[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
                          MEMBER PROPOSALS ON
                         ENERGY TAX INCENTIVES

=======================================================================

                                HEARING

                               before the

                SUBCOMMITTEE ON SELECT REVENUE MEASURES

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 24, 2007

                               __________

                           Serial No. 110-32

                               __________

         Printed for the use of the Committee on Ways and Means



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                      COMMITTEE ON WAYS AND MEANS

                 CHARLES B. RANGEL, New York, Chairman

FORTNEY PETE STARK, California       JIM MCCRERY, Louisiana
SANDER M. LEVIN, Michigan            WALLY HERGER, California
JIM MCDERMOTT, Washington            DAVE CAMP, Michigan
JOHN LEWIS, Georgia                  JIM RAMSTAD, Minnesota
RICHARD E. NEAL, Massachusetts       SAM JOHNSON, Texas
MICHAEL R. MCNULTY, New York         PHIL ENGLISH, Pennsylvania
JOHN S. TANNER, Tennessee            JERRY WELLER, Illinois
XAVIER BECERRA, California           KENNY HULSHOF, Missouri
LLOYD DOGGETT, Texas                 RON LEWIS, Kentucky
EARL POMEROY, North Dakota           KEVIN BRADY, Texas
STEPHANIE TUBBS JONES, Ohio          THOMAS M. REYNOLDS, New York
MIKE THOMPSON, California            PAUL RYAN, Wisconsin
JOHN B. LARSON, Connecticut          ERIC CANTOR, Virginia
RAHM EMANUEL, Illinois               JOHN LINDER, Georgia
EARL BLUMENAUER, Oregon              DEVIN NUNES, California
RON KIND, Wisconsin                  PAT TIBERI, Ohio
BILL PASCRELL, JR., New Jersey       JON PORTER, Nevada
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama

             Janice Mays, Chief Counsel and Staff Director

                  Brett Loper, Minority Staff Director

                                 ______

                SUBCOMMITTEE ON SELECT REVENUE MEASURES

                RICHARD E. NEAL, Massachusetts, Chairman

LLOYD DOGGETT, Texas                 PHIL ENGLISH, Pennsylvania
MIKE THOMPSON, California            THOMAS M. REYNOLDS, New York
JOHN B. LARSON, Connecticut          ERIC CANTOR, Virginia
ALLYSON Y. SCHWARTZ, Pennsylvania    JOHN LINDER, Georgia
JIM MCDERMOTT, Washington            PAUL RYAN, Wisconsin
RAHM EMANUEL, Illinois
EARL BLUMENAUER, Oregon

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of April 24, 2007 announcing the hearing................     2

                               WITNESSES

The Honorable Jim McDermott, a Representative in Congress from 
  the State of Washington........................................     4
The Honorable Dave Weldon, M.D., a Representative in Congress 
  from the State of Florida......................................    11
The Honorable Earl Pomeroy, a Representative in Congress from the 
  State of North Dakota..........................................    11
The Honorable Earl Blumenauer, a Representative in Congress from 
  the State of Oregon............................................    15
The Honorable Shelley Berkley, a Representative in Congress from 
  the State of Nevada............................................    18
The Honorable Devin Nunes, a Representative in Congress from the 
  State of California............................................    21
The Honorable William J. Jefferson, a Representative in Congress 
  from the State of Louisiana....................................    24
The Honorable Mike Doyle, a Representative in Congress from the 
  State of Pennsylvania..........................................    27
The Honorable Collin C. Peterson, a Representative in Congress 
  from the State of Minnesota....................................    32
The Honorable James P. McGovern, a Representative in Congress 
  from the State of Massachusetts................................    34
The Honorable Lee Terry, a Representative in Congress from the 
  State of Nebraska..............................................    36
The Honorable Brian Baird, a Representative in Congress from the 
  State of Washington............................................    38
The Honorable Mike Ferguson, a Representative in Congress from 
  the State of New Jersey........................................    47
The Honorable John Shimkus, a Representative in Congress from the 
  State of Illinois..............................................    49
The Honorable Raul M. Grijalva, a Representative in Congress from 
  the State of Arizona...........................................    51
The Honorable Geoff Davis, a Representative in Congress from the 
  State of Kentucky..............................................    53
The Honorable Tim Murphy, a Representative in Congress from the 
  State of Pennsylvania..........................................    56
The Honorable Jay Inslee, a Representative in Congress from the 
  State of Washington............................................    61

                       SUBMISSIONS FOR THE RECORD

The Honorable Jerry Weller, a Representative in Congress from the 
  State of Illinois..............................................    64
The Honorable Pete Hoekstra, a Representative in Congress from 
  the State of Michigan..........................................    65
AARP, statement..................................................    65
David B. Goldstein, statement....................................    68
Enterprise Rent-A-Car, statement.................................    73
Methanol Institute, statement....................................    74
Wayne F. Krouse, statement.......................................    75


                          MEMBER PROPOSALS ON
                         ENERGY TAX INCENTIVES

                              ----------                              


                        TUESDAY, APRIL 24, 2007

             U.S. House of Representatives,
                       Committee on Ways and Means,
                   Subcommittee on Select Revenue Measures,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 3:14 p.m., in 
Room 1100, Longworth House Office Building, Hon. Richard E. 
Neal (Chairman of the Subcommittee), presiding.
    [The advisory announcing the hearing follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                SUBCOMMITTEE ON SELECT REVENUE MEASURES

                                                CONTACT: (202) 225-5522
FOR IMMEDIATE RELEASE
April 24, 2007
SRM-4

                       Neal Announces Hearing on

               Member Proposals on Energy Tax Incentives

    House Ways and Means Select Revenue Measures Subcommittee Chairman 
Richard E. Neal (D-MA) announced today that the Subcommittee on Select 
Revenue Measures will hold a hearing on specific Member proposals on 
tax incentives for alternative energy sources that have been introduced 
in the 109th and 110th Congress. The hearing will take place on 
Tuesday, April 24, 2007, in the main Committee hearing room, 1100 
Longworth House Office Building, beginning at 2:00 p.m.
      
    Oral testimony at this hearing will be limited to Members of the 
House of Representatives. However, any individual or organization not 
scheduled for an oral appearance may submit a written statement for 
consideration by the Committee and for inclusion in the printed record 
of the hearing.
      

FOCUS OF THE HEARING:

      
    The hearing provides Members the opportunity to speak on behalf of 
specific tax proposals they have introduced in the 109th or 110th 
Congress that would encourage the development of alternative energy 
sources, or that would act to reduce carbon dioxide emissions.
      

BACKGROUND:

      
    This hearing is the third in a series of hearings on energy policy 
conducted by the House Ways and Means Committee, and the second 
conducted by the Subcommittee on Select Revenue Measures exploring the 
nexus between energy policies and tax incentives. The Committee has 
heard testimony from scientists and policy experts who have urged 
Congress to develop legislation that would reduce carbon dioxide 
emissions, which are a primary source of global warming. These experts 
testified that enacting tax incentives to support alternative sources 
of energy is one way that Congress can act to reduce these emissions. 
Numerous proposals designed to utilize tax incentives that would 
encourage the development of alternative energy sources have been 
referred to the Committee during this Congress and the previous 
Congress. Some of these proposals would use tax incentives to increase 
efforts to reduce carbon dioxide emissions. This hearing will provide 
Members the opportunity to speak on these issues.
      
    In announcing the hearing, Chairman Neal stated, ``Members of the 
House of Representatives regularly speak to the Committees of 
jurisdiction about issues of importance to their congressional district 
and to our nation. The need to explore ideas that would update and 
improve our existing tax incentives for alternative energy ranks high 
on the list of national priorities.''
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
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formatting requirements listed below, by close of business Tuesday, May 
8, 2007. Finally, please note that due to the change in House mail 
policy, the U.S. Capitol Police will refuse sealed-package deliveries 
to all House Office Buildings. For questions, or if you encounter 
technical problems, please call (202) 225-1721.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
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not alter the content of your submission, but we reserve the right to 
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the World Wide Web at http://waysandmeans.house.gov.
      
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with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
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materials in alternative formats) may be directed to the Committee as 
noted above.

                                 

    Chairman NEAL. Good afternoon. I want to welcome all of you 
to the second of two hearings to be held by this Subcommittee 
on alternative energy issues.
    The full Committee began this process back in February, 
hearing from scientists and experts on climate change and 
global warming. They urged Congress to act to reduce carbon 
dioxide emissions, which are a primary cause of global warming.
    Last week we heard from industry experts, who advocated for 
certain tax incentives to support or enhance alternative energy 
sources and carbon reduction. And today we will hear from 
Members of Congress, who will share with us their proposals for 
tax incentives for America and to make sure we go green. Soon 
after these hearings conclude, I expect the full Committee will 
mark up tax legislation on these very issues.
    I want to welcome each of you who will be sharing with us 
today your ideas on alternative energy and carbon reduction. I 
believe we have several bipartisan panels representing a broad 
range of ideas and geography.
    This hearing provides us the opportunity to hear from our 
colleagues regarding tax proposals that are important to them 
and their constituents, and I look forward to all of the 
testimony we are about to hear today.
    And I would now like to recognize my friend, Mr. English, 
for his opening statement.
    Mr. ENGLISH. Thank you, Mr. Chairman. Thank you for 
bringing together this array of Member expertise to testify to 
us. I have a written statement that I would like to submit for 
the record. But in the interest of moving this process forward, 
I would simply like to do that and yield back the balance of my 
time.
    [The prepared statement of Mr. English follows:]
    [Not available at the time of printing.]
    Chairman NEAL. Thank you.
    I don't believe that there are any other Members of the 
Subcommittee who are seeking recognition for an opening 
statement. But without objection, any other Members wishing to 
insert statements as a part of the record may do so. And all 
written statements by the witnesses will be inserted in the 
record as well.
    Mr. McDermott, thank you for being here.

 STATEMENT OF THE HONORABLE JIM McDERMOTT, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. MCDERMOTT. Mr. Chairman, thank you for holding this 
hearing.
    We all know that reversing global warming poses one of the 
most significant challenges of the 21st century. Responding 
inadequately to this challenge is not a legacy I want to leave 
to my grandchildren or any others. And we also know that there 
is no magic bullet.
    The task before us really is not easy, but it can be done. 
But we have got to be honest and pragmatic and realistic. We 
are the number one emitter of carbon into the atmosphere, and 
so we should be the acknowledged leader in reversing global 
warming. We can make this effort one of the defining moments in 
the history of our nation.
    It is going to take a combination of innovation, Federal 
support, lifestyle adjustment, and multilateral diplomacy to 
make a real difference. And we have to start now in order to 
stave off the potentially disastrous repercussions that global 
warming will mean for America and the world. In the U.S., the 
single largest source of the carbon we emit into the 
atmosphere--about 40 percent--comes from power plants fired by 
coal, oil, and gas.
    In my view, there are two very obvious ways we can be 
combating this problem, one of which is frequently acknowledged 
and one of which is all too often overlooked. The first thing 
we must do is develop a national policy to generate power from 
clean and renewable sources. Wind, solar, hydro, biomass, and 
geothermal sources can supply power to the nation's electrical 
grid while emitting dramatically less carbon into the 
atmosphere.
    To that end, I am pleased to hear so much discussion about 
passing long-term extensions, and I emphasize long-term, of the 
Production Tax Credit to provide clear market signals for 
private investors in renewable energy production. And we need 
to expand and improve the current Federal incentives for public 
power utilities to generate clean energy. We have not paid 
attention to the public sector in the past very much.
    The Clean Renewable Energy Bond program needs to be 
revamped so that large public power projects can be financed 
and brought online by public power utilities that now serve 
over 44 million Americans, or about 15 percent of the 
population.
    Federal incentives for both public and private utilities 
are crucial to making clean energy an affordable and cost-
competitive alternative. Providing private and public utilities 
the tools and mandate to develop clean and renewable energy is 
a major step in the right direction.
    But let me advocate on behalf of an effective policy that 
is overlooked all too often: that is energy efficiency. Every 
kilowatt we save through improvements in energy efficiency is 
one that doesn't have to be produced. We can reduce carbon 
emission and save money at the same time. It makes perfect 
sense, but today we are inadvertently rewarding the wrong 
approach.
    Under the current tax code, we allow businesses to deduct 
their energy costs from their taxable income. In other words, 
when a business's activities are energy inefficient, they 
receive a larger Federal tax subsidy. We need to change that 
course.
    We can quickly reduce carbon emissions and put downward 
pressure on electricity and natural gas prices with a Federal 
policy that promotes and rewards energy efficiency. This 
approach is comparatively inexpensive to implement, and would 
provide a bigger bang for the buck than any other Federal 
incentive. The Energy Policy Act of 2005 included some 
important, temporary energy efficiency provisions, but there is 
much more that we can do.
    Mr. Weller and I introduced legislation to expand and 
extend the current Federal tax credits and deductions for 
residential and commercial properties that meet targeted energy 
savings goals. Importantly, our bill creates a new sliding 
scale for the credits, basing the credit awarded on the level 
of energy savings.
    This should create additional market incentives for 
cheaper, more efficient technologies for consumers to use. And 
because these technologies are typically developed in America, 
as the rest of the world responds to the global climate change, 
American technology and products will have application and 
appeal worldwide.
    I believe that our bill, at a relatively minimum cost, can 
dramatically reduce carbon emissions by comprehensively 
reducing the demand for power to our Nation's homes and 
commercial buildings, which account for approximately 70 
percent of the electrical load produced by power plants in this 
country.
    In conclusion, the tax code is one of the most effective 
tools we have at our disposal in this effort. With it, this 
Committee can send a clear signal to the marketplace to promote 
renewable energy generation. At the same time, the Committee 
should promote energy efficiency.
    The last time we had these green amendments before us, we 
put them on for a couple of years, like wind and solar and so 
forth, and then they went away. We were leading the world in 
wind energy development. Today, every generator in the world is 
made in Denmark because we stopped giving that support to this 
technology.
    So it is within our power to combat global warming. The 
question is, will we have the political will to use it and the 
courage to stick with it? For the sake of all of us, including 
our grandchildren, I hope the answer is yes.
    Thank you.
    [The prepared statement of Mr. McDermott follows:]

Prepared Statement of The Honorable Jim McDermott, a Representative in 
                 Congress from the State of Washington

    Mr. Chairman, thank you.
    We know that reversing global warming poses one of the most 
significant challenges of the 21st century. Responding inadequately to 
this challenge is not a legacy I want to leave to my grandchildren. And 
we also know there is no magic bullet. The task before us is not easy, 
but it can be done. We've got to be honest, pragmatic and realistic. 
We're the number one emitter of carbon into the atmosphere and so we 
should be the acknowledged leader in reversing global warming. We can 
make this effort one of the defining moments in the history of our 
nation.
    It is going to take a combination of innovation, Federal support, 
lifestyle adjustment, and multilateral diplomacy to make a real 
difference. And we have to start now in order to stave off the 
potentially disastrous repercussions that global warming will mean for 
America and the world. In the U.S. the single largest source of the 
carbon we emit into the atmosphere--about 40 percent--comes from power 
plants--fired by coal, oil and gas.
    In my view, there are two very obvious ways we should be combating 
this problem--one of which is frequently acknowledged and one of which 
is all too often overlooked. The first thing we must do is to develop a 
national policy to generate power from clean and renewable sources. 
Wind, solar, hydro, biomass, and geothermal sources can supply power to 
the nation's electrical grid while emitting dramatically less carbon 
into the atmosphere. To this end, I am pleased to hear so much 
discussion around passing a long-term extension of the Production Tax 
Credit to provide clear market signals for private investors in 
renewable energy production. And we need to expand and improve the 
current Federal incentives for public power utilities to generate clean 
energy.
    The Clean Renewable Energy Bond program needs to be revamped so 
that large public power projects can be financed and brought online by 
the public power utilities that now serve over 44 million Americans, or 
about 15 percent of the population. Federal incentives for both public 
and private utilities are crucial to making clean energy an affordable 
and cost-competitive alternative. Providing private and public 
utilities the tools and mandate to develop clean and renewable energy 
is a major step in the right direction.
    But let me advocate on behalf of an effective policy that is 
overlooked all too often: energy efficiency. Every kilowatt we save 
through improvements in energy efficiency is one that doesn't have to 
be produced; we can reduce carbon emission and save money at the same 
time. It makes perfect sense, but today we are inadvertently rewarding 
the wrong approach.
    Under the current tax code, we allow businesses to deduct their 
energy costs from their taxable income. In other words, when a 
business's activities are energy inefficient they receive a larger 
Federal tax subsidy. We need to change course.
    We can quickly reduce carbon emissions and put downward pressure on 
electricity and natural gas prices with a Federal policy that promotes 
and rewards energy efficiency. This approach is comparatively 
inexpensive to implement, and would provide a bigger ``bang for the 
buck'' than other Federal incentives. The Energy Policy Act of 2005 
included some important, temporary energy efficiency provisions, but 
there is much more we can do.
    Rep. Weller and I introduced legislation to expand and extend the 
current Federal tax credits and deductions for residential and 
commercial properties that meet targeted energy savings goals. 
Importantly, our bill creates a new sliding scale for the credits, 
basing the credit awarded on the level of energy savings. This should 
create additional market incentives for cheaper, more efficient 
technologies for consumers to utilize. And because these technologies 
are typically developed in America, as the rest of the world responds 
to global climate change, American technology and products will have 
application and appeal worldwide.
    I believe that our bill, at a relatively minimal cost, can 
dramatically reduce carbon emissions by comprehensively reducing the 
demand for power to our nation's homes and commercial buildings, which 
account for approximately 70 percent of the electric load produced by 
power plants in this country.
    In conclusion, the tax code is one of the most effective tools we 
have at our disposal in this effort. With it, this committee can send a 
clear signal to the marketplace to promote renewable energy generation. 
At the same time, this committee should promote energy efficiency.
    Mr. Chairman, it is within our power to effectively combat global 
warming; the question is: Will we have the political will to use it. 
For the sake of my grandchildren, I hope so.
    Thank you.

                                 

    Chairman NEAL. We thank the gentleman for his very 
instructive testimony.
    And the chair will now recognize a Member of the 
Subcommittee, Mr. Doggett.
    Mr. DOGGETT. Thank you, Mr. Chairman and Members.
    I would formally bring to the Subcommittee's attention H.R. 
1331, the Plug-in Hybrid Electric Vehicles Tax Credit Act, 
which is cosponsored by almost a hundred of our colleagues, 
Democrats and Republicans, including a number of Members of 
this Subcommittee.
    This bipartisan bill that I have authored will help build a 
market for an important new emerging technology, plug-in hybrid 
electric vehicles. All of you are familiar with hybrids, but 
today the only plug-in hybrids exist as prototypes.
    Some of you may have had an opportunity to take a ride in 
one of the plug-in prototypes that were here on Capitol Hill 
recently. It is the battery and the convenient method of 
recharging it that distinguishes plug-in hybrids from the more 
traditional variety.
    This battery offers enough energy on board to power the 
vehicle for at least 40 miles solely on stored power. 
Considering that half the cars in America each day travel 25 
miles a day or less, a plug-in with this range could eliminate 
gasoline use in the daily commute of millions of our neighbors.
    The cost of an electric gallon of gas is estimated to be 
less than a dollar a gallon. By implementing this consumer tax 
credit, we will support plug-in vehicle technology that can 
achieve the equivalent of 150 miles per gallon of gasoline. 
These normally emission-free vehicles also contain a small 
combustion engine for longer trips. H.R. 1331 also includes an 
incentive for combining this battery power with existing flex 
fuel technology.
    Plug-in hybrids are an important part of our National 
effort to combat global warming. The Environmental Protection 
Agency just within the past month estimated that a nationwide 
switch to electric-based fuel would decrease greenhouse gas 
emissions by 47 percent.
    This confirms the position taken by the American Public 
Power Association, the Electric Power Research Institute, the 
Energy and Environment Study Institute, and the Alliance to 
Save Energy, along with many others.
    The Wall Street Journal recently did a front-page article 
that I would ask unanimous consent to make a part of our 
record.
    Chairman NEAL. Without objection.
    Mr. DOGGETT. And it directs or focuses its attention on the 
role that Austin Energy and the National Plug-in Partners 
Campaign have spirited on this issue. Plug-in Partners 
represent a network of many cities, states, public power 
utilities, investor-owned utilities, individual businesses, and 
environmental groups across America that are promoting plug-in 
electric vehicles.
    I have worked with them since their inception, and this 
bill is the only one of several plug-in alternatives that Plug-
in Partners has endorsed. It is a targeted consumer tax credit 
linked directly to the purchased vehicle's most important cost 
element, the battery, and its capacity to perform independent 
of foreign oil.
    While the short-term cost of this credit over the next few 
years is zero since these are not in production, and joint tax 
has scored the bill already at a 5-year cost of only $155 
million, there is no doubt that it will cost more than that as 
these come on line.
    To ensure that the long-term cost is manageable, the bill 
establishes a per-manufacturer limitation on the number of 
vehicles covered similar to that that we did for hybrid, but 
separate from the hybrid tax cap. The per-manufacturer 
limitation used for hybrids has already proven to be effective 
as an affordable incentive.
    This is a next generation of hybrids, and I believe that 
decisive action on this technology in making it widely 
accessible to consumers will help us move from the fossilized 
ideas of our energy past to the renewable promise of our energy 
future.
    Thank you.
    [The Wall Street Journal article follows:]

    [GRAPHIC] [TIFF OMITTED] T8111A.001
    

    [GRAPHIC] [TIFF OMITTED] T8111A.002
    

    Chairman NEAL. I thank the gentleman for his testimony.
    Dr. Weldon.

STATEMENT OF THE HONORABLE DAVE WELDON, M.D., A REPRESENTATIVE 
             IN CONGRESS FROM THE STATE OF FLORIDA

    Dr. WELDON. Thank you, Mr. Chairman, and I have submitted 
my testimony in writing. So I will very briefly summarize.
    I have introduced legislation, H.R. 3319, the Short Sea 
Shipping Act, again in this Congress, which would modify the 
tonnage fee that is applied to the harbor maintenance tax. What 
this bill does in essence is to try to promote moving goods by 
barge or ship along our coasts and our rivers rather than the 
current paradigm, which is big freighters come in and 
everything goes off in trucks.
    The goal here is to get more of our freight moving by our 
waterways as opposed to by trucks. Our highways are overloaded. 
It is very costly to expand our highways. And the important 
thing, and the relevance to your Committee and this hearing, 
and I commend you for conducting this hearing, is it is green.
    The Europeans are ahead of us on this issue. They are 
moving toward a blue water highway kind of system in Europe, 
moving goods more around by canal and rivers. And of course, we 
have our oceans that we can use. They studied this issue, and 
they said you save a third in their research on the fuel 
consumption per ton moving freight from point A to point B.
    I will point out that your Ranking Member was on this bill 
last year, along with some of the people sitting here with me. 
And additionally, I will point out to you this is a bipartisan 
issue. Representative Tubbs-Jones and Representative Cummings 
have introduced very similar pieces of legislation that deal 
with the Great Lakes.
    This is a win/win all around, Mr. Chairman, and I would 
highly encourage you to seriously take a look at it. I know 
your Ranking Member is on this issue. It is something I think 
Republicans and Democrats can both embrace, good for the 
environment, good for our roads and highways, and it allows our 
economy to keep churning.
    And I yield back. Thank you very much.
    [The prepared statement of Dr. Weldon follows:]
    [Not available at the time of printing.]
    Chairman NEAL. Thank you. I believe Mr. Abercrombie has 
spoken to me as well about this issue, Doctor.
    The chair would recognize the gentleman from North Dakota, 
Mr. Pomeroy.

