[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 162 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                 S. 162

To amend the Internal Revenue Code of 1986 to modify the alcohol credit 
and the alternative fuel credit, to amend the Clean Air Act to promote 
the installation of fuel pumps for E-85 fuel, to amend title 49 of the 
     United States Code to require the manufacture of dual fueled 
                  automobiles, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 4, 2007

   Mr. Lugar introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to modify the alcohol credit 
and the alternative fuel credit, to amend the Clean Air Act to promote 
the installation of fuel pumps for E-85 fuel, to amend title 49 of the 
     United States Code to require the manufacture of dual fueled 
                  automobiles, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``National Fuels 
Initiative''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
                       TITLE I--ALTERNATIVE FUELS

Sec. 101. Declaration of United States policy on the development and 
                            use of renewable alternative fuels.
Sec. 102. Modification to alcohol credit and alternative fuel credit.
Sec. 103. Installation of E-85 fuel pumps by major oil companies at 
                            owned stations and branded stations.
Sec. 104. Requirement to manufacture dual fueled automobiles.
Sec. 105. Definition of automobile.
Sec. 106. Average fuel economy standards.
Sec. 107. Credit trading and compliance.
Sec. 108. Consumer tax credit.
Sec. 109. Advanced technology motor vehicles manufacturing credit.
                TITLE II--USED OIL RE-REFINING AND REUSE

Sec. 201. Definitions.
Sec. 202. Informing public.
Sec. 203. Labeling.
Sec. 204. Collection facilities.
Sec. 205. Information exchange.
Sec. 206. Used oil from Federal agencies.
Sec. 207. Used oil in space heaters.
Sec. 208. Extension and modification of election to expense certain 
                            refineries.
Sec. 209. Credit for re-refined lubricating oil feedstock.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) The national security and economic prosperity of the 
        United States is threatened by our oil dependence, and the 
        reliance of the United States on oil imports impinges on our 
        foreign policy. Adversarial regimes rich in oil and natural gas 
        are using their energy supplies as leverage against import-
        dependent countries and are using increased revenues from oil 
        and gas exports to gain international influence, fund anti-
        American appeals, entrench authoritarianism, and support 
        terrorism.
            (2) Global competition for oil reserves is increasing as 
        supply is depleted, demand increases, and foreign governments 
        attempt to exert more control over reserves. Supplies of oil 
        are vulnerable to disruption resulting from war, political 
        manipulation, natural disasters, and terrorist attacks. A major 
        loss in oil supply could result in a price shock extremely 
        damaging to the economy of the United States and our way of 
        life, and competition over scarce resources could create 
        conflict.
            (3) Inefficient and unclean use of oil damages the 
        environment and worsens the threat of global climate change.

                       TITLE I--ALTERNATIVE FUELS

SEC. 101. DECLARATION OF UNITED STATES POLICY ON THE DEVELOPMENT AND 
              USE OF RENEWABLE ALTERNATIVE FUELS.

    Congress declares that:
            (1) It is the policy of the United States to reduce 
        dependence on imported oil through increased efficiency and 
        diversification of fuel sources through dramatically expanded 
        use of clean alternative fuels. Such a reduction will increase 
        the foreign policy flexibility of the United States, make the 
        United States less vulnerable to oil supply disruption, and 
        promote economic growth. The United States will continue to 
        promote research and development of a range of alternatives 
        fuels, and it will implement policies to accelerate the 
        deployment and commercialization of existing efficiency and 
        alternative fuels technologies.
            (2) It is the policy goal of the United States to produce 
        and utilize the equivalent of at least 100,000,000,000 gallons 
        of renewable fuel per year by 2025. This amount of renewable 
        fuel, along with innovation in fuel efficiency, will 
        substantially reduce the need for oil imports in the United 
        States.
            (3) It is the policy of the United States to promote the 
        development of a global biofuels market through partnerships 
        with other nations and to reduce trade barriers for renewable 
        fuels.

SEC. 102. MODIFICATION TO ALCOHOL CREDIT AND ALTERNATIVE FUEL CREDIT.

