Short title

This Act may be cited as the

Freedom through Renewable Energy Expansion (FREE) Act

Repeal of nuclear subsidies

(a)

Next generation nuclear plant project

Subtitle C of title VI of the Energy Policy Act of 2005 (42 U.S.C. 16021 et. seq.) and the items relating thereto in the table of contents in section 1(b) of that Act are repealed. (b)

Standby support for certain nuclear plant delays

Section 638 of the Energy Policy Act of 2005 (42 U.S.C. 16014) and the item relating thereto in the table of contents in section 1(b) of that Act are repealed. (c)

Repeal of credit for production from advanced nuclear power facilities

(1)

In general

Subparagraph (B) of section 45J(d)(1) of the Internal Revenue Code of 1986 (relating to advanced nuclear power facility) is amended by striking January 1, 2021 and inserting the date of the enactment of the Freedom through Renewable Energy Expansion (FREE) Act. (2)

Effective date

The amendment made by paragraph (1) shall apply to property placed in service after the date of the enactment of this Act.

Repeal of certain tax subsidies for the oil and gas industry

(a)

Repeal of election to expense certain refineries

(1)

In general

Subparagraph (B) of section 179C(c)(1) of the Internal Revenue Code of 1986 (relating to qualified refinery property) is amended by striking January 1, 2012 and inserting the date of the enactment of the Freedom through Renewable Energy Expansion (FREE) Act. (2)

Effective date

The amendment made by paragraph (1) shall apply to property placed in service after the date of the enactment of this Act. (b)

Repeal of treatment of natural gas distribution lines as 15-year property

(1)

In general

Clause (viii) of section 168(e)(3)(E) of such Code (relating to 15-year property) is amended by striking January 1, 2011 and inserting the Freedom through Renewable Energy Expansion (FREE) Act. (2)

Effective date

The amendment made by paragraph (1) shall apply to property placed in service after the date of the enactment of this Act. (c)

Repeal of treatment of natural gas gathering lines as 7-year property

(1)

In general

Clause (iv) of section 168(e)(3)(C) of such Code (relating to 7-year property) is amended by inserting and which is placed in service before the date of the enactment of the Freedom through Renewable Energy Expansion (FREE) Act after April 11, 2005,. (2)

Effective date

The amendment made by paragraph (1) shall apply to property placed in service after the date of the enactment of this Act. (d)

Repeal of new rule for determining small refiner exception to oil depletion deduction

(1)

In general

Paragraph (4) of section 613A(d) of such Code (relating to certain refiners excluded) is amended to read as follows:

(4)

Certain refiners excluded

If the taxpayer or a related person engages in the refining of crude oil, subsection (c) shall not apply to such taxpayer if on any day during the taxable year the refinery runs of the taxpayer and such person exceed 50,000 barrels.

(2)

Effective date

The amendment made by paragraph (1) shall apply to taxable years beginning after the date of the enactment of this Act. (e)

Repeal of amortization of geological and geophysical expenditures

(1)

In general

Section 167 of such Code (relating to depreciation) is amended by striking subsection (h) and redesignating subsection (i) as subsection (h). (2)

Conforming amendment

Section 263A(c)(3) of such Code is amended by striking 167(h),. (3)

Effective date

The amendments made by this subsection shall apply to amounts paid or incurred after the date of the enactment of this Act.

Repeal of certain provisions of the Energy Policy Act of 2005 and other laws providing incentives for oil and gas production from Federal lands

(a)

Repeals

The following provisions of the Energy Policy Act of 2005, and the items relating thereto in the table of contents in section 1(b) of that Act, are repealed: (1)Section 343 (relating to marginal property production incentives). (2)Section 344 (relating to incentives for natural gas production from deep wells in the shallow waters of the Gulf of Mexico). (3)Section 345 (relating to royalty relief for deep water production). (4)Section 357 (relating to comprehensive inventory of OCS oil and natural gas resources). (5)Section 362 (relating to management of Federal oil and gas leasing programs, including expediting leases and permit applications). (6)Section 965 (relating to oil and gas research programs). (7)Section 966 (relating to low-volume oil and gas reservoir research program). (8)Subtitle J of title IX (relating to ultra-deepwater and unconventional natural gas and other petroleum resources). (b)

Repeal of Alaska Offshore Royalty Suspension

Section 8(a)(3)(B) of the Outer Continental Shelf Lands Act (43 U.S.C. 1337(a)(3)(B)) is amended by striking and in the Planning Areas offshore Alaska. (c)

Repeal of Royalty suspension with respect to National Petroleum Reserve in Alaska

Section 107 of the Naval Petroleum Reserves Production Act of 1976 (as amended by section 347(b)(11) of the Energy Policy Act of 2005 (119 Stat. 706)) is amended by repealing subsection (k). (d)

Conforming amendment

Section 961(c) of the Energy Policy Act of 2005 (42 U.S.C. 16291(c)) is amended by striking paragraph (3) and redesignating paragraph (4) as paragraph (3).

