[Congressional Record Volume 149, Number 115 (Wednesday, July 30, 2003)]
[Senate]
[Pages S10297-S10439]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           TEXT OF AMENDMENTS

  SA 1419. Ms. CANTWELL (for herself, Mr. Bingaman, Mrs. Feinstein, Mr. 
Hollings, Mr. Wyden, Mrs. Boxer, Mrs. Murray, Mr. Harkin, and Mr. 
Rockefeller) proposed an amendment to amendment SA 1412 proposed by Mr. 
Domenici (for himself, Ms. Landrieu, Mr. Thomas, Ms. Murkowski, Mr. 
Campbell, Mr. Smith, Mr. Alexander, Mr. Kyl, Mr. Nelson of Nebraska, 
Mr. Hagel, Mr. Talent, Mr. Bunning, and Mr. Coleman) to the bill S. 14, 
to enhance the energy security of the United States, and for other 
purposes; as follows:

       In the pending amendment,
       Strike section 1172 and insert the following:

     SEC. 1172. MARKET MANIPULATION.

       (a) Prohibition.--Part II of the Federal Power Act (as 
     amended by section 1171) is amended by adding at the end the 
     following:

     ``SEC. 219. PROHIBITION ON MARKET MANIPULATION.

       ``It shall be unlawful for any person, directly or 
     indirectly, to use or employ, in connection with the purchase 
     or sale of electric energy or the purchase or sale of 
     transmission services subject to the jurisdiction of the 
     Commission, any manipulative or deceptive device or 
     contrivance in contravention of such regulations as the 
     Commission may promulgate as appropriate in the public 
     interest or for the protection of electric ratepayers.''.
       (b) Rates Resulting From Market Manipulation.--Section 
     205(a) of the Federal Power Act (16 U.S.C. 824d(a)) is 
     amended by inserting after ``not just and reasonable'' the 
     following: ``or that result from a manipulative or deceptive 
     device or contrivance in violation of a regulation 
     promulgated under section 219''.
       (c) Additional Remedy for Market Manipulation.--Section 206 
     of the Federal Power Act (16 U.S.C. 824e) is amended by 
     adding at the end the following:
       ``(e) Remedy for Market Manipulation.--If the Commission 
     finds that a public utility has knowingly employed any 
     manipulative or deceptive device or contrivance in violation 
     of a regulation promulgated under section 219, the Commission 
     shall, in addition to any other remedy available under this 
     Act, revoke the authority of the public utility to charge 
     market-based rates.''.
                                 ______
                                 
  SA 1420. Mr. JEFFORDS submitted an amendment intended to be proposed 
to amendment SA 1412 proposed by Mr. Domenici (for himself, Ms. 
Landrieu, Mr. Thomas, Ms. Murkowski, Mr. Campbell, Mr. Smith, Mr. 
Alexander,

[[Page S10298]]

Mr. Kyl, Mr. Nelson of Nebraska, Mr. Hagel, Mr. Talent, Mr. Bunning, 
and Mr. Coleman) to the bill S. 14, to enhance the energy security of 
the United States, and for other purposes; which was ordered to lie on 
the table; as follows:

       On page 19 strike line 6 through line 18 and insert:
       (a) Net Metering.--
       (1) Each electric utility shall make available upon request 
     net metering service to any electric consumer that the 
     electric utility serves.
       (2) For purposes of implementing this paragraph, any 
     reference contained in this section to the date of enactment 
     of the Public Utility Regulatory Policies Act of 1978 shall 
     be deemed to be a reference to the date of enactment of this 
     paragraph.
                                 ______
                                 
  SA 1421. Mr. JEFFORDS submitted an amendment intended to be proposed 
to amendment SA 1412 proposed by Mr. Domenici (for himself, Ms. 
Landrieu, Mr. Thomas, Ms. Murkowski, Mr. Campbell, Mr. Smith, Mr. 
Alexander, Mr. Kyl, Mr. Nelson of Nebraska, Mr. Hagel, Mr. Talent, Mr. 
Bunning, and Mr. Coleman) to the bill S. 14, to enhance the energy 
security of the United States, and for other purposes; which was 
ordered to lie on the table; as follows:

       At the appropriate place, insert the following:

                      Subtitle I--System Benefits

     SEC. 1192. SYSTEM BENEFITS FUND.

       (a) Definitions.--For purposes of this section:
       (1) Administrator.--The term ``Administrator'' means the 
     Administrator of the Environmental Protection Agency.
       (2) Board.--The term ``Board'' means the Board established 
     under this section.
       (3) Commission.--The term ``Commission'' means the Federal 
     Energy Regulatory Commission.
       (4) Fund.--The term ``Fund'' means the System Benefits 
     Trust Fund established by this section.
       (5) Renewable Energy.--The term ``renewable energy'' means 
     electricity generated from wind, organic waste (excluding 
     incinerated municipal solid waste), or biomass (including 
     anaerobic digestion from farm systems and landfill gas 
     recovery) or a geothermal, solar thermal, or photovoltaic 
     source. For purposes of this paragraph, a farm system is an 
     electric generating facility that generates electric energy 
     from the anaerobic digestion of agricultural waste produced 
     by farming that is located on the farm where substantially 
     all of the waste used in produced.
       (6) Secretary.--The term ``Secretary'' means the Secretary 
     of Energy.
       (b) Board.--
       (1) Establishment.--The Secretary shall establish a System 
     Benefits Trust Fund Board to carry out the functions and 
     responsibilities described in this section.
       (2) Membership.--The Board shall be composed of--
       (A) 1 representative of the Federal Energy Regulatory 
     Commission appointed by the Federal Energy Regulatory 
     Commission;
       (B) 2 representatives of the Secretary of Energy appointed 
     by the Secretary of Energy;
       (C) 2 persons nominated by the National Association of 
     Regulatory Utility Commissioners and appointed by the 
     Secretary;
       (D) 1 person nominated by the National Association of State 
     Utility Consumer advocates and appointed by the Secretary;
       (E) 1 person nominated by the National Association of State 
     Energy Officials and appointed by the Secretary;
       (F) 1 person nominated by the National Energy Assistance 
     Directors' Association and appointed by the Secretary; and
       (G) 1 representative of the Environmental Protection Agency 
     appointed by the Administrator.
       (3) Chairperson.--The Secretary shall select a member of 
     the Board to serve as Chairperson of the Board.
       (c) Establishment of Fund.--
       (1) In general.--The Board shall establish an account or 
     accounts at one of more financial institutions, which account 
     or accounts shall be known as the System Benefits Trust Fund 
     consisting of amounts deposited in the fund under subsection 
     (d).
       (2) Status of fund.--The wires charges collected under 
     subsection (e) and deposited in the Fund--
       (A) shall not constitute funds of the United States;
       (B) shall be held in trust by the Board solely for the 
     purposes stated in subsection (d); and
       (C) shall not be available to meet any obligations of the 
     United States.
       (d) Use of Funds.--
       (1) Funding of state programs.--Amounts in the Fund shall 
     be used by the Board to provide matching funds to States and 
     Indian tribes for the support of State or tribal public 
     benefits programs relating to--
       (A) energy conservation and efficiency;
       (B) renewable energy sources;
       (C) assisting low-income households in meeting their home 
     energy needs; or
       (D) research and development in areas described in 
     subparagraphs (A) through (C).
       (2) Distribution.--
       (A) In general.--Except for amounts needed to pay costs of 
     the Board in carrying out its duties under this section, the 
     Board shall distribute all amounts in the Fund to States or 
     Indian tribes to fund public benefits programs under 
     paragraph (1).
       (B) Funds share.--
       (i) In general.--Subject to clause (iii), the Fund share of 
     a public benefits program funded under paragraph (1) shall be 
     50 percent.
       (ii) Proportionate reduction.--To the extent that the 
     amount of matching funds requested by States and Indian 
     tribes exceeds the maximum projected revenues of the Fund, 
     the matching funds distributed to the States and Indian 
     tribes shall be reduced by an amount that is proportionate to 
     each State's annual consumption of electricity compared to 
     the Nation's aggregate annual consumption of electricity.
       (iii) Additional state or Indian tribe funding.--A State or 
     Indian tribe may apply funds to public benefits programs in 
     addition to the amount of funds applied for the purpose of 
     matching the Fund share.
       (3) Program Criteria.--The Board shall recommend 
     eligibility criteria for public benefits programs funded 
     under this section for approval by the Secretary of Energy.
       (4) Application.--Not later than August 1 of each year 
     beginning in 2002, a State or Indian tribe seeking matching 
     funds for the following fiscal year shall file with the 
     Board, in such form as the Board may require, an 
     application--
       (A) certifying that the funds will be used for an eligible 
     public benefits program;
       (B) stating the amount of State or Indian tribe funds 
     earmarked for the program; and
       (C) summarizing how System Benefit Trust Fund funds from 
     the previous calendar year (if any) were spent by the State 
     and what the State accomplished as a result of these 
     expenditures.
       (e) Wires Charge.--
       (1) Determination of Needed Funding.--Not later than August 
     1 of each year, the Board shall determine and inform the 
     Federal Energy Regulatory Commission of the aggregate amount 
     of wires charges that will be necessary to be paid into the 
     Fund to pay matching funds to States and Indian tribes and 
     pay the operating costs of the Board in the following fiscal 
     year.
       (2) Imposition of Wires Charge.--
       (A) In general.--Not later than December 15 of each year, 
     the Federal Energy Regulatory Commission shall impose a 
     nonbypassable, competitively neutral wires charge, to be paid 
     directly into the Fund by the operator of the wire, on 
     electricity carried through the wire (measured as it exits 
     the busbar at a generation facility, or, for electricity 
     generated outside the United States, at the point of delivery 
     to the wire operator's system) in interstate commerce.
       (B) Amount.--The wires charge shall be set at a rate equal 
     to the lesser of
       (i) 2.0 mills per kilowatt hour; or
       (ii) a rate that is estimated to result in the collection 
     of an amount of wires charges that is as nearly as possible 
     equal to the amount of needed funding determined under 
     paragraph (1).
       (3) Deposit in the fund.--The wires charge shall be paid by 
     the operator of the wire directly into the Fund at the end of 
     each month during the calendar year for distribution by the 
     Board under subsection (c).
       (4) Penalties.--The Federal Energy Regulatory Commission 
     may assess against a wire operator that fails to pay a wires 
     charge as required by this subsection a civil penalty in an 
     amount equal to not more than the amount of the unpaid wires 
     charge.
       (e) Auditing.--
       (1) In general.--The Fund shall be audited annually by a 
     firm or independent certified public accountants in 
     accordance with generally accepted auditing standards.
       (2) Access to records.--Representatives of the Secretary of 
     Energy and the Federal Energy Regulatory Commission shall 
     have access to all books, accounts, reports, files, and other 
     records pertaining to the Fund as necessary to facilitate and 
     verify the audit.
       (3) Reports.--
       (A) In general.--A report on each audit shall be submitted 
     to the Secretary of Energy, the Federal Energy Regulatory 
     Commission, and the Secretary of the Treasury, who shall 
     submit the report to the President and Congress not later 
     than 180 days after the close of the fiscal year.
       (B) Requirements.--An audit report shall--
       (i) set for the scope of the audit; and
       (ii) include--
       (I) a statement of assets and liabilities, capital, and 
     surplus or deficit;
       (II) a surplus or deficit analysis;
       (III) a statement of income and expenses;
       (IV) any other information that may be considered necessary 
     to keep the President and Congress informed of the operations 
     and financial condition of the Fund; and
       (V) any recommendations with respect to the Fund that the 
     Secretary of Energy or the Federal Energy Regulatory 
     Commission may have.
                                 ______
                                 
  SA 1422. Mr. NELSON of Nebraska submitted an amendment intended to be 
proposed to amendment SA 1412 proposed by Mr. Domenici (for himself, 
Ms. Landrieu, Mr. Thomas, Ms. Murkowski, Mr. Campbell, Mr. Smith, Mr. 
Alexander, Mr. Kyl, Mr. Nelson of Nebraska, Mr. Hagel, Mr. Talent, Mr. 
Bunning, and Mr. Coleman) to the bill S. 14, to enhance the energy 
security of

[[Page S10299]]

the United States, and for other purposes; which was ordered to lie on 
the table; as follows:

       At the appropriate place insert the following:
       ``(6) Electric utility.--The term `electric utility' does 
     not include--
       ``(A) the United States;
       ``(B) a State or political subdivision of a State;
       ``(C) an agency, authority, or instrumentality of the 
     United States, a State, or political subdivision of a State; 
     or
       ``(D) an electric cooperative.
                                 ______
                                 
  SA 1423. Mr. VOINOVICH submitted an amendment intended to be proposed 
by him to the bill S. 14, to enhance the energy security of the United 
States, and for other purposes; which was ordered to lie on the table; 
as follows:

       On page 145, between lines 18 and 19, insert the following:

                  Subtitle D--Growth of Nuclear Energy

     SEC. 4____. COMBINED LICENSE PERIODS.

       Section 103c. of the Atomic Energy Act of 1954 (42 U.S.C. 
     2133(c)) is amended--
       (1) by striking ``c. Each such'' and inserting the 
     following:
       ``c. License Period.--
       ``(1) In general.--Each such''; and
       (2) by adding at the end the following:
       ``(2) Combined licenses.--In the case of a combined 
     construction and operating license issued under section 
     185(b), the duration of the operating phase of the license 
     period shall not be less than the duration of the operating 
     license if application had been made for separate 
     construction and operating licenses.''.

                   Subtitle E--NRC Regulatory Reform

     SEC. 4____. ANTITRUST REVIEW.

       (a) In General.--Section 105 of the Atomic Energy Act of 
     1954 (42 U.S.C. 2135) is amended by adding at the end the 
     following:
       ``d. Antitrust Laws.--
       ``(1) Notification.--Except as provided in paragraph (4), 
     when the Commission proposes to issue a license under section 
     103 or 104b., the Commission shall notify the Attorney 
     General of the proposed license and the proposed terms and 
     conditions of the license.
       ``(2) Action by the attorney general.--Within a reasonable 
     time (but not more than 90 days) after receiving notification 
     under paragraph (1), the Attorney General shall submit to the 
     Commission and publish in the Federal Register a 
     determination whether, insofar as the Attorney General is 
     able to determine, the proposed license would tend to create 
     or maintain a situation inconsistent with the antitrust laws.
       ``(3) Information.--On the request of the Attorney General, 
     the Commission shall furnish or cause to be furnished such 
     information as the Attorney General determines to be 
     appropriate or necessary to enable the Attorney General to 
     make the determination under paragraph (2).
       ``(4) Applicability.--This subsection shall not apply to 
     such classes or type of licenses as the Commission, with the 
     approval of the Attorney General, determines would not 
     significantly affect the activities of a licensee under the 
     antitrust laws.''.
       (b) Conforming Amendment.--Section 105c. of the Atomic 
     Energy Act of 1954 (42 U.S.C. 2135(c)) is amended by adding 
     at the end the following:
       ``(9) Applicability.--This subsection does not apply to an 
     application for a license to construct or operate a 
     utilization facility under section 103 or 104b. that is filed 
     on or after the date of enactment of subsection d.''.