    (a) Income Tax Credit for Alcohol.--
            (1) Rate based on price of oil.--Section 40 of the Internal 
        Revenue Code of 1986 (relating to alcohol used as fuel) is 
        amended by striking ``60 cents'' each place it appears and 
        inserting ``the applicable amount''.
            (2) Applicable amount.--Subsection (h) of section 40 of 
        such Code is amended to read as follows:
    ``(h) Applicable Amount.--For purposes of this section--
            ``(1) In general.--The term `applicable amount' means, with 
        respect to any quarter--
                    ``(A) five cents for each $1 (or any fraction 
                thereof) by which $45 exceeds--
                            ``(i) in the case of the alcohol mixture 
                        credit, the average price of a barrel of oil 
                        for the quarter during which the qualified 
                        mixture used is sold or used, and
                            ``(ii) in the case of the alcohol credit, 
                        the average price of a barrel of oil for the 
                        quarter during which the alcohol was sold or 
                        used, and
                    ``(B) $0 for any quarter in which the price of a 
                barrel of oil is greater than $45.
            ``(2) Special rule for certain taxpayers.--
                    ``(A) In general.--In the case of any alcohol or 
                qualified mixture sold or used before January 1, 2011, 
                by an applicable taxpayer, the applicable amount is--
                            ``(i) 60 cents in the case of a qualified 
                        mixture in which none of the alcohol consists 
                        of ethanol, and
                            ``(ii) 51 cents in any other case.
                    ``(B) Applicable taxpayer.--For purposes of 
                subparagraph (A), the term `applicable taxpayer' means 
                a taxpayer who, on the day before the date of the 
                enactment of the National Fuels Initiative, is in the 
                trade or business of producing qualified mixtures or 
                selling alcohol at retail for use as a fuel.
            ``(3) Other rules.--For purposes of this subsection--
                    ``(A) Determination of average price.--The average 
                price of a barrel of oil shall be determined under 
                regulations prescribed by the Secretary.
                    ``(B) Barrel.--The term `barrel' means 42 United 
                States gallons.''.
            (3) Modification of small ethanol producer credit.--
        Paragraph (1) of section 40(g) of such Code is amended by 
        adding at the end the following new sentence: ``Such term shall 
        not include any person who is not in the trade or business of 
        producing alcohol (as defined in subsection (d)(1)(A) without 
        regard to clauses (i) and (ii)) before the date of the 
        enactment of this Act.''.
            (4) Extension of credit.--
                    (A) In general.--Paragraph (1) of section 40(e) of 
                such Code is amended--
                            (i) by striking ``This section'' and 
                        inserting ``Except as provided in paragraph 
                        (2), this section'',
                            (ii) in subparagraph (A), by striking 
                        ``2010'' and inserting ``2020'', and
                            (iii) in subparagraph (B), by striking 
                        ``2011'' and inserting ``2021''.
                    (B) Termination of small ethanol producer credit.--
                            (i) In general.--Subsection (e) of section 
                        40 of such Code is amended by redesignating 
                        paragraph (2) as paragraph (3) and by inserting 
                        after paragraph (1) the following new 
                        paragraph:
            ``(2) Small ethanol producer credit.--No credit shall be 
        allowed under subsection (a)(3) for any sale or use--
                    ``(A) for any period after December 31, 2010, or
                    ``(B) for any period before January 1, 2011, during 
                which the rates of tax under section 4081(a)(2)(A) are 
                4.3 cents per gallon.''.
                            (ii) Conforming amendment.--Section 
                        40(e)(3) of such Code, as redesignated by 
                        clause (i), is amended by inserting ``or (2)'' 
                        after ``paragraph (1)''.
            (5) Conforming amendment.--Section 40(b) of such Code is 
        amended by striking paragraph (3) and by redesignating 
        paragraphs (4) and (5) as paragraph (3) and (4), respectively.
    (b) Modifications to Excise Tax Credit and Payments for Alcohol.--
            (1) In general.--Paragraph (2) of section 6426(b) of the 
        Internal Revenue Code of 1986 is amended to read as follows:
            ``(2) Applicable amount.--For purposes of this section--
                    ``(A) In general.--The term `applicable amount' 
                means, with respect to any quarter--
                            ``(i) five cents for each $1 (or any 
                        fraction thereof) by which $45 exceeds the 
                        average price of a barrel of oil for the 
                        quarter during which the alcohol fuel mixture 
                        is sold or used, and
                            ``(ii) $0 for any quarter in which the 
                        price of a barrel of oil is greater than $45.
                    ``(B) Special rule for certain taxpayers.--
                            ``(i) In general.--In the case of any 
                        alcohol fuel mixture sold or used before 
                        January 1, 2011, by an applicable taxpayer, the 
                        applicable amount is--
                                    ``(I) 60 cents in the case of a 
                                qualified mixture in which none of the 
                                alcohol consists of ethanol, and
                                    ``(II) 51 cents in any other case.
                            ``(ii) Applicable taxpayer.--For purposes 
                        of subparagraph (A), the term `applicable 
                        taxpayer' means a taxpayer who, on the day 
                        before the date of the enactment of the 
                        National Fuels Initiative, is in the trade or 
                        business of producing alcohol fuel mixtures.
                    ``(C) Other rules.--For purposes of this 
                subsection--
                            ``(i) Determination of average price.--The 
                        average price of a barrel of oil shall be 
                        determined under regulations prescribed by the 
                        Secretary.
                            ``(ii) Barrel.--The term `barrel' means 42 
                        United States gallons.''.
            (2) Extension.--
                    (A) Alcohol fuel mixture credit.--Paragraph (5) of 
                section 6426(b) of such Code is amended by striking 
                ``2010'' and inserting ``2020''.
                    (B) Payments.--Subparagraph (A) of section 
                6427(e)(5) of such Code is amended by striking ``2010'' 
                and inserting ``2020''.
    (c) Modifications to Excise Tax and Payments for Alternative 
Fuel.--
            (1) Alternative fuel credit.--
                    (A) Rate.--
                            (i) In general.--Paragraph (1) of section 
                        6426(d) of the Internal Revenue Code of 1986 is 
                        amended by striking ``50 cents'' and inserting 
                        ``the applicable amount''.
                            (ii) Applicable amount.--Subsection (d) of 
                        section 6426 of such Code is amended by 
                        redesignating paragraphs (2), (3), and (4) as 
                        paragraphs (3), (4), and (5), respectively, and 
                        by inserting after paragraph (1) the following 
                        new paragraph:
            ``(2) Applicable amount.--For purposes of this section--
                    ``(A) In general.--The term `applicable amount' 
                means, with respect to any quarter--
                            ``(i) five cents for each $1 (or any 
                        fraction thereof) by which $45 exceeds the 
                        average price of a barrel of oil for the 
                        quarter during which the alternative fuel is 
                        sold or used, and
                            ``(ii) $0 for any quarter in which the 
                        price of a barrel of oil is greater than $45.
                    ``(B) Special rule for certain taxpayers.--
                            ``(i) In general.--In the case of any 
                        alternative fuel sold or used before January 1, 
                        2011, by an applicable taxpayer, the applicable 
                        amount is 50 cents.
                            ``(ii) Applicable taxpayer.--For purposes 
                        of subparagraph (A), the term `applicable 
                        taxpayer' means a taxpayer who, on the day 
                        before the date of the enactment of the 
                        National Fuels Initiative, is in the trade or 
                        business of producing alternative fuels.
                    ``(C) Other rules.--For purposes of this 
                subsection--
                            ``(i) Determination of average price.--The 
                        average price of a barrel of oil shall be 
                        determined under regulations prescribed by the 
                        Secretary.
                            ``(ii) Barrel.--The term `barrel' means 42 
                        United States gallons.''.
                    (B) Extension.--Paragraph (5) of section 6426(d) of 
                such Code, as redesignated by subparagraph (A), is 
                amended by striking ``2009 (September 30, 2014, in the 
                case of any sale or use involving liquified hydrogen)'' 
                and inserting ``2020''.
            (2) Alternative fuel mixture credit.--
                    (A) Rate.--
                            (i) In general.--Paragraph (1) of section 
                        6426(e) of the Internal Revenue Code of 1986 is 
                        amended by striking ``50 cents'' and inserting 
                        ``the applicable amount''.
                            (ii) Applicable amount.--Subsection (e) of 
                        section 6426 of such Code is amended by 
                        redesignating paragraphs (2) and (3) as 
                        paragraphs (3) and (4), respectively, and by 
                        inserting after paragraph (1) the following new 
                        paragraph:
            ``(2) Applicable amount.--For purposes of this section--
                    ``(A) In general.--The term `applicable amount' 
                means, with respect to any quarter--
                            ``(i) five cents for each $1 (or any 
                        fraction thereof) by which $45 exceeds the 
                        average price of a barrel of oil for the 
                        quarter during which the alternative fuel 
                        mixture is sold or used, and
                            ``(ii) $0 for any quarter in which the 
                        price of a barrel of oil is greater than $45.
                    ``(B) Special rule for certain taxpayers.--
                            ``(i) In general.--In the case of any 
                        alternative fuel mixture sold or used before 
                        January 1, 2011, by an applicable taxpayer, the 
                        applicable amount is 50 cents.
                            ``(ii) Applicable taxpayer.--For purposes 
                        of subparagraph (A), the term `applicable 
                        taxpayer' means a taxpayer who, on the day 
                        before the date of the enactment of the 
                        National Fuels Initiative, is in the trade or 
                        business of producing alternative fuel 
                        mixtures.
                    ``(C) Other rules.--For purposes of this 
                subsection--
                            ``(i) Determination of average price.--The 
                        average price of a barrel of oil shall be 
                        determined under regulations prescribed by the 
                        Secretary.
                            ``(ii) Barrel.--The term `barrel' means 42 
                        United States gallons.''.
                    (B) Extension.--Paragraph (4) of section 6426(e) of 
                such Code, as redesignated by subparagraph (A), is 
                amended by striking ``2009 (September 30, 2014, in the 
                case of any sal or use involving liquified hydrogen)'' 
                and inserting ``2020''.
            (3) Payments.--Paragraph (5) of section 6427(e) is amended 
        by inserting ``and'' at the end of subparagraph (B), by 
        striking subparagraphs (C) and (D), and by inserting after 
        subparagraph (B) the following:
                    ``(C) any alternative fuel or alternative fuel 
                mixture (as defined in subsection (d)(3) or (e)(3) of 
                section 6426) sold or used after September 30, 2020.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to fuel used or sold in quarters beginning after the date of the 
enactment of this Act.