 STATEMENT OF THE HONORABLE EARL POMEROY, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF NORTH DAKOTA

    Mr. POMEROY. I thank the chair. And I also have written 
testimony submitted. I will try and abridge as quickly as I 
can, recognizing the disruption to this Committee caused by the 
earlier evacuation of the building.
    I want to talk about the wind production tax credit, clean 
renewable energy bonds, and the tax support for ethanol and 
biodiesel. All of these are important components of expanding 
our renewable energy usage in this country.
    First, production tax credit for wind: Congressman 
McDermott is exactly correct when he talks about the disruption 
caused by this production tax credit expiring, as it has on 
three occasions since 1999. I will tell you, those Congresses 
were absolutely guilty of malfeasance when it comes to this one 
because it had no serious detractors as a component of energy 
policy. It just got put in the extenders and allowed to expire.
    In 2005 and 2006, more than 2400 megawatts of wind were 
being installed each year, yet in 2004, when the tax had 
expired for 10 months, 389 megawatts were developed. A facility 
in North Dakota that now has 800 employees producing blades for 
these turbines was down to fewer than 25 employees at the end 
of 2003. That is just a very real indication of the utter 
disruption to this industry of having that credit lapse.
    Congressman Ramstad and I have introduced a bill that would 
extend that production tax credit for 5 years. I believe that 
is precisely what is needed to maximize the potential of wind.
    I was fascinated, Mr. Chairman, at the excellent hearing 
you had last week to have the proponent of the wind energy 
indicate that potentially 20 percent of the nation's energy 
needs could be ultimately met if we really get at it in a 
serious way. It is going to take an extended production tax 
credit to do it.
    Clean renewable energy bonds: Again, Congressman McDermott 
is precisely correct when he talks about how we need to get 
municipal power systems and rural electric coops fully engaged 
in the business of moving toward renewable energy sources. The 
way we try and incentavize activity is through the tax code, 
but each of these entities, public power and coops, are not 
taxed.
    We have in the past floated, although it was not met with 
the approval of the prior chair, a notion of tradable tax 
credits so that a nontaxed entity could get the value of a tax 
credit and trade it to somebody who could then pay them for it.
    That didn't go. So we developed this Clean Renewable Energy 
Bond mechanism whereby the ultimate bondholder--the bonds are 
sold. The ultimate bondholder, who is a taxed entity, gets the 
value of the tax incentive and the coop or public power system 
gets essentially the value of interest-free money.
    The benefit of this is very real, and the first year's 
results surprised everyone. Eight hundred million dollars of 
Clean Renewable Energy Bonds were made available. It was 
estimated that that amount wouldn't go for 2 years, take care 
of 2 years' worth of need. It was over-subscribed the first 
year, and in fact, the waiting list was 176 projects that 
didn't get any funding at all. Projects were allocated on a 
small to large basis, which meant some of the largest, most 
significant projects didn't get a dime on this one.
    So we are seeking a billion dollars in each of the next 2 
years in Clean Renewable Energy Bonds to provide meaningful 
incentives to the 25 percent of our nation's power system that 
comes from nontaxed entities, public power and rural electric 
coops.
    Finally, Mr. Chairman, the biodiesel tax credit expires in 
2008. Ethanol expires in 2010. We believe each of these should 
be made permanent. The biodiesel tax credit, for an example, 
has generated very substantial production enhancement. In 2000, 
about 25 million gallons produced; in 2004, when the tax credit 
came online, 250 million gallons.
    The ethanol story is unfolding even as we speak. We are 
going to blow past the goals of the Energy Policy Act of 2005. 
That is a good thing. But undergirding it all is this tax 
credit that needs to continue, and those contemplating massive 
investments in new renewable energy plants, ethanol and 
biodiesel, need to know that that credit is going to be there 
to support them.
    Thank you, Mr. Chairman, for your consideration.
    [The prepared statement of Mr. Pomeroy follows:]

 Prepared Statement of The Honorable Earl Pomeroy, a Representative in 
                Congress from the State of North Dakota

    Chairman Neal and Ranking Member English, I would like to thank you 
for the opportunity to testify before the subcommittee today regarding 
three pieces of legislation that I have introduced in the 110th 
Congress to incentivize the development of renewable energy. These 
bills would extend the current tax credits for ethanol and biodiesel, 
the renewable energy production tax credit and would allocate more 
money for the Clean Renewable Energy Bonds program.
    I would first like to discuss my bill H.R. 197, which will extend 
for 5 years the production tax credit (PTC) for electricity produced 
from wind and other renewable energy sources such as closed and open-
loop biomass and geothermal power. The PTC provides a 1.5 cent per 
kilowatt hour tax credit for electricity that is produced from these 
qualified renewable sources. The credit is adjusted for inflation and 
is currently 2 cents per kilowatt hour. It is currently scheduled to 
expire at the end of 2008. Rep. Jim Ramstad (R-MN) and I introduced 
H.R. 197 on the first day of the 110th Congress and there are currently 
87 bipartisan cosponsors.
    The PTC has a history of short term extensions and expirations that 
have hampered industry's ability to effectively develop generation 
capacity. Since 1999 the PTC has expired three times. With each of 
these expirations came dramatic slow down in wind power investment and 
the loss of thousands of jobs across the industry. LM Glasfiber, a 
blade manufacturer in my district that is currently approaching 800 
employees, was forced to furlough 60-70 of what was then approximately 
100 employees when the credit had expired 2004. A 5-year extension will 
prevent this from happening and provide a level of stability for the 
industry that it has not had for many years.
    We have seen over the past 2 years how effective the PTC has been 
when there is some level of certainty that the credit will not expire. 
Over 2,400 megawatts (MW) of wind power were installed in each 2005 and 
2006 when industry was assured that the credit was not going to expire 
at the end of that year, versus only 389 MW in 2004 when the credit was 
expired for the first 10 months of the year.
    In my state of North Dakota we can see an example of a project that 
would not be going forward if the most recent extension had not been 
enacted. The 179 MW Langdon Wind Farm is scheduled to begin 
construction this year. Had the most recent one year extension not been 
enacted, this project would not be proceeding due to the risk that the 
facility would not be placed in service by the previous December 31, 
2007, expiration date. A 5-year extension will help utilities in their 
efforts to plan and construct renewable energy projects by providing 
the certainty that is necessary for large scale development.
    While investor-owned utilities and private developers are eligible 
for the PTC to incentivize renewable electricity development, rural 
electric cooperatives and public power utilities are ineligible for the 
PTC as they are not-for-profit utilities and therefore do not pay 
income tax. Rural electric co-ops and public power utilities, who serve 
25% of the nation's power needs, should be provided an incentive 
similar to the PTC to encourage them to develop renewable energy in a 
cost effective manner.
    To address this issue, Rep. Ron Lewis (R-KY) and I introduced the 
Clean Energy Bonds Act of 2005 (H.R. 2794) in the 109th Congress to 
create a new type of bond to help fund renewable energy projects by 
not-for-profit utilities. When a person purchases a regular bond, the 
issuer gives the bondholder interest payments on their investment. With 
clean energy bonds, instead of the issuer (the cooperative or public 
utility) paying out interest to bondholders, the bondholders receive a 
Federal income tax credit in recognition of their investment. The 
issuer can then utilize all bond proceeds to finance clean energy 
projects.
    The Energy Policy Act of 2005 authorized the creation of the Clean 
Renewable Energy Bonds (CREBs) program and allocated $800 million for 
the bonds. The first round of allocations was announced by the IRS at 
the end of 2006 with 610 projects awarded allocations. The IRS is 
currently in the process of accepting applications for an additional 
$400 million in allocations that were approved in the Tax Relief and 
Health Care Act of 2006.
    While the program has been a success to date, there has been one 
major flaw--an insufficient availability of the bonds to meet demand. 
The IRS received over $2.5 billion in requests for the initial 
allocation of $800 million. To address the need for greater allocations 
of these bonds, Rep. Lewis and I have introduced H.R. 1965, which would 
provide a $1 billion allocation of CREBs in each 2008 and 2009. This 
additional allocation will provide not-for-profit utilities, who are 
often better situated to harness renewable energy sources like wind and 
biomass, further resources to finance renewable energy projects. I 
strongly urge the Committee's support for increased allocations of 
Clean Renewable Energy Bonds.
    Finally, I would like to discuss H.R. 196, which Rep. Kenny Hulshof 
(R-MO) and I have introduced to permanently extend the current tax 
credits for biodiesel and ethanol as well as the current tariff on 
imported ethanol. As Congress debates energy policy that will reduce 
America's dependence on foreign oil, many different technologies will 
need to be developed. Increased renewable electricity generation and 
energy efficiency will be vital, as will the increased use of 
alternative fuels in the transportation industry.
    Long term extensions of the current ethanol and biodiesel credits 
are necessary to ensure that these industries are able to gain a 
significant foothold in the market so that traditional petroleum based 
fuels are not able to force alternative fuels out of the market.
    The Energy Policy Act of 2005 mandated that 7.5 billion gallons per 
year of biofuels be used by 2012. Just 2 years ago that level seemed 
unreachable to some. Now a mere 20 months after the passage of the 
Energy Policy Act, over 5 billion gallons of biofuels will be produced 
this year and the 7.5 billion mark will be passed long before the 2012 
deadline. This has largely been achieved because of the current tax 
credits for ethanol and biodiesel. These developing industries do not 
have the developed infrastructure that the oil and gas industry possess 
and there for need an incentive to compete.
    The statistics show that these credits have had their intended 
effect. The ethanol industry has more than tripled production capacity 
since 2000 and the biodiesel industry has increased its sales from 25 
million gallons in 2004 when the biodiesel credit was first enacted to 
250 million gallons in 2006. The increase in biofuels development in 
North Dakota alone has been astounding. Two years ago North Dakota 
produced just 35 million gallons of ethanol. Now, an additional 100 
million gallons have come online with more than 250 million gallons of 
production capacity in various stages of development, as are over 100 
million gallons of biodiesel production.
    The current ethanol credits include 51 cents per gallon available 
at the blender lever and 10 cents per gallon for small producers (those 
producers with less than 60 million gallons per year of capacity). The 
biodiesel credits include the same 10 cent per gallon credit for small 
agri-biodiesel producers and a $1 per gallon credit at the blender 
level for agri-biodiesel (50 cents per gallon of non agri-biodiesel). 
As the 51 cent per gallon credit for ethanol is also available for 
imported ethanol, a 54 cent per gallon tariff on imported ethanol is 
imposed to prevent foreign ethanol that already receives subsidies in 
many countries around the word, from flooding the U.S. market and 
putting domestic producers out of business.
    As the Committee knows, currently, most of the ethanol produced in 
America is produced using corn as the primary feedstock. Though this 
has the potential to change, technology continues to develop that will 
allow the utilization of cellulosic ethanol. A long term extension of 
ethanol and biodiesel credits will provide an incentive to ensure that 
research into cellulosic ethanol technologies continues. This research 
has the potential to lead to commercial scale cellulosic ethanol plants 
that will be more energy efficient and dramatically increase the volume 
of biofuels that can be domestically produced.
    In addition to reducing America's dependence on foreign oil, the 
biofuels industry represents a tremendous opportunity to revitalize 
America's rural economies. The construction and operation of biofuels 
plants has led to the creation of thousands of jobs and billions of 
dollars in economic activity, much of it in rural states like North 
Dakota. A vibrant biofuels industry will ensure that money that would 
have otherwise flown outside of the country to pay for oil imports will 
flow into America's heartland.
    Mr. Chairman, no single technology is going to cure America of its 
dependence on foreign oil or significantly reduce carbon emissions to 
address global warming. Instead multiple technologies and approaches 
must be implemented. The incentives that I have discussed will go a 
long way towards developing America's renewable energy industries and 
aid in meeting those goals. I look forward to working with the 
Committee on these proposals. In addition to the industries I have 
discussed today, I believe that we must make significant investments in 
clean coal technology, energy efficiency and in the nations electric 
transmission grid which is currently inadequate to meet the growing 
demands of renewable energy and the American people. Thank you.

                                 

    Chairman NEAL. Thank you, Mr. Pomeroy.
    The gentleman from Oregon, Mr. Blumenauer, is recognized.

STATEMENT OF THE HONORABLE EARL BLUMENAUER, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. BLUMENAUER. Thank you, Mr. Chairman. I appreciate the 
work that you have done focusing on areas of climate change and 
energy independence, issues that must be very closely linked.
    The importance of addressing the two issues simultaneously 
cannot be overestimated. Energy independence alone could drive 
us into a polluted, coal-dependent future. Tackling climate 
change without looking at how we produce and use energy is 
pointless. Fortunately, progress on these two challenges 
presents an opportunity to revitalize economies based on a 
clean, renewable energy and improve the quality of life.
    Unfortunately, the current tax policy takes us in precisely 
the wrong direction. The current tax code values wasteful and 
dirty energy generation by five to one, perhaps more, over 
clean, renewable technology. Under the current tax code, the 
oil industry receives over $5 billion each year to engage in 
policies that lead us further away from a sustainable future.
    Before I get to some specific ideas, I would like to lay 
out a series of principles that I hope we can work on with this 
Subcommittee to guide actions in the future, to serve as a 
screen to make sure that all our work takes us in the right 
direction on carbon.
    First, I hope that we make a commitment to reducing 
greenhouse gas emissions to make the tax code carbon neutral at 
the least, and make sure any changes result in reducing carbon 
emissions.
    Second, I think we ought to level the playingfield for 
energy sources as much as possible. Where there is favoritism 
in terms of the tax code or other incentives, it ought to be 
directed toward emerging sustainable technologies.
    We must make sure that all subsidies are cost-effective, 
sustainable, and consider the net environmental impacts of 
each.
    I join with my colleagues in urging that adequate time and 
certainty be provided for tax benefits under the code. We ought 
to promote cost-effective conservation and efficiency first. I 
couldn't agree more with my colleague from the Northwest, Mr. 
McDermott. Since 1980, our region has saved the equivalent of 
eight large coal plants directly through a regional strategy of 
conservation.
    We want to promote the most appropriate and efficient use 
of energy sources such as the direct use of natural gas instead 
of using it to produce electricity. It has been likened by a 
friend of mine that using natural gas to produce electricity is 
like using fine Scotch to wash your dishes. We have homes all 
across America with both gas and electric service that have 
electric hot water heaters. We ought to be thinking about ways 
to fix that.
    We ought to ensure that the Federal Government leads by 
example, that as the largest landlord, landowner, and employer, 
we set the standard; and finally, working on this Committee to 
make sure that United States trade policy promotes carbon 
reduction and energy efficiency.
    I would hope that we start with your work by commissioning 
a carbon audit of the tax code. I am currently drafting 
legislation to have the National Academy of Sciences convene a 
panel of experts to look at the code and identify activities 
that impact our carbon emission. I strongly support the 
references that have been made here to the production tax 
credit. I am pleased to cosponsor that legislation, and 
certainly would support a longer-term extension.
    Two ideas that I hope the Subcommittee will consider, 
either independently as legislation that has been introduced or 
that could be wrapped into larger legislation: One is House 
Resolution 1772, with Representative Cole and I, the Rural Wind 
Energy Act to produce an investment tax credit of $1500 per 
half kilowatt of capacity for small wind systems.
    I also have another piece of legislation that I hope you 
will look favorably upon to reward people who burn calories 
instead of gasoline. It is the Bike Commuter Act. Right now we 
provide substantial free parking to commuters, tax-free. We 
provide less support for commuters who use transit systems. We 
use zero support for people who don't commit an assault on the 
environment in terms of emission, congestion.
    It is a relatively minor bill, but it would have a profound 
effect for millions of potential bike commuters. The typical 
commuter averages five miles, half of them five miles or less. 
A bike could make a difference. I wanted to put that on the 
table before I concluded my testimony.
    Thank you very much.
    [The prepared statement of Mr. Blumenauer follows:]

 Prepared Statement of The Honorable Earl Blumenauer, a Representative 
                  in Congress from the State of Oregon

    Thank you for the opportunity to testify today on changes to the 
tax code that will help us address two closely linked issues: climate 
change and energy independence.
    The importance of addressing these two issues simultaneously cannot 
be overstated. Energy independence alone could drive us to a polluted, 
coal dependent future. Tackling climate change without looking at how 
we produce and use energy is pointless. Fortunately, progress on these 
two challenges presents an opportunity to revitalize economies based on 
clean, renewable energy and improve quality of life.
    Addressing these issues through the tax system is logical. 
Unfortunately, current tax policy takes us in the wrong direction. The 
tax code values wasteful and dirty energy generation by 5 to 1--if not 
more--over clean, renewable technology. Under the current tax code, the 
oil industry receives over $5 billion each year to engage in policies 
that lead us further away from a sustainable future. This includes 
money to mine shale and tar sands, to expense various attributes of 
mining, drilling and refining, and to subsidize the extraction of oil 
from marginal sources.
    In my testimony I will discuss a few ideas that I have been working 
on to use the tax code to produce and use energy in a less carbon-
intensive manner. But before I get to that, I'd like to lay out a 
series of principles that I hope can guide this Committee's action on 
the issue in the future and serve as a screen to make sure all of our 
work takes us in the right direction on carbon.

      A commitment to reducing greenhouse gas emissions: make 
the tax code carbon neutral at least, and make sure any changes result 
in reducing carbon emissions;
      Level the playing field for energy sources as much as 
possible;
      Where there is favoritism in terms of the tax code or 
other incentives, direct it towards emerging technologies;
      Make sure all subsidies are cost-effective, sustainable, 
and consider the net environmental impacts of each;
      Give adequate time and certainty for tax benefits;
      Promote cost-effective conservation and efficiency first;
      Promote the most appropriate and efficient use of energy 
sources, such as the direct use of natural gas instead of using it to 
produce electricity;
      Ensure that the Federal Government leads by example;
      U.S. trade policy should promote carbon reduction and 
energy efficiency.

    An action that could help direct our efforts to make the tax code 
as carbon friendly as possible would be to commission a carbon audit of 
the tax code. I am currently drafting legislation which would have the 
National Academy of Sciences convene a panel of experts to look at the 
tax code and identify activities that impact our carbon emissions. In 
addition to providing us with important information on how to ``green 
the tax code,'' this exercise could also supply us with ideas on how to 
raise revenue. This audit could take some time, and there may be some 
obvious changes to the tax code we need to make immediately for the 
sake of carbon reduction. I would not want to hold those up with this 
audit. But to truly address global warming we need to go beyond the 
obvious.
    It is vital that any changes to the tax code increase incentives 
for producing energy in a clean, renewable manner. I strongly support 
the renewable production tax credit (PTC), which has made a huge 
difference to the development of renewable energy, especially wind, in 
my state and around the country.
    I am pleased to be a co-sponsor of Rep. Earl Pomeroy's legislation 
to extend the production tax credit for five years. In fact, I would 
support a longer-term extension to give even more certainty to the 
industry. As has been discussed in this Committee, the short-term 
extensions of the credit in the past have created a boom-and-bust cycle 
that is not conducive to the development of capital intensive projects 
like wind farms and geothermal plants. I understand this is an 
expensive endeavor, and pledge to help the Committee to look for 
additional revenue raisers in the energy realm that could offset the 
additional cost.
    There are a number of improvements we could make to the tax code to 
help meet our goals of reducing greenhouse gases and addressing energy 
independence. But I would like to focus on two ideas that I have put 
forward in legislation.
    Last month, Rep. Tom Cole and I introduced H.R. 1772, the Rural 
Wind Energy Development Act. This legislation would provide an 
investment tax credit of $1500 per \1/2\ kilowatt of capacity for small 
wind systems, which could be carried over for a customer unable to take 
advantage of the entire credit within a 1-year period. The bill also 
calls for a 3-year accelerated depreciation for small wind systems.
    Small wind systems are electric generators that produce 100 
kilowatts or less of energy--but the wind energy industry estimates 
that this credit will be mostly used for turbines between 2 and 10 kW 
in size. The tax credit would be available to offset the high up-front 
costs of owning a small wind turbine for homeowners, farmers, and small 
businesses. It would allow these individuals to generate their own 
power, independent from the electric grid. They would be able to cut 
their energy bills and, at times, put power back into the grid.
    There is an existing investment tax credit available to homeowners 
who install small solar systems, which has been very successful in 
increasing the number of solar panels installed. This bill would simply 
expand that to include wind.
    I am pleased to tell you that H.R. 1772 currently has 17 bi-
partisan co-sponsors, including the Chairman of the Ways and Means 
Committee, Charlie Rangel.
    Another piece of legislation I would like to highlight is H.R. 
1498, which would address not the production of energy but the use of 
oil. The ``Bike Commuter Act'' would extend the transportation fringe 
benefit to bike commuters. It would reward commuters who burn calories 
instead of gas.
    Currently, employers may offer a transportation fringe benefit to 
their employees for certain costs incurred while commuting to work. 
Employees who take advantage of this benefit may receive a tax-exempt 
benefit of up to $215/month for drivers participating in qualified 
parking plans or $110/month for those who use transit or vanpooling. 
Current law also allows the option of taking cash compensation. My 
legislation aims to balance the incentive structure by extending the 
transportation fringe benefit to include bicycling.
    With over 50 percent of the population commuting 5 miles or less to 
work, incentives for bicycle commuting have great potential to reduce 
single occupancy vehicle trips. A Rodale Press survey recently found 
that Americans want to have the opportunity to bike to work instead of 
drive, with 40% of those surveyed indicating they would commute by bike 
if safe facilities were available. I believe this is the type of 
message that Congress should be sending to our communities through the 
tax code: that we support efforts to reduce energy consumption, ease 
traffic congestion, and encourage healthy activities as part of our 
daily routines.
    I appreciate the opportunity to discuss the ways that we can reform 
the tax system to spur innovation, save energy, and make our 
communities more livable. I look forward to working with this Committee 
to craft legislation that will take us a big step in the right 
direction.

                                 

    Chairman NEAL. We thank the gentleman. We always appreciate 
your vision on these energy issues.
    The gentlelady from Nevada, Ms. Berkley, is recognized.

STATEMENT OF THE HONORABLE SHELLEY BERKLEY, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF NEVADA

    Ms. BERKLEY. Thank you, Mr. Chairman. And I can't thank you 
enough for holding this hearing.
    I am here today to talk about a bill I have introduced, 
H.R. 1133, the Freedom through Renewable Energy Expansion Act, 
the FREE Act. I first introduced the FREE Act in the 109th 
Congress because it became clear to me that this nation cannot 
continue to depend on foreign countries for our energy needs. 
It is a matter of national security to become energy 
independent, and we can do this by turning to our own vast 
resources for alternative energy.
    The nation's tax policy should be an integral part of the 
congressional effort to free the nation from polluting sources 
of energy. The FREE Act addresses this issue in two ways. 
First, it repeals tax breaks and other subsidies to oil, gas, 
and nuclear industries. Not only are these industries reaping 
record profits, but the energy they produce and the waste that 
results from it is harmful to the environment and exacerbates 
the problem of global warming. Repealing giveaways to these 
industries will free up some of the finances needed to achieve 
energy independence.
    Earlier this year, the House set aside $14 billion for the 
promotion of alternative energy when we passed the Clean Energy 
Act. By repealing additional subsidies that are unnecessary and 
wasteful, the FREE Act would cut Federal spending by nearly $13 
billion. Of this total cost savings, over $6 billion would come 
from repealed tax subsidies.
    The FREE Act's second approach to securing independence is 
by changing the energy we use and how we use it. The FREE Act 
promotes the production and use of renewable energy, funds 
renewable energy research, and requires energy efficiency.
    Today I will highlight the use of tax credits to promote 
the production of renewable energy because it is under the 
jurisdiction of this Subcommittee.
    Various energy tax credits are currently available to the 
business and residential sectors, several of which Congress 
extended in the Energy Policy Act of 2005. However, these are 
about to expire, and without a long-term extension, the 
renewable energy will not be able to deliver the clean energy 
our nation needs.
    The production tax credit is currently available to 
facilities that produce alternative forms of power. This credit 
is set to expire at the end of 2008, and the FREE Act would 
extend it until January 1, 2016. The commercial investment tax 
credit is currently available to businesses investing in solar, 
fuel cell, and geothermal properties. The FREE Act would extend 
this credit until January 1, 2016, and would modify the 
geothermal ITC to match the solar ITC, which receives a higher 
credit level.
    We must also provide incentives to homeowners to promote 
renewable energy consumption to all sectors. The ITC for 
residential energy-efficient properties that use solar and fuel 
cell equipment currently expires on December 31, 2008, but the 
FREE Act would extend it another 7 years until 2015.
    Finally, the FREE Act would create a new small wind ITC 
that covers small wind systems used to power homes, farms, and 
small businesses.
    The FREE Act would provide long-term extension of these tax 
credits because it has become clear that short-term extensions 
will not provide a sufficient incentive. Southern Nevada, the 
community that I represent, has some of the best solar 
resources in the entire world, offering between 7,000 and 7,500 
watt hours per square meter--but the construction of large-
scale solar power plants takes 5 to 7 years from planning to 
startup.
    Nevada Solar One, a 450-acre concentrating solar power 
facility just outside Las Vegas, will provide 64 megawatts of 
solar power when it comes online this spring. It took 6\1/2\ 
years to build from planning to startup, and it is the only 
facility of its kind in the United States created in the last 
15 years.
    If Congress does not pass a long-term extension of this 
credit, projects such as this with long construction periods 
will never be financially viable. A short-term extension of 
this credit will not offer enough incentives.
    The same is true for the effectiveness of the PTC as an 
incentive for geothermal energy production. Geothermal plants 
have a construction lead time of 3 years or more, which means 
that some of the largest new geothermal facilities may not go 
forward because they will not be able to meet the deadline for 
the PTC.
    Oftentimes, investors are scared away from a geothermal 
project because they are afraid they will not be able to place 
the facility in service in time to receive the credit. 
Geothermal is an untapped energy resource that is abundant in 
the state of Nevada and has enormous potential for energy 
production across the Western states. It would be inexcusable 
for Congress to let this clean energy resource go unused.
    In conclusion, while this Committee will deal with using 
tax credits to promote renewable energy production, there are 
other ways for the Federal Government to pave the way toward 
energy independence, and the FREE Act would help in those 
areas.
    I won't go into them now because I see that my time is up. 
I will submit my entire statement for the record. I am 
delighted that we are doing this, Mr. Chairman. When I was in 
law school, standing in those long lines in the 1970s to gas up 
on an odd day or an even day depending on my license plate, if 
you would have told me that 30 years later I would be sitting 
in Congress and this nation has done little or nothing to make 
a difference and change the way we do business in this country, 
I would have told you you were out of your mind.
    But I am here in Congress now. I think we all understand 
the urgency. And I am looking forward to working with all of 
you to make a difference for future generations of Americans.
    [The prepared statement of Ms. Berkley follows:]

 Prepared Statement of The Honorable Shelley Berkley, a Representative 
                  in Congress from the State of Nevada