     SEC. 4____. DECOMMISSIONING.

       (a) Authority Over Former Licensees for Decommissioning 
     Funding.--Section 161i. of the Atomic Energy Act of 1954 (42 
     U.S.C. 2201(i)) is amended--
       (1) by striking ``and (3)'' and inserting ``(3)''; and
       (2) by inserting before the semicolon at the end the 
     following: ``, and (4) to ensure that sufficient funds will 
     be available for the decommissioning of any production or 
     utilization facility licensed under section 103 or 104b., 
     including standards and restrictions governing the control, 
     maintenance, use, and disbursement by any former licensee 
     under this Act that has control over any fund for the 
     decommissioning of the facility''.
       (b) Treatment of Nuclear Reactor Financial Obligations.--
     Section 523 of title 11, United States Code, is amended by 
     adding at the end the following:
       ``(f) Treatment of Nuclear Reactor Financial Obligations.--
     Notwithstanding any other provision of this title--
       ``(1) any funds or other assets held by a licensee or 
     former licensee of the Nuclear Regulatory Commission, or by 
     any other person, to satisfy the responsibility of the 
     licensee, former licensee, or any other person to comply with 
     a regulation or order of the Nuclear Regulatory Commission 
     governing the decontamination and decommissioning of a 
     nuclear power reactor licensed under section 103 or 104b. of 
     the Atomic Energy Act of 1954 (42 U.S.C. 2133, 2134(b)) shall 
     not be used to satisfy the claim of any creditor in any 
     proceeding under this title, other than a claim resulting 
     from an activity undertaken to satisfy that responsibility, 
     until the decontamination and decommissioning of the nuclear 
     power reactor is completed to the satisfaction of the Nuclear 
     Regulatory Commission;
       ``(2) obligations of licensees, former licensees, or any 
     other person to use funds or other assets to satisfy a 
     responsibility described in paragraph (1) may not be 
     rejected, avoided, or discharged in any proceeding under this 
     title or in any liquidation, reorganization, receivership, or 
     other insolvency proceeding under Federal or State law; and
       ``(3) private insurance premiums and standard deferred 
     premiums held and maintained in accordance with section 170b. 
     of the Atomic Energy Act of 1954 (42 U.S.C. 2210(b)) shall 
     not be used to satisfy the claim of any creditor in any 
     proceeding under this title, until the indemnification 
     agreement executed in accordance with section 170c. of that 
     Act (42 U.S.C. 2210(c)) is terminated.''.

                    Subtitle F--NRC Personnel Crisis

     SEC. 4____. ELIMINATION OF PENSION OFFSET.

       Section 161 of the Atomic Energy Act of 1954 (42 U.S.C. 
     2201) is amended by adding at the end the following:
       ``y. exempt from the application of sections 8344 and 8468 
     of title 5, United States Code, an annuitant who was formerly 
     an employee of the Commission who is hired by the Commission 
     as a consultant, if the Commission finds that the annuitant 
     has a skill that is critical to the performance of the duties 
     of the Commission.''.

     SEC. 4____. NRC TRAINING PROGRAM.

       (a) In General.--In order to maintain the human resource 
     investment and infrastructure of the United States in the 
     nuclear sciences, health physics, and engineering fields, in 
     accordance with the statutory authorities of the Commission 
     relating to the civilian nuclear energy program, the Nuclear 
     Regulatory Commission shall carry out a training and 
     fellowship program to address shortages of individuals with 
     critical safety skills.
       (b) Authorization of Appropriations.--
       (1) In general.--There are authorized to be appropriated to 
     carry out this section $1,000,000 for each of fiscal years 
     2004 through 2007.
       (2) Availability.--Funds made available under paragraph (1) 
     shall remain available until expended.
                                 ______
                                 
  SA 1424. Mr. GRASSLEY (for himself, Mr. Baucus, Mr. Domenici, and Mr. 
Bingaman) submitted an amendment intended to be proposed by him to the 
bill S. 14, to enhance the energy security of the United States, and 
for other purposes; which was ordered to lie on the table; as follows:

       At the end add the following:

                   DIVISION B--ENERGY TAX INCENTIVES

     SECTION 1. SHORT TITLE; ETC.

       (a) Short Title.--This division may be cited as the 
     ``Energy Tax Incentives Act of 2003''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this division an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Table of Contents.--The table of contents for this 
     division is as follows:

Sec. 1. Short title; etc.

          TITLE I--RENEWABLE ELECTRICITY PRODUCTION TAX CREDIT

Sec. 101. Extension and expansion of credit for electricity produced 
              from certain renewable resources.

       TITLE II--ALTERNATIVE MOTOR VEHICLES AND FUELS INCENTIVES

Sec. 201. Alternative motor vehicle credit.
Sec. 202. Modification of credit for qualified electric vehicles.
Sec. 203. Credit for installation of alternative fueling stations.
Sec. 204. Credit for retail sale of alternative fuels as motor vehicle 
              fuel.
Sec. 205. Small ethanol producer credit.
Sec. 206. Increased flexibility in alcohol fuels tax credit.
Sec. 207. Incentives for biodiesel.
Sec. 208. Alcohol fuel and biodiesel mixtures excise tax credit.
Sec. 209. Sale of gasoline and diesel fuel at duty-free sales 
              enterprises.

        TITLE III--CONSERVATION AND ENERGY EFFICIENCY PROVISIONS

Sec. 301. Credit for construction of new energy efficient home.
Sec. 302. Credit for energy efficient appliances.
Sec. 303. Credit for residential energy efficient property.
Sec. 304. Credit for business installation of qualified fuel cells and 
              stationary microturbine power plants.
Sec. 305. Energy efficient commercial buildings deduction.
Sec. 306. Three-year applicable recovery period for depreciation of 
              qualified energy management devices.
Sec. 307. Three-year applicable recovery period for depreciation of 
              qualified water submetering devices.
Sec. 308. Energy credit for combined heat and power system property.
Sec. 309. Credit for energy efficiency improvements to existing homes.

                    TITLE IV--CLEAN COAL INCENTIVES

Subtitle A--Credit for Emission Reductions and Efficiency Improvements 
        in Existing Coal-Based Electricity Generation Facilities

Sec. 401. Credit for production from a qualifying clean coal technology 
              unit.

[[Page S10300]]

 Subtitle B--Incentives for Early Commercial Applications of Advanced 
                        Clean Coal Technologies

Sec. 411. Credit for investment in qualifying advanced clean coal 
              technology.
Sec. 412. Credit for production from a qualifying advanced clean coal 
              technology unit.

     Subtitle C--Treatment of Persons Not Able To Use Entire Credit

Sec. 421. Treatment of persons not able to use entire credit.

                    TITLE V--OIL AND GAS PROVISIONS

Sec. 501. Oil and gas from marginal wells.
Sec. 502. Natural gas gathering lines treated as 7-year property.
Sec. 503. Expensing of capital costs incurred in complying with 
              Environmental Protection Agency sulfur regulations.
Sec. 504. Environmental tax credit.
Sec. 505. Determination of small refiner exception to oil depletion 
              deduction.
Sec. 506. Marginal production income limit extension.
Sec. 507. Amortization of delay rental payments.
Sec. 508. Amortization of geological and geophysical expenditures.
Sec. 509. Extension and modification of credit for producing fuel from 
              a nonconventional source.
Sec. 510. Natural gas distribution lines treated as 15-year property.
Sec. 511. Credit for Alaska natural gas.
Sec. 512. Certain Alaska natural gas pipeline property treated as 7-
              year property.
Sec. 513. Arbitrage rules not to apply to prepayments for natural gas.

          TITLE VI--ELECTRIC UTILITY RESTRUCTURING PROVISIONS

Sec. 601. Modifications to special rules for nuclear decommissioning 
              costs.
Sec. 602. Treatment of certain income of cooperatives.
Sec. 603. Sales or dispositions to implement Federal Energy Regulatory 
              Commission or State electric restructuring policy.

                    TITLE VII--ADDITIONAL PROVISIONS

Sec. 701. Extension of accelerated depreciation and wage credit 
              benefits on Indian reservations.
Sec. 702. Study of effectiveness of certain provisions by GAO.
Sec. 703. Repeal of 4.3-cent motor fuel excise taxes on railroads and 
              inland waterway transportation which remain in general 
              fund.
Sec. 704. Expansion of research credit.

                     TITLE VIII--REVENUE PROVISIONS

        Subtitle A--Provisions Designed To Curtail Tax Shelters

Sec. 801. Penalty for failing to disclose reportable transaction.
Sec. 802. Accuracy-related penalty for listed transactions and other 
              reportable transactions having a significant tax 
              avoidance purpose.
Sec. 803. Tax shelter exception to confidentiality privileges relating 
              to taxpayer communications.
Sec. 804. Disclosure of reportable transactions.
Sec. 805. Modifications to penalty for failure to register tax 
              shelters.
Sec. 806. Modification of penalty for failure to maintain lists of 
              investors.
Sec. 807. Penalty on promoters of tax shelters.

      Subtitle B--Provisions to Discourage Corporate Expatriation

Sec. 821. Tax treatment of inverted corporate entities.
Sec. 822. Excise tax on stock compensation of insiders in inverted 
              corporations.
Sec. 823. Reinsurance of United States risks in foreign jurisdictions.

                  Subtitle C--Other Revenue Provisions

Sec. 831. Extension of Internal Revenue Service user fees.
Sec. 832. Addition of vaccines against hepatitis A to list of taxable 
              vaccines.
Sec. 833. Individual expatriation to avoid tax.

          TITLE I--RENEWABLE ELECTRICITY PRODUCTION TAX CREDIT

     SEC. 101. EXTENSION AND EXPANSION OF CREDIT FOR ELECTRICITY 
                   PRODUCED FROM CERTAIN RENEWABLE RESOURCES.

       (a) Expansion of Qualified Energy Resources.--Subsection 
     (c) of section 45 (relating to electricity produced from 
     certain renewable resources) is amended to read as follows:
       ``(c) Qualified Energy Resources.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified energy resources' 
     means--
       ``(A) wind,
       ``(B) closed-loop biomass,
       ``(C) biomass (other than closed-loop biomass),
       ``(D) geothermal energy,
       ``(E) solar energy,
       ``(F) small irrigation power,
       ``(G) biosolids and sludge, and
       ``(H) municipal solid waste.''.
       ``(2) Closed-loop biomass.--The term `closed-loop biomass' 
     means any organic material from a plant which is planted 
     exclusively for purposes of being used at a qualified 
     facility to produce electricity.
       ``(3) Biomass.--
       ``(A) In general.--The term `biomass' means--
       ``(i) any agricultural livestock waste nutrients, or
       ``(ii) 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 
     and harvesting residues, precommercial thinnings, slash, and 
     brush,
       ``(II) solid wood waste materials, including waste pallets, 
     crates, dunnage, manufacturing and construction wood wastes 
     (other than pressure-treated, chemically-treated, or painted 
     wood wastes), and landscape or right-of-way tree trimmings, 
     but not including municipal solid waste, gas derived from the 
     biodegradation of solid waste, or paper which is commonly 
     recycled, or
       ``(III) agriculture sources, including orchard tree crops, 
     vineyard, grain, legumes, sugar, and other crop by-products 
     or residues.

       ``(B) Agricultural livestock waste nutrients.--
       ``(i) In general.--The term `agricultural livestock waste 
     nutrients' means agricultural livestock manure and litter, 
     including wood shavings, straw, rice hulls, and other bedding 
     material for the disposition of manure.
       ``(ii) Agricultural livestock.--The term `agricultural 
     livestock' includes bovine, swine, poultry, and sheep.
       ``(4) Geothermal energy.--The term `geothermal energy' 
     means energy derived from a geothermal deposit (within the 
     meaning of section 613(e)(2)).
       ``(5) Small irrigation power.--The term `small irrigation 
     power' means power--
       ``(A) generated without any dam or impoundment of water 
     through an irrigation system canal or ditch, and
       ``(B) the installed capacity of which is less than 5 
     megawatts.
       ``(6) Biosolids and sludge.--The term `biosolids and 
     sludge' means the residue or solids removed in the treatment 
     of commercial, industrial, or municipal wastewater.
       ``(7) Municipal solid waste.--The term `municipal solid 
     waste' has the meaning given the term `solid waste' under 
     section 2(27) of the Solid Waste Disposal Act (42 U.S.C. 
     6903).''.
       (b) Extension and Expansion of Qualified Facilities.--
       (1) In general.--Section 45 is amended by redesignating 
     subsection (d) as subsection (e) and by inserting after 
     subsection (c) the following new subsection:
       ``(d) Qualified Facilities.--For purposes of this section--
       ``(1) Wind facility.--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 January 1, 
     2007.
       ``(2) Closed-loop biomass facility.--
       ``(A) In general.--In the case of a facility using closed-
     loop biomass to produce electricity, the term `qualified 
     facility' means any facility--
       ``(i) owned by the taxpayer which is originally placed in 
     service after December 31, 1992, and before January 1, 2007, 
     or
       ``(ii) owned by the taxpayer which before January 1, 2007, 
     is originally placed in service and modified to use closed-
     loop biomass to co-fire with coal, with other biomass, or 
     with both, but only if the modification is approved under the 
     Biomass Power for Rural Development Programs or is part of a 
     pilot project of the Commodity Credit Corporation as 
     described in 65 Fed. Reg. 63052.
       ``(B) Special rules.--In the case of a qualified facility 
     described in subparagraph (A)(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 the Energy Tax Incentives Act of 2003,
       ``(ii) the amount of the credit determined under subsection 
     (a) with respect to the facility shall be an amount equal to 
     the amount determined without regard to this clause 
     multiplied by the ratio of the thermal content of the closed-
     loop biomass used in such facility to the thermal content of 
     all fuels used in such facility, and
       ``(iii) if the owner of such facility is not the producer 
     of the electricity, the person eligible for the credit 
     allowable under subsection (a) shall be the lessee or the 
     operator of such facility.
       ``(3) Biomass facility.--
       ``(A) In general.--In the case of a facility using biomass 
     (other than closed-loop biomass) to produce electricity, the 
     term `qualified facility' means any facility owned by the 
     taxpayer which--
       ``(i) in the case of a facility using agricultural 
     livestock waste nutrients, is originally placed in service 
     after the date of the enactment of the Energy Tax Incentives 
     Act of 2003 and before January 1, 2007, and
       ``(ii) in the case of any other facility, is originally 
     placed in service before January 1, 2005.
       ``(B) Special rules for preeffective date facilities.--In 
     the case of any facility described in subparagraph (A)(ii) 
     which is placed in service before the date of the enactment 
     of such Act--
       ``(i) subsection (a)(1) shall be applied by substituting 
     `1.2 cents' for `1.5 cents', and
       ``(ii) the 5-year period beginning on January 1, 2004, 
     shall be substituted for the 10-year period in subsection 
     (a)(2)(A)(ii).
       ``(C) Credit eligibility.--In the case of any facility 
     described in subparagraph (A), if the owner of such facility 
     is not the producer of the electricity, the person eligible 
     for the

