Short title

This Act may be cited as the

Biogas Production Incentive Act of 2007

Credit for production of biogas from certain renewable feedstocks

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 40A the following new section:

40B.

Biogas produced from certain renewable feedstocks

(a)

General rule

For purposes of section 38, the qualified biogas production credit for any taxable year is an amount equal to the product of— (1)$4.27, and (2)each million British thermal units (mmBtu) of biogas— (A)produced by the taxpayer— (i)from qualified energy feedstock, and (ii)at a qualified facility during the 7-year period beginning on the date the facility was originally placed in service, and (B)either— (i)sold by the taxpayer to an unrelated person during the taxable year, or (ii)used by the taxpayer during the taxable year. (b)

Definitions

(1)

Biogas

The term biogas means a gas that— (A)is derived by processing qualified energy feedstock in an anaerobic digester, and (B)contains— (i)at least 60 percent methane, and (ii)carbon dioxide and trace gases. (2)

Qualified energy feedstock

(A)

In general

The term qualified energy feedstock means— (i)manure of agricultural livestock, including litter, wood shavings, straw, rice hulls, bedding material, and other materials incidentally collected with the manure, (ii)any nonhazardous, cellulosic, or other organic agricultural or food industry byproduct or waste material that is derived from— (I)harvesting residues, (II)wastes or byproducts from fermentation processes, ethanol production, biodiesel production, slaughter of agricultural livestock, food production, food processing, or food service, or (III)other organic wastes, byproducts, or sources, or (iii)solid wood waste materials, including waste pallets, crates, dunnage, manufacturing and construction wood wastes, and landscape or right-of-way tree trimmings. (B)

Exclusions

The term qualified energy feedstock does not include— (i)pressure-treated, chemically-treated, or painted wood wastes, (ii)municipal solid waste, (iii)landfills, or (iv)paper that is commonly recycled. (C)

Agricultural livestock

The term agricultural livestock means poultry, cattle, sheep, swine, goats, horses, mules, and other equines. (3)

Qualified facility

The term qualified facility means a facility that— (A)uses anaerobic digesters to process qualified energy feedstock into biogas, (B)is owned by the taxpayer, (C)is located in the United States, (D)is originally placed in service before January 1, 2018, and (E)the biogas output of which is— (i)marketed through interconnection with a gas distribution or transmission pipeline, or (ii)used on-site or off-site in a quantity that is sufficient to offset the consumption of at least 6,570 mmBtu annually of commercially–marketed fuel derived from coal, crude oil, natural gas, propane, or other fossil fuel. (c)

Special rules

For purposes of this section— (1)

Production attributable to the taxpayer

In the case of a facility in which more than 1 person has an ownership interest, except to the extent provided in regulations prescribed by the Secretary, production from the qualified facility shall be allocated among such persons in proportion to their respective ownership interests in the gross sales from such qualified facility. (2)

Related persons

Persons shall be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b). In the case of a corporation which is a member of an affiliated group of corporations filing a consolidated return, such corporation shall be treated as selling biogas to an unrelated person if such biogas is sold to such a person by another member of such group. (3)

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. (4)

Coordination with credit from producing fuel from a nonconventional source

The amount of biogas produced and sold or used by the taxpayer during any taxable year which is taken into account under this section shall be reduced by the amount of biogas produced and sold by the taxpayer in such taxable year which is taken into account under section 45K. (5)

Credit eligibility in the case of government-owned facilities using poultry waste

In the case of a facility using poultry waste to produce biogas and owned by a governmental unit, subparagraph (B) of subsection (b)(3) shall be applied by substituting is leased or operated by the taxpayer for is owned by the taxpayer. (d)

Transferability of credit

(1)

In general

A taxpayer may transfer the credit under this section through an assignment to any person. Such transfer may be revoked only with the consent of the Secretary. (2)

Regulations

The Secretary shall prescribe such regulations as necessary to ensure that any credit transferred under paragraph (1) is claimed once and not reassigned by such other person. (e)

Adjustment based on inflation

(1)

In general

The $4.27 amount under subsection (b)(1) shall be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale occurs. If any amount as increased under the preceding sentence is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent. (2)

Computation of inflation adjustment factor

(A)

In general

The Secretary shall, not later than April 1 of each calendar year, determine and publish in the Federal Register the inflation adjustment factor in accordance with this paragraph. (B)

Inflation adjustment factor

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 calendar year 2007. The term GDP implicit price deflator means the most recent revision of the implicit price deflator for the gross domestic product as computed and published by the Department of Commerce before March 15 of the calendar year.

