amended by this Act, is
amended by inserting ``, 25D,'' after ``sections 25C''.
(2) Section 25(e)(1)(C), as in effect for taxable years
beginning before January 1, 2004, and as amended by this Act,
is amended by inserting ``25D,'' after ``25C,''.
(3) 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 new paragraph:
``(33) to the extent provided in section 25D(g), in the
case of amounts with respect to which a credit has been
allowed under section 25D.''.
(4) Section 1400C(d), as in effect for taxable years
beginning before January 1, 2004, and as amended by this Act,
is amended by striking ``section 25C'' and inserting
``sections 25C and 25D''.
(5) 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.''.
(d) Effective Dates.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to property
installed after the date of the enactment of this Act, in
taxable years ending after such date.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to taxable years beginning after December 31,
2003.

TITLE IV--CLEAN COAL INCENTIVES

Subtitle A--Credit for Emission Reductions and Efficiency Improvements
in Existing Coal-Based Electricity Generation Facilities

SEC. 401. CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN COAL
TECHNOLOGY UNIT.

(a) Credit for Production From a Qualifying Clean Coal
Technology Unit.--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 FROM A QUALIFYING CLEAN
COAL TECHNOLOGY UNIT.

``(a) General Rule.--For purposes of section 38, the
qualifying clean coal technology production credit of any
taxpayer for any taxable year is equal to--
``(1) the applicable amount of clean coal technology
production credit, multiplied by
``(2) the applicable percentage of the sum of--
``(A) the kilowatt hours of electricity, plus
``(B) each 3,413 Btu of fuels or chemicals,
produced by the taxpayer during such taxable year at a
qualifying clean coal technology unit, but only if such
production occurs during the 10-year period beginning on the
date the unit was returned to service after becoming a
qualifying clean coal technology unit.
``(b) Applicable Amount.--
``(1) In general.--For purposes of this section, the
applicable amount of clean coal technology production credit
is equal to $0.0034.
``(2) Inflation adjustment.--For calendar years after 2004,
the applicable amount of clean coal technology production
credit shall be adjusted by multiplying such amount by the
inflation adjustment factor for the calendar year in which
the amount is applied. If any amount as increased under the
preceding sentence is not a multiple of 0.01 cent, such
amount shall be rounded to the nearest multiple of 0.01 cent.
``(c) Applicable Percentage.--For purposes of this section,
with respect to any qualifying clean coal technology unit,
the applicable percentage is the percentage equal to the
ratio which the portion of the national megawatt capacity
limitation allocated to the taxpayer with respect to such
unit under subsection (e) bears to the total megawatt
capacity of such unit.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Qualifying clean coal technology unit.--The term
`qualifying clean coal technology unit' means a clean coal
technology unit of the taxpayer which--
``(A) on the date of the enactment of this section--
``(i) was a coal-based electricity generating steam
generator-turbine unit which was not a clean coal technology
unit, and
``(ii) had a nameplate capacity rating of not more than 300
megawatts,
``(B) becomes a clean coal technology unit as the result of
the retrofitting, repowering, or replacement of the unit with
clean coal technology during the 10-year period beginning on
the date of the enactment of this section,
``(C) is not receiving nor 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 Energy, and

[[Page S10419]]

``(D) receives an allocation of a portion of the national
megawatt capacity limitation under subsection (e).
``(2) Clean coal technology unit.--The term `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, integrated gasification
combined cycle, or any other technology, 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 such unit as described in paragraph (1)(A),
``(D) has a maximum design net heat rate of not more than
9,500, and
``(E) meets the pollution control requirements of paragraph
(3).
``(3) 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 for the category
of source at the time of the retrofitting, repowering, or
replacement 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 retrofitting, repowering, or
replacement.
``(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.
``(4) 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 deg.F,
``(iv) temperature, wet bulb of 54 deg.F, and
``(v) relative humidity of 55 percent, and
``(D) if carbon capture controls have been installed with
respect to any qualifying 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.
``(5) HHV.--The term `HHV' means higher heating value.
``(6) Application of certain rules.--The rules of
paragraphs (3), (4), and (5) of section 45(e) shall apply.
``(7) Inflation adjustment factor.--
``(A) In general.--The term `inflation adjustment factor'
means, with respect to a calendar year, a fraction the
numerator of which is the GDP implicit price deflator for the
preceding calendar year and the denominator of which is the
GDP implicit price deflator for the calendar year 2003.
``(B) GDP implicit price deflator.--The term `GDP implicit
price deflator' means, for any calendar year, the most recent
revision of the implicit price deflator for the gross
domestic product as of June 30 of such calendar year as
computed by the Department of Commerce before October 1 of
such calendar year.
``(8) Noncompliance with pollution laws.--For purposes of
this section, a unit which is not in compliance with the
applicable State and Federal pollution prevention, control,
and permit requirements for any period of time shall not be
considered to be a qualifying clean coal technology unit
during such period.
``(e) National Limitation on the Aggregate Capacity of
Qualifying Clean Coal Technology Units.--
``(1) In general.--For purposes of this section, the
national megawatt capacity limitation for qualifying clean
coal technology units is 4,000 megawatts.
``(2) Allocation of limitation.--The Secretary shall
allocate the national megawatt capacity limitation for
qualifying clean coal technology units in such manner as the
Secretary may prescribe under the regulations under paragraph
(3).
``(3) 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--
``(A) to carry out the purposes of this subsection,
``(B) to limit the capacity of any qualifying clean coal
technology unit to which this section applies so that the
megawatt capacity allocated to any unit under this subsection
does not exceed 300 megawatts and the combined megawatt
capacity allocated to all such units when all such units are
placed in service during the 10-year period described in
subsection (d)(1)(B), does not exceed 4,000 megawatts,
``(C) to provide a certification process under which the
Secretary, in consultation with the Secretary of Energy,
shall approve and allocate the national megawatt capacity
limitation--
``(i) to encourage that units with the highest thermal
efficiencies, when adjusted for the heat content of the
design coal and site reference conditions described in
subsection (d)(4)(C), and environmental performance, be
placed in service as soon as possible, and
``(ii) to allocate capacity to taxpayers which have a
definite and credible plan for placing into commercial
operation a qualifying 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 that the Secretary determines are
appropriate,

``(D) to allocate the national megawatt capacity limitation
to a portion of the capacity of a qualifying clean coal
technology unit if the Secretary determines that such an
allocation would maximize the amount of efficient production
encouraged with the available tax credits,
``(E) to set progress requirements and conditional
approvals so that capacity allocations for clean coal
technology units which become unlikely to meet the necessary
conditions for qualifying can be reallocated by the Secretary
to other clean coal technology units, and
``(F) to provide taxpayers with opportunities to correct
administrative errors and omissions with respect to
allocations and record keeping within a reasonable period
after discovery, taking into account the availability of
regulations and other administrative guidance from the
Secretary.''.
(b) Credit Treated as 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 (18), by striking the period at the end of
paragraph (19) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(20) the qualifying clean coal technology production
credit determined under section 45I(a).''.
(c) Transitional Rule.--Section 39(d) (relating to
transitional rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(16) No carryback of section 45i credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the qualifying clean
coal technology production credit determined under section
45I may be carried back to a taxable year ending on or before
the date of the enactment of such section.''.
(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 new item:

``Sec. 45I. Credit for production from a qualifying clean coal
technology unit.''.
(e) Effective Date.--The amendments made by this section
shall apply to production after the date of the enactment of
this Act, in taxable years ending after such date.

Subtitle B--Incentives for Early Commercial Applications of Advanced
Clean Coal Technologies

SEC. 411. CREDIT FOR INVESTMENT IN QUALIFYING ADVANCED CLEAN
COAL TECHNOLOGY.

(a) Allowance of Qualifying Advanced Clean Coal Technology
Unit Credit.--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 qualifying advanced clean coal technology unit
credit.''.
(b) Amount of Qualifying Advanced Clean Coal Technology
Unit Credit.--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. QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY UNIT
CREDIT.

``(a) In General.--For purposes of section 46, the
qualifying advanced clean coal technology unit credit for any
taxable year is an amount equal to 10 percent of the
applicable percentage of the qualified investment in a
qualifying advanced clean coal technology unit for such
taxable year.
``(b) Qualifying Advanced Clean Coal Technology Unit.--

[[Page S10420]]

``(1) In general.--For purposes of subsection (a), the term
`qualifying advanced clean coal technology unit' means an
advanced clean coal technology unit of the taxpayer--
``(A)(i) in the case of a unit first placed in service
after the date of the enactment of this section, the original
use of which commences with the taxpayer, or
``(ii) in the case of the retrofitting or repowering of a
unit first placed in service before such date of enactment,
the retrofitting or repowering of which is completed by the
taxpayer after such date, or
``(B) which is depreciable under section 167,
``(C) which has a useful life of not less than 4 years,
``(D) which is located in the United States,
``(E) which is not receiving nor 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 Energy,
``(F) which is not a qualifying clean coal technology unit,
and
``(G) which receives an allocation of a portion of the
national megawatt capacity limitation under subsection (f).
``(2) Special rule for sale-leasebacks.--For purposes of
subparagraph (A) of paragraph (1), in the case of a unit
which--
``(A) is originally placed in service by a person, and
``(B) is sold and leased back by such person, or is leased
to such person, within 3 months after the date such unit was
originally placed in service, for a period of not less than
12 years,
such unit shall be treated as originally placed in service
not earlier than the date on which such unit is used under
the leaseback (or lease) referred to in subparagraph (B). The
preceding sentence shall not apply to any property if the
lessee and lessor of such property make an election under
this sentence. Such an election, once made, may be revoked
only with the consent of the Secretary.
``(3) Noncompliance with pollution laws.--For purposes of
this subsection, a unit which is not in compliance with the
applicable State and Federal pollution prevention, control,
and permit requirements for any period of time shall not be
considered to be a qualifying advanced clean coal technology
unit during such period.
``(c) Applicable Percentage.--For purposes of this section,
with respect to any qualifying advanced clean coal technology
unit, the applicable percentage is the percentage equal to
the ratio which the portion of the national megawatt capacity
limitation allocated to the taxpayer with respect to such
unit under subsection (f) bears to the total megawatt
capacity of such unit.
``(d) Advanced Clean Coal Technology Unit.--For purposes of
this section--
``(1) In general.--The term `advanced clean coal technology
unit' means a new, retrofit, or repowering unit of the
taxpayer which--
``(A) 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, and
``(B) 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--
``(A) is placed in service after the date of the enactment
of this section and before January 1, 2013, and
``(B) 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--
``(A) is placed in service after the date of the enactment
of this section and before January 1, 2017, and
``(B) 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, which--
``(A) is placed in service after the date of the enactment
of this section and before January 1, 2017,
``(B) 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
``(C) 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
using any other technology for the production of electricity
which is placed in service after the date of the enactment of
this section and before January 1, 2017.
``(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.
``(e) General Definitions.--Any term used in this section
which is also used in section 45I shall have the meaning
given such term in section 45I.
``(f) National Limitation on the Aggregate Capacity of
Advanced Clean Coal Technology Units.--
``(1) In general.--For purposes of subsection (b)(1)(G),
the national megawatt capacity limitation is--
``(A) for qualifying advanced clean coal technology units
using advanced pulverized coal or atmospheric fluidized bed
combustion technology, not more than 1,000 megawatts (not
more than 500 megawatts in the case of units placed in
service before 2009),
``(B) for such units using pressurized fluidized bed
combustion technology, not more than 500 megawatts (not more
than 250 megawatts in the case of units placed in service
before 2009),
``(C) for such units using integrated gasification combined
cycle technology, with or without fuel or chemical co-
production, not more than 2,000 megawatts (not more than 750
megawatts in the case of units placed in service before
2009), and
``(D) for such units using other technology for the
production of electricity, not more than 500 megawatts (not
more than 250 megawatts in the case of units placed in
service before 2009).
``(2) Allocation of limitation.--The Secretary shall
allocate the national megawatt capacity limitation for
qualifying advanced clean coal technology units in such
manner as the Secretary may prescribe under the regulations
under paragraph (3).
``(3) 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--
``(A) to carry out the purposes of this subsection and
section 45J,
``(B) to limit the capacity of any qualifying advanced
clean coal technology unit to which this section applies so
that the combined megawatt capacity of all such units to
which this section applies does not exceed 4,000 megawatts,
``(C) to provide a certification process described in
section 45I(e)(3)(C),
``(D) to carry out the purposes described in subparagraphs
(D), (E), and (F) of section 45I(e)(3), and
``(E) to reallocate capacity which is not allocated to any
technology described in subparagraphs (A) through (D) of
paragraph (1) because an insufficient number of qualifying
units request an allocation for such technology, to another
technology described in such subparagraphs in order to
maximize the amount of energy efficient production encouraged
with the available tax credits.
``(4) Selection criteria.--For purposes of this subsection,
the selection criteria for allocating the national megawatt
capacity limitation to qualifying advanced clean coal
technology units--
``(A) shall be established by the Secretary of Energy as
part of a competitive solicitation,
``(B) shall include primary criteria of minimum design net
heat rate, maximum design thermal efficiency, environmental
performance, and lowest cost to the Government, and
``(C) shall include supplemental criteria as determined
appropriate by the Secretary of Energy.
``(g) Qualified Investment.--For purposes of subsection
(a), the term `qualified investment' means, with respect to
any taxable year, the basis of a qualifying advanced clean
coal technology unit placed in service by the taxpayer during
such taxable year (in the case of a unit described in
subsection (b)(1)(A)(ii), only that portion of the basis of
such unit which is properly attributable to the retrofitting
or repowering of such unit).
``(h) Qualified Progress Expenditures.--
``(1) Increase in qualified investment.--In the case of a
taxpayer who has made an election under paragraph (5), the
amount of the qualified investment of such taxpayer for the
taxable year (determined under subsection (g) without regard
to this subsection) shall be increased by an amount equal to
the aggregate of each qualified progress expenditure for the
taxable year with respect to progress expenditure property.
``(2) Progress expenditure property defined.--For purposes
of this subsection, the

[[Page S10421]]

term `progress expenditure property' means any property being
constructed by or for the taxpayer and which it is reasonable
to believe will qualify as a qualifying advanced clean coal
technology unit which is being constructed by or for the
taxpayer when it is placed in service.
``(3) Qualified progress expenditures defined.--For
purposes of this subsection--
``(A) Self-constructed property.--In the case of any self-
constructed property, the term `qualified progress
expenditures' means the amount which, for purposes of this
subpart, is properly chargeable (during such taxable year) to
capital account with respect to such property.
``(B) Nonself-constructed property.--In the case of
nonself-constructed property, the term `qualified progress
expenditures' means the amount paid during the taxable year
to another person for the construction of such property.
``(4) Other definitions.--For purposes of this subsection--
``(A) Self-constructed property.--The term `self-
constructed property' means property for which it is
reasonable to believe that more than half of the construction
expenditures will be made directly by the taxpayer.
``(B) Nonself-constructed property.--The term `nonself-
constructed property' means property which is not self-
constructed property.
``(C) Construction, etc.--The term `construction' includes
reconstruction and erection, and the term `constructed'
includes reconstructed and erected.
``(D) Only construction of qualifying advanced clean coal
technology unit to be taken into account.--Construction shall
be taken into account only if, for purposes of this subpart,
expenditures therefor are properly chargeable to capital
account with respect to the property.
``(5) Election.--An election under this subsection may be
made at such time and in such manner as the Secretary may by
regulations prescribe. Such an election shall apply to the
taxable year for which made and to all subsequent taxable
years. Such an election, once made, may not be revoked except
with the consent of the Secretary.
``(i) Coordination With Other Credits.--This section shall
not apply to any property with respect to which the
rehabilitation credit under section 47 or the energy credit
under section 48 is allowed unless the taxpayer elects to
waive the application of such credit to such property.''.
(c) Recapture.--Section 50(a) (relating to other special
rules) is amended by adding at the end the following new
paragraph:
``(6) Special rules relating to qualifying advanced clean
coal technology unit.--For purposes of applying this
subsection in the case of any credit allowable by reason of
section 48A, the following rules shall apply:
``(A) General rule.--In lieu of the amount of the increase
in tax under paragraph (1), the increase in tax shall be an
amount equal to the investment tax credit allowed under
section 38 for all prior taxable years with respect to a
qualifying advanced clean coal technology unit (as defined by
section 48A(b)(1)) multiplied by a fraction the numerator of
which is the number of years remaining to fully depreciate
under this title the qualifying advanced clean coal
technology unit disposed of, and the denominator of which is
the total number of years over which such unit would
otherwise have been subject to depreciation. For purposes of
the preceding sentence, the year of disposition of the
qualifying advanced clean coal technology unit shall be
treated as a year of remaining depreciation.
``(B) Property ceases to qualify for progress
expenditures.--Rules similar to the rules of paragraph (2)
shall apply in the case of qualified progress expenditures
for a qualifying advanced clean coal technology unit under
section 48A, except that the amount of the increase in tax
under subparagraph (A) of this paragraph shall be substituted
for the amount described in such paragraph (2).
``(C) Application of paragraph.--This paragraph shall be
applied separately with respect to the credit allowed under
section 38 regarding a qualifying advanced clean coal
technology unit.''.
(d) Transitional Rule.--Section 39(d) (relating to
transitional rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(17) No carryback of section 48a credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the qualifying advanced
clean coal technology unit credit determined under section
48A may be carried back to a taxable year ending on or before
the date of the enactment of such section.''.
(e) Technical Amendments.--
(1) 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 qualifying advanced
clean coal technology unit attributable to any qualified
investment (as defined by section 48A(g)).''.
(2) Section 50(a)(4) is amended by striking ``and (2)'' and
inserting ``, (2), and (6)''.
(3) Section 50(c) is amended by adding at the end the
following new paragraph:
``(6) Nonapplication.--Paragraphs (1) and (2) shall not
apply to any qualifying advanced clean coal technology unit
credit under section 48A.''.
(4) 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. Qualifying advanced clean coal technology unit credit.''.