SEC. 103. INSTALLATION OF E-85 FUEL PUMPS BY MAJOR OIL COMPANIES AT 
              OWNED STATIONS AND BRANDED STATIONS.

    Section 211(o) of the Clean Air Act (42 U.S.C. 7545(o)) is amended 
by adding at the end the following:
            ``(11) Installation of e-85 fuel pumps by major oil 
        companies at owned stations and branded stations.--
                    ``(A) Definitions.--In this paragraph:
                            ``(i) E-85 fuel.--The term `E-85 fuel' 
                        means a blend of gasoline approximately 85 
                        percent of the content of which is derived from 
                        ethanol produced in the United States.
                            ``(ii) Major oil company.--The term `major 
                        oil company' means any person that, 
                        individually or together with any other person 
                        with respect to which the person has an 
                        affiliate relationship or significant ownership 
                        interest, has not less than 4,500 retail 
                        station outlets according to the latest 
                        publication of the Petroleum News Annual 
                        Factbook.
                            ``(iii) Secretary.--The term `Secretary' 
                        means the Secretary of Energy, acting in 
                        consultation with the Administrator of the 
                        Environmental Protection Agency and the 
                        Secretary of Agriculture.
                    ``(B) Regulations.--The Secretary shall promulgate 
                regulations to ensure that each major oil company that 
                sells or introduces gasoline into commerce in the 
                United States through wholly-owned stations or branded 
                stations installs or otherwise makes available 1 or 
                more pumps that dispense E-85 fuel (including any other 
                equipment necessary, such as including tanks, to ensure 
                that the pumps function properly) at not less than the 
                applicable percentage of the wholly-owned stations and 
                the branded stations of the major oil company specified 
                in subparagraph (C).
                    ``(C) Applicable percentage.--For the purpose of 
                subparagraph (B), the applicable percentage of the 
                wholly-owned stations and the branded stations shall be 
                determined in accordance with the following table:

                                       Applicable percentage of wholly-
                                            owned stations and branded 
                                                              stations 
``Calendar year:                                             (percent):
    2008..........................................                   5 
    2009..........................................                  10 
    2010..........................................                  15 
    2011..........................................                  20 
    2012..........................................                  25 
    2013..........................................                  30 
    2014..........................................                  35 
    2015..........................................                  40 
    2016..........................................                  45 
    2017 and each calendar year thereafter........                  50.
                    ``(D) Geographic distribution.--
                            ``(i) In general.--Subject to clause (ii), 
                        in promulgating regulations under subparagraph 
                        (B), the Secretary shall ensure that each major 
                        oil company described in subparagraph (B) 
                        installs or otherwise makes available 1 or more 
                        pumps that dispense E-85 fuel at not less than 
                        a minimum percentage (specified in the 
                        regulations) of the wholly-owned stations and 
                        the branded stations of the major oil company 
                        in each State.
                            ``(ii) Requirement.--In specifying the 
                        minimum percentage under clause (i), the 
                        Secretary shall ensure that each major oil 
                        company installs or otherwise makes available 1 
                        or more pumps described in that clause in each 
                        State in which the major oil company operates.
                    ``(E) Financial responsibility.--In promulgating 
                regulations under subparagraph (B), the Secretary shall 
                ensure that each major oil company described in that 
                subparagraph assumes full financial responsibility for 
                the costs of installing or otherwise making available 
                the pumps described in that subparagraph and any other 
                equipment necessary (including tanks) to ensure that 
                the pumps function properly.
                    ``(F) Production credits for exceeding e-85 fuel 
                pumps installation requirement.--
                            ``(i) Earning and period for applying 
                        credits.--If the percentage of the wholly-owned 
                        stations and the branded stations of a major 
                        oil company at which the major oil company 
                        installs E-85 fuel pumps in a particular 
                        calendar year exceeds the percentage required 
                        under subparagraph (C), the major oil company 
                        earns credits under this paragraph, which may 
                        be applied to any of the 3 consecutive calendar 
                        years immediately after the calendar year for 
                        which the credits are earned.
                            ``(ii) Trading credits.--Subject to clause 
                        (iii), a major oil company that has earned 
                        credits under clause (i) may sell credits to 
                        another major oil company to enable the 
                        purchaser to meet the requirement under 
                        subparagraph (C).
                            ``(iii) Exception.--A major oil company may 
                        not use credits purchased under clause (ii) to 
                        fulfill the geographic distribution requirement 
                        in subparagraph (D).''.

SEC. 104. REQUIREMENT TO MANUFACTURE DUAL FUELED AUTOMOBILES.

    (a) Requirement.--
            (1) In general.--Chapter 329 of title 49, United States 
        Code, is amended by inserting after section 32902 the 
        following:
``Sec. 32902A. Requirement to manufacture dual fueled automobiles
    ``(a) Requirement.--Each manufacturer of new automobiles that are 
capable of operating on gasoline or diesel fuel shall ensure that the 
percentage of such automobiles, manufactured in any model year after 
model year 2007 and distributed in commerce for sale in the United 
States, which are dual fueled automobiles is equal to not less than the 
applicable percentage set forth in the following table:


                                         The percentage of dual fueled
                                          automobiles manufactured shall
                                          be not less than:
 
``For the model year:
  2008.................................  10 percent
  2009.................................  20 percent
  2010.................................  30 percent
  2011.................................  40 percent
  2012.................................  50 percent
  2013.................................  60 percent
  2014.................................  70 percent
  2015.................................  80 percent
  2016.................................  90 percent
  2017 and beyond......................  100 percent.