    Mr. Chairman,
    Thank you for holding this hearing. I am here today to talk about a 
bill I have introduced, H.R. 1133, the Freedom through Renewable Energy 
Expansion Act, or FREE Act.
    I first introduced the FREE Act in the 109th Congress because it 
had become clear to me that this country cannot continue to depend on 
foreign countries for our energy needs. We must become energy 
independent and free from foreign fuels, and we can do this by turning 
to our own vast resources for alternative energy.
    The nation's tax policy should be an integral part of the 
congressional effort to free the nation from polluting sources of 
energy. The FREE Act addresses this issue in two ways. First, it 
repeals tax breaks and other subsidies to the oil, gas and nuclear 
industries. Not only are these industries reaping record profits, but 
the energy they produce and the waste that results from it is harmful 
to the environment and exacerbates the problem of global warming. 
Repealing giveaways to these industries will free up some of the 
finances needed to achieve energy independence.
    Earlier this year, the House set aside $14 billion for the 
promotion of alternative energy when it passed the CLEAN Energy Act. By 
repealing additional subsidies that are unnecessary and wasteful, the 
FREE Act would cut Federal spending by nearly $13 billion. Of this 
total cost savings, over $6 billion would come from repealed tax 
subsidies.
    The FREE Act's second approach to securing independence is by 
changing what energy we use and how we use it. The FREE Act promotes 
the production and use of renewable energy, funds renewable energy 
research, and requires energy efficiency.
    Today I will highlight the use of tax credits to promote the 
production of renewable energy because it is under the jurisdiction of 
this subcommittee.
    Various energy tax credits are currently available to the business 
and residential sectors, several of which Congress extended in the 
Energy Policy Act of 2005. However, these are about to expire, and 
without a long-term extension, the renewable industry will not be able 
to deliver the clean energy our country needs.
    The Production Tax Credit (PTC) is currently available to 
facilities that produce alternative forms of power. The PTC is set to 
expire at the end of 2008, and the FREE Act would extend it until 
January 1, 2016, another 7 years.
    The commercial Investment Tax Credit (ITC) is currently available 
to businesses investing in solar, fuel cell, and geothermal properties. 
The FREE Act would extend the ITC until January 1, 2016, and would 
modify the geothermal ITC to match the solar ITC, which receives a 
higher credit level.
    We must also provide incentives to home owners to promote renewable 
energy consumption in all sectors. The ITC for residential energy 
efficient properties that use solar and fuel cell equipment currently 
expires on December 31, 2008, but the FREE Act would extend it another 
7 years, until December 31, 2015.
    Finally, the FREE Act would create a new small wind ITC that covers 
small wind systems used to power homes, farms, and small businesses.
    The FREE Act would provide a long-term extension of these tax 
credits because it has become clear that short-term extensions will not 
provide a sufficient incentive. Southern Nevada has some of the best 
solar resources in the entire world--offering between 7,000 and 7,500 
watt-hours per square meter--but the construction of large scale solar 
power plants takes 5-7 years from planning to startup.
    Nevada Solar One, a 450-acre concentrating solar power facility 
just outside of Las Vegas, will provide 64 megawatts of solar power 
when it comes online this spring. It took 6\1/2\ years to build, from 
planning to startup, and it is the only facility of its kind built in 
the U.S. in the last 15 years. If Congress does not pass a long-term 
extension of this credit, projects such as this with long construction 
periods will not be financially viable. A short-term extension of this 
credit will not offer enough incentive.
    The same is true for the effectiveness of the PTC as an incentive 
for geothermal energy production. Geothermal plants have a construction 
lead-time of 3 years or more, which means that some of the largest new 
geothermal facilities may not go forward because they will not be able 
to meet the deadline for the PTC. Often times, investors are scared 
away from a geothermal project because they are afraid they won't be 
able to place a facility in service in time to receive the credit, and 
the project would not be financially viable without the credit. 
Geothermal is an untapped energy resource that is abundant in Nevada 
and has enormous potential for energy production across the Western 
states. It would be inexcusable for Congress to let this clean energy 
resource go unused.
    While this Committee will deal with using tax credits to promote 
renewable energy production, there are other ways for the Federal 
Government to pave the way toward energy independence, and the FREE Act 
would help in those areas. The FREE Act calls for several non-tax 
provisions, including a Federal Renewable Portfolio Standard that would 
require 20 percent of the nation's energy come from renewable sources 
by 2016. The FREE Act would also strengthen the Federal energy purchase 
requirement to require that the Federal Government consume at least 20 
percent of its energy from renewable sources by 2015.
    The FREE Act would also create a Federal grant to schools that 
produce renewable energy, provide research funding for geothermal 
energy, and would raise the nation's average fuel economy standards to 
33 mpg by 2017.
    This government action combined with market incentives will help 
create a healthy renewable energy industry and move us in the direction 
of energy independence. Funded by repeals in unnecessary tax breaks, 
these efforts will free the country from foreign oil and unclean 
energy. Becoming energy independent will take time, and that is why we 
need to begin now. The FREE Act will point us in the right direction.

                                 

    Chairman NEAL. We thank the gentlelady.
    The gentleman from California, Mr. Nunes, is recognized.

  STATEMENT OF THE HONORABLE DEVIN NUNES, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. NUNES. Thank you, Mr. Chairman and Ranking Member 
English. I appreciate the opportunity to testify today on our 
nation's energy future. While gas prices have fallen over the 
winter, they are back on the rise just in time for the summer 
driving season. All we need is a hiccup in the supply chain of 
crude oil and the prices at the pump can quickly return to the 
historic levels we saw last year, or even higher.
    We have heard over and over again that we import 65 percent 
of our petroleum needs and that number is expected to rise. The 
situation has stifled economic development, put our nation's 
security at risk, and placed an unnecessary burden on the 
family budget.
    We need to come to grips with the onerous policies of the 
past that are strangling us now. What we need is a 
comprehensive market-based strategy that will reduce our 
dependence on foreign sources of oil while bridging the gap to 
the next generation of energy.
    For these reasons, I and a number of my colleagues from 
both sides of the aisle introduced the American-Made Energy 
Freedom Act last Congress. This bill would provide short-term 
relief while funding a long-term solution for energy freedom.
    I am certainly flattered that H.R. 6, which was brought to 
the floor under the 100-hour agenda, included my idea of a 
secure trust fund to pay for the next generation of energy. 
However, I am concerned with the approach taken in the bill. 
Instead of taxing energy companies, which will be inevitably 
passed on to consumers, I believe we should provide incentives 
for them to pay for the development of renewable and 
alternative energy.
    This could be accomplished by opening ANWR and investing 
the Federal share of the lease and royalty revenue into a trust 
fund. This fund would be used to pay for numerous renewable, 
alternative and advanced energy programs.
    Within the first 2 years of enactment, this legislation 
would provide an infusion of investment into numerous renewable 
and alternative energy programs, including the next generation 
of ethanol, coal to liquid technology, solar and fuel cell 
technology, and biofuel energy production.
    With that said, I am currently working on a new and 
improved version of my legislation. The general concept in the 
bill will remain the same, but I am expanding it into other 
areas of renewable energy production and conservation that have 
shown promising results. I expect that I will re-introduce some 
time this coming month.
    Certainly there are no quick fixes to our energy 
challenges. However, a few things are clear. We must recognize 
the possibility of global shortages and disruptions as demand 
continues to grow. We are in the midst of a Global War on 
Terror, fighting radicals whose stated objective is to destroy 
Western civilization.
    At the same time, we rely on certified state sponsors of 
terrorism for our petroleum needs. Therefore, we must 
contemplate the real possibility that oil will be used an 
economic weapon. Consequently, in my view, it is irresponsible 
for the United States to buy oil from fanatical regimes that 
are determined to destroy our way of life.
    It is time for energy freedom. It is time for energy 
security. And it is time for action on an American-made 
solution.
    Thank you, Mr. Chairman, and I yield back.
    [The prepared statement of Mr. Nunes follows:]

 Prepared Statement of The Honorable Devin Nunes, a Representative in 
                 Congress from the State of California

    Chairman Neal and Ranking Member English;
    I appreciate the opportunity to testify today on legislation that I 
and a number of my colleagues, including Senator Burr, introduced last 
Congress to address our nation's energy future. While gas prices fell 
over the winter, they are back on the rise just in time for the summer 
driving season. All we need is a hiccup in the supply chain of crude 
oil, and the prices at the pump can quickly return to the historic 
levels we saw last year--or even higher.
    Indeed, in the past, we have attempted to address our nation's 
energy security by looking at renewables and alternatives--only to see 
crude oil poured into the international market driving down the price 
per barrel of oil. In this case, basic economics take over and the 
cheaper energy source prevails. Because of this, crude oil has been the 
fuel of choice for more than a century. This economic addiction to 
cheap energy has led to the crisis we are now experiencing.
    As everyone on this Committee knows, we import 65% of our petroleum 
needs, and the Energy Information Administration (EIA) projects that by 
2025 we will import 71% of our petroleum. While this is a tenuous 
situation, it is exacerbated by the fact that two-thirds of the world's 
proven oil reserves are located in the volatile Middle East. The nexus 
of instability with the Middle East, as well as the threat of lost 
production from Nigeria and Venezuela, and a virtual halt to new energy 
exploration in the United States resulted in the price of oil reaching 
all-time highs last year. With this in mind, it does not surprise me 
that year after year we pay higher and higher prices for energy--
whether at the pumps or in our home energy bills. This situation has 
stifled economic development, put our nation's security at risk, and 
placed an unnecessary burden on the family budget. We need to come to 
grips with the onerous policies of the past that are strangling us now; 
this is an American-Made problem that requires an American-Made 
solution.
    Unfortunately, we, as legislators, have tried time and again to 
enact solutions to expand our energy resources only to be thwarted by a 
vocal minority of interest groups. Their only solution is social 
engineering by mandating that the American people change their 
lifestyle. This has not worked in the past and will not work today. 
What we need is a comprehensive market-based strategy that will reduce 
our dependence on foreign sources of oil while bridging the gap to the 
next generation of energy. Congress has a responsibility to deal with 
our nation's energy demands in a bi-partisan manner that benefits all 
Americans.
    My bipartisan, bicameral, bill would provide short-term relief 
while funding a long-term solution for energy freedom. We would 
accomplish this by opening the Arctic National Wildlife Refuge (ANWR) 
to exploration and investing the Federal share of the lease and royalty 
revenue into an energy trust fund. This trust fund would be used to pay 
for numerous renewable, alternative, and advanced energy programs. At 
an estimated $40 billion over 30 years, this trust fund would be the 
largest investment in renewable, alternative, and advanced energy in 
our nation's history--all at no cost to the taxpayer.
    Within the first 2 years of enactment of this legislation, numerous 
renewable and alternative energy programs would receive billions of 
dollars in much needed investment. This would include an infusion of 
investment into the next generation of ethanol (cellulosic), a 
deployment of Coal-to-Liquid (CTL) technology, an expansion of the use 
of solar and fuel cell technology, and significant growth in the 
biofuel energy production industry. A number of these investments would 
come in the form of market-based tax credits.
    Moreover, the bill funds numerous renewable energy provisions that 
were originally authorized in the Energy Policy Act of 2005 and have 
yet to receive significant funding. These Federal investments are 
needed to ensure breakthroughs in biotechnology, new feedstocks, 
harvesting, storage, transportation, and processing to produce a 
sustainable transportation fuel at a price competitive with fuel from 
the mature petroleum industry. Furthermore, enhancing Federal consumer 
tax credits is necessary to ensure that every home owner or small 
business has the opportunity to participate in our energy freedom by 
installing alternative energy systems that are economically viable and 
environmentally sensitive.
    Indeed, the proposals put forth in this legislation will have 
numerous benefits. First, it will bridge the gap in our efforts to 
transition to homegrown energy and reduce our dependence on foreign 
oil. Second, it will assist us in meeting Renewable Portfolio Standards 
which have been set by many states. Third, it will significantly reduce 
greenhouse gas emissions. Finally, all of this is accomplished by 
incubating technology rather than subsidize an industry.
    With that said, I am currently working on a new and improved 
version of my legislation. The general concept in the bill will remain 
the same, but I am expanding it into other areas of renewable energy 
production and conservation that have shown promising results. I expect 
that I will reintroduce it some time in the coming month.
    Certainly, there are no quick fixes to our energy challenges. 
However, one thing is clear. Americans cannot continue to rely on cheap 
imports for our energy future. It is important for us to recognize the 
possibility of global shortages or disruptions as demand for fossil 
fuel continues to grow. We must also contemplate the real possibility 
that oil will be used as an economic weapon against us. We are in the 
midst of a Global War on Terrorism, fighting radicals whose stated 
objective is to destroy Western civilization and install religious 
theocracies. At the same time, we rely on certified state-sponsors of 
terrorism for our petroleum needs. In my view, it is irresponsible for 
the United States to buy oil from fanatical regimes that are determined 
to destroy our way of life. It is time for energy freedom, it is time 
for energy security, and it is time for action on an American-Made 
solution.
    I appreciate the opportunity to testify today and I look forward to 
working with my colleagues on the Committee to address the tax 
provisions in my proposed legislation.

                                 

    Chairman NEAL. We thank the gentleman.
    The gentleman from Louisiana, Mr. Jefferson, is recognized.

      STATEMENT OF THE HONORABLE WILLIAM J. JEFFERSON, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA

    Mr. JEFFERSON. Thank you, Mr. Chairman. It is a pleasure to 
be here with you and the Subcommittee, and to hear the 
remarkable expressions I have heard of so many Members today 
who talk about forward-looking proposals for energy 
independence.
    I have two proposals that would set a good example of 
collaboration between the oil and gas industries, alternative 
energy, agricultural industries, and finally, environmental 
groups.
    The first would be the Biomethane Tax Credit, which would 
ultimately provide Federal incentives for the production of 
biomethane from landfills, animal waste, sewage, biomass, and 
other renewable resources.
    Due to its environmental advantages, the demand for natural 
gas will continue to grow in the United States. Biomethane is a 
pipeline-quality natural gas substitute produced by purifying 
biogas. This biogas is a mixture of methane and other gases 
produced from the decomposition of organic materials, produced 
naturally in landfills, animal waste, sewage, and crop waste. 
It would definitely be a wise alternative to capture the biogas 
from these renewable waste sources, convert them, and use the 
biomethane for transportation or other energy applications.
    In 1998, the U.S. Department of Energy completed a study 
that estimated that worldwide, between 25 and 37 quadrillion 
BTUs of methane are released each year into the atmosphere due 
to natural decomposition of organic material. This would be the 
equivalent of up to 38 percent of all energy used in the 
country annually. According to this study, the amount of 
biomethane that can be captured domestically, for example, 
would be enough to replace 10 billion gallons of gasoline each 
year.
    There are several opportunities and benefits that can be 
realized from this. The sources of this biomethane would come 
from landfills, animal waste, and sewage, as I have said, which 
are largely untapped sources. Landfills generate a substantial 
amount of biogas through anaerobic degradation of waste.
    According to the EPA, there were 380 landfill gas 
electrification projects in place at the end of 2006. The EPA 
estimates that there are 600 to 700 additional landfill gas-to-
energy projects that could be constructed nationwide. Farmers 
and other animal facility operators can install systems to 
convert their waste into usable biomethane, with a valuable 
sanitary fertilizer as a by-product.
    The environmental benefits are immeasurable. This natural 
gas is one of the cleanest fuels on the market today. Methane 
leaking from landfills, animal lagoons, and other waste sites 
pose significant greenhouse gas problems. Just by processing 
animal waste in lieu of streaming it into animal lagoons 
significantly reduces groundwater contamination.
    Finally, increasing the production of biogas and biomethane 
would do these things: one, substantially increase the supply 
of domestically produced, renewable non-fossil fuel energy; 
second, create jobs at home; third, convert a waste problem for 
farmers as well as provide them a valuable supplemental revenue 
source; and fourth, provide a valuable supplemental revenue 
source to municipalities while reducing the amount of sewage 
solids that need to be processed.
    A tax credit for biomethane fuel produced from waste biogas 
for a reasonable time would lower the risk often associated 
with the price of natural gas and encourage the creation of 
more biomethane production facilities.
    Currently there are tax credits available for projects that 
produce electricity using biogas produced from waste of 
renewable sources. The Waste to Biomethane Tax Credit of 2007, 
which I advocate, will provide comparable tax credits for 
waste-to-biomethane production. By doing so, many of these 
sites could be economic energy generators. Since virtually 
every community faces the problem of waste disposal of sewage, 
solid municipal waste, or animal or crop waste, the 
environmental and economic impacts of this incentive would be 
far-reaching.
    The second proposal I have is the Waste Vegetable Oils Tax 
Credit. Used in its pure form in diesel engine vehicles, or 
blended with petroleum diesel to boost vehicle performance, 
biodiesel has significantly lower emissions than petroleum-
based diesel when burned. According to a 1998 report by the 
U.S. National Renewable Energy Laboratory, it results in carbon 
monoxide reductions of approximately 50 percent over regular 
diesel, and carbon dioxide reductions of 78 percent.
    China actually serves as a good example of this policy's 
importance. China's biodiesel production began in 2001. At that 
time the oil wastes cost $212 per ton, while the price of 
petroleum-based diesel was $350 per ton. With little research 
or information available, a group began to design rudimentary 
equipment and experimented with fuel production. Since that 
time, the government there has stepped in and helped to expand 
them and boost their biodiesel industry.
    Market incentives and government support have enabled 
biodiesel production projects to expand nationwide since 2005. 
China now boasts more than 100 biodiesel production facilities. 
China generates more than 4.5 million tons of used oil and 
grease each year, roughly half of which could be collected 
through the establishment of an integrated collection and 
recycling system.
    As of 2000, the United States was producing in excess of 3 
billion gallons of waste vegetable oil annually, mainly from 
industrial deep fryers in potato processing plants, snack food 
factories, and fast food restaurants. Waste vegetable oil has a 
stable market value of approximately 40 cents per gallon as of 
2003, which is enough to make collection economically viable.
    The restaurant industry in Louisiana is one of the largest 
business organizations in the state, representing more than 
7,000 establishments and related businesses, and is also one of 
the state's largest private employers, with more than 132,000 
employed directly and another 55,000 indirectly employed. The 
bill will amend the Internal Revenue Code 1986 to allow the 
small agri-biodiesel credit for biodiesel to extend to 
biodiesel produced from 100 percent waste vegetable oil 
products. The tax credit would give birth to a new lucrative 
industry such as an integrated collection and recycling of used 
oil to produce biodiesel.
    I thank the Committee for listening to what I have had to 
say here. I would like to thank you for your attention to this 
matter and urge the Committee to take these under 
consideration.
    Thank you very much.
    [The prepared statement of Mr. Jefferson follows:]

      Prepared Statement of The Honorable William J. Jefferson, a 
         Representative in Congress from the State of Louisiana

    Thank you, Mr. Chairman, for inviting me to present my remarks on 
this important matter. I wish to express my sincere gratitude to the 
Committee for its continued interest in addressing our energy crisis as 
well as our environmental challenges. I would also like to take this 
opportunity to thank my colleagues from this panel, Congressmen 
McDermott and Peterson, whom I have partnered with in the past to 
address the energy needs of our country.
    I have two proposals that would set a good example of collaboration 
the oil and gas industries, alternative energy, agricultural industries 
and finally environmental groups.
    The first would be the Biomethane Tax Credit which would ultimately 
provide Federal incentives for the production of biomethane from 
landfills, animal waste, sewage, biomass and other renewable resources.
    Due to its environmental advantages, the demand for natural gas 
will continue to grow in the United States. Biomethane is a pipeline 
quality natural-gas substitute produced by purifying biogas. This 
biogas is a mixture of methane and other gases produced from the 
decomposition of organic materials, produced naturally in landfills, 
animal waste, sewage and crop waste. It would definitely be a wise 
alternative to capture the biogas from these renewable waste sources, 
convert them, and use the biomethane for transportation or other energy 
applications.
    In 1998, the U.S. Department of Energy completed a study that 
estimated that, worldwide, between 25 and 37 quadrillion BTUs of 
methane released each year into the atmosphere due to natural 
decomposition of organic material. This would be the equivalent of up 
to 38% of all the energy used in the country annually. According to 
this study, the amount of biomethane that can be captured domestically 
for example would be enough to replace 10 billion gallons of gasoline 
each year.
    There are several opportunities and benefits that can be realized 
from this. The sources of this biomethane would come from landfills, 
animal waste, and sewage, which are untapped sources. Landfills 
generate a substantial amount of biogas through anaerobic degradation 
of waste. According to the EPA, there were 380 landfill gas 
electrification projects in place at the end of 2006. EPA estimates 
that there are 600-700 additional landfill gas-to-energy projects that 
could be constructed nationwide. Farmers and other animal-facility 
operators can install systems to convert their waste into usable 
biomethane with a valuable sanitary fertilizer as a byproduct.
    The environmental benefits are immeasurable. This natural gas is 
one of the cleanest fuels on the market today. Methane leaking from 
landfills, animal lagoons and other waste sites pose significant 
greenhouse gas problems. Just by processing animal waste in lieu of 
streaming it into animal lagoons significantly reduces groundwater 
contamination.
    Finally increasing the production of biogas and biomethane would:

      substantially increase the supply of domestically 
produced, renewable non-fossil fuel energy
      create jobs at home
      convert a waste problem for farmers as well as provide 
them a valuable supplementary revenue source
      provide a valuable supplemental revenue source to 
municipalities while reducing the amount of sewage solids that need to 
be processed.

    A tax credit for biomethane fuel produced from waste biogas for a 
reasonable time would lower the risk often associated with the price of 
natural gas and encourage the creation of more biomethane production 
facilities.
    Currently, there are tax credits available for projects that 
produce electricity-using biogas produced from waste or renewable 
sources. The Waste to Biomethane Tax Credit of 2007 will provide 
comparable tax credits for waste-to-biomethane production. By doing so, 
many of these sites could be economic energy generators. Since 
virtually every community faces the problem of waste disposal of 
sewage, solid municipal waste or animal or crop waste, the 
environmental and economic impacts of this incentive would be far-
reaching.
    The second proposal I have is the Waste Vegetable Oils Tax Credit. 
Used in its pure form in diesel-engine vehicles, or blended with 
petroleum diesel to boost vehicle performance, bio-diesel has 
significantly lower emissions than petroleum-based diesel when burned. 
According to a 1998 report by the U.S. National Renewable Energy 
Laboratory, it results in carbon monoxide reductions of approximately 
50% over regular diesel, and carbon dioxide reductions of 78%.
    China actually serves as a good example of this policy's 
importance. China's bio-diesel production began in 2001. At that time, 
the oil wastes cost $212 per ton, while the price of petroleum-based 
diesel was $350 per ton. With little research or information available, 
a group began to design rudimentary equipment and experimented with 
fuel production. Since that time, the government there stepped in and 
helped to expand them and boost their bio-diesel industry.
    Market incentives and government support have enabled bio-diesel 
production projects to expand nationwide since 2005. China now boasts 
more than 100 bio-diesel production facilities. China generates more 
than 4.5 million tons of used oil and grease each year, roughly half of 
which could be collected through the establishment of an integrated 
collection and recycling system.
    As of 2000, the United States was producing in excess of 3 billion 
gallons of waste vegetable oil annually, mainly from industrial deep 
fryers in potato processing plants, snack food factories and fast food 
restaurants. Waste vegetable oil has a stable market value of 
approximately 40 cents per gallon as of 2003, which is enough to make 
collection economically viable.
    The restaurant industry in Louisiana is one of the largest business 
organizations in the state, representing more than 7,000 establishments 
and related businesses and is also one of the state's largest private 
employers with more than 132,000 employed directly and another 55,000 
indirectly employed. The bill will amend Internal Revenue Code of 1986 
to allow the small agri-biodiesel credit for bio-diesel to extend to 
biodiesel produced from 100% waste vegetable oils. This tax credit 
could give birth to a new lucrative industry such as an integrated 
collection and recycling of used oil to produce bio-diesel.
    I would like to once again thank the Committee for their time and 
attention to this matter.
    Thank you

                                 

    Chairman NEAL. We thank the gentleman from Louisiana.
    Mr. JEFFERSON. And tell Mr. Doggett I missed him. I enjoyed 
his remarks. I wanted to make that remark to him myself.
    Chairman NEAL. We will give the panelists the chance to 
move along if they feel that they have to. And I know we have 
been joined by two new panelists.
    The chair would like to recognize the gentleman from 
Pennsylvania, Mr. Doyle.