(b)

Credit treated as business credit

Section 38(b) of the Internal Revenue Code of 1986 is amended by striking plus at the end of paragraph (30), by striking the period at the end of paragraph (31) and inserting , plus, and by adding at the end the following new paragraph:

(32)the qualified biogas production credit under section 40B(a).

(c)

Credit allowed against AMT

Section 38(c)(4)(B) 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)(II) and inserting , and, and by adding at the end the following new clause:

(iii)the credit determined under section 40B.

(d)

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 inserting after the item relating to section 40A the following new item:

Sec. 40B. Biogas produced from certain renewable feedstocks.

(e)

Effective date

The amendments made by this section shall apply to biogas produced and sold or used in taxable years beginning after the date of the enactment of this Act.

Incentives for biogas production

Title IX of the Farm Security and Rural Investment Act of 2002 (7 U.S.C. 8101 et seq.) is amended by adding at the end the following:

9012.

Counter-cyclical payments for the production of biogas from certain renewable feedstock resources

(a)

Definitions

In this section: (1)

Agricultural livestock

The term agricultural livestock means— (A)poultry; (B)cattle; (C)sheep; (D)swine; (E)goats; (F)horses; (G)mules; and (H)other equines. (2)

Biogas

The term biogas means a gas that— (A)is produced at a qualified facility; (B)is derived by processing qualified energy feedstock in an anaerobic digester; and (C)contains— (i)at least 60 percent methane; and (ii)carbon dioxide and trace gases. (3)

Provider

The term provider means a provider of qualified energy feedstock, including a farmer, rancher, rural small business, agricultural cooperative, and partnership. (4)

Qualified biogas producer

The term qualified biogas producer means a person that operates a qualified facility. (5)

Qualified energy feedstock

(A)

In general

The term qualified energy feedstock means— (i)manure of agricultural livestock, including litter, wood shavings, straw, rice hulls, bedding material, and other materials incidentally collected with the manure; (ii)any nonhazardous, cellulosic, or other organic agricultural or food industry byproduct or waste material that is derived from— (I)harvesting residues; (II)wastes or byproducts from fermentation processes, ethanol production, biodiesel production, slaughter of agricultural livestock, food production, food processing, or food service; or (III)other organic wastes, byproducts, or sources; or (iii)solid wood waste materials, including waste pallets, crates, dunnage, manufacturing and construction wood wastes, and landscape or right-of-way tree trimmings. (B)

Exclusions

The term qualified energy feedstock does not include— (i)pressure-treated, chemically-treated, or painted wood wastes; (ii)municipal solid waste; (iii)landfills; or (iv)paper that is commonly recycled. (6)

Qualified facility

The term qualified facility means a facility that— (A)uses anaerobic digesters to process qualified energy feedstock into biogas; (B)is located in the United States; and (C)the biogas output of which is— (i)marketed through interconnection with a gas distribution or transmission pipeline; or (ii)used on-site or off-site in a quantity that is sufficient to offset the consumption of at least 50,000 mmBtu annually of commercially–marketed fuel derived from coal, crude oil, natural gas, propane, or other fossil fuel. (b)

Counter-cyclical payments

(1)

In general

The Secretary shall use such funds of the Commodity Credit Corporation as are necessary to make counter-cyclical payments in accordance with this subsection to qualified biogas producers for qualified facilities placed in service before December 31, 2013. (2)

Payment amount

(A)

In general

The amount of the payments described in paragraph (1) shall be equal to the product obtained by multiplying— (i)the applicable amount calculated under subparagraph (B); and (ii)the mmBtus of biogas that is produced in any year during the 10–year period beginning on the date on which the qualified facility is placed into service. (B)

