[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 559 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                 S. 559

 To promote the production and use of renewable energy, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 10, 2011

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

_______________________________________________________________________

                                 A BILL


 
 To promote the production and use of renewable energy, 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) In General.--This Act may be cited as the ``Securing America's 
Future with Energy and Sustainable Technologies Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Definition of Secretary.
                    TITLE I--RENEWABLE FUEL PROGRAM

Sec. 101. Definition of advanced biofuel.
Sec. 102. Biomass-based diesel.
Sec. 103. International indirect land use changes.
Sec. 104. Modification of definition of renewable biomass.
             TITLE II--PRODUCTION AND USE OF RENEWABLE FUEL

Sec. 201. Loan guarantees for projects to construct renewable fuel 
                            pipelines.
Sec. 202. Open fuel standard for transportation.
Sec. 203. Tax incentives for qualified blender pumps.
Sec. 204. Blender pump installation.
               TITLE III--RENEWABLE ENERGY TAX EXTENSIONS

Sec. 301. Modification of credit for alcohol used as fuel.
Sec. 302. Reform of biodiesel income tax incentives.
Sec. 303. Reform of biodiesel excise tax incentives.
Sec. 304. Biodiesel treated as taxable fuel.
           TITLE IV--RENEWABLE ELECTRICITY INTEGRATION CREDIT

Sec. 401. Renewable electricity integration credit.
                          TITLE V--WIND ENERGY

Sec. 501. Removal of certain tax restrictions to promote expansion of 
                            capital for wind farm investment.
    TITLE VI--RENEWABLE ELECTRICITY AND ENERGY EFFICIENCY RESOURCE 
                               STANDARDS

Sec. 601. Renewable electricity and energy efficiency resource 
                            standards.
Sec. 602. Energy efficiency resource standard for retail electricity 
                            and natural gas distributors.
Sec. 603. Voluntary renewable energy markets.

SEC. 2. DEFINITION OF SECRETARY.

    In this Act, the term ``Secretary'' means the Secretary of Energy.

                    TITLE I--RENEWABLE FUEL PROGRAM

SEC. 101. DEFINITION OF ADVANCED BIOFUEL.

    Section 211(o)(1)(B) of the Clean Air Act (42 U.S.C. 7545(o)(1)(B)) 
is amended--
            (1) in clause (i), by striking ``, other than ethanol 
        derived from corn starch,''; and
            (2) in clause (ii)(II), by striking ``(other than corn 
        starch)''.

SEC. 102. BIOMASS-BASED DIESEL.

    Section 211(o)(2)(A) of the Clean Air Act (42 U.S.C. 7545(o)(2)(A)) 
is amended by adding at the end the following:
                            ``(v) Grandfathering biomass-based 
                        diesel.--The Administrator shall promulgate 
                        regulations that exempt from the lifecycle 
                        greenhouse gas requirements of subparagraphs 
                        (B) and (D) of paragraph (1) up to the greater 
                        of 1,000,000,000 gallons or the volume mandate 
                        adopted pursuant to subparagraph (B)(ii), of 
                        biomass-based diesel annually from facilities 
                        that commenced construction before December 19, 
                        2007.''.

SEC. 103. INTERNATIONAL INDIRECT LAND USE CHANGES.

    Section 211(o) of the Clean Air Act (42 U.S.C. 7545(o)) is amended 
by adding at the end the following:
            ``(13) International indirect land use changes.--
                    ``(A) Exclusion from regulatory requirements 
                regarding lifecycle greenhouse gas emissions.--
                Notwithstanding the definition of `lifecycle greenhouse 
                gas emissions' in paragraph (1)(H), for purposes of 
                determining whether a fuel meets a definition under 
                paragraph (1) or complies with paragraph (2)(A)(i), the 
                Administrator shall exclude emissions from indirect 
                land use changes outside the country of origin of the 
                feedstock of a renewable fuel.
                    ``(B) National academies of science report.--
                            ``(i) In general.--Not later than 180 days 
                        after the date of enactment of this paragraph, 
                        the Administrator and the Secretary of 
                        Agriculture shall jointly arrange for the 
                        National Academies of Science to review and 
                        report on specified issues relating to indirect 
                        greenhouse gas emissions relating to 
                        transportation fuels.
                            ``(ii) Models and methodologies.--The 
                        report shall evaluate and report on whether 
                        there are economic and environmental models and 
                        methodologies that individually, or as a 
                        system, can project with reliability, 
                        predictability, and confidence--
                                    ``(I) for purposes of determining 
                                whether a fuel meets a definition under 
                                paragraph (1) or complies with 
                                paragraph (2)(A)(i), indirect land use 
                                changes that are related to the 
                                production of renewable fuels and that 
                                may occur outside the country in which 
                                the feedstocks are grown, and the 
                                impacts of those changes on greenhouse 
                                gas emissions; and
                                    ``(II) indirect effects, both 
                                domestic and international, related to 
                                the production and importation of 
                                nonrenewable transportation fuels that 
                                have significant greenhouse gas 
                                emissions, and the impact of those 
                                effects on greenhouse gas emissions.
                            ``(iii) Administration.--
                                    ``(I) In general.--The report 
                                shall--
                                            ``(aa) include a review and 
                                        assessment of all pertinent 
                                        scientific studies, 
                                        methodologies, and data;
                                            ``(bb) evaluate potential 
                                        methodologies for calculating 
                                        emissions (including an 
                                        evaluation of methods for 
                                        annualizing emissions 
                                        associated with forest 
                                        degradation or land 
                                        conversion); and
                                            ``(cc) make appropriate 
                                        recommendations.
                                    ``(II) Indirect effects.--The 
                                recommendations shall address indirect 
                                effects, both domestic and 
                                international, relating to the 
                                production and importation of 
                                nonrenewable transportation fuels that 
                                have significant greenhouse gas 
                                emissions.
                                    ``(III) Validation.--The report 
                                shall use appropriate validation 
                                procedures, including sensitivity 
                                analyses, to measure how results change 
                                as assumptions change.
                                    ``(IV) Models.--The evaluation 
                                shall include a model, methodology, or 
                                system of models that assesses how 
                                reliably the models, methodologies, or 
                                systems--
                                            ``(aa) track actual 
                                        outcomes over historical 
                                        periods using available 
                                        historical data; and
                                            ``(bb) will project future 
                                        outcomes.
                            ``(iv) Availability.--The report shall--
                                    ``(I) be publicly available; and
                                    ``(II) include sufficient 
                                information and data so that economists 
                                and other scientists with relevant 
                                expertise that are not on the National 
                                Academies of Science panel can fully 
                                evaluate the conclusions of the report.
                            ``(v) Deadline.--The report shall be 
                        completed not later than 3 years after the date 
                        of enactment of this paragraph.
                    ``(C) Determination.--
                            ``(i) In general.--The Administrator and 
                        the Secretary of Agriculture shall, after 
                        notice and an opportunity for public comment, 
                        determine--
                                    ``(I) whether, for purposes of 
                                determining compliance with the percent 
                                reductions in lifecycle greenhouse gas 
                                emissions specified in paragraph (1) 
                                for various renewable fuels, 
                                scientifically valid models and 
                                methodologies exist to project indirect 
                                land use changes that are related to 
                                the production of renewable fuels and 
                                that occur outside the country in which 
                                the feedstocks are grown outside the 
                                country of origin of the feedstocks; 
                                and
                                    ``(II) the impact of those changes 
                                on greenhouse gas emissions.
                            ``(ii) Basis.--
                                    ``(I) Report.--The determination 
                                shall take into account the findings 
                                and recommendations of the report 
                                required under subparagraph (B), as 
                                well as other available scientific, 
                                economic, and other relevant 
                                information.
                                    ``(II) Other federal agencies.--The 
                                Administrator and the Secretary of 
                                Agriculture may also consider methods 
                                used by the Environmental Protection 
                                Agency, the Department of Agriculture, 
                                and other Federal agencies to assess or 
                                guide related policies.
                            ``(iii) Publication of determinations.--
                                    ``(I) In general.--The 
                                Administrator and the Secretary of 
                                Agriculture shall publish--
                                            ``(aa) a proposed 
                                        determination not later than 4 
                                        years after the date of 
                                        enactment of this paragraph; 
                                        and
                                            ``(bb) a final 
                                        determination not later than 5 
                                        years after the date of 
                                        enactment of this paragraph.
                                    ``(II) Explanation.--An explanation 
                                and justification of the determination 
                                shall be included in the proposed and 
                                final actions, together with a response 
                                to comments received.
                    ``(D) Response to determination.--
                            ``(i) Positive determination.--
                                    ``(I) In general.--In the case of a 
                                positive determination under 
                                subparagraph (C), the Administrator and 
                                the Secretary of Agriculture shall, 
                                after notice and an opportunity for 
                                public comment, by the same date 
                                jointly establish 1 or more 
                                methodologies to calculate greenhouse 
                                gas emissions from indirect land use 
                                changes that are attributable to the 
                                production of renewable fuels and that 
                                occur outside the country in which 
                                feedstocks are grown outside the 
                                country of origin of the feedstock for 
                                purposes of calculating the lifecycle 
                                greenhouse gas emissions of a renewable 
                                fuel to determine whether the renewable 
                                fuel meets a definition under paragraph 
                                (1) or complies with paragraph 
                                (2)(A)(i).
                                    ``(II) Administration.--In the 
                                calendar year following a positive 
                                determination under subparagraph (C)--
                                            ``(aa) the exclusion under 
                                        subparagraph (A) shall 
                                        terminate; and
                                            ``(bb) the Administrator 
                                        shall promulgate a regulation 
                                        by the same date that shall 
                                        include emissions from indirect 
                                        land use changes outside the 
                                        country of origin of a 
                                        feedstock of a renewable fuel 
                                        for purposes of calculating the 
                                        lifecycle greenhouse gas 
                                        emissions of the renewable fuel 
                                        to determine whether the 
                                        renewable fuel meets a 
                                        definition under paragraph (1) 
                                        or complies with paragraph 
                                        (2)(A)(i) for renewable fuels 
                                        sold in the calendar year.
                                    ``(III) Effective date.--The 
                                effective date of the regulation shall 
                                be 6 years after the date of enactment 
                                of this paragraph.
                            ``(ii) Negative determination.--A negative 
                        determination under subparagraph (C) shall 
                        include a statement of the basis for the 
                        determination.
                    ``(E) Accountability.--The joint duties and actions 
                of the Administrator and the Secretary of Agriculture 
                under this paragraph shall be subject to sections 304 
                and 307 as if the duties and actions were the duties 
                and actions of the Administrator alone.''.

SEC. 104. MODIFICATION OF DEFINITION OF RENEWABLE BIOMASS.

    (a) National Academy of Sciences Report.--Not later than 1 year 
after the date of enactment of this Act, the Administrator of the 
Environmental Protection Agency, the Secretary of Agriculture, and the 
Federal Energy Regulatory Commission shall jointly enter into an 
arrangement with the National Academy of Sciences to evaluate how 
sources of renewable biomass contribute to the goals of increasing the 
energy independence of the United States, protecting the environment, 
and reducing global warming pollution.
    (b) Modification.--
            (1) EPA modification authority.--After reviewing the report 
        required by subsection (a), the Administrator of the 
        Environmental Protection Agency, with the concurrence of the 
        Secretary of Agriculture, may, by regulation and after public 
        notice and comment, modify the non-Federal land portion of the 
        definition of ``renewable biomass'' in section 211(o)(1)(I) of 
        the Clean Air Act (42 U.S.C. 7545(o)(1)(I)) and in section 610 
        of the Public Utility Regulatory Policies Act of 1978 in order 
        to advance the goals of increasing the energy independence of 
        the United States, protecting the environment, and reducing 
        global warming pollution.
            (2) FERC modification authority.--After reviewing the 
        report required by subsection (a), the Federal Energy 
        Regulatory Commission, with the concurrence of the Secretary of 
        Agriculture, may, by regulation and after public notice and 
        comment, modify the non-Federal lands portion of the definition 
        of ``renewable biomass'' in section 610(a) of the Public 
        Utility Regulatory Policies Act of 1978 in order to advance the 
        goals of increasing the energy independence of the United 
        States, protecting the environment, and reducing global warming 
        pollution.
    (c) Federal Land.--
            (1) Scientific review.--Not later than 1 year after the 
        date of enactment of this Act, the Secretary of the Interior, 
        the Secretary of Agriculture, and the Administrator of the 
        Environmental Protection Agency shall conduct a joint 
        scientific review to evaluate how sources of biomass from 
        Federal land could contribute to the goals of increasing the 
        energy independence of the United States, protecting the 
        environment, and reducing global warming pollution.
            (2) Modification authority.--Based on the scientific 
        review, the agencies may, by rule, modify the definition of 
        ``renewable biomass'' from Federal land in sections 
        211(o)(1)(I) of the Clean Air Act (42 U.S.C. 7545(o)(1)(I)) and 
        section 610 of the Public Utility Regulatory Policies Act of 
        1978, as appropriate, to advance the goals of increasing the 
        energy independence of the United States, protecting the 
        environment, and reducing global warming pollution.

             TITLE II--PRODUCTION AND USE OF RENEWABLE FUEL

SEC. 201. LOAN GUARANTEES FOR PROJECTS TO CONSTRUCT RENEWABLE FUEL 
              PIPELINES.

