II 110th CONGRESS 1st Session S. 133 IN THE SENATE OF THE UNITED STATES January 4, 2007 Mr. Obama (for himself, Mr. Lugar, and Mr. Harkin) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To promote the national security and stability of the economy of the United States by reducing the dependence of the United States on oil through the use of alternative fuels and new technology, and for other purposes.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the American Fuels Act of 2007. (b)

Table of contents

The table of contents for this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Office of Energy Security. Sec. 3. Credit for production of qualified flexible fuel motor vehicles. Sec. 4. Incentives for the retail sale of alternative fuels as motor vehicle fuel. Sec. 5. Freedom for fuel franchisers. Sec. 6. Alternative diesel fuel content of diesel. Sec. 7. Excise tax credit for production of cellulosic biomass ethanol. Sec. 8. Incentive for Federal and State fleets for medium and heavy duty hybrids. Sec. 9. Credit for qualifying ethanol blending and processing equipment. Sec. 10. Public access to Federal alternative refueling stations. Sec. 11. Purchase of clean fuel buses. Sec. 12. Domestic fuel production volumes to meet Department of Defense needs. Sec. 13. Federal fleet energy conservation improvement.

2.

Office of Energy Security

(a)

Definitions

In this section: (1)

Director

The term Director means the Director of Energy Security appointed under subsection (c)(1). (2)

Office

The term Office means the Office of Energy Security established by subsection (b). (b)

Establishment

There is established in the Executive Office of the President the Office of Energy Security. (c)

Director

(1)

In general

The Office shall be headed by a Director, who shall be appointed by the President, by and with the advice and consent of the Senate. (2)

Rate of pay

The Director shall be paid at a rate of pay equal to level I of the Executive Schedule under section 5312 of title 5, United States Code. (d)

Responsibilities

(1)

In general

The Office, acting through the Director, shall be responsible for overseeing all Federal energy security programs, including the coordination of efforts of Federal agencies to assist the United States in achieving full energy independence. (2)

Specific responsibilities

In carrying out paragraph (1), the Director shall— (A)serve as head of the energy community; (B)act as the principal advisor to the President, the National Security Council, the National Economic Council, the Domestic Policy Council, and the Homeland Security Council with respect to intelligence matters relating to energy security; (C)with request to budget requests and appropriations for Federal programs relating to energy security— (i)consult with the President and the Director of the Office of Management and Budget with respect to each major Federal budgetary decision relating to energy security of the United States; (ii)based on priorities established by the President, provide to the heads of departments containing agencies or organizations within the energy community, and to the heads of such agencies and organizations, guidance for use in developing the budget for Federal programs relating to energy security; (iii)based on budget proposals provided to the Director by the heads of agencies and organizations described in clause (ii), develop and determine an annual consolidated budget for Federal programs relating to energy security; and (iv)present the consolidated budget, together with any recommendations of the Director and any heads of agencies and organizations described in clause (ii), to the President for approval; (D)establish and meet regularly with a council of business and labor leaders to develop and provide to the President and Congress recommendations relating to the impact of energy supply and prices on economic growth; (E)submit to Congress an annual report that describes the progress of the United States toward the goal of achieving full energy independence; and (F)carry out such other responsibilities as the President may assign. (e)

Staff

(1)

In general

The Director may, without regard to the civil service laws (including regulations), appoint and terminate such personnel as are necessary to enable the Director to carry out the responsibilities of the Director under this section. (2)

Compensation

(A)

In general

Except as provided in subparagraph (B), the Director may fix the compensation of personnel without regard to the provisions of chapter 51 and subchapter III of chapter 53 of title 5, United States Code, relating to classification of positions and General Schedule pay rates. (B)

Maximum rate of pay

The rate of pay for the personnel appointed by the Director shall not exceed the rate payable for level V of the Executive Schedule under section 5316 of title 5, United States Code. (f)

Authorization of Appropriations

There are authorized to be appropriated such sums as are necessary to carry out this section.

3.

Credit for production of qualified flexible fuel motor vehicles

(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 the following new section:

45O.

Production of qualified flexible fuel motor vehicles

(a)

Allowance of credit

For purposes of section 38, in the case of a manufacturer, the qualified flexible fuel motor vehicle production credit determined under this section for any taxable year is an amount equal to the incremental flexible fuel motor vehicle cost for each qualified flexible fuel motor vehicle produced in the United States by the manufacturer during the taxable year. (b)

Incremental flexible fuel motor vehicle cost

With respect to any qualified flexible fuel motor vehicle, the incremental flexible fuel motor vehicle cost is an amount equal to the lesser of— (1)the excess of— (A)the cost of producing such qualified flexible fuel motor vehicle, over (B)the cost of producing such motor vehicle if such motor vehicle was not a qualified flexible fuel motor vehicle, or (2)$100. (c)

Qualified Flexible Fuel Motor Vehicle

For purposes of this section, the term qualified flexible fuel motor vehicle means a flexible fuel motor vehicle— (1)the production of which is not required for the manufacturer to meet— (A)the maximum credit allowable for vehicles described in paragraph (2) in determining the fleet average fuel economy requirements (as determined under section 32904 of title 49, United States Code) of the manufacturer for the model year ending in the taxable year, or (B)the requirements of any other provision of Federal law, and (2)which is designed so that the vehicle is propelled by an engine which can use as a fuel a gasoline mixture of which 85 percent (or another percentage of not less than 70 percent, as the Secretary may determine, by rule, to provide for requirements relating to cold start, safety, or vehicle functions) of the volume of consists of ethanol. (d)