(f) Effective Date.--The amendments made by this section
shall apply to periods after the date of the enactment of
this Act, 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. 412. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED
CLEAN COAL TECHNOLOGY UNIT.

(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. 45J. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED
CLEAN COAL TECHNOLOGY UNIT.

``(a) General Rule.--For purposes of section 38, the
qualifying advanced clean coal technology production credit
of any taxpayer for any taxable year is equal to--
``(1) the applicable amount of advanced clean coal
technology production credit, multiplied by
``(2) the applicable percentage (as determined under
section 48A(c)) of the sum of--
``(A) the kilowatt hours of electricity, plus
``(B) each 3,413 Btu of fuels or chemicals,
produced by the taxpayer during such taxable year at a
qualifying advanced clean coal technology unit, but only if
such production occurs during the 10-year period beginning on
the date the unit was originally placed in service (or
returned to service after becoming a qualifying advanced
clean coal technology unit).
``(b) Applicable Amount.--For purposes of this section--
``(1) In general.--Except as provided in paragraph (2), the
applicable amount of advanced clean coal technology
production credit with respect to production from a
qualifying advanced clean coal technology unit shall be
determined as follows:
``(A) If the qualifying advanced clean coal technology unit
is producing electricity only:
``(i) In the case of a unit originally placed in service
before 2009, if--

------------------------------------------------------------------------
The applicable amount is:
---------------------------------
``The design net heat rate is:      For 1st 5 years   For 2d 5 years
of such service  of such service
------------------------------------------------------------------------
Not more than 8,500...................          $.0060           $.0038
More than 8,500 but not more than               $.0025           $.0010
8,750................................
More than 8,750 but less than 8,900...          $.0010          $.0010.
------------------------------------------------------------------------

``(ii) In the case of a unit originally placed in service
after 2008 and before 2013, if--

------------------------------------------------------------------------
The applicable amount is:
---------------------------------
``The design net heat rate is:      For 1st 5 years   For 2d 5 years
of such service  of such service
------------------------------------------------------------------------
Not more than 7,770...................          $.0105           $.0090
More than 7,770 but not more than               $.0085           $.0068
8,125................................
More than 8,125 but less than 8,500...          $.0075          $.0055.
------------------------------------------------------------------------

``(iii) In the case of a unit originally placed in service
after 2012 and before 2017, if--

------------------------------------------------------------------------
The applicable amount is:
---------------------------------
``The design net heat rate is:      For 1st 5 years   For 2d 5 years
of such service  of such service
------------------------------------------------------------------------
Not more than 7,380...................          $.0140           $.0115
More than 7,380 but not more than               $.0120          $.0090.
7,720................................
------------------------------------------------------------------------

``(B) If the qualifying advanced clean coal technology unit
is producing fuel or chemicals:
``(i) In the case of a unit originally placed in service
before 2009, if--

------------------------------------------------------------------------
The applicable amount is:
``The unit design net thermal     ---------------------------------
efficiency (HHV) is:           For 1st 5 years   For 2d 5 years
of such service  of such service
------------------------------------------------------------------------
Not less than 40.2 percent............          $.0060           $.0038
Less than 40.2 but not less than 39             $.0025           $.0010
percent..............................
Less than 39 but not less than 38.4             $.0010          $.0010.
percent..............................
------------------------------------------------------------------------

``(ii) In the case of a unit originally placed in service
after 2008 and before 2013, if--

------------------------------------------------------------------------
The applicable amount is:
``The unit design net thermal     ---------------------------------
efficiency (HHV) is:           For 1st 5 years   For 2d 5 years
of such service  of such service
------------------------------------------------------------------------
Not less than 43.9 percent............          $.0105           $.0090
Less than 43.9 but not less than 42             $.0085           $.0068
percent..............................
Less than 42 but not less than 40.2             $.0075          $.0055.
percent..............................
------------------------------------------------------------------------

[[Page S10422]]

``(iii) In the case of a unit originally placed in service
after 2012 and before 2017, if--

------------------------------------------------------------------------
The applicable amount is:
``The unit design net thermal     ---------------------------------
efficiency (HHV) is:           For 1st 5 years   For 2d 5 years
of such service  of such service
------------------------------------------------------------------------

Not less than 46.3 percent............          $.0140           $.0115
Less than 46.3 but not less than 44.2           $.0120          $.0090.
percent..............................
------------------------------------------------------------------------

``(2) Special rule for units qualifying for greater
applicable amount when placed in service.--If, at the time a
qualifying advanced clean coal technology unit is placed in
service, production from the unit would be entitled to a
greater applicable amount if such unit had been placed in
service at a later date, the applicable amount for such unit
shall be such greater amount.
``(c) Inflation Adjustment.--For calendar years after 2004,
each dollar amount in subsection (b)(1) shall be adjusted by
multiplying such amount by the inflation adjustment factor
for the calendar year in which the amount is applied. If any
amount as increased under the preceding sentence is not a
multiple of 0.01 cent, such amount shall be rounded to the
nearest multiple of 0.01 cent.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) In general.--Any term used in this section which is
also used in section 45I or 48A shall have the meaning given
such term in such section.
``(2) Applicable rules.--The rules of paragraphs (3), (4),
and (5) of section 45(e) shall apply.''.
(b) Credit Treated as 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 (19), by striking the period at the end of
paragraph (20) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(21) the qualifying advanced clean coal technology
production credit determined under section 45J(a).''.
(c) Transitional Rule.--Section 39(d) (relating to
transitional rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(18) No carryback of section 45j credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the qualifying advanced
clean coal technology production credit determined under
section 45J may be carried back to a taxable year ending on
or before the date of the enactment of such section.''.
(d) Denial of Double Benefit.--Section 29(d) (relating to
other definitions and special rules) is amended by adding at
the end the following new paragraph:
``(9) Denial of double benefit.--This section shall not
apply with respect to any qualified fuel the production of
which may be taken into account for purposes of determining
the credit under section 45J.''.
(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. 45J. Credit for production from a qualifying advanced clean coal
technology unit.''.
(f) Effective Date.--The amendments made by this section
shall apply to production after the date of the enactment of
this Act, in taxable years ending after such date.

Subtitle C--Treatment of Persons Not Able To Use Entire Credit

SEC. 421. TREATMENT OF PERSONS NOT ABLE TO USE ENTIRE CREDIT.

(a) In General.--Section 45I, as added by this Act, is
amended by adding at the end the following new subsection:
``(f) Treatment of Person Not Able To Use Entire Credit.--
``(1) Allowance of credits.--
``(A) In general.--Any credit allowable under this section,
section 45J, or section 48A with respect to a facility owned
by a person described in subparagraph (B) may be transferred
or used as provided in this subsection, and the determination
as to whether the credit is allowable shall be made without
regard to the tax-exempt status of the person.
``(B) Persons described.--A person is described in this
subparagraph if the person is--
``(i) an organization described in section 501(c)(12)(C)
and exempt from tax under section 501(a),
``(ii) an organization described in section 1381(a)(2)(C),
``(iii) a public utility (as defined in section
136(c)(2)(B)),
``(iv) any State or political subdivision thereof, the
District of Columbia, or any agency or instrumentality of any
of the foregoing,
``(v) any Indian tribal government (within the meaning of
section 7871) or any agency or instrumentality thereof, or
``(vi) the Tennessee Valley Authority.
``(2) Transfer of credit.--
``(A) In general.--A person described in clause (i), (ii),
(iii), (iv), or (v) of paragraph (1)(B) may transfer any
credit to which paragraph (1)(A) applies through an
assignment to any other person not described in paragraph
(1)(B). Such transfer may be revoked only with the consent of
the Secretary.
``(B) Regulations.--The Secretary shall prescribe such
regulations as necessary to ensure that any credit described
in subparagraph (A) is claimed once and not reassigned by
such other person.
``(C) Transfer proceeds treated as arising from essential
government function.--Any proceeds derived by a person
described in clause (iii), (iv), or (v) of paragraph (1)(B)
from the transfer of any credit under subparagraph (A) shall
be treated as arising from the exercise of an essential
government function.
``(3) Use of credit as an offset.--Notwithstanding any
other provision of law, in the case of a person described in
clause (i), (ii), or (v) of paragraph (1)(B), any credit to
which paragraph (1)(A) applies may be applied by such person,
to the extent provided by the Secretary of Agriculture, as a
prepayment of any loan, debt, or other obligation the entity
has incurred under subchapter I of chapter 31 of title 7 of
the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.),
as in effect on the date of the enactment of this section.
``(4) Use by tva.--
``(A) In general.--Notwithstanding any other provision of
law, in the case of a person described in paragraph
(1)(B)(vi), any credit to which paragraph (1)(A) applies may
be applied as a credit against the payments required to be
made in any fiscal year under section 15d(e) of the Tennessee
Valley Authority Act of 1933 (16 U.S.C. 831n-4(e)) as an
annual return on the appropriations investment and an annual
repayment sum.
``(B) Treatment of credits.--The aggregate amount of
credits described in paragraph (1)(A) with respect to such
person shall be treated in the same manner and to the same
extent as if such credits were a payment in cash and shall be
applied first against the annual return on the appropriations
investment.
``(C) Credit carryover.--With respect to any fiscal year,
if the aggregate amount of credits described paragraph (1)(A)
with respect to such person exceeds the aggregate amount of
payment obligations described in subparagraph (A), the excess
amount shall remain available for application as credits
against the amounts of such payment obligations in succeeding
fiscal years in the same manner as described in this
paragraph.
``(5) Credit not income.--Any transfer under paragraph (2)
or use under paragraph (3) of any credit to which paragraph
(1)(A) applies shall not be treated as income for purposes of
section 501(c)(12).
``(6) Treatment of unrelated persons.--For purposes of this
subsection, transfers among and between persons described in
clauses (i), (ii), (iii), (iv), and (v) of paragraph (1)(B)
shall be treated as transfers between unrelated parties.''.
(b) Effective Date.--The amendment made by this section
shall apply to production after the date of the enactment of
this Act, in taxable years ending after such date.

TITLE V--OIL AND GAS PROVISIONS

SEC. 501. 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 new
section:

``SEC. 45K. 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 crude 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.--
``(i) In general.--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.
``(ii) Inflation adjustment factor.--For purposes of clause
(i)--

``(I) In general.--The term `inflation adjustment factor'
means, with respect to a calendar year, a fraction the
numerator of which is the GDP implicit price deflator for the
preceding calendar year and the denominator of which is the
GDP implicit price deflator for the calendar year 2002.
``(II) GDP implicit price deflator.--The term `GDP implicit
price deflator' means, for

[[Page S10423]]

any calendar year, the most recent revision of the implicit
price deflator for the gross domestic product as of June 30
of such calendar year as computed by the Department of
Commerce before October 1 of such calendar year.

``(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 29(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 domestic 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 equivalents.
``(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) Noncompliance with pollution laws.--Production from
any well during any period in which such well is not in
compliance with applicable Federal pollution prevention,
control, and permit requirements shall not be treated as
qualified crude oil production or qualified natural gas
production.
``(4) 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 equivalents, 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).
``(C) Barrel equivalent.--The term `barrel equivalent'
means, with respect to natural gas, a conversation ratio of
6,000 cubic feet of natural gas to 1 barrel of crude oil.
``(D) Domestic natural gas.--The term `domestic natural
gas' does not include Alaska natural gas (as defined in
section 45M(c)(1)).
``(d) Other Rules.--
``(1) Production attributable to the taxpayer.--In the case
of a qualified marginal well in which there is more than 1
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 29 for the
taxable year, no credit shall be allowable under this section
unless the taxpayer elects not to claim the credit under
section 29 with respect to the well.''.
(b) Credit Treated as 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 (20), by striking the period at the end of
paragraph (21) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(22) the marginal oil and gas well production credit
determined under section 45K(a).''.
(c) No Carryback of Marginal Oil and Gas Well Production
Credit Before Effective Date.--Section 39(d) (relating to
transition rules), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(19) No carryback of marginal oil and gas well production
credit before effective date.--No portion of the unused
business credit for any taxable year which is attributable to
the marginal oil and gas well production credit determined
under section 45K may be carried back to a taxable year
ending on or before the date of the enactment of such
section.''.
(d) Coordination With Section 29.--Section 29(a) (relating
to allowance of credit) is amended by striking ``There'' and
inserting ``At the election of the taxpayer, there''.
(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. 45K. Credit for producing oil and gas from marginal wells.''.
(f) Effective Date.--The amendments made by this section
shall apply to production in taxable years beginning after
the date of the enactment of this Act.

SEC. 502. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR
PROPERTY.

(a) In General.--Section 168(e)(3)(C) (defining 7-year
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.--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) Natural gas gathering line.--The term `natural gas
gathering line' means--
``(A) 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
certificated by the Federal Energy Regulatory Commission as
an interstate transmission pipeline,
``(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,
or
``(B) any other pipe, equipment, or appurtenances
determined to be a gathering line by the Federal Energy
Regulatory Commission.
(c) 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 (C)(i) the following new item:

``(C)(ii).........................................................10''.
(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. 503. 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 Expense.--
``(1) In general.--A small business refiner may elect to
treat any qualified capital costs as an expense which is not
chargeable to capital account. Any qualified cost which is so
treated shall be allowed as a deduction for the taxable year
in which the cost is paid or incurred.
``(2) Limitation.--
``(A) In general.--The aggregate costs which may be taken
into account under this subsection for any taxable year with
respect to any facility may not exceed the applicable
percentage of the qualified capital costs paid or incurred
for the taxable year with respect to such facility.
``(B) Applicable percentage.--For purposes of subparagraph
(A)--
``(i) In general.--Except as provided in clause (ii), the
applicable percentage is 75 percent.
``(ii) Reduced percentage.--In the case of any facility
with average daily refinery runs or average retained
production for the period described in subsection (b)(2) in
excess of 155,000 barrels, the percentage described in clause
(i) shall be reduced (but not below zero) by the product of--

``(I) such percentage (before the application of this
clause), and
``(II) the ratio of such excess to 50,000 barrels.

``(b) Definitions.--For purposes of this section--
``(1) Qualified capital costs.--The term `qualified capital
costs' means any costs which--
``(A) are otherwise chargeable to capital account, and
``(B) are paid or incurred for the purpose of complying
with the Highway Diesel Fuel Sulfur Control Requirement of
the Environmental Protection Agency, as in effect on the date
of the enactment of this section, with respect to a facility
placed in service by the taxpayer before such date.
``(2) Small business refiner.--The term `small business
refiner' means, with respect to any taxable year, a refiner
of crude oil--
``(A) which, within the refinery operations of the
business, employs not more than 1,500 employees on any day
during such taxable year, and
``(B) the average daily refinery run or average retained
production of which for all facilities of the taxpayer for
the 1-year period ending on the date of the enactment of this
section did not exceed 410,000 barrels.
``(c) Coordination With Other Provisions.--Section 280B
shall not apply to

[[Page S10424]]

amounts which are treated as expenses under this section.
``(d) Basis Reduction.--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).
``(e) Controlled Groups.--For purposes of this section, all
persons treated as a single employer under subsection (b),
(c), (m), or (o) of section 414 shall be treated as a single
employer.''.
(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 inserting after subparagraph (I)
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(d).''.
(5) Section 1245(a), as amended by this Act, is amended by
inserting ``179C,'' after ``179B,'' both places it appears in
paragraphs (2)(C) and (3)(C).
(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. 504. ENVIRONMENTAL TAX CREDIT.

(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. 45L. ENVIRONMENTAL TAX CREDIT.

``(a) In General.--For purposes of section 38, the amount
of the environmental tax credit determined under this section
with respect to any small business refiner for any taxable
year is an amount equal to 5 cents for every gallon of low-
sulfur diesel fuel produced at a facility by such small
business refiner during such taxable year.
``(b) Maximum Credit.--
``(1) In general.--For any small business refiner, the
aggregate amount determined under subsection (a) for any
taxable year with respect to any facility shall not exceed
the applicable percentage of the qualified capital costs paid
or incurred by such small business refiner with respect to
such facility during the applicable period, reduced by the
credit allowed under subsection (a) with respect to such
facility for any preceding year.
``(2) Applicable percentage.--For purposes of paragraph
(1)--
``(A) In general.--Except as provided in subparagraph (B),
the applicable percentage is 25 percent.
``(B) Reduced percentage.--The percentage described in
subparagraph (A) shall be reduced in the same manner as under
section 179C(a)(2)(B)(ii).
``(c) Definitions.--For purposes of this section--
``(1) In general.--The terms `small business refiner' and
`qualified capital costs' have the same meaning as given in
section 179C.
``(2) Low-sulfur diesel fuel.--The term `low-sulfur diesel
fuel' means diesel fuel containing not more than 15 parts per
million of sulfur.
``(3) Applicable period.--The term `applicable period'
means, with respect to any facility, the period beginning on
the day after the date of the enactment of this section and
ending with 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.
``(4) Applicable epa regulations.--The term `applicable EPA
regulations' means the Highway Diesel Fuel Sulfur Control
Requirements of the Environmental Protection Agency, as in
effect on the date of the enactment of this section.
``(d) Certification.--
``(1) Required.--Not later than the date which is 30 months
after the first day of the first taxable year in which a
credit is allowed under this section with respect to a
facility, the small business refiner shall obtain a
certification from the Secretary, in 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, in 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 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.
``(e) Controlled Groups.--For purposes of this section, all
persons treated as a single employer under subsection (b),
(c), (m), or (o) of section 414 shall be treated as a single
employer.
``(f) 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 quantity or 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 rules for decrease in credits for taxable
year.--If the amount of the credit of a cooperative
organization determined under subsection (a) for a taxable
year is less than the amount of such credit shown on the
return of the cooperative organization for such year, an
amount equal to the excess of--
``(A) such reduction, over
``(B) the amount not apportioned to such patrons under
paragraph (1) for the taxable year,
shall be treated as an increase in tax imposed by this
chapter on the organization. Such increase 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.--Section
38(b) (relating to current year business credit), as amended
by this Act, is amended by striking ``plus'' at the end of
paragraph (21), by striking the period at the end of
paragraph (22) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(23) in the case of a small business refiner, the
environmental tax credit determined under section 45L(a).''.
(c) Denial of Double Benefit.--Section 280C (relating to
certain expenses for which credits are allowable), as amended
by this Act, is amended by adding at the end the following
new subsection:
``(e) Environmental Tax 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 45L(a).''.
(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 new item:

``Sec. 45L. Environmental tax credit.''.
(e) 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. 505. 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 60,000 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.''.

