[Congressional Record Volume 145, Number 97 (Monday, July 12, 1999)]
[Senate]
[Pages S8269-S8271]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself, Mr. Murkowski, and Mr. Harkin):
  S. 1351. A bill to amend the Internal Revenue Code of 1986 to extend 
and modify the credit for electricity produced from newable resources; 
to the Committee on Finance.


                 the biomass and wind energy tax credit

  Mr. GRASSLEY. Mr. President, I rise today to acknowledge the 
unfortunate expiration of the section 45 tax credit on June 30 for 
electricity produced from alternative energy sources. In response, I am 
introducing legislation to extend and expand the credit to help sustain 
the public benefits derived from these sources. As many of my 
colleagues know, I authored the section 45 credit in the Senate and it 
was included in the Energy Policy Act of 1992. I am being joined in 
this bipartisan effort today by Senator Murkowski and Senator Harkin.
  Earlier this year, I introduced S. 414 to extend the wind energy 
portion of section 45, which has been extremely successful. The purpose 
of today's bill is to extend and expand the biomass portion of section 
45 to include technologies such as biomass combustion and cofiring 
biomass with coal-fired facilities. Formerly, section 45 only allowed 
the use of closed-loop biomass, which has proven to be unworkable. 
Consequently, the biomass aspect of section 45 has never been utilized. 
The clean, controlled combustion of biomass, which in layman's terms 
consists of woodchips, agricultural byproducts, and untreated 
construction debris, is another proven, effective technology that 
currently generates numerous pollution avoidance and waste management 
public benefits across the nation.

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  Unfortunately, the 1992 bill restrictively defined qualifying biomass 
processes by requiring taxpayers to grow the biomass solely for the 
purposes of combustion. This then-untested theory has since proven to 
be singularly uneconomic, and taxpayers have never claimed one single 
cent of tax credits. My bill retains this dormant ``closed-loop'' 
biomass provision in the hopes that some day it may be found feasible.
  In order to retain the environmental, waste management, and the rural 
employment benefits that we currently receive from the existing ``open-
loop'' biomass facilities, by bill rewrites section 45 to allow tax 
credits for clean combustion of wood waste and similar residues in 
these unique facilities. These valuable, yet economically vulnerable, 
facilities that convert 20 million tons of waste into clean electricity 
annually, and which have never received section 45 tax credits, would 
be eligible for the same ten years of tax credits per facility, 
beginning at date of enactment.
  Importantly, we have gone to great lengths to ensure that the 
definition of qualifying biomass materials is limited to organic, 
nonhazardous materials that are clearly proven to burn cleanly without 
any pollution risk. Also, to allay any concern that biomass plants 
might burn paper and thus possibly jeopardize the amount of paper that 
is available to be recycled, I have specifically excluded paper that is 
commonly recycled from the list of materials that would qualify for the 
credit.
  One promising technology that does not yet operate here in the U.S., 
but has now been proven to be feasible and practical, involves the 
cofiring of biomass with coal. A partial tax credit for cofiring would 
stimulate economic growth in rural areas by creating new markets for 
forage crops. The environmental benefits from reduced coal plant 
emissions would also be substantial.
  Finally, my bill acknowledges the potential that biomass combustion 
has to solve the nation's pressing poultry waste problem by making 
electricity produced from the combustion of poultry litter eligible for 
the sec. 45 tax credit. As Chairman Roth has recently pointed out, the 
increased growth of our domestic chicken and turkey industry has 
created the need to find a new, creative means for disposing of the 
waste of some 600 million chickens in the Delaware, Maryland, and 
Virginia peninsula alone.
  Today, much of the waste from these operations (deposited upon 
biomass materials) is spread on farmland, resulting in a nutrient 
runoff that has contaminated streams, rivers and bays, with devastating 
effect on the local environment. Fortunately, scientists in the United 
Kingdom have developed a combustion technology that cleanly disposes of 
the waste and produces clean electricity. While no such plants are 
currently operating in the U.S., state and local authorities in the 
affected jurisdictions assure us that, with the enactment of this 
critical tax credit legislation, action would be taken to build these 
plants immediately.
  With regard to wind energy, and my involvement in supporting this 
technology which goes back to my authorship of the Wind Energy 
Incentives Act of 1992, I am proud to say that this credit is one of 
the success stories of section 45. The public policy benefits of wind 
energy are indisputable: it is clean, safe and abundant within the 
United States. I understand that every 10,000 megawatts of wind energy 
produced in the U.S. can reduce carbon monoxide emissions by 33 million 
metric tons by replacing the combustion of fossil fuels.
  Mr. President, I believe this bill provides a common sense 
combination of current and new technologies to help maintain the 
economic, environmental and waste management benefits derived from wind 
and biomass power. This bill has strong support from both the biomass 
industry and environmental groups including the Union of Concerned 
Scientists and the Natural Resources Defense Council. I urge my 
colleagues to join in supporting this legislation.
  Mr. President, I ask unanimous consent that a copy of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1351

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

      SECTION 1. CREDIT FOR ELECTRICITY PRODUCED FROM RENEWABLE 
                   RESOURCES.