Other Definitions and Special Rules

For purposes of this section— (1)

Motor vehicle

The term motor vehicle has the meaning given such term by section 30(c)(2). (2)

Manufacturer

The term manufacturer has the meaning given such term in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.). (3)

Reduction in basis

For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this paragraph) result from such expenditure shall be reduced by the amount of the credit so allowed. (4)

No double benefit

The amount of any deduction or credit allowable under this chapter (other than the credits allowable under this section and section 30B) shall be reduced by the amount of credit allowed under subsection (a) for such vehicle for the taxable year. (5)

Election not to take credit

No credit shall be allowed under subsection (a) for any vehicle if the taxpayer elects to not have this section apply to such vehicle. (6)

Termination

This section shall not apply to any vehicle produced after December 31, 2011. (7)

Cross reference

For an election to claim certain minimum tax credits in lieu of the credit determined under this section, see section 53(e).

. (b)

Credit Allowed Against the Alternative Minimum Tax

Section 38(c)(4)(B) of the Internal Revenue Code of 1986 (defining specified credits) is amended 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 45O. . (c)

Election To Use Additional AMT Credit

Section 53 of the Internal Revenue Code of 1986 (relating to credit for prior year minimum tax liability) is amended by adding at the end the following new subsection: (e)

Additional Credit in Lieu of Flexible Fuel Motor Vehicle Credit

(1)

In general

In the case of a taxpayer making an election under this subsection for a taxable year, the amount otherwise determined under subsection (c) shall be increased by any amount of the credit determined under section 45O for such taxable year which the taxpayer elects not to claim pursuant to such election. (2)

Election

A taxpayer may make an election for any taxable year not to claim any amount of the credit allowable under section 45O with respect to property produced by the taxpayer during such taxable year. An election under this subsection may only be revoked with the consent of the Secretary. (3)

Credit refundable

The aggregate increase in the credit allowed by this section for any taxable year by reason of this subsection shall for purposes of this title (other than subsection (b)(2) of this section) be treated as a credit allowed to the taxpayer under subpart C. . (d)

Conforming Amendments

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 flexible fuel motor vehicle production credit determined under section 45N, plus . (e)

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 the following new item: Sec. 45O. Production of qualified flexible fuel motor vehicles. . (f)

Effective Date

The amendments made by this section shall apply to motor vehicles produced in model years ending after the date of the enactment of this Act.

4.

Incentives for the retail sale of alternative fuels as motor vehicle 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 inserting after section 40A the following new section:

40B.

Credit for retail sale of alternative fuels as motor vehicle fuel

(a)

General Rule

The alternative fuel retail sales credit for any taxable year is the applicable amount for each gallon of alternative fuel sold at retail by the taxpayer during such year. (b)

Applicable Amount

For purposes of this section, the applicable amount shall be determined in accordance with the following table: In the case ofThe applicable amount  any sale:for each gallon is: Before 201035 cents During 2010 or 201120 cents During 201210 cents. (c)

Definitions

For purposes of this section— (1)

Alternative fuel

The term alternative fuel means any fuel at least 85 percent (or another percentage of not less than 70 percent, as the Secretary may determine, by rule, to provide for requirements relating to cold start, safety, or vehicle functions) of the volume of which consists of ethanol. (2)

Sold at retail

(A)

In general

The term sold at retail means the sale, for a purpose other than resale, after manufacture, production, or importation. (B)

Use treated as sale

If any person uses alternative fuel (including any use after importation) as a fuel to propel any qualified alternative fuel motor vehicle (as defined in this section) before such fuel is sold at retail, then such use shall be treated in the same manner as if such fuel were sold at retail as a fuel to propel such a vehicle by such person. (3)

Qualified alternative fuel motor vehicle

The term new qualified alternative fuel motor vehicle means any motor vehicle— (A)which is capable of operating on an alternative fuel, (B)the original use of which commences with the taxpayer, (C)which is acquired by the taxpayer for use or lease, but not for resale, and (D)which is made by a manufacturer. (d)

Election To Pass Credit

A person which sells alternative fuel at retail may elect to pass the credit allowable under this section to the purchaser of such fuel or, in the event the purchaser is a tax-exempt entity or otherwise declines to accept such credit, to the person which supplied such fuel, under rules established by the Secretary. (e)

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. (f)

Termination

This section shall not apply to any fuel sold at retail after December 31, 2012.

. (b)

Credit Treated as Business Credit

Section 38(b) of the Internal Revenue Code of 1986 (relating to current year business credit), as amended by section 4(d), is amended by striking plus at the end of paragraph (31), by striking the period at the end of paragraph (32) and inserting , plus, and by adding at the end the following new paragraph: (33)the alternative fuel retail sales credit determined under section 40B(a). . (c)

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. Credit for retail sale of alternative fuels as motor vehicle fuel. . (d)

Effective Date

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

5.