    ``(b) Production Credits for Exceeding Flexible Fuel Automobile 
Production Requirement.--
            ``(1) Earning and period for applying credits.--If the 
        number of dual fueled automobiles manufactured by a 
        manufacturer in a particular model year exceeds the number 
        required under subsection (a), the manufacturer earns credits 
        under this section, which may be applied to any of the 3 
        consecutive model years immediately after the model year for 
        which such credits are earned.
            ``(2) Trading credits.--A manufacturer that has earned 
        credits under paragraph (1) may sell credits to another 
        manufacturer to enable the purchaser to meet the requirement 
        under subsection (a).''.
            (2) Technical amendment.--The table of sections for chapter 
        329 of title 49, United States Code, is amended by inserting 
        after the item relating to section 32902 the following:

``32902A. Requirement to manufacture dual fueled automobiles.''.
    (b) Activities To Promote the Use of Certain Alternative Fuels.--
The Secretary of Transportation shall carry out activities to promote 
the use of fuel mixtures containing gasoline or diesel fuel and 1 or 
more alternative fuels, including a mixture containing at least 85 
percent of methanol, denatured ethanol, and other alcohols by volume 
with gasoline or other fuels, to power automobiles in the United 
States.

SEC. 105. DEFINITION OF AUTOMOBILE.

    (a) In General.--Section 32901(a)(3) of title 49, United States 
Code, is amended by striking ``rated
at--'' and all that follows through the period at the end and inserting 
``rated at not more than 10,000 pounds gross vehicle weight.''.
    (b) Fuel Economy Information.--Section 32908(a) of title 49, United 
States Code, is amended, by striking ``section--'' and all that follows 
through ``(2)'' and inserting ``section, the term''.
    (c) Effective Date.--The amendments made by this section shall 
apply to model year 2009 and each subsequent model year.

SEC. 106. AVERAGE FUEL ECONOMY STANDARDS.

