S. 3590Senate111th Congress (2009-2011)In Committee

Carbon Capture and Sequestration Deployment Revenue Act of 2010

Introduced July 14, 2010

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Read twice and referred to the Committee on Finance.

July 14, 2010

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SenateIntro Referral

Introduced in Senate

July 14, 2010

SenateIntro Referral

Read twice and referred to the Committee on Finance.

July 14, 2010

Floor Debate

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What members said about S. 3590 on the floor

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Michael C. Burgess
Rep. Michael C. BurgessR-TX-26 · Mar 22, 2010

Mr. Speaker, I, too, am coming to the floor of the House tonight to try to clarify for the American people some of the things that have happened here over the weekend. As you know, we passed a very…

Tom Coburn
Sen. Tom CoburnR-OK · Jan 20, 2010

Mr. President, I ask unanimous consent that these letters commenting on the Patient Protection and Affordable Care Act of 2009-- the majority's ``health reform bill''--be printed in the Record. Mr.…

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Introduced in SenateIssued July 14, 2010
        [Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 3590 Introduced in Senate (IS)]

111th CONGRESS
2d Session
S. 3590

To amend the Internal Revenue Code of 1986 to provide financial
incentives to facilitate the development and early deployment of carbon
capture and sequestration technologies, and for other purposes.

_______________________________________________________________________

IN THE SENATE OF THE UNITED STATES

July 14, 2010

Mr. Rockefeller (for himself and Mr. Voinovich) introduced the
following bill; which was read twice and referred to the Committee on
Finance

_______________________________________________________________________

A BILL

To amend the Internal Revenue Code of 1986 to provide financial
incentives to facilitate the development and early deployment of carbon
capture and sequestration technologies, and for other purposes.

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Carbon Capture and Sequestration
Deployment Revenue Act of 2010''.

SEC. 2. TABLE OF CONTENTS.

The table of contents for this Act is as follows:

TITLE I--SEQUESTRATION TAX CREDIT AND CAPACITY INCENTIVES

Sec. 101. Carbon sequestration tax credit amendments.
Sec. 102. Federal financial incentives for additional 10 GW of
capacity.
TITLE II--62 GW EARLY ADOPTER PROGRAM; SEQUESTRATION BONDS

Sec. 201. Tax credit for early adoption of CCS.
Sec. 202. Carbon sequestration bonds.

TITLE I--SEQUESTRATION TAX CREDIT; CAPACITY INCENTIVES

SEC. 101. CARBON SEQUESTRATION TAX CREDIT AMENDMENTS.

(a) In General.--Section 45Q of the Internal Revenue Code of 1986
is amended--
(1) by inserting ``or converted to a stable form in which
it is securely and permanently sequestered'' after ``secure
geological storage'' in subparagraph (B) of section 45Q(a)(1);
(2) by striking subsection (a)(2) an inserting the
following:
``(2) $10 per metric ton of qualified carbon dioxide which
is captured at a qualified facility and used as a tertiary
injectant in a qualified enhanced oil or natural gas recovery
project, and
``(A) disposed of in secure geologic storage, or
``(B) converted to a stable form to enable
permanent sequestration, including the beneficial use
of such converted carbon dioxide.'';
(3) by striking the words ``by the taxpayer'' each place
they appear in subsection (a);
(4) by striking ``would otherwise'' in subsection (b)(1)(A)
and inserting ``would, but for the capture and use or
sequestration,'';
(5) by striking paragraph (1) of subsection (c) and
redesignating paragraphs (2) and (3) as paragraphs (1) and (2),
respectively;
(6) by striking paragraph (5) of subsection (d) and
inserting the following:
``(5) Credit attributable to taxpayer.--Any credit under
this section shall be attributable to the person that captures
the qualified carbon dioxide, except to the extent provided in
regulations prescribed by the Secretary.'';
(7) by adding at the end of subsection (d) the following:
``(8) Placed in service.--Carbon capture equipment is
placed in service on the date qualified carbon dioxide is first
captured at a qualified facility and either--
``(A) injected in secure geologic storage or
converted to a stable form, or
``(B) used as an injectant in a qualified enhanced
hydrocarbon recovery project or converted to a stable
form.
``(9) Transferability of credit.--The credit under this
section may be transferred to any other person by the person to
which the credit is attributable.'';
(8) by striking subsection (e) and inserting the following:
``(e) Application of section.--The credit under this section shall
apply with respect to qualified carbon dioxide captured at a qualified
facility at which carbon capture equipment is placed in service prior
to January 1, 2019. The taxpayer may claim the credit for a 10-year
period commencing with the date the carbon capture equipment is placed
in service.''; and
(9) by inserting ``or conversion to a stable form'' after
``geological storage'' in subsection (d)(2).
(b) Effective Date.--The amendments made by subsection (a) shall
apply to carbon dioxide captured after the date of enactment of this
Act.