Freedom for fuel franchisers

(a)

Prohibition on restriction of installation of alternative fuel pumps

(1)

In general

Title I of the Petroleum Marketing Practices Act (15 U.S.C. 2801 et seq.) is amended by adding at the end the following:

107.

Prohibition on restriction of installation of alternative fuel pumps

(a)

Definition

In this section: (1)

Alternative fuel

The term alternative fuel means any fuel— (A)at least 85 percent of the volume of which consists of ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, or any combination of those fuels; or (B)any mixture of biodiesel (as defined in section 40A(d)(1) of the Internal Revenue Code of 1986) and diesel fuel (as defined in section 4083(a)(3) of the Internal Revenue Code of 1986), determined without regard to any use of kerosene and containing at least 20 percent biodiesel. (2)

Franchise-related document

The term franchise-related document means— (A)a franchise under this Act; and (B)any other contract or directive of a franchisor relating to terms or conditions of the sale of fuel by a franchisee. (b)

Prohibitions

(1)

In general

Notwithstanding any provision of a franchise-related document in effect on the date of enactment of this section, no franchisee or affiliate of a franchisee shall be restricted from— (A)installing on the marketing premises of the franchisee an alternative fuel pump; (B)converting an existing tank and pump on the marketing premises of the franchisee for alternative fuel use; (C)advertising (including through the use of signage or logos) the sale of any alternative fuel; or (D)selling alternative fuel in any specified area on the marketing premises of the franchisee (including any area in which a name or logo of a franchisor or any other entity appears). (2)

Enforcement

Any restriction described in paragraph (1) that is contained in a franchise-related document and in effect on the date of enactment of this section— (A)shall be considered to be null and void as of that date; and (B)shall not be enforced under section 105. (c)

Exception to 3-grade requirement

No franchise-related document that requires that 3 grades of gasoline be sold by the applicable franchisee shall prevent the franchisee from selling an alternative fuel in lieu of 1 grade of gasoline.

. (2)

Conforming amendments

(A)

In general

Section 101(13) of the Petroleum Marketing Practices Act (15 U.S.C. 2801(13)) is amended by adjusting the indentation of subparagraph (C) appropriately. (B)

Table of contents

The table of contents of the Petroleum Marketing Practices Act (15 U.S.C. 2801 note) is amended— (i)by inserting after the item relating to section 106 the following: Sec. 107. Prohibition on restriction of installation of alternative fuel pumps. ; and(ii)by striking the item relating to section 202 and inserting the following: Sec. 202. Automotive fuel rating testing and disclosure requirements. . (b)

Application of Gasohol Competition Act of 1980

Section 26 of the Clayton Act (15 U.S.C. 26a) is amended— (1)by redesignating subsection (c) as subsection (d); (2)by inserting after subsection (b) the following: (c)

Restriction prohibited

For purposes of subsection (a), restricting the right of a franchisee to install on the premises of that franchisee qualified alternative fuel vehicle refueling property (as defined in section 30C(c) of the Internal Revenue Code of 1986) shall be considered an unlawful restriction. ; and (3)in subsection (d) (as redesignated by paragraph (1)), by striking (d) As used in this section, and inserting the following:

6.

Alternative diesel fuel content of diesel

(a)

Findings

Congress finds that— (1)section 211(o) of the Clean Air Act (42 U.S.C. 7535(o)) (as amended by section 1501 of the Energy Policy Act of 2005 (Public Law 109–58)) established a renewable fuel program under which entities in the petroleum sector are required to blend renewable fuels into motor vehicle fuel based on the gasoline motor pool; (2)the need for energy diversification is greater as of the date of enactment of this Act than it was only months before the date of enactment of the Energy Policy Act (Public Law 109–58; 119 Stat. 594); and (3)(A)the renewable fuel program under section 211(o) of the Clean Air Act requires a small percentage of the gasoline motor pool, totaling nearly 140,000,000,000 gallons, to contain a renewable fuel; and (B)the small percentage requirement described in subparagraph (A) does not include the 40,000,000,000-gallon diesel motor pool. (b)

Alternative diesel fuel program for diesel motor pool

Section 211 of the Clean Air Act (42 U.S.C. 7545) is amended by inserting after subsection (o) the following: (p)

Alternative diesel fuel program for diesel motor pool

(1)

Definition of alternative diesel fuel

(A)

In general

In this subsection, the term alternative diesel fuel means biodiesel (as defined in section 312(f) of the Energy Policy Act of 1992 (42 U.S.C. 13220(f))) and any blending components derived from alternative fuel (provided that only the alternative fuel portion of any such blending component shall be considered to be part of the applicable volume under the alternative diesel fuel program established by this subsection). (B)

Inclusions

The term alternative diesel fuel includes a diesel fuel substitute produced from— (i)animal fat; (ii)plant oil; (iii)recycled yellow grease; (iv)single-cell or microbial oil; (v)thermal depolymerization; (vi)thermochemical conversion; (vii)a coal-to-liquid process (including the Fischer-Tropsch process) that provides for the sequestration of carbon emissions; (viii)a diesel-ethanol blend of not less than 7 percent ethanol; or (ix)sugar, starch, or cellulosic biomass. (2)

Alternative diesel fuel program

(A)

Regulations

(i)