    (a) Definitions.--Section 1701 of the Energy Policy Act of 2005 (42 
U.S.C. 16511) is amended by adding at the end the following:
            ``(6) Renewable fuel.--The term `renewable fuel' has the 
        meaning given the term in section 211(o)(1) of the Clean Air 
        Act (42 U.S.C. 7545(o)(1)), except that the term shall include 
        all ethanol and biodiesel.
            ``(7) Renewable fuel pipeline.--The term `renewable fuel 
        pipeline' means a pipeline for transporting renewable fuel.''.
    (b) Amount.--Section 1702(c) of the Energy Policy Act of 2005 (42 
U.S.C. 16512(c)) is amended--
            (1) by striking ``Unless otherwise'' and inserting the 
        following:
            ``(1) In general.--Unless otherwise''; and
            (2) by adding at the end the following:
            ``(2) Renewable fuel pipelines.--A guarantee for a project 
        described in section 1703(b)(11) shall be in an amount equal to 
        80 percent of the project cost of the facility that is the 
        subject of the guarantee, as estimated at the time at which the 
        guarantee is issued.''.
    (c) Reasonable Prospect of Repayment.--Section 1702(d) of the 
Energy Policy Act of 2005 (42 U.S.C. 16512(d)) is amended by adding at 
the end the following:
            ``(4) Renewable fuel pipeline.--In determining under 
        paragraph (1) whether there is a reasonable prospect of 
        repayment with respect to a renewable fuel pipeline project 
        described in section 1703(b)(11), the Secretary shall not 
        require a demonstration of existing contractual obligations for 
        a specific minimum capacity of pipeline usage.''.
    (d) Renewable Fuel Pipeline Eligibility.--Section 1703(b) of the 
Energy Policy Act of 2005 (42 U.S.C. 16513(b)) is amended by adding at 
the end the following:
            ``(11) Renewable fuel pipelines.''.
    (e) Rapid Deployment of Renewable Fuel.--Section 1705 of the Energy 
Policy Act of 2005 (42 U.S.C. 16516) is amended--
            (1) in subsection (a)--
                    (A) in the matter preceding paragraph (1), by 
                inserting ``or, in the case of projects described in 
                paragraph (4), September 30, 2013'' before the colon at 
                the end; and
                    (B) by adding at the end the following:
            ``(4) Installation of sufficient infrastructure to allow 
        for the cost-effective deployment of clean energy technologies 
        appropriate to each region of the United States, including the 
        deployment of renewable fuel pipelines through loan guarantees 
        in an amount equal to 80 percent of the cost.''; and
            (2) in subsection (e), by inserting ```or, in the case of 
        projects described in subsection (a)(4), September 30, 2013''' 
        before the period at the end.
    (f) Regulations.--Not later than 90 days after the date of 
enactment of this Act, the Secretary of Energy shall issue such 
regulations as are necessary to carry out the amendments made by this 
section.

SEC. 202. OPEN FUEL STANDARD FOR TRANSPORTATION.

    (a) In General.--Chapter 329 of title 49, United States Code, is 
amended by adding at the end the following:

``SEC. 32920. OPEN FUEL STANDARD FOR TRANSPORTATION.

    ``(a) Definitions.--In this section:
            ``(1) E85.--The term `E85' means a fuel mixture containing 
        approximately 85 percent ethanol and 15 percent gasoline or a 
        special fuel by volume.
            ``(2) Flexible fuel automobile.--The term `flexible fuel 
        automobile' means an automobile that has been warranted by its 
        manufacturer to operate on gasoline, E85, and M85.
            ``(3) Fuel choice-enabling automobile.--The term `fuel 
        choice-enabling automobile' means--
                    ``(A) a flexible fuel automobile;
                    ``(B) an automobile that has been warranted by its 
                manufacturer to operate on biodiesel;
                    ``(C) an automobile that uses hydrogen fuel cell 
                technology;
                    ``(D) a hybrid automobile, or an automobile with 
                any other technology, that uses at least--
                            ``(i) during the 10-year period beginning 
                        on the date of enactment of this section, 50 
                        percent less fossil fuel per mile than the 
                        average of vehicles in the class of the hybrid 
                        automobile or an automobile with any other 
                        technology (under the applicable corporate 
                        average fuel standard under section 32902 of 
                        title 49, United States Code); and
                            ``(ii) effective beginning 10 years after 
                        the date of enactment of this section, 75 
                        percent less fossil fuel per mile than the 
                        average of vehicles in the class of the hybrid 
                        automobile or an automobile with any other 
                        technology (under the applicable corporate 
                        average fuel standard under section 32902 of 
                        title 49, United States Code); or
                    ``(E) an automobile that only uses an electric 
                motor to move the vehicle.
            ``(4) Hybrid automobile.--The term `hybrid automobile' 
        means a light-duty automobile that uses 2 or more distinct 
        power sources to move the vehicle.
            ``(5) Light-duty automobile.--The term `light-duty 
        automobile' means a light-duty automobile (as defined in 
        regulations promulgated by the Secretary of Transportation to 
        establish corporate average fuel standards under section 32902 
        of title 49, United States Code).
            ``(6) Light-duty automobile manufacturer's annual covered 
        inventory.--The term `light-duty automobile manufacturer's 
        annual covered inventory' means the number of light-duty 
        automobiles powered solely by an internal combustion engine 
        that a manufacturer, during a given calendar year, manufactures 
        in the United States or imports from outside of the United 
        States for sale in the United States.
            ``(7) M85.--The term `M85' means a fuel mixture containing 
        85 percent methanol and 15 percent gasoline by volume.
    ``(b) Open Fuel Standard for Transportation.--
            ``(1) In general.--Except as provided in paragraph (2), 
        each light-duty automobile manufacturer's annual covered 
        inventory shall be comprised of--
                    ``(A) not less than 30 percent fuel choice-enabling 
                automobiles by model year 2013;
                    ``(B) not less than 50 percent fuel choice-enabling 
                automobiles by model year 2015;
                    ``(C) not less than 80 percent fuel choice-enabling 
                automobiles by model year 2017; and
                    ``(D) not less than 100 percent of fuel choice-
                enabling automobiles by model year 2021 and each model 
                year thereafter.
            ``(2) Temporary exemption from requirements.--
                    ``(A) Application.--A manufacturer may request an 
                exemption from the requirement described in paragraph 
                (1) by submitting an application to the Secretary, at 
                such time, in such manner, and containing such 
                information as the Secretary may require by regulation. 
                Each such application shall specify the models, lines, 
                and types of automobiles affected.
                    ``(B) Evaluation.--After evaluating an application 
                received from a manufacturer, the Secretary may at any 
                time, under such terms and conditions, and to such 
                extent as the Secretary considers appropriate, 
                temporarily exempt, or renew the exemption of, a light-
                duty automobile from the requirement described in 
                paragraph (1) if the Secretary determines that 1 or 
                more of the following unavoidable events that are not 
                under the control of the manufacturer prevent the 
                manufacturer of such automobile from meeting its 
                required production volume of fuel choice-enabling 
                automobiles:
                            ``(i) A disruption in the supply of any 
                        component required for compliance with the 
                        regulations.
                            ``(ii) A disruption in the use and 
                        installation by the manufacturer of such 
                        component.
                            ``(iii) The failure for plug-in hybrid 
                        electric automobiles to meet State air quality 
                        requirements as a result of the requirement 
                        described in paragraph (1).
                    ``(C) Consolidation.--The Secretary may consolidate 
                applications received from multiple manufactures under 
                subparagraph (A) if they are of a similar nature.
                    ``(D) Notice.--The Secretary shall publish in the 
                Federal Register--
                            ``(i) notice of each application received 
                        from a manufacturer;
                            ``(ii) notice of each decision to grant or 
                        deny a temporary exemption; and
                            ``(iii) the reasons for granting or denying 
                        such exemptions.
    ``(c) Limited Liability Protection for Renewable Fuel and Ethanol 
Manufacture, Use, or Distribution.--
            ``(1) In general.--Notwithstanding any other provision of 
        Federal or State law, any fuel containing ethanol or a 
        renewable fuel (as defined in section 211(o)(1) of the Clean 
        Air Act) that is used or intended to be used to operate an 
        internal combustion engine shall not be deemed to be a 
        defective product or subject to a failure to warn due to such 
        ethanol or renewable fuel content unless such fuel violates a 
        control or prohibition imposed by the Administrator under 
        section 211 of the Clean Air Act (42 U.S.C. 7545).
            ``(2) Savings provision.--Nothing in this subsection may be 
        construed to affect the liability of any person other than 
        liability based upon a claim of defective product and failure 
        to warn described in paragraph (1).
    ``(d) Rulemaking.--Not later than 1 year after the date of the 
enactment of this section, the Secretary of Transportation shall 
promulgate regulations to carry out this section in consultation with 
the Administrator and taking into consideration existing 
regulations.''.
    (b) Conforming Amendment.--The analysis for chapter 329 of title 
49, United States Code, is amended by adding at the end the following:

``Sec. 32920. Open fuel standard for transportation.''.

SEC. 203. TAX INCENTIVES FOR QUALIFIED BLENDER PUMPS.

    (a) Credit for Installation of Blender Pumps.--Section 30C of the 
Internal Revenue Code of 1986 is amended by redesignating subsections 
(f) and (g) as subsections (g) and (h), respectively, and by inserting 
after subsection (e) the following new subsection:
    ``(f) Treatment of Blender Pumps as Qualified Alternative Fuel 
Vehicle Refueling Property.--
            ``(1) In general.--A qualified blender pump shall be 
        treated as qualified alternative refueling property under this 
        section.
            ``(2) Qualified blender pump.--For purposes of this 
        subsection, the term `qualified blender pump' means property 
        (not including a building or its structural components)--
                    ``(A) which is subject to the allowance for 
                depreciation or which is installed on property which is 
                used as a principal residence,
                    ``(B) the original use of which begins with the 
                taxpayer, and
                    ``(C) which is for the storage or dispensing of a 
                qualified ethanol blend into the fuel tank of a motor 
                vehicle (as defined in section 179A(e)(2)) propelled by 
                such blend, but only if--
                            ``(i) the storage or dispensing is at the 
                        point where such fuel is delivered into the 
                        fuel tank of the motor vehicle, and
                            ``(ii) such property is capable of 
                        dispensing qualified ethanol blends of not less 
                        than 3 different percentage volumes of ethanol 
                        which may be selected by the pump operator.
            ``(3) Qualified ethanol blend.--For purposes of this 
        subsection, the term `qualified ethanol blend' means any fuel 
        which is not less than 20 percent ethanol by volume and not 
        more than 85 percent ethanol by volume.''.
    (b) Effective Date.--The amendment made by this subsection shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 204. BLENDER PUMP INSTALLATION.

    (a) Definitions.--In this section:
            (1) Blender pump.--The term ``blender pump'' means an 
        automotive fuel dispensing pump capable of dispensing at least 
        3 different blends of gasoline and ethanol, as selected by the 
        pump operator, including blends ranging from 0 percent ethanol 
        to 85 percent denatured ethanol, as determined by the 
        Secretary.
            (2) Covered entity.--The term ``covered entity'' means an 
        individual or entity that owns or manages 10 or more retail 
        fueling stations.
            (3) E-85 fuel.--The term ``E-85 fuel'' means a blend of 
        gasoline approximately 85 percent of the content of which is 
        ethanol.
            (4) Ethanol fuel blend.--The term ``ethanol fuel blend'' 
        means a blend of gasoline or a special fuel and ethanol, with a 
        minimum of 0 percent and maximum of 85 percent of the content 
        of which is denatured ethanol.
    (b) Mandate.--
            (1) In general.--Subject to paragraph (2), the Secretary 
        shall, by regulation, require each covered entity to install, 
        at each retail fueling station owned or managed by the covered 
        entity, as a replacement for each pump at the retail fueling 
        station that requires replacement after the effective date 
        described in paragraph (2)--
                    (A) a blender pump; and
                    (B) all blender pump fuel infrastructure, including 
                infrastructure necessary--
                            (i) for the direct retail sale of ethanol 
                        fuel blends (including E-85 fuel), including 
                        blender pumps, transmission lines, and storage 
                        tanks; and
                            (ii) to directly market ethanol fuel blends 
                        (including E-85 fuel) to gas retailers, 
                        including inline blending equipment, pumps, 
                        storage tanks, and loadout equipment.
            (2) Effective date.--The effective date of the regulations 
        described in paragraph (1) shall be January 1, 2013.

               TITLE III--RENEWABLE ENERGY TAX EXTENSIONS

SEC. 301. MODIFICATION OF CREDIT FOR ALCOHOL USED AS FUEL.

    (a) In General.--Section 40 of the Internal Revenue Code of 1986 is 
amended to read as follows:

``SEC. 40. ALCOHOL, ETC., USED AS FUEL.

    ``(a) General Rule.--For purposes of section 38, the alcohol fuels 
credit determined under this section for the taxable year is an amount 
equal to the sum of--
            ``(1) the credit amount for each gallon of qualified 
        alcohol production during such taxable year,
            ``(2) the cellulosic biofuel producer credit determined 
        under subsection (c) for such taxable year, plus
            ``(3) in the case of an eligible small ethanol producer, 
        the small ethanol producer credit.
    ``(b) Qualified Alcohol Production.--For purposes of this section--
            ``(1) In general.--The term `qualified alcohol production' 
        means qualified alcohol which is produced by the taxpayer and 
        which--
                    ``(A) is sold by the taxpayer to another person--
                            ``(i) for use by such other person in the 
                        production of a qualified mixture in the 
                        ordinary course of such other person's trade or 
                        business,
                            ``(ii) for use by such other person as a 
                        fuel in the ordinary course of such other 
                        person's trade or business (other than casual 
                        off-farm production), or
                            ``(iii) who sells such alcohol at retail to 
                        another person and places such alcohol in the 
                        fuel tank of such other person, or
                    ``(B) is used or sold by the taxpayer for any 
                purpose described in subparagraph (A).
            ``(2) Qualified alcohol.--The term `qualified alcohol' 
        means alcohol--
                    ``(A) which has lifecycle greenhouse gas emissions 
                that are at least 15 percent less than baseline 
                lifecycle greenhouse gas emissions (as determined by 
                the Administrator of the Environmental Protection 
                Agency, in conjunction with the Secretary of 
                Agriculture), and
                    ``(B) which has a proof of not less than 200 
                (determined without regard to any added denaturants), 
                and
        does not include any alcohol which is purchased by the producer 
        and the proof of which is increased by the producer by 
        additional distillation.
            ``(3) Alcohol.--The term `alcohol' includes methanol and 
        ethanol, without regard to the feedstock from which such 
        alcohol is produced.
            ``(4) Qualified mixture.--The term `qualified mixture' 
        means a mixture of alcohol and gasoline or of alcohol and a 
        special fuel which--
                    ``(A) is sold by the person producing such mixture 
                to any person for use as a fuel, or
                    ``(B) is used as a fuel by the person producing 
                such mixture.
            ``(5) Denial of double benefit.--The amount of any 
        qualified alcohol production which is qualified cellulosic 
        biofuel production shall not be taken into account under 
        subsection (a)(1).
            ``(6) Credit amount.--For purposes of subsection (a)(1), 
        the credit amount shall be determined in accordance with the 
        following table:

``In the case of any sale or use                             The credit
  during calendar year:                                      amount is:
        2012...............................................   20 cents 
        2013...............................................   15 cents 
         2014..............................................   10 cents 
        2015 or thereafter.................................    5 cents.
    ``(c) Cellulosic Biofuel Producer Credit.--
            ``(1) In general.--The cellulosic biofuel producer credit 
        determined under this subsection of any taxpayer is an amount 
        equal to $1.01 for each gallon of qualified cellulosic biofuel 
        production.
            ``(2) Qualified cellulosic biofuel production.--For 
        purposes of this subsection, the term `qualified cellulosic 
        biofuel production' means any cellulosic biofuel which is 
        produced by the taxpayer, and which during the taxable year--
                    ``(A) is sold by the taxpayer to another person--
                            ``(i) for use by such other person in the 
                        production of a qualified cellulosic biofuel 
                        mixture in such other person's trade or 
                        business (other than casual off-farm 
                        production),
                            ``(ii) for use by such other person as a 
                        fuel in a trade or business, or
                            ``(iii) who sells such cellulosic biofuel 
                        at retail to another person and places such 
                        cellulosic biofuel in the fuel tank of such 
                        other person, or
                    ``(B) is used or sold by the taxpayer for any 
                purpose described in subparagraph (A).
        The qualified cellulosic biofuel production of any taxpayer for 
        any taxable year shall not include any alcohol which is 
        purchased by the taxpayer and with respect to which such 
        producer increases the proof of the alcohol by additional 
        distillation.
            ``(3) Qualified cellulosic biofuel mixture.--For purposes 
        of this subsection, the term `qualified cellulosic biofuel 
        mixture' means a mixture of cellulosic biofuel and gasoline or 
        of cellulosic biofuel and a special fuel which--
                    ``(A) is sold by the person producing such mixture 
                to any person for use as a fuel, or
                    ``(B) is used as a fuel by the person producing 
                such mixture.
            ``(4) Cellulosic biofuel.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `cellulosic biofuel' 
                means any liquid fuel which--
                            ``(i) is produced from any lignocellulosic 
                        or hemicellulosic matter that is available on a 
                        renewable or recurring basis, and
                            ``(ii) meets the registration requirements 
                        for fuels and fuel additives established by the 
                        Environmental Protection Agency under section 
                        211 of the Clean Air Act (42 U.S.C. 7545).
                    ``(B) Exclusion of low-proof alcohol.--Such term 
                shall not include any alcohol with a proof of less than 
                200. The determination of the proof of any alcohol 
                shall be made without regard to any added denaturants.
                    ``(C) Exclusion of unprocessed fuels.--The term 
                `cellulosic biofuel' shall not include any fuel if--
                            ``(i) more than 4 percent of such fuel 
                        (determined by weight) is any combination of 
                        water and sediment, or
                            ``(ii) the ash content of such fuel is more 
                        than 1 percent (determined by weight).
            ``(5) Allocation of cellulosic biofuel producer credit to 
        patrons of cooperative.--
                    ``(A) Election to allocate.--
                            ``(i) In general.--In the case of a 
                        cooperative organization described in section 
                        1381(a), any portion of the credit determined 
                        under this subsection for the taxable year may, 
                        at the election of the organization, be 
                        apportioned pro rata among patrons of the 
                        organization on the basis of the quantity or 
                        value of business done with or for such patrons 
                        for the taxable year.
                            ``(ii) Form and effect of election.--An 
                        election under clause (i) for any taxable year 
                        shall be made on a timely filed return for such 
                        year. Such election, once made, shall be 
                        irrevocable for such taxable year. Such 
                        election shall not take effect unless the 
                        organization designates the apportionment as 
                        such in a written notice mailed to its patrons 
                        during the payment period described in section 
                        1382(d).
                    ``(B) Treatment of organizations and patrons.--
                            ``(i) Organizations.--The amount of the 
                        credit not apportioned to patrons pursuant to 
                        subparagraph (A) shall be included in the 
                        amount determined under this subsection for the 
                        taxable year of the organization.
                            ``(ii) Patrons.--The amount of the credit 
                        apportioned to patrons pursuant to subparagraph 
                        (A) shall be included in the amount determined 
                        under this subsection for the first taxable 
                        year of each patron ending on or after the last 
                        day of the payment period (as defined in 
                        section 1382(d)) for the taxable year of the 
                        organization or, if earlier, for the taxable 
                        year of each patron ending on or after the date 
                        on which the patron receives notice from the 
                        cooperative of the apportionment.
                            ``(iii) Special rules for decrease in 
                        credits for taxable year.--If the amount of the 
                        credit of the organization determined under 
                        this subsection for a taxable year is less than 
                        the amount of such credit shown on the return 
                        of the organization for such year, an amount 
                        equal to the excess of--
                                    ``(I) such reduction, over
                                    ``(II) the amount not apportioned 
                                to such patrons under subparagraph (A) 
                                for the taxable year,
                        shall be treated as an increase in tax imposed 
                        by this chapter on the organization. Such 
                        increase shall not be treated as tax imposed by 
                        this chapter for purposes of determining the 
                        amount of any credit under this chapter or for 
                        purposes of section 55.
    ``(d) Small Ethanol Producer Credit.--
            ``(1) In general.--The small ethanol producer credit of any 
        eligible small ethanol producer for any taxable year is 10 
        cents for each gallon of qualified ethanol fuel production of 
        such producer.
            ``(2) Qualified ethanol fuel production.--For purposes of 
        this subsection, the term `qualified ethanol fuel production' 
        means any qualified alcohol which is ethanol and which is 
        produced by an eligible small ethanol producer.
            ``(3) Limitation.--The qualified ethanol fuel production of 
        any producer for any taxable year shall not exceed 15,000,000 
        gallons (determined without regard to any qualified cellulosic 
        biofuel production).
            ``(4) Additional distillation excluded.--The qualified 
        ethanol fuel production of any producer for any taxable year 
        shall not include any alcohol which is purchased by the 
        producer and with respect to which such producer increases the 
        proof of the alcohol by additional distillation.
            ``(5) Eligible small ethanol producer.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `eligible small ethanol producer' means a 
                person who, at all times during the taxable year, has a 
                productive capacity for alcohol (as defined in 
                subsection (b)(3)) not in excess of 60,000,000 gallons.
                    ``(B) Aggregation rule.--For purposes of the 
                15,000,000 gallon limitation under paragraph (3) and 
                the 60,000,000 gallon limitation under subparagraph 
                (A), all members of the same controlled group of 
                corporations (within the meaning of section 267(f)) and 
                all persons under common control (within the meaning of 
                section 52(b) but determined by treating an interest of 
                more than 50 percent as a controlling interest) shall 
                be treated as 1 person.
                    ``(C) Partnerships, s corporations, and other pass-
                thru entities.--In the case of a partnership, trust, S 
                corporation, or other pass-thru entity, the limitations 
                contained in paragraph (3) and subparagraph (A) shall 
                be applied at the entity level and at the partner or 
                similar level.
                    ``(D) Allocation.--For purposes of this subsection, 
                in the case of a facility in which more than 1 person 
                has an interest, productive capacity shall be allocated 
                among such persons in such manner as the Secretary may 
                prescribe.
                    ``(E) Regulations.--The Secretary may prescribe 
                such regulations as may be necessary--
                            ``(i) to prevent the credit under this 
                        subsection from directly or indirectly 
                        benefitting any person with a direct or 
                        indirect productive capacity of more than 
                        60,000,000 gallons of alcohol during the 
                        taxable year, or
                            ``(ii) to prevent any person from directly 
                        or indirectly benefitting with respect to more 
                        than 15,000,000 gallons of ethanol during the 
                        taxable year.
            ``(6) Allocation of small ethanol producer credit to 
        patrons of cooperative.--Rules similar to the rules of 
        subsection (c)(5) shall apply for purposes of this subsection.
    ``(e) Performance Credit for Alcohol.--
            ``(1) In general.--In the case of any qualified alcohol 
        production in a taxable year from qualified alcohol which has a 
        baseline lifecycle greenhouse gas improvement of not less than 
        50 percent, the credit amount determined under subsection 
        (a)(1) for such taxable year with respect to such production 
        shall be increased by the applicable amount.
            ``(2) Applicable amount.--For purposes of paragraph (1), 
        the applicable amount is--
                    ``(A) 5 cents for every gallon of qualified alcohol 
                production from qualified alcohol which has a baseline 
                lifecycle greenhouse gas improvement of not less than 
                50 percent and less than 75 percent,
                    ``(B) 15 cents for every gallon of qualified 
                alcohol production from qualified alcohol which has a 
                baseline lifecycle greenhouse gas improvement of not 
                less than 75 percent and less than 90 percent, and
                    ``(C) 25 cents for every gallon of qualified 
                alcohol production from qualified alcohol which has a 
                baseline lifecycle greenhouse gas improvement of not 
                less than 90 percent.
            ``(3) Baseline lifecycle greenhouse gas improvement.--For 
        purposes of this subsection, the term `baseline lifecycle 
        greenhouse gas improvement' means the amount, expressed as a 
        percentage, which is--
                    ``(A) the direct lifecycle greenhouse gas emissions 
                of an alcohol, divided by
                    ``(B) the baseline lifecycle greenhouse gas 
                emissions,
        as determined by the Administrator of the Environmental 
        Protection Agency, in conjunction with the Secretary of 
        Agriculture.
    ``(f) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Special fuel.--The term `special fuel' includes any 
        liquid fuel (other than gasoline) which is suitable for use in 
        an internal combustion engine.
            ``(2) Registration requirement.--No credit shall be 
        determined under subsection (a)(1), (c), or (d) with respect to 
        any taxpayer unless such taxpayer is registered with the 
        Secretary as a producer of alcohol or cellulosic biofuel, 
        whichever is applicable, under section 4101.
            ``(3) Special rule for cellulosic biofuel producer 
        credit.--No cellulosic biofuel producer credit shall be 
        determined under subsection (c) with respect to any cellulosic 
        biofuel unless such cellulosic biofuel is produced in the 
        United States and used as a fuel in the United States. For 
        purposes of this subsection, the term `United States' includes 
        any possession of the United States.
            ``(4) Limitation to alcohol with connection to the united 
        states.--No credit shall be determined under this section with 
        respect to any alcohol which is produced outside the United 
        States. For purposes of this paragraph, the term `United 
        States' includes any possession of the United States.
            ``(5) Mixture or alcohol not used as a fuel, etc.--
                    ``(A) Mixtures.--If--
                            ``(i) any credit was determined under this 
                        section with respect to alcohol used in the 
                        production of any qualified mixture, and
                            ``(ii) any person--
                                    ``(I) separates the alcohol from 
                                the mixture, or
                                    ``(II) without separation, uses the 
                                mixture other than as a fuel,
                then there is hereby imposed on such person a tax equal 
                to such credit so determined with respect to each 
                gallon of alcohol in such mixture.
                    ``(B) Alcohol.--If--
                            ``(i) any credit was determined under this 
                        section with respect to the retail sale of any 
                        alcohol, and
                            ``(ii) any person mixes such alcohol or 
                        uses such alcohol other than as a fuel,
                then there is hereby imposed on such person a tax equal 
                to such credit so determined with respect to each 
                gallon of such alcohol.
                    ``(C) Cellulosic biofuel producer credit.--If--
                            ``(i) any credit is allowed under 
                        subsection (c), and
                            ``(ii) any person does not use such fuel 
                        for a purpose described in subsection (c)(3),
                then there is hereby imposed on such person a tax equal 
                to $1.01 for each gallon of such cellulosic biofuel.
                    ``(D) Small ethanol producer credit.--If--
                            ``(i) any credit is allowed under 
                        subsection (d), and
                            ``(ii) any person does not use such fuel 
                        for a purpose described in subsection 
                        (b)(1)(A),
                then there is hereby imposed on such person a tax equal 
                to 10 cents a gallon for each gallon of such alcohol.
                    ``(E) Applicable laws.--All provisions of law, 
                including penalties, shall, insofar as applicable and 
                not inconsistent with this section, apply in respect of 
                any tax imposed under subparagraph (A), (B), (C), or 
                (D) as if such tax were imposed by section 4081 and not 
                by this chapter.
            ``(6) Volume of alcohol.--For purposes of determining under 
        subsection (a) the number of gallons of alcohol with respect to 
        which a credit is allowable under subsection (a), the volume of 
        alcohol shall include the volume of any denaturant (including 
        gasoline) which is added under any formulas approved by the 
        Secretary to the extent that such denaturants do not exceed 2 
        percent of the volume of such alcohol (including denaturants).
            ``(7) Pass-thru in the case of estates and trusts.--Under 
        regulations prescribed by the Secretary, rules similar to the 
        rules of subsection (d) of section 52 shall apply.
            ``(8) Allocation of general credit to patrons of 
        cooperative.--Rules similar to the rules of subsection (c)(5) 
        shall apply for purposes of the portion of the credit 
        determined under subsection (a)(1).
    ``(g) Coordination With Exemption From Excise Tax.--The amount of 
the credit determined under this section with respect to any alcohol 
shall, under regulations prescribed by the Secretary, be properly 
reduced to take into account any benefit provided with respect to such 
alcohol solely by reason of the application of section 4041(b)(2), 
section 6426, or section 6427(e).
    ``(h) Termination.--
            ``(1) In general.--This section shall not apply to any sale 
        or use for any period after December 31, 2016.
            ``(2) No carryovers to certain years after expiration.--If 
        this section ceases to apply for any period by reason of 
        paragraph (1), no amount attributable to any sale or use before 
        the first day of such period may be carried under section 39 by 
        reason of this section (treating the amount allowed by reason 
        of this section as the first amount allowed by this subpart) to 
        any taxable year beginning after the 3-taxable-year period 
        beginning with the taxable year in which such first day 
        occurs.''.
    (b) Conforming Amendments.--
            (1) Section 4101(a)(1) of the Internal Revenue Code of 1986 
        is amended by striking ``section 40(b)(6)(E)'' and inserting 
        ``section 40(c)(4)''.
            (2) Section 6426(g) of such Code is amended by striking 
        ``section 40(c)'' and inserting ``section 40(g)''.
            (3) Section 6501(m) of such Code is amended by striking 
        ``40(f),''.
    (c) Modification of Volumetric Ethanol Excise Tax Credit.--
            (1) In general.--Subsection (b) of section 6426 of the 
        Internal Revenue Code of 1986, as amended by this Act, is 
        amended--
                    (A) by striking paragraph (2) and inserting the 
                following:
            ``(2) Applicable amount.--For purposes of this subsection, 
        with respect to each gallon of alcohol, the applicable amount 
        is the sum of the credit amount determined in accordance with 
        the following table plus the applicable amount under section 
        40(e)(2) attributable to such gallon:

``In the case of any sale, use, or                           The credit
  removal during calendar year:                              amount is:
        2012...............................................   20 cents 
        2013...............................................   15 cents 
         2014..............................................   10 cents 
        2015...............................................    5 cents 
        2016 and thereafter................................  0 cents'',
                and
                    (B) by striking ``December 31, 2011'' in paragraph 
                (6) and inserting ``December 31, 2015''.
            (2) Payments in lieu of credits.--Subparagraph (A) of 
        section 6427(e)(6) is amended by striking ``December 31, 2010'' 
        and inserting ``December 31, 2015''.
    (d) Extension of Additional Duties on Ethanol.--Headings 9901.00.50 
and 9901.00.52 of the Harmonized Tariff Schedule of the United States 
are each amended in the effective period column by striking ``1/1/
2012'' and inserting ``1/1/2016''.
    (e) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to fuel sold and 
        used after December 31, 2011.
            (2) Additional duties.--The amendments made by subsection 
        (d) shall take effect on January 1, 2012.