       (a) Extension and Modification of Placed-in-Service 
     Rules.--Paragraph (3) of section 45(c) of the Internal 
     Revenue Code of 1986 is amended to read as follows:
       ``(3) Qualified facility.--
       ``(A) Wind facilities.--In the case of a facility using 
     wind to produce electricity, the term 'qualified facility' 
     means any facility owned by the taxpayer which is originally 
     placed in service after December 31, 1993, and before July 1, 
     2004.
       ``(B) Biomass facilities.--In the case of a facility using 
     biomass to produce electricity, the term 'qualified facility' 
     means, with respect to any month, any facility owned, leased, 
     or operated by the taxpayer which is originally placed in 
     service before July 1, 2004, if, for such month--
       ``(i) biomass comprises not less than 75 percent (on a Btu 
     basis) of the average monthly fuel input of the facility for 
     the taxable year which includes such month, or
       ``(ii) in the case of a facility principally using coal to 
     produce electricity, biomass comprises not more than 25 
     percent (on a Btu basis) of the average monthly fuel input of 
     the facility for the taxable year which includes such month.
       ``(C) Special rules.--
       ``(i) In the case of a qualified facility described in 
     subparagraph (B)(i)--

       ``(I) the 10-year period referred to in subsection (a) 
     shall be treated as beginning no earlier than the date of the 
     enactment of this paragraph, and
       ``(II) subsection (b)(3) shall not apply to any such 
     facility originally placed in service before January 1, 1997.

       ``(ii) In the case of a qualified facility described in 
     subparagraph (B)(ii)--

       ``(I) the 10-year period referred to in subsection (a) 
     shall be treated as beginning no earlier than the date of the 
     enactment of this paragraph, and
       ``(II) the amount of the credit determined under subsection 
     (a) with respect to any project for any taxable year shall be 
     adjusted by multiplying such amount (determined without 
     regard to this clause) by 0.59.''.

       (b) Credit Not To Apply To Electricity Sold to Utilities 
     Under Certain Contracts.--Section 45(b) of the Internal 
     Revenue Code of 1986 (relating to limitations and 
     adjustments) is amended by adding at the end the following:
       ``(4) Credit not to apply to electricity sold to utilities 
     under certain contracts.--
       ``(A) In general.--The credit determined under subsection 
     (a) shall not apply to electricity--
       ``(i) produced at a qualified facility placed in service by 
     the taxpayer after June 30, 1999, and
       ``(ii) sold to a utility pursuant to a contract originally 
     entered into before January 1, 1987 (whether or not amended 
     or restated after that date).
       ``(B) Exception.--Subparagraph (A) shall not apply if--
       ``(i) the prices for energy and capacity from such facility 
     are established pursuant to an amendment to the contract 
     referred to in subparagraph (A)(ii);
       ``(ii) such amendment provides that the prices set forth in 
     the contract which exceed avoided cost prices determined at 
     the time of delivery shall apply only to annual quantities of 
     electricity (prorated for partial years) which do not exceed 
     the greater of--

       ``(I) the average annual quantity of electricity sold to 
     the utility under the contract during calendar years 1994, 
     1995, 1996, 1997, and 1998, or
       ``(II) the estimate of the annual electricity production 
     set forth in the contract, or, if there is no such estimate, 
     the greatest annual quantity of electricity sold to the 
     utility under the contract in any of the calendar years 1996, 
     1997, or 1998; and

       ``(iii) such amendment provides that energy and capacity in 
     excess of the limitation in clause (ii) may be--

       ``(I) sold to the utility only at prices that do not exceed 
     avoided cost prices determined at the time of delivery, or
       ``(II) sold to a third party subject to a mutually agreed 
     upon advance notice to the utility.

     For purposes of this subparagraph, avoided cost prices shall 
     be determined as provided for in 18 CFR 292.304(d)(1) or any 
     successor regulation.''.
       (c) Qualified Facilities Include All Biomass Facilities.--
       (1) In general.--Subparagraph (B) of section 45(c)(1) of 
     the Internal Revenue Code of 1986 (defining qualified energy 
     resources) is amended to read as follows:
       ``(B) biomass.''.
       (2) Biomass defined.--Paragraph (2) of section 45(c) of 
     such Code (relating to definitions) is amended to read as 
     follows:
       ``(2) Biomass.--The term `biomass' means--
       ``(A) any organic material from a plant which is planted 
     exclusively for purposes of being used at a qualified 
     facility to produce electricity, or
       ``(B) any solid, nonhazardous, cellulosic waste material 
     which is segregated from other waste materials and which is 
     derived from--
       ``(i) any of the following forest-related resources: mill 
     residues, precommercial thinnings, slash, and brush, but not 
     including old-growth timber,

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       ``(ii) poultry waste,
       ``(iii) urban sources, including waste pallets, crates, and 
     dunnage, manufacturing and construction wood wastes, and 
     landscape or right-of-way tree trimmings, but not including 
     unsegregated municipal solid waste (garbage) or paper that is 
     commonly recycled, or
       ``(iv) agriculture sources, including orchard tree crops, 
     vineyard, grain, legumes, sugar, and other crop by-products 
     or residues.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to electricity produced after the date of the 
     enactment of this Act.
                                 ______