[[Page S10301]]

     credit allowable under subsection (a) shall be the lessee or 
     the operator of such facility.
       ``(4) Geothermal or solar energy facility.--
       ``(A) In general.--In the case of a facility using 
     geothermal or solar energy to produce electricity, the term 
     `qualified facility' means any facility owned by the taxpayer 
     which is originally placed in service after the date of the 
     enactment of the Energy Tax Incentives Act of 2003 and before 
     January 1, 2007.
       ``(B) Special rule.--In the case of any facility described 
     in subparagraph (A), the 5-year period beginning on the date 
     the facility was originally placed in service shall be 
     substituted for the 10-year period in subsection 
     (a)(2)(A)(ii).
       ``(5) Small irrigation power facility.--In the case of a 
     facility using small irrigation power to produce electricity, 
     the term `qualified facility' means any facility owned by the 
     taxpayer which is originally placed in service after the date 
     of the enactment of the Energy Tax Incentives Act of 2003 and 
     before January 1, 2007.
       ``(6) Biosolids and sludge facility.--In the case of a 
     facility using waste heat from the incineration of biosolids 
     and sludge to produce electricity, the term `qualified 
     facility' means any facility owned by the taxpayer which is 
     originally placed in service after the date of the enactment 
     of the Energy Tax Incentives Act of 2003 and before January 
     1, 2007. Such term shall not include any property described 
     in section 48(a)(6) the basis of which is taken into account 
     for purposes of the energy credit under section 46.
       ``(7) Municipal solid waste facility.--
       ``(A) In general.--In the case of a facility or unit 
     incinerating municipal solid waste to produce electricity, 
     the term `qualified facility' means any facility or unit 
     owned by the taxpayer which is originally placed in service 
     after the date of the enactment of the Energy Tax Incentives 
     Act of 2003 and before January 1, 2007.
       ``(B) Special rule.--In the case of any facility or unit 
     described in subparagraph (A), the 5-year period beginning on 
     the date the facility or unit was originally placed in 
     service shall be substituted for the 10-year period in 
     subsection (a)(2)(A)(ii).
       ``(C) Credit eligibility.--In the case of any qualified 
     facility described in subparagraph (A), if the owner of such 
     facility is not the producer of the electricity, the person 
     eligible for the credit allowable under subsection (a) shall 
     be the lessee or the operator of such facility.''.
       (2) No credit for certain production.--Section 45(e) 
     (relating to definitions and special rules), as redesignated 
     by paragraph (1), is amended by striking paragraph (6) and 
     inserting the following new paragraph:
       ``(6) Operations inconsistent with solid waste disposal 
     act.--In the case of a qualified facility described in 
     subsection (d)(6)(A), subsection (a) shall not apply to 
     electricity produced at such facility during any taxable year 
     if, during a portion of such year, there is a certification 
     in effect by the Administrator of the Environmental 
     Protection Agency that such facility was permitted to operate 
     in a manner inconsistent with section 4003(d) of the Solid 
     Waste Disposal Act (42 U.S.C. 6943(d)).''.
       (3) Conforming amendment.--Section 45(e), as so 
     redesignated, is amended by striking ``subsection (c)(3)(A)'' 
     in paragraph (7)(A)(i) and inserting ``subsection (d)(1)''.
       (c) Credit Rate for Electricity Produced From New 
     Facilities.--
       (1) In general.--Section 45(a) is amended by adding at the 
     end the following new flush sentence:
     ``In the case of electricity produced after 2003 at any 
     qualified facility originally placed in service after the 
     date of the enactment of the Energy Tax Incentives Act of 
     2003, paragraph (1) shall be applied by substituting `1.8 
     cents' for `1.5 cents'.''.
       (2) New rate not subject to inflation adjustment.--Section 
     45(b)(2) (relating to credit and phaseout adjustment based on 
     inflation) is amended by adding at the end the following new 
     sentence: ``This paragraph shall not apply to any amount 
     which is substituted for the 1.5 cent amount in subsection 
     (a) by reason of any provision of this section.''.
       (d) Elimination of Certain Credit Reductions.--Section 
     45(b)(3)(A) (relating to credit reduced for grants, tax-
     exempt bonds, subsidized energy financing, and other credits) 
     is amended--
       (1) by striking clause (ii),
       (2) by redesignating clauses (iii) and (iv) as clauses (ii) 
     and (iii),
       (3) by inserting ``(other than proceeds of an issue of 
     State or local government obligations the interest on which 
     is exempt from tax under section 103, or any loan, debt, or 
     other obligation incurred under subchapter I of chapter 31 of 
     title 7 of the Rural Electrification Act of 1936 (7 U.S.C. 
     901 et seq.), as in effect on the date of the enactment of 
     the Energy Tax Incentives Act of 2003)'' after ``project'' in 
     clause (ii) (as so redesignated),
       (4) by adding at the end the following new sentence: ``This 
     paragraph shall not apply with respect to any facility 
     described in subsection (d)(2)(A)(ii).'', and
       (5) by striking ``tax-exempt bonds,'' in the heading and 
     inserting ``certain''.
       (e) Treatment of Persons Not Able To Use Entire Credit.--
     Section 45(e) (relating to definitions and special rules), as 
     redesignated by subsection (b)(1), is amended by adding at 
     the end the following new paragraph:
       ``(8) Treatment of persons not able to use entire credit.--
       ``(A) Allowance of credit.--
       ``(i) In general.--Except as otherwise provided in this 
     subsection--

       ``(I) any credit allowable under subsection (a) with 
     respect to a qualified facility owned by a person described 
     in clause (ii) may be transferred or used as provided in this 
     paragraph, and
       ``(II) the determination as to whether the credit is 
     allowable shall be made without regard to the tax-exempt 
     status of the person.

       ``(ii) Persons described.--A person is described in this 
     clause if the person is--

       ``(I) an organization described in section 501(c)(12)(C) 
     and exempt from tax under section 501(a),
       ``(II) an organization described in section 1381(a)(2)(C),
       ``(III) a public utility (as defined in section 
     136(c)(2)(B)), which is exempt from income tax under this 
     subtitle,
       ``(IV) any State or political subdivision thereof, the 
     District of Columbia, any possession of the United States, or 
     any agency or instrumentality of any of the foregoing, or

       ``(V) any Indian tribal government (within the meaning of 
     section 7871) or any agency or instrumentality thereof.

       ``(B) Transfer of credit.--
       ``(i) In general.--A person described in subparagraph 
     (A)(ii) may transfer any credit to which subparagraph (A)(i) 
     applies through an assignment to any other person not 
     described in subparagraph (A)(ii). Such transfer may be 
     revoked only with the consent of the Secretary.
       ``(ii) Regulations.--The Secretary shall prescribe such 
     regulations as necessary to ensure that any credit described 
     in clause (i) is assigned once and not reassigned by such 
     other person.
       ``(iii) Transfer proceeds treated as arising from essential 
     government function.--Any proceeds derived by a person 
     described in subclause (III), (IV), or (V) of subparagraph 
     (A)(ii) from the transfer of any credit under clause (i) 
     shall be treated as arising from the exercise of an essential 
     government function.
       ``(C) Use of credit as an offset.--Notwithstanding any 
     other provision of law, in the case of a person described in 
     subclause (I), (II), or (V) of subparagraph (A)(ii), any 
     credit to which subparagraph (A)(i) applies may be applied by 
     such person, to the extent provided by the Secretary of 
     Agriculture, as a prepayment of any loan, debt, or other 
     obligation the entity has incurred under subchapter I of 
     chapter 31 of title 7 of the Rural Electrification Act of 
     1936 (7 U.S.C. 901 et seq.), as in effect on the date of the 
     enactment of the Energy Tax Incentives Act of 2003.
       ``(D) Credit not income.--Any transfer under subparagraph 
     (B) or use under subparagraph (C) of any credit to which 
     subparagraph (A)(i) applies shall not be treated as income 
     for purposes of section 501(c)(12).
       ``(E) Treatment of unrelated persons.--For purposes of 
     subsection (a)(2)(B), sales of electricity among and between 
     persons described in subparagraph (A)(ii) shall be treated as 
     sales between unrelated parties.''.
       (f) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to electricity produced and sold after the date of the 
     enactment of this Act, in taxable years ending after such 
     date.
       (2) Certain biomass facilities.--With respect to any 
     facility described in section 45(d)(3)(A)(ii) of the Internal 
     Revenue Code of 1986, as added by subsection (b)(1), which is 
     placed in service before the date of the enactment of this 
     Act, the amendments made by this section shall apply to 
     electricity produced and sold after December 31, 2003, in 
     taxable years ending after such date.
       (3) Credit rate for new facilities.--The amendments made by 
     subsection (c) shall apply to electricity produced and sold 
     after December 31, 2003, in taxable years ending after such 
     date.
       (4) Nonapplication of amendments to preeffective date 
     poultry waste facilities.--The amendments made by this 
     section shall not apply with respect to any poultry waste 
     facility (within the meaning of section 45(c)(3)(C), as in 
     effect on the day before the date of the enactment of this 
     Act) placed in service on or before such date of enactment.

       TITLE II--ALTERNATIVE MOTOR VEHICLES AND FUELS INCENTIVES

     SEC. 201. ALTERNATIVE MOTOR VEHICLE CREDIT.

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

     ``SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT.

       ``(a) Allowance of Credit.--There shall be allowed as a 
     credit against the tax imposed by this chapter for the 
     taxable year an amount equal to the sum of--
       ``(1) the new qualified fuel cell motor vehicle credit 
     determined under subsection (b),
       ``(2) the new qualified hybrid motor vehicle credit 
     determined under subsection (c), and
       ``(3) the new qualified alternative fuel motor vehicle 
     credit determined under subsection (d).
       ``(b) New Qualified Fuel Cell Motor Vehicle Credit.--
       ``(1) In general.--For purposes of subsection (a), the new 
     qualified fuel cell motor vehicle credit determined under 
     this subsection with respect to a new qualified fuel

[[Page S10302]]

     cell motor vehicle placed in service by the taxpayer during 
     the taxable year is--
       ``(A) $4,000, if such vehicle has a gross vehicle weight 
     rating of not more than 8,500 pounds,
       ``(B) $10,000, if such vehicle has a gross vehicle weight 
     rating of more than 8,500 pounds but not more than 14,000 
     pounds,
       ``(C) $20,000, if such vehicle has a gross vehicle weight 
     rating of more than 14,000 pounds but not more than 26,000 
     pounds, and
       ``(D) $40,000, if such vehicle has a gross vehicle weight 
     rating of more than 26,000 pounds.
       ``(2) Increase for fuel efficiency.--
       ``(A) In general.--The amount determined under paragraph 
     (1)(A) with respect to a new qualified fuel cell motor 
     vehicle which is a passenger automobile or light truck shall 
     be increased by--
       ``(i) $1,000, if such vehicle achieves at least 150 percent 
     but less than 175 percent of the 2002 model year city fuel 
     economy,
       ``(ii) $1,500, if such vehicle achieves at least 175 
     percent but less than 200 percent of the 2002 model year city 
     fuel economy,
       ``(iii) $2,000, if such vehicle achieves at least 200 
     percent but less than 225 percent of the 2002 model year city 
     fuel economy,
       ``(iv) $2,500, if such vehicle achieves at least 225 
     percent but less than 250 percent of the 2002 model year city 
     fuel economy,
       ``(v) $3,000, if such vehicle achieves at least 250 percent 
     but less than 275 percent of the 2002 model year city fuel 
     economy,
       ``(vi) $3,500, if such vehicle achieves at least 275 
     percent but less than 300 percent of the 2002 model year city 
     fuel economy, and
       ``(vii) $4,000, if such vehicle achieves at least 300 
     percent of the 2002 model year city fuel economy.
       ``(B) 2002 model year city fuel economy.--For purposes of 
     subparagraph (A), the 2002 model year city fuel economy with 
     respect to a vehicle shall be determined in accordance with 
     the following tables:
       ``(i) In the case of a passenger automobile:
``If vehicle inertia weight clThe 2002 model year city fuel economy is:
1,500 or 1,750 lbs............................................45.2 mpg 
2,000 lbs.....................................................39.6 mpg 
2,250 lbs.....................................................35.2 mpg 
2,500 lbs.....................................................31.7 mpg 
2,750 lbs.....................................................28.8 mpg 
3,000 lbs.....................................................26.4 mpg 
3,500 lbs.....................................................22.6 mpg 
4,000 lbs.....................................................19.8 mpg 
4,500 lbs.....................................................17.6 mpg 
5,000 lbs.....................................................15.9 mpg 
5,500 lbs.....................................................14.4 mpg 
6,000 lbs.....................................................13.2 mpg 
6,500 lbs.....................................................12.2 mpg 
7,000 to 8,500 lbs............................................11.3 mpg.
       ``(ii) In the case of a light truck:

``If vehicle inertia weight clThe 2002 model year city fuel economy is:
1,500 or 1,750 lbs............................................39.4 mpg 
2,000 lbs.....................................................35.2 mpg 
2,250 lbs.....................................................31.8 mpg 
2,500 lbs.....................................................29.0 mpg 
2,750 lbs.....................................................26.8 mpg 
3,000 lbs.....................................................24.9 mpg 
3,500 lbs.....................................................21.8 mpg 
4,000 lbs.....................................................19.4 mpg 
4,500 lbs.....................................................17.6 mpg 
5,000 lbs.....................................................16.1 mpg 
5,500 lbs.....................................................14.8 mpg 
6,000 lbs.....................................................13.7 mpg 
6,500 lbs.....................................................12.8 mpg 
7,000 to 8,500 lbs............................................12.1 mpg.
       ``(C) Vehicle inertia weight class.--For purposes of 
     subparagraph (B), the term `vehicle inertia weight class' has 
     the same meaning as when defined in regulations prescribed by 
     the Administrator of the Environmental Protection Agency for 
     purposes of the administration of title II of the Clean Air 
     Act (42 U.S.C. 7521 et seq.).
       ``(3) New qualified fuel cell motor vehicle.--For purposes 
     of this subsection, the term `new qualified fuel cell motor 
     vehicle' means a motor vehicle--
       ``(A) which is propelled by power derived from 1 or more 
     cells which convert chemical energy directly into electricity 
     by combining oxygen with hydrogen fuel which is stored on 
     board the vehicle in any form and may or may not require 
     reformation prior to use,
       ``(B) which, in the case of a passenger automobile or light 
     truck--
       ``(i) for 2002 and later model vehicles, has received a 
     certificate of conformity under the Clean Air Act and meets 
     or exceeds the equivalent qualifying California low emission 
     vehicle standard under section 243(e)(2) of the Clean Air Act 
     for that make and model year, and
       ``(ii) for 2004 and later model vehicles, has received a 
     certificate that such vehicle meets or exceeds the Bin 5 Tier 
     II emission level established in regulations prescribed by 
     the Administrator of the Environmental Protection Agency 
     under section 202(i) of the Clean Air Act for that make and 
     model year vehicle,
       ``(C) the original use of which commences with the 
     taxpayer,
       ``(D) which is acquired for use or lease by the taxpayer 
     and not for resale, and
       ``(E) which is made by a manufacturer.
       ``(c) New Qualified Hybrid Motor Vehicle Credit.--
       ``(1) In general.--For purposes of subsection (a), the new 
     qualified hybrid motor vehicle credit determined under this 
     subsection with respect to a new qualified hybrid motor 
     vehicle placed in service by the taxpayer during the taxable 
     year is the credit amount determined under paragraph (2).
       ``(2) Credit amount.--
       ``(A) In general.--The credit amount determined under this 
     paragraph shall be determined in accordance with the 
     following tables:
       ``(i) In the case of a new qualified hybrid motor vehicle 
     which is a passenger automobile, medium duty passenger 
     vehicle, or light truck and which provides the following 
     percentage of the maximum available power:

``If percentage of the maximum available power is:The credit amount is:
  At least 4 percent but less than 10 percent.................$250 ....