[[Page S10425]]

(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. 506. MARGINAL PRODUCTION INCOME LIMIT EXTENSION.

Section 613A(c)(6)(H) (relating to temporary suspension of
taxable income limit with respect to marginal production) is
amended by striking ``2004'' and inserting ``2007''.

SEC. 507. 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. 508. 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 costs paid or incurred in taxable years
beginning after the date of the enactment of this Act.

SEC. 509. 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.--
``(1) Oil and gas.--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, notwithstanding subsection (f),
this section shall apply with respect to such fuels produced
at such well or facility before the close of the 3-year
period beginning on the date that such well is drilled or
such facility is placed in service.
``(2) Facilities producing fuels from agricultural and
animal waste.--
``(A) In general.--In the case of facility for producing
liquid, gaseous, or solid fuels from qualified agricultural
and animal wastes, including such fuels when used as
feedstocks, which was 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 before the close of the 3-year period beginning on
the date such facility is placed in service.
``(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.
``(3) Wells producing viscous oil.--
``(A) In general.--In the case of a well for producing
viscous oil which was 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
well before the close of the 3-year period beginning on the
date such well is placed in service.
``(B) Viscous oil.--The term `viscous oil' means heavy oil,
as defined in section 613A(c)(6), except that--
``(i) `22 degrees' shall be substituted for `20 degrees' in
applying subparagraph (F) thereof, and
``(ii) in all cases, the oil gravity shall be measured from
the initial well-head samples, drill cuttings, or down hole
samples.
``(C) Waiver of unrelated person requirement.--In the case
of viscous oil, the requirement under subsection (a)(2)(A) of
a sale to an unrelated person shall not apply to any sale to
the extent that the viscous oil is not consumed in the
immediate vicinity of the wellhead.
``(4) Facilities producing refined coal.--
``(A) In general.--In the case of a facility described in
subparagraph (C) for producing refined coal which was 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 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 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) Qualifying advanced clean coal technology units
excluded.--A facility described in this subparagraph shall
not include a qualifying advanced clean coal technology unit
(as defined in section 48A(b)).
``(5) Coalmine gas.--
``(A) In general.--This section shall apply to coalmine
gas--
``(i) captured or extracted by the taxpayer during the
period beginning after the date of the enactment of this
subsection and ending before January 1, 2007, 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 State and Federal pollution prevention, control,
and permit requirements.
``(6) 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 (2), (3), (4), or (5) 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 project shall
not exceed an average barrel-of-oil equivalent of 200,000
cubic feet of natural gas per day. Days before the date the
project is placed in service shall not be taken into account
in determining such average.
``(C) Credit amount.--The dollar amount applicable under
subsection (a)(1) shall be $3 (and the inflation adjustment
under subsection (b)(2) shall not apply to such amount).''.
(b) Clarification of Placed in Service Date for Certain
Landfill Gas Facilities.--Section 29(d) (relating to other
definitions and special rules), as amended by this Act, is
amended by adding at the end the following new paragraph:
``(10) Clarification of placed in service date for certain
landfill gas facilities.--
``(A) In general.--In the case of a landfill placed in
service on or before the date of the enactment of this
paragraph--
``(i) a facility for producing qualified fuel from such
landfill shall include all wells,

[[Page S10426]]

pipes, and related components used to collect landfill gas,
and
``(ii) production of landfill gas from such landfill
attributable to wells, pipes, and related components placed
in service after such date of enactment shall be treated as
produced from a facility placed in service on the date such
wells, pipes, and related components were placed in service.
``(B) Landfill gas.--The term `landfill gas' means gas
described in subsection (c)(1)(B)(ii) and derived from the
biodegradation of municipal solid waste.''.
(c) Extension for certain fuel produced at existing
facilities.--Section 29(f)(2) (relating to application of
section) is amended by inserting ``(January 1, 2006, in the
case of any coke, coke gas, or natural gas and byproducts
produced by coal gasification from lignite in a facility
described in paragraph (1)(B))'' after ``January 1, 2003''.
(d) Study of Coalbed Methane.--
(1) In general.--The Secretary of the Treasury shall
conduct a study regarding the effect of section 29 of the
Internal Revenue Code of 1986 on the production of coalbed
methane.
(2) Contents of study.--The study under paragraph (1) shall
estimate the total amount of credits under section 29 of the
Internal Revenue Code of 1986 claimed annually and in the
aggregate which are related to the production of coalbed
methane since the date of the enactment of such section 29.
Such study shall report the annual value of such credits
allowable for coalbed methane compared to the average annual
wellhead price of natural gas (per thousand cubic feet of
natural gas). Such study shall also estimate the incremental
increase in production of coalbed methane which has resulted
from the enactment of such section 29, and the cost to the
Federal Government, in terms of the net tax benefits claimed,
per thousand cubic feet of incremental coalbed methane
produced annually and in the aggregate since such enactment.
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to fuel sold
after the date of the enactment of this Act, in taxable years
ending after such date.
(2) Existing facilities.--The amendments made by subsection
(c) shall apply to fuel sold after December 31, 2002, in
taxable years ending after such date.

SEC. 510. NATURAL GAS DISTRIBUTION LINES TREATED AS 15-YEAR
PROPERTY.

(a) In General.--Section 168(e)(3)(E) (defining 15-year
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) (relating to special rule for certain property
assigned to classes), as amended by this Act, is amended by
adding after the item relating to subparagraph (E)(iii) the
following new item:

``(E)(iv).........................................................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.

SEC. 511. CREDIT FOR ALASKA NATURAL GAS.

(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. 45M. ALASKA NATURAL GAS.

``(a) In General.--For purposes of section 38, the Alaska
natural gas credit for any taxable year is an amount equal to
the product of--
``(1) the credit amount, and
``(2) Alaska natural gas the production of which is
attributable to the taxpayer.
``(b) Credit Amount.--For purposes of this section--
``(1) In general.--The credit amount is $0.52 per 1,000,000
Btu of Alaska natural gas.
``(2) Reduction as gas prices increase.--
``(A) In general.--The dollar amount under paragraph (1)
shall 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 $0.83, bears to
``(ii) $0.52.
``(B) Applicable reference price.--For purposes of this
paragraph--
``(i) In general.--The applicable reference price for any
calendar month in a taxable year is the reference price for
the calendar month in which production occurs.
``(ii) Reference price.--The term `reference price' means,
with respect to any calendar month, a published market price
for natural gas in United States dollars per 1,000,000 Btu
(reduced by any gas transportation costs and gas processing
costs as determined by the appropriate national regulatory
body for natural gas transportation) as determined under
regulations by the Secretary.
``(C) Inflation adjustment.--
``(i) In general.--In the case of any taxable year
beginning in a calendar year after 2003, each of the dollar
amounts contained in paragraph (1) and subparagraph (A) of
this paragraph shall be increased to an amount equal to such
dollar amount multiplied by the inflation adjustment factor
for such calendar year.
``(ii) Inflation adjustment factor.--For purposes of clause
(i)--

``(I) In general.--The term `inflation adjustment factor'
means, with respect to a calendar year, a fraction the
numerator of which is the GDP implicit price deflator for the
preceding calendar year and the denominator of which is the
GDP implicit price deflator for the calendar year 2002.
``(II) GDP implicit price deflator.--The term `GDP implicit
price deflator' means, for any calendar year, the most recent
revision of the implicit price deflator for the gross
domestic product as of June 30 of such calendar year as
computed by the Department of Commerce before October 1 of
such calendar year.

``(c) Alaska Natural Gas.--For purposes of this section--
``(1) In general.--The term `Alaska natural gas' means
natural gas entering the Alaska natural gas pipeline (as
defined in section 168(i)(18) (determined without regard to
subparagraph (B) thereof)) which is produced from a well--
``(A) located in the area of the State of Alaska lying
north of 64 degrees North latitude, determined by excluding
the area of the Alaska National Wildlife Refuge (including
the continental shelf thereof within the meaning of section
638(1)), and
``(B) pursuant to the applicable State and Federal
pollution prevention, control, and permit requirements from
such area (including the continental shelf thereof within the
meaning of section 638(1)).
``(2) Natural gas.--The term `natural gas' has the meaning
given such term by section 613A(e)(2).
``(d) Special Rules.--For purposes of this section--
``(1) Production attributable to the taxpayer.--
``(A) In general.--In the case of a well in which there is
more than 1 person or entity--
``(i) entitled to production of Alaska natural gas, or
``(ii) at the election of such person or entity, entitled
to the value of production as either an operating interest
owner or a royalty interest owner,
the portion of such production attributable to such person or
entity shall be determined on the basis of the ratio which
the person's or entity's interest in the production or the
value of production bears to the aggregate of the interests
of all such persons or entities. Production otherwise
attributable to a United States tax-exempt person or entity
by reason of a royalty interest shall be attributable to such
person or entity with respect to whom royalty-in-value
production remains or to whom royalty-in-kind production is
sold.
``(B) Partnership properties.--In the case of a
partnership, for purposes of applying subparagraph (A),
production shall be attributable to its partners based on
each partner's distributive share of Alaska natural gas which
is produced from partnership properties and attributable to
the partnership or its partners under subparagraph (A).
``(2) 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) Application of Section.--This section shall apply to
Alaska natural gas during the period--
``(1) beginning with the later of--
``(A) January 1, 2010, or
``(B) the initial date for the interstate transportation of
such Alaska natural gas, and
``(2) ending with the date which is 25 years after the date
described in paragraph (1).''.
(b) Credit Treated as 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 (22), by striking the period at the end of
paragraph (23) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(24) The Alaska natural gas credit determined under
section 45M(a).''.
(c) Allowing Credit Against Entire Regular Tax and Minimum
Tax.--
(1) In general.--Section 38(c) (relating to limitation
based on amount of tax), as amended by this Act, is amended
by redesignating paragraph (5) as paragraph (6) and by
inserting after paragraph (4) the following new paragraph:
``(5) Special rules for alaska natural gas credit.--
``(A) In general.--In the case of the Alaska natural gas
credit--
``(i) this section and section 39 shall be applied
separately with respect to the credit, and
``(ii) in applying paragraph (1) to the credit--

``(I) the amounts in subparagraphs (A) and (B) thereof
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 Alaska
natural gas credit).

``(B) Alaska Natural Gas Credit.--For purposes of this
subsection, the term `Alaska natural gas credit' means the
credit allowable under subsection (a) by reason of section
45M(a).''.
(2) Conforming amendments.--Subclause (II) of section
38(c)(2)(A)(ii), as amended by this Act, subclause (II) of
section 38(c)(3)(A)(ii), as amended by this Act, and
subclause (II) of section 38(c)(4)(A)(ii), as added by this
Act, are each amended by inserting ``or the Alaska natural
gas credit'' after ``producer credit''.

[[Page S10427]]

(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 new item:

``Sec. 45M. Alaska natural gas.''.

SEC. 512. CERTAIN ALASKA NATURAL GAS PIPELINE PROPERTY
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 Alaska natural gas pipeline, and''.
(b) Alaska Natural Gas Pipeline.--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:
``(18) Alaska natural gas pipeline.--The term `Alaska
natural gas pipeline' means the natural gas pipeline system
located in the State of Alaska which--
``(A) has a capacity of more than 500,000,000,000 Btu of
natural gas per day, and
``(B) is--
``(i) placed in service after December 31, 2012, or
``(ii) treated as placed in service on January 1, 2013, if
the taxpayer who places such system in service before January
1, 2013, elects such treatment.
Such term includes the pipe, trunk lines, related equipment,
and appurtenances used to carry natural gas, but does not
include any gas processing plant.''.
(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)........................................................10''.

``(d) 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. 513. ARBITRAGE RULES NOT TO APPLY TO PREPAYMENTS FOR
NATURAL GAS.

(a) In General.--Section 148(b) (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 or for a utility owned by a governmental unit if
the amount of gas permitted to be acquired under the contract
for 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 use by a business 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) Overall limitation.--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 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.--Section 141(c)(2) (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) Effective Date.--The amendment made by this section
shall apply to obligations issued after the date of the
enactment of this Act.

SEC. 514. EXTENSION OF ENHANCED OIL RECOVERY CREDIT TO
CERTAIN ALASKA 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 to construct a gas treatment plant which--
``(i) is located in the area of the United States (within
the meaning of section 638(1)) lying north of 64 degrees
North latitude,
``(ii) prepares Alaska natural gas (as defined in section
45M(c)(1)) for transportation through a pipeline with a
capacity of at least 2,000,000,000,000 Btu of natural gas per
day, and
``(iii) 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.

TITLE VI--ELECTRIC UTILITY RESTRUCTURING PROVISIONS

SEC. 601. 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.--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.''.
(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.--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--
``(A) the transfer of such Fund shall not cause such Fund
to be disqualified from the application of this section, and
``(B) no amount shall be treated as distributed from such
Fund, or be includable in gross income, by reason of such
transfer.''.
(c) Treatment of Certain Decommissioning Costs.--

[[Page S10428]]

(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 excess of the total nuclear decommissioning costs with
respect to such nuclear power plant over the portion of such
costs taken into account in determining the ruling amount in
effect immediately before the transfer.
``(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 or a corresponding amount was not included
in gross income. 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 transferee and not the transferor. The preceding
sentence shall not apply if the transferor is an entity
exempt from tax under this chapter.
``(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 Amendment.--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 the date of the
enactment of this Act.

SEC. 602. TREATMENT OF CERTAIN INCOME OF COOPERATIVES.

(a) Income From Open Access and Nuclear Decommissioning
Transactions.--
(1) In general.--Section 501(c)(12)(C) (relating to list of
exempt organizations) 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 open access transaction (other than income
received or accrued directly or indirectly from a member),
``(iii) from any nuclear decommissioning transaction,
``(iv) from any asset exchange or conversion transaction,
or
``(v) from the prepayment of any loan, debt, or obligation
made, insured, or guaranteed under the Rural Electrification
Act of 1936.''.
(2) Definitions and special rules.--Section 501(c)(12) is
amended by adding at the end the following new subparagraphs:
``(E) For purposes of subparagraph (C)(ii)--
``(i) The term `open access transaction' means any
transaction meeting the open access requirements of any of
the following subclauses with respect to a mutual or
cooperative electric company:

``(I) The provision or sale of electric transmission
service or ancillary services meets the open access
requirements of this subclause only if such services are
provided on a nondiscriminatory open access basis pursuant to
an open access transmission tariff filed with and approved by
FERC, including an acceptable reciprocity tariff, or under a
regional transmission organization agreement approved by
FERC.
``(II) The provision or sale of electric energy
distribution services or ancillary services meets the open
access requirements of this subclause only if such services
are provided on a nondiscriminatory open access basis to end-
users served by distribution facilities owned by the mutual
or cooperative electric company (or its members).
``(III) The delivery or sale of electric energy generated
by a generation facility meets the open access requirements
of this subclause only if such facility is directly connected
to distribution facilities owned by the mutual or cooperative
electric company (or its members) which owns the generation
facility, and such distribution facilities meet the open
access requirements of subclause (II).

``(ii) Clause (i)(I) shall apply in the case of a
voluntarily filed tariff only if the mutual or cooperative
electric company files a report with FERC within 90 days
after the date of the enactment of this subparagraph relating
to whether or not such company will join a regional
transmission organization.
``(iii) A mutual or cooperative electric company shall be
treated as meeting the open access requirements of clause
(i)(I) if a regional transmission organization controls the
transmission facilities.
``(iv) References to FERC in this subparagraph shall be
treated as including references to 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))) or references to the Rural Utilities
Service with respect to any other facility not subject to
FERC jurisdiction.
``(v) For purposes of this subparagraph--

``(I) The term `transmission facility' means an electric
output facility (other than a generation facility) which
operates at an electric voltage of 69 kilovolts or greater.
To the extent provided in regulations, such term includes any
output facility which FERC determines is a transmission
facility under standards applied by FERC under the Federal
Power Act (as in effect on the date of the enactment of the
Energy Tax Incentives Act of 2003).
``(II) The term `regional transmission organization'
includes an independent system operator.
``(III) The term `FERC' means the Federal Energy Regulatory
Commission.

