[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4288 Introduced in House (IH)]







104th CONGRESS
  2d Session
                                H. R. 4288

      To encourage the increased use of domestic natural gas as a 
              transportation fuel, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 28, 1996

 Mr. Barton of Texas (for himself, Mr. Bilbray, Mr. Bono, Mr. Combest, 
Mr. Gingrich, Mr. McCrery, Mr. Regula, Mr. Tauzin, Mr. Thornberry, and 
  Mr. Wise) introduced the following bill; which was referred to the 
      Committee on Commerce, and in addition to the Committees on 
 Transportation and Infrastructure, Ways and Means, National Security, 
 and Government Reform and Oversight, for a period to be subsequently 
   determined by the Speaker, in each case for consideration of such 
 provisions as fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
      To encourage the increased use of domestic natural gas as a 
              transportation fuel, and for other purposes.

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

                      TITLE I--GENERAL PROVISIONS

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Natural Gas Vehicle Incentives Act 
of 1996''.

SEC. 2. FINDINGS.

    (a) Principal Finding.--The Congress finds that it is in the 
interest of the United States to encourage the increased use of 
domestic natural gas as a transportation fuel and thereby realize the 
broad societal benefits associated with such use, including improved 
environmental quality, enhanced energy security, and increased domestic 
economic activity.
    (b) General Findings.--The Congress finds that--
            (1) the United States currently imports approximately 50 
        percent of the petroleum consumed within the country, and this 
        figure is expected to increase to 73 percent by the year 2000;
            (2) the transfer of wealth from the United States to oil 
        exporting countries in 1994 was approximately $45,000,000,000;
            (3) the transportation sector in the United States is 97 
        percent dependent upon petroleum and accounts for approximately 
        67 percent of the Nation's demand for petroleum;
            (4) emissions from transportation sources contribute 
        approximately 57 percent of the total criteria pollutants 
        within the United States and one-third of the total greenhouse 
        gas emissions within the United States;
            (5) approximately 62,000,000 Americans live in areas that 
        are in violation of the air quality standards established by 
        the Clean Air Act, and many of these Americans, especially 
        those in urban areas, increasingly are suffering adverse health 
        consequences resulting from poor air quality;
            (6) natural gas is a plentiful, domestically available 
        alternative to petroleum;
            (7) in comparison to a gasoline-powered vehicle, a typical 
        natural gas vehicle substantially reduces emissions of carbon 
        monoxide, nonmethane organic gases, oxides of nitrogen, and 
        particulate matter;
            (8) the environmental risks inherent in the production, 
        refining, transportation, and storage of petroleum-based fuels 
        are far greater than the corresponding environmental risks 
        associated with the production, transportation, and storage of 
        natural gas used as a transportation fuel;
            (9) the technology to maximize the potential societal 
        benefits resulting from the increased use of natural gas as a 
        transportation fuel is available in the commercial marketplace 
        today;
            (10) the financial assistance of the Federal Government is 
        needed to provide incentives to stimulate the mass production 
        of natural gas vehicles; and
            (11) incentives to the private sector are the most 
        efficient and effective means of producing long-term reductions 
        in motor vehicle emissions and oil imports.

                  TITLE II--EMISSION REDUCTION CREDITS

SEC. 201. EMISSION REDUCTION CREDITS.

    Part A of title I of the Clean Air Act (42 U.S.C. 7401 et seq.) is 
amended by adding the following new section at the end thereof:

``SEC. 132. CREDIT PROGRAM FOR NATURAL GAS VEHICLES AND FUELING 
              INFRASTRUCTURE.