  At least 10 percent but less than 20 percent................$500 ....

  At least 20 percent but less than 30 percent................$750 ....

  At least 30 percent.......................................$1,000.....

       ``(ii) In the case of a new qualified hybrid motor vehicle 
     which is a heavy duty hybrid motor vehicle and which provides 
     the following percentage of the maximum available power:

       ``(I) If such vehicle has a gross vehicle weight rating of 
     not more than 14,000 pounds:

``If percentage of the maximum available power is:The credit amount is:
  At least 20 percent but less than 30 percent..............$1,000 ....

  At least 30 percent but less than 40 percent..............$1,750 ....

  At least 40 percent but less than 50 percent..............$2,000 ....

  At least 50 percent but less than 60 percent..............$2,250 ....

  At least 60 percent.......................................$2,500.....

       ``(II) If such vehicle has a gross vehicle weight rating of 
     more than 14,000 but not more than 26,000 pounds:

``If percentage of the maximum available power is:The credit amount is:
  At least 20 percent but less than 30 percent..............$4,000 ....

  At least 30 percent but less than 40 percent..............$4,500 ....

  At least 40 percent but less than 50 percent..............$5,000 ....

  At least 50 percent but less than 60 percent..............$5,500 ....

  At least 60 percent.......................................$6,000.....

       ``(III) If such vehicle has a gross vehicle weight rating 
     of more than 26,000 pounds:

``If percentage of the maximum available power is:The credit amount is:
  At least 20 percent but less than 30 percent..............$6,000 ....

  At least 30 percent but less than 40 percent..............$7,000 ....

  At least 40 percent but less than 50 percent..............$8,000 ....

  At least 50 percent but less than 60 percent..............$9,000 ....

  At least 60 percent......................................$10,000.....

       ``(B) Increase for fuel efficiency.--
       ``(i) Amount.--The amount determined under subparagraph 
     (A)(i) with respect to a new qualified hybrid motor vehicle 
     which is a passenger automobile or light truck shall be 
     increased by--

       ``(I) $500, if such vehicle achieves at least 125 percent 
     but less than 150 percent of the 2002 model year city fuel 
     economy,
       ``(II) $1,000, if such vehicle achieves at least 150 
     percent but less than 175 percent of the 2002 model year city 
     fuel economy,
       ``(III) $1,500, if such vehicle achieves at least 175 
     percent but less than 200 percent of the 2002 model year city 
     fuel economy,
       ``(IV) $2,000, if such vehicle achieves at least 200 
     percent but less than 225 percent of the 2002 model year city 
     fuel economy,
       ``(V) $2,500, if such vehicle achieves at least 225 percent 
     but less than 250 percent of the 2002 model year city fuel 
     economy, and
       ``(VI) $3,000, if such vehicle achieves at least 250 
     percent of the 2002 model year city fuel economy.

       ``(ii) 2002 model year city fuel economy.--For purposes of 
     clause (i), the 2002 model year city fuel economy with 
     respect to a vehicle shall be determined on a gasoline gallon 
     equivalent basis as determined by the

[[Page S10303]]

     Administrator of the Environmental Protection Agency using 
     the tables provided in subsection (b)(2)(B) with respect to 
     such vehicle.
       ``(C) Increase for accelerated emissions performance.--The 
     amount determined under subparagraph (A)(ii) with respect to 
     an applicable heavy duty hybrid motor vehicle shall be 
     increased by the increased credit amount determined in 
     accordance with the following tables:
       ``(i) In the case of a vehicle which has a gross vehicle 
     weight rating of not more than 14,000 pounds:

``If the model year is:                 The increased credit amount is:
  2003......................................................$3,000 ....

  2004......................................................$2,500 ....

  2005......................................................$2,000 ....

  2006......................................................$1,500.....

       ``(ii) In the case of a vehicle which has a gross vehicle 
     weight rating of more than 14,000 pounds but not more than 
     26,000 pounds:

``If the model year is:               46The increased credit amount is:
  2003......................................................$7,750 ....

  2004......................................................$6,500 ....

  2005......................................................$5,250 ....

  2006......................................................$4,000.....

       ``(iii) In the case of a vehicle which has a gross vehicle 
     weight rating of more than 26,000 pounds:

``If the model year is:                 The increased credit amount is:
  2003.....................................................$12,000 ....

  2004.....................................................$10,000 ....

  2005......................................................$8,000 ....

  2006......................................................$6,000.....

       ``(D) Definitions relating to credit amount.--
       ``(i) Applicable heavy duty hybrid motor vehicle.--For 
     purposes of subparagraph (C), the term `applicable heavy duty 
     hybrid motor vehicle' means a heavy duty hybrid motor vehicle 
     which is powered by an internal combustion or heat engine 
     which is certified as meeting the emission standards set in 
     the regulations prescribed by the Administrator of the 
     Environmental Protection Agency for 2007 and later model year 
     diesel heavy duty engines, or for 2008 and later model year 
     ottocycle heavy duty engines, as applicable.
       ``(ii) Maximum available power.--

       ``(I) Passenger automobile, medium duty passenger vehicle, 
     or light truck.--For purposes of subparagraph (A)(i), the 
     term `maximum available power' means the maximum power 
     available from the rechargeable energy storage system, during 
     a standard 10 second pulse power or equivalent test, divided 
     by such maximum power and the SAE net power of the heat 
     engine.
       ``(II) Heavy duty hybrid motor vehicle.--For purposes of 
     subparagraph (A)(ii), the term `maximum available power' 
     means the maximum power available from the rechargeable 
     energy storage system, during a standard 10 second pulse 
     power or equivalent test, divided by the vehicle's total 
     traction power. The term `total traction power' means the sum 
     of the peak power from the rechargeable energy storage system 
     and the heat engine peak power of the vehicle, except that if 
     such storage system is the sole means by which the vehicle 
     can be driven, the total traction power is the peak power of 
     such storage system.

       ``(3) New qualified hybrid motor vehicle.--For purposes of 
     this subsection--
       ``(A) In general.--The term `new qualified hybrid motor 
     vehicle' means a motor vehicle--
       ``(i) which draws propulsion energy from onboard sources of 
     stored energy which are both--

       ``(I) an internal combustion or heat engine using 
     consumable fuel, and
       ``(II) a rechargeable energy storage system,

       ``(ii) which, in the case of a passenger automobile, medium 
     duty passenger vehicle, or light truck--

       ``(I) for 2002 and later model vehicles, has received a 
     certificate of conformity under the Clean Air Act and meets 
     or exceeds the equivalent qualifying California low emission 
     vehicle standard under section 243(e)(2) of the Clean Air Act 
     for that make and model year, and
       ``(II) for 2004 and later model vehicles, has received a 
     certificate that such vehicle meets or exceeds the Bin 5 Tier 
     II emission level established in regulations prescribed by 
     the Administrator of the Environmental Protection Agency 
     under section 202(i) of the Clean Air Act for that make and 
     model year vehicle,

       ``(iii) which, in the case of a heavy duty hybrid motor 
     vehicle, has an internal combustion or heat engine which has 
     received a certificate of conformity under the Clean Air Act 
     as meeting the emission standards set in the regulations 
     prescribed by the Administrator of the Environmental 
     Protection Agency for 2004 through 2007 model year diesel 
     heavy duty engines or ottocycle heavy duty engines, as 
     applicable,
       ``(iv) the original use of which commences with the 
     taxpayer,
       ``(v) which is acquired for use or lease by the taxpayer 
     and not for resale, and
       ``(vi) which is made by a manufacturer.
       ``(B) Consumable fuel.--For purposes of subparagraph 
     (A)(i)(I), the term `consumable fuel' means any solid, 
     liquid, or gaseous matter which releases energy when consumed 
     by an auxiliary power unit.
       ``(4) Heavy duty hybrid motor vehicle.--For purposes of 
     this subsection, the term `heavy duty hybrid motor vehicle' 
     means a new qualified hybrid motor vehicle which has a gross 
     vehicle weight rating of more than 8,500 pounds. Such term 
     does not include a medium duty passenger vehicle.
       ``(d) New Qualified Alternative Fuel Motor Vehicle 
     Credit.--
       ``(1) Allowance of credit.--Except as provided in paragraph 
     (5), the new qualified alternative fuel motor vehicle credit 
     determined under this subsection is an amount equal to the 
     applicable percentage of the incremental cost of any new 
     qualified alternative fuel motor vehicle placed in service by 
     the taxpayer during the taxable year.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage with respect to any new 
     qualified alternative fuel motor vehicle is--
       ``(A) 40 percent, plus
       ``(B) 30 percent, if such vehicle--
       ``(i) has received a certificate of conformity under the 
     Clean Air Act and meets or exceeds the most stringent 
     standard available for certification under the Clean Air Act 
     for that make and model year vehicle (other than a zero 
     emission standard), or
       ``(ii) has received an order certifying the vehicle as 
     meeting the same requirements as vehicles which may be sold 
     or leased in California and meets or exceeds the most 
     stringent standard available for certification under the 
     State laws of California (enacted in accordance with a waiver 
     granted under section 209(b) of the Clean Air Act) for that 
     make and model year vehicle (other than a zero emission 
     standard).

     For purposes of the preceding sentence, in the case of any 
     new qualified alternative fuel motor vehicle which weighs 
     more than 14,000 pounds gross vehicle weight rating, the most 
     stringent standard available shall be such standard available 
     for certification on the date of the enactment of the Energy 
     Tax Incentives Act of 2003.
       ``(3) Incremental cost.--For purposes of this subsection, 
     the incremental cost of any new qualified alternative fuel 
     motor vehicle is equal to the amount of the excess of the 
     manufacturer's suggested retail price for such vehicle over 
     such price for a gasoline or diesel fuel motor vehicle of the 
     same model, to the extent such amount does not exceed--
       ``(A) $5,000, if such vehicle has a gross vehicle weight 
     rating of not more than 8,500 pounds,
       ``(B) $10,000, if such vehicle has a gross vehicle weight 
     rating of more than 8,500 pounds but not more than 14,000 
     pounds,
       ``(C) $25,000, if such vehicle has a gross vehicle weight 
     rating of more than 14,000 pounds but not more than 26,000 
     pounds, and
       ``(D) $40,000, if such vehicle has a gross vehicle weight 
     rating of more than 26,000 pounds.
       ``(4) New qualified alternative fuel motor vehicle.--For 
     purposes of this subsection--
       ``(A) In general.--The term `new qualified alternative fuel 
     motor vehicle' means any motor vehicle--
       ``(i) which is only capable of operating on an alternative 
     fuel,
       ``(ii) the original use of which commences with the 
     taxpayer,
       ``(iii) which is acquired by the taxpayer for use or lease, 
     but not for resale, and
       ``(iv) which is made by a manufacturer.
       ``(B) Alternative fuel.--The term `alternative fuel' means 
     compressed natural gas, liquefied natural gas, liquefied 
     petroleum gas, hydrogen, and any liquid at least 85 percent 
     of the volume of which consists of methanol.
       ``(5) Credit for mixed-fuel vehicles.--
       ``(A) In general.--In the case of a mixed-fuel vehicle 
     placed in service by the taxpayer during the taxable year, 
     the credit determined under this subsection is an amount 
     equal to--
       ``(i) in the case of a 75/25 mixed-fuel vehicle, 70 percent 
     of the credit which would have been allowed under this 
     subsection if such vehicle was a qualified alternative fuel 
     motor vehicle, and
       ``(ii) in the case of a 90/10 mixed-fuel vehicle, 90 
     percent of the credit which would have been allowed under 
     this subsection if such vehicle was a qualified alternative 
     fuel motor vehicle.
       ``(B) Mixed-fuel vehicle.--For purposes of this subsection, 
     the term `mixed-fuel vehicle' means any motor vehicle 
     described in subparagraph (C) or (D) of paragraph (3), 
     which--
       ``(i) is certified by the manufacturer as being able to 
     perform efficiently in normal operation on a combination of 
     an alternative fuel and a petroleum-based fuel,
       ``(ii) either--

       ``(I) has received a certificate of conformity under the 
     Clean Air Act, or
       ``(II) has received an order certifying the vehicle as 
     meeting the same requirements as vehicles which may be sold 
     or leased in California and meets or exceeds the low emission 
     vehicle standard under section 88.105-94 of title 40, Code of 
     Federal Regulations, for that make and model year vehicle,

       ``(iii) the original use of which commences with the 
     taxpayer,
       ``(iv) which is acquired by the taxpayer for use or lease, 
     but not for resale, and
       ``(v) which is made by a manufacturer.
       ``(C) 75/25 mixed-fuel vehicle.--For purposes of this 
     subsection, the term `75/25 mixed-fuel vehicle' means a 
     mixed-fuel vehicle which operates using at least 75 percent 
     alternative fuel and not more than 25 percent petroleum-based 
     fuel.
       ``(D) 90/10 mixed-fuel vehicle.--For purposes of this 
     subsection, the term `90/10 mixed-fuel vehicle' means a 
     mixed-fuel vehicle which operates using at least 90 percent