SEC. 102. FEDERAL FINANCIAL INCENTIVES FOR ADDITIONAL 10 GW OF
CAPACITY.

(a) Additional Authorization.--Section 1704 of the Energy Policy
Act of 2005 (42 U.S.C. 16514) is amended--
(1) by adding the following at the end of subsection (a):
``In addition to other amounts made available under this
section, there are authorized $20,000,000,000 to be used only
for guarantees under this title for--
``(1) the construction of new commercial scale electric
generation units, or industrial facility units, that are
eligible units utilizing carbon capture and sequestration
technology;
``(2) the retrofit of existing commercial scale electric
generation units, or industrial facility units, that are
eligible units providing for carbon capture and sequestration;
and
``(3) the construction of carbon dioxide transmission
pipelines to transport carbon dioxide to sequestration sites or
to sites where such carbon dioxide will be used for hydrocarbon
recovery.''; and
(2) by adding at the end thereof the following:
``(c) Definitions.--In this section:
``(1) Commercial scale.--The term `commercial scale' means,
with respect to an electric generation unit, that the unit is
designed to generate and sell electric power directly to
consumers, or for resale, with a carbon dioxide capture system
having a useful life of at least 15 years.
``(2) Permanent geologic storage site.--The term `permanent
geologic storage site' means a site that the Secretary
determines is capable of storing carbon dioxide in saline or
other deep geologic storage structures.
``(3) Eligible unit.--The term `eligible unit' means an
electric generation unit or industrial facility unit located in
the United States that--
``(A) uses coal or petroleum coke for at least 75
percent of the fuel used by the unit;
``(B) uses carbon capture technology to treat at
least--
``(i) 20 percent of the carbon dioxide
emissions of the unit; or
``(ii) an amount of carbon dioxide
emissions that is attributable to 200 megawatts
of the total nameplate generating capacity of
the unit;
``(C) captures at least 80 percent of the carbon
dioxide emissions from the treated emissions of the
unit;
``(D) transports such captured carbon dioxide to a
permanent geologic storage site in the United States or
to a site on the North American continent for use for
hydrocarbon recovery;
``(E) provides for the permanent storage of such
carbon dioxide in such site; and
``(F) has been approved by the Secretary as
eligible under this subsection.
``(d) Eligible Units.--
``(1) Certification.--No unit shall be an eligible unit
under subsection (c) unless the Secretary has certified such
unit as meeting the requirements of such subsection (c)
pursuant to a certification process established by the
Secretary by rule.
``(2) Limitation.--The Secretary may certify eligible units
under this subsection which total in the aggregate no more than
10 gigawatts of treated generating capacity, of which not more
than the equivalent of 5 gigawatts of capacity may be for
industrial units. For purposes of determining equivalency under
this subsection, an industrial unit with uncontrolled carbon
dioxide emissions equal to the uncontrolled carbon dioxide
emissions of a 500 megawatt electric generation unit shall be
treated as having installed capacity equivalent to such 500
megawatt unit.''.
(b) Tax Credits.--
(1) In general.--Subpart E of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 is amended by
adding at the end thereof the following:

``SEC. 48E. PIONEER CCS FACILITIES.