    (a) Standards.--Section 32902 of title 49, United States Code, is 
amended--
            (1) in subsection (a)--
                    (A) in the header, by inserting ``Manufactured 
                Before Model Year 2012'' after ``Non-Passenger 
                Automobiles''; and
                    (B) by adding at the end the following: ``This 
                subsection shall not apply to automobiles manufactured 
                after model year 2011.'';
            (2) in subsection (b)--
                    (A) in the header, by inserting ``Manufactured 
                Before Model Year 2012'' after ``Passenger 
                Automobiles'';
                    (B) by inserting ``and before model year 2009'' 
                after ``1984''; and
                    (C) by adding at the end the following: ``Such 
                standard shall be increased by 4 percent per year for 
                model years 2009 through 2011 (rounded to the nearest 
                \1/10\ mile per gallon)'';
            (3) by amending subsection (c) to read as follows:
    ``(c) Automobiles Manufactured After Model Year 2011.--(1) Not 
later than 18 months before the beginning of each model year after 
model year 2011, the Secretary of Transportation shall prescribe, by 
regulation--
            ``(A) an average fuel economy standard for automobiles 
        manufactured by a manufacturer in that model year; or
            ``(B) based on 1 or more vehicle attributes that relate to 
        fuel economy--
                    ``(i) separate standards for different classes of 
                automobiles; or
                    ``(ii) standards expressed in the form of a 
                mathematical function.
    ``(2)(A) Except as provided under paragraphs (3) and (4) and 
subsection (d), standards under paragraph (1) shall attain a projected 
aggregate level of average fuel economy of 27.5 miles per gallon for 
all automobiles manufactured by all manufacturers for model year 2012.
    ``(B) The projected aggregate level of average fuel economy for 
model year 2013 and each succeeding model year shall be increased by 4 
percent from the level for the prior model year (rounded to the nearest 
1/10 mile per gallon).
    ``(C) Notwithstanding subparagraphs (A) and (B), the fleetwide 
average fuel economy standard for passenger automobiles manufactured by 
a manufacturer in a model year for that manufacturer's domestic fleet 
and for its foreign fleet as calculated under section 32904 as in 
effect before the date of enactment of the National Fuels Initiative 
shall not be less than 92 percent of the average fuel economy projected 
by the Secretary for the combined domestic and foreign fleets 
manufactured by all manufacturers in that model year.
    ``(3) If the actual aggregate level of average fuel economy 
achieved by manufacturers for each of 3 consecutive model years is at 
least 5 percent less than the projected aggregate level of average fuel 
economy for such model year, the Secretary shall make appropriate 
adjustments to the standards prescribed under this subsection.
    ``(4)(A) Notwithstanding paragraphs (1) through (3) and subsection 
(b), the Secretary of Transportation may prescribe a lower average fuel 
economy standard for 1 or more model years if the Secretary of 
Transportation, in consultation with the Secretary of Energy, 
determines that the minimum standards prescribed under paragraph (2) or 
(3) or subsection (b) for each model year--
            ``(i) are technologically unachievable;
            ``(ii) cannot be achieved without materially reducing the 
        overall safety of automobiles manufactured or sold in the 
        United States; or
            ``(iii) is shown, by clear and convincing evidence, not to 
        be cost effective.
    ``(B) If a lower standard is prescribed for a model year under 
subparagraph (A), such standard shall be the maximum standard that--
            ``(i) is technologically achievable;
            ``(ii) can be achieved without materially reducing the 
        overall safety of automobiles manufactured or sold in the 
        United States; and
            ``(iii) is cost effective.
    ``(5) In determining cost effectiveness under paragraph 
(4)(A)(iii), the Secretary of Transportation shall take into account 
the total value to the Nation of reduced petroleum use, including the 
value of reducing external costs of petroleum use, using a value for 
such costs equal to 50 percent of the value of a gallon of gasoline 
saved or the amount determined in an analysis of the external costs of 
petroleum use that considers--
            ``(A) value to consumers;
            ``(B) economic security;
            ``(C) national security;
            ``(D) foreign policy;
            ``(E) the impact of oil use--
                    ``(i) on sustained cartel rents paid to foreign 
                suppliers;
                    ``(ii) on long-run potential gross domestic product 
                due to higher normal-market oil price levels, including 
                inflationary impacts;
                    ``(iii) on import costs, wealth transfers, and 
                potential gross domestic product due to increased trade 
                imbalances;
                    ``(iv) on import costs and wealth transfers during 
                oil shocks;
                    ``(v) on macroeconomic dislocation and adjustment 
                costs during oil shocks;
                    ``(vi) on the cost of existing energy security 
                policies, including the management of the Strategic 
                Petroleum Reserve;
                    ``(vii) on the timing and severity of the oil 
                peaking problem;
                    ``(viii) on the risk, probability, size, and 
                duration of oil supply disruptions;
                    ``(ix) on OPEC strategic behavior and long-run oil 
                pricing;
                    ``(x) on the short term elasticity of energy demand 
                and the magnitude of price increases resulting from a 
                supply shock;
                    ``(xi) on oil imports, military costs, and related 
                security costs, including intelligence, homeland 
                security, sea lane security and infrastructure, and 
                other military activities;
                    ``(xii) on oil imports, diplomatic and foreign 
                policy flexibility, and connections to geopolitical 
                strife, terrorism, and international development 
                activities;
                    ``(xiii) all relevant environmental hazards under 
                the jurisdiction of the Environmental Protection 
                Agency; and
                    ``(xiv) on well-to-wheels urban and local air 
                emissions of `pollutants' and their uninternalized 
                costs;
            ``(F) the impact of the oil or energy intensity of the 
        United States economy on the sensitivity of the economy to oil 
        price changes, including the magnitude of gross domestic 
        product losses in response to short term price shocks or long 
        term price increases;
            ``(G) the impact of United States payments for oil imports 
        on political, economic, and military developments in unstable 
        or unfriendly oil exporting countries;
            ``(H) the uninternalized costs of pipeline and storage oil 
        seepage, and for risk of oil spills from production, handling, 
        and transport, and related landscape damage; and
            ``(I) additional relevant factors, as determined by the 
        Secretary.
    ``(6) When considering the value to consumers of a gallon of 
gasoline saved, the Secretary of Transportation may not use a value 
less than the greatest of--
            ``(A) the average national cost of a gallon of gasoline 
        sold in the United States during the 12-month period ending on 
        the date on which the new fuel economy standard is proposed;
            ``(B) the most recent weekly estimate by the Energy 
        Information Administration of the Department of Energy of the 
        average national cost of a gallon of gasoline (all grades) sold 
        in the United States; or
            ``(C) the gasoline prices projected by the Energy 
        Information Administration for the 20-year period beginning in 
        the year following the year in which the standards are 
        established.
    ``(7) In prescribing standards under this subsection, the Secretary 
may prescribe standards for 1 or more model years.
    ``(8)(A) Not later than December 31, 2016, the Secretary of 
Transportation, the Secretary of Energy, and the Administrator of the 
Environmental Protection Agency shall submit a joint report to Congress 
on the state of global automotive efficiency technology development, 
and on the accuracy of tests used to measure fuel economy of 
automobiles under section 32904(c), utilizing the study and assessment 
of the National Academy of Sciences referred to in subparagraph (B).
    ``(B) The Secretary shall enter into appropriate arrangements with 
the National Academy of Sciences to conduct a comprehensive study of 
the technological opportunities to enhance fuel economy and an analysis 
and assessment of the accuracy of fuel economy tests used by the 
Administrator of the Environmental Protection Agency to measure fuel 
economy for each model under section 32904(c). Such analysis and 
assessment shall identify any additional factors or methods that should 
be included in tests to measure fuel economy for each model to more 
accurately reflect actual fuel economy of automobiles. The Secretary 
and the Administrator of the Environmental Protection Agency shall 
furnish, at the request of the Academy, any information which the 
Academy determines to be necessary to conduct the study, analysis, and 
assessment under this subparagraph.
    ``(C) The report submitted under subparagraph (A) shall include--
            ``(i) the study of the National Academy of Sciences 
        referred to in subparagraph (B); and
            ``(ii) an assessment by the Secretary of technological 
        opportunities to enhance fuel economy and opportunities to 
        increase overall fleet safety.
    ``(D) The report submitted under subparagraph (A) shall identify 
and examine additional opportunities to reform the regulatory structure 
under this chapter, including approaches that seek to merge vehicle and 
fuel requirements into a single system that achieves equal or greater 
reduction in petroleum use and environmental benefits.
    ``(E) The report submitted under subparagraph (A) shall--
            ``(i) include conclusions reached by the Administrator of 
        the Environmental Protection Agency, as a result of detailed 
        analysis and public comment, on the accuracy of current fuel 
        economy tests;
            ``(ii) identify any additional factors that the 
        Administrator determines should be included in tests to measure 
        fuel economy for each model to more accurately reflect actual 
        fuel economy of automobiles; and
            ``(iii) include a description of options, formulated by the 
        Secretary and the Administrator, to incorporate such additional 
        factors in fuel economy tests in a manner that will not 
        effectively increase or decrease average fuel economy for any 
        automobile manufacturer.
    ``(F) There is authorized to be appropriated to the Secretary such 
amounts as are required to carry out the study, analysis, and 
assessment required by subparagraph (B).''; and
            (4) in subsection (g)(2), by striking ``(and submit the 
        amendment to Congress when required under subsection (c)(2) of 
        this section)''.
    (b) Conforming Amendments.--
            (1) In general.--Chapter 329 of title 49, United States 
        Code, is amended--
                    (A) in section 32903--
                            (i) by striking ``passenger'' each place it 
                        appears;
                            (ii) by striking ``section 32902(b)-(d) of 
                        this title'' each place it appears and 
                        inserting ``subsection (c) or (d) of section 
                        32902'';
                            (iii) by striking subsection (e); and
                            (iv) by redesignating subsection (f) as 
                        subsection (e); and
                    (B) in section 32904(a)--
                            (i) by striking ``passenger'' each place it 
                        appears; and
                            (ii) in paragraph (1), by striking 
                        ``subject to'' and all that follows through 
                        ``section 32902(b)-(d) of this title'' and 
                        inserting ``subsection (c) or (d) of section 
                        32902''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply to automobiles manufactured after model year 2011.

SEC. 107. CREDIT TRADING AND COMPLIANCE.

    (a) Credit Trading.--Section 32903(a) of title 49, United States 
Code, is amended--
            (1) by inserting ``Credits earned by a manufacturer under 
        this section may be sold to any other manufacturer and used as 
        if earned by that manufacturer; except that credits earned by a 
        manufacturer described in section 32904(b)(1)(A)(i) may not be 
        sold to or purchased by a manufacturer described in 
        32904(b)(1)(A)(ii),'' after ``earns credits.''; and
            (2) by striking ``3 consecutive model years immediately'' 
        each place it appears and inserting ``model years''.
    (b) Treatment of Imports.--
            (1) Conforming amendment.--Section 32904(b) is amended by 
        striking ``passenger'' each place it appears.
            (2) Applicability.--The amendments made by paragraph (1) 
        shall apply to automobiles manufactured after model year 2011.
    (c) Multi-Year Compliance Period.--Section 32904(c) of such title 
is amended--
            (1) by inserting ``(1)'' before ``The Administrator''; and
            (2) by adding at the end the following:
    ``(2) The Secretary, by rule, may allow a manufacturer to elect a 
multi-year compliance period of not more than 4 consecutive model years 
in lieu of the single model year compliance period otherwise applicable 
under this chapter.''.