[[Page S10304]]

     alternative fuel and not more than 10 percent petroleum-based 
     fuel.
       ``(e) Application With Other Credits.--The credit allowed 
     under subsection (a) for any taxable year shall not exceed 
     the excess (if any) of--
       ``(1) the regular tax for the taxable year reduced by the 
     sum of the credits allowable under subpart A and sections 27, 
     29, and 30, over
       ``(2) the tentative minimum tax for the taxable year.
       ``(f) Other Definitions and Special Rules.--
     For purposes of this section--
       ``(1) Motor vehicle.--The term `motor vehicle' has the 
     meaning given such term by section 30(c)(2).
       ``(2) City fuel economy.--The city fuel economy with 
     respect to any vehicle shall be measured in a manner which is 
     substantially similar to the manner city fuel economy is 
     measured in accordance with procedures under part 600 of 
     subchapter Q of chapter I of title 40, Code of Federal 
     Regulations, as in effect on the date of the enactment of 
     this section.
       ``(3) Other terms.--The terms `automobile', `passenger 
     automobile', `medium duty passenger vehicle', `light truck', 
     and `manufacturer' have the meanings given such terms in 
     regulations prescribed by the Administrator of the 
     Environmental Protection Agency for purposes of the 
     administration of title II of the Clean Air Act (42 U.S.C. 
     7521 et seq.).
       ``(4)  Reduction in basis.--For purposes of this subtitle, 
     the basis of any property for which a credit is allowable 
     under subsection (a) shall be reduced by the amount of such 
     credit so allowed (determined without regard to subsection 
     (e)).
       ``(5) No double benefit.--The amount of any deduction or 
     other credit allowable under this chapter--
       ``(A) for any incremental cost taken into account in 
     computing the amount of the credit determined under 
     subsection (d) shall be reduced by the amount of such credit 
     attributable to such cost, and
       ``(B) with respect to a vehicle described under subsection 
     (b) or (c), shall be reduced by the amount of credit allowed 
     under subsection (a) for such vehicle for the taxable year.
       ``(6) Property used by tax-exempt entities.--In the case of 
     a credit amount which is allowable with respect to a motor 
     vehicle which is acquired by an entity exempt from tax under 
     this chapter, the person which sells or leases such vehicle 
     to the entity shall be treated as the taxpayer with respect 
     to the vehicle for purposes of this section and the credit 
     shall be allowed to such person, but only if the person 
     clearly discloses to the entity at the time of any sale or 
     lease the specific amount of any credit otherwise allowable 
     to the entity under this section.
       ``(7) Recapture.--The Secretary shall, by regulations, 
     provide for recapturing the benefit of any credit allowable 
     under subsection (a) with respect to any property which 
     ceases to be property eligible for such credit (including 
     recapture in the case of a lease period of less than the 
     economic life of a vehicle).
       ``(8) Property used outside united states, etc., not 
     qualified.--No credit shall be allowed under subsection (a) 
     with respect to any property referred to in section 50(b) or 
     with respect to the portion of the cost of any property taken 
     into account under section 179.
       ``(9) Election to not take credit.--No credit shall be 
     allowed under subsection (a) for any vehicle if the taxpayer 
     elects to not have this section apply to such vehicle.
       ``(10) Carryback and carryforward allowed.--
       ``(A) In general.--If the credit allowable under subsection 
     (a) for a taxable year exceeds the amount of the limitation 
     under subsection (e) for such taxable year (in this paragraph 
     referred to as the `unused credit year'), such excess shall 
     be a credit carryback to each of the 3 taxable years 
     preceding the unused credit year and a credit carryforward to 
     each of the 20 taxable years following the unused credit 
     year, except that no excess may be carried to a taxable year 
     beginning before the date of the enactment of this paragraph.
       ``(B) Rules.--Rules similar to the rules of section 39 
     shall apply with respect to the credit carryback and credit 
     carryforward under subparagraph (A).
       ``(11) Interaction with air quality and motor vehicle 
     safety standards.--Unless otherwise provided in this section, 
     a motor vehicle shall not be considered eligible for a credit 
     under this section unless such vehicle is in compliance 
     with--
       ``(A) the applicable provisions of the Clean Air Act for 
     the applicable make and model year of the vehicle (or 
     applicable air quality provisions of State law in the case of 
     a State which has adopted such provision under a waiver under 
     section 209(b) of the Clean Air Act), and
       ``(B) the motor vehicle safety provisions of sections 30101 
     through 30169 of title 49, United States Code.
       ``(g) Regulations.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     Secretary shall promulgate such regulations as necessary to 
     carry out the provisions of this section.
       ``(2) Coordination in prescription of certain 
     regulations.--The Secretary of the Treasury, in coordination 
     with the Secretary of Transportation and the Administrator of 
     the Environmental Protection Agency, shall prescribe such 
     regulations as necessary to determine whether a motor vehicle 
     meets the requirements to be eligible for a credit under this 
     section.
       ``(h) Termination.--This section shall not apply to any 
     property purchased after--
       ``(1) in the case of a new qualified fuel cell motor 
     vehicle (as described in subsection (b)), December 31, 2011, 
     and
       ``(2) in the case of any other property, December 31, 
     2006.''.
       (b) Conforming Amendments.--
       (1) Section 1016(a) is amended by striking ``and'' at the 
     end of paragraph (27), by striking the period at the end of 
     paragraph (28) and inserting ``, and'', and by adding at the 
     end the following new paragraph:
       ``(29) to the extent provided in section 30B(f)(4).''.
       (2) Section 55(c)(2) is amended by inserting ``30B(e),'' 
     after ``30(b)(3),''.
       (3) Section 6501(m) is amended by inserting ``30B(f)(9),'' 
     after ``30(d)(4),''.
       (4) The table of sections for subpart B of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 30A the following new item:

``Sec. 30B. Alternative motor vehicle credit.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 202. MODIFICATION OF CREDIT FOR QUALIFIED ELECTRIC 
                   VEHICLES.

       (a) Amount of Credit.--
       (1) In general.--Section 30(a) (relating to allowance of 
     credit) is amended by striking ``10 percent of''.
       (2) Limitation of credit according to type of vehicle.--
     Section 30(b) (relating to limitations) is amended--
       (A) by striking paragraphs (1) and (2) and inserting the 
     following new paragraph:
       ``(1) Limitation according to type of vehicle.--The amount 
     of the credit allowed under subsection (a) for any vehicle 
     shall not exceed the greatest of the following amounts 
     applicable to such vehicle:
       ``(A) In the case of a vehicle with a gross vehicle weight 
     rating not exceeding 8,500 pounds--
       ``(i) except as provided in clause (ii) or (iii), $3,500,
       ``(ii) $6,000, if such vehicle is--

       ``(I) capable of a driving range of at least 100 miles on a 
     single charge of the vehicle's rechargeable batteries as 
     measured pursuant to the urban dynamometer schedules under 
     appendix I to part 86 of title 40, Code of Federal 
     Regulations, or
       ``(II) capable of a payload capacity of at least 1,000 
     pounds, and

       ``(iii) if such vehicle is a low-speed vehicle which 
     conforms to Standard 500 prescribed by the Secretary of 
     Transportation (49 C.F.R. 571.500), as in effect on the date 
     of the enactment of the Energy Tax Incentives Act of 2003, 
     the lesser of--

       ``(I) 10 percent of the manufacturer's suggested retail 
     price of the vehicle, or
       ``(II) $1,500.

       ``(B) In the case of a vehicle with a gross vehicle weight 
     rating exceeding 8,500 but not exceeding 14,000 pounds, 
     $10,000.
       ``(C) In the case of a vehicle with a gross vehicle weight 
     rating exceeding 14,000 but not exceeding 26,000 pounds, 
     $20,000.
       ``(D) In the case of a vehicle with a gross vehicle weight 
     rating exceeding 26,000 pounds, $40,000.'', and
       (B) by redesignating paragraph (3) as paragraph (2).
       (3) Conforming amendments.--
       (A) Section 53(d)(1)(B)(iii) is amended by striking 
     ``section 30(b)(3)(B)'' and inserting ``section 
     30(b)(2)(B)''.
       (B) Section 55(c)(2), as amended by this Act, is amended by 
     striking ``30(b)(3)'' and inserting ``30(b)(2)''.
       (b) Qualified Battery Electric Vehicle.--
       (1) In general.--Section 30(c)(1)(A) (defining qualified 
     electric vehicle) is amended to read as follows:
       ``(A) which is--
       ``(i) operated solely by use of a battery or battery pack, 
     or
       ``(ii) powered primarily through the use of an electric 
     battery or battery pack using a flywheel or capacitor which 
     stores energy produced by an electric motor through 
     regenerative braking to assist in vehicle operation,''.
       (2) Leased vehicles.--Section 30(c)(1)(C) is amended by 
     inserting ``or lease'' after ``use''.
       (3) Conforming amendments.--
       (A) Subsections (a), (b)(2), and (c) of section 30 are each 
     amended by inserting ``battery'' after ``qualified'' each 
     place it appears.
       (B) The heading of subsection (c) of section 30 is amended 
     by inserting ``Battery'' after ``Qualified''.
       (C) The heading of section 30 is amended by inserting 
     ``battery'' after ``qualified''.
       (D) The item relating to section 30 in the table of 
     sections for subpart B of part IV of subchapter A of chapter 
     1 is amended by inserting ``battery'' after ``qualified''.
       (E) Section 179A(c)(3) is amended by inserting ``battery'' 
     before ``electric''.
       (F) The heading of paragraph (3) of section 179A(c) is 
     amended by inserting ``battery'' before ``electric''.
       (c) Additional Special Rules.--Section 30(d) (relating to 
     special rules) is amended by adding at the end the following 
     new paragraphs:
       ``(5) No double benefit.--The amount of any deduction or 
     other credit allowable

[[Page S10305]]

     under this chapter for any cost taken into account in 
     computing the amount of the credit determined under 
     subsection (a) shall be reduced by the amount of such credit 
     attributable to such cost.
       ``(6) Property used by tax-exempt entities.--In the case of 
     a credit amount which is allowable with respect to a vehicle 
     which is acquired by an entity exempt from tax under this 
     chapter, the person which sells or leases such vehicle to the 
     entity shall be treated as the taxpayer with respect to the 
     vehicle for purposes of this section and the credit shall be 
     allowed to such person, but only if the person clearly 
     discloses to the entity at the time of any sale or lease the 
     specific amount of any credit otherwise allowable to the 
     entity under this section.
       ``(7) Carryback and carryforward allowed.--
       ``(A) In general.--If the credit allowable under subsection 
     (a) for a taxable year exceeds the amount of the limitation 
     under subsection (b)(2) for such taxable year (in this 
     paragraph referred to as the `unused credit year'), such 
     excess shall be a credit carryback to each of the 3 taxable 
     years preceding the unused credit year and a credit 
     carryforward to each of the 20 taxable years following the 
     unused credit year, except that no excess may be carried to a 
     taxable year beginning before the date of the enactment of 
     this paragraph.
       ``(B) Rules.--Rules similar to the rules of section 39 
     shall apply with respect to the credit carryback and credit 
     carryforward under subparagraph (A).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 203. CREDIT FOR INSTALLATION OF ALTERNATIVE FUELING 
                   STATIONS.

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

     ``SEC. 30C. CLEAN-FUEL VEHICLE REFUELING PROPERTY CREDIT.

       ``(a) Credit Allowed.--There shall be allowed as a credit 
     against the tax imposed by this chapter for the taxable year 
     an amount equal to 50 percent of the amount paid or incurred 
     by the taxpayer during the taxable year for the installation 
     of qualified clean-fuel vehicle refueling property.
       ``(b) Limitation.--The credit allowed under subsection 
     (a)--
       ``(1) with respect to any retail clean-fuel vehicle 
     refueling property, shall not exceed $30,000, and
       ``(2) with respect to any residential clean-fuel vehicle 
     refueling property, shall not exceed $1,000.
       ``(c) Year Credit Allowed.--Notwithstanding subsection (a), 
     no credit shall be allowed under subsection (a) with respect 
     to any qualified clean-fuel vehicle refueling property before 
     the taxable year in which the property is placed in service 
     by the taxpayer.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified clean-fuel vehicle refueling property.--The 
     term `qualified clean-fuel vehicle refueling property' has 
     the same meaning given such term by section 179A(d).
       ``(2) Residential clean-fuel vehicle refueling property.--
     The term `residential clean-fuel vehicle refueling property' 
     means qualified clean-fuel vehicle refueling property which 
     is installed on property which is used as the principal 
     residence (within the meaning of section 121) of the 
     taxpayer.
       ``(3) Retail clean-fuel vehicle refueling property.--The 
     term `retail clean-fuel vehicle refueling property' means 
     qualified clean-fuel vehicle refueling property which is 
     installed on property (other than property described in 
     paragraph (2)) used in a trade or business of the taxpayer.
       ``(e) Application With Other Credits.--The credit allowed 
     under subsection (a) for any taxable year shall not exceed 
     the excess (if any) of--
       ``(1) the regular tax for the taxable year reduced by the 
     sum of the credits allowable under subpart A and sections 27, 
     29, 30, and 30B, over
       ``(2) the tentative minimum tax for the taxable year.
       ``(f) Basis Reduction.--For purposes of this title, the 
     basis of any property shall be reduced by the portion of the 
     cost of such property taken into account under subsection 
     (a).
       ``(g) No Double Benefit.--
       ``(1) Coordination with other deductions and credits.--
     Except as provided in paragraph (2), the amount of any 
     deduction or other credit allowable under this chapter for 
     any cost taken into account in computing the amount of the 
     credit determined under subsection (a) shall be reduced by 
     the amount of such credit attributable to such cost.
       ``(2) No deduction allowed under section 179a.--No 
     deduction shall be allowed under section 179A with respect to 
     any property with respect to which a credit is allowed under 
     subsection (a).
       ``(h) Refueling Property Installed for Tax-Exempt 
     Entities.--In the case of qualified clean-fuel vehicle 
     refueling property installed on property owned or used by an 
     entity exempt from tax under this chapter, the person which 
     installs such refueling property for the entity shall be 
     treated as the taxpayer with respect to the refueling 
     property for purposes of this section (and such refueling 
     property shall be treated as retail clean-fuel vehicle 
     refueling property) and the credit shall be allowed to such 
     person, but only if the person clearly discloses to the 
     entity in any installation contract the specific amount of 
     the credit allowable under this section.
       ``(i) Carryforward Allowed.--
       ``(1) In general.--If the credit allowable under subsection 
     (a) for a taxable year exceeds the amount of the limitation 
     under subsection (e) for such taxable year, such excess shall 
     be a credit carryforward to each of the 20 taxable years 
     following such taxable year.
       ``(2) Rules.--Rules similar to the rules of section 39 
     shall apply with respect to the credit carryforward under 
     paragraph (1).
       ``(j) Special Rules.--Rules similar to the rules of 
     paragraphs (4) and (5) of section 179A(e) shall apply.
       ``(k) Regulations.--The Secretary shall prescribe such 
     regulations as necessary to carry out the provisions of this 
     section.
       ``(l) Termination.--This section shall not apply to any 
     property placed in service--
       ``(1) in the case of property relating to hydrogen, after 
     December 31, 2011, and
       ``(2) in the case of any other property, after December 31, 
     2007.''.
       (b) Modifications to Extension of Deduction for Certain 
     Refueling Property.--
       (1) In general.--Subsection (f) of section 179A is amended 
     to read as follows:
       ``(f) Termination.--This section shall not apply to any 
     property placed in service--
       ``(1) in the case of property relating to hydrogen, after 
     December 31, 2011, and
       ``(2) in the case of any other property, after December 31, 
     2007.''.
       (2) Extension of phaseout.--Section 179A(b)(1)(B) is 
     amended--
       (A) by striking ``calendar year 2004'' in clause (i) and 
     inserting ``calendar years 2004 and 2005 (calendar years 2004 
     through 2009 in the case of property relating to hydrogen) 
     '',
       (B) by striking ``2005'' in clause (ii) and inserting 
     ``2006 (calendar year 2010 in the case of property relating 
     to hydrogen)'', and
       (C) by striking ``2006'' in clause (iii) and inserting 
     ``2007 (calendar year 2011 in the case of property relating 
     to hydrogen)''.
       (c) Incentive for Production of Hydrogen at Qualified 
     Clean-Fuel Vehicle Refueling Property.--Section 179A(d) 
     (defining qualified clean-fuel vehicle refueling property) is 
     amended by adding at the end the following new flush 
     sentence:

     ``In the case of clean-burning fuel which is hydrogen 
     produced from another clean-burning fuel, paragraph (3)(A) 
     shall be applied by substituting `production, storage, or 
     dispensing' for `storage or dispensing' both places it 
     appears.''.
       (d) Conforming Amendments.--
       (1) Section 1016(a), as amended by this Act, is amended by 
     striking ``and'' at the end of paragraph (28), by striking 
     the period at the end of paragraph (29) and inserting ``, 
     and'', and by adding at the end the following new paragraph:
       ``(30) to the extent provided in section 30C(f).''.
       (2) Section 55(c)(2), as amended by this Act, is amended by 
     inserting ``30C(e),'' after ``30B(e),''.
       (3) The table of sections for subpart B of part IV of 
     subchapter A of chapter 1, as amended by this Act, is amended 
     by inserting after the item relating to section 30B the 
     following new item:

``Sec. 30C. Clean-fuel vehicle refueling property credit.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 204. CREDIT FOR RETAIL SALE OF ALTERNATIVE FUELS AS 
                   MOTOR VEHICLE FUEL.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits) is amended 
     by inserting after section 40 the following new section:

     ``SEC. 40A. CREDIT FOR RETAIL SALE OF ALTERNATIVE FUELS AS 
                   MOTOR VEHICLE FUEL.