In general

Not later than 1 year after the date of enactment of this subsection, the Administrator shall promulgate regulations to ensure that diesel sold or introduced into commerce in the United States (except in noncontiguous States or territories), on an annual average basis, contains the applicable volume of alternative diesel fuel determined in accordance with subparagraph (B). (ii)

Provisions of regulations

Regardless of the date of promulgation, the regulations promulgated under clause (i)— (I)shall contain compliance provisions applicable to refineries, blenders, distributors, and importers, as appropriate, to ensure that the requirements of this paragraph are met; but (II)shall not— (aa)restrict geographic areas in which alternative diesel fuel may be used; or (bb)impose any per-gallon obligation for the use of alternative diesel fuel. (iii)

Requirement in case of failure to promulgate regulations

If the Administrator fails to promulgate regulations under clause (i), the percentage of alternative diesel fuel in the diesel motor pool sold or dispensed to consumers in the United States, on a volume basis, shall be 0.6 percent for calendar year 2009. (B)

Applicable volume

(i)

Calendar years 2009 through 2016

For the purpose of subparagraph (A), the applicable volume for any of calendar years 2009 through 2016 shall be determined in accordance with the following table: Applicable volume of Alternative diesel fuel in diesel motor pool (in millions of gallons):Calendar year: 2502009 5002010 7502011 1,0002012 1,2502013 1,5002014 1,7502015 2,0002016 (ii)

Calendar year 2017 and thereafter

The applicable volume for calendar year 2017 and each calendar year thereafter shall be determined by the Administrator, in coordination with the Secretary of Agriculture and the Secretary of Energy, based on a review of the implementation of the program during calendar years 2009 through 2016, including a review of— (I)the impact of the use of alternative diesel fuels on the environment, air quality, energy security, job creation, and rural economic development; and (II)the expected annual rate of future production of alternative diesel fuels to be used as a blend component or replacement to the diesel motor pool. (iii)

Minimum applicable volume

For the purpose of subparagraph (A), the applicable volume for calendar year 2017 and each calendar year thereafter shall be equal to the product obtained by multiplying— (I)the number of gallons of diesel that the Administrator estimates will be sold or introduced into commerce during the calendar year; and (II)the ratio that— (aa)2,000,000,000 gallons of alternative diesel fuel; bears to (bb)the number of gallons of diesel sold or introduced into commerce during calendar year 2016. (3)

Applicable percentages

(A)

Provision of estimate of volumes of diesel sales

Not later than October 31 of each of calendar years 2008 through 2016, the Administrator of the Energy Information Administration shall provide to the Administrator an estimate, with respect to the following calendar year, of the volumes of diesel projected to be sold or introduced into commerce in the United States. (B)

Determination of applicable percentages

(i)

In general

Not later than November 30 of each of calendar years 2009 through 2016, based on the estimate provided under subparagraph (A), the Administrator shall determine and publish in the Federal Register, with respect to the following calendar year, the alternative diesel fuel obligation that ensures that the requirements of paragraph (2) are met. (ii)

Required elements

The alternative diesel fuel obligation determined for a calendar year under clause (i) shall— (I)be applicable to refineries, blenders, and importers, as appropriate; (II)be expressed in terms of a volume percentage of diesel sold or introduced into commerce in the United States; and (III)subject to subparagraph (C), consist of a single applicable percentage that applies to all categories of persons described in subclause (I). (C)

Adjustments

In determining the applicable percentage for a calendar year, the Administrator shall make adjustments to prevent the imposition of redundant obligations on any person described in subparagraph (B)(ii)(I). (4)

Credit program

(A)

In general

The regulations promulgated pursuant to paragraph (2)(A) shall provide for the generation of an appropriate amount of credits by any person that refines, blends, or imports diesel that contains a quantity of alternative diesel fuel that is greater than the quantity required under paragraph (2). (B)

Use of credits

A person that generates a credit under subparagraph (A) may use the credit, or transfer all or a portion of the credit to another person, for the purpose of complying with regulations promulgated pursuant to paragraph (2). (C)

Duration of credits

A credit generated under this paragraph shall be valid during the 1-year period beginning on the date on which the credit is generated. (D)

Inability to generate or purchase sufficient credits

The regulations promulgated pursuant to paragraph (2)(A) shall include provisions allowing any person that is unable to generate or purchase sufficient credits under subparagraph (A) to meet the requirements of paragraph (2) by carrying forward a credit generated during a previous year on the condition that the person, during the calendar year following the year in which the alternative diesel fuel deficit is created— (i)achieves compliance with the alternative diesel fuel requirement under paragraph (2); and (ii)generates or purchases additional credits under subparagraph (A) to offset the deficit of the previous year. (5)

Waivers

(A)

In general

The Administrator, in consultation with the Secretary of Agriculture and the Secretary of Energy, may waive the requirements of paragraph (2) in whole or in part on receipt of a petition of 1 or more States by reducing the national quantity of alternative diesel fuel for the diesel motor pool required under paragraph (2) based on a determination by the Administrator, after public notice and opportunity for comment, that— (i)implementation of the requirement would severely harm the economy or environment of a State, a region, or the United States; or (ii)there is an inadequate domestic supply of alternative diesel fuel. (B)