``(a) Additional Qualifying Advanced Coal Project Credit.--For
purposes of section 46, the qualifying advanced coal project credit for
any taxable year shall also include an additional amount equal to 30
percent of the incremental cost for carbon capture and sequestration
systems for eligible units, determined as follows:
``(1) For an eligible unit that is a new electric
generation unit, the incremental costs shall be the amount by
which the costs incurred by the taxpayer for the unit exceed
the costs of construction of a comparable supercritical
pulverized coal unit without carbon capture and sequestration
technology. To establish incremental costs, the taxpayer shall
obtain a certified report of a qualified independent engineer
estimating the differential construction cost between the
eligible unit and a comparably-sized supercritical pulverized
coal unit without carbon capture and sequestration. The
independent engineer shall utilize cost estimates for
supercritical pulverized coal units available from Federal
agencies, academia and/or the private sector, appropriately
adjusted for size, fuel source and location. An engineering
design of a hypothetical supercritical pulverized coal unit
shall not be required to establish the incremental costs.
``(2) For an eligible unit that is a new industrial unit,
the incremental costs shall be the amount by which the costs
incurred by the taxpayer for the unit exceed the costs of
construction of a comparable industrial unit without carbon
capture and sequestration.
``(3) For an eligible unit that retrofits a carbon capture,
transportation, and sequestration system on an existing
generation or industrial unit, the incremental cost shall be
the construction costs incurred by the taxpayer for the carbon
capture and sequestration system.
``(b) Definitions.--For purposes of this section, the term
`eligible unit' means an electric generation unit or industrial
facility unit located in the United States that--
``(A) uses coal or petroleum coke for at least 75 percent
of the fuel used by the unit;
``(B) uses carbon capture technology to treat at least--
``(i) 20 percent of the carbon dioxide emissions of
the unit; or
``(ii) an amount of carbon dioxide emissions that
is attributable to 200 megawatts of the total nameplate
generating capacity of the unit;
``(C) captures at least 80 percent of the carbon dioxide
emissions from the treated emissions of the unit;
``(D) transports such captured carbon dioxide to a
permanent geologic storage site in the United States or to a
site on the North American continent for use for hydrocarbon
recovery; and
``(E) provides for the permanent storage of such carbon
dioxide in such site.
``(c) Election.--No costs for which a credit has been provided
under section 48A or section 48B shall be eligible for a credit under
this section.''.
(2) Clerical amendment.--The table of contents for such
subpart E is amended by adding at the end thereof the
following:

``48E. Pioneer CCS facilities.''.
(3) Effective Date.--The amendments made by this subsection
shall apply with respect to--
(A) new facilities placed in service after December
31, 2010, and before January 1, 2025; and
(B) the retrofit of existing facilities that
commence operation with such retrofit after December
31, 2010, and before January 1, 2025.

TITLE II--62 GW EARLY ADOPTER PROGRAM; SEQUESTRATION BONDS

SEC. 201. TAX CREDIT FOR EARLY ADOPTION OF CCS.

(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 is amended by adding at the end
thereof the following:

``SEC. 45S. CREDIT FOR EARLY ADOPTION OF CCS.