    ``(a) Establishment of Credit Program.--Within 1 year after the 
date of enactment of this section, the Administrator shall promulgate 
regulations establishing an emission reduction credit program for 
natural gas vehicles, ULEV-certified alternative fuel vehicles that 
operate on alternative fuel, and fueling infrastructure. The 
regulations shall provide that credits shall be usable beginning no 
later than 18 months after the date of enactment of this section.
    ``(b) Standards for Vehicles.--The rules promulgated under 
subsection (a) shall base emission reduction credits for natural gas 
vehicles and ULEV-certified alternative fuel vehicles on the difference 
in emission levels between in-use gasoline and diesel vehicles and the 
levels of emissions from natural gas vehicles and ULEV-certified 
alternative fuel vehicles of similar type and weight, based on data 
developed by the Administrator for purposes of emissions certification 
of natural gas vehicles and ULEV-certified alternative fuel vehicles. 
The rules shall be based on the following:
            ``(1) Credits shall be available to owners or operators of 
        natural gas vehicles or ULEV-certified alternative fuel 
        vehicles that certify annual use of at least 1,500 gallons or 
        gallon equivalents of natural gas, or alternative fuel in the 
        case of ULEV-certified alternative fuel vehicles, per year, per 
        natural gas vehicle or ULEV-certified alternative fuel vehicle.
            ``(2) The right to obtain credits or hold credits shall be 
        freely transferable.
            ``(3) Credits may be used to offset any requirements in 
        effect pursuant to this title (A) to reduce emissions of 
        nitrogen oxides, volatile organic compounds, nonmethane organic 
        gas, carbon monoxide, and particulates, including those 
        applicable to motor vehicles or stationary sources; and (B) to 
        implement transportation control measures, including high 
        occupancy vehicles restrictions and employee trip reduction 
        programs.
            ``(4) Credits shall be based on assumed vehicle mileage of 
        20,000 miles per year.
            ``(5) Owners or operators of natural gas vehicles and ULEV-
        certified alternative fuel vehicles or their assignees shall be 
        provided an opportunity to demonstrate eligibility to receive 
        excess credits based on vehicle mileage in excess of the 
        assumed mileage. Procedures established by the Administrator 
        related to such excess credits shall be simple and not require 
        burdensome recordkeeping.
            ``(6) The Administrator shall establish different levels of 
        credit to reflect the difference in emissions among various 
        weight classifications of natural gas vehicles or ULEV-
        certified alternative fuel vehicles. The Administrator shall 
        consult with affected parties to determine the appropriate 
        weight classifications for purposes of this program.
    ``(c) Standards for Fueling Infrastructure.--The rules promulgated 
under subsection (a) shall base emission reduction credits for the 
installation and rehabilitation of natural gas fueling stations on the 
initial capacity of a station and emission reduction credits for the 
operation of natural gas fueling stations on the annual volume of 
natural gas actually dispensed at a station. The rules shall be based 
on the following:
            ``(1) Credits shall be available to any individual or 
        entity that installs a new natural gas fueling station, 
        increases the capacity or efficiency of an existing natural gas 
        fueling station, or operates a natural gas fueling station.
            ``(2) For installation and rehabilitation credits, 
        different levels of credit shall be established to reflect the 
        varied fueling capacity of the different types of natural gas 
        fueling stations. For operational credits, the level of credit 
        shall reflect the actual annual volume of natural gas dispensed 
        at a station. The Administrator shall consult with the affected 
        parties to determine the appropriate classifications for 
        purposes of this program.
            ``(3) The right to obtain credits or hold credits shall be 
        freely transferable.
            ``(4) Credits may be used to offset any requirements in 
        effect pursuant to this title to reduce emissions of nitrogen 
        oxides, nonmethane organic gas, carbon monoxide, and 
        particulates, including those applicable to motor vehicles or 
        stationary sources.
            ``(5) Credits shall be higher for natural gas fueling 
        stations that provide public access.
            ``(6) Procedures established by the Administrator related 
        to such credits shall be simple and not require burdensome 
        recordkeeping.
    ``(d) Definitions.--For purposes of this subsection--
            ``(1) Natural gas vehicle.--The term `natural gas vehicle' 
        means a vehicle that will operate on natural gas alone or 
        natural gas in combination with another fuel in a dual-fuel 
        configuration.
            ``(2) Natural gas.--The term `natural gas' includes 
        compressed natural gas and liquefied natural gas.
            ``(3) Natural gas fueling station.--The term `natural gas 
        fueling station' means any property or equipment necessary to 
        dispense natural gas as a vehicular fuel.
            ``(4) Alternative fuel and alternative fuel vehicle.--The 
        terms `alternative fuel' and `alternative fuel vehicle' have 
        the same meanings as in section 301 of the Energy Policy Act of 
        1992.
            ``(5) ULEV-certified alternative fuel vehicle.--The term 
        `ULEV-certified alternative fuel vehicle' means any vehicle 
        that operates on alternative fuel and has been certified by the 
        California Air Resources Board or by the Administrator to meet 
        the current ultra-low emission vehicle standard as established 
        by the California Air Resources Board or as established under 
        title II of this Act.
    ``(e) Bifuel Natural Gas Vehicles.--The rules issued under this 
section shall permit bifuel vehicles that are capable of operating both 
on natural gas and gasoline to receive credits.''.