  STATEMENT OF THE HONORABLE MIKE DOYLE, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF PENNSYLVANIA

    Mr. DOYLE. Thank you, Mr. Chairman. And thank you for 
holding this hearing today and inviting me to testify.
    Today we will hear about the nexus between energy policies 
and tax incentives. At a local level, this is an important 
issue for my constituents in Pittsburgh, Pennsylvania; on a 
broader scale, it is an important issue for the residents of 
the Commonwealth of Pennsylvania and for our nation.
    Energy policy and taxes intersect in many areas, and 
Congress has often provided tax incentives, such as tax 
credits, to promote projects that exploit domestic sources of 
energy. The tax credits are necessary to attract the financing 
for projects that might not otherwise prove economically viable 
in the short term.
    However, in the long term, these projects often provide 
significant positive externalities, such as the use of 
alternative energy sources, environmental benefits, and to 
reduce reliance on foreign energy sources. For this reason, tax 
incentives play an important role in the development of energy 
resources and provide an important public-private partnership 
for the continued advancement of energy policy.
    The key to the nation's long-term energy health is a 
comprehensive and inclusive national energy policy. Such a 
policy would include both traditional fossil fuels: coal, oil, 
and gas. It would also diversify the portfolio of fuels with 
renewable energy sources such as fuel cells, solar, wind power, 
and combined heat and power systems, as well as developing new 
technologies, like the research that is ongoing to extract gas 
from methane hydrates.
    One type of fuel source combines both the traditional 
fossil fuel, coal, with a substance that would otherwise be a 
hazardous waste to create a fuel product that is used in coke 
batteries as a feedstock for the production of coke. This type 
of fuel is known as refined coal from a qualified coal waste 
sludge recycling process, and last week I introduced a bill, 
H.R. 1976, that would expand the existing Section 45 refined 
coal credit to include a tax incentive for the production of 
this fuel.
    I would also like to recognize my distinguished colleague 
from Pennsylvania and the Ranking Member of the Select Revenue 
Measures Subcommittee, Congressman Phil English, who joined me 
as an original cosponsor of this important legislation.
    I believe that refined coal from a qualified coal waste 
sludge recycling process provides significant energy and 
environmental benefits because the process recaptures the BTU 
content of coal waste sludge and has the associated 
environmental benefits of disposing of the coal waste sludge in 
a manner that is approved by the Environmental Protection 
Agency.
    This is exactly the type of alternative energy technology 
that Congress has desired to encourage in the past, and the 
provision of a tax incentive for the production of refined coal 
from a qualified coal waste sludge recycling process 
significantly furthers sound energy, environmental, and 
economic policies.
    The qualified coal waste sludge recycling process combines 
coal and coal waste sludge to create a solid fuel product that 
is used by the domestic steel industry as a feedstock for the 
manufacture of coke. Coal waste sludge is the tar decanter 
sludge and other by-products of the coking process, including 
such materials that have been stored in ground, in tanks, and 
in lagoons that have been generally treated as hazardous waste 
under applicable Federal environmental rules.
    Presently, there are three primary methods for the disposal 
of coal waste sludge: No. 1, manufacture of refined coal from a 
qualified coal waste sludge recycling process; No. 2, 
transportation to incinerators; or No. 3, transportation to 
foreign landfills.
    The most favorable method, from an energy and environmental 
perspective, is to use a process that processes liquefied coal 
waste sludge with coal into a refined coal fuel product for use 
in steel producers' coke batteries. This method recaptures the 
significant energy content of the coal waste sludge and can be 
performed on the site of the steel producers' coke operations. 
The disposal of coal waste sludge in this manner has been 
approved by the EPA.
    The alternative methods of disposal are to transport the 
coal waste sludge offsite for incineration, or to foreign 
countries for landfilling. The alternative methods have 
significant drawbacks, including the need to physically convey 
a hazardous waste--which is a dangerous, cumbersome, and 
expensive undertaking--and the failure to recapture the energy 
content of the coal waste sludge if it is incinerated or 
landfilled rather than combined with coal to create a coke 
feedstock.
    It is important to note that the production of domestic 
steel would greatly benefit from Section 45 tax credit for 
qualified coal waste sludge recycling. Steel companies can 
directly or indirectly share in the benefits of the tax credit, 
and this results in cheaper coke, which can result in steel 
companies being more competitive against coke imported from 
foreign countries like China.
    In the past, cheap Chinese coke has flooded the domestic 
market. Such competition has drastic implications because once 
a coke battery shuts down, it is no longer able to function to 
produce coke and new coke batteries must be built to fill that 
void that is left behind. The potential for cheap coal through 
unfair foreign competition is a threat to our domestic energy 
security. The availability of the credit has a secondary 
benefit of mitigating this threat.
    Finally, Mr. Chairman, H.R. 1976 would amend Section 45 to 
provide that refined coal from a qualified coal waste sludge 
recycling process is eligible for a credit. The amount of the 
credit would be set at an inflation-adjusted $3 per barrel of 
oil equivalent for refined coal from a qualified coal waste 
sludge recycling process produced and sold to an unrelated 
party.
    That credit would be in place for 4 years to allow for a 
sufficient period to encourage coke batteries to adopt the coal 
waste sludge recycling process. This incentive is an important 
component to the development of a national energy policy that 
includes a diverse portfolio of energy resources.
    These incentives can be used effectively to promote the 
development of projects that would not otherwise go forward, 
notwithstanding their positive energy and environmental 
benefits. Such incentives have seen success in areas like 
landfill gas and other alternative fuels. My legislation, H.R. 
1976, to amend Section 45 to include refined coal, is part of 
an effort to follow the past successes with tax incentives that 
will have similar results.
    I encourage the Committee to include H.R. 1976 in the 
upcoming effort to stimulate energy innovation through the tax 
code, and look forward to working with you, Mr. Chairman, and 
the Members of the Committee to make our shared vision of a 
national energy policy a reality. And I thank you for your 
time.
    [The prepared statement of Mr. Doyle follows:]

  Prepared Statement of The Honorable Mike Doyle, a Representative in 
                Congress from the State of Pennsylvania

Background
    Thank you, Mr. Chairman. Today, we will hear about the nexus 
between energy policies and tax incentives. At a local level, this is 
an important issue for my constituents in Pittsburgh, Pennsylvania; on 
a broader scale, it is an important issue for residents of the 
Commonwealth of Pennsylvania and of our Nation. Energy policy and taxes 
intersect in many areas and Congress has often provided tax incentives, 
such as tax credits, to promote projects that exploit domestic sources 
of energy. The tax credits are necessary to attract the financing for 
projects that might not otherwise prove economically viable in the 
short term. However, in the long-term, these projects often provide 
significant positive externalities, such as the use of alternative 
energy sources, environmental benefits, and reduce reliance on foreign 
energy sources. For this reason, tax incentives play an important role 
in the development of energy resources and provide an important public-
private partnership for the continued advancement of energy policy.
    The key to the nation's long-term energy health is a comprehensive 
and inclusive national energy policy. Such a policy would include both 
traditional fossil fuels: coal, oil, gas, etc. It would also diversify 
the portfolio of fuels with renewable energy sources such as fuel 
cells, solar, wind power and combined heat and power systems, as well 
as developing new technologies, like the research that is ongoing to 
extract gas from methane hydrates.
    One type of fuel source combines both a traditional fossil fuel, 
coal, with a substance that would otherwise be a hazardous waste to 
create a fuel product that is used in coke batteries as a feedstock for 
the production of coke. This type of fuel is known as refined coal from 
a qualified coal waste sludge recycling process and last week I 
submitted a bill that would expand the existing Section 45 refined coal 
credit to include a tax incentive for the production of this fuel.
    I believe that refined coal from a qualified coal waste sludge 
recycling process provides significant energy and environmental 
benefits because the process recaptures the BTU content of ``coal waste 
sludge'' (described below) and has the associated environmental 
benefits of disposing of the coal waste sludge in a manner approved by 
the Environmental Protection Agency. The use of coal waste sludge as a 
fuel product offsets other fuels that would otherwise be used in the 
coke manufacturing process. This is exactly the type of alternative 
energy technology that Congress has desired to encourage in the past 
and the provision of a tax incentive for the production of refined coal 
from a qualified coal waste sludge recycling process significantly 
furthers sound energy, environmental, and economic policies.
Description of Process
    The qualified coal waste sludge recycling process combines coal and 
coal waste sludge to create a solid fuel product that is used by the 
domestic steel industry as a feedstock for the manufacture of coke. 
Coal waste sludge is the tar decanter sludge and other byproducts of 
the coking process, including such materials that have been stored in 
ground, in tanks and in lagoons, that have generally been treated as 
hazardous wastes under applicable Federal environmental rules.
    Presently, there are three primary methods for disposal of coal 
waste sludge:

      Manufacture of refined coal from a qualified coal waste 
sludge recycling process.
      Transportation to incinerators.
      Transportation to foreign landfills.

    The most favorable method, from an energy and environmental 
perspective, is to use a process (described in patent numbers 4,579,563 
(April 1, 1986), 4,758,246 (July 19, 1988) and 4,778,115 (October 18, 
1988)) that processes liquefied coal waste sludge with coal into a 
refined coal fuel product for use in steel producers' coke batteries. 
This method recaptures the significant energy content of the coal waste 
sludge and can be performed on the site of the steel producers' coke 
operations. The disposal of coal waste sludge in this manner has been 
approved by the EPA. See 50 Federal Register No. 120 (June 22, 1992).
    The alternative methods of disposal are to transport the coal waste 
sludge off-site for incineration or to foreign countries for land-
filling. The alternative methods have significant drawbacks, including 
the need to physically convey a hazardous waste (which is a dangerous, 
cumbersome and expensive undertaking) and the failure to recapture the 
energy content of the coal waste sludge if it is incinerated or land-
filled rather than combined with coal to create a coke feedstock.
    The manufacture of refined coal from a qualified coal waste sludge 
recycling process is a technology that should be promoted. While 
currently the process is primarily used to convert coal waste sludge 
produced in the current operations of coke batteries into a fuel 
product, there are other sources of coal waste sludge available to be 
processed into a refined coal product. For example, coal waste sludge 
was historically stored in domestic storage lagoons and storage tanks. 
There exists an abundant supply of coal waste sludge in these areas. In 
addition, ``town gas'' waste sites, which date back to the 19th century 
when coal gas was widely used as an energy source, also provide another 
potential source for an alternative fuel that could be capitalized upon 
by using the coal waste sludge recycling process. However, to fully 
achieve these benefits, technological advances are needed to spur other 
industrial developments allowing economical and efficient clean up of 
these sources of coal waste sludge.
    Finally, it is important to note that the production of domestic 
steel would benefit greatly from the Section 45 tax credit for 
qualified coal waste sludge recycling. Steel companies can directly or 
indirectly share in the benefits of the tax credit and this results in 
cheaper coke, which can result in the steel companies being more 
competitive against coke imported from foreign countries such as China. 
In the past, cheap Chinese coke has flooded the domestic market and 
played a role in the demise of various coke operations that could not 
compete. Such competition has drastic implications because, once a coke 
battery shuts down, it is no longer able to function to produce coke 
and new coke batteries must be built to fill the void let behind. The 
potential for cheap coal through unfair foreign competition is a threat 
to domestic energy security. The availability of the credit has a 
secondary benefit of helping to mitigate such a threat.
Explanation of Section 45 Amendment
    The bill that I have submitted would amend Section 45 to provide 
(i) that refined coal from a qualified coal waste sludge recycling 
process is eligible for a credit, (ii) a definition of ``coal waste 
sludge'' (i.e., the tar decanter sludge and related byproducts of the 
coking process, including such materials that have been stored in 
ground, in tanks and in lagoons, that have been treated as hazardous 
wastes under applicable Federal environmental rules absent liquefaction 
and processing with coal into a feedstock for the manufacture of coke), 
(iii) that a qualified coal waste sludge recycling facility shall be 
treated as placed in service for purposes of this amendment when such 
facility is in place and functioning to process coal with coal waste 
sludge, (iv) a placed-in-service window of 1 year from the date of 
enactment of the bill allowing for the construction of new qualified 
coal waste sludge recycling facilities, and (v) that the credit period 
would be for such refined coal that is produced and sold during the 
period beginning on the date of enactment of this amendment and ending 
on the date that is 4 years after the later of the first day of the 
fifth full month after the date of enactment or the facility's placed-
in-service date.
    Additional details set forth in the legislation include the 
following:

      A qualified coal waste sludge recycling process liquefies 
and distributes approximately one-quarter to one-half gallon of 
liquefied coal waste sludge per ton of coal. Liquefied coal waste 
sludge in excess of such amounts would have adverse effects on the 
operations and equipment of the coke batteries that use refined coal 
from a qualified coal waste sludge recycling process as a feedstock to 
produce coke. Based on industry research, an excessive amount of coal 
waste sludge causes extreme and irreparable damage to the coke battery. 
Coal waste sludge has an energy content of approximately 7,000 to 
16,000 BTUs per pound.
      For purposes of this amendment, a ``qualified coal waste 
sludge recycling facility'' includes a plant, comprised of one or more 
batch tanks and/or one or more storage tanks, steam and spray pipes, 
processing pumps, variable speed drives, a flowmeter and related 
electrical equipment, that processes coal and liquefied coal waste 
sludge.

    The amount of the credit would be set at an inflation-adjusted 
$3.00 per barrel-of-oil equivalent for refined coal from a qualified 
coal waste sludge recycling process produced and sold to an unrelated 
party. Producers of refined coal from a qualified coal waste sludge 
recycling process would only be able to claim credits once; i.e., if an 
income tax credit for the fuel production is claimed under Section 45, 
an income tax credit could not be claimed under any other code 
provision. However, the Section 45 credit shall be available for 
refined coal that meets the requirements of Section 45, notwithstanding 
the fact that such refined coal is purchased for use as a feedstock for 
coke by a taxpayer that has previously claimed credits under Section 
45K for the production of coke or coke gas. Coke or coke gas produced 
from refined coal from a qualified coal waste sludge recycling process 
for which credits have been claimed under Section 45 would not be 
eligible for an income tax credit under Section 45K. However, a coke or 
coke gas credit under Section 45 may be claimed if such coke or coke 
gas was produced from a feedstock for which the refined coal credit 
under Section 45 has not been claimed.

Final Remarks
    Tax incentives are an important component to the development of a 
national energy policy that includes a diverse portfolio of energy 
resources. Tax incentives can be used to effectively promote the 
development of projects that would not otherwise go forward--
notwithstanding their positive energy and environmental benefits. Such 
incentives have seen success in areas like landfill gas an other 
alternative fuels. The amendment of Section 45 to include refined coal 
from a qualified coal waste sludge recycling process is part of an 
effort to follow the past successes with tax incentives that will have 
similar results. Refined coal from a qualified coal waste sludge 
recycling process will achieve this benefit by utilizing a traditional 
fossil fuel, coal, together with what would otherwise be a hazardous 
waste, coal waste sludge, to create an alternative fuel. For this 
reason, tax incentives should be provided to attract the capital 
necessary to develop these projects.

                                 

    Mr. LARSON [presiding]. We thank the gentleman from 
Pennsylvania for his succinct and insightful testimony. We know 
him to be a champion of energy conservation, and we are pleased 
to take his testimony before the Committee.
    The chair now recognizes the distinguished gentleman from 
Minnesota and Chairman of the Agriculture Committee, Mr. 
Peterson.

STATEMENT OF THE HONORABLE COLLIN C. PETERSON, A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF MINNESOTA

    Mr. PETERSON. Thank you, Mr. Chairman, and I will try to be 
brief. You have my written testimony. I just want to hit on a 
couple points.
    We have been working in the Ag Committee on feedstock 
issues for the new cellulosic ethanol and biodiesel industry. 
But in my district, we have a big wind energy industry that has 
developed. And I have introduced a bill before, and have been 
working on this for a number of years.
    For whatever reason, when the electricity credit for these 
windmills was put in, it was done differently than was done for 
the low-income housing tax credit program. When we set that 
program up back in 1986, I think there was a provision in there 
that allowed you to use as much as $25,000 of your earned 
income, where you could offset the credit against that earned 
income. When we set up the Section 45 credits, we didn't allow 
that, so that you have to either have corporate income or 
passive income in order for you to utilize these credits.
    And I don't know why it was done differently, when you have 
the same kind of basic issue. And so what has happened is the 
big utilities from outside of the state of Minnesota own all of 
these windmills in Minnesota. They are the ones that put them 
up, that got the tax credits and so forth.
    So what we are proposing is that my bill would have adopted 
the same basic formula that we have in the low-income tax 
credit area, which would allow ten farmers to go together and 
put up one of these wind generators and be able to use the 
credits against their Schedule F income or earned income. And 
it gives them an opportunity to be part of the ownership of 
this.
    There is a lot of interest out there in doing this. But 
they are precluded by the tax law. And I don't think this would 
cost any money because all it does is change who gets the 
credits. Instead of a big power company getting it or a big 
corporation getting this and using it against their corporate 
income, ten farmers could go together and use it. It is the 
same amount of tax credit. The only thing it changes is who it 
goes to.
    The more we look at this, I don't know why we have these 
earned income limitations on there in the first place. We have 
got some questions on the amount of the credit. We are working 
on legislation now with Congressman Walz, who also has a lot of 
these windmills in his district, and Congresswoman Herseth in 
South Dakota, where we may actually come in with some 
additional requests over and above what we initially put 
together in the last session to try to make this work.
    The long and the short of it is farmers are getting $2- to 
$3,000 per wind generator rent on their farmland, and these 
corporations that are buying the tax credits after 10, or 15 
years are making $100,000 a year. And we created this market in 
Minnesota by requiring that 10 percent of the renewable energy 
be wind energy. So we created this market, and we are letting 
out-of-state corporations benefit from it. It doesn't make a 
lot of sense. I would encourage you to look at this issue.
    In addition to that, there is one other thing I wanted to 
put on the table. I haven't introduced a bill on this, but we 
have been working on these feedstocks for the next generation 
ethanol plants and cellulosic ethanol. And initially, these 
plants are going to use agricultural waste. They are going to 
be using wheat straw, rice straw, and so forth. But eventually, 
we want to use switch grass and wood and those kinds of things 
in the future.
    But the more I look at this, I think as we develop this 
industry there is going to be an intermediate step where we are 
going to be looking at making some use of the next generation 
of feed stocks, either pelletizing the switch grass or maybe 
gasifying it. And there is nothing in the tax code to encourage 
us to be able to put those plants in, to get us so we can 
actually get the feedstock established, and have a place to use 
it, as we build these ethanol plants, which are going to take 5 
or 6 years.
    So we are going to be putting something together in this 
area to try to fill that gap so that we can help build this 
industry as quickly as we can. And I haven't got that bill 
ready yet, but when I do get it introduced, I would appreciate 
it if you would look at it.
    So I thank the Committee listening to me, and hope that you 
can do something to help us as you move through this process.
    [The prepared statement of Mr. Peterson follows:]

       Prepared Statement of The Honorable Collin C. Peterson, a 
         Representative in Congress from the State of Minnesota

    Chairman Neal, Ranking Member English and other Members of the 
Subcommittee, I appreciate the time you are taking to hold a series of 
hearings to examine the need for tax incentives to continue us on a 
path to energy independence using renewable energy resources.
    Thank you for allowing me to appear today to talk about legislation 
that I have introduced to help encourage more local investment in wind 
turbines to provide renewable electricity. My legislation would allow 
individuals investing in wind energy facilities to be eligible for the 
$25,000 passive loss offset in the Internal Revenue Code.
    Under current tax law, individuals are eligible for tax deductions 
for losses incurred by industry investments. The passive loss 
limitation rule prevents individuals from making investments in an 
industry in which they are not active, simply to receive tax 
deductions. However, a $25,000 passive loss offset exists for 
individuals investing in oil and gas development and real estate.
    In rural areas, farmers, ranchers and other local individuals are 
looking to diversify their income by installing wind turbines for the 
production of electricity. This electricity generation could be 
connected to the grid, and farmers and ranchers would help provide 
power from a renewable, domestic energy source, while creating 
sustainable rural development.
    Unfortunately, most rural residents do not have the ability to 
finance such projects, and attracting investors is difficult since the 
first years after installation often produce losses. My legislation 
would allow the $25,000 passive loss offset, currently only for oil, 
gas and real estate investments, to apply to individuals who invest in 
wind energy facilities. Individuals can use credits against their 
earned income.
    I would also like to take this opportunity to encourage you to keep 
in mind the chicken and egg situation that I know you are well aware 
of. Our inability to provide a longer term Section 45 Production Tax 
Credit is continuing our reliance on foreign component suppliers and 
leaving our country waiting to take advantage of the huge potential we 
have for wind energy. We are fortunate to have a plant that has 
recently opened in southern Minnesota to make the nose cones and blades 
for turbines. This company will provide 275 jobs in a town of 4,400 
when it reaches full capacity--that is a huge economic impact in a 
rural Minnesota city.
    The continuation of the Section 45 credit and the continuation of 
the Section 29 credit or another form of a credit that would apply to 
other types of renewable energy is another important discussion that I 
hope you will have. We need to provide the incentive to allow local 
communities, ag producers and businesses large and small to turn to 
renewable sources such as gasification and digesters to help with their 
power needs. This would be a nice compliment to the proposal that we 
hope to include in the farm bill to increase the availability and type 
of feedstocks for cellulosic ethanol. It would also work well with the 
incentives currently in the farm bill for removing livestock manure and 
poultry litter from watersheds that have too many nutrients--these are 
valuable commodities that can be made into energy.
    My state of Minnesota has been and continues to be a leader in the 
use of renewable energy, and the recent passage of an aggressive 
renewable portfolio standard continues that tradition. I believe it is 
important to give our average citizens the opportunity to participate 
in making our goals of renewable energy reachable.
    Thank you again for allowing me to testify, and I look forward to 
working with you to encouraging local ownership of renewable energy 
resources. I also look forward to working with you as we craft a new 
farm bill to ensure that your tax policies and our farm bill programs 
work in concert to help us supply more home-grown renewable energy.

                                 

    Mr. LARSON. Thank you. Thank you, Mr. Chairman, and thank 
you for your testimony. And the Committee is honored to receive 
it.
    The chair now recognizes the distinguished Member of the 
Rules Committee from Massachusetts, Mr. McGovern.

STATEMENT OF THE HONORABLE JAMES P. MCGOVERN, A REPRESENTATIVE 
          IN CONGRESS FROM THE STATE OF MASSACHUSETTS

    Mr. MCGOVERN. Thank you, Mr. Chairman. And I want to thank 
you and Members of the Committee for giving me this opportunity 
to testify before you today.
    I am here to discuss legislation I introduced, H.R. 1475, 
the Commuter Benefits Equity Act of 2007. H.R. 1475 seeks to 
amend the Internal Revenue Code 1986 to increase and equalize 
the exclusion from gross income for parking and transportation 
fringe benefits and to provide for a common cost of living 
adjustment, and for other purposes.
    Transit benefits are authorized by Section 132(f) of the 
Internal Revenue Code, which allows for pretax salary 
deductions for transit and parking or employer-subsidized 
transit or parking. The current tax-free limit for transit is 
$110 per month, and the limit for parking is $215 per month. 
H.R. 1475 would create parity between the transit and parking 
portions at $200. To offset the cost of creating parity, the 
tax-free limit of $215 per month for parking would be reduced 
to $200, and the cost of living adjustment included in Section 
132(f) would be frozen in order to pay for the increase in the 
transit portion.
    Mr. Chairman, the transit benefit inequity has created a 
financial incentive for commuters to drive to work by 
themselves rather than utilize a form of public transportation 
or vanpool. In our efforts to reduce traffic congestion and end 
our fossil fuel dependencies, we simply cannot afford to 
promote tax policies that do more harm than good to the 
environment.
    As the Committee searches for ways to promote energy 
conservation, the role of public transportation cannot be 
ignored. Public transportation eases congestion by keeping cars 
off the road. It improves air quality by reducing automobile 
emissions, and perhaps most importantly, it reduces our 
dependency on foreign oil.
    Currently, public transportation reduces gasoline 
consumption in the United States by 1.4 billion gallons per 
year. Now, if we equalize the transit benefit with the parking 
benefit, the amount of savings will increase and our dependency 
on gasoline will be reduced. By leveling the playing field 
between the transit and parking portions, we can fix the 
current policy which discourages public transit use and 
encourages gasoline consumption.
    Mr. Chairman, I would also like to note the widespread 
support for this legislation. The bill currently has 50 
cosponsors from every state and region of the country. And I 
encourage all Members of the Committee to consider supporting 
my legislation, and I look forward to working with you.
    I would like to ask unanimous consent to insert for the 
record letters of support from the American Public 
Transportation Association, letters from the Vanpool Services 
Corporation, and a report by Linda Bailey of INTERFACE 
International, all in support of what I am trying to do.
    Mr. LARSON. Without objection, so ordered.
    Mr. MCGOVERN. I thank the Chairman for listening to me, and 
Members of the Committee, and I hope that you will support this 
legislation.
    [The prepared statement of Mr. McGovern and the letters of 
support follow:]
Prepared Statement of The Honorable James P. McGovern, a Representative 
              in Congress from the State of Massachusetts
    I would like to thank my friend and colleague from Massachusetts, 
Chairman Neal, and the Committee for giving me the opportunity to come 
here today and testify.
    I would also like to thank the Chairman, as well as Representative 
Schwartz, Representative McDermott, and Representative Blumenauer for 
cosponsoring the bill. Your support is truly appreciated.
    I am here to discuss legislation I have introduced, H.R. 1475, the 
``Commuter Benefits Equity Act of 2007.'' H.R. 1475 seeks to amend the 
Internal Revenue Code of 1986 to increase and equalize the exclusion 
from gross income for parking and transportation fringe benefits and to 
provide for a common cost-of-living adjustment, and for other purposes.
    Transit Benefits are authorized by Section 132(f) of the Internal 
Revenue Code, which allows for pre-tax salary deductions for transit 
and parking or employer subsidized transit or parking. The current tax-
free limit for transit is $110 per month and the limit for parking is 
$215 per month.
    H.R. 1475 would create parity between the transit and parking 
portions at $200. To offset the cost of creating parity, the tax-free 
limit of $215 per month for parking would be reduced to $200, and the 
cost of living adjustments included in Section 132(f) would be frozen 
in order to pay for the increase in the transit portion.
    Mr. Chairman, this transit benefit inequity has created a financial 
incentive for commuters to drive to work by themselves, rather than 
utilize a form of public transportation or vanpool. In our efforts to 
reduce traffic congestion and end our fossil fuel dependencies, we 
simply cannot afford to promote tax policies that do more harm than 
good to the environment.
    As the Committee searches for ways to promote energy conservation, 
the role of public transportation cannot be ignored. Public 
transportation eases congestion by keeping cars off the road. It 
improves air quality by reducing automobile emissions. And perhaps most 
importantly, it reduces our dependency on foreign oil.
    Currently, public transportation reduces gasoline consumption in 
the United States by 1.4 billion gallons per year. If we equalize the 
transit benefit with the parking benefit, the amount of savings will 
increase, and our dependency on gasoline will be reduced.
    By leveling the playing field between the transit and parking 
portions, we can fix the current policy which discourages public 
transit use and encourages gasoline consumption.
    Mr. Chairman, I would also like to note the widespread support this 
legislation has demonstrated. The bill currently has over 50 cosponsors 
from states in every region of the country.
    I encourage all Members of this Committee to consider supporting my 
legislation and look forward to working with you.