``(F) 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) 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.--
Section 501(c)(12), 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 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 calendar year which includes the date of the
enactment of this

[[Page S10429]]

subparagraph or, if later, at the election of the mutual or
cooperative electric company--
``(I) the first year that such electric company offers
nondiscriminatory open access, or
``(II) the first year in which at least 10 percent of such
electric company's sales are not to members of such electric
company.
``(viii) A company shall not fail to be treated as a mutual
or cooperative 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) In the case of a mutual or cooperative electric
company, income from any open access transaction 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.--
Section 512(b) (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. 603. 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.--For purposes of this subtitle, if a
taxpayer elects the application of this subsection to a
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
such ordinary income which is required to be included in
gross income for such taxable year (determined without regard
to this subsection),
shall be so recognized and included ratably over the 8-
taxable year period beginning with such taxable year.
``(2) Qualifying electric transmission transaction.--For
purposes of this subsection, the term `qualifying electric
transmission transaction' means any sale or other disposition
before January 1, 2008, of--
``(A) property used by the taxpayer 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.
``(3) Independent transmission company.--For purposes of
this subsection, the term `independent transmission company'
means--
``(A) a regional transmission organization 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) is not
a market participant within the meaning of such Commission's
rules applicable to regional transmission organizations, 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
regional transmission organization before the close of the
period specified in such authorization, but not later than
January 1, 2008, or
``(C) in the case of facilities subject to the exclusive
jurisdiction of the Public Utility Commission of Texas, a
person which is approved by that Commission as consistent
with Texas State law regarding an independent transmission
organization.
``(4) Election.--An election under paragraph (1), once
made, shall be irrevocable.
``(5) 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 amendment made by this section
shall apply to transactions occurring after the date of the
enactment of this Act.

TITLE VII--ADDITIONAL PROVISIONS

SEC. 701. EXTENSION OF ACCELERATED DEPRECIATION AND WAGE
CREDIT BENEFITS ON INDIAN RESERVATIONS.

(a) Special Recovery Period for Property on Indian
Reservations.--Section 168(j)(8) (relating to termination) is
amended by striking ``2004'' and inserting ``2005''.
(b) Indian Employment Credit.--Section 45A(f) (relating to
termination) is amended by striking ``2004'' and inserting
``2005''.

SEC. 702. STUDY OF EFFECTIVENESS OF CERTAIN PROVISIONS BY
GAO.

(a) Study.--The Comptroller General of the United States
shall undertake an ongoing analysis of--
(1) the effectiveness of the alternative motor vehicles and
fuel incentives provisions under title II and the
conservation and energy efficiency provisions under title
III, and
(2) the recipients of the tax benefits contained in such
provisions, including an identification of such recipients by
income and other appropriate measurements.
Such analysis shall quantify the effectiveness of such
provisions by examining and comparing the Federal
Government's forgone revenue to the aggregate amount of
energy actually conserved and tangible environmental benefits
gained as a result of such provisions.
(b) Reports.--The Comptroller General of the United States
shall report the analysis required under subsection (a) to
Congress not later than December 31, 2004, and annually
thereafter.

SEC. 703. 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. 704. EXPANSION OF RESEARCH CREDIT.

(a) Credit for Expenses Attributable to Certain
Collaborative Energy Research Consortia.--
(1) In general.--Section 41(a) (relating to credit for
increasing research activities) is amended by striking
``and'' at the end of paragraph (1), by striking the period
at the end of paragraph (2) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(3) 20 percent of the amounts paid or incurred by the
taxpayer in carrying on any trade or business of the taxpayer
during the taxable year (including as contributions) to an
energy research consortium.''.
(2) Energy research consortium defined.--Section 41(f)
(relating to special rules) is amended by adding at the end
the following new paragraph:
``(6) Energy research consortium.--
``(A) In general.--The term `energy research consortium'
means any organization--
``(i) which is--

``(I) described in section 501(c)(3) and is exempt from tax
under section 501(a) and is organized and operated primarily
to conduct energy research, or
``(II) organized and operated primarily to conduct energy
research in the public interest (within the meaning of
section 501(c)(3)),

[[Page S10430]]

``(ii) which is not a private foundation,
``(iii) to which at least 5 unrelated persons paid or
incurred during the calendar year in which the taxable year
of the organization begins amounts (including as
contributions) to such organization for energy research, and
``(iv) to which no single person paid or incurred
(including as contributions) during such calendar year an
amount equal to more than 50 percent of the total amounts
received by such organization during such calendar year for
energy research.
``(B) Treatment of persons.--All persons treated as a
single employer under subsection (a) or (b) of section 52
shall be treated as related persons for purposes of
subparagraph (A)(iii) and as a single person for purposes of
subparagraph (A)(iv).''.
(3) Conforming amendment.--Section 41(b)(3)(C) is amended
by inserting ``(other than an energy research consortium)''
after ``organization''.
(b) Repeal of Limitation on Contract Research Expenses Paid
to Small Businesses, Universities, and Federal
Laboratories.--Section 41(b)(3) (relating to contract
research expenses) is amended by adding at the end the
following new subparagraph:
``(D) Amounts paid to eligible small businesses,
universities, and federal laboratories.--
``(i) In general.--In the case of amounts paid by the
taxpayer to--

``(I) an eligible small business,
``(II) an institution of higher education (as defined in
section 3304(f)), or
``(III) an organization which is a Federal laboratory,

for qualified research which is energy research, subparagraph
(A) shall be applied by substituting `100 percent' for `65
percent'.
``(ii) Eligible small business.--For purposes of this
subparagraph, the term `eligible small business' means a
small business with respect to which the taxpayer does not
own (within the meaning of section 318) 50 percent or more
of--

``(I) in the case of a corporation, the outstanding stock
of the corporation (either by vote or value), and
``(II) in the case of a small business which is not a
corporation, the capital and profits interests of the small
business.

``(iii) Small business.--For purposes of this
subparagraph--

``(I) In general.--The term `small business' means, with
respect to any calendar year, any person if the annual
average number of employees employed by such person during
either of the 2 preceding calendar years was 500 or fewer.
For purposes of the preceding sentence, a preceding calendar
year may be taken into account only if the person was in
existence throughout the year.
``(II) Startups, controlled groups, and predecessors.--
Rules similar to the rules of subparagraphs (B) and (D) of
section 220(c)(4) shall apply for purposes of this clause.

``(iv) Federal laboratory.--For purposes of this
subparagraph, the term `Federal laboratory' has the meaning
given such term by section 4(6) of the Stevenson-Wydler
Technology Innovation Act of 1980 (15 U.S.C. 3703(6)), as in
effect on the date of the enactment of the Energy Tax
Incentives Act of 2003.''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after the date of the
enactment of this Act.

TITLE VIII--REVENUE PROVISIONS

Subtitle A--Provisions Designed To Curtail Tax Shelters

SEC. 801. PENALTY FOR FAILING TO DISCLOSE REPORTABLE
TRANSACTION.

(a) In General.--Part I of subchapter B of chapter 68
(relating to assessable penalties) is amended by inserting
after section 6707 the following new section:

``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE
TRANSACTION INFORMATION WITH RETURN OR
STATEMENT.

``(a) Imposition of Penalty.--Any person who fails to
include on any return or statement any information with
respect to a reportable transaction which is required under
section 6011 to be included with such return or statement
shall pay a penalty in the amount determined under subsection
(b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraphs (2) and
(3), the amount of the penalty under subsection (a) shall be
$50,000.
``(2) Listed transaction.--The amount of the penalty under
subsection (a) with respect to a listed transaction shall be
$100,000.
``(3) Increase in penalty for large entities and high net
worth individuals.--
``(A) In general.--In the case of a failure under
subsection (a) by--
``(i) a large entity, or
``(ii) a high net worth individual,
the penalty under paragraph (1) or (2) shall be twice the
amount determined without regard to this paragraph.
``(B) Large entity.--For purposes of subparagraph (A), the
term `large entity' means, with respect to any taxable year,
a person (other than a natural person) with gross receipts in
excess of $10,000,000 for the taxable year in which the
reportable transaction occurs or the preceding taxable year.
Rules similar to the rules of paragraph (2) and subparagraphs
(B), (C), and (D) of paragraph (3) of section 448(c) shall
apply for purposes of this subparagraph.
``(C) High net worth individual.--For purposes of
subparagraph (A), the term `high net worth individual' means,
with respect to a reportable transaction, a natural person
whose net worth exceeds $2,000,000 immediately before the
transaction.
``(c) Definitions.--For purposes of this section--
``(1) Reportable transaction.--The term `reportable
transaction' means any transaction with respect to which
information is required to be included with a return or
statement because, as determined under regulations prescribed
under section 6011, such transaction is of a type which the
Secretary determines as having a potential for tax avoidance
or evasion.
``(2) Listed transaction.--Except as provided in
regulations, the term `listed transaction' means a reportable
transaction which is the same as, or substantially similar
to, a transaction specifically identified by the Secretary as
a tax avoidance transaction for purposes of section 6011.
``(d) Authority To Rescind Penalty.--
``(1) In general.--The Commissioner of Internal Revenue may
rescind all or any portion of any penalty imposed by this
section with respect to any violation if--
``(A) the violation is with respect to a reportable
transaction other than a listed transaction,
``(B) the person on whom the penalty is imposed has a
history of complying with the requirements of this title,
``(C) it is shown that the violation is due to an
unintentional mistake of fact;
``(D) imposing the penalty would be against equity and good
conscience, and
``(E) rescinding the penalty would promote compliance with
the requirements of this title and effective tax
administration.
``(2) Discretion.--The exercise of authority under
paragraph (1) shall be at the sole discretion of the
Commissioner and may be delegated only to the head of the
Office of Tax Shelter Analysis. The Commissioner, in the
Commissioner's sole discretion, may establish a procedure to
determine if a penalty should be referred to the Commissioner
or the head of such Office for a determination under
paragraph (1).
``(3) No appeal.--Notwithstanding any other provision of
law, any determination under this subsection may not be
reviewed in any administrative or judicial proceeding.
``(4) Records.--If a penalty is rescinded under paragraph
(1), the Commissioner shall place in the file in the Office
of the Commissioner the opinion of the Commissioner or the
head of the Office of Tax Shelter Analysis with respect to
the determination, including--
``(A) the facts and circumstances of the transaction,
``(B) the reasons for the rescission, and
``(C) the amount of the penalty rescinded.
``(5) Report.--The Commissioner shall each year report to
the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate--
``(A) a summary of the total number and aggregate amount of
penalties imposed, and rescinded, under this section, and
``(B) a description of each penalty rescinded under this
subsection and the reasons therefor.
``(e) Penalty Reported to SEC.--In the case of a person--
``(1) which is required to file periodic reports under
section 13 or 15(d) of the Securities Exchange Act of 1934 or
is required to be consolidated with another person for
purposes of such reports, and
``(2) which--
``(A) is required to pay a penalty under this section with
respect to a listed transaction, or
``(B) is required to pay a penalty under section 6662A with
respect to any reportable transaction at a rate prescribed
under section 6662A(c),

the requirement to pay such penalty shall be disclosed in
such reports filed by such person for such periods as the
Secretary shall specify. Failure to make a disclosure in
accordance with the preceding sentence shall be treated as a
failure to which the penalty under subsection (b)(2) applies.
``(f) Coordination With Other Penalties.--The penalty
imposed by this section is in addition to any penalty imposed
under this title.''.
(b) Conforming Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by inserting after
the item relating to section 6707 the following:

``Sec. 6707A. Penalty for failure to include reportable transaction
information with return or statement.''.
(c) Effective Date.--The amendments made by this section
shall apply to returns and statements the due date for which
is after the date of the enactment of this Act.

SEC. 802. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS
AND OTHER REPORTABLE TRANSACTIONS HAVING A
SIGNIFICANT TAX AVOIDANCE PURPOSE.

(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662 the following new section:

``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERSTATEMENTS WITH RESPECT TO REPORTABLE
TRANSACTIONS.

``(a) Imposition of Penalty.--If a taxpayer has a
reportable transaction understatement for any taxable year,
there shall be added to the tax an amount equal to 20 percent
of the amount of such understatement.
``(b) Reportable Transaction Understatement.--For purposes
of this section--

[[Page S10431]]

``(1) In general.--The term `reportable transaction
understatement' means the sum of--
``(A) the product of--
``(i) the amount of the increase (if any) in taxable income
which results from a difference between the proper tax
treatment of an item to which this section applies and the
taxpayer's treatment of such item (as shown on the taxpayer's
return of tax), and
``(ii) the highest rate of tax imposed by section 1
(section 11 in the case of a taxpayer which is a
corporation), and
``(B) the amount of the decrease (if any) in the aggregate
amount of credits determined under subtitle A which results
from a difference between the taxpayer's treatment of an item
to which this section applies (as shown on the taxpayer's
return of tax) and the proper tax treatment of such item.

For purposes of subparagraph (A), any reduction of the excess
of deductions allowed for the taxable year over gross income
for such year, and any reduction in the amount of capital
losses which would (without regard to section 1211) be
allowed for such year, shall be treated as an increase in
taxable income.
``(2) Items to which section applies.--This section shall
apply to any item which is attributable to--
``(A) any listed transaction, and
``(B) any reportable transaction (other than a listed
transaction) if a significant purpose of such transaction is
the avoidance or evasion of Federal income tax.
``(c) Higher Penalty for Nondisclosed Listed and Other
Avoidance Transactions.--
``(1) In general.--Subsection (a) shall be applied by
substituting `30 percent' for `20 percent' with respect to
the portion of any reportable transaction understatement with
respect to which the requirement of section 6664(d)(2)(A) is
not met.
``(2) Rules applicable to compromise of penalty.--
``(A) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which paragraph (1)
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(B) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
subparagraph (A).
``(d) Definitions of Reportable and Listed Transactions.--
For purposes of this section, the terms `reportable
transaction' and `listed transaction' have the respective
meanings given to such terms by section 6707A(c).
``(e) Special Rules.--
``(1) Coordination with penalties, etc., on other
understatements.--In the case of an understatement (as
defined in section 6662(d)(2))--
``(A) the amount of such understatement (determined without
regard to this paragraph) shall be increased by the aggregate
amount of reportable transaction understatements for purposes
of determining whether such understatement is a substantial
understatement under section 6662(d)(1), and
``(B) the addition to tax under section 6662(a) shall apply
only to the excess of the amount of the substantial
understatement (if any) after the application of subparagraph
(A) over the aggregate amount of reportable transaction
understatements.
``(2) Coordination with other penalties.--
``(A) Application of fraud penalty.--References to an
underpayment in section 6663 shall be treated as including
references to a reportable transaction understatement.
``(B) No double penalty.--This section shall not apply to
any portion of an understatement on which a penalty is
imposed under section 6663.
``(3) Special rule for amended returns.--Except as provided
in regulations, in no event shall any tax treatment included
with an amendment or supplement to a return of tax be taken
into account in determining the amount of any reportable
transaction understatement if the amendment or supplement is
filed after the earlier of the date the taxpayer is first
contacted by the Secretary regarding the examination of the
return or such other date as is specified by the Secretary.
``(4) Cross reference.--

``For reporting of section 6662A(c) penalty to the Securities and
Exchange Commission, see section 6707A(e).''.
(b) Determination of Other Understatements.--Subparagraph
(A) of section 6662(d)(2) is amended by adding at the end the
following flush sentence:

``The excess under the preceding sentence shall be determined
without regard to items to which section 6662A applies.''.
(c) Reasonable Cause Exception.--
(1) In general.--Section 6664 is amended by adding at the
end the following new subsection:
``(d) Reasonable Cause Exception for Reportable Transaction
Understatements.--
``(1) In general.--No penalty shall be imposed under
section 6662A with respect to any portion of a reportable
transaction understatement if it is shown that there was a
reasonable cause for such portion and that the taxpayer acted
in good faith with respect to such portion.
``(2) Special rules.--Paragraph (1) shall not apply to any
reportable transaction understatement unless--
``(A) the relevant facts affecting the tax treatment of the
item are adequately disclosed in accordance with the
regulations prescribed under section 6011,
``(B) there is or was substantial authority for such
treatment, and
``(C) the taxpayer reasonably believed that such treatment
was more likely than not the proper treatment.

A taxpayer failing to adequately disclose in accordance with
section 6011 shall be treated as meeting the requirements of
subparagraph (A) if the penalty for such failure was
rescinded under section 6707A(d).
``(3) Rules relating to reasonable belief.--For purposes of
paragraph (2)(C)--
``(A) In general.--A taxpayer shall be treated as having a
reasonable belief with respect to the tax treatment of an
item only if such belief--
``(i) is based on the facts and law that exist at the time
the return of tax which includes such tax treatment is filed,
and
``(ii) relates solely to the taxpayer's chances of success
on the merits of such treatment and does not take into
account the possibility that a return will not be audited,
such treatment will not be raised on audit, or such treatment
will be resolved through settlement if it is raised.
``(B) Certain opinions may not be relied upon.--
``(i) In general.--An opinion of a tax advisor may not be
relied upon to establish the reasonable belief of a taxpayer
if--

``(I) the tax advisor is described in clause (ii), or
``(II) the opinion is described in clause (iii).

``(ii) Disqualified tax advisors.--A tax advisor is
described in this clause if the tax advisor--

``(I) is a material advisor (within the meaning of section
6111(b)(1)) who participates in the organization, management,
promotion, or sale of the transaction or who is related
(within the meaning of section 267(b) or 707(b)(1)) to any
person who so participates,
``(II) is compensated directly or indirectly by a material
advisor with respect to the transaction,
``(III) has a fee arrangement with respect to the
transaction which is contingent on all or part of the
intended tax benefits from the transaction being sustained,
or
``(IV) as determined under regulations prescribed by the
Secretary, has a continuing financial interest with respect
to the transaction.

``(iii) Disqualified opinions.--For purposes of clause (i),
an opinion is disqualified if the opinion--

``(I) is based on unreasonable factual or legal assumptions
(including assumptions as to future events),
``(II) unreasonably relies on representations, statements,
findings, or agreements of the taxpayer or any other person,
``(III) does not identify and consider all relevant facts,
or
``(IV) fails to meet any other requirement as the Secretary
may prescribe.''.