Petitions for waivers

Not later than 90 days after the date on which the Administrator receives a petition under subparagraph (A), the Administrator, in consultation with the Secretary of Agriculture and the Secretary of Energy, shall approve or disapprove the petition. (C)

Termination of waivers

(i)

In general

Except as provided in clause (ii), a waiver under subparagraph (A) shall terminate on the date that is 1 year after the date on which the waiver is provided. (ii)

Exception

The Administrator, in consultation with the Secretary of Agriculture and the Secretary of Energy, may extend a waiver under subparagraph (A), as the Administrator determines to be appropriate. . (c)

Penalties and enforcement

Section 211(d) of the Clean Air Act (42 U.S.C. 7545(d)) is amended— (1)in paragraph (1), by striking or (o) each place it appears and inserting (o), or (p); and (2)in paragraph (2), by striking and (o) each place it appears and inserting (o), and (p). (d)

Technical amendments

Section 211 of the Clean Air Act (42 U.S.C. 7545) is amended— (1)in subsection (i)(4), by striking section 324 each place it appears and inserting section 325; (2)in subsection (k)(10), by indenting subparagraphs (E) and (F) appropriately; (3)in subsection (n), by striking section 219(2) and inserting section 216(2); (4)by redesignating the second subsection (r) and subsection (s) as subsections (s) and (t), respectively; and (5)in subsection (t)(1) (as redesignated by paragraph (4)), by striking this subtitle and inserting this part.

7.

Excise tax credit for production of cellulosic biomass ethanol

(a)

Allowance of excise tax credit

(1)

In general

Section 6426 of the Internal Revenue Code of 1986 (relating to credit for alcohol fuel, biodiesel, and alternative fuel mixtures) is amended by redesignating subsections (f) and (g) as subsections (g) and (h), respectively, and by inserting after subsection (e) the following new subsection: (f)

Cellulosic biomass ethanol credit

(1)

In general

For purposes of this section, in the case of a cellulosic biomass ethanol producer, the cellulosic biomass ethanol credit is the product of— (A)the product of 51 cents times the equivalent number of gallons of renewable fuel specified in section 211(o)(4) of the Clean Air Act, times (B)the number of gallons of qualified cellulosic biomass ethanol fuel production of such producer. (2)

Definitions

(A)

Cellulosic biomass ethanol

The term cellulosic biomass ethanol has the meaning given such term under section 211(o)(1)(A) of the Clean Air Act. (B)

Qualified cellulosic biomass ethanol fuel production

The term qualified cellulosic biomass ethanol fuel production means any alcohol which is cellulosic biomass ethanol which during the taxable year— (i)is sold by the producer to another person — (I)for use by such other person in the production of an alcohol fuel mixture in such other person's trade or business (other than casual off-farm production), (II)for use by such other person as a fuel in a trade or business, or (III)who sells such cellulosic biomass ethanol at retail to another person and places such ethanol in the fuel tank of such other person, or (ii)is used or sold by the producer for any purpose described in clause (i). (3)

Denial of double benefit

No credit shall be allowed under subsection (b) or (c) to any taxpayer with respect to any fuel to the extent that a credit has been allowed with respect to such fuel to any taxpayer under this subsection or a payment has been made with respect to such fuel under section 6427(e). (4)

Termination

This section shall not apply to any sale or use for any period after December 31, 2008. . (2)

Conforming amendments

(A)Section 6426(a) of such Code is amended— (i)by striking subsection (d) in paragraph (2) and inserting subsections (d) and (f), and (ii)by striking and (e) in the last sentence and inserting , (e), and (f). (B)The heading for section 6426 of such Code is amended to read as follows:

6426.

Credit for certain fuels and fuel mixtures

. (C)The table of section for subchapter B of chapter 65 of such Code is amended by striking the item relating to section 6426 and inserting the following new item: Sec. 6426. Credit for certain fuels and fuel mixtures. . (b)

Cellulosic biomass ethanol not used for a taxable purpose

(1)

In general

Section 6427(e) of the Internal Revenue Code of 1986 is amended by redesignating paragraphs (3) through (5) as paragraphs (4) through (6), respectively, and by inserting after paragraph (2) the following new paragraph: (3)

Cellulosic biomass ethanol

If any person sells or uses cellulosic biomass ethanol (as defined in section 6426(f)(2)(A)) for a purpose described in section 6426(f)(2)(B) in such person's trade or business, the Secretary shall pay (without interest) to such person an amount equal to the cellulosic biomass ethanol credit with respect to such fuel. . (2)

Denial of double benefit

Paragraph (4) of section 6427(e) of such Code, as redesignated by paragraph (1), is amended to read as follows: (4)

Coordination with other repayment provisions

(A)

In general

No amount shall be payable under paragraph (1), (2), or (3) with respect to any mixture, alternative fuel, or cellulosic biomass ethanol with respect to which an amount is allowed as a credit under section 6426. (B)

Cellulosic biomass ethanol

No amount shall be payable under paragraph (1) or (2) with respect to any cellulosic biomass ethanol if a payment has been made with respect to such ethanol under paragraph (3). . (3)

Termination

Paragraph (6) of section 6427(e) of such Code, as redesignated by paragraph (1), is amended by striking and at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting , and, and by adding at the end the following new subparagraph: (E)any cellulosic biomass ethanol credit (as defined in section 6426(f)(2)(A)) sold or used after December 31, 2008. . (4)

Conforming amendment

Paragraph (5) of section 6427(e) of such Code, as redesignated by paragraph (1), is amended by striking or alternative fuel mixture credit and inserting , alternative fuel mixture credit, or cellulosic biomass ethanol credit. (c)

Effective date

The amendments made by this section shall apply to fuel sold or used after the date of the enactment of this Act.