                                 

    Mr. LARSON. We thank the gentleman from Massachusetts for 
his cogent testimony.
    Now I will prevail upon the distinguished Member and 
classmate from the great state of Nebraska, Mr. Terry.

   STATEMENT OF THE HONORABLE LEE TERRY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEBRASKA

    Mr. TERRY. I appreciate that. And before I go into my 
remarks, let me thank this Subcommittee for actually allowing 
us nonmembers of your prestigious Subcommittee and Committee to 
come and let you know about some of the ideas that we have to 
make sure that we become a more energy-independent country.
    Together with my good friend and Committee Member and co-
founder of the Distributive Power Caucus, Mr. Doyle, sitting 
next to me, we wrote H.R. 805. And Albert Wynn is also an 
original cosponsor with us. And it allows for tax credits for 
both the creation and use of hydrogen fuel cells.
    President Bush, in his 2006 State of the Union address, 
outlined an Advanced Energy Initiative to drastically reduce 
our dependence on foreign sources of oil. The President set a 
national goal of 75-percent reduction of oil imports from the 
Middle East by 2025. I think if we use the ideas that are being 
brought before you today, especially H.R. 805, we can 
significantly reduce our dependence on foreign oil a lot sooner 
than 2025.
    We are making tremendous breakthroughs in advanced energy 
technologies, like the use of hydrogen fuel cells for both 
vehicles and as a source of electrical production. In my home 
town, Omaha, several stationary fuel cells are used to power a 
data center in a large banking facility, First National Bank in 
downtown Omaha. The Lied Jungle uses fuel cells and co-
generation to supply the electricity and humidity for their 
Lied Jungle. An office area on our Air Force base also uses 
this power.
    Our bill, H.R. 805, is designed to provide tax credits for 
new technologies like advanced automotive, stationary, and 
portable fuel cells, as well as refueling infrastructure and 
hydrogen production. It would allow a tax credit for devices 
using hydrogen up to 30 percent of the amount paid by the 
taxpayer or $1,500, whichever is less. The credit would be 
available for amounts paid or incurred for hydrogen fuel 
devices prior to December 31, 2015.
    The bill also extends the existing residential energy 
efficiency tax credit for fuel cells and micro turbines through 
December 31, 2013, which this Committee did in the energy 
package of 2 years ago. This has been an important tax benefit 
that has helped push these technologies into the consumer 
marketplace.
    Testimony before our Committee, we had representatives of 
the automobile industry who testified--Energy and Commerce--it 
is going to be these breakthroughs in the consumer marketplace 
that are going to speed up the rollout of hydrogen fuel cells 
for the automobile industry.
    And then finally, Mr. Chairman, this bill also adds the 
requirement that these secondary uses of fuel or fuel cell 
power sources be used in public buildings. So the next building 
built that is a Federal Government building should have this 
type of technology in it, I would hope, for the baseload, then 
be able to help with peak power as well.
    Now, if we do all of these types of things to help the 
rollout of this technology in the marketplace sooner than 
later, we will have the technology breakthroughs to make sure 
that we meet our goals of 75-percent reduction of dependence on 
foreign oil a lot sooner than 2025.
    I appreciate your Committee listening to these type of 
ideas and initiatives, and I look forward to the bill that you 
all put together and hope that H.R. 805 can be part of that. 
Thank you.
    [The prepared statement of Mr. Terry follows:]

  Prepared Statement of The Honorable Lee Terry, a Representative in 
                  Congress from the State of Nebraska

    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to appear today in support of H.R. 805, a bill I have 
cosponsored with my friend and colleague on the Energy and Commerce 
Committee, Mr. Doyle (PA-14), and several others.
    In President Bush's 2006 State of the Union address to Congress, he 
outlined the Advanced Energy Initiative to drastically reduce our 
dependence on foreign sources of energy. The President set a national 
goal of replacing more than 75% of our oil imports from the Middle East 
by 2025. We are making tremendous breakthroughs in advanced energy 
technologies, like the use of hydrogen fuel cells for both vehicles and 
stationary sources of power. Omaha is home to several stationary fuel 
cells including those at Henry Doorly Zoo, the First National Bank 
building in downtown Omaha, and Offutt Air Force Base.
    Our bill, H.R. 805, is designed to provide tax credits for new 
technologies like advanced automotive, stationary and portable fuel 
cells, as well as refueling infrastructure and hydrogen production. It 
would allow a tax credit for devices using hydrogen up to 30 percent of 
the amount paid by the taxpayer or $1,500 whichever is the lesser 
amount. The credit would be available for amounts paid or incurred for 
hydrogen fuel devices prior to December 31, 2015.
    The bill also extends the existing residential energy efficiency 
tax credit for fuel cells and micro turbines through December 31, 2013. 
This has been an important tax benefit that has helped push these 
technologies into the consumer marketplace.
    Finally, Mr. Chairman, H.R. 805 adds a requirement for the 
increased use of secondary fuel cell power sources in public buildings. 
Under the bill, any new Federal buildings constructed after December 
31, 2008 in excess of 50,000 square feet must have as part of its 
design, provisions for a secondary, independent backup source of 
electrical power. The Administrator of the General Services 
Administration (GSA) must also consider the use of a fuel cell as part 
of the base load electric power needs of the Federal building.
    Thank you again, Mr. Chairman, for the opportunity to testify in 
support of H.R. 805 and I urge the Subcommittee to move this 
legislation through the Committee to the House floor.

                                 

    Mr. LARSON. Thank you, Mr. Terry. And as a cosponsor of 
your legislation along with Mr. Doyle, I am proud to receive it 
on the Committee.
    I am going to ask Members if they would care to inquire 
because I know the distinguished Ranking Member would look to 
do so. But we are going to switch panels. But does the 
distinguished Ranking Member have any questions he would like 
to ask the panelists before they----
    Mr. ENGLISH. No. I want to thank Mr. Doyle for bringing to 
us a very detailed tax policy that I know has been worked 
through and interacts well with provisions that are already in 
the code. I am very grateful for his focus on how to take what 
is, in effect, sludge that has been declared a hazardous 
substance and recycle it.
    And I particularly want to thank Mr. Terry for thinking 
through how we can bring into the market aggressively hydrogen 
as a major energy source, which in my view is potentially one 
of the most flexible sources of energy. If we can use 
incentives to develop the technologies to make that transition, 
I think you have made a compelling case, sir.
    I want to thank both of these witnesses for their 
presentations.
    Mr. LARSON. Thank you. And if we could have--I know that we 
are joined by Representative Baird and Representative Davis. 
And if they could come forward.
    Let us begin with the distinguished gentleman and fellow 
classmate from the state of Washington, Mr. Baird.

  STATEMENT OF THE HONORABLE BRIAN BAIRD, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. BAIRD. I thank my good friend and the Committee 
Members, and thank Ranking Member English, and appreciate very 
much this time.
    Legislation that we are proposing is supported by industry, 
supported by labor, and would have a very positive impact on 
energy consumption in this country. As we all know, our nation 
faces important energy challenges, and we have to work together 
to find ways to conserve energy. That is why I have been 
pleased to work very closely with my colleague, Ms. Schwartz, 
on introducing this legislation.
    What we are focusing on here is the potential to save 
energy by making our buildings more efficient. Buildings use 71 
percent of all the electricity used in this country and 
comprise 80 percent of all electric expenditures in the U.S. 
Commercial buildings alone accounted for 35 percent of our 
entire nation's electricity consumption. This is not only a 
drain on our economy, it is a significant environmental impact.
    I am pleased to have introduced, therefore, H.R. 539 with 
my colleague, Congresswoman Schwartz, a Member of the 
Committee. The intent of this bill, the Buildings for the 21st 
Century Act, is to encourage energy-efficient, cost-saving 
commercial properties.
    Briefly, what the bill does is extend and improve upon the 
commercial buildings tax deduction, which was established in 
the Energy Policy Act of 2005. There are essentially two 
significant improvements. This is a tax deduction for energy-
efficient building expenditures made by a building owner.
    In the 2005 energy bill, the deduction was limited to $1.80 
per square foot for buildings that reduce their annual energy 
and power costs by at least 50 percent; and for buildings that 
do not achieve a 50 percent overall cost savings, there was 
nevertheless an allowance for partial deductions for reductions 
in lighting, heating, and cooling energy use.
    The provision, however, was set to expire at the end of 
2007. Fortunately, we worked with the Committee to extend the 
provision until December 31, 2008. While we are pleased for the 
extension, we believe it is important to extend it to 2013, and 
the simple reason is there is a long startup time to planning 
and conducting some of these changes. And if it expires very 
quickly, people might say, we don't think we can get in under 
the wire, and then they will forego the effort, and thereby we 
forego the savings and don't take advantage of that. Increasing 
the level of deduction will be an added incentive for people to 
engage in these activities.
    Again, I would note we have 136 bipartisan cosponsors. The 
bill is supported by a coalition of business, trade, 
government, and agency groups ranging from the Edison Electric 
Institute to the Natural Resources Defense Council. It alone 
will not solve our energy challenges, but it is an important 
step.
    Again, I am very, very pleased and honored to be able to 
work with Ms. Schwartz on this. I thank the Committee for their 
consideration, and would hope we can include it.
    [The prepared statement of Mr. Baird follows:]

 Prepared Statement of The Honorable Brian Baird, a Representative in 
                 Congress from the State of Washington

    Good afternoon Chairman Neal, Ranking Member English, and Members 
of the Subcommittee. Thank you for the opportunity to address you 
today.
    As we all know, our nation is facing an energy crisis. We must work 
together to identify ways to conserve energy and protect our 
environment, and do so in a way that does not have a negative impact on 
our economy.
    I have focused on one area that I think presents an enormous 
opportunity for our nation to conserve our resources and improve our 
environment, while also saving businesses money. Congresswoman Allyson 
Schwartz, a Member of this Committee, and I have developed legislation 
that will provide the necessary economic incentives to make substantial 
progress towards becoming a more energy-efficient and environmentally-
friendly nation.
    Before I get into the details of our bill, I would like to share 
some statistics with you about the impact of commercial buildings on 
the environment and on businesses' bottom line.
    Buildings use 71% of all electricity, and comprise 80% of all 
electric expenditures in the U.S. Commercial buildings alone account 
for 35% of our entire nation's electricity consumption.
    This not only indicates a huge drain on our natural resources but 
also represents a significant cost to businesses. In fact, energy 
accounts for nearly a third of a typical building's costs and is 
generally a property owner's single largest operating expense.
    For these reasons, I am pleased to have introduced H.R. 539 with my 
colleague, Congresswoman Schwartz. The intent of this bill, the 
Buildings for the 21st Century Act, is to encourage energy-efficient, 
cost-saving commercial properties.
    Why exactly does our bill do?
    The Buildings for the 21st Century Act extends and improves upon 
the commercial buildings tax deduction established in the Energy Policy 
Act of 2005. This is a tax deduction for energy efficient building 
expenditures made by a building owner. In the 2005 energy bill, this 
deduction was limited to $1.80 per square foot for buildings that 
reduce their annual energy and power costs by at least 50%. For those 
commercial buildings that do not achieve the 50% overall cost savings, 
the 2005 bill also allowed for partial deductions for reducing 
lighting, heating, and cooling energy use.
    This provision was set to expire at the end of 2007. Fortunately, 
we worked together to get it extended at the end of last year until 
December 31, 2008.
    While we were pleased to see this extension, we believe it is very 
important that the deduction be extended to 2013. Our legislation does 
this. It also enhances the deduction to $2.25 per square foot and 75 
cents per square foot for the partial deduction.
    Due to the significant amount of time and resources needed to plan 
and prepare for major construction, it is important that the deduction 
be extended for a significant amount of time. The truth is that 
commercial buildings have lead times for planning of 2 to 4 years. This 
means that, if the deduction is set to expire in the near future, many 
companies will simply choose not to make improvements on their 
buildings.
    Increasing the amount of the deduction will also encourage more 
builders and business owners to utilize the deduction. As you may know, 
$2.25 per square foot was the initial proposal supported by a large 
environmental and industry coalition. This figure was based on 
calculations to ensure that the deduction maximized market 
participation without extraneous cost to taxpayers. Unfortunately, a 
last minute agreement in Congress reduced the deduction to its present 
$1.80.
    The Buildings for the 21st Century Act has 136 bipartisan 
cosponsors. It is supported by a coalition of business, trade, 
government, and energy efficiency groups, ranging from the Edison 
Electric Institute to the Natural Resources Defense Council.
    Although our impending energy crisis cannot be solved with one 
piece of legislation alone, the Buildings for the 21st Century Act 
takes a meaningful step towards a more energy-efficient economy. Our 
bill will have an overall positive effect on both the environment and 
the economy, and should be enacted.
    I strongly believe that we can take considerable steps towards 
becoming a more environmentally conscious society with legislation such 
as this. When we create environmental policies that make sense for 
business, we will achieve greater cooperation in conserving energy and 
protecting the environment.
    Thank you.

                                 

    Mr. LARSON. I thank the gentleman for his succinct 
testimony, and I am going to yield to the gentlelady from 
Pennsylvania for a comment. But I would just say to the 
panelists that we are pleased that you are all here. But we are 
anticipating having votes in about 20 minutes, so brevity is 
the soul of wit.
    The gentlelady from Pennsylvania.
    Ms. SCHWARTZ. Thank you, Mr. Chairman. And I am pleased to 
just take a couple minutes to thank Mr. Baird for working with 
me on this legislation. And I think the fact that we have 136 
of our colleagues working with us on this--and I have certainly 
heard from many, many different segments, whether they are 
architects or builders or contractors, that this is really very 
important for us to do, to be able to really work in a very 
constructive way, and in this case to reduce our use of 
electricity.
    I think many people--we often concentrate on other uses, 
whether they are industrial uses or cars. The fact that 
buildings use 80 percent of our electricity, and that 
commercial buildings alone consume 35 percent of the 
electricity in this country, if we could reduce that by a few 
percentage points would be very dramatic in our use.
    And as we move toward energy independence--and this 
legislation also doesn't pick winners and losers. I think this 
is going to be one of the most difficult things for our 
Committee and the Congress to work on, is to think about new 
ways and to be able to encourage new sources of energy.
    But this is a case that really is going to help reduce use, 
and that is very exciting. And at the same time, it is also 
going to reduce cost. And if we can help build buildings that 
are going to last for 75 years, many of them, if we can do that 
right and help businesses be able to reduce costs, I am really 
just very excited about doing that. Thank you for your work 
that you have done.
    Mr. LARSON. I am sure the gentlelady will submit for the 
record additional comments as well.
    Ms. SCHWARTZ. I will.
    Mr. LARSON. And the chair will now recognize the 
distinguished gentleman from New Jersey, Mr. Ferguson.
    Ms. SCHWARTZ. And I am going to just ask if I can submit 
some letters of endorsement.
    Mr. LARSON. Without objection, so ordered.
    Ms. SCHWARTZ. Thank you very much.
    [The prepared statement of Ms. Schwartz and letters of 
endorsement follow:]

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    Mr. BLUMENAUER. Mr. Chairman, just would you entertain 30 
seconds from another Member of the Committee?
    Mr. LARSON. How about 20 seconds? You are so recognized, 
Mr. Blumenauer.
    Mr. BLUMENAUER. I just want to say, the notion of being 
able to deal with the energy footprint up front in the design 
function, we are getting there sooner rather than later. But 
the legislation that is being discussed here ought to be a part 
of something that we do because it will pay dividends forever 
if we can move that up earlier in the process.
    By the time the footings are poured, about 80 percent of 
the energy footprint is established. And so I would like us to 
probe this to see if there are ways that this could be a part 
of the comprehensive effort that the Committee does.
    Mr. LARSON. As always, the gentleman from Oregon adds 
insight to our process.
    The distinguished gentleman from New Jersey, Mr. Ferguson.

 STATEMENT OF THE HONORABLE MIKE FERGUSON, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. FERGUSON. Thank you, Chairman Neal and--I am sorry, 
Chairman Larson today, and Mr. English, for allowing me the 
opportunity to testify before the Subcommittee on tax 
incentives and alternative energy sources. Recent months, 
renewable energy and energy security have dominated the 
domestic energy debate. Renewable energy technology holds 
tremendous potential to make great advancements toward energy 
security in the 21st century.
    In my home state of New Jersey, we have seen what a 
difference renewable energy can make not only in promoting a 
clean, healthy environment by reducing greenhouse gases, but 
also in cutting the cost of energy bills for consumers. In 
2001, New Jersey began offering 70 percent rebates on solar 
power installations for residential homes and businesses. Five 
years later, New Jersey is the second largest state market for 
solar power, and 2,000 homes and businesses have taken 
advantage of the program. There continues to be a long waiting 
list for that program.
    That is why in the 110th Congress I introduced H.R. 1596, 
the Clean and Green Renewable Energy Tax Credit Act. This 
legislation builds upon the efforts that I began in the 109th 
Congress with H.R. 4300. My bill would extend the existing 
Federal tax credits for solar energy until 2016.
    Under this legislation, consumers would receive a $3,000 
per kilowatt Federal tax credit for any solar energy 
installation. For example, the typical home roof-mounted system 
is $10,000 per kilowatt installed, and the average system is 3 
kilowatts, making the total cost to the homeowner $30,000. 
Under the legislation, the consumer would receive a Federal tax 
credit of $9,000 for a $30,000 system.
    The Clean and Green Renewable Energy Tax Credit Act would 
also extend the tax credits created in the Energy Policy Act of 
2005 for insulation, windows, and heating and cooling equipment 
for 2 years. Additionally, it extends the production tax credit 
for wind facilities through 2013, and creates a 30 percent 
investment tax credit for small wind systems for both 
businesses and residents.
    I am also a cosponsor of H.R. 550, the Securing America's 
Energy Independence Act. This legislation, led by 
Representative Camp and Representative McNulty, not only 
extends the investment tax credit for residential and 
commercial solar and fuel cell equipment for an additional 8 
years, but also provides alternative minimum tax relief for 
fuel cells and solar energy. While the solar tax credits 
created in the Energy Policy Act are a good first step, this 8-
year extension is critical to leave more time for research and 
development and for the additional time that is required to 
finance solar and fuel cell projects.
    Throughout my terms in Congress, I have been a strong 
proponent for solar energy. I believe that solar energy holds 
significant promise in job creation, energy security, 
reliability, and helping to decrease the number of dangerous 
emissions being released into our atmosphere. And one must look 
no further than New Jersey to see how successful these 
cooperative state and Federal tax incentive programs can be.
    However, to truly benefit from this energy source, it is 
our job as lawmakers to make this technology widely available 
and affordable to both consumers and utilities. While it is of 
the utmost importance to make this technology an energy option 
for homeowners, I believe we also must take these initiatives 
even further and remove the exclusion for utilities in the 
investment tax credit.
    Many energy companies, namely PSEG, a large energy company 
headquartered in New Jersey, have stated their interest in 
investing in solar technology. These companies recognize the 
potential in solar energy, and are taking the lead in 
environmental responsibility and energy independence.
    Again, I would like to thank you for allowing me to testify 
today. And I urge you to take action to extend and expand these 
renewable energy tax credits and make this energy more 
affordable and accessible to consumers. I have seen the success 
that we have had in New Jersey with these initiatives, and I 
believe that we can see the same kind of success on a national 
level.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Ferguson follows:]

Prepared Statement of The Honorable Mike Ferguson, a Representative in 
                 Congress from the State of New Jersey

    I'd like to thank Chairman Neal and Ranking Member English for 
allowing me the opportunity to testify before the Subcommittee on 
Select Revenue Measures on tax incentives for alternative energy 
sources. In recent months, renewable energy and energy security have 
dominated the domestic energy debate. Renewable energy technology holds 
tremendous potential to make great advancements towards energy security 
in the 21st century.
    In my home state of New Jersey we have seen what a difference 
renewable energy can make not only in promoting a clean, healthy 
environment by reducing greenhouse gasses, but also in cutting the cost 
of energy bills for consumers. In 2001 New Jersey began offering 70% 
rebates on solar-power installations for residential homes and 
businesses. Five years later, New Jersey is the second largest state 
market for solar power and 2,000 homes and businesses have taken 
advantage of the program and there continues to be a long waiting list.
    That is why in the 110th Congress I introduced H.R. 1596; the Clean 
and Green Renewable Energy Tax Credit Act. This legislation builds upon 
efforts that I began in the 109th Congress with H.R. 4300. My bill 
would extend the existing Federal tax credits for solar energy until 
2016. Under this legislation, consumers would receive a $3,000 per 
kilowatt Federal tax credit for any solar energy installation. For 
example, the typical home roof-mounted system is $10,000 per kilowatt 
installed, and the average system is 3 kilowatts, making the total cost 
to the homeowner $30,000. Under this legislation the consumer would 
receive a Federal tax credit of $9,000 for a $30,000 system.
    The Clean and Green Renewable Energy Tax Credit Act would also 
extend the tax credits created in the Energy Policy Act of 2005 for 
insulation, windows, and heating and cooling equipment for 2 years. 
Additionally, it extends the production tax credit for wind facilities 
through 2013 and creates a 30% investment tax credit for small wind 
systems for both businesses and residences.
    I am also a cosponsor of H.R. 550, the Securing America's Energy 
Independence Act. This legislation, led by Rep. Camp and Rep. McNulty 
not only extends the investment tax credit for residential and 
commercial solar and fuel cell equipment for an additional 8 years but 
also provides alternative minimum tax relief for fuel cells and solar 
energy. While the solar tax credits created in EPACT are a good first 
step, this 8 year extension is critical to leave more time for research 
and development and for the additional time that is required to finance 
solar and fuel cell projects.
    Throughout my term in Congress I have been a strong proponent of 
solar energy. I believe that solar energy holds significant promise in 
job creation, energy security, reliability, and helping to decrease the 
number of dangerous emissions being released into our atmosphere and 
one must look no further than New Jersey to see how successful these 
cooperative state and Federal tax incentive programs can be.
    However, in order to truly benefit from this energy source, it is 
our job, as lawmakers, to make this technology widely available and 
affordable to both consumers and utilities. While it is of utmost 
importance to make this technology an energy option for homeowners, I 
believe that we must take these initiatives even further and remove the 
exclusion for utilities in the investment tax credit. Many energy 
companies, namely PSEG, a large energy company headquartered in New 
Jersey, have stated their interest in investing in solar technology. 
These companies recognize the potential in solar energy and are taking 
a lead in environmental responsibility and energy independence.
    Again, I'd like to thank you for allowing me to testify today and I 
urge you to take action to extend and expand these renewable energy tax 
credits and make this energy more affordable and accessible to 
consumers. I have seen the success that New Jersey has had with these 
initiatives and I believe that we can see the same kind of success on a 
national level.

                                 

    Mr. LARSON. And thank the gentleman from New Jersey for his 
testimony.
    And now I recognize the gentleman from Illinois, Mr. 
Shimkus.