(2) Conforming amendment.--The heading for subsection (c)
of section 6664 is amended by inserting ``for Underpayments''
after ``Exception''.
(d) Conforming Amendments.--
(1) Subparagraph (C) of section 461(i)(3) is amended by
striking ``section 6662(d)(2)(C)(iii)'' and inserting
``section 1274(b)(3)(C)''.
(2) Paragraph (3) of section 1274(b) is amended--
(A) by striking ``(as defined in section
6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
(B) by adding at the end the following new subparagraph:
``(C) Tax shelter.--For purposes of subparagraph (B), the
term `tax shelter' means--
``(i) a partnership or other entity,
``(ii) any investment plan or arrangement, or
``(iii) any other plan or arrangement,
if a significant purpose of such partnership, entity, plan,
or arrangement is the avoidance or evasion of Federal income
tax.''.
(3) Section 6662(d) is amended--
(A) by striking subparagraphs (C) and (D) of paragraph (2),
and
(B) by adding at the end the following:
``(3) Secretarial list.--For purposes of this subsection,
section 6664(d)(2), and section 6694(a)(1), the Secretary may
prescribe a list of positions for which the Secretary
believes there is not substantial authority or there is no
reasonable belief that the tax treatment is more likely than
not the proper tax treatment. Such list (and any revisions
thereof) shall be published in the Federal Register or the
Internal Revenue Bulletin.''.
(4) Section 6664(c)(1) is amended by striking ``this part''
and inserting ``section 6662 or 6663''.
(5) Subsection (b) of section 7525 is amended by striking
``section 6662(d)(2)(C)(iii)'' and inserting ``section
1274(b)(3)(C)''.
(6)(A) The heading for section 6662 is amended to read as
follows:

``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERPAYMENTS.''.

(B) The table of sections for part II of subchapter A of
chapter 68 is amended by striking the item relating to
section 6662 and inserting the following new items:

``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements
with respect to reportable transactions.''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable

[[Page S10432]]

years ending after the date of the enactment of this Act.

SEC. 803. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES
RELATING TO TAXPAYER COMMUNICATIONS.

(a) In General.--Section 7525(b) (relating to section not
to apply to communications regarding corporate tax shelters)
is amended to read as follows:
``(b) Section Not To Apply to Communications Regarding Tax
Shelters.--The privilege under subsection (a) shall not apply
to any written communication which is--
``(1) between a federally authorized tax practitioner and--
``(A) any person,
``(B) any director, officer, employee, agent, or
representative of the person, or
``(C) any other person holding a capital or profits
interest in the person, and
``(2) in connection with the promotion of the direct or
indirect participation of the person in any tax shelter (as
defined in section 1274(b)(3)(C)).''.
(b) Effective Date.--The amendment made by this section
shall apply to communications made on or after the date of
the enactment of this Act.

SEC. 804. DISCLOSURE OF REPORTABLE TRANSACTIONS.

(a) In General.--Section 6111 (relating to registration of
tax shelters) is amended to read as follows:

``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.

``(a) In General.--Each material advisor with respect to
any reportable transaction shall make a return (in such form
as the Secretary may prescribe) setting forth--
``(1) information identifying and describing the
transaction,
``(2) information describing any potential tax benefits
expected to result from the transaction, and
``(3) such other information as the Secretary may
prescribe.

Such return shall be filed not later than the date specified
by the Secretary.
``(b) Definitions.--For purposes of this section--
``(1) Material advisor.--
``(A) In general.--The term `material advisor' means any
person--
``(i) who provides any material aid, assistance, or advice
with respect to organizing, promoting, selling, implementing,
or carrying out any reportable transaction, and
``(ii) who directly or indirectly derives gross income in
excess of the threshold amount for such aid, assistance, or
advice.
``(B) Threshold amount.--For purposes of subparagraph (A),
the threshold amount is--
``(i) $50,000 in the case of a reportable transaction
substantially all of the tax benefits from which are provided
to natural persons, and
``(ii) $250,000 in any other case.
``(2) Reportable transaction.--The term `reportable
transaction' has the meaning given to such term by section
6707A(c).
``(c) Regulations.--The Secretary may prescribe regulations
which provide--
``(1) that only 1 person shall be required to meet the
requirements of subsection (a) in cases in which 2 or more
persons would otherwise be required to meet such
requirements,
``(2) exemptions from the requirements of this section, and
``(3) such rules as may be necessary or appropriate to
carry out the purposes of this section.''.
(b) Conforming Amendments.--
(1) The item relating to section 6111 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:

``Sec. 6111. Disclosure of reportable transactions.''.
(2)(A) So much of section 6112 as precedes subsection (c)
thereof is amended to read as follows:

``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS
MUST KEEP LISTS OF ADVISEES.

``(a) In General.--Each material advisor (as defined in
section 6111) with respect to any reportable transaction (as
defined in section 6707A(c)) shall maintain, in such manner
as the Secretary may by regulations prescribe, a list--
``(1) identifying each person with respect to whom such
advisor acted as such a material advisor with respect to such
transaction, and
``(2) containing such other information as the Secretary
may by regulations require.

This section shall apply without regard to whether a material
advisor is required to file a return under section 6111 with
respect to such transaction.''.
(B) Section 6112 is amended by redesignating subsection (c)
as subsection (b).
(C) Section 6112(b), as redesignated by subparagraph (B),
is amended--
(i) by inserting ``written'' before ``request'' in
paragraph (1)(A), and
(ii) by striking ``shall prescribe'' in paragraph (2) and
inserting ``may prescribe''.
(D) The item relating to section 6112 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:

``Sec. 6112. Material advisors of reportable transactions must keep
lists of advisees.''.
(3)(A) The heading for section 6708 is amended to read as
follows:

``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH
RESPECT TO REPORTABLE TRANSACTIONS.''.

(B) The item relating to section 6708 in the table of
sections for part I of subchapter B of chapter 68 is amended
to read as follows:

``Sec. 6708. Failure to maintain lists of advisees with respect to
reportable transactions.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions with respect to which material
aid, assistance, or advice referred to in section
6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as
added by this section) is provided after the date of the
enactment of this Act.

SEC. 805. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER
TAX SHELTERS.

(a) In General.--Section 6707 (relating to failure to
furnish information regarding tax shelters) is amended to
read as follows:

``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING
REPORTABLE TRANSACTIONS.

``(a) In General.--If a person who is required to file a
return under section 6111(a) with respect to any reportable
transaction--
``(1) fails to file such return on or before the date
prescribed therefor, or
``(2) files false or incomplete information with the
Secretary with respect to such transaction,

such person shall pay a penalty with respect to such return
in the amount determined under subsection (b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraph (2), the
penalty imposed under subsection (a) with respect to any
failure shall be $50,000.
``(2) Listed transactions.--The penalty imposed under
subsection (a) with respect to any listed transaction shall
be an amount equal to the greater of--
``(A) $200,000, or
``(B) 50 percent of the gross income derived by such person
with respect to aid, assistance, or advice which is provided
with respect to the listed transaction before the date the
return including the transaction is filed under section 6111.

Subparagraph (B) shall be applied by substituting `75
percent' for `50 percent' in the case of an intentional
failure or act described in subsection (a).
``(c) Rescission Authority.--The provisions of section
6707A(d) (relating to authority of Commissioner to rescind
penalty) shall apply to any penalty imposed under this
section.
``(d) Reportable and Listed Transactions.--The terms
`reportable transaction' and `listed transaction' have the
respective meanings given to such terms by section
6707A(c).''.
(b) Clerical Amendment.--The item relating to section 6707
in the table of sections for part I of subchapter B of
chapter 68 is amended by striking ``tax shelters'' and
inserting ``reportable transactions''.
(c) Effective Date.--The amendments made by this section
shall apply to returns the due date for which is after the
date of the enactment of this Act.

SEC. 806. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN
LISTS OF INVESTORS.

(a) In General.--Subsection (a) of section 6708 is amended
to read as follows:
``(a) Imposition of Penalty.--
``(1) In general.--If any person who is required to
maintain a list under section 6112(a) fails to make such list
available upon written request to the Secretary in accordance
with section 6112(b)(1)(A) within 20 business days after the
date of the Secretary's request, such person shall pay a
penalty of $10,000 for each day of such failure after such
20th day.
``(2) Reasonable cause exception.--No penalty shall be
imposed by paragraph (1) with respect to the failure on any
day if such failure is due to reasonable cause.''.
(b) Effective Date.--The amendment made by this section
shall apply to requests made after the date of the enactment
of this Act.

SEC. 807. PENALTY ON PROMOTERS OF TAX SHELTERS.

(a) Penalty on Promoting Abusive Tax Shelters.--Section
6700(a) is amended by adding at the end the following new
sentence: ``Notwithstanding the first sentence, if an
activity with respect to which a penalty imposed under this
subsection involves a statement described in paragraph
(2)(A), the amount of the penalty shall be equal to 50
percent of the gross income derived (or to be derived) from
such activity by the person on which the penalty is
imposed.''.
(b) Effective Date.--The amendment made by this section
shall apply to activities after the date of the enactment of
this Act.

Subtitle B--Provisions to Discourage Corporate Expatriation

SEC. 821. TAX TREATMENT OF INVERTED CORPORATE ENTITIES.

(a) In General.--Subchapter C of chapter 80 (relating to
provisions affecting more than one subtitle) is amended by
adding at the end the following new section:

``SEC. 7874. RULES RELATING TO INVERTED CORPORATE ENTITIES.

``(a) Inverted Corporations Treated as Domestic
Corporations.--
``(1) In general.--If a foreign incorporated entity is
treated as an inverted domestic corporation, then,
notwithstanding section 7701(a)(4), such entity shall be
treated for purposes of this title as a domestic corporation.
``(2) Inverted domestic corporation.--For purposes of this
section, a foreign incorporated entity shall be treated as an
inverted domestic corporation if, pursuant to a plan (or a
series of related transactions)--

[[Page S10433]]

``(A) the entity completes after March 20, 2002, the direct
or indirect acquisition of substantially all of the
properties held directly or indirectly by a domestic
corporation or substantially all of the properties
constituting a trade or business of a domestic partnership,
``(B) after the acquisition at least 80 percent of the
stock (by vote or value) of the entity is held--
``(i) in the case of an acquisition with respect to a
domestic corporation, by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation, or
``(ii) in the case of an acquisition with respect to a
domestic partnership, by former partners of the domestic
partnership by reason of holding a capital or profits
interest in the domestic partnership, and
``(C) the expanded affiliated group which after the
acquisition includes the entity does not have substantial
business activities in the foreign country in which or under
the law of which the entity is created or organized when
compared to the total business activities of such expanded
affiliated group.

Except as provided in regulations, an acquisition of
properties of a domestic corporation shall not be treated as
described in subparagraph (A) if none of the corporation's
stock was readily tradeable on an established securities
market at any time during the 4-year period ending on the
date of the acquisition.
``(b) Preservation of Domestic Tax Base in Certain
Inversion Transactions To Which Subsection (a) Does Not
Apply.--
``(1) In general.--If a foreign incorporated entity would
be treated as an inverted domestic corporation with respect
to an acquired entity if either--
``(A) subsection (a)(2)(A) were applied by substituting
`after December 31, 1996, and on or before March 20, 2002'
for `after March 20, 2002' and subsection (a)(2)(B) were
applied by substituting `more than 50 percent' for `at least
80 percent', or
``(B) subsection (a)(2)(B) were applied by substituting
`more than 50 percent' for `at least 80 percent',

then the rules of subsection (c) shall apply to any inversion
gain of the acquired entity during the applicable period and
the rules of subsection (d) shall apply to any related party
transaction of the acquired entity during the applicable
period. This subsection shall not apply for any taxable year
if subsection (a) applies to such foreign incorporated entity
for such taxable year.
``(2) Acquired entity.--For purposes of this section--
``(A) In general.--The term `acquired entity' means the
domestic corporation or partnership substantially all of the
properties of which are directly or indirectly acquired in an
acquisition described in subsection (a)(2)(A) to which this
subsection applies.
``(B) Aggregation rules.--Any domestic person bearing a
relationship described in section 267(b) or 707(b) to an
acquired entity shall be treated as an acquired entity with
respect to the acquisition described in subparagraph (A).
``(3) Applicable period.--For purposes of this section--
``(A) In general.--The term `applicable period' means the
period--
``(i) beginning on the first date properties are acquired
as part of the acquisition described in subsection (a)(2)(A)
to which this subsection applies, and
``(ii) ending on the date which is 10 years after the last
date properties are acquired as part of such acquisition.
``(B) Special rule for inversions occurring before march
21, 2002.--In the case of any acquired entity to which
paragraph (1)(A) applies, the applicable period shall be the
10-year period beginning on January 1, 2003.
``(c) Tax on Inversion Gains May Not Be Offset.--If
subsection (b) applies--
``(1) In general.--The taxable income of an acquired entity
(or any expanded affiliated group which includes such entity)
for any taxable year which includes any portion of the
applicable period shall in no event be less than the
inversion gain of the entity for the taxable year.
``(2) Credits not allowed against tax on inversion gain.--
Credits shall be allowed against the tax imposed by this
chapter on an acquired entity for any taxable year described
in paragraph (1) only to the extent such tax exceeds the
product of--
``(A) the amount of the inversion gain for the taxable
year, and
``(B) the highest rate of tax specified in section
11(b)(1).

For purposes of determining the credit allowed by section 901
inversion gain shall be treated as from sources within the
United States.
``(3) Special rules for partnerships.--In the case of an
acquired entity which is a partnership--
``(A) the limitations of this subsection shall apply at the
partner rather than the partnership level,
``(B) the inversion gain of any partner for any taxable
year shall be equal to the sum of--
``(i) the partner's distributive share of inversion gain of
the partnership for such taxable year, plus
``(ii) income or gain required to be recognized for the
taxable year by the partner under section 367(a), 741, or
1001, or under any other provision of chapter 1, by reason of
the transfer during the applicable period of any partnership
interest of the partner in such partnership to the foreign
incorporated entity, and
``(C) the highest rate of tax specified in the rate
schedule applicable to the partner under chapter 1 shall be
substituted for the rate of tax under paragraph (2)(B).
``(4) Inversion gain.--For purposes of this section, the
term `inversion gain' means any income or gain required to be
recognized under section 304, 311(b), 367, 1001, or 1248, or
under any other provision of chapter 1, by reason of the
transfer during the applicable period of stock or other
properties by an acquired entity--
``(A) as part of the acquisition described in subsection
(a)(2)(A) to which subsection (b) applies, or
``(B) after such acquisition to a foreign related person.

The Secretary may provide that income or gain from the sale
of inventories or other transactions in the ordinary course
of a trade or business shall not be treated as inversion gain
under subparagraph (B) to the extent the Secretary determines
such treatment would not be inconsistent with the purposes of
this section.
``(5) Coordination with section 172 and minimum tax.--Rules
similar to the rules of paragraphs (3) and (4) of section
860E(a) shall apply for purposes of this section.
``(6) Statute of limitations.--
``(A) In general.--The statutory period for the assessment
of any deficiency attributable to the inversion gain of any
taxpayer for any pre-inversion year shall not expire before
the expiration of 3 years from the date the Secretary is
notified by the taxpayer (in such manner as the Secretary may
prescribe) of the acquisition described in subsection
(a)(2)(A) to which such gain relates and 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.
``(B) Pre-inversion year.--For purposes of subparagraph
(A), the term `pre-inversion year' means any taxable year
if--
``(i) any portion of the applicable period is included in
such taxable year, and
``(ii) such year ends before the taxable year in which the
acquisition described in subsection (a)(2)(A) is completed.
``(d) Special Rules Applicable to Related Party
Transactions.--
``(1) Annual application for agreements on return
positions.--
``(A) In general.--Each acquired entity to which subsection
(b) applies shall file with the Secretary an application for
an approval agreement under subparagraph (D) for each taxable
year which includes a portion of the applicable period. Such
application shall be filed at such time and manner, and shall
contain such information, as the Secretary may prescribe.
``(B) Secretarial action.--Within 90 days of receipt of an
application under subparagraph (A) (or such longer period as
the Secretary and entity may agree upon), the Secretary
shall--
``(i) enter into an agreement described in subparagraph (D)
for the taxable year covered by the application,
``(ii) notify the entity that the Secretary has determined
that the application was filed in good faith and
substantially complies with the requirements for the
application under subparagraph (A), or
``(iii) notify the entity that the Secretary has determined
that the application was not filed in good faith or does not
substantially comply with such requirements.

If the Secretary fails to act within the time prescribed
under the preceding sentence, the entity shall be treated for
purposes of this paragraph as having received notice under
clause (ii).
``(C) Failures to comply.--If an acquired entity fails to
file an application under subparagraph (A), or the acquired
entity receives a notice under subparagraph (B)(iii), for any
taxable year, then for such taxable year--
``(i) there shall not be allowed any deduction, or addition
to basis or cost of goods sold, for amounts paid or incurred,
or losses incurred, by reason of a transaction between the
acquired entity and a foreign related person,
``(ii) any transfer or license of intangible property (as
defined in section 936(h)(3)(B)) between the acquired entity
and a foreign related person shall be disregarded, and
``(iii) any cost-sharing arrangement between the acquired
entity and a foreign related person shall be disregarded.
``(D) Approval agreement.--For purposes of subparagraph
(A), the term `approval agreement' means a prefiling, advance
pricing, or other agreement specified by the Secretary which
contains such provisions as the Secretary determines
necessary to ensure that the requirements of sections 163(j),
267(a)(3), 482, and 845, and any other provision of this
title applicable to transactions between related persons and
specified by the Secretary, are met.
``(E) Tax court review.--
``(i) In general.--The Tax Court shall have jurisdiction
over any action brought by an acquired entity receiving a
notice under subparagraph (B)(iii) to determine whether the
issuance of the notice was an abuse of discretion, but only
if the action is brought within 30 days after the date of the
mailing (determined under rules similar to section 6213) of
the notice.