                       TITLE III--TAX INCENTIVES

SEC. 301. CREDITS FOR NATURAL GAS VEHICLES, FUELING STATIONS, AND FUEL.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45D. CREDITS RELATED TO NATURAL GAS VEHICLES.

    ``(a) Credit for Vehicles.--
            ``(1) In general.--For purposes of section 38, the natural 
        gas vehicle property credit for any taxable year is an amount 
        equal to 50 percent of the cost of any qualified natural gas 
        vehicle property placed in service by the taxpayer during such 
        taxable year.
            ``(2) Qualified natural gas vehicle property.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `qualified natural gas vehicle property' means 
                any property which would be qualified clean-fuel 
                vehicle property as defined in section 179A(c) if--
                            ``(i) paragraph (2) thereof did not apply, 
                        and
                            ``(ii) the only clean-burning fuels under 
                        such section were natural gas and liquefied 
                        natural gas.
                    ``(B) Vehicle must be part of fleet.--Property 
                shall not be treated as qualified natural gas vehicle 
                property unless the motor vehicle of which it is a part 
                is part of a fleet which includes at least 5 motor 
                vehicles which are used by the taxpayer in a trade or 
                business.
            ``(3) Termination.--
                    ``(A) In general.--This subsection shall not apply 
                to property placed in service after the first calendar 
                year after the termination year.
                    ``(B) Termination year.--For purposes of 
                subparagraph (A), the termination year is the first 
                calendar year in which the number of qualified natural 
                gas vehicles placed in service is at least 10 percent 
                of the total number of all motor vehicles placed in 
                service during such year.
                    ``(C) Definitions.--For purposes of subparagraph 
                (B)--
                            ``(i) Qualified natural gas vehicle.--The 
                        term `qualified natural gas vehicle' means any 
                        motor vehicle capable of operating on 
                        compressed natural gas or liquefied natural 
                        gas.
                            ``(ii) Motor vehicle.--The term `motor 
                        vehicle' has the meaning given such term by 
                        section 179A(e)(2).
    ``(b) Credit for Fueling Stations.--
            ``(1) In general.--For purposes of section 38, the natural 
        gas fueling property credit for any taxable year is an amount 
        equal to the lesser of--
                    ``(A) $25,000, or
                    ``(B) 10 percent of the cost of any qualified 
                natural gas vehicle fueling property placed in service 
                by the taxpayer during such taxable year.
            ``(2) Qualified natural gas vehicle fueling property.--For 
        purposes of this section, the term `qualified natural gas 
        vehicle fueling property' means any property--
                    ``(A) which is placed in service to fuel qualified 
                natural gas vehicles;
                    ``(B) the original use of which commences with the 
                taxpayer; and
                    ``(C) which is of a character subject to the 
                allowance for depreciation.
            ``(3) Termination.--This subsection shall not apply to 
        property placed in service after the first calendar year after 
        the termination year (as defined in subsection (a)(3)).
    ``(c) Credit for Natural Gas Used as a Transportation Fuel.--
            ``(1) In general.--For purposes of section 38, the natural 
        gas motor fuel credit for any taxable year is an amount equal 
        to--
                    ``(A) 25 cents per gallon of liquefied natural gas, 
                and
                    ``(B) 25 cents per gasoline gallon equivalent (as 
                determined by the National Conference on Weights and 
                Measures) of compressed natural gas,
        used during such taxable year by the taxpayer as a fuel to 
        propel a natural gas vehicle.
            ``(2) Natural gas vehicle.--For purposes of this section, 
        the term `natural gas vehicle' means any motor vehicle (as 
        defined in section 179A(e)(2))--
                    ``(A) used in a trade or business by the taxpayer 
                as part of a fleet consisting of at least 5 motor 
                vehicles which are so used;
                    ``(B) that consumes at least 1,500 gasoline gallon 
                equivalents of natural gas per year; and
                    ``(C) the original use of which commences with the 
                taxpayer.
            ``(3) Natural gas.--For purposes of this section, the term 
        `natural gas' means compressed natural gas or liquefied natural 
        gas.
            ``(4) Termination.--This subsection shall not apply to fuel 
        used after the first calendar year after the termination year 
        (as defined in subsection (a)(3)).
    ``(d) Special Rules.--
            ``(1) Coordination with section 179a.--The cost otherwise 
        taken into account under section 179A with respect to any 
        property shall be reduced by the amount of the credit allowed 
        under this section with respect to such cost.
            ``(2) Certain rules to apply.--Rules similar to the rules 
        of subsection (a)(2), and paragraphs (3), (4), (5), and (6) of 
        subsection (e), of section 179A shall apply for purposes of 
        subsections (a) and (b).''
    (b) Conforming Amendments.--
            (1) Subsection (a) of section 38 of such Code is amended by 
        striking ``plus'' at the end of paragraph (11), by striking the 
        period at the end of paragraph (12) and inserting a comma, and 
        by adding at the end the following new paragraphs:
            ``(13) the natural gas vehicle property credit determined 
        under section 45D(a),
            ``(14) the natural gas fueling property credit determined 
        under section 45D(b), plus
            ``(15) the natural gas motor fuel credit determined under 
        section 45D(c).''
            (2) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following new item:

                              ``Sec. 45D. Credits related to natural 
                                        gas vehicles.''
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 302. EXCISE TAXATION OF LIQUEFIED NATURAL GAS.

    (a) In General.--Paragraph (3) of section 4041(a) of the Internal 
Revenue Code of 1986 is amended to read as follows:
            ``(3) Compressed or liquefied natural gas.--
                    ``(A) In general.--There is hereby imposed a tax on 
                compressed or liquefied natural gas--
                            ``(i) sold by any person to an owner, 
                        lessee, or other operator of a motor vehicle or 
                        motorboat for use as a fuel in such motor 
                        vehicle or motorboat, or
                            ``(ii) used by any person as a fuel in a 
                        motor vehicle or motorboat unless there was a 
                        taxable sale of such gas under clause (i).
                The rate of the tax imposed by this paragraph shall be 
                48.54 cents per MCF (determined at standard temperature 
                and pressure) in the case of compressed natural gas and 
                3.54 cents per gallon in the case of liquefied natural 
                gas.''
    (b) Conforming Amendment.--Paragraph (2) of section 4041(a) of such 
Code is amended by striking ``(other'' and all that follows through 
``4081)'' and inserting ``(other than liquefied natural gas, kerosene, 
gas oil, or fuel oil, or any product taxable under section 4081)''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 303. SHORTER DEPRECIATION RECOVERY PERIODS FOR NATURAL GAS 
              VEHICLES AND REFUELING PROPERTY.

    (a) Vehicles Treated as 3-Year Property.--
            (1) Subparagraph (A) of section 168(e)(3) of the Internal 
        Revenue Code of 1986 is amended by striking ``and'' at the end 
        of clause (i), by striking the period at the end of clause (ii) 
        and inserting ``, and'', and by adding at the end the following 
        new clause:
                            ``(iii) any automobile, general purpose 
                        truck, or bus which is fueled in whole or in 
                        part by compressed natural gas or liquefied 
                        natural gas.''
            (2) Subparagraph (A) of section 280F(a)(1) of such Code is 
        amended by adding at the end the following flush sentence:
        ``The preceding sentence shall not apply to any passenger 
        automobile described in section 168(e)(3)(A)(iii).''
    (b) Refueling Property Treated as 7-Year Property.--Subparagraph 
(C) of section 168(e)(3) of such Code is amended by redesignating 
clause (ii) as clause (iii) and by inserting after clause (i) the 
following new clause:
                            ``(ii) any qualified clean-fuel vehicle 
                        refueling property (as defined in section 
                        179(d)), and''.
    (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.

                TITLE IV--REVISION OF PURCHASE MANDATES

SEC. 401. STATEMENT OF POLICY.