 STATEMENT OF THE HONORABLE JOHN SHIMKUS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. SHIMKUS. Thank you, Mr. Chairman. I will be brief. I 
will ask that my whole statement be submitted for the record, 
and just say a couple quick things.
    Congress recognized the potential for coal to liquid in the 
2005 Highway Reauthorization and Excise Tax Simplification Act. 
The Act provides a 50 cents per gallon tax credit for coal to 
liquid production through September 2009. But since it takes 5 
to 7 years to build a coal-to-liquid facility, and since no 
facilities are yet being built, the current law credit is 
having no impact. So my basic legislation is to extend that to 
2020.
    Other provisions that we hope that you all will consider--
Jeff Davis is going to testify here. This is legislation that I 
am on with Chairman Rahall and Rick Boucher, which would extend 
a 20-percent investment tax credit for the construction of coal 
to liquid fuels production facilities, and alternatively, an 
election to expense investment in such facilities; and for the 
global warming crowd, a tax credit to facilitate projects that 
will capture and second quarter carbon dioxide produced from 
coal to liquid facilities.
    Thank you, Mr. Chairman, and I will yield back.
    [The prepared statement of Mr. Shimkus follows:]

 Prepared Statement of The Honorable John Shimkus, a Representative in 
                  Congress from the State of Illinois

    Mr. Chairman,
    Thank you for the opportunity to testify today before your 
Subcommittee in support of legislation that would accelerate the 
deployment of coal-to-liquid CTL production facilities in the United 
States.
    America's abundant coal reserves can produce the ultra-clean CTL 
transportation fuels needed to help the United States reduce its 
dependency on oil imported from unfriendly and unstable regimes. CTL 
fuel would be readily usable today in existing transportation markets 
and could be delivered through existing pipelines.
    And we can produce CTL fuels in an environmentally-friendly way. 
Coal liquefaction plants generate carbon dioxide in a highly 
concentrated form which allows for the capture CO2 for use 
in enhanced oil and coal bed methane recovery, or for safe storage 
underground. Further, the tailpipe emissions from CTL fuels are cleaner 
than conventional diesel.
    Unlike many other potential alternative energy sources, CTL 
technologies are proven to be effective. CTL technology has been used 
internationally for decades. Today, CTL technologies are being 
developed for industrial-scale production in China and by other major 
industrial competitors of the United States. CTL fuels are used today 
to meet more than 30 percent of South Africa's transportation needs.
    Unfortunately, CTL production facilities are not yet being built in 
the United States. The costs of engineering and building a CTL facility 
are huge--in the billions of dollars--and private investors face risks 
that future changes in energy prices will destroy the economics of CTL 
production. As a result, investors today simply lack the financial 
certainty they need to undertake these projects.
    For these reasons, Federal participation in the development of a 
U.S. CTL industry is critically important. Congress recognized the 
potential for CTL in the 2005 Highway Reauthorization and Excise Tax 
Simplification Act. The Act provided a 50-cents-per-gallon tax credit 
for CTL produced through September 30, 2009. But since it takes 5 to 7 
years to build a CTL facility, and since no facilities are yet being 
built, the current-law credit is having no impact. Investors need a 
longer-term production credit, and other incentives, before they can 
commit funds to CTL projects.
    To foster U.S. CTL production, I joined with 28 of my colleagues, 
including Chairmen Rahall and Boucher, as an original cosponsor to 
legislation introduced by Chairman Rahall and Representative Geoff 
Davis of Kentucky. Included in H.R. 370 are the following critical tax 
incentives that I would urge the Committee on Ways and Means to 
approve.

      Extension through September 30, 2020, of the 50-cent 
alternative fuel tax credit for production of transportation fuel 
derived from coal.
      A 20-percent investment tax credit for the construction 
of CTL fuels production facilities or, alternatively, an election to 
expense investments in such facilities.
      A tax credit to facilitate projects that will capture and 
sequester carbon dioxide produced from CTL facilities.

    I would urge the Committee to include these provisions in an energy 
bill this spring. Enactment of these incentives would be a major step 
in our efforts to increase alternative energy production and reduce our 
reliance on imported oil. Thank you for your consideration of these 
issues.

                                 

    Mr. LARSON. I thank the gentleman from Illinois for his 
brevity. And of course, as you have indicated, you will submit 
your testimony for the record and we deeply appreciate that.
    And the chair will now recognize the distinguished 
gentleman from Arizona, Mr. Grijalva.

 STATEMENT OF THE HONORABLE RAUL GRIJALVA, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF ARIZONA

    Mr. GRIJALVA. Thank you, Mr. Chairman, Ranking Member 
English, and Members of the Subcommittee. It is a pleasure to 
be here with you to discuss a piece of legislation that I hope 
you will agree is an important measure for Indian Country and 
for the nation at large.
    The legislation I am speaking about, my bill, cosponsored 
by my colleague from Arizona, Congressman Pastor, H.R. 1954, 
would amend the Internal Revenue Code of 1986 to allow Indian 
tribal governments who are tax-exempt to transfer their share 
of the production tax credit to their taxable partners in joint 
venture renewable energy projects on tribal lands. This is a 
relatively small change in the current law, but would be 
meaningful and important for Native people and their economic 
development.
    Under current law, if a tribal government wishes to enter 
into a joint venture with an outside partner for a renewable 
energy project taking place on its land, the tribe cannot take 
advantage of the production tax credit for renewable resources 
as a private landowner could because it has no tax liability to 
offset, nor can it transfer its portion of credit to its 
taxable partners.
    So by way of example, if you have a private business 
providing 100 percent of financing for a renewable energy joint 
venture with a tribe, the private business may only receive 50 
percent of the tax credit, whereas if that business located its 
project on private lands, it could take advantage of 100 
percent of the tax credit.
    This situation puts tribes at a tremendous disadvantage 
when trying to attract renewable energy projects to their 
lands. Let me just emphasize that by excluding tribes from this 
activity, we are missing out on a huge opportunity to not only 
facilitate production of many thousands of megawatts of clean 
power, but we are also losing an opportunity to help improve 
conditions for tribal peoples who are in dire need of 
sustainable economic development on their lands.
    Tribal lands in the U.S. have a vast potential in renewable 
energy production. Wind generation potential on tribal lands 
could produce a net estimated 14 percent of the total U.S. 
energy production, while the solar electricity potential is 
estimated at 4.5 times the annual total electricity needs of 
the U.S. Tribal lands also contain significant geothermal 
resources.
    While providing for much-needed economic development in 
these areas, renewable energy projects would also allow tribes 
to offer power to their own people. I should note that in 
Arizona, the Navajo Nation, for example, 37 percent of the 
households on that nation do not have electricity.
    In addition, many tribes would like to play a role in 
helping to address the climate crisis. This would provide 
outside businesses an incentive to partner with tribes and tap 
into the vast renewable resources on tribal lands.
    To show their commitment to producing renewable energy, 
tribes are moving forward with small projects, with grants, and 
funding from carbon offset purchases. However, these are small-
scale demonstration projects. What tribes need to do now is to 
be on an even playing field with other private landowners in 
the development of utility-sized projects that can begin to 
benefit from the outstanding resources on tribal lands.
    My proposal, all it would do is level the playing field for 
Native people who want clean and sustainable economic 
development on their lands, by putting them in the same 
position as any other landowner. I hope you will join me in 
looking at this legislation, and hopefully your support.
    Thanks for your time, and I will be glad to answer any 
questions or submit any additional information for the record. 
Thank you, Mr. Chairman.
    [The prepared statement of Mr. Grijalva follows:]

Prepared Statement of The Honorable Raul M. Grijalva, a Representative 
                 in Congress from the State of Arizona

    Mr. Chairman, Ranking Member English and Members of the 
Subcommittee. It is a great pleasure to be here this afternoon to 
discuss a proposal that I am personally very excited to be working on. 
I hope you will agree that this is an important measure for Indian 
Country and for the nation at large.
    My bill, H.R. 1954, would amend the Internal Revenue Code of 1986 
to allow Indian tribal governments, who are tax-exempt, to transfer 
their share of the production tax credit to their taxable partners in 
joint venture, renewable energy projects on tribal lands.
    This is a relatively small change in current law, but would be 
meaningful and important for Native peoples and their economic 
development.
    Under current law, if a tribal government wishes to enter into a 
joint venture with outside partners for a renewable energy project 
taking place on its lands, the tribe cannot take advantage of the 
production tax credit for renewable resources as a private landowner 
could because it has no tax liability to offset, nor can it transfer 
its portion of the credit to its taxable partners.
    By way of an example, if you have a private business providing 100% 
financing for a renewable energy joint venture with a tribe, the 
private business may only receive 50% of the tax credit, whereas if the 
business located its project on private lands, it could take advantage 
of 100% of the credit.
    This situation puts tribes at a tremendous disadvantage when trying 
to attract renewable energy projects to their lands.
    By excluding tribes from this activity, we are missing out on a 
huge opportunity to not only facilitate production of many thousands of 
megawatts of clean power, but we also are losing an opportunity to help 
improve conditions for tribal peoples, who are in dire need of 
sustainable economic development on their lands.
    Tribal lands in the U.S. have vast potential in renewable energy 
production. Wind generation potential on tribal lands could produce an 
estimated 14% of total U.S. energy production, while the solar 
electricity potential is estimated at 4.5 times the annual total 
electricity needs of the U.S.\1\ Tribal lands also contain significant 
geothermal resources.
---------------------------------------------------------------------------
    \1\ 2004 Department of Energy figures.
---------------------------------------------------------------------------
    While providing for much-needed economic development in these 
traditionally impoverished areas, renewable energy projects would also 
allow tribes to offer power to their own people, many of whom do not 
have electricity in their homes. Arizona tribes are in great need of 
electrification. For example, almost 37 percent of all households on 
the Navajo Nation do not have electricity.
    In addition, many tribes would like to play a role in helping to 
address the climate crisis, and this would provide outside businesses 
an incentive to partner with tribes and tap into the vast renewable 
resources on tribal lands.
    To show their commitment to producing renewable energy, tribes are 
moving forward with projects with Federal grant money and with funding 
from carbon offset purchases, however, most of these are small-scale 
demonstration projects. What tribes need now is to be on an even 
playing field with other private landowners in the development of 
utility-sized projects that can begin to benefit from the outstanding 
resources on tribal lands.
    In short, all my proposal would do is level the playing field for 
Native peoples who want clean and sustainable economic development on 
their lands, by putting them in the same position as any other 
landowner. I hope you will join me in supporting this important 
legislation.
    Thank you for your time and I am happy to answer any questions you 
might have.

                                 

    Mr. LARSON. I thank the gentleman from Arizona and his 
longstanding commitment to Native Americans and to their 
economic security, which makes the whole nation secure. And I 
look forward to following through with you on your legislation.
    The chair will now recognize the distinguished gentleman 
from Kentucky, Mr. Davis.

  STATEMENT OF THE HONORABLE GEOFF DAVIS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF KENTUCKY

    Mr. DAVIS. Thank you, Mr. Chairman, Ranking Member English, 
and Members of the Committee. Thank you for allowing us this 
time to present ideas on ways to update and improve our 
existing tax incentives for alternative energy. I support 
offering tax incentives to promote the commercial development 
of technology that increases the availability of alternative 
fuels. There are many proposals before the Ways and Means 
Committee to encourage its development.
    What I propose today is not a tax incentive in the 
traditional sense. Rather, the tax provision I am here to 
discuss is a simple method of returning money paid in the form 
of an unconstitutional tax. That money should be returned to 
the taxpayer and could be better used for reinvestment in 
research and development and the deployment of new technology 
and the production of cleaning energy.
    I am here to discuss H.R. 1762, a bill to facilitate and 
expedite direct refunds to coal producers and exporters of the 
coal excise tax, unconstitutionally imposed and collected on 
coal exported from the United States. Representative Artur 
Davis and I introduced this bill in March. The bill enjoys 
bipartisan support in both the House and Senate, with the 
Senate bill being S. 373 introduced by Senators Bunning and 
Rockefeller.
    The bill is necessary to facilitate the refund of an 
unconstitutional excise tax collected on coal exported from the 
United States. The tax should never have been collected in the 
first place. This provision will help U.S. coal producers and 
exporters harmed by the collection of this tax on coal exports 
to recover the funds paid. These refunds can be used for 
reinvestment and research and development on coal to liquids 
technology, clean coal technology, and coal blending.
    This is an issue of equity and fairness. The Export Clause 
of the United States Constitution provides that ``No Tax or 
Duty shall be laid on Articles exported from any State.'' The 
Coal Excise Tax was declared unconstitutional as applied to 
exported coal in a 1998 district court case, Ranger Fuel v. 
United States. The U.S. Government never appealed the ruling. 
The Ranger Fuel case clearly establishes that the money paid in 
the unconstitutional taxes are due to the taxpayer.
    H.R. 1762 addresses problems associated with the two types 
of refund claims, administrative claims pursuant to the 
Internal Revenue Code, and Tucker Act claims. Claims were filed 
by the industry under both scenarios, and to date, the IRS has 
refused to refund all the money owed, despite repeated court 
decisions requiring refund of principal and statutory interest.
    Tucker Act claims going back to approximately 1990 are 
based on a 2000 U.S. Court of Appeals for the Federal Circuit 
entitled Cyprus Amax Coal v. United States. In that case, the 
Court of Appeals held that producers and the exporters could 
claim a refund under the Tucker Act. The Tucker Act allows for 
the recovery of any IRS tax illegally or erroneously collected 
within a 6-year statute of limitations. In the subsequent case 
of Elkhorn Mining v. United States, the Court of Appeals for 
the Federal Circuit held that principal and statutory interest 
are due to the producers and exporters for the ``illegally 
levied taxes.''
    Notwithstanding repeated rulings by the courts against the 
IRS that the principal and statutory interest amounts on 
certain CET refund claims are owed to coal producers and 
exporters, the IRS has again appealed the issue. The IRS has 
taken this position even though the courts have clearly 
established that the export of coal makes the tax 
unconstitutional and makes the refund due.
    The IRS continues to appeal the issue of whether or not it 
owes principal and interest on Tucker Act claims filed by coal 
producers and exporters. The legislation is necessary to ensure 
that all claimants will be able to recover all amounts owed 
during the 6-year period of recovery under the Tucker Act, and 
all administrative refund claims.
    The correction provided by H.R. 1762 is set out in the form 
of an off-code provision and will not result in a change to the 
Internal Revenue Code. There is no need for legislation to 
apply prospectively because the marketplace has addressed the 
issue for the foreseeable future.
    H.R. 1762 is simple and straightforward and will facilitate 
direct refunds plus statutory interest on the 
unconstitutionally collected tax to producers and exporters 
when they establish that the coal upon which the tax was paid 
was exported. The IRS has 180 days from filing of a claim to 
determine whether the exporter has proved the coal was exported 
and that a refund is due, and another 180 days to refund the 
money owed the taxpayer.
    The bill also tracks the exact statutory time periods for 
which refunds of the unconstitutionally collected tax are 
allowed under current law. Refunds will be made from the fourth 
quarter 1990 to present, even though the unconstitutional 
burden of this tax was imposed an additional 12 years for 
exports, since 1978. Refunds of tax already paid through the 
administrative claims process will be prohibited to prevent any 
possibility of double dipping.
    This resolution will also end the needless litigation 
between industry and the U.S. Government concerning CET 
refunds. Although entitled to the refunds of the 
unconstitutional coal excise tax on exported coal, the IRS 
continues to deny certain administrative claims and continues 
to litigate issues that have been repeatedly rule on by the 
courts. This affects both the producers and the unaffiliated 
coal exporters.
    The refunds will infuse the industry with additional 
capital that can be used for reinvestment and job creation. 
This was unconstitutionally levied. Coal excise taxes paid to 
the Treasury are owed to the taxpayers who bore the burden of 
these taxes, and the monies can in turn be used for 
reinvestment in alternative energy, clean burning coal, and 
ultimately help our economy.
    I appreciate the Committee's time, and I am open to any 
questions.
    [The prepared statement of Mr. Davis follows:]

 Prepared Statement of The Honorable Geoff Davis, a Representative in 
                  Congress from the State of Kentucky

    Chairman Neal, Ranking Member English and Members of the Committee, 
my name is Geoff Davis, and I represent Kentucky's 4th Congressional 
District. Thank you for allowing us this time to present ideas on ways 
to update and improve our existing tax incentives for alternative 
energy. I support offering tax incentives to promote the commercial 
development of technology that increases the availability of 
alternative fuels. There are many proposals before the Ways and Means 
Committee to encourage the development of energy alternatives.
    What I propose today is not a tax ``incentive'' in the traditional 
sense. Rather, the tax provision I am here to discuss is a simple 
method of returning money paid in the form of an unconstitutional tax. 
That money should be returned to the taxpayer and could better be used 
for reinvestment in research and development and the deployment of new 
technology for the production of cleaner energy.
    I am here today to discuss H.R. 1762, a bill to facilitate and 
expedite direct refunds to coal producers and exporters of the coal 
excise tax (CET) unconstitutionally imposed and collected on coal 
exported from the United States. Representative Artur Davis and I 
introduced this bill in March. The bill enjoys bipartisan support in 
both the House and Senate. The Senate bill is S. 373 and was introduced 
by Senators Jim Bunning and Jay Rockefeller.
    The bill is necessary to facilitate the refund of an 
unconstitutional excise tax illegally collected on coal exported from 
the U.S. The tax should never have been collected in the first place. 
This provision will help U.S. coal producers and exporters harmed by 
the collection of this tax on coal exports to recover the funds paid. 
Refunds can be used for reinvestment, research and development and the 
commercial deployment of programs such as CO2 sequestration, 
coal-to-liquids, clean coal technology and coal blending technology.
    This is an issue of equity and fairness. The Export Clause of the 
United States Constitution provides that ``No Tax or Duty shall be laid 
on Articles exported from any State.'' The Coal Excise Tax (CET) was 
declared unconstitutional as applied to exported coal in a 1998 U.S. 
district court case, Ranger Fuel v. United States. The U.S. Government 
never appealed this ruling. The Ranger Fuel case clearly establishes 
that the money paid in the unconstitutional taxes are due to the 
taxpayer.
    H.R. 1762 addresses problems associated with the two types of 
refund claims: administrative claims pursuant to the Internal Revenue 
Code and Tucker Act claims. Claims were filed by the industry under 
both scenarios. To date, the IRS has refused to refund all money owed, 
despite repeated court decisions requiring refund of principal and 
statutory interest.
    Tucker Act claims going back to approximately 1990 are based on a 
2000 U.S. Court of Appeals for the Federal Circuit ruling entitled, 
Cyprus Amax Coal v. United States. In that case, the Court of Appeals 
held that producers and the exporters could claim a refund under the 
Tucker Act. The Tucker Act allows for the recovery of any Internal 
Revenue Tax illegally or erroneously collected within a 6-year statute 
of limitations. In the subsequent case of Clintwood Elkhorn Mining Co., 
et al vs. United States, the Court of Appeals for the Federal Circuit 
held that principal and statutory interest are due to the producers and 
exporters for the ``illegally levied taxes.''
    Notwithstanding repeated rulings by the courts against the IRS that 
the principal and statutory interest amounts on certain CET refund 
claims are owed to coal producers and exporters, the IRS has again 
appealed the issue. The IRS has taken this position even though the 
courts have clearly established that the export of the coal makes the 
tax unconstitutional, and make the refund due. The IRS continues to 
appeal the issue of whether or not it owes principal and interest on 
claims filed by coal producers and exporters. The legislation is 
necessary to ensure that all claimants will be able to recover all 
amounts owed during the six year period of recovery under the Tucker 
Act and all administrative refund claims.
    The correction provided by H.R. 1762 is set out in the form of an 
off-code provision and will not result in a change to the Internal 
Revenue Code. There is no need for the legislation to apply 
prospectively because the marketplace has addressed the issue for the 
future.
    H.R. 1762 is simple and straightforward. It will facilitate the 
direct refunds of, plus statutory interest on, the unconstitutionally 
collected tax to producers and exporters when they establish that the 
coal upon which the tax was paid was exported. The IRS has 180 days 
from filing of a claim to determine whether the exporter has proved the 
coal was exported and that a refund is due. The IRS then has another 
180 days to refund the money owed to the taxpayer. The bill also tracks 
the exact statutory time periods for which refunds of the 
unconstitutionally collected tax are allowed under current law. Refunds 
will be made on taxes paid from the 4th quarter of 1990 to present, 
even though the unconstitutional burden of this tax was imposed for an 
additional 12 years of exports (since 1978). Refunds of tax already 
paid through the administrative claims process will be prohibited to 
prevent any possibility of ``double dipping.''
    H.R. 1762 will also end the needless litigation between industry 
and the U.S. Government concerning CET refunds. Although entitled to 
the refunds of the unconstitutional CET on exported coal, the Internal 
Revenue Service (IRS) continues to deny certain administrative claims, 
and continues to litigate issues that have been repeatedly ruled on by 
the courts. This affects both coal producers and unaffiliated coal 
exporters.
    These refunds will infuse the industry with additional capital that 
can be used for reinvestment and job creation. The coal excise tax was 
unconstitutionally levied. Coal excise taxes paid to the Treasury are 
owed to the taxpayers who bore the burden of this tax. These funds are 
better spent by the industry creating jobs and investing in research 
and development that promotes clean burning fuels and alternative 
energy sources.
    I appreciate very much the Committee's time and consideration of 
this important measure, and ask that the measure be given consideration 
for passage this Congress.

                                 

    Mr. LARSON. Thank you very much. I appreciate the testimony 
from the gentleman from Kentucky.
    I will now recognize the gentleman from Pennsylvania, Mr. 
Murphy, and ask that the gentleman from Washington state, Mr. 
Inslee, come forward as well, and just remind the panelists 
that we have a vote that is going on.
    Mr. Murphy.

  STATEMENT OF THE HONORABLE TIM MURPHY, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF PENNSYLVANIA

    Mr. MURPHY. Thank you, Mr. Chairman and distinguished 
colleagues of the Committee. And thank you for allowing me to 
speak on behalf of my legislation, the Environmental 
Restoration Act. Please allow me to explain how this bill can 
be a key component of our national strategy to achieve energy 
independence.
    This Congress has been keenly aware of our nation's need to 
produce more energy here at home. We import too much energy 
sources from the most volatile regions of the globe. These 
dependent relationships compromise our long-term national 
security, economic security, and energy security.
    More than a century ago, much of the modern industrial 
world was literally built by Pittsburgh Energy and Pittsburgh 
Steel. Andrew Carnegie did not manufacture steel in Pittsburgh 
because the region had abundant supplies of iron ore. Rather, 
steel was made in Southwestern Pennsylvania because we had 
energy, and lots of it, in the form of coal and the water 
resources to transport it.
    To this day, Pittsburgh sits on top of a 250-year supply of 
coal. The Pittsburgh coal seam is one of the most valuable 
natural resource stockpiles in the entire world. As we seek to 
capitalize on domestic energy supplies, we must make coal, 
clean coal energy, a big part of this equation.
    Coal produces more than half our domestic electricity, and 
this Congress has provided extensive funding for research and 
clean coal initiatives that will virtually eliminate emissions 
in future plants. However, the coal mines of decades past did 
not emphasize clean air or clean water.
    One of the unfortunate legacies of the coal mining industry 
are mountains and mountains of waste coal, also known as gob. 
In the past, mining technology was less sophisticated in 
separating out coal from other materials. These gob piles are a 
mixture of coal, clay, rocks, soil, and other unusable raw 
materials. These massive piles can be seen on the horizon in 
any mining state. They are unsightly, and a source of air 
pollution from their dust and acid mine runoff that pollutes 
our streams every time it rains.
    However, the 1.1 billion tons of waste coal in the U.S. are 
potential sources of energy. By using waste coal as a fuel 
source in power plants, the existing waste coal sites can be 
reclaimed, the mine drainage associated with these sites 
ameliorated, and the mine lands can be reclaimed for other 
uses. It is an expensive process, however. But creating energy 
out of waste coal has obvious benefits for cleaning up the 
environment while producing that energy.
    Toward the objective of recycling more waste coal, the 
Environmental Restoration Act would encourage energy producers 
to address waste coal by providing a business tax credit for 
waste coal energy production. This year's bill would provide a 
tax credit to an energy producer of 51.7 cents per million BTUs 
of heat input from the qualified waste coal recycling. Simply 
put, the bill would provide an essential incentive for the 
private sector to overcome the financial costs of recycling 
waste coal and maximize its energy potential.
    Mr. Chairman, I know you and Members of the Subcommittee 
share my unequivocal goal of obtaining energy independence 
based on cleaner alternative sources for energy for America. In 
pursuit of that energy independence, we need to conserve our 
energy use, diversify our energy sources, and explore new 
sources of energy. I believe the Environmental Restoration Act 
can be an indispensable part of such a strategy.
    Thank you for allowing me this time today and for your 
consideration of the Environmental Restoration Act. I look 
forward to continuing cooperation to secure an energy-
independent future for our nation. Thank you.
    [The prepared statement of Mr. Murphy follows:]

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    Mr. LARSON. I thank the gentleman from Pennsylvania for his 
insightful testimony, and would now call upon the gentleman 
from Washington state, Mr. Inslee, a leader and introducer of 
an Apollo plan for energy independence for the country.
    Mr. Inslee.

