[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2149 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                S. 2149

   To amend the Energy Policy Act of 1992 to establish a program to 
provide incentives for projects to produce synthetic gas, liquid fuels, 
and other products from coal and other feedstocks while simultaneously 
reducing greenhouse gas emissions and reliance of the United States on 
           petroleum and natural gas, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 4, 2007

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

_______________________________________________________________________

                                 A BILL


 
   To amend the Energy Policy Act of 1992 to establish a program to 
provide incentives for projects to produce synthetic gas, liquid fuels, 
and other products from coal and other feedstocks while simultaneously 
reducing greenhouse gas emissions and reliance of the United States on 
           petroleum and natural gas, 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.

    This Act may be cited as the ``Coal Fuels and Industrial 
Gasification Demonstration and Development Act of 2007''.

SEC. 2. COAL INNOVATION PROGRAM.

    (a) In General.--Title XXXI of the Energy Policy Act of 1992 (42 
U.S.C. 13571 et seq.) is amended by adding at the end the following:

``SEC. 3105. COAL INNOVATION PROGRAM.

    ``(a) Definitions.--In this section:
            ``(1) Administrator.--The term `Administrator' means the 
        Administrator of the Environmental Protection Agency.
            ``(2) Carbon capture.--The term `carbon capture' means the 
        capture, separation, and compression of carbon dioxide that 
        would otherwise be released to the atmosphere at a facility in 
        the production of end products of a project prior to 
        transportation of the carbon dioxide to a long-term storage 
        site.
            ``(3) Coal-to-liquid product.--The term `coal-to-liquid 
        product' means a liquid fuel resulting from the conversion of a 
        feedstock, as described in this section.
            ``(4) Combustible end product.--The term `combustible end 
        product' means any product of a facility intended to be used as 
        a combustible fuel.
            ``(5) Conventional baseline emissions.--The term 
        `conventional baseline emissions' means--
                    ``(A) the lifecycle greenhouse gas emissions of a 
                facility that produces combustible end products, using 
                petroleum as a feedstock, that are equivalent to 
                combustible end products produced by a facility of 
                comparable size through an eligible project;
                    ``(B) in the case of noncombustible products 
                produced through an eligible project, the average 
                lifecycle greenhouse gas emissions emitted by projects 
                that--
                            ``(i) are of comparable size; and
                            ``(ii) produce equivalent products using 
                        conventional feedstocks; and
                    ``(C) in the case of synthesized gas intended for 
                use as a combustible fuel in lieu of natural gas 
                produced by an eligible project, the lifecycle 
                greenhouse gas emissions that would result from 
                equivalent use of natural gas.
            ``(6) Conventional feedstock.--
                    ``(A) In general.--The term `conventional 
                feedstock' means a traditional carbon-based feedstock 
                that--
                            ``(i) is supplied to any powerplant, oil 
                        refinery, or petrochemical production facility 
                        that is located in the United States as of the 
                        date of enactment of this section; and
                            ``(ii) could be made available in large 
                        quantities under a long-term contract.
                    ``(B) Inclusions.--The term `conventional 
                feedstock' includes--
                            ``(i) coal;
                            ``(ii) natural gas; and
                            ``(iii) crude oil.
                    ``(C) Exclusions.--The term `conventional 
                feedstock' does not include--
                            ``(i) petroleum coke; and
                            ``(ii) biomass.
            ``(7) Deep saline formation.--The term `deep saline 
        formation' means a measurable unit of rock that contains 
        nonpotable water that is--
                    ``(A) present in a stratigraphic column located 
                beneath any fresh potable water aquifer; and
                    ``(B) of a sufficient depth to store carbon dioxide 
                in a supercritical phase.
            ``(8) Eligible feedstock.--The term `eligible feedstock' 
        includes--
                    ``(A) coal;
                    ``(B) petroleum residue;
                    ``(C) renewable biomass; and
                    ``(D) any other combination of materials of which 
                coal is the predominant component with respect to 
                energy content.
            ``(9) Eligible project.--The term `eligible project' means 
        a project--
                    ``(A) that produces liquid transportation fuels, 
                industrial chemicals, or electricity; and
                    ``(B) for which--
                            ``(i) with respect to a project that is 
                        selected by the Secretary during a period 
                        described in subsection (b)(2)(C)(i) or 
                        subsection (c)(3)(C)(i)--
                                    ``(I) the annual lifecycle 
                                greenhouse gas emissions are not 
                                greater than conventional baseline 
                                emissions;
                                    ``(II) at least 70 percent of the 
                                carbon dioxide that would otherwise be 
                                released to the atmosphere at the 
                                facility in the production of end 
                                products from the project is captured 
                                for long-term storage; and
                                    ``(III) the individual or entity 
                                carrying out the eligible project has 
                                entered into an enforceable agreement 
                                with the Secretary to implement carbon 
                                capture at the percentage that, by the 
                                end of the 5-year period after 
                                commencement of commercial operation of 