[[Page S10434]]

``(ii) Court action.--The Tax Court shall issue its
decision within 30 days after the filing of the action under
clause (i) and may order the Secretary to issue a notice
described in subparagraph (B)(ii).
``(iii) Review.--An order of the Tax Court under this
subparagraph shall be reviewable in the same manner as any
other decision of the Tax Court.
``(2) Modifications of limitation on interest deduction.--
In the case of an acquired entity to which subsection (b)
applies, section 163(j) shall be applied--
``(A) without regard to paragraph (2)(A)(ii) thereof, and
``(B) by substituting `25 percent' for `50 percent' each
place it appears in paragraph (2)(B) thereof.
``(e) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Rules for application of subsection (a)(2).--In
applying subsection (a)(2) for purposes of subsections (a)
and (b), the following rules shall apply:
``(A) Certain stock disregarded.--There shall not be taken
into account in determining ownership for purposes of
subsection (a)(2)(B)--
``(i) stock held by members of the expanded affiliated
group which includes the foreign incorporated entity, or
``(ii) stock of such entity which is sold in a public
offering or private placement related to the acquisition
described in subsection (a)(2)(A).
``(B) Plan deemed in certain cases.--If a foreign
incorporated entity acquires directly or indirectly
substantially all of the properties of a domestic corporation
or partnership during the 4-year period beginning on the date
which is 2 years before the ownership requirements of
subsection (a)(2)(B) are met with respect to such domestic
corporation or partnership, such actions shall be treated as
pursuant to a plan.
``(C) Certain transfers disregarded.--The transfer of
properties or liabilities (including by contribution or
distribution) shall be disregarded if such transfers are part
of a plan a principal purpose of which is to avoid the
purposes of this section.
``(D) Special rule for related partnerships.--For purposes
of applying subsection (a)(2) to the acquisition of a
domestic partnership, except as provided in regulations, all
partnerships which are under common control (within the
meaning of section 482) shall be treated as 1 partnership.
``(E) Treatment of certain rights.--The Secretary shall
prescribe such regulations as may be necessary--
``(i) to treat warrants, options, contracts to acquire
stock, convertible debt instruments, and other similar
interests as stock, and
``(ii) to treat stock as not stock.
``(2) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group as defined in
section 1504(a) but without regard to section 1504(b)(3),
except that section 1504(a) shall be applied by substituting
`more than 50 percent' for `at least 80 percent' each place
it appears.
``(3) Foreign incorporated entity.--The term `foreign
incorporated entity' means any entity which is, or but for
subsection (a)(1) would be, treated as a foreign corporation
for purposes of this title.
``(4) Foreign related person.--The term `foreign related
person' means, with respect to any acquired entity, a foreign
person which--
``(A) bears a relationship to such entity described in
section 267(b) or 707(b), or
``(B) is under the same common control (within the meaning
of section 482) as such entity.
``(5) Subsequent acquisitions by unrelated domestic
corporations.--
``(A) In general.--Subject to such conditions, limitations,
and exceptions as the Secretary may prescribe, if, after an
acquisition described in subsection (a)(2)(A) to which
subsection (b) applies, a domestic corporation stock of which
is traded on an established securities market acquires
directly or indirectly any properties of one or more acquired
entities in a transaction with respect to which the
requirements of subparagraph (B) are met, this section shall
cease to apply to any such acquired entity with respect to
which such requirements are met.
``(B) Requirements.--The requirements of the subparagraph
are met with respect to a transaction involving any
acquisition described in subparagraph (A) if--
``(i) before such transaction the domestic corporation did
not have a relationship described in section 267(b) or
707(b), and was not under common control (within the meaning
of section 482), with the acquired entity, or any member of
an expanded affiliated group including such entity, and
``(ii) after such transaction, such acquired entity--

``(I) is a member of the same expanded affiliated group
which includes the domestic corporation or has such a
relationship or is under such common control with any member
of such group, and
``(II) is not a member of, and does not have such a
relationship and is not under such common control with any
member of, the expanded affiliated group which before such
acquisition included such entity.

``(f) Regulations.--The Secretary shall provide such
regulations as are necessary to carry out this section,
including regulations providing for such adjustments to the
application of this section as are necessary to prevent the
avoidance of the purposes of this section, including the
avoidance of such purposes through--
``(1) the use of related persons, pass-through or other
noncorporate entities, or other intermediaries, or
``(2) transactions designed to have persons cease to be (or
not become) members of expanded affiliated groups or related
persons.''.
(b) Treatment of Agreements.--
(1) Confidentiality.--
(A) Treatment as return information.--Section 6103(b)(2)
(relating to return information) is amended by striking
``and'' at the end of subparagraph (C), by inserting ``and''
at the end of subparagraph (D), and by inserting after
subparagraph (D) the following new subparagraph:
``(E) any approval agreement under section 7874(d)(1) to
which any preceding subparagraph does not apply and any
background information related to the agreement or any
application for the agreement,''.
(B) Exception from public inspection as written
determination.--Section 6110(b)(1)(B) is amended by striking
``or (D)'' and inserting ``, (D), or (E)''.
(2) Reporting.--The Secretary of the Treasury shall include
with any report on advance pricing agreements required to be
submitted after the date of the enactment of this Act under
section 521(b) of the Ticket to Work and Work Incentives
Improvement Act of 1999 (Public Law 106-170) a report
regarding approval agreements under section 7874(d)(1) of the
Internal Revenue Code of 1986. Such report shall include
information similar to the information required with respect
to advance pricing agreements and shall be treated for
confidentiality purposes in the same manner as the reports on
advance pricing agreements are treated under section
521(b)(3) of such Act.
(c) Information Reporting.--The Secretary of the Treasury
shall exercise the Secretary's authority under the Internal
Revenue Code of 1986 to require entities involved in
transactions to which section 7874 of such Code (as added by
subsection (a)) applies to report to the Secretary,
shareholders, partners, and such other persons as the
Secretary may prescribe such information as is necessary to
ensure the proper tax treatment of such transactions.
(d) Conforming Amendment.--The table of sections for
subchapter C of chapter 80 is amended by adding at the end
the following new item:

``Sec. 7874. Rules relating to inverted corporate entities.''.
(e) Transition Rule for Certain Regulated Investment
Companies and Unit Investment Trusts.--Notwithstanding
section 7874 of the Internal Revenue Code of 1986 (as added
by subsection (a)), a regulated investment company, or other
pooled fund or trust specified by the Secretary of the
Treasury, may elect to recognize gain by reason of section
367(a) of such Code with respect to a transaction under which
a foreign incorporated entity is treated as an inverted
domestic corporation under section 7874(a) of such Code by
reason of an acquisition completed after March 20, 2002, and
before January 1, 2004.

SEC. 822. EXCISE TAX ON STOCK COMPENSATION OF INSIDERS IN
INVERTED CORPORATIONS.

(a) In General.--Subtitle D is amended by adding at the end
the following new chapter:

``CHAPTER 48--STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS

``Sec. 5000A. Stock compensation of insiders in inverted corporations
entities.

``SEC. 5000A. STOCK COMPENSATION OF INSIDERS IN INVERTED
CORPORATIONS.

``(a) Imposition of Tax.--In the case of an individual who
is a disqualified individual with respect to any inverted
corporation, there is hereby imposed on such person a tax
equal to 20 percent of the value (determined under subsection
(b)) of the specified stock compensation held (directly or
indirectly) by or for the benefit of such individual or a
member of such individual's family (as defined in section
267) at any time during the 12-month period beginning on the
date which is 6 months before the inversion date.
``(b) Value.--For purposes of subsection (a)--
``(1) In general.--The value of specified stock
compensation shall be--
``(A) in the case of a stock option (or other similar
right) or any stock appreciation right, the fair value of
such option or right, and
``(B) in any other case, the fair market value of such
compensation.
``(2) Date for determining value.--The determination of
value shall be made--
``(A) in the case of specified stock compensation held on
the inversion date, on such date,
``(B) in the case of such compensation which is canceled
during the 6 months before the inversion date, on the day
before such cancellation, and
``(C) in the case of such compensation which is granted
after the inversion date, on the date such compensation is
granted.
``(c) Tax To Apply Only If Shareholder Gain Recognized.--
Subsection (a) shall apply to any disqualified individual
with respect to an inverted corporation only if gain (if any)
on any stock in such corporation is recognized in whole or
part by any shareholder by reason of the acquisition referred
to in section 7874(a)(2)(A) (determined by substituting `July
10, 2002' for `March 20, 2002') with respect to such
corporation.

[[Page S10435]]

``(d) Exception Where Gain Recognized on Compensation.--
Subsection (a) shall not apply to--
``(1) any stock option which is exercised on the inversion
date or during the 6-month period before such date and to the
stock acquired in such exercise, and
``(2) any specified stock compensation which is sold,
exchanged, or distributed during such period in a transaction
in which gain or loss is recognized in full.
``(e) Definitions.--For purposes of this section--
``(1) Disqualified individual.--The term `disqualified
individual' means, with respect to a corporation, any
individual who, at any time during the 12-month period
beginning on the date which is 6 months before the inversion
date--
``(A) is subject to the requirements of section 16(a) of
the Securities Exchange Act of 1934 with respect to such
corporation or any member of the expanded affiliated group
which includes such corporation, or
``(B) would be subject to such requirements if such
corporation or member were an issuer of equity securities
referred to in such section.
``(2) Inverted corporation; inversion date.--
``(A) Inverted corporation.--The term `inverted
corporation' means any corporation to which subsection (a) or
(b) of section 7874 applies determined--
``(i) by substituting `July 10, 2002' for `March 20, 2002'
in section 7874(a)(2)(A), and
``(ii) without regard to subsection (b)(1)(A).

Such term includes any predecessor or successor of such a
corporation.
``(B) Inversion date.--The term `inversion date' means,
with respect to a corporation, the date on which the
corporation first becomes an inverted corporation.
``(3) Specified stock compensation.--
``(A) In general.--The term `specified stock compensation'
means payment (or right to payment) granted by the inverted
corporation (or by any member of the expanded affiliated
group which includes such corporation) to any person in
connection with the performance of services by a disqualified
individual for such corporation or member if the value of
such payment or right is based on (or determined by reference
to) the value (or change in value) of stock in such
corporation (or any such member).
``(B) Exceptions.--Such term shall not include--
``(i) any option to which part II of subchapter D of
chapter 1 applies, or
``(ii) any payment or right to payment from a plan referred
to in section 280G(b)(6).
``(4) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group (as defined in
section 1504(a) without regard to section 1504(b)(3)); except
that section 1504(a) shall be applied by substituting `more
than 50 percent' for `at least 80 percent' each place it
appears.
``(f) Special Rules.--For purposes of this section--
``(1) Cancellation of restriction.--The cancellation of a
restriction which by its terms will never lapse shall be
treated as a grant.
``(2) Payment or reimbursement of tax by corporation
treated as specified stock compensation.--Any payment of the
tax imposed by this section directly or indirectly by the
inverted corporation or by any member of the expanded
affiliated group which includes such corporation--
``(A) shall be treated as specified stock compensation, and
``(B) shall not be allowed as a deduction under any
provision of chapter 1.
``(3) Certain restrictions ignored.--Whether there is
specified stock compensation, and the value thereof, shall be
determined without regard to any restriction other than a
restriction which by its terms will never lapse.
``(4) Property transfers.--Any transfer of property shall
be treated as a payment and any right to a transfer of
property shall be treated as a right to a payment.
``(5) Other administrative provisions.--For purposes of
subtitle F, any tax imposed by this section shall be treated
as a tax imposed by subtitle A.
``(g) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''.
(b) Denial of Deduction.--
(1) In general.--Paragraph (6) of section 275(a) is amended
by inserting ``48,'' after ``46,''.
(2) $1,000,000 limit on deductible compensation reduced by
payment of excise tax on specified stock compensation.--
Paragraph (4) of section 162(m) is amended by adding at the
end the following new subparagraph:
``(G) Coordination with excise tax on specified stock
compensation.--The dollar limitation contained in paragraph
(1) with respect to any covered employee shall be reduced
(but not below zero) by the amount of any payment (with
respect to such employee) of the tax imposed by section 5000A
directly or indirectly by the inverted corporation (as
defined in such section) or by any member of the expanded
affiliated group (as defined in such section) which includes
such corporation.''.
(c) Conforming Amendments.--
(1) The last sentence of section 3121(v)(2)(A) is amended
by inserting before the period ``or to any specified stock
compensation (as defined in section 5000A) on which tax is
imposed by section 5000A''.
(2) The table of chapters for subtitle D is amended by
adding at the end the following new item:

``Chapter 48. Stock compensation of insiders in inverted
corporations.''.
(d) Effective Date.--The amendments made by this section
shall take effect on July 11, 2002; except that periods
before such date shall not be taken into account in applying
the periods in subsections (a) and (e)(1) of section 5000A of
the Internal Revenue Code of 1986, as added by this section.

SEC. 823. REINSURANCE OF UNITED STATES RISKS IN FOREIGN
JURISDICTIONS.

(a) In General.--Section 845(a) (relating to allocation in
case of reinsurance agreement involving tax avoidance or
evasion) is amended by striking ``source and character'' and
inserting ``amount, source, or character''.
(b) Effective Date.--The amendments made by this section
shall apply to any risk reinsured after April 11, 2002.

Subtitle C--Other Revenue Provisions

SEC. 831. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

(a) In General.--Chapter 77 (relating to miscellaneous
provisions) is amended by adding at the end the following new
section:

``SEC. 7528. INTERNAL REVENUE SERVICE USER FEES.

``(a) General Rule.--The Secretary shall establish a
program requiring the payment of user fees for--
``(1) requests to the Internal Revenue Service for ruling
letters, opinion letters, and determination letters, and
``(2) other similar requests.
``(b) Program Criteria.--
``(1) In general.--The fees charged under the program
required by subsection (a)--
``(A) shall vary according to categories (or subcategories)
established by the Secretary,
``(B) shall be determined after taking into account the
average time for (and difficulty of) complying with requests
in each category (and subcategory), and
``(C) shall be payable in advance.
``(2) Exemptions, etc.--
``(A) In general.--The Secretary shall provide for such
exemptions (and reduced fees) under such program as the
Secretary determines to be appropriate.
``(B) Exemption for certain requests regarding pension
plans.--The Secretary shall not require payment of user fees
under such program for requests for determination letters
with respect to the qualified status of a pension benefit
plan maintained solely by 1 or more eligible employers or any
trust which is part of the plan. The preceding sentence shall
not apply to any request--
``(i) made after the later of--

``(I) the fifth plan year the pension benefit plan is in
existence, or
``(II) the end of any remedial amendment period with
respect to the plan beginning within the first 5 plan years,
or

``(ii) made by the sponsor of any prototype or similar plan
which the sponsor intends to market to participating
employers.
``(C) Definitions and special rules.--For purposes of
subparagraph (B)--
``(i) Pension benefit plan.--The term `pension benefit
plan' means a pension, profit-sharing, stock bonus, annuity,
or employee stock ownership plan.
``(ii) Eligible employer.--The term `eligible employer'
means an eligible employer (as defined in section
408(p)(2)(C)(i)(I)) which has at least 1 employee who is not
a highly compensated employee (as defined in section 414(q))
and is participating in the plan. The determination of
whether an employer is an eligible employer under
subparagraph (B) shall be made as of the date of the request
described in such subparagraph.
``(iii) Determination of average fees charged.--For
purposes of any determination of average fees charged, any
request to which subparagraph (B) applies shall not be taken
into account.
``(3) Average fee requirement.--The average fee charged
under the program required by subsection (a) shall not be
less than the amount determined under the following table:

``Category                                                  Average fee
Employee plan ruling and opinion............................$250 ....

Exempt organization ruling..................................$350 ....

Employee plan determination.................................$300 ....

Exempt organization determination...........................$275 ....

Chief counsel ruling........................................$200.....

``(c) Termination.--No fee shall be imposed under this
section with respect to requests made after September 30,
2013.''.
(b) Conforming Amendments.--
(1) The table of sections for chapter 77 is amended by
adding at the end the following new item:

``Sec. 7528. Internal Revenue Service user fees.''.
(2) Section 10511 of the Revenue Act of 1987 is repealed.
(3) Section 620 of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is repealed.
(c) Limitations.--Notwithstanding any other provision of
law, any fees collected pursuant to section 7528 of the
Internal Revenue Code of 1986, as added by subsection (a),
shall not be expended by the Internal Revenue Service unless
provided by an appropriations Act.
(d) Effective Date.--The amendments made by this section
shall apply to requests made after the date of the enactment
of this Act.

[[Page S10436]]

SEC. 832. ADDITION OF VACCINES AGAINST HEPATITIS A TO LIST OF
TAXABLE VACCINES.

(a) In General.--Section 4132(a)(1) (defining taxable
vaccine) is amended by redesignating subparagraphs (I), (J),
(K), and (L) as subparagraphs (J), (K), (L), and (M),
respectively, and by inserting after subparagraph (H) the
following new subparagraph:
``(I) Any vaccine against hepatitis A.''.
(b) Conforming Amendment.--Section 9510(c)(1)(A) is amended
by striking ``October 18, 2000'' and inserting ``April 2,
2003''.
(c) Effective Date.--
(1) Sales, etc.--The amendments made by this section shall
apply to sales and uses on or after the first day of the
first month which begins more than 4 weeks after the date of
the enactment of this Act.
(2) Deliveries.--For purposes of paragraph (1) and section
4131 of the Internal Revenue Code of 1986, in the case of
sales on or before the effective date described in such
paragraph for which delivery is made after such date, the
delivery date shall be considered the sale date.