  STATEMENT OF THE HONORABLE JAY INSLEE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. INSLEE. Thank you, Mr. Chairman. And we are all leaders 
on energy. We need to be.
    I have got four points I would like to quickly make. The 
first point, I was just reading an article asking what the new 
frontier is for America after the original western frontier and 
then the space frontier. What is the new frontier?
    And I would suggest the new frontier is clean energy. And 
we are here today, and this Committee can really advance the 
ball on that and I hope to work with the Committee to do that. 
I have introduced several bills--a plug-in hybrid bill, a co-
generation bill, a Marine energy bill, and lastly, the big 
smorgasbord piece, the new Apollo energy project bill, which 
has a whole host of new tax incentives to help American 
businesses develop these new technologies. And I think this can 
play a pivotal role in what really is the new frontier of the 
new Apollo project for our country.
    The second point, I want to point to the Committee that it 
will have, I believe, some funds available to us to help 
develop these new economic marvels because we are at some point 
going to have a cap and trade system that will generate 
significant revenues to be used in these new investments.
    If you look at--we don't know the precise contours of that 
program, but I think it is reasonable to expect that it could 
generate $20 billion by 2020 and $60 billion by 2025 from the 
auctions, permits that would be sold to bidders on the open 
market for the right to put carbon dioxide in the atmosphere.
    So as we go forward, this discussion of where we find tax 
incentives to incentivize new investment in American 
technology, I think we should be aware we are going to have 
some funds with which to make those investments. And that is a 
nice parallel situation, where we have a fund to produce this 
money and a way to use it to create technologies to reduce 
CO2 emissions.
    The third point, and I think it maybe might be one of the 
most important ones I would like to make, is that whatever this 
Committee does, I think it is extremely important to take a 
position that tax incentives are effective when they are long-
term and predictable, and investors can have confidence that 
they will be there for longer than short periods of a 1- or 2-
year period.
    I have been writing a book for the last year about the 
development of the clean energy in the United States--the 
electrification of the car, the wave energy, the solar energy, 
wonderful things that are going on, the energy efficiency 
industries, companies that are finding out how to use our 
computer systems, for instance, more efficiently.
    And I think every single businessperson I have talked to 
that is engaged in developing these new technologically 
oriented companies, they all have one thing to say to me: Do 
not do short-term tax incentives. Do them long term. Because 
when you go to a venture capitalist or the equity funds, the 
only way to really make them work is to give predictability 
that the business plan is going to last more than 1 or 2 years.
    Investors are not interested in putting money into 
companies that are going to fold in 14 months because Congress 
has a change of flavor, and the tax break dries up and goes 
away. So the one thing I would really urge the Committee to do 
is whatever we do, do it for a longer period of time so that we 
can unlock the investment capital.
    One difference from the Apollo project, the original one 
and the second one that I am advancing, is that that one was 
done pretty much with all public funds. This one is one where 
we have got to use public funds to leverage huge investments 
from the private capital system, which can be much more change-
inducing than even the original Apollo project. So I would urge 
you to make them long term.
    Fourth, I would urge the Committee to be scrupulous in its 
review of these new sources of energy. Not all ``alternative'' 
energy sources are created equal when it comes to carbon 
dioxide in particular. And I would urge the Committee to focus 
its precious resources of tax incentives on the measures that 
will help us deal with global warming.
    Now, one case in point is coal. I think there is a good 
possibility we can burn coal cleanly, capture the 
CO2, bury it underground, and produce electricity in 
an economic manner. However, some have suggested we do what is 
called coal to liquids, where we gasify coal, we make it into a 
liquid, and we burn it in our cars.
    That is something that does not reduce CO2 
emissions, unfortunately. It will either create twice as many 
emissions per gallon of gasoline or, at best case scenario, 
only as good as gasoline. I don't think we have enough 
resources to use our tax breaks on industries that will not 
solve the global warming problem. I urge us to target.
    And thank you for your interest, Mr. Chair.
    [The prepared statement of Mr. Inslee follows:]

  Prepared Statement of The Honorable Jay Inslee, a Representative in 
                 Congress from the State of Washington

    Thank you for allowing me the opportunity to testify before this 
Committee regarding the tax provisions included in energy proposals 
that I am leading. While I serve on the Energy and Commerce Committee, 
the Select Committee on Energy and Global Warming and the Natural 
Resources, this Committee has the opportunity to significantly impact 
policy that will take this country into the next new energy economy.
    Climate change is a fact. We have the opportunity to create jobs 
and become an international leader on the development of new 
technologies that reduce our emissions and change the way we rely on 
energy.
    The energy proposals that I have worked on with my colleagues from 
all over the country include the following tax provisions that I 
request your favorable review on.

      The Get Real Incentives to Drive (GRID) PLUG-IN Vehicles 
bill, H.R. 589, will provide a $3,000 tax credit to consumers that 
purchase a vehicle that runs on electricity.
      The Marine Hydrokinetic Renewable Energy Act provides for 
the inclusion of ocean, tidal and wave power in Section 45 Production 
Tax Credits, extends the 5-year accelerated depreciation benefit to 
ocean and tidal technologies, as well as establishes a 30 percent 
Investment Tax Credit.
      The Industrial Cogeneration Act of 2007 would provide a 
10 percent investment tax credit for combined heat and power properties 
with electrical capacities up to 50 megawatts.
      The New Apollo Energy Act of 2007 is currently in draft 
form. This new bill will include several provisions that were in the 
New Apollo Energy Act of 2005. During the 109th Congress, H.R. 2828 
included the following tax provisions:
        Extension of the Biodiesel Tax Credits for 10 years.
        Expand the Production Tax Credit for renewable 
resources by removing the \1/2\ credit periods for solar and geothermal 
so that they receive the full 10-year credit period.
        Create incentives for re-tooling investment in new 
facilities and assets to produce energy efficient technologies and 
domestic clean energy production technologies.
      There are provisions that will be included in the New 
Apollo Energy Act of 2007:
        Expansion of the Investment Tax Credit provided for 
solar energy and fuel cells and include small wind, geothermal, biomass 
and kinetic hydropower projects.
        Extension and expansion of the Clean Renewable Energy 
Bonds for 10-years.
        Increase in the annual cap on the 30 percent tax credit 
for residential solar tax credits and water heaters from $2,000 to 
$4,000.

    A cap-and-trade program to reduce greenhouse gas emissions would 
include an emissions allowance auction program that could generate tens 
of billions of dollars to offset tax incentives. Following the 
allocation and auction scheme proposed by Senator Feinstein and 
assuming that carbon credits will be trading at a minimum of $20 per 
ton--a conservative estimate, according to experts--we can expect 
annual revenues in 2010 to be about $20 billion. Following the same 
scheme--whereby a decreasing number of credits will be given away for 
free and an increasing number of credits will be sold at auction--we 
estimate that annual revenues by 2025 will be in the range of $60 
billion. I advocate using a large portion of these revenues to fund tax 
provisions that will encourage private investment in energy efficiency 
and renewable energy technologies. That way we can help American 
businesses meet emissions reductions targets while increasing America's 
competitive edge in a global clean energy economy.
    Lastly, as we move forward with crafting these proposals, I urge 
you to keep in mind that not all energy solutions are created equally. 
When it comes to providing for energy security and protecting the 
climate system, Congress must address the impacts that technologies 
like IGCC, or Coal to Liquids, have on the environment. With this in 
mind, I support IGCC (integrated gasification combined cycle) clean 
coal technology for electricity generation because it improves air 
quality and is highly compatible with carbon capture and sequestration. 
On the other hand, I do not think that the Federal Government should be 
providing incentives for the construction of coal-to-liquids plants, 
which could lead to a doubling of carbon dioxide emissions from 
transportation fuels.
    I look forward to working with the Committee to identify truly 
clean alternative energy technologies that will put America on a path 
toward a sustainable, secure and clean energy future.

                                 

    Mr. LARSON. Well, I thank the gentleman from Washington 
state, and it is an honor to serve with him on the Select 
Committee on Energy Independence and Global Warming. And again, 
your knowledge and understanding of the need to leverage new 
financial platforms that will assist in this area of technology 
transfer, and your admonitions to the Committee with regard to 
the scarcity of resources and to appropriately invest them, are 
well received and taken.
    I thank the gentleman for his testimony. You may submit 
further testimony if you like. I would like to thank all the 
witnesses for their testimony today. It was extremely helpful 
as we move forward in crafting our legislation in the 
Committee.
    Without objection, Chairman Neal has asked that the record 
will remain open for 2 weeks for any additional material that 
needs to be included.
    If there are no further comments or questions, the hearing 
will stand adjourned.
    [Whereupon, at 4:45 p.m., the Subcommittee was adjourned.]
    [Submissions for the record follows:]

 Statement of The Honorable Jerry Weller, a Representative in Congress 
                       from the State of Illinois

    Thank you, Mr. Chairman, for allowing me to testify on what I feel 
is one of the most important issues facing our Nation.
    As we look for ways to become a more energy independent nation, I 
believe we should continue down the path that we laid in the Energy 
Policy Act of 2005. With the Energy Policy Act of 2005, we took steps 
forward in reducing our dependence on foreign oil by creating policy 
that increased the use of renewable energy in tandem with increasing 
our domestic production and increasing energy efficiency and 
conservation.
    Mr. Chairman, as I mentioned last week at the hearing many of the 
tax incentives included in the energy bill have produced real results 
in my district back home.
    Due to the energy bill, we have seen over $100 million invested in 
wind energy and 4 to 5 new ethanol and biodiesel plants in my district. 
Stepan Company, a biodiesel producer located in Joliet, Illinois, 
doubled its production of biodiesel fuel because of the changes made in 
the energy bill. Transco Products Inc., a small manufacturing facility 
that provides services for many of our energy providers, has tripled 
the number of people they employ since passage of the energy bill. Even 
last week, I was at the ground breaking of a new biodiesel facility in 
Seneca, Illinois that will produce roughly 30 new permanent jobs and 
approximately 60 million gallons of biodiesel.
    In total, we saw investment in renewable energy double in the 
United States to $68 billion. It is this investment we need to continue 
to fuel. The tax incentives we passed are spurring investment and in 
turn aiding us towards the goal of energy independence.
    As Congressman McDermott mentioned in his testimony, together we 
introduced H.R. 1385, the EXTEND the Energy Efficiency Incentives Act 
of 2007. With the support of a broad business coalition, from the 
utilities to builders and manufacturers, this measure continues on what 
we started in the energy bill with tax incentives for residential and 
commercial energy efficiency.
    Among its provisions the bill extends both the tax credit for 
energy efficient residential new home and equipment and the tax 
deduction for energy efficient buildings to 2010 and 2011. Often 
overlooked, energy efficiency is a great tool that we can use to 
achieve energy independence. By increasing efficiency, we can reduce 
energy demand and also reduce carbon emissions.
    Mr. Chairman, in closing, I want to also touch upon another bill I 
introduced earlier this year.
    H.R. 765 establishes a new tax credit for consumers who purchase a 
new concept vehicle, which a U.S. auto manufacturer has introduced, 
that combines hybrid and flexible fuel technologies that will be 
available to consumers in the near future. With a maximum credit amount 
of $3,500, it is this marriage of these technologies that will create a 
vehicle that will be a better steward to our environment and will 
further reduce our dependence on foreign sources of oil.
    If just 5 percent of the U.S. vehicle fleet were powered by hybrids 
operating on E85 ethanol, oil imports could be reduced by about 140 
million barrels a year. In addition, these vehicles will produce about 
25% less carbon dioxide. In providing this tax credit, we can promote a 
greater sense of innovation for the future of automobiles.
    Mr. Chairman, I want to thank you again for letting me testify here 
today and I look forward to working with everyone on the Committee as 
we look for solutions to the energy crisis we as a Nation are facing.

                                 
Statement of The Honorable Pete Hoekstra, a Representative in Congress 
                       from the State of Michigan

    Thank you, Chairman Neal and Ranking Member English, for the 
opportunity to testify before you on tax legislation that is important 
for energy conservation, the reduction of harmful emissions and the 
growth of our nation's economy.
    A small business owner in Michigan's Second Congressional District 
brought to my attention a problem with the U.S. tax code, a problem 
that harms the environment and limits economic activity in an important 
American industry. The problem is that many of the heating, 
ventilation, air conditioning and refrigeration (HVACR) systems in 
today's buildings are old, inefficient and harmful to the environment 
and need to be replaced.
    The average lifespan of an air conditioning system in a commercial 
building is 15 to 20 years, yet the tax code treats them as though 
their lifespan is 39 years. The depreciation schedule in the tax code 
acts as a disincentive to invest and replace large, old and inefficient 
HVACR systems in commercial buildings.
    The unfair treatment of HVACR systems in the tax code is the reason 
I introduced, with bipartisan support, H.R. 1888, the Cool and 
Efficient Buildings Act.
    The legislation would shorten the depreciation schedule for HVACR 
systems in commercial buildings to 20 years, which would more 
accurately reflect the lifespan of these units. The commonsense change 
would positively impact energy efficiency, the environment and economy.
    Reducing the depreciation period will provide an incentive for 
building owners to retire old systems and upgrade to more efficient 
equipment by allowing them to expense more of the costs of the systems 
each year. By replacing a building's existing units, building owners 
and managers lower energy costs and energy demand.
    Such a simple change in the tax code will improve the environment 
in many important ways: First, as I mentioned, the replacement of old 
systems with newer, advanced technological systems greatly increases 
efficiency. New chillers are 40 percent more efficient than chillers 
installed 20 years ago.
    The EOP Group, an analytical consulting firm, found replacing 
inefficient commercial cooling equipment will save 137 trillion BTUs a 
year by 2015. The savings is equivalent to the amount of energy 
consumed by approximately 1.4 million average U.S. households. 
Commercial cooling equipment is one of the largest users of 
electricity, replacing old systems with newer technology is one of the 
easiest energy efficiency measures to undertake.
    Secondly, it is estimated that the accelerated replacement of 
cooling equipment would reduce carbon dioxide emissions by 1 million 
metric tons in 2007, rising to 95 million metric tons in 2015. The 
savings are equivalent to emissions released by approximately 174,672 
U.S. passenger vehicles in 2007 and would increase to about 16.5 
million passenger vehicles in 2015.
    Thirdly, it would provide an incentive for the replacement of the 
33,300 chillers still in use in 2005 that use chlorofluorocarbon (CFC) 
refrigerants. This represents 42 percent of the original 80,000 CFC 
chillers banned from production in the United States in 1995 due to 
concerns over the impact of CFCs on the environment.
    The U.S. air conditioning and refrigeration industry employs more 
than 130,000 workers and contributes $30 billion annually to the U.S. 
economy. The U.S. HVACR industry exports $4.7 billion annually, 
providing an industry trade surplus of more than $2.1 billion.
    Lowering the depreciation period to an accurate 20 years would 
encourage building owners to invest in new systems, save small 
businesses money and create business for American manufacturers and 
contractors.
    H.R. 1888, the Cool and Efficient Buildings Act, would make a 
commonsense change to the U.S. tax code to the benefit of the U.S. 
economy and all Americans. I would like to express my appreciation to 
the 28 Members of Congress who have joined me in co-sponsoring H.R. 
1888 in the 110th Congress and the various organizations that support 
this measure, including the Air Conditioning Contractors of America, 
the Air-Conditioning and Refrigeration Institute, Associated Builders 
and Contractors, Associated General Contractors, the Council for an 
Energy Efficient Economy, and the Sheet Metal Air Conditioning 
Contractors National Association.
    Mr. Chairman, thank you again for the opportunity to present this 
legislation before your Subcommittee.

                                 
                           Statement of AARP

    On behalf of AARP's 38 million members we thank you for holding 
this hearing on the 2007 Medicare Trustees' Report. The annual Report 
of the Trustees offers an important opportunity for Members of Congress 
to closely examine the financial health of the Medicare program.
Hospital Insurance (HI) Trust Fund
    The new insolvency date for the Hospital Insurance (HI) Trust Fund 
is 1 year later than projected in last year's report, which means that 
Medicare beneficiaries' coverage is not in immediate jeopardy. It is 
important to note that predicting solvency over the long term is very 
difficult since it depends on estimates of both payroll tax income and 
health care spending. Part A solvency has averaged 12 years since the 
program began 36 years ago. In the past, Congress has stepped in to 
either increase Trust Fund income or decrease spending from the Trust 
Fund so that the reserves are not depleted.
    The Trustees' findings are not unusual for Medicare Part A which 
has averaged a 12 year solvency projection since the program began 36 
years ago (see Chart 1, p. 8).
    The HI Trustees' report can be viewed as an early warning system--
providing Congress with ample opportunity to act judiciously to 
strengthen and improve the Medicare program for current and future 
beneficiaries. This report is no different, but it does highlight the 
urgent need to control rising costs across the entire health care 
system--not just within Medicare.
Supplementary Medical Insurance (SMI) Trust Fund
    Because the SMI or Medicare Part B Trust Fund is funded by premiums 
and general tax revenues, it faces cost pressure, but not insolvency. 
As in the private sector, Part B growth still outpaces the growth in 
the Gross Domestic Product (GDP) due in large part to growth in 
physician and hospital outpatient spending. Estimating conventions 
require the Trustees' baseline to reflect current law, which include 
significant cuts in physician payments scheduled to take effect as a 
result of the Sustainable Growth Rate (SGR) formula. Congress has 
consistently voted to override these mandated reductions since 2003. 
CMS actuaries have estimated that continuous overrides of the SGR would 
result in $300-$400 billion in aggregate expenditures in the Part B 
program over 10 years.
    Each time Congress overrides the SGR there is a direct cost for 
Medicare beneficiaries. That's because by law, the monthly Part B 
premium is set at 25 percent of Part B spending. The Part B premium has 
doubled since 2000--due in large part to increases in physician 
spending. The Trustees estimate that premium increases could be as much 
as 20 percent higher over 10 years if Congress prevents projected 
reductions in physician payments. Medicare beneficiaries would also pay 
higher copayments for physician care as payments to physicians 
increase.
    Congress must address the physician payment issue in order to 
control Part B expenditures and protect Medicare beneficiaries from 
burdensome out-of-pocket costs. Short-term fixes simply exacerbate 
spending growth and only delay needed discussions about how to slow 
rising expenditures. A new Medicare physician payment system should be 
designed with the beneficiary in mind by holding cost-sharing and 
premium increases down and improving the care beneficiaries receive. 
AARP believes Medicare's physician payment system should be changed 
from one that rewards quantity to one that rewards quality.
Medicare Advantage
    Because Medicare Advantage (Part C) plans are required to offer all 
Part A and Part B benefits, they are paid for from both the HI and SMI 
trust funds.
    The Medicare Trustees note that in 2006 there was a substantial 
increase in MA enrollment due to higher payments for MA plans provided 
under the Medicare Modernization Act (MMA). Ultimately, the solvency of 
the Medicare Trust Funds is negatively affected by current excess 
payment policies to MA plans.
    AARP believes Medicare payments should be neutral with respect to 
coverage options. Therefore, AARP urges Congress to more closely align 
MA plan payments with payments for traditional Medicare.
    Currently, Medicare payments clearly favor the MA program over 
traditional Medicare, which is unfair to the majority of beneficiaries 
who participate in the traditional program. All taxpayers and all 
Medicare beneficiaries--not just the 18 percent of Medicare 
beneficiaries enrolled in private MA plans--are funding these excess 
payments.
    When private plans were introduced to Medicare, they were expected 
to provide extra benefits to beneficiaries by achieving greater 
efficiencies at a lower cost to the program than traditional Medicare 
through the use of care coordination, negotiated prices, provider 
networks and other strategies. Given the fact that MA plans have 
control over hospital and physician services, as well as the 
opportunity to manage and coordinate care, it is reasonable for 
Congress to hold MA plans to payment levels that are no more than those 
for the fee-for-service program.
    In order to minimize the disruption to beneficiaries who rely on MA 
plans for their health care, AARP believes Congress should phase out MA 
plan payments that exceed fee-for-service costs over a period of time. 
Because geographic variations in spending continue to be a problem in 
the Medicare program, including within the MA program, AARP believes it 
is important that Congress address the payment areas with the largest 
discrepancies first. It is important that those areas of the country 
that provide care most efficiently are not penalized.
Medicare Funding Warning
    The Trustees' report includes the second ``funding warning'' in 
this year's annual report. The Medicare Modernization Act requires the 
Trustees to issue this warning if general revenues account for 45 
percent of combined HI and SMI expenditures at any period during a 7-
year window.
    AARP believes the 45 percent trigger is an arbitrary limit and 
provides a false alarm about Medicare's funding situation. General 
revenues have always financed a significant portion of Medicare Part B.
    Moreover, because of the way the trigger is designed, policy 
options to avoid the trigger are limited and may do little to help 
long-run cost growth. For example, while researchers have documented 
worrisome trends in obesity rates and chronic conditions for current 
and future Medicare beneficiaries, efforts to improve preventive 
services may reduce Part A costs, but increase Part B costs, thereby 
setting off the trigger. Similarly, shifting services from inpatient to 
outpatient settings has the same effect.
    AARP believes the 45 percent trigger should ultimately be repealed 
so that Congress is not distracted from the real issue--runaway health 
costs in the entire health care system. Runaway costs burden not only 
Medicare and other Federal health care programs, but negatively impact 
state and local governments, employers, and individuals. Congress must 
begin to address the problem of system wide health care cost growth--it 
is not just a Medicare problem, and it cannot be addressed in Medicare 
alone.
Medicare Part D
    Because Part D is financed similarly to Part B, it too faces cost 
pressure, but not insolvency. The Trustees' Part D cost estimates are 
substantially lower than those reported last year, primarily due to 
lower prescription drug plan bid submissions. However, the Trustees are 
projecting the average annual increases in spending to be nearly 13 
percent--due mainly to increases in per capita drug costs (about \2/3\) 
and enrollment (about \1/3\).
    The projected increase in Part D spending is clear evidence of the 
need for Congress to enact policies to further help lower drug costs.
    AARP supports legislation to:

      Remove the prohibition on the Secretary of HHS from 
negotiating with pharmaceutical manufacturers on behalf of Medicare 
beneficiaries (H.R. 4, S. 3);
      Allow for a pathway for the approval of lower cost, safe, 
comparable, and interchangeable versions of biologic drugs (H.R. 1038, 
S. 623);
      Legalize personal and wholesale importation of 
prescription drugs, starting with Canada (H.R. 380, S. 242);
      Prevent abuses in patent settlements between generic and 
brand name prescription drug manufacturers (S. 316); and
      Provide full funding for comparative effectiveness 
research authorized in the MMA.
Conclusion
    The Medicare program is vitally important to tens of millions of 
Americans and their families. Each year, the Trustees' Report presents 
the challenges faced by the program and offers the opportunity to make 
some improvements for the future.
    AARP believes Congress must make changes to the way Medicare pays 
physicians and Medicare Advantage plans to keep the program strong for 
the future. In addition, Congress can take important steps to help 
reduce the price of prescription drugs for all Americans. Ultimately, 
however, it must address the underlying rate of growth of health care 
costs in the entire health system--not just Medicare--if we are truly 
to achieve meaningful reform.

                                Chart 1
           Projections of Part A Solvency Have Varied Widely

       Average number of years until insolvency is 12 (1970-2007)

[GRAPHIC] [TIFF OMITTED] T8111A.011

    Source: Derived from CRS, April 1995, and the Annual Reports of the 
Board of Trustees of the Hospital Insurance Trust Fund, 1996-2007.

    Notes:
      No insolvency dates indicated in 1973 and 1974.
      No long-range projection in 1989.
      Range reported, as indicated by the white bars: 1975 
Report--late 1990s; 1976 Report--early 1990s; 1977 Report--late 1980s.