                                the eligible project achieves a 
                                reduction in carbon emissions that is 
                                not less than 70 percent;
                            ``(ii) with respect to a project that is 
                        selected by the Secretary during a period 
                        described in subsection (b)(2)(C)(ii) or 
                        subsection (c)(3)(C)(ii)--
                                    ``(I) the annual lifecycle 
                                greenhouse gas emissions are at least 
                                15 percent lower than conventional 
                                baseline emissions;
                                    ``(II) at least 80 percent of the 
                                carbon dioxide that would otherwise be 
                                released to the atmosphere at the 
                                facility in the production of end 
                                products from the project is captured 
                                for long-term storage; and
                                    ``(III) the individual or entity 
                                carrying out the eligible project has 
                                entered into an enforceable agreement 
                                with the Secretary to implement carbon 
                                capture at the percentage that, by the 
                                end of the 5-year period after 
                                commencement of commercial operation of 
                                the eligible project achieves a 
                                reduction in carbon emissions that is 
                                not less than 80 percent; and
                            ``(iii) in the opinion of the Secretary, 
                        sufficient commitments have been secured to 
                        achieve long-term storage of captured carbon 
                        dioxide beginning as of the date of 
                        commencement of commercial operation of the 
                        project.
            ``(10) Facility.--The term `facility' means a facility at 
        which the conversion of feedstocks to end products takes place.
            ``(11) Gasification technology.--The term `gasification 
        technology' means any process that--
                    ``(A) converts coal, petroleum residue, renewable 
                biomass, or other material that is recovered for energy 
                or feedstock value into a synthesis gas composed 
                primarily of carbon monoxide and hydrogen for direct 
                use or subsequent chemical or physical conversion; and
                    ``(B) produces oxygen for the gasification, 
                conditioning, or cleanup of synthetic gas to prepare 
                the synthetic gas for downstream use.
            ``(12) Greenhouse gas.--The term `greenhouse gas' means any 
        of--
                    ``(A) carbon dioxide;
                    ``(B) methane;
                    ``(C) nitrous oxide;
                    ``(D) hydrofluorocarbons;
                    ``(E) perfluorocarbons; and
                    ``(F) sulfur hexafluoride.
            ``(13) Lifecycle greenhouse gas emissions.--The term 
        `lifecycle greenhouse gas emissions' means the aggregate 
        quantity of greenhouse gases directly attributable to the 
        production and transportation of end products at a facility, 
        including the production, extraction, cultivation, 
        distribution, and transportation of feedstocks, and the 
        subsequent distribution and use of any combustible end 
        products, as modified by deducting, as determined by the 
        Administrator--
                    ``(A) any greenhouse gases captured at the facility 
                and sequestered;
                    ``(B) the carbon content, expressed in units of 
                carbon dioxide equivalent, of any feedstock that is 
                renewable biomass;
                    ``(C) the carbon content, expressed in units of 
                carbon dioxide equivalent, of any end products that do 
                not result in the release of carbon dioxide to the 
                atmosphere; and
                    ``(D) the acreage of terrestrial sequestration that 
                is used to grow feedstocks to be used at the facility, 
                including soil-root carbon storage areas at which--
                            ``(i) biomass is grown on carbon-depleted 
                        soils; and
                            ``(ii) carbon is stored in the soil under 
                        which the biomass is grown.
            ``(14) Long-term storage.--The term `long-term storage' 
        means sequestration with an expected maximum rate of carbon 
        dioxide leakage over a specified period of time that is 
        consistent with the objective of reducing atmospheric 
        concentrations of carbon dioxide, subject to a permit issued 
        pursuant to law in effect as of the date of the sequestration.
            ``(15) Renewable biomass.--The term `renewable biomass' 
        means--
                    ``(A) nonmerchantable materials or precommercial 
                thinnings that--
                            ``(i) are byproducts of preventive 
                        treatments, such as trees, wood, brush, 
                        thinnings, chips, and slash, that are removed--
                                    ``(I) to reduce hazardous fuels;
                                    ``(II) to reduce or contain disease 
                                or insect infestation; or
                                    ``(III) to restore forest health;
                            ``(ii) would not otherwise be used for 
                        higher-value products; and
                            ``(iii) are harvested from National Forest 
                        System land or public lands (as defined in 
                        section 103 of the Federal Land Policy and 
                        Management Act of 1976 (43 U.S.C. 1702))--
                                    ``(I) where permitted by law; and
                                    ``(II) in accordance with--
                                            ``(aa) applicable land 
                                        management plans; and
                                            ``(bb) the requirements for 
                                        old-growth maintenance, 
                                        restoration, and management 
                                        direction of paragraphs (2), 
                                        (3), and (4) of subsection (e), 
                                        and the requirements for large-