``(a) Early Adoption Credit.--For purposes of section 38, the
carbon dioxide sequestration credit for any taxable year shall be the
amount set forth in subsection (b), in the case of certified new or
retrofit electric utility units or certified new or retrofit industrial
units in providing for carbon capture and sequestration in secure
geologic storage, adjusted as provided in subsection (c).
``(b) Determination of Amount.--
``(1) 65 Percent capture rate.--Except as provided in
paragraph (2) and adjusted in subsection (c), the amount of the
credit under subsection (a) shall be $67 per ton of carbon
dioxide captured and sequestered in the case of a certified new
or retrofit electric utility unit or a certified new or
retrofit industrial unit that--
``(A) is placed in service before January 1, 2025,
and
``(B) captures and sequesters at least 65 percent
of the carbon dioxide emissions in the treated portion
of the flue gas or fuel gas stream.
``(2) Higher capture rate.--The amount of credit provided
under paragraph (1) shall be increased by $1.15 per ton for
each percent of additional carbon dioxide emissions captured
and sequestered above such 65 percent capture rate, up to a
maximum credit of $96 per ton for a capture and sequestration
rate of 90 percent or more.
``(c) Adjustment for Later Commencement.--The amount of the credit
determined under subsection (b) shall be reduced by $1 per ton of
carbon dioxide for each year after the calendar year 2024 in which the
carbon capture and sequestration equipment is placed in service.
``(d) Placed in Service.--For purposes of this section, the term
`placed in service' with respect to a certified new or retrofit
electric utility unit or a certified new or retrofit industrial unit is
the date on which such unit first captures and sequesters carbon
dioxide in secure geologic storage.
``(e) Certification of 62 GW.--No credit shall be allowed under
this section unless the electric utility unit or industrial unit with
respect to which a credit is applied has been certified by the
Secretary. Upon application of any taxpayer for certification under
this section, the Secretary shall certify the unit in accordance with
the certification program under subsection (g).
``(f) Limitation.--The Secretary shall certify eligible new or
retrofit units under this subsection which total in the aggregate no
more than 62 gigawatts of treated generating capacity, of which not
more than 10 percent of this capacity may be for industrial units. For
purposes of determining gigawatt equivalency under this subsection, 6
million metric tonnes per year of captured and sequestered carbon
dioxide emissions from industrial units shall be treated as having the
capacity equivalent of 1 gigawatt of treated generating capacity.
``(g) Certification Program.--
``(1) The Secretary shall establish a program for the
certification of new or retrofit electric units and new or
retrofit industrial units utilizing carbon capture and
sequestration technology eligible to apply for a credit under
this section. A facility shall be certified only if the owner
or operator of the unit--
``(A) specifies the capacity of the unit subject to
carbon capture and sequestration, and
``(B) commits to place the unit, or equipment in
the case of a retrofit, in service within 7 years after
the date of the certification and to comply with such
interim development milestones (including the issuance
of all necessary Federal, State, and local permits) as
the Secretary shall, by rule, prescribe.
``(2) Failure to comply with the 7-year date set forth in
this subsection or with any significant milestone or other
requirement established by the Secretary under paragraph (1)
shall result in the termination of the certification. The 7-
year date shall be extended by the period of any delay caused
by challenges or litigation related to permits required for the
facility. No unit for which a certification has been terminated
shall be eligible for a new certification under this section.
``(h) Application of Section.--The credit under this section shall
apply to carbon dioxide captured and sequestered in secure geologic
storage from a certified new or retrofit electric utility unit or from
a certified new or retrofit industrial unit. The taxpayer may claim the
credit for a 10-year period commencing on the date the unit is placed
in service.
``(i) Other Credits.--Carbon dioxide from equipment for which
carbon dioxide storage credit has been allowed under section 45Q or an
investment credit has been allowed under section 48E shall not be
eligible for a credit under this section.
``(j) Definitions.--In this section:
``(1) Retrofit.--The term `retrofit' means the application
of carbon capture and sequestration technology to an existing
unit, provided that such technology treats at least--
``(A) 20 percent of the carbon dioxide emissions of
the unit; or
``(B) an amount of carbon dioxide emissions that is
attributable to 200 megawatts of the total nameplate
generating capacity (or, in the case of an industrial
unit, an equivalent capacity).
(2) Industrial unit.--The term `industrial unit' means a
unit that--
``(A) is not a qualifying electric generating unit;
``(B) uses coal or petroleum coke for at least 75
percent of the fuel used by the unit; and
``(C) absent carbon capture and sequestration,
would emit greater than 500,000 tons per year of carbon
dioxide.
``(3) Treated generating capacity.--The term `treated
generating capacity' means the portion of the total generating
capacity of an electric generating unit (or, in the case of an
industrial unit, an equivalent capacity) for which the flue gas
or fuel gas is treated by carbon capture and sequestration
technology.''.
(b) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by adding at the end thereof the following:

``45S. Credit for early adoption of CCS.''.