Requirement to suspend royalty relief

(a)

Requirement to suspend

The President shall suspend the application of any provision of Federal law under which any person is given relief from any requirement to pay royalty for production oil or natural gas from Federal lands (including submerge lands), for production occurring in any period with respect to which— (1)in the case of production of oil, the average price of crude oil in the United States over the most recent 4 consecutive weeks is greater than $40 per barrel, or such lesser amount as applies for such purpose under the lease under which such production occurs; and (2)in the case of production of natural gas, the average wellhead price of natural gas in the United States over the most recent 4 consecutive weeks is greater than $5 per thousand cubic feet, or such lesser amount as applies for such purpose under the lease under which such production occurs. (b)

Determination of market price

The President shall determine average prices for purposes of subsection (a) based on the most recent data reported by the Energy Information Administration of the Department of Energy.

Average Fuel Economy Standards

(a)

In General

Section 32902 of title 49, United States Code, is amended— (1)in subsection (c)— (A)by striking (1) Subject to paragraph (2) of this subsection, the and inserting The; and (B)by striking paragraph (2); and (2)by redesignating subsections (i) and (j) as subsections (j) and (k), respectively, and by inserting after subsection (h) the following:

(i)

Standards for Model Years After 2008

The Secretary of Transportation shall prescribe by regulation average fuel economy standards for passenger automobiles manufactured by a manufacturer in model years after model year 2008, that shall— (1)ensure that the average fuel economy achieved by passenger automobiles manufactured by a manufacturer in model years after 2015 is no less than 33 miles per gallon; (2)ensure that improvements to fuel economy standards do not degrade the safety of passenger automobiles manufactured by a manufacturer; and (3)maximize the retention of jobs in the automobile manufacturing sector of the United States.

(b)

Conforming Amendments

Section 32902 of title 49, United States Code, is further amended— (1)in subsection (g)(2), by striking (and submit the amendment to Congress when required under subsection (c)(2) of this section); and (2)in subsection (k) (as so redesignated) by striking or (g) and inserting (g), or (i).

Renewable electricity production credit

(a)

In general

Section 45(d) of the Internal Revenue Code of 1986 (relating to qualified facilities) is amended by striking January 1, 2008 each place it appears in paragraphs (1), (2), (3), (4), (5), (6), and (7) and inserting January 1, 2012. (b)

Effective date

The amendments made by subsection (a) shall apply to property placed in service after the date of the enactment of this Act.

Extension and modification of investment tax credit with respect to solar energy property, qualified fuel cell property, and geothermal property

(a)

Solar energy property

Paragraphs (2)(A)(i)(II) and (3)(A)(ii) of section 48(a) of the Internal Revenue Code of 1986 are each amended by striking January 1, 2008 and inserting January 1, 2016. (b)

Eligible fuel cell property

Paragraph (1)(E) of section 48(c) of such Code is amended by striking December 31, 2007 and inserting December 31, 2015. (c)

Geothermal property

Paragraph (2)(A)(i) of section 48(a) of such Code is amended by striking and at the end of subclause (II) and by adding at the end the following new subclause:

(IV)energy property described in paragraph (3)(A)(iii) but only with respect to periods ending before January 1, 2016, and

(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.

Extension of credit for residential energy efficient property

(a)

Extension

Subsection (g) of section 25D of the Internal Revenue Code of 1986 (relating to termination) is amended by striking December 31, 2007 and inserting December 31, 2015. (b)

Effective date

The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.

10.

Credit for wind energy property installed in residences and businesses

(a)

In general

Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 30C the following new section:

30D.

Wind energy property

(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 30 percent (10 percent after December 31, 2015) of the amount paid or incurred by the taxpayer for qualified wind energy property placed in service or installed during such taxable year. (b)

Limitation

No credit shall be allowed under subsection (a) unless at least 50 percent of the energy produced annually by the qualified wind energy property is consumed on the site on which the property is placed in service or installed. (c)

Qualified wind energy property

For purposes of this section, the term qualified wind energy property means a qualifying wind turbine if— (1)such turbine is placed in service or installed on or in connection with property located in the United States, (2)in the case of an individual, the property on or in connection with which such turbine is installed is a dwelling unit which is located in the United States, (3)the original use of such turbine commences with the taxpayer, and (4)such turbine carries at least a 5-year limited warranty covering defects in design, material, or workmanship, and, for property that is not installed by the taxpayer, at least a 5-year limited warranty covering defects in installation. (d)