                                        tree retention of subsection 
                                        (f), of section 102 of the 
                                        Healthy Forests Restoration Act 
                                        of 2003 (16 U.S.C. 6512); or
                    ``(B) any organic matter that is available on a 
                renewable or recurring basis from non-Federal land or 
                from land belonging to an Indian tribe, or an Indian 
                individual, that is held in trust by the United States 
                or subject to a restriction against alienation imposed 
                by the United States, including--
                            ``(i) renewable plant material, including--
                                    ``(I) feed grains;
                                    ``(II) agricultural commodities 
                                (including any crop that is planted as 
                                an energy crop);
                                    ``(III) plants and trees; and
                                    ``(IV) algae; and
                            ``(ii) waste material, including--
                                    ``(I) crop residue;
                                    ``(II) vegetative waste material 
                                (including wood waste and wood 
                                residues);
                                    ``(III) animal waste and byproducts 
                                (including fats, oils, greases, and 
                                manure); and
                                    ``(IV) food waste and yard waste.
            ``(16) Sequestration.--The term `sequestration' means the 
        placement of carbon dioxide in a geological formation, 
        including--
                    ``(A) an operating oil and gas field;
                    ``(B) coal bed methane recovery;
                    ``(C) a depleted oil and gas field;
                    ``(D) an unmineable coal seam;
                    ``(E) a deep saline formation; and
                    ``(F) a deep geological system.
            ``(17) Unmineable coal seam.--The term `unmineable coal 
        seam' means a coal seam that is--
                    ``(A) determined by the Secretary of the Interior 
                to be economically unrecoverable (including by any 
                foreseeable advance in mining technology); and
                    ``(B) located at a depth at which the temperature 
                and pressure at the coal seam are sufficient to 
                maintain carbon dioxide in a supercritical phase.
    ``(b) Financial Assistance Cooperative Agreement Program.--
            ``(1) In general.--Subject to paragraph (3), not later than 
        1 year after the date of the enactment of this section, the 
        Secretary shall carry out a program to provide grants for use 
        in obtaining or carrying out any services necessary for the 
        planning and permitting of an eligible project.
            ``(2) Selection of eligible projects.--
                    ``(A) In general.--In accordance with subparagraphs 
                (B) and (C), the Secretary shall select eligible 
                projects to receive grants under this subsection--
                            ``(i) through the conduct of a reverse 
                        auction, in which eligible projects proposed to 
                        be carried out that have the greatest 
                        percentage reduction of lifecycle greenhouse 
                        gas emissions in comparison to facilities that 
                        use conventional feedstocks and do not use 
                        carbon capture and sequestration technologies, 
                        are given priority;
                            ``(ii) that, taken together, would--
                                    ``(I) represent a variety of 
                                geographical regions;
                                    ``(II) represent a variety of 
                                facilities, each of which is capable of 
                                producing a different quantity of 
                                synthetic gas, liquid fuel, or other 
                                product from coal and other feedstocks;
                                    ``(III) use a variety of feedstocks 
                                and types of coal; and
                                    ``(IV) to the extent consistent 
                                with achieving long-term storage, 
                                represent a variety of geological 
                                formations; and
                            ``(iii) for which eligible projects, in the 
                        opinion of the Secretary--
                                    ``(I) each award recipient is 
                                financially viable without the receipt 
                                of additional Federal funding 
                                associated with the proposed project;
                                    ``(II) each recipient will provide 
                                sufficient information to the Secretary 
                                for the Secretary to ensure that the 
                                qualified investment is expended 
                                efficiently and effectively;
                                    ``(III) a market exists for the 
                                products of the proposed project, as 
                                evidenced by contracts or written 
                                statements of intent from potential 
                                customers;
                                    ``(IV) the project team of each 
                                recipient is competent in the 
                                construction and operation of the 
                                gasification technology proposed; and
                                    ``(V) each recipient has met such 
                                other criteria as may be established 
                                and published by the Secretary.
                    ``(B) Special consideration.--In selecting eligible 
                projects under subparagraph (A), the Secretary shall 
                give special consideration to projects that--
                            ``(i) include a feedstock that is comprised 
                        of a quantity of biomass that is greater than 5 
                        percent of the total quantity of the feedstock 
                        (as measured by the weight of the feedstock); 
                        or
                            ``(ii) participate in a regional carbon 
                        sequestration partnership, as described in the 