SEC. 108. CONSUMER TAX CREDIT.

    (a) Elimination on Number of New Qualified Hybrid and Advanced Lean 
Burn Technology Vehicles Eligible for Alternative Motor Vehicle 
Credit.--
            (1) In general.--Section 30B of the Internal Revenue Code 
        of 1986 is amended--
                    (A) by striking subsection (f); and
                    (B) by redesignating subsections (g) through (j) as 
                subsections (f) through (i), respectively.
            (2) Conforming amendments.--
                    (A) Paragraphs (4) and (6) of section 30B(h) of 
                such Code are each amended by striking ``(determined 
                without regard to subsection (g))'' and inserting 
                ``determined without regard to subsection (f))''.
                    (B) Section 38(b)(25) of such Code is amended by 
                striking ``section 30B(g)(1)'' and inserting ``section 
                30B(f)(1)''.
                    (C) Section 55(c)(2) of such Code is amended by 
                striking ``section 30B(g)(2)'' and inserting ``section 
                30B(f)(2)''.
                    (D) Section 1016(a)(36) of such Code is amended by 
                striking ``section 30B(h)(4)'' and inserting ``section 
                30B(g)(4)''.
                    (E) Section 6501(m) of such Code is amended by 
                striking ``section 30B(h)(9)'' and inserting ``section 
                30B(g)(9)''.
    (b) Extension of Alternative Vehicle Credit for New Qualified 
Hybrid Motor Vehicles.--Paragraph (3) of section 30B(i) of such Code 
(as redesignated by subsection (a)) is amended by striking ``December 
31, 2009'' and inserting ``December 31, 2010''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2005, in taxable 
years ending after such date.

SEC. 109. ADVANCED TECHNOLOGY MOTOR VEHICLES MANUFACTURING CREDIT.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to foreign tax credit, 
etc.) is amended by adding at the end the following new section:

``SEC. 30D. ADVANCED TECHNOLOGY MOTOR VEHICLES MANUFACTURING CREDIT.

    ``(a) Credit Allowed.--There shall be allowed as a credit against 
the tax imposed by this chapter for the taxable year an amount equal to 
35 percent of the qualified investment of an eligible taxpayer for such 
taxable year.
    ``(b) Qualified Investment.--For purposes of this section--
            ``(1) In general.--The qualified investment for any taxable 
        year is equal to the incremental costs incurred during such 
        taxable year--
                    ``(A) to re-equip, expand, or establish any 
                manufacturing facility in the United States of the 
                eligible taxpayer to produce advanced technology motor 
                vehicles or to produce eligible components,
                    ``(B) for engineering integration performed in the 
                United States of such vehicles and components as 
                described in subsection (d),
                    ``(C) for research and development performed in the 
                United States related to advanced technology motor 
                vehicles and eligible components, and
                    ``(D) for employee retraining with respect to the 
                manufacturing of such vehicles or components 
                (determined without regard to wages or salaries of such 
                retrained employees).
            ``(2) Attribution rules.--In the event a facility of the 
        eligible taxpayer produces both advanced technology motor 
        vehicles and conventional motor vehicles, or eligible and non-
        eligible components, only the qualified investment attributable 
        to production of advanced technology motor vehicles and 
        eligible components shall be taken into account.
    ``(c) Definitions.--In this section:
            ``(1) Advanced technology motor vehicle.--The term 
        `advanced technology motor vehicle' means--
                    ``(A) any qualified electric vehicle (as defined in 
                section 30(c)(1)),
                    ``(B) any new qualified fuel cell motor vehicle (as 
                defined in section 30B(b)(3)),
                    ``(C) any new advanced lean burn technology motor 
                vehicle (as defined in section 30B(c)(3)),
                    ``(D) any new qualified hybrid motor vehicle (as 
                defined in section 30B(d)(2)(A) and determined without 
                regard to any gross vehicle weight rating),
                    ``(E) any new qualified alternative fuel motor 
                vehicle (as defined in section 30B(e)(4), including any 
                mixed-fuel vehicle (as defined in section 
                30B(e)(5)(B)), and
                    ``(F) any other motor vehicle using electric drive 
                transportation technology (as defined in paragraph 
                (3)).
            ``(2) Electric drive transportation technology.--The term 
        `electric drive transportation technology' means technology 
        used by vehicles that use an electric motor for all or part of 
        their motive power and that may or may not use off-board 
        electricity, such as battery electric vehicles, fuel cell 
        vehicles, engine dominant hybrid electric vehicles, plug-in 
        hybrid electric vehicles, and plug-in hybrid fuel cell 
        vehicles.
            ``(3) Eligible components.--The term `eligible component' 
        means any component inherent to any advanced technology motor 
        vehicle, including--
                    ``(A) with respect to any gasoline or diesel-
                electric new qualified hybrid motor vehicle--
                            ``(i) electric motor or generator;
                            ``(ii) power split device;
                            ``(iii) power control unit;
                            ``(iv) power controls;
                            ``(v) integrated starter generator; or
                            ``(vi) battery;
                    ``(B) with respect to any hydraulic new qualified 
                hybrid motor vehicle--
                            ``(i) accumulator or other energy storage 
                        device;
                            ``(ii) hydraulic pump;
                            ``(iii) hydraulic pump-motor assembly;
                            ``(iv) power control unit; and
                            ``(v) power controls;
                    ``(C) with respect to any new advanced lean burn 
                technology motor vehicle--
                            ``(i) diesel engine;
                            ``(ii) turbo charger;
                            ``(iii) fuel injection system; or
                            ``(iv) after-treatment system, such as a 
                        particle filter or NO<INF>X</INF> absorber; and
                    ``(D) with respect to any advanced technology motor 
                vehicle, any other component submitted for approval by 
                the Secretary.
            ``(4) Eligible taxpayer.--The term `eligible taxpayer' 
        means any taxpayer if more than 20 percent of the taxpayer's 
        gross receipts for the taxable year is derived from the 
        manufacture of motor vehicles or any component parts of such 
        vehicles.
    ``(d) Engineering Integration Costs.--For purposes of subsection 
(b)(1)(B), costs for engineering integration are costs incurred prior 
to the market introduction of advanced technology vehicles for 
engineering tasks related to--
            ``(1) establishing functional, structural, and performance 
        requirements for component and subsystems to meet overall 
        vehicle objectives for a specific application,
            ``(2) designing interfaces for components and subsystems 
        with mating systems within a specific vehicle application,
            ``(3) designing cost effective, efficient, and reliable 
        manufacturing processes to produce components and subsystems 
        for a specific vehicle application, and
            ``(4) validating functionality and performance of 
        components and subsystems for a specific vehicle application.
    ``(e) Limitation Based on Amount of Tax.--The credit allowed under 
subsection (a) for the taxable year shall not exceed the excess of--
            ``(1) the sum of--
                    ``(A) the regular tax liability (as defined in 
                section 26(b)) for such taxable year, plus
                    ``(B) the tax imposed by section 55 for such 
                taxable year and any prior taxable year beginning after 
                1986 and not taken into account under section 53 for 
                any prior taxable year, over
            ``(2) the sum of the credits allowable under subpart A and 
        sections 27, 30, and 30B for the taxable year.
    ``(f) 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.
    ``(g) No Double Benefit.--
            ``(1) Coordination with other deductions and credits.--
        Except as provided in paragraph (2), the amount of any 
        deduction or other credit allowable under this chapter for any 
        cost taken into account in determining the amount of the credit 
        under subsection (a) shall be reduced by the amount of such 
        credit attributable to such cost.
            ``(2) Research and development costs.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), any amount described in subsection 
                (b)(1)(C) taken into account in determining the amount 
                of the credit under subsection (a) for any taxable year 
                shall not be taken into account for purposes of 
                determining the credit under section 41 for such 
                taxable year.
                    ``(B) Costs taken into account in determining base 
                period research expenses.--Any amounts described in 
                subsection (b)(1)(C) taken into account in determining 
                the amount of the credit under subsection (a) for any 
                taxable year which are qualified research expenses 
                (within the meaning of section 41(b)) shall be taken 
                into account in determining base period research 
                expenses for purposes of applying section 41 to 
                subsequent taxable years.
    ``(h) Business Carryovers Allowed.--If the credit allowable under 
subsection (a) for a taxable year exceeds the limitation under 
subsection (e) for such taxable year, such excess (to the extent of the 
credit allowable with respect to property subject to the allowance for 
depreciation) shall be allowed as a credit carryback to each of the 15 
taxable years immediately preceding the unused credit year and as a 
carryforward to each of the 20 taxable years immediately following the 
unused credit year.
    ``(i) Special Rules.--For purposes of this section, rules similar 
to the rules of section 179A(e)(4) and paragraphs (1) and (2) of 
section 41(f) shall apply
    ``(j) Election Not To Take Credit.--No credit shall be allowed 
under subsection (a) for any property if the taxpayer elects not to 
have this section apply to such property.
    ``(k) Regulations.--The Secretary shall prescribe such regulations 
as necessary to carry out the provisions of this section.
    ``(l) Termination.--This section shall not apply to any qualified 
investment after December 31, 2010.''.
    (b) Conforming Amendments.--
            (1) Section 1016(a) of the Internal Revenue Code of 1986 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) to the extent provided in section 30D(g).''.
            (2) Section 6501(m) of such Code is amended by inserting 
        ``30D(k),'' after ``30C(e)(5),''.
            (3) 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. Advanced technology motor vehicles manufacturing credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts incurred in taxable years beginning after December 31, 
1999.