       ``(a) General Rule.--For purposes of section 38, the 
     alternative fuel retail sales credit for any taxable year is 
     the applicable amount for each gasoline gallon equivalent of 
     alternative fuel sold at retail by the taxpayer during such 
     year as a fuel to propel any qualified motor vehicle.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Applicable amount.--The term `applicable amount' 
     means the amount determined in accordance with the following 
     table:

``In the case of any taxable year ending in--The applicable amount is--
2003...........................................................30 cents
2004...........................................................40 cents
2005 and 2006..................................................50 cents

       ``(2) Alternative fuel.--The term `alternative fuel' means 
     compressed natural gas, liquefied natural gas, liquefied 
     petroleum gas, hydrogen, or any liquid at least 85 percent of 
     the volume of which consists of methanol or ethanol.
       ``(3) Gasoline gallon equivalent.--The term `gasoline 
     gallon equivalent' means, with respect to any alternative 
     fuel, the amount (determined by the Secretary) of such fuel 
     having a Btu content of 114,000.
       ``(4) Qualified motor vehicle.--The term `qualified motor 
     vehicle' means any motor

[[Page S10306]]

     vehicle (as defined in section 30(c)(2)) which meets any 
     applicable Federal or State emissions standards with respect 
     to each fuel by which such vehicle is designed to be 
     propelled.
       ``(5) Sold at retail.--
       ``(A) In general.--The term `sold at retail' means the 
     sale, for a purpose other than resale, after manufacture, 
     production, or importation.
       ``(B) Use treated as sale.--If any person uses alternative 
     fuel (including any use after importation) as a fuel to 
     propel any new qualified alternative fuel motor vehicle (as 
     defined in section 30B(d)(4)) before such fuel is sold at 
     retail, then such use shall be treated in the same manner as 
     if such fuel were sold at retail as a fuel to propel such a 
     vehicle by such person.
       ``(c) No Double Benefit.--The amount of any deduction or 
     other credit allowable under this chapter for any fuel taken 
     into account in computing the amount of the credit determined 
     under subsection (a) shall be reduced by the amount of such 
     credit attributable to such fuel.
       ``(d) Pass-Thru in the Case of Estates and Trusts.--Under 
     regulations prescribed by the Secretary, rules similar to the 
     rules of subsection (d) of section 52 shall apply.
       ``(e) Termination.--This section shall not apply to any 
     fuel sold at retail after December 31, 2006.''.
       (b) Credit Treated as Business Credit.--Section 38(b) 
     (relating to current year business credit) is amended by 
     striking ``plus'' at the end of paragraph (14), by striking 
     the period at the end of paragraph (15) and inserting ``, 
     plus'', and by adding at the end the following new paragraph:
       ``(16) the alternative fuel retail sales credit determined 
     under section 40A(a).''.
       (c) Transitional Rule.--Section 39(d) (relating to 
     transitional rules) is amended by adding at the end the 
     following new paragraph:
       ``(11) No carryback of section 40a credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the alternative fuel 
     retail sales credit determined under section 40A(a) may be 
     carried back to a taxable year ending on or before the date 
     of the enactment of such section.''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 is amended by 
     inserting after the item relating to section 40 the following 
     new item:

``Sec. 40A. Credit for retail sale of alternative fuels as motor 
              vehicle fuel.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to fuel sold at retail after the date of the 
     enactment of this Act, in taxable years ending after such 
     date.

     SEC. 205. SMALL ETHANOL PRODUCER CREDIT.

       (a) Allocation of Alcohol Fuels Credit to Patrons of a 
     Cooperative.--Section 40(g) (relating to definitions and 
     special rules for eligible small ethanol producer credit) is 
     amended by adding at the end the following new paragraph:
       ``(6) Allocation of small ethanol producer credit to 
     patrons of cooperative.--
       ``(A) Election to allocate.--
       ``(i) In general.--In the case of a cooperative 
     organization described in section 1381(a), any portion of the 
     credit determined under subsection (a)(3) for the taxable 
     year may, at the election of the organization, be apportioned 
     pro rata among patrons of the organization on the basis of 
     the quantity or value of business done with or for such 
     patrons for the taxable year.
       ``(ii) Form and effect of election.--An election under 
     clause (i) for any taxable year shall be made on a timely 
     filed return for such year. Such election, once made, shall 
     be irrevocable for such taxable year.
       ``(B) Treatment of organizations and patrons.--The amount 
     of the credit apportioned to patrons under subparagraph (A)--
       ``(i) shall not be included in the amount determined under 
     subsection (a) with respect to the organization for the 
     taxable year, and
       ``(ii) shall be included in the amount determined under 
     subsection (a) for the taxable year of each patron for which 
     the patronage dividends for the taxable year described in 
     subparagraph (A) are included in gross income.
       ``(C) Special rules for decrease in credits for taxable 
     year.--If the amount of the credit of a cooperative 
     organization determined under subsection (a)(3) for a taxable 
     year is less than the amount of such credit shown on the 
     return of the cooperative organization for such year, an 
     amount equal to the excess of--
       ``(i) such reduction, over
       ``(ii) the amount not apportioned to such patrons under 
     subparagraph (A) for the taxable year,

     shall be treated as an increase in tax imposed by this 
     chapter on the organization. Such increase shall not be 
     treated as tax imposed by this chapter for purposes of 
     determining the amount of any credit under this chapter or 
     for purposes of section 55.''.
       (b) Improvements to Small Ethanol Producer Credit.--
       (1) Definition of small ethanol producer.--Section 40(g) 
     (relating to definitions and special rules for eligible small 
     ethanol producer credit) is amended by striking 
     ``30,000,000'' each place it appears and inserting 
     ``60,000,000''.
       (2) Small ethanol producer credit not a passive activity 
     credit.--Clause (i) of section 469(d)(2)(A) is amended by 
     striking ``subpart D'' and inserting ``subpart D, other than 
     section 40(a)(3),''.
       (3) Allowing credit against entire regular tax and minimum 
     tax.--
       (A) In general.--Subsection (c) of section 38 (relating to 
     limitation based on amount of tax) is amended by 
     redesignating paragraph (4) as paragraph (5) and by inserting 
     after paragraph (3) the following new paragraph:
       ``(4) Special rules for small ethanol producer credit.--
       ``(A) In general.--In the case of the small ethanol 
     producer credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to the credit, and
       ``(ii) in applying paragraph (1) to the credit--

       ``(I) the amounts in subparagraphs (A) and (B) thereof 
     shall be treated as being zero, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the small 
     ethanol producer credit).

       ``(B) Small ethanol producer credit.--For purposes of this 
     subsection, the term `small ethanol producer credit' means 
     the credit allowable under subsection (a) by reason of 
     section 40(a)(3).''.
       (B) Conforming amendments.--Subclause (II) of section 
     38(c)(2)(A)(ii) and subclause (II) of section 38(c)(3)(A)(ii) 
     are each amended by inserting ``or the small ethanol producer 
     credit'' after ``employee credit''.
       (4) Small ethanol producer credit not added back to income 
     under section 87.--Section 87 (relating to income inclusion 
     of alcohol fuel credit) is amended to read as follows:

     ``SEC. 87. ALCOHOL FUEL CREDIT.

       ``Gross income includes an amount equal to the sum of--
       ``(1) the amount of the alcohol mixture credit determined 
     with respect to the taxpayer for the taxable year under 
     section 40(a)(1), and
       ``(2) the alcohol credit determined with respect to the 
     taxpayer for the taxable year under section 40(a)(2).''.
       (c) Conforming Amendment.--Section 1388 (relating to 
     definitions and special rules for cooperative organizations) 
     is amended by adding at the end the following new subsection:
       ``(k) Cross Reference.--For provisions relating to the 
     apportionment of the alcohol fuels credit between cooperative 
     organizations and their patrons, see section 40(g)(6).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 206. INCREASED FLEXIBILITY IN ALCOHOL FUELS TAX CREDIT.

       (a) Alcohol Fuels Credit May Be Transferred.--Section 40 
     (relating to alcohol used as fuel) is amended by adding at 
     the end the following new subsection:
       ``(i) Credit May Be Transferred.--
       ``(1) In general.--A taxpayer may transfer any credit 
     allowable under paragraph (1) or (2) of subsection (a) with 
     respect to alcohol used in the production of ethyl tertiary 
     butyl ether through an assignment to a qualified assignee. 
     Such transfer may be revoked only with the consent of the 
     Secretary.
       ``(2) Qualified assignee.--For purposes of this subsection, 
     the term `qualified assignee' means any person who--
       ``(A) is liable for taxes imposed under section 4081,
       ``(B) is registered under section 4101, and
       ``(C) obtains a certificate from the taxpayer described in 
     paragraph (1) which identifies the amount of alcohol used in 
     such production.
       ``(3) Regulations.--The Secretary shall prescribe such 
     regulations as necessary to insure that any credit described 
     in paragraph (1) is claimed once and not reassigned by a 
     qualified assignee.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply on and after the date of the enactment of this 
     Act.

     SEC. 207. INCENTIVES FOR BIODIESEL.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by this Act, is amended by inserting after section 40A the 
     following new section:

     ``SEC. 40B. BIODIESEL USED AS FUEL.

       ``(a) General Rule.--For purposes of section 38, the 
     biodiesel fuels credit determined under this section for the 
     taxable year is an amount equal to the biodiesel mixture 
     credit.
       ``(b) Definition of Biodiesel Mixture Credit.--For purposes 
     of this section--
       ``(1) Biodiesel mixture credit.--
       ``(A) In general.--The biodiesel mixture credit of any 
     taxpayer for any taxable year is the sum of the products of 
     the biodiesel mixture rate for each qualified biodiesel 
     mixture and the number of gallons of such mixture of the 
     taxpayer for the taxable year.
       ``(B) Biodiesel mixture rate.--For purposes of subparagraph 
     (A), the biodiesel mixture rate for each qualified biodiesel 
     mixture shall be--
       ``(i) in the case of a mixture with only agri-biodiesel, 1 
     cent for each whole percentage point (not exceeding 20 
     percentage points) of agri-biodiesel in such mixture, and
       ``(ii) in the case of a mixture with recycled biodiesel, or 
     a combination of agri-biodiesel and recycled biodiesel, 0.5 
     cent for each whole percentage point (not exceeding 20 
     percentage points) of such biodiesel in such mixture.

[[Page S10307]]

       ``(2) Qualified biodiesel mixture.--
       ``(A) In general.--The term `qualified biodiesel mixture' 
     means a mixture of diesel fuel and biodiesel which--
       ``(i) is sold by the taxpayer producing such mixture to any 
     person for use as a fuel in a diesel-powered engine, or
       ``(ii) is used as a fuel in a diesel-powered engine by the 
     taxpayer producing such mixture.
       ``(B) Sale or use must be in trade or business, etc.--
       ``(i) In general.--The production of a qualified biodiesel 
     mixture shall be taken into account--

       ``(I) only if the sale or use described in subparagraph (A) 
     is in a trade or business of the taxpayer, and
       ``(II) for the taxable year in which such sale or use 
     occurs.