                        notice entitled `Notice of Availability of a 
                        Financial Assistance Solicitation' (67 Fed. 
                        Reg. 71540 (December 2, 2002)).
                    ``(C) Authorized quantity of eligible projects.--In 
                carrying out subparagraph (A), the Secretary shall--
                            ``(i) for the 5-year period beginning on 
                        the date that is 1 year after the date of 
                        enactment of this section, select a quantity of 
                        not more than 3 eligible projects; and
                            ``(ii) for the 5-year period beginning on 
                        the date that is 6 years after the date of 
                        enactment of this section, select a quantity of 
                        not more than 3 eligible projects.
            ``(3) Maximum amount of grants.--In carrying out this 
        subsection, the Secretary shall provide not more than--
                    ``(A) $20,000,000 in grant funds for any eligible 
                project; and
                    ``(B) $120,000,000 in grant funds, in the 
                aggregate, for all eligible projects.
    ``(c) Direct Loan Program.--
            ``(1) In general.--Not later than 1 year after the date of 
        enactment of this section, and subject to funds being made 
        available in advance through appropriations Acts, the Secretary 
        shall carry out a program to provide a total of not more than 
        $10,000,000,000 in loans to eligible individuals and entities 
        (as determined by the Secretary) for use in carrying out 
        eligible projects.
            ``(2) Application.--To receive a loan from the Secretary 
        under paragraph (1), an applicant shall submit to the Secretary 
        an application at such time, in such manner, and containing 
        such information as the Secretary may require, including a 
        written assurance that--
                    ``(A) all laborers and mechanics employed by 
                contractors or subcontractors during construction, 
                alteration, or repair that is financed, in whole or in 
                part, by a loan under this subsection shall be paid 
                wages at rates that are not less than those prevailing 
                on similar construction in the locality, as determined 
                by the Secretary of Labor in accordance with sections 
                3141 through 3144, 3146, and 3147 of title 40, United 
                States Code; and
                    ``(B) the Secretary of Labor shall, with respect to 
                the labor standards described in this paragraph, have 
                the authority and functions set forth in Reorganization 
                Plan Numbered 14 of 1950 (5 U.S.C. App.) and section 
                3145 of title 40, United States Code.
            ``(3) Selection of eligible projects.--
                    ``(A) In general.--In accordance with subparagraphs 
                (B) and (C), the Secretary shall select eligible 
                projects to receive loans under this subsection--
                            ``(i) through the conduct of a reverse 
                        auction, in which eligible projects proposed to 
                        be carried out that have the greatest 
                        percentage reduction of lifecycle greenhouse 
                        gas emissions in comparison to facilities that 
                        use conventional feedstocks and do not use 
                        carbon capture and sequestration technologies, 
                        are given priority;
                            ``(ii) that, taken together, would--
                                    ``(I) represent a variety of 
                                geographic regions;
                                    ``(II) represent a variety of 
                                facilities, each of which is capable of 
                                producing a different quantity of 
                                synthetic gas, liquid fuel, or other 
                                product from coal and other feedstocks;
                                    ``(III) use a variety of types of 
                                feedstocks and coal; and
                                    ``(IV) to the extent consistent 
                                with achieving long-term storage, 
                                represent a variety of geological 
                                formations; and
                            ``(iii) for which eligible projects, in the 
                        opinion of the Secretary--
                                    ``(I) each award recipient is 
                                financially viable without the receipt 
                                of additional Federal funding 
                                associated with the proposed project;
                                    ``(II) each recipient will provide 
                                sufficient information to the Secretary 
                                for the Secretary to ensure that the 
                                qualified investment is expended 
                                efficiently and effectively;
                                    ``(III) a market exists for the 
                                products of the proposed project, as 
                                evidenced by contracts or written 
                                statements of intent from potential 
                                customers;
                                    ``(IV) the project team of each 
                                recipient is competent in the 
                                construction and operation of the 
                                gasification technology proposed; and
                                    ``(V) each recipient has met such 
                                other criteria as may be established 
                                and published by the Secretary.
                    ``(B) Special consideration.--In selecting eligible 
                projects under subparagraph (A), the Secretary shall 
                give special consideration to projects that--
                            ``(i) include a feedstock that is comprised 
                        of a quantity of biomass that is greater than 5 
                        percent of the total quantity of the feedstock 
                        (as measured by the weight of the feedstock); 
                        or
                            ``(ii) participate in a regional carbon 
                        sequestration partnership, as described in the 
                        notice entitled `Notice of Availability of a 