                                 
   Statement of David B. Goldstein, Natural Resources Defense Council

I.  Introduction
    My name is David B. Goldstein and I am Energy Program Director of 
the Natural Resources Defense Council, a national environmental 
advocacy organization with over 1.2 million members and activists 
nationwide. NRDC has been active in developing and advocating an energy 
strategy that is based on providing energy services at least cost. The 
strategy offers environmental benefits as well as promoting economic 
development and the growth of jobs.
    The Alliance to Save Energy, a bipartisan, nonprofit coalition of 
more than 120 business, government, environmental, and consumer 
leaders, also supports the recommendations in this testimony.
    The foundation of a least cost strategy is energy efficiency. 
Energy efficiency means the provision of the same (or better) energy 
services for lower energy use and cost, substituting more advanced 
technologies or designs for brute force use of energy resources. 
Although energy efficiency is defined as providing at least the same 
level of energy services, in many or all cases, the value of service 
improvements for efficiency technologies and designs exceeds the energy 
savings themselves.
    Comprehensive studies of least cost energy futures, whether 
performed by state energy offices, national labs, environmental 
advocates, or national governments virtually always find that energy 
efficiency is the dominant new resource by virtue of its lowest cost 
and its near-universal availability.\1\
---------------------------------------------------------------------------
    \1\ A large number of books and articles documenting the large 
efficiency potential that can be realized at no cost has been published 
over the past 30 years. The following is a selection of some of the 
most convincing:
    S.D. Freeman, et al. ``A Time To Choose.'' Cambridge, MA: Ballinger 
Publishing, 1974.
    Ahern, Doctor, et al. ``Energy Alternatives for California: Paths 
to the Future'' RAND Corporation, R-1793-CSA/RF, 197.
    Lovins, A. and H. Soft Energy Paths.
    P. Craig, D. Goldstein, R. Kukulka, A. Rosenfeld. ``Energy 
Extension for California: Context and Potential.'' Proceedings of the 
1976 Summer Workshop on an Energy Extension Service. Lawrence Berkeley 
Laboratory, LBL-5236, 1977.
    R. Cavanagh, et al. ``Choosing an Electrical Energy Future for the 
Pacific Northwest: An Alternative Scenario.'' U.S. Department of 
Energy. DOE/CS/10045-T1, 1980.
    L. King, D.B. Goldstein, et al., ``Moving California Toward a 
Renewable Energy Future,'' Natural Resources Defense Council, San 
Francisco, 1980.
    Solar Energy Research Institute: ``A New Prosperity: Building a 
Sustainable Energy Future--The SERI Solar/Conservation Study,'' 
Brickhouse Publishing, Handover, MA 1981.
    D.B. Goldstein, M. Gardner, et al. ``A Model Electric Power and 
Conservation Plan for the Pacific Northwest,'' Northwest Conservation 
Act Coalition, 1982.
    Northwest Conservation and Electric Power Plan, Northwest Power 
Planning Council, Portland, OR, 1986.
    J. Goldemberg, et al., Energy for a Sustainable World, World 
Resources Institute, Washington, D.C., 1987.
    1989 Supplement to the Northwest Conservation and Electric Power 
Plan. Northwest Power Planning Council, Portland, OR, 1989.
    ``California's Energy Outlook, 1987 Biennial Report'' and ``1987 
Conservation Report,'' California Energy Commission.
    A. Meyer, H. Geller, D. Lashof, M.B. Zimmerman, P.M. Miller, D.B. 
Goldstein et al., America's Energy Choices, Union of Concerned 
Scientists, Cambridge, MA (1991).
    Energy Efficiency Report, California Energy Commission, 1993.
    S. Bernow, et al., ``Energy Innovations: A Prosperous Path to a 
Clean Environment,'' ASE, ACEEE, NRDC, Tellus Institute, UCS, 1997.
    Inter-Laboratory Working Group on Energy Efficient and Low-Carbon 
Technologies, ``Potential Impacts of Energy Efficient and Low-Carbon 
Technologies by 2010 and Beyond,'' U.S. Department of Energy, Sept. 
1997.
    A.H. Rosenfeld, and D. Hafemeister, ``Energy Efficient Buildings,'' 
Scientific American, April 1998.
    R. Watson, Oil and Conservation Resources Fact Sheet: A Least-Cost 
Planning Perspective, NRDC, San Francisco, 1998.
    Douglas H. Ogden. Boosting Prosperity: Reducing the Threat of 
Global Climate Change Through Sustainable Energy Investment. American 
Council for an Energy Efficient Economy, ACEEE Report Number E963, 
1995.
    ``Northwest Power in Transition.'' (Northwest Power Planning 
Council, Portland, OR, Publication 98-22A, Adopted July 1, 1998.
    Howard Geller, Stephen Bernow, and William Dougherty. Meeting 
America's Kyoto Protocol Target: Policies and Impacts. American Council 
for an Energy Efficient Economy, ACEEE Report #E993, 1999.
    Howard Geller, Steven Nadel, R. Neal Elliott, Martin Thomas, and 
John DeCicco. Approaching the Kyoto Targets: Five Key Strategies for 
the United States. American Council for an Energy Efficient Economy, 
ACEEE Report #E981, 1998.
    Inter-Laboratory Working Group. Scenarios for a Clean Energy 
Future, Oak Ridge National Laboratory and Lawrence Berkeley National 
Laboratory, (2000).
    ``Cutting Carbon Emissions at a Profit'' (F. Krause, International 
Project for Sustainable Energy Paths, IPSEP, 2001).
    Geller, H. Energy Revolution: Policies for a Sustainable Future. 
Island Press, 2003.
---------------------------------------------------------------------------
    And more recent analysis shows that where policies have promoted 
efficiency aggressively, the remaining efficiency resource grows, 
because the policies lead to innovation and new technology 
development.\2\
---------------------------------------------------------------------------
    \2\ Saving Energy, Growing Jobs: How Environmental Protection 
Promotes Economic Growth, Profitability, Innovation, and Competition. 
David B. Goldstein. (Point Richmond, California: Bay Tree Publishing, 
2007.)

II. Energy Efficiency is the Biggest, Cheapest, and Fastest New Energy 
---------------------------------------------------------------------------
        Resource Available to the Nation

A. Energy Efficiency is the Biggest GHG Reduction Resource

    Both prospective analyses of energy options and retrospective 
studies of where new energy has come from in jurisdictions that have 
promoted energy efficiency reach the same conclusions: that energy 
efficiency is by far the largest available resource. Usually the 
contribution of efficiency is larger than all other options combined.
    An International Energy Agency study that concluded that global 
emissions could be held constant by 2050 (compared to a business as 
usual doubling) found that 78% of the emission savings were due to 
energy efficiency, 12% to renewables, and 10% to nuclear power.\3\ Yet, 
despite accounting for the lion's share of the benefits, very little 
discussion is devoted to efficiency and to the policies needed to 
achieve it.
---------------------------------------------------------------------------
    \3\ ``Energy Technology Perspectives--Scenarios and Strategies to 
2050.'' International Energy Agency, 2006.
---------------------------------------------------------------------------
    The energy efficiency advocacy community's 1992 study America's 
Energy Choices found that greenhouse gas emissions could be cut by 70% 
in 40 years, when the business as usual projection was for an increase 
of about 55%. Efficiency alone reduced emissions by 55% compared to 
business as usual, while renewables increased the reduction to 82%. So 
efficiency was more than twice as important as an emissions reduction 
strategy than renewables and fuel substitution combined. This result 
occurred despite the fact that efficiency levels were limited to then-
current technology, while we now see that where policy has been 
aggressive, new options are available in 2006 that were not foreseen in 
1992.
    Looking retrospectively, California has held its energy electricity 
consumption per capita constant since 1975, compared to 60% growth for 
the rest of the country. Considering that the rest of the country was 
also improving efficiency, this result means that California now 
derives more than half of its electricity supply from energy 
efficiency. Renewables make up 13% or 14% of what's left.

B. Energy Efficiency is the Cheapest GHG Reduction Resource

    While some zero carbon approaches, such as renewable energy are 
cost-effective today, they offer little purely cost advantage compared 
to conventional resources. (They do offer other economic advantages 
such as diversity of energy supply, promotion of U.S. competitiveness, 
and reduction of import dependence.) Other zero carbon sources, such as 
nuclear, are substantially more expensive than conventional supply. But 
efficiency is typically one-third to one-half the cost of conventional 
energy supply.
    Efficiency is based on investments in new technologies, and on 
better designs that out-perform existing ones. Frequently, these more 
efficient products have side benefits whose values dwarf even the value 
of the energy savings.
    By promoting efficiency, we encourage innovation and the 
development of new technologies. Thus, even the potential contributions 
in studies like that of the IEA underestimate what efficiency can 
deliver if we really try, and overestimate the costs of expanding the 
markets for efficiency. For the products in which standards and 
incentives have been strongest and most consistent, the potential for 
further increases in efficiency is undiminished. In contrast, in 
products where little progress has been made, due to failure of energy 
policy to promote them, the potential is smaller.
    So efficiency technologies follow a learning curve, in which 
increased experience leads to improved performance and lower cost.
    Renewable energy sources have also exhibited a learning curve 
effect, which is another reason for supporting them. But they are 
mostly at least twice the cost of efficiency.

C. Energy Efficiency is the Fastest GHG Reduction Resource

    Energy efficiency can be obtained much faster than other resources. 
For example, the Energy Policy Act of 2005 established tax credits for 
super efficient air conditioners when it was passed in August 2005. By 
2006, in markets where the tax credit was promoted by utilities, 15% of 
all air conditioners sold to existing homes were at the efficient 
level. No other resource could have come on line from a standing start 
so strongly in one year.
    Other incentives for efficient products have achieved their savings 
with lead times measured in months, not years. Even the slower policy 
mechanisms for energy efficiency deployment, such as codes and 
standards, have lead times of only 3-5 years.

III. Incentives for Energy Efficiency

A. Efficiency Provides the Best Bang for the Buck

    Efficiency resources are cheaper than conventional resources as 
discussed above. But from the point of view of the Federal budget, the 
situation is even better than that. Tax incentives for energy 
efficiency are leveraged in two different ways.
    The first form of leverage is straightforward. Tax incentives such 
as those in the McDermott/Markey/Weller Bill (H.R. 1385) are designed 
such that the tax incentive covers typically 30%-50% of the incremental 
costs of energy efficiency. Thus, each dollar spent by the Treasury is 
matched by $1-$2 of investment by the private sector.
    More importantly, these tax incentives are designed to encourage 
only the most advanced technologies. Virtually no Federal money will be 
spent on ``free riders'' because the number of taxpayers achieving 
these levels of efficiency is utterly insignificant. For the commercial 
buildings tax deduction, for example, a detailed study by the New 
Buildings Institute could find only 100 buildings nationwide that met 
the McDermott/Markey/Weller energy efficiency target.\4\ So virtually 
any taxpayer taking advantage of the incentives is producing new energy 
savings that would not have occurred otherwise.
---------------------------------------------------------------------------
    \4\ See http://newbuildings.org/gtf/index.htm.
---------------------------------------------------------------------------
    More importantly, these incentives, along with the manufacturer tax 
credits for efficient appliances, are part of a program that has been 
called market transformation. Such a program is an effort to introduce 
new technologies into the marketplace by making it financially feasible 
for suppliers to offer them, or viewed alternately, by providing market 
signals such that consumers will be able to buy or specify them. These 
products and services are expected to be (and have always turned out to 
be) cost effective on their own merit. The incentives are merely 
priming the pump by providing reinforcing market signals that these 
heightened new levels of efficiency can be produced and sold by 
suppliers and that a market for them exists so that consumers can 
demand them.
    The tax incentives will greatly ramp up the prevalence of these 
efficiency measures for the 3 or 4 or 5 years they are in effect, but 
after the incentives expire, other market interventions and perhaps 
simply the self-interest of all participants is overwhelmingly likely 
to provide greater and greater market share for these technologies in 
the future. Thus, by paying for the first few years of super 
efficiency, the government is buying higher market shares and 
infinitely many years into the future of new energy savings.
    Perhaps the best example of this sort of market transformation is 
the ``Golden Carrot'' \TM\ program of the Super Efficient Refrigerator 
Program, Inc. (SERP). The utilities participating in SERP offered a 
contract of up to $30 million to the manufacturer that could offer the 
greatest energy savings in mass-produced refrigerators for the least 
incentive per unit. This contest produced a new generation of 
refrigerators that saved 30%-40% compared to the stringent 1993 
standards by the mid-1990s.
    But the experience in meeting the SERP specifications, both by the 
winner of the program and by other companies that needed to compete 
with the winner, produced technologies that were so well-established in 
industry that they were accepted in a consensus efficiency standard 
adopted by the Department of Energy effective in 2001.
    So, by paying for less than 200,000 refrigerators, the SERP market 
transformation effort produced a situation in which over 7 million 
refrigerators sold every year from 2001 and onward will meet the 
efficiency targets of the program. This is the kind of leverage that we 
can expect from the tax incentives for energy efficiency in buildings 
and appliances.

B. The Consequences of Better Cost Effectiveness in a Budget-
        Constrained World

    Ideally, Congress should provide economic incentives for any 
improvements to the energy system that are cost effective or needed for 
the environment. But this would likely entail a budget far greater than 
will actually be available. How can we achieve the best environmental 
and economic result within a budget constraint?
    The answer to that is very clear. Congress can get the greatest 
amount of greenhouse gas emission savings--and also the greatest amount 
of economic benefits--within a given budget constraint by rank-ordering 
all of the available options in terms of environmental and economic 
benefits per dollar of Federal money spent, and then picking the 
cheapest resources first. This economic-based approach is much 
different from a politically-based approach of ``sharing the wealth'' 
among different aspirants to tax incentives. The ``sharing the wealth'' 
principle guarantees that every dollar spent on the less cost-effective 
resources will reduce environmental benefits and economic benefits 
compared to a scenario that goes with the cheapest buys first.
    While NRDC has not done a comprehensive analysis of all the options 
before this Committee, we feel confident that when such an analysis is 
done, it will find that the energy efficiency measures for buildings 
are at the very top of the list.
    Therefore, assuming that this result is validated, the efficiency 
tax incentives should be fully funded and the remaining budget either 
divided up among other aspirants or increased to cover all meritorious 
investments.

C. Additional Economic Benefits of Energy Efficiency in the Commercial 
        Sector

    While the following may or may not be counted by the Joint 
Committee on Taxation, the plain economic fact is that tax incentives 
for energy efficiency in commercial applications, such as the 
commercial buildings tax deduction in McDermott/Markey/Weller, actually 
raise revenues for the government rather than decreasing them.
    The reason for this is that energy costs in a business are a 
deductible business expense. A company in the 35% tax bracket that 
saves $1.00 square foot on in its energy bill (about the amount that it 
would take to qualify for the commercial buildings tax deduction) finds 
itself with that extra dollar no longer being deductible on its 
corporate income tax return, so the Federal Government gets $0.35. It 
is quick to see that a $2.25 tax deduction that produces a $1 annual 
increase in taxable income will pay back its initial cost to the 
government in enhanced tax collections within 3 years of the building 
being placed in service. This effect is so large that we have estimated 
that by the end of 10 years, the cumulative enhanced revenues from the 
commercial buildings tax deduction will pay for the entire cost of all 
the other incentives in the bill. And over 20 years, of course, the 
effect becomes much larger because of market transformation effects 
increasing the revenue generation and the fact that the tax deduction 
sunsets after 5 years.

IV. Energy Efficiency Incentives Produce Jobs

    Expanding energy efficiency increases jobs in 2 different ways. 
First, the employment intensity of energy efficiency is similar to that 
of the rest of the economy. Energy efficiency involves contractor labor 
in installing efficiency measures in buildings, manufacturing labor in 
producing the efficiency technologies, and service sector labor in 
designing more efficient buildings and products. These are similar in 
labor intensity to the rest of the economy. But energy supply itself 
has much lower job intensity. Thus, a project that costs a million 
dollars and saves a million dollars in energy costs over its lifetime 
will produce an increase in net jobs because the million dollars spent 
on efficiency is more labor intensive than the million dollars spent on 
energy.
    This effect is enhanced by the fact that all of the energy 
efficiency measures of the type being discussed here are cost 
effective. Rather than $1 million of investment in energy efficiency 
saving a $1 million in energy supply, it saves $2 or $3 million in 
direct energy costs. The additional savings represents money available 
to businesses and consumers to either distribute to their shareholders 
or to spend on other pursuits. This re-spending also produces 
substantial increases in employment.
    Energy efficiency also serves to enhance domestic employment as 
opposed to foreign jobs. And the new jobs produced are not merely 
within the United States as a whole, but within communities as they 
currently exist. So, for example, when new energy efficient homes are 
constructed, the builders and their contractors offer these services 
through jobs that are located at the site of the construction. These 
jobs cannot be outsourced to another region of the United States, much 
less to a foreign country. When home retrofit projects are initiated, 
they provide domestic jobs for energy raters who will advise the 
householder on what the most profitable upgrades are and then will 
inspect the finished work to assure both the IRS and the resident that 
the work has been done properly, for contractors and subcontractors who 
will do the work, and to component suppliers who will sell the 
insulation, equipment, etc. All of these jobs are domestic.
    In contrast, most supply-side resources (with the exception of 
distributed energy resources such as solar) may or may not offer 
domestic jobs, but even when they do, the jobs often are located in 
remote areas where the new employment opportunities may come at the 
cost of disrupting family lives and establishing unstable (boom and 
bust) energy development communities.
    More broadly, incentives for energy efficiency at the highest 
levels of technology encourage American businesses to be at the cutting 
edge of the world in terms of new technologies. These build on American 
strengths: innovation and the ability to start small businesses that 
can be competitive and facilitate the development of new companies that 
can become global leaders.
    They increase U.S. competitiveness and promote export markets.

V. Summary

    We urge the Committee to consider the manifold economic as well as 
environmental benefits of energy efficiency when deciding what energy 
incentives to offer. We encourage the Committee to support all cost 
effective, performance-based green energy incentives.
    If all worthy efficiency and renewable energy incentives cannot be 
funded, we urge the Committee to maximize environmental and economic 
benefits by fully funding the most cost effective proposals first.

                                 

                                              Enterprise Rent-A-Car
                                                     April 23, 2007

The Honorable Richard E. Neal, Chairman
Subcommittee on Select Revenue Measures
Committee on Ways and Means
U.S. House of Representatives
Washington, D.C. 20515

Dear Chairman Neal and Ranking Member English:

    Enterprise Rent-A-Car Company (``Enterprise'') respectfully tenders 
this letter in response to the Subcommittee's request for submissions 
in connection with its April 24, 2007 hearing on proposals for Federal 
tax incentives for alternative energy sources. Enterprise appreciates 
the opportunity to communicate its views to the Subcommittee.
    Enterprise is a family-owned company headquartered in St. Louis, 
Missouri, that is celebrating its 50th Anniversary in 2007. Enterprise 
is the largest car rental company in North America with almost 7,000 
airport and local rental offices, 65,000 employees, and approximately 
900,000 vehicles in its rental and leasing fleet.
    For its 50th Anniversary, Enterprise recognized the opportunity to 
celebrate the company's first 50 years by making meaningful and 
significant commitments for the next 50 years. To that end, Enterprise 
has:

      Partnered with the National Arbor Day Foundation and the 
U.S. Forest Service to underwrite the planting of 50 million trees--1 
million trees a year for each of the next 50 years in national forests 
throughout the United States, as well as in Canada and Europe.
      Donated $25 million to a leading plant science center to 
start the Enterprise Rent-A-Car Institute for Renewable Fuels, which is 
tasked with finding new ways to create fuel from renewable and reliable 
plant sources.

    Enterprise will continue its efforts to decrease the impact of the 
company's operations on the environment in the future. The company's 
approach is built on a commitment to ensure the sustainability of 
Enterprise's business, as well as the sustainability of the world 
Enterprise shares. For example:

      47% of the company's worldwide rental fleet averages 28 
mpg or better . . . and 28% averages 32 mpg or better.
      33% of Enterprise's U.S. fleet qualify for the 
Environmental Protection Agency's ``SmartWay Seal.''
      Enterprise's fleet is populated with a significant number 
of alternative fuel vehicles--from 38,000 FlexFuel vehicles to 3,000 
gasoline/electric hybrid vehicles--making it the largest fleet of 
alternative fuel vehicles among the country's car rental companies.
      Enterprise manages, in major metropolitan areas, vanpool 
businesses that provide more than 1,700 vans that transport over 16,000 
urban commuters each day.

    Enterprise does not have a set of concrete policy recommendations 
to make to the House Ways and Means Committee or to Congress with 
respect to proposals on tax incentives for alternative energy sources. 
However, Enterprise believes that it is the role of the Federal 
Government to incentivize the economic behavior it seeks to encourage--
such as more widespread use of biofuels such as E85 and biodiesel, 
increased consumer demand for flexible fuel vehicles, and the expansion 
of the infrastructure for providing these biofuels to consumers. As a 
nationwide company that has already made both the financial and 
operational commitment to biofuels, Enterprise is prepared to provide 
whatever information may be of interest to the Committee as it 
considers its Federal policy options in the alternative fuel area.
    Please do not hesitate to contact me if there are questions about 
Enterprise's comprehensive environmental platform or the public policy 
steps that Congress can take to encourage Enterprise and other 
companies to expand their commitment to alternative energy sources, 
particularly biofuels.

            Sincerely yours,
                                                   Gregory M. Scott
                                                            Partner

                                 

                                                 Methanol Institute
                                                     April 30, 2007

Hon. Richard E. Neal
U.S. House of Representatives
2208 Rayburn House Office Building
Washington, DC 20515

Dear Ways and Means Select Revenue Measures Subcommittee Leaders,

    First, while the Energy Policy Act of 2005 (P.L. 109-58) did 
include methanol fueled vehicles under the definition of qualifying 
alternative motor vehicles for the vehicle tax credits (Section 1341), 
the final legislation mistakenly did not include methanol alternative 
fueling stations as qualifying for the infrastructure installation tax 
credit (Section 1342).
    Second, the Volumetric Ethanol Excise Tax Credit established under 
the American Jobs Creation Act (P.L. 108-357) includes methanol 
produced from renewable resources as a qualifying alcohol fuel for 
VEETC treatment. However, the alternative fuel tax incentives adopted 
under the SAFETEA bill (P.L. 109-59) mistakenly failed to include 
methanol as a qualifying alternative fuel along with CNG, LNG, LPG, 
hydrogen, Fischer-Tropsch fuels, and P-Series fuels. This means that 
methanol produced from natural gas or coal gasification does not 
qualify for any Federal tax incentives even though these fuels have 
been defined as qualifying alternative fuels under previous Federal 
legislation (Alternative Motor Fuels Act of 1988 and Energy Policy Act 
of 1992).
    During the 1990s methanol was considered a viable alternative to 
gasoline, with thousands of methanol flexible fuel vehicles on the 
road, served by nearly 200 fueling stations. While support for methanol 
gave way to compressed natural gas, battery electric and ethanol 
vehicles, there is a resurgence of interest in the use of methanol 
today. Much of this interest is generated by simple economics: the 
current contract price for methanol is about $1.00 per gallon, and we 
have recently seen spot sales of less than 80 cents per gallon. Even 
adjusting for methanol's slightly lower energy content than gasoline, 
the full delivered cost to the consumer would be just $2.00 per gallon.
    Methanol also offers the broadest range of potential production 
feedstocks. In the U.S. and on a global basis, natural gas is the 
typical feedstock for methanol production. Today, much of the 2.4 
billion gallons of methanol consumed each year is imported from 
countries with access to inexpensive natural gas, such as Trinidad and 
Chile. In Kingsport, Tennessee, Eastman Chemical operates a coal-based 
methanol plant that was the U.S. DOE's first successful integrated 
gasification combined cycle commercial demonstration project. Mature 
gasification technologies--like that employed in Kingsport--can be 
utilized for the gasification of biomass (forest thinnings, waste wood, 
municipal waste) for the production of cellulosic methanol. With energy 
efficiencies in the 60-70% range, one ton of biomass can be converted 
into 165-185 gallons of methanol. By comparison, the potential yields 
from cellulosic ethanol may only reach 60 gallons of fuel per ton of 
biomass.
    With bills like the DRIVE Act (H.R. 670), there is an increasing 
call for truly flexible fuel vehicles that can run on any combination 
of gasoline ethanol or methanol. An ``A-85'' or alcohol compatible FFV 
would offer significant benefits in fuel diversity, price competition 
and consumer choice. The late Roberta Nichols, who founded the Ford 
Motor Company's industry leading FFV technology development wrote, 
``The good news is, the FFV can use either methanol or ethanol and, in 
fact, some of the early experimental cars ran well on a combination of 
all three fuels (methanol, ethanol, and/or gasoline), which made them 
really flexible!''
    As the trade association for the global methanol industry, the 
Methanol Institute is seeking a level playing field with respect to 
Federal tax incentives for the use of methanol as an alternative fuel. 
We believe that technical corrections to current tax credits for 
alternative fuels and alternative fueling station equipment 
installation can greatly help put the methanol option back on the 
table.

            Sincerely,
                                                          John Lynn
                                                    President & CEO

                                 
                      Statement of Wayne F. Krouse

    As the President, C.E.O. and Founder of a U.S. company with 
hydrokinetic power projects currently in development, I appreciate the 
opportunity to provide my thoughts in writing to the Subcommittee on 
Select Revenue Measures regarding the need to include hydrokinetic 
power technologies (river, ocean and tidal) as qualifying resources in 
the Section 45 Production Tax Credit (PTC). I also would like to 
express my support for H.R. 2036, Congressman Jay Inslee's Marine and 
Hydrokinetic Renewable Energy Promotion Act of 2007, as well as Senator 
Gordon Smith's S. 411 and S. 425.
    Hydro Green Energy, LLC (HGE) is a Houston, TX-based renewable 
energy project developer and equipment manufacturer that designs, 
builds and operates hydrokinetic power systems that generate 
electricity exclusively from moving water without having to first 
construct dams, impoundments or conduits. Our systems operate in 
rivers, tidal areas and oceans. HGE has a U.S. Patent and several U.S. 
and international patents are pending.
    Hydro Green Energy is presently in the Federal Energy Regulatory 
Commission's (FERC) licensing and permitting process for its first 
project Minnesota, with the goal of becoming the first commercially-
operational, licensed hydrokinetic power project in the United States. 
Hydro Green Energy is also in various stages of development in 
Illinois, Mississippi, New York, Texas and Washington.
    Hydrokinetic power holds great promise as a new, carbon-free, low 
or no impact, domestic energy source. In fact, a recent study by the 
Electric Power Research Institute (EPRI) found that the U.S. could 
develop at a minimum 13,000 megawatts of river and ocean-based 
hydrokinetic power by 2025. Earlier estimates by the Department of 
Energy (DOE) showed even greater potential and suggested that the U.S. 
might be able to double its existing hydropower output with the 
development of new technologies.
    Like all emerging energy technologies, hydrokinetic power sources 
face high capital costs. In addition, these technologies face costly 
and time-consuming regulatory hurdles not faced by any other energy 
source. The development costs for hydrokinetic technologies are very 
similar, if not higher, to the development costs of the resources 
presently included in the Section 45 production tax credit. In short, 
hydrokinetic power deserves inclusion in all policies designed to 
encourage the development of new renewable energy sources, such as the 
Section 45 PTC.
    As the Committee moves forward with the implementation of policies 
to better develop our abundant supply of renewable energy, I hope that 
the Committee will act to include hydrokinetic power in the Section 45 
PTC. By doing so, we will ensure that these promising technologies are 
given an opportunity to develop, which will give the U.S. an abundant 
new source of clean energy, as well as an exportable technology for a 
potentially vast worldwide market that is already developing.

                                  
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