                TITLE II--USED OIL RE-REFINING AND REUSE

SEC. 201. DEFINITIONS.

    In this title:
            (1) Administrator.--The term ``Administrator'' means the 
        Administrator of the Environmental Protection Agency.
            (2) Re-refine.--The term ``re-refine'', with respect to the 
        treatment of used oil, means the process by which the physical 
        and chemical contaminants contained in used oil as a result of 
        previous use are removed to produce lubricating oil or another 
        oil.
            (3) Re-refinery.--The term ``re-refinery'' means a plant or 
        facility used for the purpose of re-refining used oil.
            (4) Reuse.--The term ``reuse'', with respect to used oil, 
        means any process by which oil is used after the original use 
        of the oil, including through re-refining, reprocessing, or 
        reclaiming.
            (5) Secretary.--The term ``Secretary'' means the Secretary 
        of Energy.
            (6) Used oil.--The term ``used oil'' means any oil that has 
        been refined from crude oil, or any synthetic oil, that is 
        contaminated by a physical or chemical impurity as a result of 
        the use of the oil.

SEC. 202. INFORMING PUBLIC.

    The Secretary shall develop a program under which the Secretary 
shall provide to the public information about the benefits of 
collecting, re-refining, and otherwise reusing used oil, including 
through--
            (1) the establishment of a website providing--
                    (A) a description of the benefits of re-refining or 
                otherwise reusing used oil;
                    (B) a list of used oil collection facilities, re-
                refiners, and other entities that reuse used oil; and
                    (C) links to State and local websites containing 
                other appropriate information;
            (2) publication and distribution of educational materials, 
        in English and other languages, describing--
                    (A) the benefits of collecting, re-refining, and 
                otherwise reusing used oil; and
                    (B) methods for ensuring the safe collection, 
                storage, transportation, and reuse of used oil; and
            (3) submission to Congress and publication of an annual 
        report describing measures carried out during the preceding 
        calendar year to increase the collection, re-refining, and 
        other reuse of used oil, including estimates of the energy 
        resources saved, and the quantity of emissions reduced, through 
        those measures.

SEC. 203. LABELING.

    Not later than January 1, 2009, the Secretary shall develop 
proposed guidelines, to take effect not later than January 1, 2010, for 
the labeling of re-refined lubricating oil, including establishment, 
and guidelines for use, of a re-refined label to be approved by the 
Secretary for lubricating oil that--
            (1) meets industry standards as in effect on the date of 
        enactment of this Act; and
            (2) contains base oil composed of not less than 50 percent 
        re-refined lubricating oil.

SEC. 204. COLLECTION FACILITIES.

    The Secretary, in cooperation with the Administrator, shall 
establish--
            (1) guidelines for the collection of used oil by facilities 
        in an environmentally safe manner; and
            (2) a process by which facilities may be certified to 
        collect used oil as part of a national used oil collection 
        network.

SEC. 205. INFORMATION EXCHANGE.

    (a) In General.--The Secretary, in cooperation with the 
Administrator, shall develop a program to facilitate the exchange of 
information among State and local agencies and the public concerning 
re-refining and other means of reusing used oil to enhance energy 
conservation and emissions reduction, including through--
            (1) the establishment of a clearinghouse for applicable 
        data and reports;
            (2) the development of best management practices; and
            (3) the convening of periodic conferences relating to re-
        refining and other reuse of used oil.
    (b) Rural and Farming Communities.--In carrying out subsection (a), 
the Secretary shall ensure that--
            (1) opportunities for re-refining and other reuse of used 
        oil in rural and farming communities are appropriately 
        considered; and
            (2) information regarding appropriate and cost-effective 
        measures to encourage those opportunities is made available to 
        State and local agencies and the public.