       ``(ii) Certification for agri-biodiesel.--Agri-biodiesel 
     used in the production of a qualified biodiesel mixture shall 
     be taken into account only if the taxpayer described in 
     subparagraph (A) obtains a certification from the producer of 
     the agri-biodiesel which identifies the product produced.
       ``(C) Casual off-farm production not eligible.--No credit 
     shall be allowed under this section with respect to any 
     casual off-farm production of a qualified biodiesel mixture.
       ``(c) Coordination With Credit Against Excise Tax.--The 
     amount of the credit determined under this section with 
     respect to any agri-biodiesel shall, under regulations 
     prescribed by the Secretary, be properly reduced to take into 
     account any benefit provided with respect to such agri-
     biodiesel solely by reason of the application of section 6426 
     or 6427(e).
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Biodiesel.--The term `biodiesel' means the monoalkyl 
     esters of long chain fatty acids for use in diesel-powered 
     engines which meet--
       ``(A) the registration requirements for fuels and fuel 
     additives established by the Environmental Protection Agency 
     under section 211 of the Clean Air Act (42 U.S.C. 7545), and
       ``(B) the requirements of the American Society of Testing 
     and Materials D6751.
       ``(2) Agri-biodiesel.--The term `agri-biodiesel' means 
     biodiesel derived solely from virgin oils. Such term shall 
     include esters derived from vegetable oils from corn, 
     soybeans, sunflower seeds, cottonseeds, canola, crambe, 
     rapeseeds, safflowers, flaxseeds, rice bran, and mustard 
     seeds, and from animal fats.
       ``(3) Recycled biodiesel.--The term `recycled biodiesel' 
     means biodiesel derived from nonvirgin vegetable oils or 
     nonvirgin animal fats.
       ``(4) Biodiesel mixture not used as a fuel, etc.--
       ``(A) Imposition of tax.--If--
       ``(i) any credit was determined under this section with 
     respect to biodiesel used in the production of any qualified 
     biodiesel mixture, and
       ``(ii) any person--

       ``(I) separates such biodiesel from the mixture, or

       ``(II) without separation, uses the mixture other than as a 
     fuel,

     then there is hereby imposed on such person a tax equal to 
     the product of the biodiesel mixture rate applicable under 
     subsection (b)(1)(B) and the number of gallons of the 
     mixture.
       ``(B) Applicable laws.--All provisions of law, including 
     penalties, shall, insofar as applicable and not inconsistent 
     with this section, apply in respect of any tax imposed under 
     subparagraph (A) as if such tax were imposed by section 4081 
     and not by this chapter.
       ``(5) Pass-thru in the case of estates and trusts.--Under 
     regulations prescribed by the Secretary, rules similar to the 
     rules of subsection (d) of section 52 shall apply.
       ``(e) Termination.--This section shall not apply to any 
     fuel sold after December 31, 2005.''.
       (b) Credit Treated as Part of General Business Credit.--
     Section 38(b) (relating to current year business credit), as 
     amended by this Act, is amended by striking ``plus'' at the 
     end of paragraph (15), by striking the period at the end of 
     paragraph (16) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(17) the biodiesel fuels credit determined under section 
     40B(a).''.
       (c) Conforming Amendments.--
       (1) Section 39(d), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(12) No carryback of biodiesel fuels credit before 
     effective date.--No portion of the unused business credit for 
     any taxable year which is attributable to the biodiesel fuels 
     credit determined under section 40B may be carried back to a 
     taxable year ending on or before the date of the enactment of 
     section 40B.''.
       (2) Section 196(c) is amended by striking ``and'' at the 
     end of paragraph (9), by striking the period at the end of 
     paragraph (10) and inserting ``, and'', and by adding at the 
     end the following new paragraph:
       ``(11) the biodiesel fuels credit determined under section 
     40B(a).''.
       (3) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by this Act, is amended 
     by adding after the item relating to section 40A the 
     following new item:

``Sec. 40B. Biodiesel used as fuel.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to fuel sold after the date of the enactment of 
     this Act, in taxable years ending after such date.

     SEC. 208. ALCOHOL FUEL AND BIODIESEL MIXTURES EXCISE TAX 
                   CREDIT.

       (a) In General.--Subchapter B of chapter 65 (relating to 
     rules of special application) is amended by inserting after 
     section 6425 the following new section:

     ``SEC. 6426. CREDIT FOR ALCOHOL FUEL AND BIODIESEL MIXTURES.

       ``(a) Allowance of Credits.--There shall be allowed as a 
     credit against the tax imposed by section 4081 an amount 
     equal to the sum of--
       ``(1) the alcohol fuel mixture credit, plus
       ``(2) the biodiesel mixture credit.
       ``(b) Alcohol Fuel Mixture Credit.--
       ``(1) In general.--For purposes of this section, the 
     alcohol fuel mixture credit is the applicable amount for each 
     gallon of alcohol used by the taxpayer in producing an 
     alcohol fuel mixture.
       ``(2) Applicable amount.--For purposes of this subsection--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the applicable amount is 52 cents (51 cents in the case of 
     any sale or use after 2004).
       ``(B) Mixtures not containing ethanol.--In the case of an 
     alcohol fuel mixture in which none of the alcohol consists of 
     ethanol, the applicable amount is 60 cents.
       ``(3) Alcohol fuel mixture.--For purposes of this 
     subsection, the term `alcohol fuel mixture' is a mixture 
     which--
       ``(A) consists of alcohol and a taxable fuel, and
       ``(B) is sold for use or used as a fuel by the taxpayer 
     producing the mixture.
       ``(4) Other definitions.--For purposes of this subsection--
       ``(A) Alcohol.--The term `alcohol' includes methanol and 
     ethanol but does not include--
       ``(i) alcohol produced from petroleum, natural gas, or coal 
     (including peat), or
       ``(ii) alcohol with a proof of less than 190 (determined 
     without regard to any added denaturants).

     Such term also includes an alcohol gallon equivalent of ethyl 
     tertiary butyl ether or other ethers produced from such 
     alcohol.
       ``(B) Taxable fuel.--The term `taxable fuel' has the 
     meaning given such term by section 4083(a)(1).
       ``(5) Termination.--This subsection shall not apply to any 
     sale or use for any period after December 31, 2010.
       ``(c) Biodiesel Mixture Credit.--
       ``(1) In general.--For purposes of this section, the 
     biodiesel mixture credit is the product of the applicable 
     amount and the number of gallons of agri-biodiesel used by 
     the taxpayer in producing any qualified biodiesel mixture 
     containing only agri-biodiesel, except that the number of 
     gallons of agri-biodiesel taken into account in determining 
     the credit shall not exceed 1 gallon for each 5 gallons of 
     qualified biodiesel mixture produced.
       ``(2) Applicable amount.--For purposes of this subsection, 
     the applicable amount is $1.00.
       ``(3) Definitions.--Any term used in this subsection which 
     is also used in section 40B shall have the meaning given such 
     term by section 40B.
       ``(4) Termination.--This subsection shall not apply to any 
     sale or use for any period after December 31, 2005.
       ``(d) Mixture not used as a fuel, etc.--
       ``(1) Imposition of tax.--If--
       ``(A) any credit was determined under this section with 
     respect to alcohol or agri-biodiesel used in the production 
     of any alcohol fuel mixture or qualified biodiesel mixture, 
     respectively, and
       ``(B) any person--
       ``(i) separates such alcohol or agri-biodiesel from the 
     mixture, or
       ``(ii) without separation, uses the mixture other than as a 
     fuel,
     then there is hereby imposed on such person a tax equal to 
     the product of the applicable amount and the number of 
     gallons of such alcohol or agri-biodiesel.
       ``(2) Applicable laws.--All provisions of law, including 
     penalties, shall, insofar as applicable and not inconsistent 
     with this section, apply in respect of any tax imposed under 
     paragraph (1) as if such tax were imposed by section 4081 and 
     not by this section.''.
       (b) Conforming Amendments.--
       (1) Section 40(c) is amended by striking ``section 4081(c), 
     or section 4091(c)'' and inserting ``section 4091(c), section 
     6426, section 6427(e), or section 6427(f)''.
       (2) Section 40(d)(4)(B) is amended by striking ``or 
     4081(c)''.
       (3) Section 40(e)(1) is amended--
       (A) by striking ``2007'' in subparagraph (A) and inserting 
     ``2010'', and
       (B) by striking ``2008'' in subparagraph (B) and inserting 
     ``2011''.
       (4) Section 40(h) is amended--
       (A) by striking ``2007'' in paragraph (1) and inserting 
     ``2010'', and
       (B) by striking ``, 2006, or 2007'' in the table contained 
     in paragraph (2) and inserting ``through 2010''.
       (5) Section 4041(b)(2)(B) is amended by striking ``a 
     substance other than petroleum or natural gas'' and inserting 
     ``coal (including peat)''.
       (6) Paragraph (1) of section 4041(k) is amended to read as 
     follows:
       ``(1) In general.--Under regulations prescribed by the 
     Secretary, in the case of the

[[Page S10308]]

     sale or use of any liquid at least 10 percent of which 
     consists of alcohol (as defined in section 6426(b)(4)(A)), 
     the rate of the tax imposed by subsection (c)(1) shall be the 
     comparable rate under section 4091(c).''.
       (7) Section 4081 is amended by striking subsection (c).
       (8) Paragraph (2) of section 4083(a) is amended to read as 
     follows:
       ``(2) Gasoline.--The term `gasoline'--
       ``(A) includes any gasoline blend, other than qualified 
     methanol or ethanol fuel (as defined in section 
     4041(b)(2)(B)) or a denaturant of alcohol (as defined in 
     section 6426(b)(4)(A)), and
       ``(B) includes, to the extent prescribed in regulations--
       ``(i) any gasoline blend stock, and
       ``(ii) any product commonly used as an additive in 
     gasoline.

     For purposes of subparagraph (B)(i), the term `gasoline blend 
     stock' means any petroleum product component of gasoline.''.
       (9) Section 6427 is amended by inserting after subsection 
     (d) the following new subsection:
       ``(e) Gasoline, Diesel Fuel, and Kerosene Used to Produce 
     Certain Alcohol Fuel and Biodiesel Mixtures.--
       ``(1) In general.--Except as provided in subsection (k), if 
     any gasoline, diesel fuel, or kerosene on which tax was 
     imposed by section 4081 is used by any person in producing a 
     mixture described in section 6426 which is sold or used in 
     such person's trade or business, the Secretary shall pay 
     (without interest) to such person an amount equal to the 
     alcohol fuel mixture credit or the biodiesel mixture credit 
     with respect to such gasoline, diesel fuel, or kerosene.
       ``(2) Coordination with other repayment provisions.--No 
     amount shall be payable under paragraph (1) with respect to 
     any gasoline, diesel fuel, or kerosene with respect to which 
     an amount is payable under subsection (b), (d), or (l) or 
     under section 6416(b)(2), 6420, 6421, or 6426.
       ``(3) Termination.--This subsection shall not apply with 
     respect to--
       ``(A) any alcohol fuel mixture (as defined in section 
     6426(b)(3)) sold or used after December 31, 2010, and
       ``(B) any qualified biodiesel mixture (within the meaning 
     of section 6426(c)(1)) sold or used after December 31, 
     2005.''.
       (10) Subsection (f) of section 6427 is amended to read as 
     follows:
       ``(f) Aviation Fuel Used to Produce Certain Alcohol 
     Fuels.--
       ``(1) In general.--Except as provided in subsection (k), if 
     any aviation fuel on which tax was imposed by section 4091 at 
     the regular tax rate is used by any person in producing a 
     mixture described in section 4091(c)(1)(A) which is sold or 
     used in such person's trade or business, the Secretary shall 
     pay (without interest) to such person an amount equal to the 
     excess of the regular tax rate over the incentive tax rate 
     with respect to such fuel.
       ``(2) Definitions.--For purposes of paragraph (1)--
       ``(A) Regular tax rate.--The term `regular tax rate' means 
     the aggregate rate of tax imposed by section 4091 determined 
     without regard to subsection (c) thereof.
       ``(B) Incentive tax rate.--The term `incentive tax rate' 
     means the aggregate rate of tax imposed by section 4091 with 
     respect to fuel described in subsection (c)(2) thereof.
       ``(3) Coordination with other repayment provisions.--No 
     amount shall be payable under paragraph (1) with respect to 
     any aviation fuel with respect to which an amount is payable 
     under subsection (d) or (l).
       ``(4) Termination.--This subsection shall not apply with 
     respect to any mixture sold or used after September 30, 
     2007.''.
       (11) Paragraphs (1) and (2) of section 6427(i) are amended 
     by inserting ``(f),'' after ``(d),''.
       (12) Section 6427(i)(3) is amended--
       (A) by striking ``subsection (f)'' both places it appears 
     in subparagraph (A) and inserting ``subsection (e)'',
       (B) by striking ``gasoline, diesel fuel, or kerosene used 
     to produce a qualified alcohol mixture (as defined in section 
     4081(c)(3))'' in subparagraph (A) and inserting ``a mixture 
     described in section 6426'',
       (C) by striking ``subsection (f)(1)'' in subparagraph (B) 
     and inserting ``subsection (e)(1)'',
       (D) by striking ``20 days of the date of the filing of such 
     claim'' in subparagraph (B) and inserting ``45 days of the 
     date of the filing of such claim (20 days in the case of an 
     electronic claim)'', and
       (E) by striking ``alcohol mixture'' in the heading and 
     inserting ``alcohol fuel and biodiesel mixture''.
       (13) Section 6427(o) is amended--
       (A) by striking paragraph (1) and inserting the following 
     new paragraph:
       ``(1) any tax is imposed by section 4081, and'',
       (B) by striking ``such gasohol'' in paragraph (2) and 
     inserting ``the alcohol fuel mixture (as defined in section 
     6426(b)(3))'',
       (C) by striking ``gasohol'' both places it appears in the 
     matter following paragraph (2) and inserting ``alcohol fuel 
     mixture'', and
       (D) by striking ``Gasohol'' in the heading and inserting 
     ``Alcohol Fuel Mixture''.
       (14) Section 9503(b)(1) is amended by adding at the end the 
     following new flush sentence:

     ``For purposes of this paragraph, taxes received under 
     sections 4041 and 4081 shall be determined without reduction 
     for credits under section 6426.''.
       (15) Section 9503(b)(4) is amended--
       (A) by adding ``or'' at the end of subparagraph (C),
       (B) by striking the comma at the end of subparagraph 
     (D)(iii) and inserting a period, and
       (C) by striking subparagraphs (E) and (F).
       (16) Section 9503(c)(2)(A)(i)(III) is amended by inserting 
     ``(other than subsection (e) thereof)'' after ``section 
     6427''.
       (17) Section 9503(e)(2) is amended by striking subparagraph 
     (B) and by redesignating subparagraphs (C), (D), and (E) as 
     subparagraphs (B), (C), and (D), respectively.
       (18) The table of sections for subchapter B of chapter 65 
     is amended by inserting after the item relating to section 
     6425 the following new item:

``Sec. 6426. Credit for alcohol fuel and biodiesel mixtures.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to fuel sold or used after September 30, 2003.
       (d) Format for Filing.--The Secretary of the Treasury shall 
     describe the electronic format for filing claims described in 
     section 6427(i)(3)(B) of the Internal Revenue Code of 1986 
     (as amended by subsection (b)(12)(D)) not later than 
     September 30, 2003.

     SEC. 209. SALE OF GASOLINE AND DIESEL FUEL AT DUTY-FREE SALES 
                   ENTERPRISES.

       (a) Prohibition.--Section 555(b) of the Tariff Act of 1930 
     (19 U.S.C. 1555(b)) is amended--
       (1) by redesignating paragraphs (6) through (8) as 
     paragraphs (7) through (9), respectively; and
       (2) by inserting after paragraph (5) the following:
       ``(6) Any gasoline or diesel fuel sold at a duty-free sales 
     enterprise shall be considered to be entered for consumption 
     into the customs territory of the United States.''.
       (b) Construction.--The amendments made by this section 
     shall not be construed to create any inference with respect 
     to the interpretation of any provision of law as such 
     provision was in effect on the day before the date of 
     enactment of this Act.
       (c) Effective date.--The amendments made by this section 
     shall take effect on the date of enactment of this Act.

        TITLE III--CONSERVATION AND ENERGY EFFICIENCY PROVISIONS

     SEC. 301. CREDIT FOR CONSTRUCTION OF NEW ENERGY EFFICIENT 
                   HOME.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

     ``SEC. 45G. NEW ENERGY EFFICIENT HOME CREDIT.