                        Financial Assistance Solicitation' (67 Fed. 
                        Reg. 71540 (December 2, 2002)).
                    ``(C) Authorized quantity of eligible projects.--In 
                carrying out subparagraph (A), the Secretary shall--
                            ``(i) for the 5-year period beginning on 
                        the date that is 1 year after the date of 
                        enactment of this section, select a quantity of 
                        not more than 3 eligible projects; and
                            ``(ii) for the 5-year period beginning on 
                        the date that is 6 years after the date of 
                        enactment of this section, select a quantity of 
                        not more than 3 eligible projects.
            ``(4) Use of loan funds.--
                    ``(A) In general.--Subject to subparagraph (B), 
                funds from a loan provided under this subsection may be 
                used to pay up to 100 percent of the costs of capital 
                associated with reducing lifecycle greenhouse gas 
                emissions at the facility (including carbon dioxide 
                capture, compression, and long-term storage, 
                cogeneration, and gasification of biomass) carried out 
                as part of an eligible project, including--
                            ``(i) equipment relating to--
                                    ``(I) the air separation unit of 
                                the facility;
                                    ``(II) the separation or capture of 
                                carbon dioxide;
                                    ``(III) the purification or drying 
                                of carbon dioxide;
                                    ``(IV) the compression of carbon 
                                dioxide;
                                    ``(V) the long-term storage of 
                                carbon dioxide;
                                    ``(VI) the cogeneration of electric 
                                power;
                                    ``(VII) the cleanup of synthetic 
                                gas at the facility; and
                                    ``(VIII) the water-gas shift 
                                reactor of the facility;
                            ``(ii) fuel handling equipment that is used 
                        for--
                                    ``(I) cofeeding coal and biomass to 
                                a gasification system; and
                                    ``(II) feeding biomass to a 
                                gasification system; and
                            ``(iii) a gasification system that is 
                        designed--
                                    ``(I) to operate with equipment 
                                that is used for the cofeeding of coal 
                                and biomass in producing an acceptable 
                                syngas for the production of liquid 
                                fuels, industrial chemicals, or 
                                electronic power; and
                                    ``(II) to operate with biomass.
                    ``(B) Total project cost.--Funds from a loan 
                provided under this subsection may not be used to pay 
                more than 50 percent of the total cost of an eligible 
                project.
            ``(5) Rates, terms, and repayment of loans.--A loan 
        provided under this subsection--
                    ``(A) shall have an interest rate that, as of the 
                date on which the loan is made, is equal to the cost of 
                funds to the Department of the Treasury for obligations 
                of comparable maturity;
                    ``(B) shall have a term equal to the lesser of--
                            ``(i) the projected life, in years, of the 
                        eligible project to be carried out using funds 
                        from the loan, as determined by the Secretary; 
                        and
                            ``(ii) 25 years;
                    ``(C) may be subject to a deferral in repayment for 
                not more than 5 years after the date on which the 
                eligible project carried out using funds from the loan 
                first begins operations, as determined by the 
                Secretary; and
                    ``(D) shall be made on the condition that the 
                Secretary shall be subrogated to the rights of the 
                recipient of the payment as specified in the loan or 
                related agreements, including, as appropriate, the 
                authority (notwithstanding any other provision of 
                law)--
                            ``(i) to complete, maintain, operate, 
                        lease, or otherwise dispose of any property 
                        acquired pursuant to the guarantee or a related 
                        agreement; or
                            ``(ii) to permit the borrower, pursuant to 
                        an agreement with the Secretary, to continue to 
                        pursue the purposes of the project, if the 
                        Secretary determines the pursuit to be in the 
                        public interest.
    ``(d) Methodology.--
            ``(1) In general.--Not later than 18 months after the date 
        of enactment of this section, in accordance with paragraph (2), 
        the Administrator, in consultation with the Secretary and the 
        Secretary of Defense, shall, by regulation, establish a 
        methodology for use in determining the lifecycle greenhouse gas 
        emissions of coal-derived liquid transportation fuels and other 
        products produced using--
                    ``(A) coal gasification technology;
                    ``(B) coal and biomass gasification technology;
                    ``(C) the Fischer-Tropsch technology; and
                    ``(D) any other technology that is in commercial 
                use.
            ``(2) Participation of certain individuals and entities.--
        In establishing the methodology described in paragraph (1), the 
        Administrator, in consultation with the Secretary and the 
        Secretary of Defense, shall seek the participation of, and 
        consider comments provided by--
                    ``(A) individuals representing private sector 
                organizations that may be affected by the methodology; 
                and
                    ``(B) any other individual or entity that 
                represents an interested organization.
    ``(e) Reporting Requirements.--
            ``(1) In general.--Not later than 180 days after the date 