SEC. 843. INDIVIDUAL EXPATRIATION TO AVOID TAX.

(a) Expatriation To Avoid Tax.--
(1) In general.--Subsection (a) of section 877 (relating to
treatment of expatriates) is amended to read as follows:
``(a) Treatment of Expatriates.--
``(1) In general.--Every nonresident alien individual to
whom this section applies and who, within the 10-year period
immediately preceding the close of the taxable year, lost
United States citizenship shall be taxable for such taxable
year in the manner provided in subsection (b) if the tax
imposed pursuant to such subsection (after any reduction in
such tax under the last sentence of such subsection) exceeds
the tax which, without regard to this section, is imposed
pursuant to section 871.
``(2) Individuals subject to this section.--This section
shall apply to any individual if--
``(A) the average annual net income tax (as defined in
section 38(c)(1)) of such individual for the period of 5
taxable years ending before the date of the loss of United
States citizenship is greater than $122,000,
``(B) the net worth of the individual as of such date is
$2,000,000 or more, or
``(C) such individual fails to certify under penalty of
perjury that he has met the requirements of this title for
the 5 preceding taxable years or fails to submit such
evidence of such compliance as the Secretary may require.

In the case of the loss of United States citizenship in any
calendar year after 2003, such $122,000 amount shall be
increased by an amount equal to such dollar amount multiplied
by the cost-of-living adjustment determined under section
1(f)(3) for such calendar year by substituting `2002' for
`1992' in subparagraph (B) thereof. Any increase under the
preceding sentence shall be rounded to the nearest multiple
of $1,000.''.
(2) Revision of exceptions from alternative tax.--
Subsection (c) of section 877 (relating to tax avoidance not
presumed in certain cases) is amended to read as follows:
``(c) Exceptions.--
``(1) In general.--Subparagraphs (A) and (B) of subsection
(a)(2) shall not apply to an individual described in
paragraph (2) or (3).
``(2) Dual citizens.--
``(A) In general.--An individual is described in this
paragraph if--
``(i) the individual became at birth a citizen of the
United States and a citizen of another country and continues
to be a citizen of such other country, and
``(ii) the individual has had no substantial contacts with
the United States.
``(B) Substantial contacts.--An individual shall be treated
as having no substantial contacts with the United States only
if the individual--
``(i) was never a resident of the United States (as defined
in section 7701(b)),
``(ii) has never held a United States passport, and
``(iii) was not present in the United States for more than
30 days during any calendar year which is 1 of the 10
calendar years preceding the individual's loss of United
States citizenship.
``(3) Certain minors.--An individual is described in this
paragraph if--
``(A) the individual became at birth a citizen of the
United States,
``(B) neither parent of such individual was a citizen of
the United States at the time of such birth,
``(C) the individual's loss of United States citizenship
occurs before such individual attains age 18\1/2\, and
``(D) the individual was not present in the United States
for more than 30 days during any calendar year which is 1 of
the 10 calendar years preceding the individual's loss of
United States citizenship.''.
(3) Conforming amendment.--Section 2107(a) is amended to
read as follows:
``(a) Treatment of Expatriates.--A tax computed in
accordance with the table contained in section 2001 is hereby
imposed on the transfer of the taxable estate, determined as
provided in section 2106, of every decedent nonresident not a
citizen of the United States if the date of death occurs
during a taxable year with respect to which the decedent is
subject to tax under section 877(b).''.
(b) Special Rules for Determining When an Individual is no
Longer a United States Citizen or Long-Term Resident.--
Section 7701 (relating to definitions) is amended by
redesignating subsection (n) as subsection (o) and by
inserting after subsection (m) the following new subsection:
``(n) Special Rules for Determining When an Individual is
no Longer a United States Citizen or Long-Term Resident.--An
individual who would not (but for this subsection) be treated
as a citizen or resident of the United States shall continue
to be treated as a citizen or resident of the United States
until such individual--
``(1) gives notice of an expatriating act or termination of
residency (with the requisite intent to relinquish
citizenship or terminate residency) to the Secretary of State
or the Secretary of Homeland Security, and
``(2) provides a statement in accordance with section
6039G.''.
(c) Physical Presence in the United States for More Than 30
Days.--Section 877 (relating to expatriation to avoid tax) is
amended by adding at the end the following new subsection:
``(g) Physical Presence.--This section shall not apply to
any individual for any taxable year during the 10-year period
referred to in subsection (a) in which such individual is
present (within the meaning of section 7701(b)(7) without
regard to subparagraphs (B), (C), and (D) thereof) in the
United States for more than 30 days in the calendar year
ending in such taxable year, and such individual shall be
treated for purposes of this title as a citizen or resident
of the United States for such taxable year.''.
(d) Transfers Subject to Gift Tax.--Subsection (a) of
section 2501 (relating to taxable transfers) is amended by
adding at the end the following:
``(6) Transfers of certain stock.--
``(A) In general.--Paragraph (3) shall not apply to the
transfer of stock described in subparagraph (B) by any
individual to whom section 877(b) applies, and section
2511(a) shall be applied without regard to whether such stock
is property which is situated within the United States.
``(B) Valuation.--For purposes of subparagraph (A), the
value of stock shall be determined as provided in section
2103, except that--
``(i) if the donor owned (within the meaning of section
958(a)) at the time of such transfer 10 percent or more of
the total combined voting power of all classes of stock
entitled to vote of a foreign corporation, and
``(ii) if such donor owned (within the meaning of section
958(a)), or is considered to have owned (by applying the
ownership rules of section 958(b)), at the time of such
transfer, more than 50 percent of--

``(I) the total combined voting power of all classes of
stock entitled to vote of such corporation, or
``(II) the total value of the stock of such corporation,

then the portion of the fair market value of the stock of
such foreign corporation transferred by such donor which is
included for purposes of subparagraph (A) shall be the amount
which bears the same ratio to such value as the fair market
value of any assets owned by such foreign corporation and
situated in the United States at the time of such transfer
bears to the total fair market value of all assets owned by
such foreign corporation at such time. For purposes of the
preceding sentence, a donor shall be treated as owning stock
of a foreign corporation at the time of such transfer if, at
such time, by trust or otherwise, within the meaning of
sections 2035 to 2038, inclusive, he owned such stock.''.
(e) Enhanced Information Reporting From Individuals Losing
United States Citizenship.--
(1) In general.--Subsection (a) of section 6039G is amended
to read as follows:
``(a) In General.--Notwithstanding any other provision of
law, any individual to whom section 877(b) applies for any
taxable year shall provide a statement for such taxable year
which includes the information described in subsection
(b).''.
(2) Information to be provided.--Subsection (b) of section
6039G is amended to read as follows:
``(b) Information To Be Provided.--Information required
under subsection (a) shall include--
``(1) the taxpayer's TIN,
``(2) the mailing address of such individual's principal
foreign residence,
``(3) the foreign country, in which such individual is
residing,
``(4) the foreign country of which such individual is a
citizen,
``(5) information detailing the income, assets, and
liabilities of such individual,
``(6) the number of days that the individual was present in
the United States during the taxable year, and
``(7) such other information as the Secretary may
prescribe.''.
(3) Increase in penalty.--Subsection (d) of section 6039G
is amended to read as follows:
``(d) Penalty.--If--
``(1) an individual is required to file a statement under
subsection (a) for any taxable year, and
``(2) fails to file such a statement with the Secretary on
or before the date such statement is required to be filed or
fails to include all the information required to be shown on
the statement or includes incorrect information,

such individual shall pay a penalty of $5,000 unless it is
shown that such failure is due to reasonable cause and not to
willful neglect.''.
(4) Conforming amendment.--Section 6039G is amended by
striking subsections (c),

[[Page S10437]]

(f), and (g) and by redesignating subsections (d) and (e) as
subsection (c) and (d), respectively.
(f) Effective Date.--The amendments made by this section
shall apply to individuals who expatriate after February 27,
2003.
______

SA 1433. Mr. FRIST proposed an amendment to the bill S. 14, to
enhance the energy security of the United States, and for other
purposes; as follows:

At the end of the amendment add the following:
All provisions of Division A and Division B shall take
effect one day after enactment of this Act.
______

SA 1434. Mr. FRIST proposed an amendment to amendment SA 1433
proposed by Mr. Frist to the bill S. 14, to enhance the energy security
of the United States, and for other purposes; as follows:

On line 3 of the amendment strike ``one day'' and insert
``two days''.
______

SA 1435. Mr. FRIST (for Mr. Campbell) proposed an amendment to the
bill S. 523, to make technical corrections to law relating to Native
Americans, and for other purposes; as follows:

Strike all after the enacting clause and insert the
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``Native
American Technical Corrections Act of 2003''.
(b) Table of Contents.--The table of contents of this Act
is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Definition of Secretary.

TITLE I--TECHNICAL AMENDMENTS AND OTHER PROVISIONS RELATING TO NATIVE
AMERICANS

Subtitle A--Technical Amendments

Sec. 101. Bosque Redondo Memorial Act.
Sec. 102. Navajo-Hopi Land Settlement Act.
Sec. 103. Tribal sovereignty.
Sec. 104. Cow Creek Band of Umpqua Indians.
Sec. 105. Pueblo de Cochiti; modification of settlement.
Sec. 106. Four Corners Interpretive Center.
Sec. 107. Mississippi Band of Choctaw Indians.
Sec. 108. Rehabilitation of Celilo Indian Village.

Subtitle B--Other Provisions Relating to Native Americans

Sec. 121. Barona Band of Mission Indians; facilitation of construction
of pipeline to provide water for emergency fire
suppression and other purposes.
Sec. 122. Conveyance of Native Alaskan objects.
Sec. 123. Pueblo of Acoma; land and mineral consolidation.
Sec. 124. Quinault Indian Nation; water feasibility study.
Sec. 125. Santee Sioux Tribe; study and report.
Sec. 126. Shakopee Mdewakanton Sioux Community.
Sec. 127. Agua Caliente Band of Cahuilla Indians.
Sec. 128. Saginaw Chippewa Tribal College.
Sec. 129. Ute Indian Tribe; oil shale reserve.

TITLE II--PUEBLO OF SANTA CLARA AND PUEBLO OF SAN ILDEFONSO

Sec. 201. Definitions.
Sec. 202. Trust for the Pueblo of Santa Clara, New Mexico.
Sec. 203. Trust for the Pueblo of San Ildefonso, New Mexico.
Sec. 204. Survey and legal descriptions.
Sec. 205. Administration of trust land.
Sec. 206. Effect.
Sec. 207. Gaming.

TITLE III--DISTRIBUTION OF QUINAULT PERMANENT FISHERIES FUNDS

Sec. 301. Distribution of judgment funds.
Sec. 302. Conditions for distribution.

SEC. 2. DEFINITION OF SECRETARY.

In this Act, except as otherwise provided in this Act, the
term ``Secretary'' means the Secretary of the Interior.

TITLE I--TECHNICAL AMENDMENTS AND OTHER PROVISIONS RELATING TO NATIVE
AMERICANS

Subtitle A--Technical Amendments

SEC. 101. BOSQUE REDONDO MEMORIAL ACT.

Section 206 of the Bosque Redondo Memorial Act (16 U.S.C.
431 note; Public Law 106-511) is amended--
(1) in subsection (a)--
(A) in paragraph (1), by striking ``2000'' and inserting
``2004''; and
(B) in paragraph (2), by striking ``2001 and 2002'' and
inserting ``2005 and 2006''; and
(2) in subsection (b), by striking ``2002'' and inserting
``2007,''.

SEC. 102. NAVAJO-HOPI LAND SETTLEMENT ACT.

Section 25(a)(8) of Public Law 93-531 (commonly known as
the ``Navajo-Hopi Land Settlement Act of 1974'') (25 U.S.C.
640d-24(a)(8)) is amended by striking ``annually for fiscal
years 1995, 1996, 1997, 1998, 1999, and 2000'' and inserting
``for each of fiscal years 2003 through 2008''.

SEC. 103. TRIBAL SOVEREIGNTY.

Section 16 of the Act of June 18, 1934 (25 U.S.C. 476), is
amended by adding at the end the following:
``(h) Tribal Sovereignty.--Notwithstanding any other
provision of this Act--
``(1) each Indian tribe shall retain inherent sovereign
power to adopt governing documents under procedures other
than those specified in this section; and
``(2) nothing in this Act invalidates any constitution or
other governing document adopted by an Indian tribe after
June 18, 1934, in accordance with the authority described in
paragraph (1).''.

SEC. 104. COW CREEK BAND OF UMPQUA INDIANS.

Section 7 of the Cow Creek Band of Umpqua Tribe of Indians
Recognition Act (25 U.S.C. 712e) is amended in the third
sentence by inserting before the period at the end the
following: ``, and shall be treated as on-reservation land
for the purpose of processing acquisitions of real property
into trust''.

SEC. 105. PUEBLO DE COCHITI; MODIFICATION OF SETTLEMENT.

Section 1 of Public Law 102-358 (106 Stat. 960) is
amended--
(1) by striking ``implement the settlement'' and inserting
the following: ``implement--
``(1) the settlement;'';
(2) by striking the period at the end and inserting ``;
and''; and
(3) by adding at the end the following:
``(2) the modifications regarding the use of the settlement
funds as described in the agreement known as the `First
Amendment to Operation and Maintenance Agreement for
Implementation of Cochiti Wetlands Solution', executed--
``(A) on October 22, 2001, by the Army Corps of Engineers;
``(B) on October 25, 2001, by the Pueblo de Cochiti of New
Mexico; and
``(C) on November 8, 2001, by the Secretary of the
Interior.''.

SEC. 106. FOUR CORNERS INTERPRETIVE CENTER.

Section 7 of the Four Corners Interpretive Center Act (113
Stat. 1706) is amended--
(1) in subsection (a)(2), by striking ``2005'' and
inserting ``2008'';
(2) in subsection (b), by striking ``2002'' and inserting
``2005''; and
(3) in subsection (c), by striking ``2001'' and inserting
``2004''.

SEC. 107. MISSISSIPPI BAND OF CHOCTAW INDIANS.

Section 1(a)(2) of Public Law 106-228 (114 Stat. 462) is
amended by striking ``report entitled'' and all that follows
through ``is hereby declared'' and inserting the following:
``report entitled `Report of May 17, 2002, Clarifying and
Correcting Legal Descriptions or Recording Information for
Certain Lands placed into Trust and Reservation Status for
the Mississippi Band of Choctaw Indians by Section 1(a)(2) of
Pub. L. 106-228, as amended by Title VIII, Section 811 of
Pub. L. 106-568', on file in the Office of the
Superintendent, Choctaw Agency, Bureau of Indian Affairs,
Department of the Interior, is declared''.

SEC. 108. REHABILITATION OF CELILO INDIAN VILLAGE.

Section 401(b)(3) of Public Law 100-581 (102 Stat. 2944) is
amended by inserting ``and Celilo Village'' after ``existing
sites''.

Subtitle B--Other Provisions Relating to Native Americans

SEC. 121. BARONA BAND OF MISSION INDIANS; FACILITATION OF
CONSTRUCTION OF PIPELINE TO PROVIDE WATER FOR
EMERGENCY FIRE SUPPRESSION AND OTHER PURPOSES.

(a) In General.--Notwithstanding any other provision of
law, subject to valid existing rights under Federal and State
law, and to any easements or similar restrictions which may
be granted to the city of San Diego, California, for the
construction, operation and maintenance of a pipeline and
related appurtenances and facilities for conveying water from
the San Vicente Reservoir to the Barona Indian Reservation,
or for conservation, wildlife or habitat protection, or
related purposes, the land described in subsection (b), fee
title to which is held by the Barona Band of Mission Indians
of California (referred to in this section as the ``Band'')--
(1) is declared to be held in trust by the United States
for the benefit of the Band; and
(2) shall be considered to be a portion of the reservation
of the Band.
(b) Land.--The land referred to in subsection (a) is land
comprising approximately 85 acres in San Diego County,
California, and described more particularly as follows: San
Bernardino Base and Meridian; T. 14 S., R. 1 E.; sec. 21:
W\1/2\ SE\1/4\, 68 acres; NW\1/4\ NW\1/4\, 17 acres.
(c) Gaming.--The land taken into trust by subsection (a)
shall neither be considered to have been taken into trust for
gaming, nor be used for gaming (as that term is used in the
Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq.)).

SEC. 122. CONVEYANCE OF NATIVE ALASKAN OBJECTS.

Notwithstanding any provision of law affecting the disposal
of Federal property, on the request of the Chugach Alaska
Corporation or Sealaska Corporation, the Secretary of
Agriculture shall convey to whichever of those corporations
that has received title to a cemetery site or historical
place on National Forest System land conveyed under section
14(h)(1) of the Alaska Native Claims Settlement Act (43
U.S.C. 1613(h)(1)) all artifacts, physical remains, and
copies of any available field records that--
(1)(A) are in the possession of the Secretary of
Agriculture; and

[[Page S10438]]

(B) have been collected from the cemetery site or
historical place; but
(2) are not required to be conveyed in accordance with the
Native American Graves Protection and Repatriation Act (25
U.S.C. 3001 et seq.) or any other applicable law.

SEC. 123. PUEBLO OF ACOMA; LAND AND MINERAL CONSOLIDATION.