    It is the policy of the United States that--
            (1) a viable, sustainable market for natural gas and other 
        low emission vehicles requires cooperative efforts by and among 
        fleet operators and other users, fuel providers, and vehicle 
        manufacturers;
            (2) government mandates requiring private sector fleet 
        purchases do not support such cooperative efforts;
            (3) the low emission vehicle market should be based on 
        voluntary, economically sound decisions; and
            (4) market-oriented incentives can provide an appropriate 
        and effective means for developing a self-sustaining market for 
        such vehicles and fuels.

SEC. 402. REVISION OF MANDATE AUTHORITIES.

    (a) Repeal of Private Fleet Mandates.--Except as provided in 
subsection (c), section 507 of the Energy Policy Act of 1992 (42 U.S.C. 
13257) is repealed.
    (b) Sunset of Fuel Provider Mandate.--Section 501(a)(1)(D) of the 
Energy Policy Act of 1992 (42 U.S.C. 13251(a)(1)(D)), relating to 
acquisitions for model year 1999 and thereafter, is amended by striking 
``and thereafter''.
    (c) Sunset of State Fleet Mandate.--Subsection (a) of this section 
shall apply, in the case of State fleets, beginning with respect to 
model year 2000.

SEC. 403. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Section 501.--(1) Section 501(b) of the Energy Policy Act of 
1992 (42 U.S.C. 13251(b)) is amended by striking ``and thereafter'' and 
inserting in lieu thereof ``through 1999''.
    (2) Section 501 of the Energy Policy Act of 1992 (42 U.S.C. 13251) 
is amended by adding at the end the following new subsection:
    ``(e) Conversions.--Nothing in this title or the amendments made by 
this title shall require a fleet owner to acquire conversion 
vehicles.''.
    (b) Section 504.--Section 504(c) of the Energy Policy Act of 1992 
(42 U.S.C. 13254(c)) is amended to read as follows:
    ``(c) Limitations on Authority.--The Secretary shall have no 
authority under this Act--
            ``(1) to mandate the production of alternative fueled 
        vehicles;
            ``(2) to specify, as applicable, the models, lines, or 
        types of, or marketing or pricing practices, policies, or 
        strategies for, vehicles subject to this Act; or
            ``(3) to mandate, except as expressly provided in this 
        title, the purchase of alternative fueled vehicles. Nothing in 
        this Act shall be construed to give the Secretary authority to 
        mandate marketing or pricing practices, policies, or strategies 
        for alternative fuels, or to mandate the production, delivery, 
        or purchase of such fuels.''.
    (c) Section 506.--Section 506 of the Energy Policy Act of 1992 (42 
U.S.C. 13256) is amended by adding at the end the following new 
subsection:
    ``(d) Consultation With Other Federal Agencies.--In carrying out 
this section, the Secretary shall consult with the Secretary of 
Transportation, the Administrator, and other appropriate Federal 
agencies.''.
    (d) Section 509.--Section 509 of the Energy Policy Act of 1992 (42 
U.S.C. 13259) is amended to read as follows:

``SEC. 509. SECRETARY'S RECOMMENDATIONS TO CONGRESS.

    ``By no later than June 30, 1997, the Secretary shall recommend to 
Congress such measures as are necessary to provide incentives for--
            ``(1) fuel suppliers to make available to the public 
        replacement fuels, including providing for the construction or 
        availability of related fuel delivery systems;
            ``(2) suppliers of alternative fueled vehicles to make 
        available to the public alternative fueled vehicles and to 
        ensure the availability of necessary related services; and
            ``(3) motor vehicle owners to use replacement fuels,
to the extent necessary to achieve the goals of replacement fuel use 
established in this title and to ensure that the availability of 
alternative fuels and of alternative fueled vehicles are consistent 
with each other.''.
    (e) Section 510.--Section 510 of the Energy Policy Act of 1992 (42 
U.S.C. 13260) is amended--
            (1) by striking ``(a) In General.--''; and
            (2) by striking subsection (b).

      TITLE V--FEDERAL TRANSIT INCENTIVES FOR NATURAL GAS VEHICLES

SEC. 501. FINDING.