SEC. 302. REFORM OF BIODIESEL INCOME TAX INCENTIVES.

    (a) In General.--Section 40A of the Internal Revenue Code of 1986 
is amended to read as follows:

``SEC. 40A. BIODIESEL PRODUCTION.

    ``(a) In General.--For purposes of section 38, the biodiesel fuels 
credit determined under this section for the taxable year is $1.00 for 
each gallon of biodiesel produced by the taxpayer which during the 
taxable year--
            ``(1) is sold by such producer to another person--
                    ``(A) for use by such other person's trade or 
                business (other than casual off-farm production),
                    ``(B) for use by such other person as a fuel in a 
                trade or business, or
                    ``(C) who sells such biodiesel at retail to another 
                person and places such biodiesel in the fuel tank of 
                such other person, or
            ``(2) is used or sold by such producer for any purpose 
        described in paragraph (1).
    ``(b) Increased Credit for Small Producers.--
            ``(1) In general.--In the case of any eligible small 
        biodiesel producer, subsection (a) shall be applied by 
        increasing the dollar amount contained therein by 10 cents.
            ``(2) Limitation.--Paragraph (1) shall only apply with 
        respect to the first 15,000,000 gallons of biodiesel produced 
        by any eligible small biodiesel producer during any taxable 
        year.
    ``(c) Coordination With Credit Against Excise Tax.--The amount of 
the credit determined under this section with respect to any biodiesel 
shall be reduced to take into account any benefit provided with respect 
to such biodiesel solely by reason of the application of section 6426 
or 6427(e).
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Biodiesel.--The term `biodiesel' means liquid fuel 
        derived from biomass which meets--
                    ``(A) the registration requirements for fuels and 
                fuel additives established by the Environmental 
                Protection Agency under section 211 of the Clean Air 
                Act (42 U.S.C. 7545), and
                    ``(B) the requirements of the American Society of 
                Testing and Materials D6751.
        Such term shall not include any liquid with respect to which a 
        credit may be determined under section 40.
            ``(2) Biodiesel not used for a qualified purpose.--If--
                    ``(A) any credit was determined with respect to any 
                biodiesel under this section, and
                    ``(B) any person does not use such biodiesel for 
                the purpose described in subsection (a),
        then there is hereby imposed on such person a tax equal to the 
        product of the rate applicable under subsection (a) and the 
        number of gallons of such biodiesel.
            ``(3) Pass-thru in the case of estates and trusts.--Under 
        regulations prescribed by the Secretary, rules similar to the 
        rules of subsection (d) of section 52 shall apply.
            ``(4) Limitation to biodiesel produced in the united 
        states.--No credit shall be determined under this section with 
        respect to any biodiesel unless such biodiesel is produced in 
        the United States from raw feedstock. For purposes of this 
        paragraph, the term `United States' includes any possession of 
        the United States.
            ``(5) Biodiesel transfers from an irs registered biodiesel 
        production facility to an irs registered terminal or 
        refinery.--The credit allowed under subsection (a) shall be 
        allowed to the terminal or refinery referred to in section 
        4081(a)(1)(B)(i) in instances where section 4081(a)(1)(B)(iii) 
        is applicable. The credit allowed under subsection (a) cannot 
        be claimed by a terminal or refinery on fuel upon which the 
        credit was previously claimed by a biodiesel producer.
    ``(e) Definitions and Special Rules for Small Biodiesel 
Producers.--
            ``(1) Eligible small biodiesel producer.--The term 
        `eligible small biodiesel producer' means a person who at all 
        times during the taxable year has a productive capacity for 
        biodiesel not in excess of 60,000,000 gallons.
            ``(2) Aggregation rule.--For purposes of the 15,000,000 
        gallon limitation under subsection (b)(2) and the 60,000,000 
        gallon limitation under paragraph (1), all members of the same 
        controlled group of corporations (within the meaning of section 
        267(f)) and all persons under common control (within the 
        meaning of section 52(b) but determined by treating an interest 
        of more than 50 percent as a controlling interest) shall be 
        treated as 1 person.
            ``(3) Partnership, s corporation, and other pass-thru 
        entities.--In the case of a partnership, trust, S corporation, 
        or other pass-thru entity, the limitations contained in 
        subsection (b)(2) and paragraph (1) shall be applied at the 
        entity level and at the partner or similar level.
            ``(4) Allocation.--For purposes of this subsection, in the 
        case of a facility in which more than 1 person has an interest, 
        productive capacity shall be allocated among such persons in 
        such manner as the Secretary may prescribe.
            ``(5) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary--
                    ``(A) to prevent the credit provided for in 
                subsection (b) from directly or indirectly benefitting 
                any person with a direct or indirect productive 
                capacity of more than 60,000,000 gallons of biodiesel 
                during the taxable year, or
                    ``(B) to prevent any person from directly or 
                indirectly benefitting with respect to more than 
                15,000,000 gallons during the taxable year.
            ``(6) Allocation of small biodiesel credit to patrons of 
        cooperative.--
                    ``(A) Election to allocate.--
                            ``(i) In general.--In the case of a 
                        cooperative organization described in section 
                        1381(a), any portion of the increase determined 
                        under subsection (b) for the taxable year may, 
                        at the election of the organization, be 
                        apportioned pro rata among patrons of the 
                        organization on the basis of the quantity or 
                        value of business done with or for such patrons 
                        for the taxable year.
                            ``(ii) Form and effect of election.--An 
                        election under clause (i) for any taxable year 
                        shall be made on a timely filed return for such 
                        year. Such election, once made, shall be 
                        irrevocable for such taxable year. Such 
                        election shall not take effect unless the 
                        organization designates the apportionment as 
                        such in a written notice mailed to its patrons 
                        during the payment period described in section 
                        1382(d).
                    ``(B) Treatment of organizations and patrons.--
                            ``(i) Organizations.--The amount of the 
                        credit not apportioned to patrons pursuant to 
                        subparagraph (A) shall be included in the 
                        amount determined under subsection (b) for the 
                        taxable year of the organization.
                            ``(ii) Patrons.--The amount of the credit 
                        apportioned to patrons pursuant to subparagraph 
                        (A) shall be included in the amount determined 
                        under such subsection for the first taxable 
                        year of each patron ending on or after the last 
                        day of the payment period (as defined in 
                        section 1382(d)) for the taxable year of the 
                        organization or, if earlier, for the taxable 
                        year of each patron ending on or after the date 
                        on which the patron receives notice from the 
                        cooperative of the apportionment.
                            ``(iii) Special rules for decrease in 
                        credits for taxable year.--If the amount of the 
                        credit of the organization determined under 
                        such subsection for a taxable year is less than 
                        the amount of such credit shown on the return 
                        of the organization for such year, an amount 
                        equal to the excess of--
                                    ``(I) such reduction, over
                                    ``(II) the amount not apportioned 
                                to such patrons under subparagraph (A) 
                                for the taxable year, shall be treated 
                                as an increase in tax imposed by this 
                                chapter on the organization.
                        Such increase shall not be treated as tax 
                        imposed by this chapter for purposes of 
                        determining the amount of any credit under this 
                        chapter or for purposes of section 55.
    ``(f) Renewable Diesel.--For purposes of this title--
            ``(1) Treatment in the same manner as biodiesel.--Renewable 
        diesel shall be treated in the same manner as biodiesel.
            ``(2) Renewable diesel defined.--The term `renewable 
        diesel' means liquid fuel derived from biomass which meets--
                    ``(A) the registration requirements for fuels and 
                fuel additives established by the Environmental 
                Protection Agency under section 211 of the Clean Air 
                Act (42 U.S.C. 7545), and
                    ``(B) the requirements of the American Society of 
                Testing and Materials D975 or D396, or other equivalent 
                standard approved by the Secretary.
        Such term shall not include any liquid with respect to which a 
        credit may be determined under section 40. Such term does not 
        include any fuel derived from coprocessing biomass with a 
        feedstock which is not biomass. For purposes of this paragraph, 
        the term `biomass' has the meaning given such term by section 
        45K(c)(3).
            ``(3) Certain aviation fuel.--Except as provided in the 
        last 3 sentences of paragraph (2), the term `renewable diesel' 
        shall include fuel derived from biomass which meets the 
        requirements of a Department of Defense specification for 
        military jet fuel or an American Society of Testing and 
        Materials specification for aviation turbine fuel.
    ``(g) Termination.--This section shall not apply to any sale or use 
after December 31, 2016.''.
    (b) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by 
striking the item relating to section 40A and inserting the following 
new item:

``Sec. 40A. Biodiesel production.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to biodiesel sold or used after December 31, 2011.

SEC. 303. REFORM OF BIODIESEL EXCISE TAX INCENTIVES.

    (a) In General.--Subsection (c) of section 6426 of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(c) Biodiesel Credit.--
            ``(1) In general.--For purposes of this section, the 
        biodiesel credit is $1.00 for each gallon of biodiesel produced 
        by the taxpayer and which--
                    ``(A) is sold by such producer to another person--
                            ``(i) for use by such other person's trade 
                        or business (other than casual off-farm 
                        production),
                            ``(ii) for use by such other person as a 
                        fuel in a trade or business, or
                            ``(iii) who sells such biodiesel at retail 
                        to another person and places such biodiesel in 
                        the fuel tank of such other person, or
                    ``(B) is used or sold by such producer for any 
                purpose described in subparagraph (A).
            ``(2) Definitions.--Any term used in this subsection which 
        is also used in section 40A shall have the meaning given such 
        term by section 40A.
            ``(3) Biodiesel transfers from an irs registered biodiesel 
        production facility to an irs registered terminal.--The credit 
        allowed under this subsection can be claimed by a registered 
        terminal or refinery in instances where section 
        4081(a)(1)(B)(iii) is applicable. The credit allowed under this 
        subsection cannot be claimed by a terminal or refinery on fuel 
        upon which the credit was previously claimed by a biodiesel 
        producer.
            ``(4) Termination.--This subsection shall not apply to any 
        sale, use, or removal for any period after December 31, 
        2016.''.
    (b) Payment of Credit.--Subsection (e) of section 6427 of such Code 
is amended--
            (1) by striking ``or the biodiesel mixture credit'' in 
        paragraph (1),
            (2) by redesignating paragraphs (3) through (6) as 
        paragraphs (4) through (7), respectively, and by inserting 
        after paragraph (2) the following new paragraph:
            ``(3) Biodiesel credit.--If any person produces biodiesel 
        and sells or uses such biodiesel as provided in section 
        6426(c), the Secretary shall pay (without interest) to such 
        person an amount equal to the biodiesel credit with respect to 
        such biodiesel.'',
            (3) by striking ``paragraph (1) or (2)'' each place it 
        appears in paragraphs (4) and (6), as redesignated by paragraph 
        (2), and inserting ``paragraph (1), (2), or (3)'',
            (4) by striking ``alternative fuel'' each place it appears 
        in paragraphs (4) and (6), as redesignated by paragraph (2), 
        and inserting ``fuel'', and
            (5) by striking ``biodiesel mixture (as defined in section 
        6426(c)(3))'' in paragraph (7)(B), as so redesignated, and 
        inserting ``biodiesel (within the meaning of section 40A)''.
    (c) Exemption for Biodiesel Transferred From a Registered Producer 
to a Registered Terminal.--Subparagraph (B) of section 4081(a)(1) of 
such Code is amended--
            (1) by striking ``clause (ii)'' in clause (i) and inserting 
        ``clauses (ii) and (iii)'', and
            (2) by adding at the end the following new clause:
                            ``(iii) Exemptions for biodiesel 
                        transferred from a registered producer to a 
                        registered terminal.--The tax imposed by this 
                        paragraph shall not apply to any removal or 
                        entry of biodiesel (as defined in section 
                        40A(d)(1)) transferred in bulk (without regard 
                        to the manner of such transfer) to a terminal 
                        or refinery if--
                                    ``(I) such biodiesel was produced 
                                by a person who is registered under 
                                section 4101 as a producer of biodiesel 
                                and who provides reporting under the 
                                ExStars fuel reporting system of the 
                                Internal Revenue Service, and
                                    ``(II) the operator of such 
                                terminal or refinery is registered 
                                under section 4101.''.
    (d) Producer Registration Requirement.--Subsection (a) of section 
6426 of such Code is amended by striking ``subsections (d) and (e)'' in 
the flush sentence at the end and inserting ``subsections (c), (d), and 
(e)''.
    (e) Recapture.--Subsection (f) of section 6426 of such Code is 
amended to read as follows:
    ``(f) Recapture.--
            ``(1) Alcohol fuel mixtures.--If--
                    ``(A) any credit was determined under this section 
                with respect to alcohol used in the production of any 
                alcohol fuel mixture, and
                    ``(B) any person--
                            ``(i) separates the alcohol from the 
                        mixture, or
                            ``(ii) without separation, uses the mixture 
                        other than as a fuel,
        then there is hereby imposed on such person a tax equal to the 
        product of the applicable amount and the number of gallons of 
        such alcohol.
            ``(2) Biodiesel.--If any credit was determined under this 
        section with respect to the production of any biodiesel and any 
        person does not use such biodiesel for a purpose described in 
        subsection (c)(1), then there is hereby imposed on such person 
        a tax equal to $1 for each gallon of such biodiesel.
            ``(3) Applicable laws.--All provisions of law, including 
        penalties, shall, insofar as applicable and not inconsistent 
        with this section, apply in respect of any tax imposed under 
        paragraph (1) or (2) as if such tax were imposed by section 
        4081 and not by this section.''.
    (f) Clerical Amendment.--The heading of section 6426 of such Code 
(and the item relating to such section in the table of sections for 
subchapter B of chapter 65 of such Code) is amended by striking 
``alcohol fuel, biodiesel, and alternative fuel mixtures'' and 
inserting ``alcohol fuel mixtures, biodiesel production, and 
alternative fuel mixtures''.
    (g) Effective Date.--The amendments made by this section shall 
apply to biodiesel sold or used after December 31, 2011.