SEC. 206. USED OIL FROM FEDERAL AGENCIES.

    (a) In General.--Not later than 2 years after the date of enactment 
of this Act, the Secretary, in consultation with the Administrator of 
General Services, shall promulgate regulations requiring all Federal 
agencies and departments--
            (1) to collect used oil produced by the agencies and 
        departments, including used oil derived from federally owned 
        and operated vehicles; and
            (2) to re-refine and reuse that used oil in accordance with 
        the regulations.
    (b) Requirements.--The regulations promulgated pursuant to 
subsection (a) shall establish a preference by the Federal Government 
in the use and disposal of used oil, in a manner that does not 
constitute a threat to public health or the environment and that 
conserves energy and materials to the maximum extent practicable--
            (1) first, for re-refining used oil, unless the re-
        refining--
                    (A) is not reasonably available; or
                    (B) involves unreasonable costs compared to other 
                methods of reuse;
            (2) second, for other reuse of used oil, including burning 
        the used oil for energy recovery; and
            (3) third, for the disposal of used oil.

SEC. 207. USED OIL IN SPACE HEATERS.

    (a) Definition of Space Heater.--In this section, the term ``space 
heater'' means a heating device with a production capacity of at least 
500,000 Btus per hour that is capable of burning used oil or other 
fuel.
    (b) Study.--The Administrator shall conduct a study of the hazards 
to public health that the Administrator reasonably anticipates to occur 
as a result of emissions covered by the Clean Air Act (42 U.S.C. 7401 
et seq.) from space heaters that burn used oil, for energy recovery or 
other purposes.
    (c) Report.--Not later than 270 days after the date of enactment of 
this Act, the Administrator shall submit to Congress a report 
describing the results of the study under subsection (b), including--
            (1) a determination by the Administrator as to whether any 
        category of new or existing space heaters poses a risk to human 
        health or the environment; and
            (2) a description of alternative control strategies for 
        space heater emissions that could require regulation under this 
        section.

SEC. 208. EXTENSION AND MODIFICATION OF ELECTION TO EXPENSE CERTAIN 
              REFINERIES.

    (a) Modification of Definition of Qualified Refinery.--
            (1) In general.--Subsection (d) of section 179C of the 
        Internal Revenue Code of 1986 is amended to read as follows:
    ``(d) Qualified Refinery.--For purposes of this section, the term 
`qualified refinery' means any refinery located in the United States 
which is designed to serve the primary purpose of--
            ``(1) processing liquid fuel from crude oil or qualified 
        fuels (as defined in section 45K(c)), or
            ``(2) processing non-virgin lube oil from used, refined 
        products (including used lube oil originally derived from crude 
        oil or qualified fuels).''.
            (2) Conforming amendments.--
                    (A) Section 179C(e) of such Code amended--
                            (i) in paragraph (1), by inserting 
                        ``virgin'' before ``lube oil'', and
                            (ii) in paragraph (2), by inserting ``or 
                        other products from used refined products'' and 
                        ``section 45K(c))''.
                    (B) Section 179C(f)(1) of such Code is amended by 
                inserting ``virgin'' before ``lube oil facility''.
    (b) Special Rule for Qualified Refineries Processing Used 
Products.--Paragraph (1) of section 179C(c) of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new 
paragraph:
            ``(4) Special rule for qualified refineries processing used 
        products.--In the case of a qualified refinery described in 
        subsection (d)(2), paragraph (1) shall be applied--
                    ``(A) by substituting `2014' for `2012' in 
                subparagraph (B),
                    ``(B) by substituting `January 4, 2007' for `June 
                14, 2005' in subparagraphs (E) and (F), and
                    ``(C) by substituting `2010' for `2008' each place 
                it appears in subparagraph (F).''.
    (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.

SEC. 209. CREDIT FOR RE-REFINED LUBRICATING OIL FEEDSTOCK.

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

``SEC. 30D. CREDIT FOR RE-REFINED LUBRICATING OIL FEEDSTOCK.

    ``(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 the product of--
            ``(1) 20 cents, and
            ``(2) the excess of--
                    ``(A) number of gallons of qualified re-refined 
                lubricating oil feedstock sold by the taxpayer to a 
                qualified re-refined lubricating oil producer during 
                the taxable year, over
                    ``(B) the highest number of gallons of qualified 
                re-refined lubricating oil feedstock sold by the 
                taxpayer to a qualified re-refined lubricating oil 
                producer in any preceding taxable year beginning after 
                December 31, 2006.
    ``(b) Qualified Re-Refined Lubricating Oil Feedstock.--For purposes 
of this section--
            ``(1) In general.--The term `qualified re-refined 
        lubricating oil feedstock' means used lubricating oil which is 
        certified by the qualified re-refined lubricating oil producer 
        to which it is sold as suitable for re-refining for use in 
        engines.
            ``(2) Certifications.--
                    ``(A) Limitation on amount certified.--
                            ``(i) In general.--The amount of used 
                        lubricating oil which may be certified by a 
                        qualified re-refined lubricating oil producer 
                        for any calendar year may not exceed the 
                        refining capacity of such qualified re-refining 
                        lubricating oil producer for such calendar 
                        year.
                            ``(ii) Noncompliance with pollution laws.--
                        For purposes of clause (i), under regulations 
                        prescribed by the Secretary, the refining 
                        capacity of any refinery which is not in 
                        material compliance with the applicable State 
                        and Federal pollution prevention, control, and 
                        permit requirements for any period of time 
                        during a calendar year shall be reduced in 
                        proportion to the period of time during which 
                        such refinery is not in material compliance 
                        with such requirements.
                    ``(B) Reports.--Each qualified re-refined 
                lubricating oil producer shall file such reports 
                regarding certifications as the Secretary may by 
                regulations prescribe.
    ``(c) Qualified Re-Refined Lubricating Oil Producer.--For purposes 
of this section, the term `qualified re-refined lubricating oil 
producer' means any person who--
            ``(1) produces a base oil manufactured from at least 95 
        percent used lubricating oil and not more than 2 percent of 
        previously unused lubricating oil by a re-refining process 
        which effectively removes physical and chemical impurities and 
        spent and unspent additives, and
            ``(2) is registered with the Secretary as a qualified re-
        refined lubricating oil producer.''.
    (b) 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 at the end the following new item:

``Sec. 30D. Credit for re-refined lubricating oil feedstock.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to production after the date of the enactment of this Act.
                                 <all>