    Section 5301(b) of title 49, United States Code, is amended--
            (1) by striking ``and'' at the end of paragraph (8);
            (2) by redesignating paragraph (9) as paragraph (10); and
            (3) by inserting after paragraph (8) the following:
            ``(9) the financial assistance provided under this chapter 
        reflects the Government's commitment to increase the use of 
        natural gas and alternative fuels as transportation fuels, 
        particularly in transportation management areas seeking to 
        increase air quality; and''.

SEC. 502. DEFINITIONS.

    Section 5302(a) of title 49, United States Code, is amended--
            (1) by redesignating paragraphs (1) through (13) as 
        paragraphs (2) through (14), respectively;
            (2) by inserting before paragraph (2), as redesignated by 
        paragraph (1) of this section, the following:
            ``(1) `alternative fuel' and `alternative fueled vehicle' 
        have the meanings given such terms in section 301 of the Energy 
        Policy Act of 1992.'';
            (3) by redesignating paragraphs (9) through (14), as 
        redesignated by paragraph (1) of this section, as paragraphs 
        (12) through (17), respectively;
            (4) by inserting after paragraph (8), as redesignated by 
        paragraph (1) of this section, the following:
            ``(9) `natural gas' includes compressed natural gas and 
        liquified natural gas.
            ``(10) `natural gas fueling station' means any property or 
        equipment necessary to dispense natural gas as a vehicular 
        fuel.
            ``(11) `natural gas vehicle' means a vehicle that will 
        operate on natural gas alone or natural gas in combination with 
        another fuel in a dual-fuel configuration.'';
            (5) by redesignating paragraph (17), as redesignated by 
        paragraph (3) of this section, as paragraph (18); and
            (6) by inserting after paragraph (16), as redesignated by 
        paragraph (3) of this section, the following:
            ``(17) `ULEV-certified alternative fueled vehicle' and 
        `ULEV-certified alternative fueled bus' mean a vehicle or bus 
        that operates on alternative fuel and has been certified by the 
        California Air Resources Board or the Environmental Protection 
        Agency as meeting the current Ultra-Low Emission Vehicle 
        standard, as established by the California Air Resources 
        Board.''.

SEC. 503. FACTORS IN METROPOLITAN PLANNING.

    Section 5303(b) of title 49, United States Code, is amended by 
adding at the end the following:
            ``(16) the opportunities that the metropolitan planning 
        organization has to stimulate the use of natural gas vehicles 
        and ULEV-certified alternative fueled vehicles and the 
        installation of a fueling infrastructure to support such 
        vehicles.''.

SEC. 504. RESEARCH, DEVELOPMENT, AND DEMONSTRATION PROJECTS.

    Section 5312(b)(1) of title 49, United States Code, is amended--
            (1) by striking ``and'' at the end of subparagraph (E);
            (2) by redesignating subparagraph (F) as subparagraph (G); 
        and
            (3) by inserting after subparagraph (E) the following:
                    ``(F) the relationship between environmental policy 
                and transportation policy, particularly the potential 
                applications for natural gas vehicles and ULEV-
                certified alternative fueled vehicles in urban 
                settings; and''.

SEC. 505. ENVIRONMENTAL FACTORS RELATED TO FUNDING FOR BUSES.

    Section 5323 of title 49, United States Code, is amended by adding 
at the end the following:
    ``(m) Funding for New Natural Gas Buses and Related Property and 
Equipment.--A Government grant for a project to be assisted under this 
chapter that involves acquiring buses powered by natural gas, or any 
ULEV-certified alternative fueled bus, and all real property or 
equipment related to the fueling thereof, shall not be less than 90 
percent of the cost of the project.''.

   TITLE VI--GOVERNMENT CONTRACT INCENTIVES FOR NATURAL GAS VEHICLES

SEC. 601. PREFERENCE FOR CONTRACTORS USING NATURAL GAS VEHICLES.