SEC. 304. BIODIESEL TREATED AS TAXABLE FUEL.

    (a) Biodiesel Treated as Taxable Fuel.--Clause (i) of section 
4083(a)(3)(A) of such Code is amended by inserting ``, including 
biodiesel (as defined in section 6426(c)(3)),'' after ``(other than 
gasoline)''.
    (b) Effective Date.--The amendment made by this section shall apply 
to biodiesel removed, entered, or sold after the date which is 6 months 
after the date of the enactment of this Act.

           TITLE IV--RENEWABLE ELECTRICITY INTEGRATION CREDIT

SEC. 401. RENEWABLE ELECTRICITY INTEGRATION CREDIT.

    (a) Business Credit.--
            (1) In general.--Subpart D of part IV of subchapter A of 
        chapter 1 of the Internal Revenue Code of 1986 is amended by 
        adding at the end the following new section:

``SEC. 45S. RENEWABLE ELECTRICITY INTEGRATION CREDIT.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
eligible taxpayer, the renewable electricity integration credit for any 
taxable year is an amount equal to the product of--
            ``(1) the intermittent renewable portfolio factor of such 
        eligible taxpayer, and
            ``(2) the number of kilowatt hours of renewable 
        electricity--
                    ``(A) purchased or produced by such taxpayer, and
                    ``(B) sold by such taxpayer to a retail customer 
                during the taxable year.
    ``(b) Intermittent Renewable Portfolio Factor.--
            ``(1) Years before 2017.--In the case of taxable years 
        beginning before January 1, 2017, the intermittent renewable 
        portfolio factor for an eligible taxpayer shall be determined 
        as follows:


----------------------------------------------------------------------------------------------------------------
   ``In the case of an eligible
    taxpayer whose intermittent       For taxable years beginning before     For taxable years beginning in or
 renewable electricity percentage      2012, the intermittent renewable         after 2012, the intermittent
                is:                          portfolio factor is:              renewable portfolio factor is:
----------------------------------------------------------------------------------------------------------------
Less than 4 percent...............  zero cents                             zero cents
At least 4 percent but less than 8  0.1 cents                              zero cents
 percent..........................
At least 8 percent but less than    0.2 cents                              0.2 cents
 12 percent.......................
At least 12 percent but less than   0.3 cents                              0.3 cents
 16 percent.......................
At least 16 percent but less than   0.4 cents                              0.4 cents
 20 percent.......................
At least 20 percent but less than   0.5 cents                              0.5 cents
 24 percent.......................
Equal to or greater than 24         0.6 cents                              0.6 cents.
 percent..........................
----------------------------------------------------------------------------------------------------------------

            ``(2) Years after 2016.--In the case of taxable years 
        beginning after December 31, 2016, the intermittent renewable 
        portfolio factor for an eligible taxpayer shall be determined 
        as follows:


----------------------------------------------------------------------------------------------------------------
   ``In the case of an eligible
    taxpayer whose intermittent       For taxable years beginning before     For taxable years beginning in or
 renewable electricity percentage      2019, the intermittent renewable         after 2019, the intermittent
                is:                          portfolio factor is:              renewable portfolio factor is:
----------------------------------------------------------------------------------------------------------------
Less than 10 percent..............  zero cents                             zero cents
At least 10 percent but less than   0.2 cents                              zero cents
 12 percent.......................
At least 12 percent but less than   0.3 cents                              0.15 cents
 16 percent.......................
At least 16 percent but less than   0.4 cents                              0.4 cents
 20 percent.......................
At least 20 percent but less than   0.5 cents                              0.5 cents
 24 percent.......................
Equal to or greater than 24         0.6 cents                              0.6 cents.
 percent..........................
----------------------------------------------------------------------------------------------------------------

    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Eligible taxpayer.--The term `eligible taxpayer' 
        means an electric utility (as defined in section 3(22) of the 
        Federal Power Act, (16 U.S.C. 796(22)).
            ``(2) Renewable electricity.--The term `renewable 
        electricity' means electricity generated by--
                    ``(A) any facility using wind to generate such 
                electricity;
                    ``(B) any facility using solar energy to generate 
                such electricity; or
                    ``(C) any facility using any other intermittent 
                renewable energy source which the Secretary of Energy 
                determines has a capacity factor of less than 50 
                percent on an annual basis.
            ``(3) Intermittent renewable electricity percentage.--The 
        term `intermittent renewable electricity percentage' means the 
        percentage of an eligible taxpayer's total sales of electricity 
        to retail customers that is derived from renewable electricity 
        (determine without regard to whether such electricity was 
        produced by the taxpayer).
            ``(4) Application of other rules.--For purposes of this 
        section, rules similar to the rules of paragraphs (1), (3), and 
        (5) of section 45(e) shall apply.
            ``(5) Credit allowed only with respect to 1 eligible 
        entity.--No credit shall be allowed under subsection (a) with 
        respect to renewable electricity purchased from another 
        eligible entity if a credit has been allowed under this section 
        or a payment has been made under section 6433 to such other 
        eligible entity.
    ``(d) Credit Disallowed Unless Credit Passed to Third Party 
Generators Charged for Integration Costs.--
            ``(1) In general.--In the case of renewable electricity 
        eligible for the credit under subsection (a) that is purchased 
        and not produced by an eligible taxpayer, no credit shall be 
        allowed unless any charge the taxpayer has assessed the seller 
        to recover the integration costs associated with such 
        electricity has been reduced (but not below zero) to the extent 
        of the credit received under subsection (a) associated with 
        such electricity.
            ``(2) Definitions.--For purposes of paragraph (1), charges 
        intended to recover integration costs do not include amounts 
        paid by the producer of the electricity for interconnection 
        facilities, distribution upgrades, network upgrades, or stand 
        alone network upgrades as those terms have been defined by the 
        Federal Energy Regulatory Commission in its Standard 
        Interconnection Procedures.
    ``(e) Coordination With Payments.--The amount of the credit 
determined under this section with respect to any electricity shall be 
reduced to take into account any payment provided with respect to such 
electricity solely by reason of the application of section 6433.''.
            (2) Credit made part of general business credit.--
        Subsection (b) of section 38 of the Internal Revenue Code of 
        1986 is amended by striking ``plus'' at the end of paragraph 
        (35), by striking the period at the end of paragraph (36) and 
        inserting ``, plus'', and by adding at the end the following 
        new paragraph:
            ``(37) the renewable electricity integration credit 
        determined under section 45S(a).''.
            (3) Specified credit.--Subparagraph (B) of section 38(c)(4) 
        of the Internal Revenue Code of 1986 is amended by 
        redesignating clauses (vii) through (ix) as clauses (viii) 
        through (x), respectively, and by inserting after clause (v) 
        the following new clause:
                            ``(vi) the credit determined under section 
                        45S.''.
            (4) Clerical amendment.--The table of sections for subpart 
        D of part IV of subchapter A of chapter 1 of the Internal 
        Revenue Code of 1986 is amended by adding at the end the 
        following new item:

``Sec. 45S. Renewable electricity integration credit.''.
    (b) Payments in Lieu of Credit.--
            (1) In general.--Subchapter B of chapter 65 of the Internal 
        Revenue Code of 1986 is amended by adding at the end the 
        following new section:

``SEC. 6433. RENEWABLE ELECTRICITY INTEGRATION PAYMENTS.

    ``(a) In General.--If any eligible person sells renewable 
electricity to a retail customer, the Secretary shall pay (without 
interest) to any such person who elects to receive a payment an amount 
equal to the product of--
            ``(1) the intermittent renewable portfolio factor of such 
        eligible person; and
            ``(2) the number of kilowatt hours of renewable 
        electricity--
                    ``(A) purchased or produced by such person; and
                    ``(B) sold by such person in the trade or business 
                of such person to a retail customer.
    ``(b) Timing of Payments.--
            ``(1) In general.--Except as provided in paragraph (2), 
        rules similar to the rules of section 6427(i)(1) shall apply 
        for purposes of this section.
            ``(2) Quarterly payments.--
                    ``(A) In general.--If, at the close of any quarter 
                of the taxable year of any person, at least $750 is 
                payable in the aggregate under subsection (a), to such 
                person with respect to electricity purchased or 
                produced during--
                            ``(i) such quarter; or
                            ``(ii) any prior quarter (for which no 
                        other claim has been filed) during such taxable 
                        year, a claim may be filed under this section 
                        with respect to such electricity.
                    ``(B) Time for filing claim.--No claim filed under 
                this paragraph shall be allowed unless filed on or 
                before the last day of the first quarter following the 
                earliest quarter included in the claim.
    ``(c) Definitions and Special Rules.--For purposes of this section:
            ``(1) Eligible person.--The term `eligible person' means an 
        electric utility (as defined in section 3(22) of the Federal 
        Power Act, (16 U.S.C. 796(22)).
            ``(2) Other definitions.--Any term used in this section 
        which is also used in section 45S shall have the meaning given 
        such term under section 45S.
            ``(3) Application of other rules.--For purposes of this 
        section, rules similar to the rules of paragraphs (1) and (3) 
        of section 45(e) shall apply.
    ``(d) Payment Disallowed Unless Amount Passed to Third Party 
Generators Charged for Integration Costs.--
            ``(1) In general.--In the case of renewable electricity 
        eligible for the payment under subsection (a) that is purchased 
        and not produced by an eligible person, no payment shall be 
        made under this section unless any charge the eligible person 
        has assessed the seller to recover the integration costs 
        associated with such electricity has been reduced (but not 
        below zero) to the extent of the payment received under 
        subsection (a) associated with such electricity.
            ``(2) Definitions.--For purposes of paragraph (1), charges 
        intended to recover integration costs do not include amounts 
        paid by the producer of the electricity for interconnection 
        facilities, distribution upgrades, network upgrades, or stand 
        alone network upgrades as those terms have been defined by the 
        Federal Energy Regulatory Commission in its Standard 
        Interconnection Procedures.''.
            (2) Clerical amendment.--The table of sections for subpart 
        B of chapter 65 of the Internal Revenue Code of 1986 is amended 
        by adding at the end the following new item:

``Sec. 6433. Renewable electricity integration payments.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to electricity produced or purchased after December 31, 2010.

                          TITLE V--WIND ENERGY

SEC. 501. REMOVAL OF CERTAIN TAX RESTRICTIONS TO PROMOTE EXPANSION OF 
              CAPITAL FOR WIND FARM INVESTMENT.

    (a) Exemption From Passive Loss Rules.--
            (1) In general.--Section 469(c) of the Internal Revenue 
        Code of 1986 (defining passive activity) is amended by adding 
        at the end the following new paragraph:
            ``(8) Certain renewable energy facilities.--The term 
        `passive activity' shall not include any trade or business 
        involving ownership of 1 or more facilities described in 
        section 45(d)(1).''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to taxable years beginning after December 31, 2010.
    (b) Application of At-Risk Rules.--
            (1) In general.--Section 465(b)(6) of the Internal Revenue 
        Code of 1986 (relating to qualified nonrecourse financing 
        treated as amount at risk) is amended--
                    (A) by inserting ``or renewable energy property'' 
                after ``real property'' each place it appears in 
                subparagraphs (A) and (B)(i), and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(F) Renewable energy property.--The term 
                `renewable energy property' means property described in 
                section 45(d)(1).''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to losses incurred after December 31, 2010, with 
        respect to property placed in service by the taxpayer after 
        such date.
    (c) Treatment of Income and Gains From Wind Energy as Qualifying 
Income for Publicly Traded Partnerships.--
            (1) In general.--Section 7704(d) of the Internal Revenue 
        Code of 1986 (defining qualifying income) is amended--
                    (A) by inserting ``wind energy,'' after 
                ``fertilizer,'' in paragraph (1)(E), and
                    (B) by adding at the end the following new 
                paragraph:
            ``(6) Wind energy.--For purposes of paragraph (1)(E), 
        income and gains from wind energy include amounts realized from 
        the sale of renewable energy credits, pollution allowances, and 
        other environmental attributes.''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply on the date of enactment of this Act.
    (d) Anti-Abuse Rules.--The Secretary of Treasury or the Secretary's 
designee shall prescribe such rules as are necessary to prevent the 
abuse of the purposes of the amendments made by this section.

    TITLE VI--RENEWABLE ELECTRICITY AND ENERGY EFFICIENCY RESOURCE 
                               STANDARDS

SEC. 601. RENEWABLE ELECTRICITY AND ENERGY EFFICIENCY RESOURCE 
              STANDARDS.

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

``SEC. 610. RENEWABLE ELECTRICITY AND ENERGY EFFICIENCY RESOURCE 
              STANDARDS.