Applicable amount

The applicable amount under subparagraph (A)(i) is the amount equal to 1.0 cent for every 1.0 cent that the annual average of average daily prices of natural gas on the Henry Hub Natural Gas Futures Market of the New York Mercantile Exchange is below $7.50 per mmBtu, as adjusted for inflation by the Secretary. (3)

Payment timing

The Secretary shall make payments under this subsection once per calendar year, on a date determined by the Secretary. (4)

Use of payments

As a condition on receipt of payments under this subsection, a qualified biogas producer shall agree to use the payments first to pay down loans and other obligations incurred by the qualified biogas producer for the physical facilities designed, built, and used to produce biogas. (c)

Transportation costs

(1)

Definition of Secretary

In this subsection, the term Secretary means the Secretary, acting in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency. (2)

In general

The Secretary shall make loans, loan guarantees, and grants to providers— (A)for collecting qualified energy feedstock and transporting the feedstock to a qualified facility that produces biogas using manure of agricultural livestock from multiple, smaller farming operations, as determined by the Secretary; or (B)for the purchase or construction of equipment or facilities used in connection with the collection and transportation under subparagraph (A). (3)

Eligibility

To be eligible to receive a grant under this subsection, a provider shall— (A)demonstrate financial need, as determined by the Secretary; and (B)submit to the Secretary a description of— (i)the terms and conditions of the commitment by a qualified facility to accept the qualified energy feedstock from the provider; (ii)the location of the qualified facility; and (iii)a plan for environmentally-sound and economically-sustainable continued transportation of the qualified energy feedstock. (4)

Cost sharing

(A)

In general

(i)

Grants

The amount of a grant under this subsection shall not exceed 75 percent of the annual cost of the activity funded under paragraph (2)(A). (ii)

Maximum amount of combined grant and loan

The combined amount of a grant and loan made or guaranteed for purchase or construction of equipment used in connection with transport of qualified energy feedstock shall not exceed 75 percent of the cost of the activity funded under paragraph (2)(B). (B)

Factors

In determining the amount of a grant or loan, the Secretary shall take into consideration, as applicable— (i)the size, location, and biogas production efficiency of the qualified facility; (ii)the estimated quantity of biogas to be produced by the qualified facility; (iii)the number of farms, ranches, or small rural businesses within a reasonable distance of the qualified facility, as determined by the Secretary; (iv)the expected environmental benefits of producing biogas from qualified energy feedstocks by the qualified facility; and (v)such other factors as the Secretary determines to be appropriate. (5)

Interest rate

(A)

In general

A loan made by the Secretary under this subsection shall bear interest at the rate equivalent to the rate of interest charged on Treasury securities of comparable maturity on the date the loan is approved. (B)

Duration

The interest rate for each loan will remain in effect for the term of the loan. (6)

Funding

(A)

In general

Notwithstanding any other provision of law, on October 1, 2007, and on each October 1 thereafter through October 1, 2011, out of any funds in the Treasury not otherwise appropriated, the Secretary of the Treasury shall transfer to the Secretary to carry out this subsection $10,000,000, to remain available until expended. (B)

Receipt and acceptance

The Secretary shall be entitled to receive, shall accept, and shall use to carry out this subsection the funds transferred under subparagraph (A), without further appropriation. (d)

Implementation

(1)

In general

Not later than 180 days after the date of enactment of this section, the Secretary shall promulgate such regulations as are necessary to implement this section, including a notice describing the method by which the Secretary determines and adjusts the average price under subsection (b)(2)(B). (2)

Procedure

The promulgation of the regulations and administration of this section shall be made without regard to— (A)the notice and comment provisions of section 553 of title 5, United States Code; (B)the Statement of Policy of the Secretary of Agriculture effective July 24, 1971 (36 Fed. Reg. 13804), relating to notices of proposed rulemaking and public participation in rulemaking; and (C)chapter 35 of title 44, United States Code (commonly known as the Paperwork Reduction Act).