    (a) Armed Services Acquisitions.--(1) Chapter 141 of title 10, 
United States Code, is amended by inserting after section 2398 the 
following new section:
``Sec. 2398a. Preference for contractors using natural gas vehicles
    ``(a) Preference for Contractors.--In entering into contracts with 
private entities for the procurement of goods or services, the 
Secretary of Defense shall give a preference to entities that use, to 
the maximum extent practicable, either of the following:
            ``(1) Motor vehicles that operate on natural gas.
            ``(2) Motor vehicles that--
                    ``(A) operate on alternative fuel (as defined in 
                section 301 of the Energy Policy Act of 1992 (42 U.S.C. 
                13211); and
                    ``(B) are certified by the California Air Resources 
                Board or by the Administrator of the Environmental 
                Protection Agency as meeting the ultra-low emission 
                vehicle standard established by the California Air 
                Resources Board.
    ``(b) Requirement To Apply Preference to Subcontractors.--The 
Secretary of Defense shall require an entity with which the Department 
of Defense has entered into a contract for the procurement of goods or 
services to give a preference, in entering into subcontracts to carry 
out such contract, to entities that use, to the maximum extent 
practicable, motor vehicles described in subsection (a).''.
    (2) The table of sections at the beginning of such chapter is 
amended by inserting after the item relating to section 2398 the 
following new item:

``2398a. Preference for contractors using natural gas vehicles.''.
    (b) Civilian Agency Acquisitions.--Title III of the Federal 
Property and Administrative Services Act of 1949 (41 U.S.C. 251 et 
seq.) is amended by adding at the end the following new section:

``SEC. 317. PREFERENCE FOR CONTRACTORS USING NATURAL GAS VEHICLES.

    ``(a) Preference for Contractors.--In entering into contracts with 
private entities for the procurement of goods or services, an executive 
agency shall give a preference to entities that use, to the maximum 
extent practicable, either of the following:
            ``(1) Motor vehicles that operate on natural gas.
            ``(2) Motor vehicles that--
                    ``(A) operate on alternative fuel (as defined in 
                section 301 of the Energy Policy Act of 1992 (42 U.S.C. 
                13211); and
                    ``(B) are certified by the California Air Resources 
                Board or by the Administrator of the Environmental 
                Protection Agency as meeting the ultra-low emission 
                vehicle standard established by the California Air 
                Resources Board.
    ``(b) Requirement of Apply Preference to Subcontractors.--The head 
of an executive agency shall require an entity with which the executive 
agency has entered into a contract for the procurement of goods or 
services to give a preference, in entering into subcontracts to carry 
out such contract, to entities that use, to the maximum extent 
practicable, motor vehicles described in subsection (a).''.
    (2) The table of sections in section 1 of such Act is amended by 
inserting after the item relating to section 316 the following new 
item:

``317. Preference for contractors using natural gas vehicles.''.
    (c) Effective Date.--Section 2398a of title 10, United States Code, 
as added by subsection (a), and section 317 of the Federal Property and 
Administrative Services Act of 1949, as added by subsection (b), shall 
apply with respect to contracts entered into after the expiration of 
the 60-day period beginning on the date of the enactment of this Act.

  TITLE VII--RESEARCH, DEVELOPMENT, AND DEMONSTRATION INCENTIVES FOR 
                          NATURAL GAS VEHICLES

SEC. 701. NATURAL GAS VEHICLE RESEARCH, DEVELOPMENT, AND DEMONSTRATION 
              PROJECTS AT THE DEPARTMENT OF ENERGY.

    (a) Natural Gas Vehicle Research, Development, and Demonstration 
Program.--(1) The Secretary of Energy shall conduct a 5-year program, 
in accordance with sections 3001 and 3002 of the Energy Policy Act of 
1992, of natural gas vehicle research, development, and demonstration.
    (2) The natural gas vehicle program conducted pursuant to this 
section shall include activities relating to--
            (A) onboard storage of both compressed natural gas and 
        liquified natural gas for vehicular use, including high-
        strength materials, low-cost carbon fiber, low-cost 
        manufacturing processes, and advanced concepts;
            (B) engine design for cycle optimization for medium-duty 
        and heavy-duty vehicles in--
                    (i) compression ignition and dual-fuel cycles; and
                    (ii) exhaust after treatment; and
            (C) fuel dispensing for low-cost metering, technical and 
        cryogenic fueling devices, and fuel conditioning.
    (b) Cooperation With Industry.--In developing the program pursuant 
to this section, the Secretary of Energy shall consult with the natural 
gas vehicle industry to ensure cooperation between the public sector 
and the private sector.
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