Other definitions

For purposes of this section: (1)

Qualifying wind turbine

The term qualifying wind turbine means a wind turbine of 100 kilowatts of rated capacity or less which meets the latest performance rating standards published by the American Wind Energy Association and which is used to generate electricity. (2)

Principal residence

The term principal residence shall have the same meaning as when used in section 121. (e)

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 under this section and subpart C thereof, relating to refundable credits) and section 1397E. (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. (f)

Special rules

For purposes of this section: (1)

Tenant-stockholder in cooperative housing corporation

In the case of an individual who is a tenant-stockholder (as defined in section 216(b)(2)) in a cooperative housing corporation (as defined in section 216(b)(1)), such individual shall be treated as having paid his tenant-stockholder’s proportionate share (as defined in section 216(b)(3)) of any expenditures paid or incurred for qualified wind energy property by such corporation, and such credit shall be allocated appropriately to such individual. (2)

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 he owns, such individual shall be treated as having paid his proportionate share of expenditures paid or incurred for qualified wind energy property by such association, and such credit shall be allocated appropriately to such individual. (B)

Condominium management association

For purposes of this paragraph, the term condominium management association means an organization which meets the requirements of section 528(c)(2) with respect to a condominium project of which substantially all of the units are used by individuals as residences. (g)

Basis adjustment

For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to a residence or other property, the basis of such residence or other property shall be reduced by the amount of the credit so allowed. (h)

Application of credit

The credit allowed under this section shall apply to property placed in service or installed after December 31, 2005.

(b)

Conforming amendment

Subsection (a) of section 1016 of such Code (relating to general rule for adjustments to basis) is amended by striking and at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting , and, and by adding at the end the following new paragraph:

(38)in the case of a residence or other property with respect to which a credit was allowed under section 30D, to the extent provided in section 30D(g).

(c)

Clerical amendment

The table of sections for subpart B of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 30C the following new item:

Sec. 30D. Wind energy property.

(d)

Effective date

The amendments made by this section shall apply to taxable years ending after December 31, 2005.

11.

Geothermal research

There are authorized to be appropriated to the Secretary of Energy $32,500,000 for geothermal research.

12.

Renewable portfolio standard

Title VI of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2601 et seq.) is amended by adding at the end the following:

610.

Federal renewable portfolio standard

(a)

Renewable Energy Requirement

(1)

In general

Each electric utility that sells electricity to electric consumers shall obtain a percentage of the base amount of electricity it sells to electric consumers in any calendar year from new renewable energy or existing renewable energy. The percentage obtained in a calendar year shall not be less than the amount specified in the following table: Calendar year:Minimum annual percentage: 2007 through 20085.0 2009 through 20108.0 2011 through 201211.0 2013 through 201415.0 2015 and thereafter20.0.

(2)

Means of compliance

An electric utility shall meet the requirements of paragraph (1) by— (A)generating electric energy using new renewable energy or existing renewable energy; (B)purchasing electric energy generated by new renewable energy or existing renewable energy; (C)purchasing renewable energy credits issued under subsection (b); or (D)a combination of the foregoing. (b)

Renewable Energy Credit Trading Program

Not later than January 1, 2007, the Secretary shall establish a renewable energy credit trading program to permit an electric utility that does not generate or purchase enough electric energy from renewable energy to meet its obligations under subsection (a)(1) to satisfy such requirements by purchasing sufficient renewable energy credits. (c)

Enforcement

(1)

Civil penalties

Any electric utility that fails to meet the renewable energy requirements of subsection (a) shall be subject to a civil penalty. (2)

Amount of penalty

The amount of the civil penalty shall be determined by multiplying the number of kilowatt-hours of electric energy sold to electric consumers in violation of subsection (a) by the greater of 1.5 cents (adjusted for inflation under subsection (f)) or 200 percent of the average market value of renewable energy credits during the year in which the violation occurred. (3)

Mitigation or waiver

The Secretary may mitigate or waive a civil penalty under this subsection if the electric utility was unable to comply with subsection (a) for reasons outside of the reasonable control of the utility. The Secretary shall reduce the amount of any penalty determined under paragraph (2) by an amount paid by the electric utility to a State for failure to comply with the requirement of a State renewable energy program if the State requirement is greater than the applicable requirement of subsection (a). (4)

Procedure for assessing penalty

The Secretary shall assess a civil penalty under this subsection in accordance with the procedures prescribed by section 333(d) of the Energy Policy and Conservation Act (42 U.S.C. 6303(d)). (d)

Rules

The Secretary shall issue rules implementing this section not later than 1 year after the date of enactment of this section. (e)