        on which an eligible project receives from the Secretary funds 
        from a grant under subsection (b) or a loan under subsection 
        (c), and each 90-day period thereafter, in accordance with 
        paragraph (2), the individual or entity carrying out the 
        eligible project shall submit to the Administrator a report 
        that contains, for the period covered by the report--
                    ``(A) a description of--
                            ``(i) the quantity and type of fossil fuels 
                        and non-carbon dioxide greenhouse gases 
                        produced, refined, imported, exported, and 
                        consumed by the eligible project;
                            ``(ii) the greenhouse gas emissions in 
                        metric tons of each greenhouse gas emitted and 
                        in metric tons of carbon dioxide equivalent of 
                        each greenhouse gas emitted by the eligible 
                        project, measured using monitoring systems for 
                        fuel flow or emissions that use--
                                    ``(I) continuous emission 
                                monitoring; or
                                    ``(II) an equivalent system of 
                                comparable rigor, accuracy, and 
                                quality; and
                            ``(iii) the quantity and type of--
                                    ``(I) feedstock fossil fuel 
                                consumption of the eligible project; 
                                and
                                    ``(II) process emissions of the 
                                eligible project; and
                    ``(B) any other data necessary for accurate 
                accounting of greenhouse gas emissions, as determined 
                by the Administrator.
            ``(2) Electronic submission of report.--An individual or 
        entity carrying out an eligible project described in paragraph 
        (1) shall electronically submit to the Administrator each 
        report required under that paragraph in such form and in such 
        manner as may be required by the Administrator.
            ``(3) No effect on other requirements.--Nothing in this 
        subsection affects any requirement in effect as of the date of 
        enactment of this section relating to the reporting of--
                    ``(A) fossil fuel production, refining, 
                importation, exportation, or consumption data;
                    ``(B) greenhouse gas emission data; or
                    ``(C) other relevant data.
    ``(f) Study of Maintaining Coal-to-Liquid Products in Strategic 
Petroleum Reserve.--Not later than 1 year after the date of enactment 
of this section, the Secretary and the Secretary of Defense shall--
            ``(1) conduct a study of the feasibility and suitability of 
        maintaining coal-to-liquid products in the Strategic Petroleum 
        Reserve; and
            ``(2) submit to the Committee on Energy and Natural 
        Resources and the Committee on Armed Services of the Senate and 
        the Committee on Energy and Commerce and the Committee on Armed 
        Services of the House of Representatives a report describing 
        the results of the study.
    ``(g) Report on Emissions of Coal-to-Liquid Products Used as 
Transportation Fuels.--
            ``(1) In general.--The Administrator, in cooperation with 
        the Secretary, the Secretary of Defense, and the Administrator 
        of the Federal Aviation Administration, shall--
                    ``(A) carry out a research and demonstration 
                program to evaluate the emissions of the use of coal-
                to-liquid fuel for transportation, including gasoline, 
                diesel, marine, and jet fuel;
                    ``(B) evaluate the effect of using coal-to-liquid 
                transportation fuel on emissions of vehicles, including 
                motor vehicles and nonroad vehicles, and aircraft (as 
                those terms are defined in sections 216 and 234, 
                respectively, of the Clean Air Act (42 U.S.C. 7550, 
                7574)); and
                    ``(C) in accordance with paragraph (4), and not 
                later than 540 days after the date of enactment of this 
                section, submit to Congress a report on the effect on 
                air and water quality, water scarcity, land use, and 
                public health of using coal-to-liquid fuel in the 
                transportation sector.
            ``(2) Guidance and technical support.--The Administrator, 
        in consultation with the Secretary, shall issue any guidance or 
        technical support documents necessary to facilitate the 
        effective use of coal-to-liquid fuel and blends under this 
        subsection.
            ``(3) Requirements.--The program described in paragraph 
        (1)(A) shall take into consideration--
                    ``(A) the use of neat (100 percent) coal-to-liquid 
                fuel and blends of coal-to-liquid fuels with 
                conventional crude oil-derived fuel for heavy-duty and 
                light-duty diesel engines, gasoline engines, marine 
                propulsion, and the aviation sector;
                    ``(B) the production costs associated with domestic 
                production of those fuels and prices for consumers; and
                    ``(C) the overall greenhouse gas effects of--
                            ``(i) substituting coal-derived fuels for 
                        crude oil-derived fuels;
                            ``(ii) using carbon capture and storage 
                        technologies; and
                            ``(iii) including biomass as a feedstock in 
                        the production process of the fuels.
            ``(4) Reports.--The Administrator shall submit to the 
        Committee on Energy and Natural Resources of the Senate and the 
        Committee on Energy and Commerce of the House of 
        Representatives--
                    ``(A) not later than 180 days after the date of 
                enactment of this section, an interim report on actions 
                taken to carry out this subsection; and
                    ``(B) not later than 1 year after the date of 
                enactment of this section, a final report on actions 
                taken to carry out this subsection.
    ``(h) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as are necessary to carry out this section.''.
    (b) Conforming Amendment.--The table of contents of the Energy 
Policy Act of 1992 (42 U.S.C. prec. 13201) is amended by adding at the 
end of the items relating to title XXXI the following:

``Sec. 3105. Coal innovation program.''.

SEC. 3. TAX CREDIT FOR CARBON DIOXIDE SEQUESTRATION.

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

``SEC. 45O. CREDIT FOR CARBON DIOXIDE SEQUESTRATION.

    ``(a) General Rule.--For purposes of section 38, the carbon dioxide 
sequestration credit for any taxable year is an amount equal to the sum 
of--
            ``(1) $20 per metric ton of qualified carbon dioxide which 
        is--
                    ``(A) captured by the taxpayer at a qualified 
                facility, and
                    ``(B) disposed of by the taxpayer in secure 
                geological storage, and
            ``(2) $10 per metric ton of qualified carbon dioxide which 
        is--
                    ``(A) captured by the taxpayer at a qualified 
                facility, and
                    ``(B) used by the taxpayer as an injectant in a 
                qualified enhanced oil or natural gas recovery project.
    ``(b) Qualified Carbon Dioxide.--For purposes of this section--
            ``(1) In general.--The term `qualified carbon dioxide' 
        means carbon dioxide captured from an industrial source which--
                    ``(A) would otherwise be released into the 
                atmosphere as industrial emission of greenhouse gas, 
                and
                    ``(B) is measured at the source of capture and 
                verified at the point of disposal or injection.
            ``(2) Recycled carbon dioxide.--The term `qualified carbon 
        dioxide' includes the initial deposit of captured carbon 
        dioxide used as a tertiary injectant. Such term does not 
        include carbon dioxide that is re-captured, recycled, and re-
        injected as part of the enhanced oil and natural gas recovery 
        process.
    ``(c) Qualified Facility.--For purposes of this section, the term 
`qualified facility' means any industrial facility--
            ``(1) which is owned by the taxpayer,
            ``(2) at which carbon capture equipment is placed in 
        service, and
            ``(3) which captures not less than 500,000 metric tons of 
        carbon dioxide during the taxable year.
    ``(d) Special Rules and Other Definitions.--For purposes of this 
section--
            ``(1) Only carbon dioxide captured within the united states 
        taken into account.--The credit under this section shall apply 
        only with respect to qualified carbon dioxide the capture of 
        which is within--
                    ``(A) the United States (within the meaning of 
                section 638(1)), or
                    ``(B) a possession of the United States (within the 
                meaning of section 638(2)).
            ``(2) Secure geological storage.--The Secretary, in 
        consultation with the Administrator of the Environmental 
        Protection Agency, shall establish regulations for determining 
        adequate security measures for the geological storage of carbon 
        dioxide under subsection (a)(1)(B) such that the carbon dioxide 
        does not escape into the atmosphere. Such term shall include 
        storage at deep saline formations and unmineable coal seems 
        under such conditions as the Secretary may determine under such 
        regulations.
            ``(3) Qualified enhanced oil or natural gas recovery 
        project.--The term `qualified enhanced oil or natural gas 
        recovery project' has the meaning given the term `qualified 
        enhanced oil recovery project' by section 43(c)(2), by 
        substituting `crude oil or natural gas' for `crude oil' in 
        subparagraph (A)(i) thereof.
            ``(4) Credit attributable to taxpayer.--Any credit under 
        this section shall be attributable to the person that captures 
        and physically or contractually ensures the disposal of or the 
        use as a tertiary injectant of the qualified carbon dioxide, 
        except to the extent provided in regulations prescribed by the 
        Secretary.
            ``(5) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit allowable 
        under subsection (a) with respect to any qualified carbon 
        dioxide which ceases to be captured, disposed of, or used as a 
        tertiary injectant in a manner consistent with the requirements 
        of this section.
            ``(6) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2008, there shall be 
        substituted for each dollar amount contained in subsection (a) 
        an amount equal to the product of--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the inflation adjustment factor for such 
                calendar year determined under section 43(b)(3)(B) for 
                such calendar year, determined by substituting `2007' 
                for `1990'.
    ``(e) Application of Section.--The credit under this section shall 
apply with respect to qualified carbon dioxide before the end of the 
calendar year in which the Secretary, in consultation with the 
Administrator of the Environmental Protection Agency, certifies that 
75,000,000 metric tons of qualified carbon dioxide have been captured 
and disposed of or used as a tertiary injectant.''.
    (b) Conforming Amendment.--Section 38(b) of the Internal Revenue 
Code of 1986 (relating to general business credit) 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 of following new paragraph:
            ``(32) the carbon dioxide sequestration credit determined 
        under section 45O(a).''.
    (c) Clerical Amendment.--The table of sections for 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. 45O. Credit for carbon dioxide sequestration.''.
    (d) Effective Date.--The amendments made by this section shall 
apply carbon dioxide captured after the date of the enactment of this 
Act.