SEC. 202. CARBON SEQUESTRATION BONDS.

(a) In General.--Part IV of subchapter A of chapter 1 of the
Internal Revenue Code of 1986 is amended by adding at the end the
following new subpart:

``Subpart K--Carbon Sequestration Bonds

``Sec. 54BB. Carbon Sequestration bonds.

``SEC. 54BB. CARBON SEQUESTRATION BONDS.

``(a) In General.--If a taxpayer holds a carbon sequestration bond
on one or more interest payment dates of the bond during any taxable
year, 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 the
credits determined under subsection (b) with respect to such dates.
``(b) Amount of Credit.--The amount of the credit determined under
this subsection with respect to any interest payment date for a carbon
sequestration bond is 70 percent of the amount of interest payable by
the issuer with respect to such date.
``(c) Limitation Based on Amount of Tax.--
``(1) In general.--The credit allowed under subsection (a)
for any 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
part (other than subpart C and this subpart).
``(2) Carryover of unused credit.--If the credit allowable
under subsection (a) exceeds the limitation imposed by
paragraph (1) 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 taxable year
(determined before the application of paragraph (1) for such
succeeding taxable year).
``(d) Carbon Sequestration Bond.--
``(1) In general.--For purposes of this section, the term
`carbon sequestration bond' means any obligation issued as part
of an issue if--
``(A) 95 percent of the available project proceeds
(as defined in section 54A) of such issue, in excess of
the amounts in a reasonably required reserve (within
the meaning of section 150(a)(3)) for such issue, are
to be used for qualified carbon sequestration costs
incurred by public power providers or cooperative
electric companies,
``(B) the obligation is issued by a qualified
issuer, and
``(C) the issuer makes an irrevocable election to
have this section apply.
``(2) Applicable rules.--For purposes of applying paragraph
(1)--
``(A) an issue shall not be treated as meeting the
requirements of paragraph (1) unless the issue
satisfies the requirements of section 148 with respect
to the proceeds of the issue,
``(B) for purposes of applying section 148 to such
an issue, the yield on a carbon sequestration bond
shall be determined without regard to the credit
allowed under subsection (a),
``(C) an issue shall not be treated as meeting the
requirements of this paragraph unless the issuer of the
carbon sequestration bonds submits reports similar to
the reports required under section 149(e), and
``(D) a bond shall not be treated as a carbon
sequestration bond if the issue price has more than a
de minimis amount (determined under rules similar to
the rules of section 1273(a)(3)) of premium over the
stated principal amount of the bond.
``(e) Limitation on Amount of Bonds Designated.--
``(1) In general.--There is a national carbon sequestration
bond limitation of $5,000,000,000.
``(2) Allocation by secretary.--The Secretary shall make
allocations of the amount of the national carbon sequestration
bond limitation in such manner as the Secretary determines
appropriate.
``(f) Interest Payment Date.--For purposes of this section, the
term `interest payment date' means any date on which the holder of
record of the carbon sequestration bond is entitled to a payment of
interest under such bond.
``(g) Special Rules.--
``(1) Interest on carbon sequestration bonds includible in
gross income for federal income tax purposes.--For purposes of
this title, interest on any carbon sequestration bond shall be
includible in gross income.
``(2) Application of certain rules.--Rules similar to the
rules of subsections (f), (g), (h), and (i) of section 54A
shall apply for purposes of the credit allowed under subsection
(a).
``(h) Special Rule for Qualified Carbon Sequestration Bonds.--In
the case of a qualified carbon sequestration bond--
``(1) Issuer allowed refundable credit.--In lieu of any
credit allowed under this section with respect to such bond,
the issuer of such bond shall be allowed a credit as provided
in section 6432.
``(2) Qualified carbon sequestration bond.--In this
subsection, the term `qualified carbon sequestration bond'
means any carbon sequestration bond issued as part of an issue
if the issuer makes an irrevocable election to have this
subsection apply.
``(i) Definitions.--In this section:
``(1) Qualified carbon sequestration costs.--The term
`qualified carbon sequestration costs' means the incremental
costs for carbon capture and sequestration systems as described
in section 48E (without regard to any placed in service date),
which systems are owned by a public power provider or a
cooperative electric company.
``(2) Public power provider.--The term `public power
provider' means a State utility with a service obligation, as
such terms are defined in section 217 of the Federal Power Act
(as in effect on the date of the enactment of the Carbon
Capture and Sequestration Deployment Revenue Act of 2010).
``(3) Cooperative electric company.--The term `cooperative
electric company' means a mutual or cooperative electric
company described in section 501(c)(12) or section 1381
(a)(2)(C).
``(4) Qualified issuer.--The term `qualified issuer' means
a public power provider, a cooperative electric company, a
clean renewable energy bond lender, or a not-for-profit
electric utility which has received a loan or loan guarantee
under the Rural Electrification Act.
``(j) Regulations.--The Secretary may prescribe such regulations
and other guidance as may be necessary or appropriate to carry out this
section and section 6431.''.
(b) Credit for Qualified Carbon Sequestration Bonds.--Subchapter B
of chapter 65 of such Code is amended by adding at the end the
following new section:

``SEC. 6432. CREDIT FOR QUALIFIED CARBON SEQUESTRATION BONDS ALLOWED TO
ISSUER.

``(a) In General.--In the case of a qualified carbon sequestration
bond, the issuer of such bond shall be allowed a credit with respect to
each interest payment under such bond which shall be payable by the
Secretary as provided in subsection (b).
``(b) Payment of Credit.--The Secretary shall pay
(contemporaneously with each interest payment date under such bond) to
the issuer of such bond (or to any person who makes such interest
payments on behalf of the issuer) 65 percent of the interest payable
under such bond on such date.
``(c) Definitions.--In this section:
``(1) Interest payment date.--The term `interest payment
date' means each date on which interest is payable by the
issuer under the terms of the bond.
``(2) Qualified carbon sequestration bond.--The term
`qualified carbon sequestration bond' has the meaning given
such term in section 54BB(h)(2).
``(d) Application of Arbitrage Rules.--For purposes of section 148,
the yield on a qualified bond shall be reduced by the credit allowed
under this section.''.
(c) Conforming Amendments.--
(1) Section 1324(b)(2) of title 31, United States Code, is
amended by striking ``or 6431'' and inserting ``6431, or
6432,''.
(2) Section 54A(c)(1)(B) of the Internal Revenue Code of
1986 is amended by striking ``subparts C and J'' and inserting
``subparts C, J, and K''.
(3) Sections 54(c)(2), 1397E(c)(2), and 1400N(l)(3)(B) of
such Code are each amended by striking ``and J'' and inserting
``J, and K''.
(4) Section 6211(b)(4)(A) of such Code is amended by
striking ``and 6431'' and inserting ``6431, and 6432''.
(5) Section 6401(b)(1) of such Code is amended by striking
``and J'' and inserting ``J, and K''.
(6) The table of subparts for part IV of subchapter A of
chapter 1 of such Code is amended by adding at the end the
following new item:

``subpart k. carbon sequestration bonds.''.

(7) The table of sections for subchapter B of chapter 65 of
such Code is amended by adding at the end the following new
item:

``Sec. 6432. Credit for qualified carbon sequestration bonds allowed to
issuer.''.
(d) Transitional Coordination With State Law.--Except as otherwise
provided by a State after the date of the enactment of this Act, the
interest on any carbon sequestration bond (as defined in section 54BB
of the Internal Revenue Code of 1986, as added by this section) and the
amount of any credit determined under such section with respect to such
bond shall be treated for purposes of the income tax laws of such State
as being exempt from Federal income tax.
(e) Effective Date.--The amendments made by this section shall
apply to obligations issued after the date of the enactment of this
Act.
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