    ``(a) Definitions.--In this section:
            ``(1) Base quantity of electricity.--
                    ``(A) In general.--The term `base quantity of 
                electricity' means the total quantity of electricity 
                sold by an electric utility to electric consumers in a 
                calendar year.
                    ``(B) Exclusions.--The term `base quantity of 
                electricity' does not include electricity generated by 
                a hydroelectric facility (including a pumped storage 
                facility but excluding incremental hydropower).
            ``(2) Distributed generation facility.--The term 
        `distributed generation facility' means a facility at a 
        customer site.
            ``(3) Geothermal energy.--The term `geothermal energy' 
        means energy derived from a geothermal deposit (within the 
        meaning of section 613(e)(2) of the Internal Revenue Code of 
        1986).
            ``(4) Incremental geothermal production.--
                    ``(A) In general.--The term `incremental geothermal 
                production' means, for any year, the excess of--
                            ``(i) the total kilowatt hours of 
                        electricity produced from a facility (including 
                        a distributed generation facility) using 
                        geothermal energy; over
                            ``(ii) the average number of kilowatt hours 
                        produced annually at the facility for 5 of the 
                        previous 7 calendar years before the date of 
                        enactment of this section after eliminating the 
                        highest and the lowest kilowatt hour production 
                        years in that 7-year period.
                    ``(B) Special rule.--A facility described in 
                subparagraph (A) that was placed in service at least 7 
                years before the date of enactment of this section 
                shall, commencing with the year in which that date of 
                enactment occurs, reduce the amount calculated under 
                subparagraph (A)(ii) each year, on a cumulative basis, 
                by the average percentage decrease in the annual 
                kilowatt hour production for the 7-year period 
                described in subparagraph (A)(ii) with such cumulative 
                sum, but not to exceed 30 percent.
            ``(5) Incremental hydropower.--
                    ``(A) In general.--The term `incremental 
                hydropower' means additional energy generated as a 
                result of efficiency improvements or capacity additions 
                made on or after--
                            ``(i) January 1, 2001; or
                            ``(ii) the effective commencement date of 
                        an existing applicable State renewable 
                        portfolio standard program at a hydroelectric 
                        facility that was placed in service before that 
                        date.
                    ``(B) Exclusion.--The term `incremental hydropower' 
                does not include additional energy generated as a 
                result of operational changes not directly associated 
                with efficiency improvements or capacity additions.
                    ``(C) Measurement and certification.--Efficiency 
                improvements and capacity additions referred to in 
                subparagraph (B) shall be--
                            ``(i) measured on the basis of the same 
                        water flow information used to determine a 
                        historic average annual generation baseline for 
                        the hydroelectric facility; and
                            ``(ii) certified by the Secretary or the 
                        Federal Energy Regulatory Commission.
            ``(6) Ocean energy.--The term `ocean energy' includes 
        current, wave, tidal, and thermal energy.
            ``(7) Renewable biomass.--Subject to section 104(b) of the 
        Securing America's Future with Energy and Sustainable 
        Technologies Act, the term `renewable biomass' means--
                    ``(A) materials, precommercial thinnings, or 
                removed invasive species from National Forest System 
                land and public lands (as defined in section 103 of the 
                Federal Land Policy and Management Act of 1976 (43 
                U.S.C. 1702)), including those that are byproducts of 
                preventive treatments (such as trees, wood, brush, 
                thinnings, chips, and slash), that are removed as part 
                of a federally recognized timber sale, or that are 
                removed to reduce hazardous fuels, to reduce or contain 
                disease or insect infestation, or to restore ecosystem 
                health, and that are--
                            ``(i) not from components of--
                                    ``(I) a component of the National 
                                Wild and Scenic Rivers System;
                                    ``(II) a component of the National 
                                Wilderness Preservation System;
                                    ``(III) a National Monument;
                                    ``(IV) any part of the National 
                                Landscape Conservation System;
                                    ``(V) a designated wilderness study 
                                area or other areas managed for 
                                wilderness characteristics;
                                    ``(VI) an inventoried roadless area 
                                within the National Forest System;
                                    ``(VII) an old growth stand (as 
                                defined by the applicable land 
                                management plan);
                                    ``(VIII) a late-successional stand 
                                (except for dead, severely damaged, or 
                                badly infested trees) (as defined by 
                                the applicable land management plan); 
                                or
                                    ``(IX) a designated primitive area;
                            ``(ii) harvested in environmentally 
                        sustainable quantities, as determined by the 
                        appropriate Federal land manager; and
                            ``(iii) harvested in accordance with 
                        applicable law and land management plans;
                    ``(B) any organic matter that is available on a 
                renewable or recurring basis from non-Federal land or 
                land belonging to an Indian or Indian tribe 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) other agricultural 
                                commodities;
                                    ``(III) other plants and trees; and
                                    ``(IV) algae; and
                            ``(ii) waste material (other than commonly 
                        recycled paper), including--
                                    ``(I) crop residue;
                                    ``(II) other vegetative waste 
                                material (including wood waste and wood 
                                residues);
                                    ``(III) animal waste and byproducts 
                                (including fats, oils, greases, and 
                                manure);
                                    ``(IV) construction waste;
                                    ``(V) food waste and yard waste; 
                                and
                                    ``(VI) waste from single or multi-
                                cellular organisms; and
                    ``(C) residues and byproducts from wood, pulp, or 
                paper products facilities.
            ``(8) Renewable energy.--The term `renewable energy' means 
        electric energy generated at a facility (including a 
        distributed generation facility) from--
                    ``(A) solar, wind, geothermal, or ocean energy;
                    ``(B) renewable biomass;
                    ``(C) landfill gas;
                    ``(D) municipal solid waste;
                    ``(E) incremental hydropower; or
                    ``(F) hydropower that has been certified by the Low 
                Impact Hydropower Institute.
    ``(b) Renewable Electricity Requirement.--
            ``(1) Requirement.--
                    ``(A) In general.--Subject to subparagraph (B), 
                each electric utility that sells electricity to 
                electric consumers shall obtain a percentage of the 
                base quantity of electricity the electric utility sells 
                to electric consumers in any calendar year through the 
                means of compliance identified in paragraph (2).
                    ``(B) Percentage.--The percentage obtained in a 
                calendar year under subparagraph (A) shall not be less 
                than the amount specified in the following table:

                                                         Minimum annual
``Calendar years:                                           percentage:
        2013...................................................     10 
        2014...................................................     11 
        2015...................................................     12 
        2016...................................................     13 
        2017...................................................     14 
        2018...................................................     15 
        2019...................................................     16 
        2020...................................................     17 
        2021...................................................     18 
        2022...................................................     19 
        2023...................................................     21 
        2024...................................................     23 
        2025...................................................     25.
            ``(2) Means of compliance.--Not later than 60 days after 
        the end of each calendar year, an electric utility shall meet 
        the requirements of paragraph (1) by--
                    ``(A) submitting to the Secretary renewable energy 
                credits issued under subsection (c);
                    ``(B) making alternative compliance payments to the 
                Secretary at the rate of 4 cents per kilowatt hour (as 
                adjusted for inflation under subsection (g));
                    ``(C) submitting to the Secretary energy efficiency 
                credits established under section 611(k) in a quantity 
                that shall not exceed 15 percent of the minimum 
                percentage required in each calendar year under 
                subparagraph (B); or
                    ``(D) conducting a combination of activities 
                described in subparagraphs (A), (B), and (C).
            ``(3) Clean energy jobs.--In carrying out this title, the 
        Secretary shall, to the maximum extent practicable, encourage 
        electric utilities, in meeting the requirements of paragraph 
        (1), also--
                    ``(A) to create jobs that pay a living wage that 
                supports a family;
                    ``(B) to provide health insurance benefits to 
                employees; and
                    ``(C) to comply with all Federal labor and 
                environmental laws (including regulations).
    ``(c) Renewable Energy Credit Trading Program.--
            ``(1) In general.--Not later than December 31, 2011, the 
        Secretary, in consultation with the Administrator, shall 
        establish a renewable energy credit trading program under which 
        electric utilities shall submit to the Secretary renewable 
        energy credits to certify the compliance of the electric 
        utilities with respect to obligations under subsection (b)(1).
            ``(2) Administration.--As part of the program, the 
        Secretary shall--
                    ``(A) issue renewable energy credits to generators 
                of electric energy from new renewable energy;
                    ``(B) issue renewable energy credits to electric 
                utilities associated with State renewable portfolio 
                standard compliance mechanisms pursuant to subsection 
                (h);
                    ``(C) subject to subparagraph (D), ensure that a 
                kilowatt hour, including the associated renewable 
                energy credit, shall be used only once for purposes of 
                compliance with this section;
                    ``(D) allow double credits for generation from 
                facilities on Indian land and brownfield sites, and 
                triple credits for generation from small renewable 
                distributed generators (meaning those no larger than 1 
                megawatt);
                    ``(E) ensure that, with respect to a purchaser 
                that, as of the date of enactment of this section, has 
                a purchase agreement from a renewable energy facility 
                placed in service before that date (other than a 
                biomass energy facility), the credit associated with 
                the generation of renewable energy under the contract 
                is issued to the purchaser of the electric energy; and
                    ``(F) not allow energy efficiency credits 
                established under section 611(k) to be traded.
            ``(3) Duration.--A credit described in paragraph (2)(A) may 
        only be used for compliance with this section during the 3-year 
        period beginning on the date of issuance of the credit.
            ``(4) Transfers.--An electric utility that holds credits in 
        excess of the quantity of credits needed to comply with 
        subsection (b) may transfer the credits to another electric 
        utility.
            ``(5) Delegation of market function.--The Secretary may 
        delegate to an appropriate entity that establishes markets the 
        administration of a national tradeable renewable energy credit 
        market for purposes of creating a transparent national market 
        for the sale or trade of renewable energy credits.
    ``(d) Enforcement.--
            ``(1) Civil penalties.--Any electric utility that fails to 
        meet the compliance requirements of subsection (b) shall be 
        subject to a civil penalty.
            ``(2) Amount of penalty.--Subject to paragraph (3), the 
        amount of the civil penalty shall be equal to the product 
        obtained by multiplying--
                    ``(A) the number of kilowatt-hours of electric 
                energy sold to electric consumers in violation of 
                subsection (b); by
                    ``(B) the greater of--
                            ``(i) 2 cents (adjusted for inflation under 
                        subsection (g)); or
                            ``(ii) 200 percent of the average market 
                        value of renewable energy credits during the 
                        year in which the violation occurred.
            ``(3) Mitigation or waiver.--
                    ``(A) In general.--The Secretary may mitigate or 
                waive a civil penalty under this subsection if the 
                electric utility is unable to comply with subsection 
                (b) due to a reason outside of the reasonable control 
                of the electric utility.
                    ``(B) Reduction.--The Secretary shall reduce the 
                amount of any penalty determined under paragraph (2) by 
                an amount paid by the electric utility to a State for 
                failure to comply with the requirement of a State 
                renewable energy program if the State requirement is 
                greater than the applicable requirement of subsection 
                (b).
            ``(4) Procedure for assessing penalty.--The Secretary shall 
        assess a civil penalty under this subsection in accordance with 
        the procedures prescribed by section 333(d) of the Energy 
        Policy and Conservation Act (42 U.S.C. 6303(d)).
    ``(e) State Renewable Energy Account Program.--
            ``(1) In general.--There is established in the Treasury a 
        State renewable energy account program.
            ``(2) Deposits.--All money collected by the Secretary from 
        alternative compliance payments and the assessment of civil 
        penalties under this section shall be deposited into the 
        renewable energy account established pursuant to this 
        subsection.
            ``(3) Use.--Proceeds deposited in the State renewable 
        energy account shall be used by the Secretary to carry out a 
        program to provide grants to the State agency responsible for 
        developing State energy conservation plans under section 362 of 
        the Energy Policy and Conservation Act (42 U.S.C. 6322) for the 
        purposes of promoting renewable energy production, including 
        programs that promote technologies that reduce the use of 
        electricity at customer sites, such as solar water heating.
            ``(4) Administration.--The Secretary may issue guidelines 
        and criteria for grants awarded under this subsection.
            ``(5) Records.--State energy offices receiving grants under 
        this section shall maintain such records and evidence of 
        compliance as the Secretary may require.
            ``(6) Preference.--In allocating funds under this 
        subsection, the Secretary shall give preference--
                    ``(A) to States in regions that have a 
                disproportionately small share of economically 
                sustainable renewable energy generation capacity; and
                    ``(B) to State programs to stimulate or enhance 
                innovative renewable energy technologies.
    ``(f) Exemptions.--During any calendar year, this section shall not 
apply to an electric utility that sold less than 4,000,000 megawatt-
hours of electric energy to electric consumers during the preceding 
calendar year.
    ``(g) Inflation Adjustment.--Not later than December 31 of each 
year beginning in 2011, the Secretary shall adjust for United States 
dollar inflation from January 1, 2011 (as measured by the Consumer 
Price Index)--
            ``(1) the price of a renewable energy credit under 
        subsection (c)(2); and
            ``(2) the amount of the civil penalty per kilowatt-hour 
        under subsection (d)(2).
    ``(h) State Programs.--
            ``(1) In general.--Subject to paragraph (2), nothing in 
        this section diminishes any authority of a State or political 
        subdivision of a State to adopt or enforce any law or 
        regulation respecting renewable energy.
            ``(2) Compliance.--Except as provided in subsection (d)(3), 
        no such law or regulation shall relieve any person of any 
        requirement otherwise applicable under this section.
            ``(3) Coordination.--The Secretary, in consultation with 
        States having such renewable energy programs, shall, to the 
        maximum extent practicable, facilitate coordination between the 
        Federal program and State programs.
            ``(4) Regulations.--
                    ``(A) In general.--The Secretary, in consultation 
                with States, shall promulgate regulations to ensure 
                that an electric utility subject to the requirements of 
                this section that is also subject to a State renewable 
                energy standard receives renewable energy credits in 
                relation to equivalent quantities of renewable energy 
                associated with compliance mechanisms, other than the 
                generation or purchase of renewable energy by the 
                electric utility, including the acquisition of 
                certificates or credits and the payment of taxes, fees, 
                surcharges, or other financial compliance mechanisms by 
                the electric utility or a customer of the electric 
                utility, directly associated with the generation or 
                purchase of renewable energy.
                    ``(B) Prohibition on double counting.--The 
                regulations promulgated under this paragraph shall 
                ensure that a kilowatt hour associated with a renewable 
                energy credit issued pursuant to this subsection shall 
                not be used for compliance with this section more than 
                once.
    ``(i) Recovery of Costs.--
            ``(1) In general.--The Commission shall promulgate and 
        enforce such regulations as are necessary to ensure that an 
        electric utility recovers all prudently incurred costs 
        associated with compliance with this section.
            ``(2) Applicable law.--A regulation under paragraph (1) 
        shall be enforceable in accordance with the provisions of law 
        applicable to enforcement of regulations under the Federal 
        Power Act (16 U.S.C. 791a et seq.).
    ``(j) Regulations.--
            ``(1) In general.--Not later than 18 months after the date 
        of enactment of this title, the Secretary, in consultation with 
        the leaders of relevant Federal agencies, shall promulgate 
        regulations to carry out this title.
            ``(2) Priorities.--The regulations promulgated under 
        paragraph (1) shall prioritize the use of components and 
        products produced in the United States, without placing 
        constraints that prevent compliance under this title, for new 
        renewable energy facilities eligible to participate in 
        activities under this title.
    ``(k) Termination of Authority.--This section and the authority 
provided by this section terminate on December 31, 2040.''.
    (b) Table of Contents Amendment.--The table of contents of the 
Public Utility Regulatory Policies Act of 1978 (16 U.S.C. prec. 2601) 
is amended by adding at the end of the items relating to title VI the 
following:

``Sec. 609. Rural and remote communities electrification grants.
``Sec. 610. Renewable electricity and energy efficiency resource 
                            standards.''.