SEC. 4. SEVEN-YEAR APPLICABLE RECOVERY PERIOD FOR DEPRECIATION OF 
              QUALIFIED CARBON DIOXIDE PIPELINE PROPERTY.

    (a) In General.--Section 168(e)(3)(C) of the Internal Revenue Code 
of 1986 (defining 7-year property) is amended by striking ``and'' at 
the end of clause iv), by striking the period at the end of clause 
(vi)(III) and inserting ``, and'', and by inserting after clause (vi) 
the following new clause:
                            ``(vii) any qualified carbon dioxide 
                        pipeline property--
                                    ``(I) the original use of which 
                                commences with the taxpayer after the 
                                date of the enactment of this clause,
                                    ``(II) the original purpose of 
                                which is to transport carbon dioxide, 
                                and
                                    ``(III) which is placed in service 
                                before January 1, 2014.''.
    (b) Definition of Qualified Carbon Dioxide Pipeline Property.--
Section 168(e) of the Internal Revenue Code of 1986 (relating to 
classification of property) is amended by inserting at the end the 
following new paragraph:
            ``(8) Qualified carbon dioxide pipeline property.--The term 
        `qualified carbon dioxide pipeline property' means property 
        which is used in the United States solely to transmit qualified 
        carbon dioxide (as defined in section 45O(b)) from the point of 
        capture to the point of disposal (as described in section 
        45O(a)(1)(B)) or the point at which such qualified carbon 
        dioxide is used as a tertiary injectant (as described in 
        section 45O(a)(2)(B)).''.
    (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. 5. CERTAIN INCOME AND GAINS RELATING TO INDUSTRIAL SOURCE CARBON 
              DIOXIDE TREATED AS QUALIFYING INCOME FOR PUBLICLY TRADED 
              PARTNERSHIPS.

    (a) In General.--Subparagraph (E) of section 7704(d)(1) of the 
Internal Revenue Code of 1986 (defining qualifying income) is amended 
by inserting ``or industrial source carbon dioxide'' after ``timber)''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act, in taxable years 
ending after such date.

SEC. 6. EXTENSION AND MODIFICATION OF ALTERNATIVE FUEL CREDIT.

    (a) Extension.--
            (1) Alternative fuel credit.--Paragraph (4) of section 
        6426(d) of the Internal Revenue Code of 1986 (relating to 
        alternative fuel credit) is amended by striking ``September 30, 
        2009'' and inserting ``September 30, 2019''.
            (2) Alternative fuel mixture credit.--Paragraph (3) of 
        section 6426(e) of such Code (relating to alternative fuel 
        mixture credit) is amended by striking ``September 30, 2009'' 
        and inserting ``September 30, 2019''.
            (3) Payments.--Subparagraph (C) of section 6427(e)(5) of 
        such Code (relating to termination) is amended by striking 
        ``September 30, 2009'' and inserting ``September 30, 2019''.
    (b) Modifications.--
            (1) Alternative fuel to include compressed or liquified 
        biomass gas.--Paragraph (2) of section 6426(d) of the Internal 
        Revenue Code of 1986 (relating to alternative fuel credit) is 
        amended by striking ``and'' at the end of subparagraph (E), by 
        redesignating subparagraph (F) as subparagraph (G), and by 
        inserting after subparagraph (E) the following new 
        subparagraph:
                    ``(F) compressed or liquified biomass gas, and''.
            (2) Credit allowed for aviation use of fuel.--Paragraph (1) 
        of section 6426(d) of such Code is amended by inserting ``sold 
        by the taxpayer for use as a fuel in aviation,'' after 
        ``motorboat,''.
    (c) Carbon Capture Requirement for Certain Fuels.--
            (1) In general.--Subsection (d) of section 6426 of the 
        Internal Revenue Code of 1986, as amended by subsection (a), is 
        amended by redesignating paragraph (4) as paragraph (5) and by 
        inserting after paragraph (3) the following new paragraph:
            ``(4) Carbon capture requirement.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if the fuel is certified, under such 
                procedures as required by the Secretary, as having been 
                produced at a facility which separates and sequesters 
                not less than the applicable percentage of such 
                facility's total carbon dioxide emissions.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage is--
                            ``(i) in the case of fuel produced after 
                        the date of enactment of this paragraph and 
                        before January 1, 2014, 70 percent, and
                            ``(ii) in the case of fuel produced after 
                        December 31, 2013, 80 percent.''.
            (2) Conforming amendment.--Subparagraph (E) of section 
        6426(d)(2) of such Code is amended by inserting ``which meets 
        the requirements of paragraph (4) and which is'' after ``any 
        liquid fuel''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to fuel sold or 
        used after the date of the enactment of this Act.
            (2) Carbon capture requirements.--The amendments made by 
        subsection (c) shall apply to fuel sold or used after December 
        31, 2007.
                                 <all>