8.

Incentive for Federal and State fleets for medium and heavy duty hybrids

Section 301 of the Energy Policy Act of 1992 (42 U.S.C. 13211) is amended— (1)in paragraph (3), by striking or a dual fueled vehicle and inserting , a dual fueled vehicle, or a medium or heavy duty vehicle that is a hybrid vehicle; (2)by redesignating paragraphs (11), (12), (13), and (14) as paragraphs (12), (14), (15), and (16), respectively; (3)by inserting after paragraph (10) the following: (11)the term hybrid vehicle means a vehicle powered both by a diesel or gasoline engine and an electric motor that is recharged as the vehicle operates; ; and (4)by inserting after paragraph (12) (as redesignated by paragraph (2)) the following: (13)the term medium or heavy duty vehicle means a vehicle that— (A)in the case of a medium duty vehicle, has a gross vehicle weight rating of more than 8,500 pounds but not more than 14,000 pounds; and (B)in the case of a heavy duty vehicle, has a gross vehicle weight rating of more than 14,000 pounds; .

9.

Credit for qualifying ethanol blending and processing equipment

(a)

Allowance of qualifying ethanol blending and processing equipment credit

Section 46 of the Internal Revenue Code of 1986 (relating to amount of credit) is amended by striking and at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting , and, and by adding at the end the following new paragraph: (5)the qualifying ethanol blending and processing equipment credit. . (b)

Amount of qualifying ethanol blending and processing equipment credit

Subpart E of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to rules for computing investment credit) is amended by inserting after section 48B the following new section:

48C.

Qualifying ethanol blending and processing equipment

(a)

In general

For purposes of section 46, the qualifying ethanol blending and processing equipment credit for any taxable year is an amount equal to 50 percent of the basis of the qualifying ethanol blending and processing equipment placed in service at a qualifying facility during such taxable year. (b)

Limitation

The credit allowed under subsection (a) for qualifying ethanol blending and processing equipment placed in service at any 1 qualifying facility during any taxable year shall not exceed $2,000,000. (c)

Qualifying ethanol blending and processing equipment

For purposes of this section, the term qualifying ethanol blending and processing equipment means any technology installed in or on a qualifying facility for blending ethanol with petroleum fuels for the purpose of direct retail sale, including in-line blending equipment, storage tanks, pumps and piping for denaturants, and load-out equipment. (d)

Qualifying facility

For purposes of this section, the term qualifying facility means any facility which produces not less than 1,000,000 gallons of ethanol during the taxable year. (e)

Special rule for certain subsidized property

Rules similar to section 48(a)(4) shall apply for purposes of this section. (f)

Certain qualified progress expenditures rules made applicable

Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this subsection. (g)

Termination

This section shall not apply to property placed in service after December 31, 2014.

. (c)

Recapture of credit where emissions reduction offset is sold

Paragraph (1) of section 50(a) of the Internal Revenue Code of 1986 is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting after subparagraph (A) the following new subparagraph: (B)

Special rule for qualifying ethanol blending and processing equipment

For purposes of subparagraph (A), any investment property which is qualifying ethanol blending and processing equipment (as defined in section 48C(c)) shall cease to be investment credit property with respect to a taxpayer if such taxpayer receives a payment in exchange for a credit for emission reductions attributable to such qualifying pollution control equipment for purposes of an offset requirement under part D of title I of the Clean Air Act. . (d)

Special rule for basis reduction; recapture of credit

Paragraph (3) of section 50(c) of the Internal Revenue Code of 1986 (relating to basis adjustment to investment credit property) is amended by inserting or qualifying ethanol blending and processing equipment credit after energy credit. (e)

Certain nonrecourse financing excluded from credit base

Section 49(a)(1)(C) of the Internal Revenue Code of 1986 (defining credit base) is amended by striking and at the end of clause (iii), by striking the period at the end of clause (iv) and inserting , and, and by adding at the end the following new clause: (v)the basis of any property which is part of any qualifying ethanol blending and processing equipment under section 48C. . (f)

Effective date

The amendments made by this section shall apply to property placed in service after December 31, 2007, in taxable years ending after such date, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

10.