SEC. 602. ENERGY EFFICIENCY RESOURCE STANDARD FOR RETAIL ELECTRICITY 
              AND NATURAL GAS DISTRIBUTORS.

    (a) In General.--Title VI of the Public Utility Regulatory Policies 
Act of 1978 (16 U.S.C. 2601 et seq.) (as amended by section 601(a)) is 
amended by adding at the end the following:

``SEC. 611. ENERGY EFFICIENCY RESOURCE STANDARD FOR RETAIL ELECTRICITY 
              AND NATURAL GAS DISTRIBUTORS.

    ``(a) Definitions.--In this section:
            ``(1) Administrator.--The term `Administrator' means the 
        Administrator of the Environmental Protection Agency.
            ``(2) Affiliate.--The term `affiliate', when used with 
        respect to a person, means another person that owns or 
        controls, is owned or controlled by, or is under common 
        ownership control with, the person, as determined under 
        regulations promulgated by the Secretary.
            ``(3) ANSI.--The term `ANSI' means the American National 
        Standards Institute.
            ``(4) ASHRAE.--The term `ASHRAE' means the American Society 
        of Heating, Refrigerating, and Air Conditioning Engineers.
            ``(5) Base quantity.--
                    ``(A) In general.--The term `base quantity', when 
                used with respect to a retail electricity distributor 
                or retail natural gas distributor, means the average 
                annual quantity of electricity or natural gas delivered 
                by the retail electricity distributor or retail natural 
                gas distributor to retail customers during the 5 
                calendar years immediately preceding the date of 
                enactment of this section.
                    ``(B) Exclusion.--The term `base quantity', when 
                used to determine the base quantity of a retail natural 
                gas distributor, does not include natural gas delivered 
                for purposes of electricity generation.
            ``(6) Codes and standards savings.--
                    ``(A) In general.--The term `codes and standards 
                savings' means a reduction in end-use electricity or 
                natural gas consumption in the service territory of a 
                retail electricity distributor or a retail natural gas 
                distributor as a result of the adoption and 
                implementation, after the date of enactment of this 
                section, of new or revised appliance and equipment 
                efficiency standards or building energy codes.
                    ``(B) Baselines.--In calculating codes and 
                standards savings--
                            ``(i) the baseline for calculating savings 
                        from building codes shall be the more stringent 
                        of--
                                    ``(I) the 2006 International Energy 
                                Conservation Code for residential 
                                buildings and the ASHRAE/ANSI/IESNA 
                                Standard 90.1 (2004) for commercial 
                                buildings;
                                    ``(II) the applicable State 
                                building code in effect on the date of 
                                enactment of this section; or
                                    ``(III) a baseline determined by 
                                the Secretary; and
                            ``(ii) the baseline for calculating savings 
                        from appliance standards shall be the average 
                        efficiency of new appliances in the applicable 
                        1 or more categories prior to adoption and 
                        implementation of the new standard.
            ``(7) Cost-effective.--The term `cost-effective', when used 
        with respect to an energy efficiency measure, means that the 
        measure achieves a net present value of economic benefits over 
        the life of the measure, both directly to the energy consumer 
        and to the economy, that is greater than the net present value 
        of the cost of the measure over the life of the measure, both 
        directly to the energy consumer and to the economy.
            ``(8) Customer facility savings.--The term `customer 
        facility savings' means a reduction in end-use electricity or 
        natural gas consumption (including recycled energy savings) at 
        a facility of an end-use consumer of electricity or natural gas 
        served by a retail electricity distributor or natural gas 
        distributor, as compared to--
                    ``(A) in the case of new equipment that replaces 
                existing equipment at the end of the useful life of the 
                existing equipment, consumption by new equipment of 
                average efficiency;
                    ``(B) in the case of new equipment that replaces 
                existing equipment with remaining useful life--
                            ``(i) consumption of the existing equipment 
                        for the remaining useful life of the equipment; 
                        and
                            ``(ii) after that useful life, consumption 
                        of new equipment of average efficiency;
                    ``(C) in the case of a new facility, consumption at 
                a reference facility of average efficiency; or
                    ``(D) in the case of energy savings measures at a 
                facility not covered by subparagraphs (A) through (C), 
                consumption at the facility during a base year.
            ``(9) Electricity savings.--The term `electricity savings' 
        means reductions in electricity consumption achieved through 
        measures implemented after the date of enactment of this 
        section, as determined in accordance with regulations 
        promulgated by the Secretary, through--
                    ``(A) customer facility savings of electricity, 
                adjusted to reflect any associated increase in fuel 
                consumption at the facility;
                    ``(B) reductions in distribution system losses of 
                electricity achieved by a retail electricity 
                distributor, as compared to losses attributable to new 
                or replacement distribution system equipment of average 
                efficiency (as defined in regulations promulgated by 
                the Secretary); and
                    ``(C) codes and standards savings of electricity.
            ``(10) IESNA.--The term `IESNA' mean the Illuminating 
        Engineering Society of North America.
            ``(11) Natural gas savings.--The term `natural gas savings' 
        means reductions in natural gas consumption from measures 
        implemented after the date of enactment of this section, as 
        determined in accordance with regulations promulgated by the 
        Secretary, through--
                    ``(A) customer facility savings of natural gas, 
                adjusted to reflect any associated increase in 
                electricity consumption or consumption of other fuels 
                at the facility;
                    ``(B) reductions in leakage, operational losses, 
                and consumption of natural gas fuel to operate a gas 
                distribution system, achieved by a retail natural gas 
                distributor, as compared to similar leakage, losses, 
                and consumption during a base period (which shall not 
                be less than 1 year); and
                    ``(C) codes and standards savings of natural gas.
            ``(12) Power pool.--The term `power pool' means an 
        association of 2 or more interconnected electric systems that 
        is recognized by the Commission as having an agreement to 
        coordinate operations and planning for improved reliability and 
        efficiencies, including a Regional Transmission Organization or 
        an Independent System Operator.
            ``(13) Recycled energy savings.--The term `recycled energy 
        savings' means a reduction in electricity or natural gas 
        consumption that results from a modification of an industrial 
        or commercial system that commenced operation before the date 
        of enactment of this section, in order to recapture electrical, 
        mechanical, or thermal energy that would otherwise be wasted, 
        as determined in accordance with regulations promulgated by the 
        Secretary.
            ``(14) Reporting period.--The term `reporting period' 
        means--
                    ``(A) calendar year 2013; and
                    ``(B) each successive calendar year thereafter.
            ``(15) Retail electricity distributor.--
                    ``(A) In general.--The term `retail electricity 
                distributor' means, for any calendar year, an electric 
                utility that owns or operates an electric distribution 
                facility and, using the facility, delivered not less 
                than 4,000,000 megawatt-hours of electric energy to 
                electric consumers for purposes other than resale 
                during the most recent 2-calendar-year period for which 
                data are available.
                    ``(B) Administration.--For purposes of determining 
                whether an electric utility qualifies as a retail 
                electricity distributor under subparagraph (A)--
                            ``(i) deliveries by any affiliate of an 
                        electric utility to electric consumers for 
                        purposes other than resale shall be considered 
                        to be deliveries by the electric utility; and
                            ``(ii) deliveries by any electric utility 
                        to a lessee, tenant, or affiliate of the 
                        electric utility shall not be treated as 
                        deliveries to electric consumers.
            ``(16) Retail natural gas distributor.--
                    ``(A) In general.--The term `retail natural gas 
                distributor' means, for any given calendar year, a 
                local distribution company (as defined in section 2 of 
                the Natural Gas Policy Act of 1978 (15 U.S.C. 3301)), 
                that delivered to natural gas consumers more than 
                5,000,000,000 cubic feet of natural gas during the most 
                recent 2-calendar-year period for which data are 
                available.
                    ``(B) Administration.--For purposes of determining 
                whether a person qualifies as a retail natural gas 
                distributor under subparagraph (A)--
                            ``(i) deliveries of natural gas by any 
                        affiliate of a local distribution company to 
                        consumers for purposes other than resale shall 
                        be considered to be deliveries by the local 
                        distribution company; and
                            ``(ii) deliveries of natural gas to a 
                        lessee, tenant, or affiliate of a local 
                        distribution company shall not be treated as 
                        deliveries to natural gas consumers.
            ``(17) Third-party efficiency provider.--The term `third-
        party efficiency provider' means any retailer, building owner, 
        energy service company, financial institution or other 
        commercial, industrial or nonprofit entity that is capable of 
        providing electricity savings or natural gas savings in 
        accordance with subsections (e) and (f).
    ``(b) Establishment of Program.--Not later than 18 months after the 
date of enactment of this section, the Secretary shall, by regulation, 
establish a program to implement and enforce this section, including--
            ``(1) measurement and verification procedures and standards 
        under subsection (f);
            ``(2) requirements under which retail electricity 
        distributors and retail natural gas distributors shall--
                    ``(A) demonstrate, document, and report compliance 
                with the performance standards established under 
                subsection (d); and
                    ``(B) estimate the impact of the standards on 
                current and future electricity and natural gas use in 
                the service territories of the retail electricity 
                distributors and retail natural gas distributors, 
                respectively; and
            ``(3) requirements governing applications for, and 
        implementation of, delegated State administration under 
        subsection (h).
    ``(c) Coordination With State Programs.--In establishing and 
implementing the program established under this section, the Secretary, 
in coordination with the Administrator, shall, to the maximum extent 
practicable, preserve the integrity, and incorporate the best 
practices, of existing State energy efficiency programs.
    ``(d) Performance Standards.--
            ``(1) Compliance obligation.--Not later than April 1 of the 
        calendar year immediately following each reporting period--
                    ``(A) each retail electricity distributor shall 
                submit to the Secretary a report, in accordance with 
                regulations promulgated by the Secretary, demonstrating 
                that the retail electricity distributor has achieved 
                cumulative electricity savings (adjusted to account for 
                any attrition of savings measures implemented in prior 
                years) in each calendar year that are least equal to 
                the applicable percentage, established under paragraph 
                (2), (3), or (4), of the base quantity of the retail 
                electricity distributor; and
                    ``(B) each retail natural gas distributor shall 
                submit to the Secretary a report, in accordance with 
                regulations promulgated by the Secretary, demonstrating 
                that the retail natural gas distributor has achieved 
                cumulative natural gas savings (adjusted to account for 
                any attrition of savings measures implemented in prior 
                years) in each calendar year compared to the base 
                quantity of the retail natural gas distributor.
            ``(2) Standards for 2012 through 2020.--For purposes of 
        paragraph (1), for each of calendar years 2012 through 2020, 
        the applicable percentages shall be as follows:

                                                 Cumulative electricity
``Calendar years:                                   savings percentage:
        2012...................................................    1.5 
        2013...................................................    2.5 
        2014...................................................    3.5 
        2015...................................................    4.5 
        2016...................................................    5.5 
        2017...................................................    6.5 
        2018...................................................    7.5 
        2019...................................................    8.5 
        2020...................................................    9.5.
            ``(3) Subsequent years.--
                    ``(A) Calendar years 2021 through 2030.--Not later 
                than December 31, 2015, the Secretary shall promulgate 
                regulations establishing performance standards 
                (expressed as applicable percentages of base quantity 
                for both cumulative electricity savings and cumulative 
                natural gas savings) for each of calendar years 2021 
                through 2030.
                    ``(B) Subsequent extensions.--Except as provided in 
                subparagraph (A), not later than December 31 of the 
                penultimate reporting period for which performance 
                standards have been established under this paragraph, 
                the Secretary shall promulgate regulations establishing 
                performance standards (expressed as applicable 
                percentages of base quantity for both cumulative 
                electricity savings and cumulative natural gas savings) 
                for the 10-calendar-year period following the last 
                calendar year for which performance standards 
                previously were established.
                    ``(C) Requirements.--
                            ``(i) In general.--Subject to clause (ii), 
                        the Secretary shall establish standards under 
                        this paragraph at levels that reflect the 
                        maximum achievable level of cost-effective 
                        energy efficiency potential, taking into 
                        account--
                                    ``(I) cost-effective energy savings 
                                achieved by leading retail electricity 
                                distributors and retail natural gas 
                                distributors;
                                    ``(II) opportunities for new codes 
                                and standard savings;
                                    ``(III) technology improvements; 
                                and
                                    ``(IV) other indicators of cost-
                                effective energy efficiency potential.
                            ``(ii) Minimum percentage.--In no case 
                        shall the applicable percentages for any 
                        calendar year be lower than the applicable 
                        percentage for calendar year 2020 (including 
                        any increase in the standard for calendar year 
                        2020 pursuant to paragraph (4)).
            ``(4) Midcourse review and adjustment of standards.--
                    ``(A) In general.--Not later than December 31, 
                2014, and at 10-year intervals thereafter, the 
                Secretary shall--
                            ``(i) review the most recent standards 
                        established under paragraph (2) or (3); and
                            ``(ii) by regulation, increase the 
                        standards if the Secretary determines that 
                        additional cost-effective energy efficiency 
                        potential is achievable, taking into account 
                        the factors described in paragraph (3)(C).
                    ``(B) Lead time.--If the Secretary revises 
                standards under this paragraph, the regulations shall 
                provide adequate lead time to ensure that compliance 
                with the increased standards is feasible.
            ``(5) Delay of submission for first reporting period.--
                    ``(A) In general.--Notwithstanding paragraphs (1) 
                and (2), for the 2013 reporting period, the Secretary 
                may accept a request from a retail electricity 
                distributor or a retail natural gas distributor to 
                delay the required submission of documentation of part 
                or all of the required savings for up to 2 years.
                    ``(B) Plan.--The request for delay shall include a 
                plan for coming into full compliance by the end of the 
                2013 through 2014 reporting period.
    ``(e) Transfers of Electricity or Natural Gas Savings.--
            ``(1) Bilateral contracts for savings transfers.--Subject 
        to the other provisions of this section, a retail electricity 
        distributor or retail natural gas distributor may use 
        electricity savings or natural gas savings purchased, pursuant 
        to a bilateral contract, from another retail electricity 
        distributor or retail natural gas distributor, a State, or a 
        third-party efficiency provider to meet the applicable 
        performance standard under subsection (d).
            ``(2) Requirements.--Electricity or natural gas savings 
        purchased and used for compliance pursuant to this subsection 
        shall be--
                    ``(A) measured and verified in accordance with 
                subsection (f);
                    ``(B) reported in accordance with subsection (d); 
                and
                    ``(C) achieved within the same State as is served 
                by the retail electricity distributor or retail natural 
                gas distributor.
            ``(3) Exception.--Notwithstanding paragraph (2)(C), a State 
        regulatory authority may authorize a retail electricity 
        distributor or a retail natural gas distributor regulated by 
        the State regulatory authority to purchase savings achieved in 
        a different State, if--
                    ``(A) the savings are achieved within the same 
                power pool; and
                    ``(B) the State regulatory authority that regulates 
                the purchaser oversees the measurement and verification 
                of the savings pursuant to the procedures and standards 
                applicable in the State of the purchaser.
            ``(4) Regulatory approval.--Nothing in this subsection 
        limits or affects the authority of a State regulatory authority 
        to require a retail electricity distributor or retail natural 
        gas distributor that is regulated by the State regulatory 
        authority to obtain the authorization or approval of the State 
        regulatory authority for a contract for transfer of savings 
        under this subsection.
            ``(5) Limitations.--In the interest of optimizing 
        achievement of cost-effective efficiency potential, the 
        Secretary may prescribe such limitations as the Secretary 
        determines to be appropriate with respect to the proportion of 
        the compliance obligation of a retail electricity or natural 
        gas distributor, under the applicable performance standards 
        under subsection (d), that may be met using electricity or 
        natural gas savings that are purchased under this subsection.
    ``(f) Measurement and Verification of Savings.--The regulations 
promulgated under subsection (b) shall include--
            ``(1) procedures and standards for defining and measuring 
        electricity savings and natural gas savings that can be counted 
        towards the performance standards established under subsection 
        (d), which shall--
                    ``(A) specify the types of energy efficiency and 
                energy conservation measures that can be counted;
                    ``(B) require that energy consumption estimates for 
                customer facilities or parts of facilities in the 
                applicable base and current years be adjusted, as 
                appropriate, to account for changes in weather, level 
                of production, and building area;
                    ``(C) account for the useful life of measures;
                    ``(D) include considered savings values for 
                specific, commonly used measures;
                    ``(E) allow for savings from a program to be 
                estimated based on extrapolation from a representative 
                sample of participating customers;
                    ``(F) include procedures for counting combined heat 
                and power savings and recycled energy savings;
                    ``(G) establish methods for calculating codes and 
                standards savings, including the use of verified 
                compliance rates;
                    ``(H) count only measures and savings that are 
                additional to business-as-usual practices;
                    ``(I) except in the case of codes and standards 
                savings, ensure that the retail electricity distributor 
                or retail natural gas distributor claiming the savings 
                played a significant role in achieving the savings 
                (including through the activities of a designated agent 
                of the distributor or through the purchase of 
                transferred savings);
                    ``(J) avoid double-counting of savings used for 
                compliance with this section and section 610, including 
                transferred savings; and
                    ``(K) include savings from programs administered by 
                the retail electric or natural gas distributor that are 
                funded by Federal, State, or other sources; and
            ``(2) procedures and standards for third-party verification 
        of reported electricity savings or natural gas savings.
    ``(g) Enforcement and Judicial Review.--
            ``(1) Review of retail distributor reports.--
                    ``(A) In general.--The Secretary shall review each 
                report submitted to the Secretary by a retail 
                electricity distributor or retail natural gas 
                distributor under subsection (d) to verify that the 
                applicable performance standards under that subsection 
                have been met.
                    ``(B) Exclusions.--In determining compliance with 
                the applicable performance standards, the Secretary 
                shall exclude reported electricity savings or natural 
                gas savings that are not adequately demonstrated and 
                documented, in accordance with the regulations 
                promulgated under subsections (d), (e), and (f).
            ``(2) Penalty for failure to document adequate savings.--If 
        a retail electricity distributor or a retail natural gas 
        distributor fails to demonstrate compliance with an applicable 
        performance standard under subsection (d) or to pay to the 
        State an applicable alternative compliance payment under 
        subsection (h)(4), the Secretary shall assess against the 
        retail electricity distributor or retail natural gas 
        distributor a civil penalty for each such failure in an amount 
        equal to, as adjusted for inflation in accordance with such 
        regulations as the Secretary may promulgate--
                    ``(A) $100 per megawatt-hour of electricity savings 
                or alternative compliance payment that the retail 
                electricity distributor failed to achieve or make, 
                respectively; or
                    ``(B) $10 per million Btu of natural gas savings or 
                alternative compliance payment that the retail natural 
                gas distributor failed to achieve or make, 
                respectively.
            ``(3) Offsetting state penalties.--The Secretary shall 
        reduce the amount of any penalty under paragraph (2) by the 
        amount paid by the applicable retail electricity distributor or 
        retail natural gas distributor to a State for failure to comply 
        with the requirements of a State energy efficiency resource 
        standard during the same compliance period, if the State 
        standard is--
                    ``(A) comparable in type to the Federal standard 
                established under this section; and
                    ``(B) more stringent than the applicable 
                performance standards under subsection (d).
            ``(4) Enforcement procedures.--The Secretary shall assess a 
        civil penalty, as provided under paragraph (2), in accordance 
        with the procedures described in section 333(d) of the Energy 
        Policy and Conservation Act (42 U.S.C. 6303(d)).
            ``(5) Judicial review.--
                    ``(A) In general.--Any person that will be 
                adversely affected by a final action taken by the 
                Secretary under this section, other than the assessment 
                of a civil penalty, may use the procedures for review 
                described in section 336(b) of the Energy Policy and 
                Conservation Act (42 U.S.C. 6306(b)).
                    ``(B) Administration.--For purposes of this 
                paragraph, references to a rule in section 336(b) of 
                the Energy Policy and Conservation Act (42 U.S.C. 
                6306(b)) shall be considered to refer also to all other 
                final actions of the Secretary under this section other 
                than the assessment of a civil penalty.
    ``(h) State Administration.--
            ``(1) In general.--On receipt of an application from the 
        Governor of a State (including, for purposes of this 
        subsection, the Mayor of the District of Columbia), the 
        Secretary may delegate to the State the administration of this 
        section within the territory of the State if the Secretary 
        determines that the State will implement an energy efficiency 
        program that meets or exceeds the requirements of this section, 
        including--
                    ``(A) achieving electricity savings and natural gas 
                savings at least as great as the savings required under 
                the applicable performance standards established under 
                subsection (d);
                    ``(B) reviewing reports and verifying electricity 
                savings and natural gas savings achieved in the State 
                (including savings transferred from outside the State); 
                and
                    ``(C) collecting any alternative compliance 
                payments under paragraph (4) and using the payments to 
                implement cost-effective efficiency programs.
            ``(2) Secretarial determination.--The Secretary shall make 
        a substantive determination approving or disapproving a State 
        application, after public notice and comment, not later than 
        180 days after the date of receipt of a complete application.
            ``(3) Alternative measurement and verification procedures 
        and standards.--As part of an application submitted under 
        paragraph (1), a State may request to use alternative 
        measurement and verification procedures and standards to the 
        procedures and standards established under subsection (f), if 
        the State demonstrates that the alternative procedures and 
        standards provide a level of accuracy of measurement and 
        verification that is at least equivalent to the Federal 
        procedures and standards promulgated under subsection (f).
            ``(4) Alternative compliance payments.--
                    ``(A) In general.--As part of an application 
                submitted under paragraph (1), a State may permit 
                retail electricity distributors or retail natural gas 
                distributors to pay to the State, by not later than 
                April 1 of the calendar year immediately following the 
                applicable reporting period, an alternative compliance 
                payment in an amount equal to, as adjusted for 
                inflation in accordance with such regulations as the 
                Secretary may promulgate, not less than--
                            ``(i) $50 per megawatt-hour of electricity 
                        savings needed to make up any deficit with 
                        regard to a compliance obligation under the 
                        applicable performance standard; or
                            ``(ii) $5 per million Btu of natural gas 
                        savings needed to make up any deficit with 
                        regard to a compliance obligation under the 
                        applicable performance standard.
                    ``(B) Use of payments.--
                            ``(i) In general.--Alternative compliance 
                        payments collected by a State pursuant to 
                        subparagraph (A) shall be used by the State to 
                        administer the delegated authority of the State 
                        under this section and to implement cost-
                        effective energy efficiency programs.
                            ``(ii) Programs.--The programs shall--
                                    ``(I) to the maximum extent 
                                practicable, achieve electricity 
                                savings and natural gas savings in the 
                                State sufficient to make up the deficit 
                                associated with the alternative 
                                compliance payments; and
                                    ``(II) be measured and verified in 
                                accordance with the applicable 
                                procedures and standards under 
                                subsection (f) or paragraph (3), as the 
                                case may be.
            ``(5) Review of state implementation.--
                    ``(A) Periodic review.--Every 2 years, the 
                Secretary shall review State implementation of this 
                section for conformance with the requirements of this 
                section in approximately \1/2\ of the States that have 
                received approval under this subsection to administer 
                the program, so that each State shall be reviewed at 
                least once every 4 years.
                    ``(B) Report.--To facilitate the review, the 
                Secretary may require the State to submit a report 
                demonstrating the compliance of the State with the 
                requirements of this section, including--
                            ``(i) reports submitted by retail 
                        electricity distributors and retail natural gas 
                        distributors to the State demonstrating 
                        compliance with applicable performance 
                        standards;
                            ``(ii) the impact of the standards on 
                        projected electricity and natural gas demand 
                        within the State;
                            ``(iii) an accounting of the use of 
                        alternative compliance payments by the State 
                        and the resulting electricity savings and 
                        natural gas savings achieved; and
                            ``(iv) such other information as the 
                        Secretary determines appropriate.
                    ``(C) Review on petition.--Notwithstanding 
                subparagraph (A), on the receipt of a public petition 
                containing a credible allegation of substantial 
                deficiencies, the Secretary shall promptly review the 
                implementation by the State of delegated authority 
                under this section.
                    ``(D) Deficiencies.--
                            ``(i) In general.--If deficiencies are 
                        found in a review under this paragraph, the 
                        Secretary shall--
                                    ``(I) notify the State; and
                                    ``(II) direct the State to correct 
                                the deficiencies and to report to the 
                                Secretary on progress not later than 
                                180 days after the date of the receipt 
                                of review results.
                            ``(ii) Substantial deficiencies.--If the 
                        deficiencies are substantial, the Secretary 
                        shall--
                                    ``(I) disallow such reported 
                                savings as the Secretary determines are 
                                not credible due to deficiencies;
                                    ``(II) re-review the State not 
                                later than 2 years after the date of 
                                the original review; and
                                    ``(III) if substantial deficiencies 
                                remain uncorrected after the review 
                                provided for under subclause (II), 
                                revoke the authority of the State to 
                                administer the program established 
                                under this section.
            ``(6) Calls for revision of state applications.--As a 
        condition of maintaining the delegated authority of a State to 
        administer this section, the Secretary may require the State to 
        submit a revised application under paragraph (1) if the 
        Secretary has--
                    ``(A) promulgated new or revised performance 
                standards under subsection (d);
                    ``(B) promulgated new or substantially revised 
                measurement and verification procedures and standards 
                under subsection (f); or
                    ``(C) otherwise substantially revised the program 
                established under this section.
    ``(i) Information and Reports.--In accordance with section 13 of 
the Federal Energy Administration Act of 1974 (15 U.S.C. 772), the 
Secretary may require any retail electricity distributor, any retail 
natural gas distributor, any third-party efficiency provider, or such 
other entities as the Secretary considers appropriate, to provide any 
information the Secretary determines appropriate to carry out this 
section.
    ``(j) State Law.--Nothing in this section diminishes or qualifies 
any authority of a State or political subdivision of a State to adopt 
or enforce any law (including a regulation) respecting electricity 
savings or natural gas savings, including any law (including a 
regulation) establishing energy efficiency requirements that are more 
stringent than the requirements established under this section, except 
that no such law or regulation may relieve any person of any 
requirement otherwise applicable under this section.
    ``(k) Energy Efficiency Credits.--The Secretary shall issue energy 
efficiency credits at the end of each calendar year to eligible retail 
electricity distributor for each kilowatt hour of electricity savings 
above the applicable percentage, established under paragraph (2), (3), 
or (4) of subsection (d), of the base quantity of the retail 
electricity distributor in a quantity that shall not exceed 15 percent 
of the minimum percentage required in each calendar year under section 
610(b)(1)(B).''.
    (b) Table of Contents Amendment.--The table of contents of the 
Public Utility Regulatory Policies Act of 1978 (16 U.S.C. prec. 2601) 
(as amended by section 601(b)) is amended by adding at the end of the 
items relating to title VI the following:

``Sec. 611. Energy efficiency resource standard for retail electricity 
                            and natural gas distributors.''.

SEC. 603. VOLUNTARY RENEWABLE ENERGY MARKETS.

    (a) In General.--It is the policy of the United States to support 
the continued growth of voluntary renewable energy markets.
    (b) Administration.--Nothing in this Act or the amendments made by 
this Act is intended to interfere with or prevent the continued 
operation and growth of the voluntary renewable energy market.
    (c) Report on Efficacy of Voluntary Renewable Energy Market.--Not 
later than 2 years after the date of enactment of this Act, the 
Comptroller General of the United States shall submit to Congress a 
report describing the efficacy of the voluntary renewable energy market 
in the context of the pollution reduction and investment programs under 
this Act and the amendments made by this Act, including--
            (1) whether meaningful reductions in carbon dioxide 
        emissions have occurred in response to investments in the 
        voluntary renewable energy market;
            (2) whether the voluntary market continues to grow; and
            (3) a list of recommended strategies for ensuring that--
                    (A) meaningful emissions reductions may occur; and
                    (B) the voluntary renewable energy market may 
                continue to grow.
                                 <all>