Exemptions

This section shall not apply in any calendar year to an electric utility— (1)that sold less than 4,000,000 megawatt-hours of electric energy to electric consumers during the preceding calendar year; or (2)in Hawaii. (f)

Inflation Adjustment

Not later than December 31 of each year beginning in 2008, the Secretary shall adjust for inflation the amount of the civil penalty per kilowatt-hour under subsection (c)(2). (g)

State Programs

Nothing in this section shall diminish any authority of a State or political subdivision thereof to adopt or enforce any law or regulation respecting renewable energy, but, except as provided in subsection (c)(3), no such law or regulation shall relieve any person of any requirement otherwise applicable under this section. The Secretary, in consultation with States having such renewable energy programs, shall, to the maximum extent practicable, facilitate coordination between the Federal program and State programs. (h)

Definitions

For purposes of this section: (1)

Base amount of electricity

The term base amount of electricity means the total amount of electricity sold by an electric utility to electric consumers in a calendar year, excluding— (A)electricity generated by a hydroelectric facility (including a pumped storage facility but excluding incremental hydropower); and (B)electricity generated through the incineration of municipal solid waste. (2)

Distributed generation facility

The term distributed generation facility means a facility at a customer site. (3)

Existing renewable energy

The term existing renewable energy means, except as provided in paragraph (7)(B), electric energy generated at a facility (including a distributed generation facility) placed in service prior to the date of enactment of this section from solar, wind, or geothermal energy; ocean energy; biomass (as defined in section 203(a) of the Energy Policy Act of 2005); or landfill gas. (4)

Geothermal energy

The term geothermal energy means energy derived from a geothermal deposit (within the meaning of section 613(e)(2) of the Internal Revenue Code of 1986). (5)

Incremental geothermal production

(A)

In general

The term incremental geothermal production means for any year the excess of— (i)the total kilowatt hours of electricity produced from a facility (including a distributed generation facility) using geothermal energy, over (ii)the average annual kilowatt hours produced at such facility for 5 of the previous 7 calendar years before the date of enactment of this section after eliminating the highest and the lowest kilowatt hour production years in such 7-year period. (B)

Special rule

A facility described in subparagraph (A) which was placed in service at least 7 years before the date of enactment of this section shall commencing with the year in which such date of enactment occurs, reduce the amount calculated under subparagraph (A)(ii) each year, on a cumulative basis, by the average percentage decrease in the annual kilowatt hour production for the 7-year period described in subparagraph (A)(ii) with such cumulative sum not to exceed 30 percent. (6)

Incremental hydropower

The term incremental hydropower means additional energy generated as a result of efficiency improvements or capacity additions made on or after the date of enactment of this section or the effective date of an existing applicable State renewable portfolio standard program at a hydroelectric facility that was placed in service before that date. The term does not include additional energy generated as a result of operational changes not directly associated with efficiency improvements or capacity additions. Efficiency improvements and capacity additions shall be measured on the basis of the same water flow information used to determine a historic average annual generation baseline for the hydroelectric facility and certified by the Secretary or the Federal Energy Regulatory Commission. (7)

New renewable energy

The term new renewable energy means— (A)electric energy generated at a facility (including a distributed generation facility) placed in service on or after January 1, 2003, from— (i)solar, wind, or geothermal energy or ocean energy; (ii)biomass (as defined in section 203(a) of the Energy Policy Act of 2005); (iii)landfill gas; or (iv)incremental hydropower; and (B)for electric energy generated at a facility (including a distributed generation facility) placed in service prior to the date of enactment of this section— (i)the additional energy above the average generation in the 3 years preceding the date of enactment of this section at the facility from— (I)solar or wind energy or ocean energy; (II)biomass (as defined in section 203(a) of the Energy Policy Act of 2005); (III)landfill gas; or (IV)incremental hydropower. (ii)the incremental geothermal production. (8)

Ocean energy

The term ocean energy includes current, wave, tidal, and thermal energy. (i)

Sunset

This section expires on December 31, 2030.

13.

Federal energy purchase requirement

Section 203(a) of the Energy Policy Act of 2005 (42 U.S.C. 15852(a)) is amended— (1)by striking seek to ensure that, to the extent economically feasible and technically practicable and inserting ensure that; (2)in paragraph (1), by striking 3 percent in fiscal years 2007 through 2009 and inserting 5 percent in fiscal years 2007 through 2010; (3)in paragraph (2), by striking 5 percent in fiscal years 2010 through 2012 and inserting 11 percent in fiscal years 2011 through 2014; and (4)in paragraph (3), by striking 7.5 percent in fiscal year 2013 and inserting 20 percent in fiscal year 2015.

14.

School renewable energy use

The Secretary of Energy shall establish a program to make grants to local schools and school districts to promote and facilitate the use of renewable energy sources in school facilities.