Public access to Federal alternative refueling stations

(a)

Definitions

In this section: (1)

Alternative fuel refueling station

The term alternative fuel refueling station has the meaning given the term qualified alternative fuel vehicle refueling property in section 30C(c)(1) of the Internal Revenue Code of 1986. (2)

Secretary

The term Secretary means the Secretary of Energy. (b)

Access to Federal Alternative Refueling Stations

Not later than 18 months after the date of enactment of this Act— (1)except as provided in subsection (d)(1), any Federal property that includes at least 1 fuel refueling station shall include at least 1 alternative fuel refueling station; and (2)except as provided in subsection (d)(2), any alternative fuel refueling station located on property owned by the Federal government shall permit full public access for the purpose of refueling using alternative fuel. (c)

Duration

The requirements described in subsection (b) shall remain in effect until the sooner of— (1)the date that is 7 years after the date of enactment of this Act; or (2)the date on which the Secretary determines that not less than 5 percent of the commercial refueling infrastructure in the United States offers alternative fuels to the general public. (d)

Exceptions

(1)

Waiver

Subsection (b)(1) shall not apply to any Federal property under the jurisdiction of a Federal agency if the Secretary determines that alternative fuel is not reasonably available to retail purchasers of the fuel, as certified by the head of the agency to the Secretary. (2)

National security exemption

Subsection (b)(2) does not apply to property of the Federal government that the Secretary, in consultation with the Secretary of Defense, has certified must be exempt for national security reasons. (e)

Report

Not later than October 31 of each year beginning after the date of enactment of this Act, the President shall submit to Congress a report that describes the progress of the agencies of the Federal Government (including the Executive Office of the President) in complying with— (1)the Energy Policy Act of 1992 (42 U.S.C. 13201 et seq.); (2)Executive Order 13149 (65 Fed. Reg. 24595; relating to greening the government through Federal fleet and transportation efficiency); and (3)the fueling center requirements of this section.

11.

Purchase of clean fuel buses

(a)

In General

Chapter 53 of title 49, United States Code, is amended by inserting after section 5325 the following:

5326.

Purchase of clean fuel buses

(a)

Definitions

In this section: (1)

Alternative diesel fuel

(A)

In general

The term alternative diesel fuel means— (i)biodiesel (as defined in section 312(f) of the Energy Policy Act of 1992 (42 U.S.C. 13220(f))); and (ii)any blending components derived from alternative fuel. (B)

Inclusions

The term alternative diesel fuel includes a diesel fuel substitute produced from— (i)animal fat; (ii)plant oil; (iii)recycled yellow grease; (iv)single-cell or microbial oil; (v)thermal depolymerization; (vi)thermochemical conversion; (vii)a coal-to-liquid process (including the Fischer-Tropsch process) that provides for the sequestration of carbon emissions; or (viii)a diesel-ethanol blend of not less than 7 percent ethanol. (2)

Cellulosic biomass ethanol

The term cellulosic biomass ethanol means ethanol derived from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis, including— (A)dedicated energy crops and trees; (B)wood and wood residues; (C)plants; (D)grasses; (E)agricultural residues; (F)fibers; (G)animal wastes and other waste materials; and (H)municipal solid waste. (3)

Clean fuel bus

The term clean fuel bus means a vehicle that— (A)is capable of being powered by— (i)compressed natural gas; (ii)liquefied natural gas; (iii)1 or more batteries; (iv)a fuel that is composed of at least 85 percent ethanol (or another percentage of not less than 70 percent, as the Secretary may determine, by rule, to provide for requirements relating to cold start, safety, or vehicle functions); (v)electricity (including a hybrid electric or plug-in hybrid electric vehicle); (vi)a fuel cell; (vii)a fuel that is composed of at least 22 percent biodiesel (as defined in section 312(f) of the Energy Policy Act of 1992 (42 U.S.C. 13220(f)) (or another percentage of not less than 10 percent, as the Secretary may determine, by rule, to provide for requirements relating to cold start, safety, or vehicle functions); (viii)ultra-low sulfur diesel; or (ix)liquid fuel manufactured with a coal feedstock; and (B)has been certified by the Administrator of the Environmental Protection Agency to significantly reduce harmful emissions, particularly in a nonattainment area (as defined in section 171 of the Clean Air Act (42 U.S.C. 7501)). (4)

Qualified alternative fuel producer

The term qualified alternative fuel producer means a producer of qualified fuels that, during the applicable taxable year— (A)are sold by the producer to another person— (i)for use by the person in the production of a mixture of qualified fuels in the trade or business of the person (other than casual off-farm production); (ii)for use by the other person as a fuel in a trade or business; or (iii)that— (I)sells to another person the qualified fuel at retail; and (II)places the qualified fuel in the fuel tank of the person that purchased the qualified fuel; or (B)are used or sold by the producer for any purpose described in subparagraph (A). (5)

Qualified fuel

The term qualified fuel includes— (A)cellulosic biomass ethanol; (B)ethanol produced in facilities in which animal waste or other waste materials are digested or otherwise used to displace at least 90 percent of the fossil fuels that would otherwise be used in the production of ethanol; (C)renewable fuels; (D)alternative diesel fuels; (E)sugar, starch, or cellulosic biomass; and (F)any other fuel that is not substantially petroleum. (6)

Renewable fuel

The term renewable fuel means fuel, at least 85 percent of the volume of which— (A)(i)is produced from grain, starch, oilseeds, vegetable, animal, or fish materials including fats, greases, and oils, sugarcane, sugar beets, sugar components, tobacco, potatoes, or other biomass; or (ii)is natural gas produced from a biogas source, including a landfill, sewage waste treatment plant, feedlot, or other place in which decaying organic material is found; and (B)is used to substantially replace or reduce the quantity of fossil fuel present in a fuel mixture used to operate a motor vehicle. (b)