(a) Definition of Bidding or Royalty Credit.--The term
``bidding or royalty credit'' means a legal instrument or
other written documentation, or an entry in an account
managed by the Secretary, that may be used in lieu of any
other monetary payment for--
(1) a bonus bid for a lease sale on the outer Continental
Shelf; or
(2) a royalty due on oil or gas production;
for any lease located on the outer Continental Shelf outside
the zone defined and governed by section 8(g)(2) of the Outer
Continental Shelf Lands Act (43 U.S.C. 1337(g)(2)).
(b) Authority.--Notwithstanding any other provision of law,
the Secretary may acquire any nontribal interest in or to
land (including an interest in mineral or other surface or
subsurface rights) within the boundaries of the Acoma Indian
Reservation for the purpose of carrying out Public Law 107-
138 (116 Stat. 6) by issuing bidding or royalty credits under
this section in an amount equal to the value of the interest
acquired by the Secretary, as determined under section 1(a)
of Public Law 107-138 (116 Stat. 6).
(c) Use of Bidding and Royalty Credits.--On issuance by the
Secretary of a bidding or royalty credit under subsection
(b), the bidding or royalty credit--
(1) may be freely transferred to any other person (except
that, before any such transfer, the transferor shall notify
the Secretary of the transfer by such method as the Secretary
may specify); and
(2) shall remain available for use by any person during the
5-year period beginning on the date of issuance by the
Secretary of the bidding or royalty credit.

SEC. 124. QUINAULT INDIAN NATION; WATER FEASIBILITY STUDY.

(a) In General.--The Secretary is authorized to carry out,
in accordance with Federal reclamation law (the Act of June
17, 1902 (32 Stat. 388, chapter 1093), and Acts supplemental
to and amendatory of that Act (43 U.S.C. 371 et seq.)), a
water source, quantity, and quality feasibility study for
land of the Quinault Indian Nation to identify ways to meet
the current and future domestic and commercial water supply
and distribution needs of the Quinault Indian Nation on the
Olympic Peninsula, Washington.
(b) Public Availability of Results.--As soon as practicable
after completion of a feasibility study under subsection (a),
the Secretary shall--
(1) publish in the Federal Register a notice of the
availability of the results of the feasibility study; and
(2) make available to the public, on request, the results
of the feasibility study.

SEC. 125. SANTEE SIOUX TRIBE; STUDY AND REPORT.

(a) Study.--Pursuant to reclamation laws, the Secretary,
acting through the Bureau of Reclamation and in consultation
with the Santee Sioux Tribe of Nebraska (referred to in this
subtitle as the ``Tribe''), shall conduct a feasibility study
to determine the most feasible method of developing a safe
and adequate municipal, rural, and industrial water treatment
and distribution system for the Santee Sioux Tribe of
Nebraska that could serve the tribal community and adjacent
communities and incorporate population growth and economic
development activities for a period of 40 years.
(b) Cooperative Agreement.--At the request of the Tribe,
the Secretary shall enter into a cooperative agreement with
the Tribe for activities necessary to conduct the study
required by subsection (a) regarding which the Tribe has
unique expertise or knowledge.
(c) Report.--Not later than 1 year after funds are made
available to carry out this subtitle, the Secretary shall
submit to Congress a report containing the results of the
study required by subsection (a).
(d) Authorization of Appropriations.--There is authorized
to be appropriated to the Secretary to carry out this section
$500,000, to remain available until expended.

SEC. 126. SHAKOPEE MDEWAKANTON SIOUX COMMUNITY.

(a) In General.--Notwithstanding any other provision of
law, without further authorization by the United States, the
Shakopee Mdewakanton Sioux Community in the State of
Minnesota (referred to in this section as the ``Community'')
may lease, sell, convey, warrant, or otherwise transfer all
or any part of the interest of the Community in or to any
real property that is not held in trust by the United States
for the benefit of the Community.
(b) No Effect on Trust Land.--Nothing in this section--
(1) authorizes the Community to lease, sell, convey,
warrant, or otherwise transfer all or part of an interest in
any real property that is held in trust by the United States
for the benefit of the Community; or
(2) affects the operation of any law governing leasing,
selling, conveying, warranting, or otherwise transferring any
interest in that trust land.

SEC. 127. AGUA CALIENTE BAND OF CAHUILLA INDIANS.

(a) In General.--Notwithstanding any other provision of law
(including any restrictive covenant in effect under, or
required by operation of, a State law), title to land that
the Secretary of the Interior agrees is to be acquired by the
United States in accordance with the Act of June 18, 1934 (25
U.S.C. 465), for the Agua Caliente Band of Cahuilla Indians
shall be taken in the name of the United States.
(b) Covenants.--A restrictive covenant referred to in
subsection (a) shall be unenforceable against the United
States if the land to which the restrictive covenant is
attached was held in trust by the United States for, or owned
by, the Agua Caliente Band of Cahuilla Indians, or an
individual member of the Band, before the date on which the
restrictive covenant attached to the land.

SEC. 128. SAGINAW CHIPPEWA TRIBAL COLLEGE.

Section 532 of the Equity in Educational Land Grant Status
Act of 1994 (7 U.S.C. 301 note; Public Law 103-382) is
amended--
(1) by redesignating paragraphs (22) through (31) as
paragraphs (23) through (32), respectively; and
(2) by inserting after paragraph (21) the following:
``(22) Saginaw Chippewa Tribal College.''.

SEC. 129. UTE INDIAN TRIBE; OIL SHALE RESERVE.

Section 3405(c) of the Strom Thurmond National Defense
Authorization Act for Fiscal Year 1999 (10 U.S.C. 7420 note;
Public Law 105-261) is amended by striking paragraph (3) and
inserting the following:
``(3) With respect to the land conveyed to the Tribe under
subsection (b)--
``(A) the land shall not be subject to any Federal
restriction on alienation; and
``(B) notwithstanding any provision to the contrary in the
constitution, bylaws, or charter of the Tribe, the Act of May
11, 1938 (commonly known as the `Indian Mineral Leasing Act
of 1938') (25 U.S.C. 396a et seq.), the Indian Mineral
Development Act of 1982 (25 U.S.C. 2101 et seq.), section
2103 of the Revised Statutes (25 U.S.C. 81), or section 2116
of the Revised Statutes (25 U.S.C. 177), or any other law, no
purchase, grant, lease, or other conveyance of the land (or
any interest in the land), and no exploration, development,
or other agreement relating to the land that is authorized by
resolution by the governing body of the Tribe, shall require
approval by the Secretary of the Interior or any other
Federal official.''.

TITLE II--PUEBLO OF SANTA CLARA AND PUEBLO OF SAN ILDEFONSO

SEC. 201. DEFINITIONS.

In this title:
(1) Agreement.--The term ``Agreement'' means the agreement
entitled ``Agreement to Affirm Boundary Between Pueblo of
Santa Clara and Pueblo of San Ildefonso Aboriginal Lands
Within Garcia Canyon Tract'', entered into by the Governors
on December 20, 2000.
(2) Boundary line.--The term ``boundary line'' means the
boundary line established under section 204(a).
(3) Governors.--The term ``Governors'' means--
(A) the Governor of the Pueblo of Santa Clara, New Mexico;
and
(B) the Governor of the Pueblo of San Ildefonso, New
Mexico.
(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) Pueblos.--The term ``Pueblos'' means--
(A) the Pueblo of Santa Clara, New Mexico; and
(B) the Pueblo of San Ildefonso, New Mexico.
(6) Trust land.--The term ``trust land'' means the land
held by the United States in trust under section 202(a) or
203(a).

SEC. 202. TRUST FOR THE PUEBLO OF SANTA CLARA, NEW MEXICO.

(a) In General.--All right, title, and interest of the
United States in and to the land described in subsection (b),
including improvements on, appurtenances to, and mineral
rights (including rights to oil and gas) to the land, shall
be held by the United States in trust for the Pueblo of Santa
Clara, New Mexico.
(b) Description of Land.--The land referred to in
subsection (a) consists of approximately 2,484 acres of
Bureau of Land Management land located in Rio Arriba County,
New Mexico, and more particularly described as--
(1) the portion of T. 20 N., R. 7 E., sec. 22, New Mexico
Principal Meridian, that is located north of the boundary
line;
(2) the southern half of T. 20 N., R. 7 E., sec. 23, New
Mexico Principal Meridian;
(3) the southern half of T. 20 N., R. 7 E., sec. 24, New
Mexico Principal Meridian;
(4) T. 20 N., R. 7 E., sec. 25, excluding the 5-acre tract
in the southeast quarter owned by the Pueblo of San
Ildefonso;
(5) the portion of T. 20 N., R. 7 E., sec. 26, New Mexico
Principal Meridian, that is located north and east of the
boundary line;
(6) the portion of T. 20 N., R. 7 E., sec. 27, New Mexico
Principal Meridian, that is located north of the boundary
line;
(7) the portion of T. 20 N., R. 8 E., sec. 19, New Mexico
Principal Meridian, that is not included in the Santa Clara
Pueblo Grant or the Santa Clara Indian Reservation; and
(8) the portion of T. 20 N., R. 8 E., sec. 30, that is not
included in the Santa Clara Pueblo Grant or the San Ildefonso
Grant.

SEC. 203. TRUST FOR THE PUEBLO OF SAN ILDEFONSO, NEW MEXICO.

(a) In General.--All right, title, and interest of the
United States in and to the land described in subsection (b),
including improvements on, appurtenances to, and mineral
rights (including rights to oil and gas)

[[Page S10439]]

to the land, shall be held by the United States in trust for
the Pueblo of San Ildefonso, New Mexico.
(b) Description of Land.--The land referred to in
subsection (a) consists of approximately 2,000 acres of
Bureau of Land Management land located in Rio Arriba County
and Santa Fe County in the State of New Mexico, and more
particularly described as--
(1) the portion of T. 20 N., R. 7 E., sec. 22, New Mexico
Principal Meridian, that is located south of the boundary
line;
(2) the portion of T. 20 N., R. 7 E., sec. 26, New Mexico
Principal Meridian, that is located south and west of the
boundary line;
(3) the portion of T. 20 N., R. 7 E., sec. 27, New Mexico
Principal Meridian, that is located south of the boundary
line;
(4) T. 20 N., R. 7 E., sec. 34, New Mexico Principal
Meridian; and
(5) the portion of T. 20 N., R. 7 E., sec. 35, New Mexico
Principal Meridian, that is not included in the San Ildefonso
Pueblo Grant.

SEC. 204. SURVEY AND LEGAL DESCRIPTIONS.

(a) Survey.--Not later than 180 days after the date of
enactment of this Act, the Office of Cadastral Survey of the
Bureau of Land Management shall, in accordance with the
Agreement, complete a survey of the boundary line established
under the Agreement for the purpose of establishing, in
accordance with sections 3102(b) and 3103(b), the boundaries
of the trust land.
(b) Legal Descriptions.--
(1) Publication.--On approval by the Governors of the
survey completed under subsection (a), the Secretary shall
publish in the Federal Register--
(A) a legal description of the boundary line; and
(B) legal descriptions of the trust land.
(2) Technical corrections.--Before the date on which the
legal descriptions are published under paragraph (1)(B), the
Secretary may correct any technical errors in the
descriptions of the trust land provided in sections 3102(b)
and 3103(b) to ensure that the descriptions are consistent
with the terms of the Agreement.
(3) Effect.--Beginning on the date on which the legal
descriptions are published under paragraph (1)(B), the legal
descriptions shall be the official legal descriptions of the
trust land.

SEC. 205. ADMINISTRATION OF TRUST LAND.

(a) In General.--Effective beginning on the date of
enactment of this Act--
(1) the land held in trust under section 202(a) shall be
declared to be a part of the Santa Clara Indian Reservation;
and
(2) the land held in trust under section 203(a) shall be
declared to be a part of the San Ildefonso Indian
Reservation.
(b) Applicable Law.--
(1) In general.--The trust land shall be administered in
accordance with any law (including regulations) or court
order generally applicable to property held in trust by the
United States for Indian tribes.
(2) Pueblo lands act.--The following shall be subject to
section 17 of the Act of June 7, 1924 (commonly known as the
``Pueblo Lands Act'') (25 U.S.C. 331 note):
(A) The trust land.
(B) Any land owned as of the date of enactment of this Act
or acquired after the date of enactment of this Act by the
Pueblo of Santa Clara in the Santa Clara Pueblo Grant.
(C) Any land owned as of the date of enactment of this Act
or acquired after the date of enactment of this Act by the
Pueblo of San Ildefonso in the San Ildefonso Pueblo Grant.
(c) Use of Trust Land.--
(1) In general.--Subject to the criteria developed under
paragraph (2), the trust land may be used only for--
(A) traditional and customary uses; or
(B) stewardship conservation for the benefit of the Pueblo
for which the trust land is held in trust.
(2) Criteria.--The Secretary shall work with the Pueblos to
develop appropriate criteria for using the trust land in a
manner that preserves the trust land for traditional and
customary uses or stewardship conservation.
(3) Limitation.--Beginning on the date of enactment of this
Act, the trust land shall not be used for any new commercial
developments.

SEC. 206. EFFECT.

Nothing in this title--
(1) affects any valid right-of-way, lease, permit, mining
claim, grazing permit, water right, or other right or
interest of a person or entity (other than the United States)
that is--
(A) in or to the trust land; and
(B) in existence before the date of enactment of this Act;
(2) enlarges, impairs, or otherwise affects a right or
claim of the Pueblos to any land or interest in land that
is--
(A) based on Aboriginal or Indian title; and
(B) in existence before the date of enactment of this Act;
(3) constitutes an express or implied reservation of water
or water right with respect to the trust land; or
(4) affects any water right of the Pueblos in existence
before the date of enactment of this Act.

SEC. 207. GAMING.

Land taken into trust under this title shall neither be
considered to have been taken into trust for, nor be used
for, gaming (as that term is used in the Indian Gaming
Regulatory Act (25 U.S.C. 2701 et seq.)).

TITLE III--DISTRIBUTION OF QUINAULT PERMANENT FISHERIES FUNDS

SEC. 301. DISTRIBUTION OF JUDGMENT FUNDS.

(a) Funds To Be Deposited Into Separate Accounts.--
(1) In general.--Subject to section 302, not later than 30
days after the date of enactment of this Act, the funds
appropriated on September 19, 1989, in satisfaction of an
award granted to the Quinault Indian Nation under Dockets
772-71, 773-71, 774-71, and 775-71 before the United States
Claims Court, less attorney fees and litigation expenses, and
including all interest accrued to the date of disbursement,
shall be distributed by the Secretary and deposited into 3
separate accounts to be established and maintained by the
Quinault Indian Nation (referred to in this title as the
``Tribe'') in accordance with this subsection.
(2) Account for principal amount.--
(A) In general.--The Tribe shall--
(i) establish an account for the principal amount of the
judgment funds; and
(ii) use those funds to establish a Permanent Fisheries
Fund.
(B) Use and investment.--The principal amount described in
subparagraph (A)(i)--
(i) except as provided in subparagraph (A)(ii), shall not
be expended by the Tribe; and
(ii) shall be invested by the Tribe in accordance with the
investment policy of the Tribe.
(3) Account for investment income.--
(A) In general.--The Tribe shall establish an account for,
and deposit in the account, all investment income earned on
amounts in the Permanent Fisheries Fund established under
paragraph (2)(A)(ii) after the date of distribution of the
funds to the Tribe under paragraph (1).
(B) Use of funds.--Funds deposited in the account
established under subparagraph (A) shall be available to the
Tribe--
(i) subject to subparagraph (C), to carry out fisheries
enhancement projects; and
(ii) pay expenses incurred in administering the Permanent
Fisheries Fund established under paragraph (2)(A)(ii).
(C) Specification of projects.--Each fisheries enhancement
project carried out under subparagraph (B)(i) shall be
specified in the approved annual budget of the Tribe.
(4) Account for income on judgment funds.--
(A) In general.--The Tribe shall establish an account for,
and deposit in the account, all investment income earned on
the judgment funds described in subsection (a) during the
period beginning on September 19, 1989, and ending on the
date of distribution of the funds to the Tribe under
paragraph (1).
(B) Use of funds.--
(i) In general.--Subject to clause (ii), funds deposited in
the account established under subparagraph (A) shall be
available to the Tribe for use in carrying out tribal
government activities.
(ii) Specification of activities.--Each tribal government
activity carried out under clause (i) shall be specified in
the approved annual budget of the Tribe.
(b) Determination of Amount of Funds Available.--Subject to
compliance by the Tribe with paragraphs (3)(C) and (4)(B)(ii)
of subsection (a), the Quinault Business Committee, as the
governing body of the Tribe, may determine the amount of
funds available for expenditure under paragraphs (3) and (4)
of subsection (a).
(c) Annual Audit.--The records and investment activities of
the 3 accounts established under subsection (a) shall--
(1) be maintained separately by the Tribe; and
(2) be subject to an annual audit.
(d) Reporting of Investment Activities and Expenditures.--
Not later than 120 days after the date on which each fiscal
year of the Tribe ends, the Tribe shall make available to
members of the Tribe a full accounting of the investment
activities and expenditures of the Tribe with respect to each
fund established under this section (which may be in the form
of the annual audit described in subsection (c)) for the
fiscal year.

SEC. 302. CONDITIONS FOR DISTRIBUTION.

(a) United States Liability.--On disbursement to the Tribe
of the funds under section 301(a), the United States shall
bear no trust responsibility or liability for the investment,
supervision, administration, or expenditure of the funds.
(b) Application of Other Law.--All funds distributed under
this title shall be subject to section 7 of the Indian Tribal
Judgment Funds Use or Distribution Act (25 U.S.C. 1407).

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