Purchase of Buses

Subject to subsections (c) and (d), beginning on the date that is 2 years after the date of enactment of this section, a bus purchased using funds made available from the Mass Transit Account of the Highway Trust Fund shall be a clean fuel bus. (c)

Ultra-low sulfur diesel

(1)

In general

Except as provided in paragraph (2), not more than 20 percent of the amount of the funds provided to a recipient to purchase buses under this section may be used by the recipient to purchase clean fuel buses that are capable of being powered by a fuel described in clause (iv), (vii), (viii), or (ix) of subsection (a)(3)(A). (2)

Exception

Paragraph (1) shall not apply if the recipient enters into a 3–year purchase agreement with a qualified alternative fuel producer to acquire qualified fuels in a volume sufficient to power the clean fuel buses purchased using amounts made available under this section. (d)

Use of certain alternative fuels

(1)

In general

To be eligible to receive funds under subsection (c)(2) for the purchase of a clean fuel bus that is capable of being powered by a fuel described in clause (iv), (vii), or (ix) of subsection (a)(3)(A), an applicant or recipient shall submit to the Secretary— (A)a certification that the applicant will operate the clean fuel bus only with the fuel at all times in accordance with the fuel capacity and use of the fuel recommended by the manufacturer of the clean fuel bus; and (B)not later than 180 days after the purchase of the clean fuel bus and every 180 days thereafter, a report that documents that the fuel was used in accordance with subparagraph (A) during the 180-day period ending on the date of the report. (2)

Noncompliance

Failure of an applicant or recipient of funds to provide the certification or documentation required under paragraph (1) shall— (A)be considered a violation of the agreement to receive the funds; and (B)require the applicant or recipient to reimburse the Secretary the full amount of the funds not later than 90 days after the Secretary has determined that a violation has occurred.

. (b)

Conforming Amendment

The analysis for chapter 53 is amended by inserting after the item relating to section 5325 the following: 5326. Clean fuel buses. .

12.

Domestic fuel production volumes to meet Department of Defense needs

Section 2922d of title 10, United States Code is amended— (1)in the heading, by striking and tar sands and inserting tar sands, and other sources; (2)in subsection (a), by striking fuel produced, in whole or in part, from coal, oil shale, and tar sands (referred to in this section as a covered fuel) that are extracted by either mining or in-situ methods and refined or otherwise processed in the United States and inserting fuel produced, in whole or in part, from coal, oil shale, and tar sands that are extracted by either mining or in-situ methods and refined or otherwise processed in the United States and fuel produced in the United States using starch, sugar, cellulosic biomass, plant or animal oils, or thermal chemical conversion, thermal depolymerization, or thermal conversion processes (referred to in this section as a covered fuel); (3)in subsection (d), by striking 1 or more years and inserting up to 5 years; (4)in subsection (e), by striking the period at the end and inserting the following: , with consideration given to military installations closed or realigned under a round of defense base closure and realignment.; and (5)by adding at the end the following new subsection: (f)

Production facilities for covered fuels

The Secretary of Defense may enter into contracts or other agreements with private companies or other entities to develop and operate production facilities for covered fuels, and may provide for the construction or capital modification of production facilities for covered fuels. .

13.

Federal fleet energy conservation improvement

(a)

Definitions

Section 301 of the Energy Policy Act of 1992 (42 U.S.C. 13211) is amended— (1)in paragraph (3), by inserting before the semicolon at the end the following: , including a vehicle that is propelled by electric drive transportation technology, engine dominant hybrid electric technology, or plug-in hybrid technology; (2)in paragraph (13), by striking and after the semicolon at the end; (3)in paragraph (14), by striking the period at the end and inserting a semicolon; and (4)by adding at the end the following: (15)the term electric drive transportation technology means— (A)technology that uses an electric motor for all or part of the motive power of a vehicle (regardless of whether off-board electricity is used), including— (i)a battery electric vehicle; (ii)a fuel cell vehicle; (iii)an engine dominant hybrid electric vehicle; (iv)a plug-in hybrid electric vehicle; (v)a plug-in hybrid fuel cell vehicle; and (vi)an electric rail vehicle; or (B)technology that uses equipment for transportation (including transportation involving any mobile source of air pollution) that uses an electric motor to replace an internal combustion engine for all or part of the work of the equipment, including corded electric equipment that is linked to transportation or a mobile source of air pollution; (16)the term engine dominant hybrid electric vehicle means an on-road or nonroad vehicle that— (A)is propelled by an internal combustion engine or heat engine using— (i)any combustible fuel; and (ii)an on-board, rechargeable storage device; and (B)has no means of using an off-board source of electricity; and (17)the term plug-in hybrid electric vehicle means an on-road or nonroad vehicle that is propelled by an internal combustion engine or heat engine using— (A)any combustible fuel; (B)an on-board, rechargeable storage device; and (C)a means of using an off-board source of electricity. . (b)

Minimum Federal fleet requirement

Section 303(b)(1) of the Energy Policy Act of 1992 (42 U.S.C. 13212(b)(1)) is amended— (1)in subparagraph (C), by striking and after the semicolon; (2)in subparagraph (D), by striking fiscal year 1999 and thereafter, and inserting each of fiscal years 1999 through 2013; and; and (3)by inserting after subparagraph (D) the following: (E)100 percent in fiscal year 2014 and thereafter, .