       ``(a) In General.--For purposes of section 38, in the case 
     of an eligible contractor, the credit determined under this 
     section for the taxable year is an amount equal to the 
     aggregate adjusted bases of all energy efficient property 
     installed in a qualifying new home during construction of 
     such home.
       ``(b) Limitations.--
       ``(1) Maximum credit.--
       ``(A) In general.--The credit allowed by this section with 
     respect to a qualifying new home shall not exceed--
       ``(i) in the case of a 30-percent home, $1,000, and
       ``(ii) in the case of a 50-percent home, $2,000.
       ``(B) 30- or 50-percent home.--For purposes of subparagraph 
     (A)--
       ``(i) 30-percent home.--The term `30-percent home' means--

       ``(I) a qualifying new home which is certified to have a 
     projected level of annual heating and cooling energy 
     consumption, measured in terms of average annual energy cost 
     to the homeowner, which is at least 30 percent less than the 
     annual level of heating and cooling energy consumption of a 
     qualifying new home constructed in accordance with the 
     standards of chapter 4 of the 2000 International Energy 
     Conservation Code, or
       ``(II) in the case of a qualifying new home which is a 
     manufactured home, a home which meets the applicable 
     standards required by the Administrator of the Environmental 
     Protection Agency under the Energy Star Labeled Homes 
     program.

       ``(ii) 50-percent home.--The term `50-percent home' means a 
     qualifying new home which would be described in clause (i)(I) 
     if 50 percent were substituted for 30 percent.
       ``(C) Prior credit amounts on same home taken into 
     account.--The amount of the credit otherwise allowable for 
     the taxable year with respect to a qualifying new home under 
     clause (i) or (ii) of subparagraph (A) shall be reduced by 
     the sum of the credits allowed under subsection (a) to any 
     taxpayer with respect to the home for all preceding taxable 
     years.
       ``(2) Coordination with certain credits.--For purposes of 
     this section--
       ``(A) the basis of any property referred to in subsection 
     (a) shall be reduced by that portion of the basis of any 
     property which is attributable to the rehabilitation credit 
     (as determined under section 47(a)) or to the energy credit 
     (as determined under section 48(a)), and
       ``(B) expenditures taken into account under section 25D, 
     47, or 48(a) shall not be taken into account under this 
     section.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Eligible contractor.--The term `eligible contractor' 
     means--
       ``(A) the person who constructed the qualifying new home, 
     or
       ``(B) in the case of a qualifying new home which is a 
     manufactured home, the manufactured home producer of such 
     home.


[[Page S10309]]


     If more than 1 person is described in subparagraph (A) or (B) 
     with respect to any qualifying new home, such term means the 
     person designated as such by the owner of such home.
       ``(2) Energy efficient property.--The term `energy 
     efficient property' means any energy efficient building 
     envelope component, and any energy efficient heating or 
     cooling equipment which can, individually or in combination 
     with other components, meet the requirements of this section.
       ``(3) Qualifying new home.--
       ``(A) In general.--The term `qualifying new home' means a 
     dwelling--
       ``(i) located in the United States,
       ``(ii) the construction of which is substantially completed 
     after the date of the enactment of this section, and
       ``(iii) the first use of which after construction is as a 
     principal residence (within the meaning of section 121).
       ``(B) Manufactured home included.--The term `qualifying new 
     home' includes a manufactured home conforming to Federal 
     Manufactured Home Construction and Safety Standards (24 
     C.F.R. 3280).
       ``(4) Construction.--The term `construction' includes 
     reconstruction and rehabilitation.
       ``(5) Building envelope component.--The term `building 
     envelope component' means--
       ``(A) any insulation material or system which is 
     specifically and primarily designed to reduce the heat loss 
     or gain of a qualifying new home when installed in or on such 
     home,
       ``(B) exterior windows (including skylights), and
       ``(C) exterior doors.
       ``(d) Certification.--
       ``(1) Method of certification.--
       ``(A) In general.--A certification described in subsection 
     (b)(1)(B) shall be determined either by a component-based 
     method or a performance-based method, or, in the case of a 
     qualifying new home which is a manufactured home, by a method 
     prescribed by the Administrator of the Environmental 
     Protection Agency under the Energy Star Labeled Homes 
     program.
       ``(B) Component-based method.--A component-based method is 
     a method which uses the applicable technical energy 
     efficiency specifications or ratings (including product 
     labeling requirements) for the energy efficient building 
     envelope component or energy efficient heating or cooling 
     equipment. The Secretary shall, in consultation with the 
     Administrator of the Environmental Protection Agency, develop 
     prescriptive component-based packages which are equivalent in 
     energy performance to properties which qualify under 
     subparagraph (C).
       ``(C) Performance-based method.--
       ``(i) In general.--A performance-based method is a method 
     which calculates projected energy usage and cost reductions 
     in the qualifying new home in relation to a new home--

       ``(I) heated by the same fuel type, and
       ``(II) constructed in accordance with the standards of 
     chapter 4 of the 2000 International Energy Conservation Code.

       ``(ii) Computer software.--Computer software shall be used 
     in support of a performance-based method certification under 
     clause (i). Such software shall meet procedures and methods 
     for calculating energy and cost savings in regulations 
     promulgated by the Secretary of Energy. Such regulations on 
     the specifications for software and verification protocols 
     shall be based on the 2001 California Residential Alternative 
     Calculation Method Approval Manual.
       ``(2) Provider.--A certification described in subsection 
     (b)(1)(B) shall be provided by--
       ``(A) in the case of a component-based method, a local 
     building regulatory authority, a utility, or a home energy 
     rating organization,
       ``(B) in the case of a performance-based method, an 
     individual recognized by an organization designated by the 
     Secretary for such purposes, or
       ``(C) in the case of a qualifying new home which is a 
     manufactured home, a manufactured home primary inspection 
     agency.
       ``(3) Form.--
       ``(A) In general.--A certification described in subsection 
     (b)(1)(B) shall be made in writing in a manner which 
     specifies in readily verifiable fashion the energy efficient 
     building envelope components and energy efficient heating or 
     cooling equipment installed and their respective rated energy 
     efficiency performance, and
       ``(i) in the case of a performance-based method, 
     accompanied by a written analysis documenting the proper 
     application of a permissible energy performance calculation 
     method to the specific circumstances of such qualifying new 
     home, and
       ``(ii) in the case of a qualifying new home which is a 
     manufactured home, accompanied by such documentation as 
     required by the Administrator of the Environmental Protection 
     Agency under the Energy Star Labeled Homes program.
       ``(B) Form provided to buyer.--A form documenting the 
     energy efficient building envelope components and energy 
     efficient heating or cooling equipment installed and their 
     rated energy efficiency performance shall be provided to the 
     buyer of the qualifying new home. The form shall include 
     labeled R-value for insulation products, NFRC-labeled U-
     factor and solar heat gain coefficient for windows, 
     skylights, and doors, labeled annual fuel utilization 
     efficiency (AFUE) ratings for furnaces and boilers, labeled 
     heating seasonal performance factor (HSPF) ratings for 
     electric heat pumps, and labeled seasonal energy efficiency 
     ratio (SEER) ratings for air conditioners.
       ``(C) Ratings label affixed in dwelling.--A permanent label 
     documenting the ratings in subparagraph (B) shall be affixed 
     to the front of the electrical distribution panel of the 
     qualifying new home, or shall be otherwise permanently 
     displayed in a readily inspectable location in such home.
       ``(4) Regulations.--
       ``(A) In general.--In prescribing regulations under this 
     subsection for performance-based certification methods, the 
     Secretary shall prescribe procedures for calculating annual 
     energy usage and cost reductions for heating and cooling and 
     for the reporting of the results. Such regulations shall--
       ``(i) provide that any calculation procedures be fuel 
     neutral such that the same energy efficiency measures allow a 
     qualifying new home to be eligible for the credit under this 
     section regardless of whether such home uses a gas or oil 
     furnace or boiler or an electric heat pump, and
       ``(ii) require that any computer software allow for the 
     printing of the Federal tax forms necessary for the credit 
     under this section and for the printing of forms for 
     disclosure to the homebuyer.
       ``(B) Providers.--For purposes of paragraph (2)(B), the 
     Secretary shall establish requirements for the designation of 
     individuals based on the requirements for energy consultants 
     and home energy raters specified by the Mortgage Industry 
     National Home Energy Rating Standards.
       ``(e) Application.--Subsection (a) shall apply to 
     qualifying new homes the construction of which is 
     substantially completed after the date of the enactment of 
     this section and purchased during the period beginning on 
     such date and ending on--
       ``(1) in the case of any 30-percent home, December 31, 
     2005, and
       ``(2) in the case of any 50-percent home, December 31, 
     2007.''.
       (b) Credit Made Part of General Business Credit.--Section 
     38(b) (relating to current year business credit), as amended 
     by this Act, is amended by striking ``plus'' at the end of 
     paragraph (16), by striking the period at the end of 
     paragraph (17) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(18) the new energy efficient home credit determined 
     under section 45G(a).''.
       (c) Denial of Double Benefit.--Section 280C (relating to 
     certain expenses for which credits are allowable) is amended 
     by adding at the end the following new subsection:
       ``(d) New Energy Efficient Home Expenses.--No deduction 
     shall be allowed for that portion of expenses for a 
     qualifying new home otherwise allowable as a deduction for 
     the taxable year which is equal to the amount of the credit 
     determined for such taxable year under section 45G(a).''.
       (d) Limitation on Carryback.--Section 39(d) (relating to 
     transition rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(13) No carryback of new energy efficient home credit 
     before effective date.--No portion of the unused business 
     credit for any taxable year which is attributable to the 
     credit determined under section 45G may be carried back to 
     any taxable year ending on or before the date of the 
     enactment of such section.''.
       (e) Deduction for Certain Unused Business Credits.--Section 
     196(c) (defining qualified business credits), as amended by 
     this Act, is amended by striking ``and'' at the end of 
     paragraph (10), by striking the period at the end of 
     paragraph (11) and inserting ``, and'', and by adding after 
     paragraph (11) the following new paragraph:
       ``(12) the new energy efficient home credit determined 
     under section 45G(a).''.
       (f) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45G. New energy efficient home credit.''.

       (g) Effective Date.--The amendments made by this section 
     shall apply to homes the construction of which is 
     substantially completed after the date of the enactment of 
     this Act.

     SEC. 302. CREDIT FOR ENERGY EFFICIENT APPLIANCES.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business-related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

     ``SEC. 45H. ENERGY EFFICIENT APPLIANCE CREDIT.

       ``(a) Allowance of Credit.--
       ``(1) In general.--For purposes of section 38, the energy 
     efficient appliance credit determined under this section for 
     the taxable year is an amount equal to the sum of the amounts 
     determined under paragraph (2) for qualified energy efficient 
     appliances produced by the taxpayer during the calendar year 
     ending with or within the taxable year.
       ``(2) Amount.--The amount determined under this paragraph 
     for any category described in subsection (b)(2)(B) shall be 
     the product of the applicable amount for appliances in the 
     category and the eligible production for the category.
       ``(b) Applicable Amount; Eligible Production.--For purposes 
     of subsection (a)--
       ``(1) Applicable amount.--The applicable amount is--

[[Page S10310]]

       ``(A) $50, in the case of--
       ``(i) a clothes washer which is manufactured with at least 
     a 1.42 MEF, or
       ``(ii) a refrigerator which consumes at least 10 percent 
     less kilowatt hours per year than the energy conservation 
     standards for refrigerators promulgated by the Department of 
     Energy and effective on July 1, 2001,
       ``(B) $100, in the case of--
       ``(i) a clothes washer which is manufactured with at least 
     a 1.50 MEF, or
       ``(ii) a refrigerator which consumes at least 15 percent 
     (20 percent in the case of a refrigerator manufactured after 
     2006) less kilowatt hours per year than such energy 
     conservation standards, and
       ``(C) $150, in the case of a refrigerator manufactured 
     before 2007 which consumes at least 20 percent less kilowatt 
     hours per year than such energy conservation standards.
       ``(2) Eligible production.--
       ``(A) In general.--The eligible production of each category 
     of qualified energy efficient appliances is the excess of--
       ``(i) the number of appliances in such category which are 
     produced by the taxpayer during such calendar year, over
       ``(ii) the average number of appliances in such category 
     which were produced by the taxpayer during calendar years 
     2000, 2001, and 2002.
       ``(B) Categories.--For purposes of subparagraph (A), the 
     categories are--
       ``(i) clothes washers described in paragraph (1)(A)(i),
       ``(ii) clothes washers described in paragraph (1)(B)(i),
       ``(iii) refrigerators described in paragraph (1)(A)(ii),
       ``(iv) refrigerators described in paragraph (1)(B)(ii), and
       ``(v) refrigerators described in paragraph (1)(C).
       ``(c) Limitation on Maximum Credit.--
       ``(1) In general.--The amount of credit allowed under 
     subsection (a) with respect to a taxpayer for all taxable 
     years shall not exceed $60,000,000, of which not more than 
     $30,000,000 may be allowed with respect to the credit 
     determined by using the applicable amount under subsection 
     (b)(1)(A).
       ``(2) Limitation based on gross receipts.--The credit 
     allowed under subsection (a) with respect to a taxpayer for 
     the taxable year shall not exceed an amount equal to 2 
     percent of the average annual gross receipts of the taxpayer 
     for the 3 taxable years preceding the taxable year in which 
     the credit is determined.
       ``(3) Gross receipts.--For purposes of this subsection, the 
     rules of paragraphs (2) and (3) of section 448(c) shall 
     apply.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified energy efficient appliance.--The term 
     `qualified energy efficient appliance' means--
       ``(A) a clothes washer described in subparagraph (A)(i) or 
     (B)(i) of subsection (b)(1), or
       ``(B) a refrigerator described in subparagraph (A)(ii), 
     (B)(ii), or (C) of subsection (b)(1).
       ``(2) Clothes washer.--The term `clothes washer' means a 
     residential clothes washer, including a residential style 
     coin operated washer.
       ``(3) Refrigerator.--The term `refrigerator' means an 
     automatic defrost refrigerator-freezer which has an internal 
     volume of at least 16.5 cubic feet.
       ``(4) MEF.--The term `MEF' means Modified Energy Factor (as 
     determined by the Secretary of Energy).
       ``(e) Special Rules.--
       ``(1) In general.--Rules similar to the rules of 
     subsections (c), (d), and (e) of section 52 shall apply for 
     purposes of this section.
       ``(2) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52 or 
     subsection (m) or (o) of section 414 shall be treated as 1 
     person for purposes of subsection (a).
       ``(f) Verification.--The taxpayer shall submit such 
     information or certification as the Secretary, in 
     consultation with the Secretary of Energy, determines 
     necessary to claim the credit amount under subsection (a).
       ``(g) Termination.--This section shall not apply--
       ``(1) with respect to refrigerators described in subsection 
     (b)(1)(A)(ii) produced after December 31, 2004, and
       ``(2) with respect to all other qualified energy efficient 
     appliances produced after December 31, 2007.''.
       (b) Credit Made Part of General Business Credit.--Section 
     38(b) (relating to current year business credit), as amended 
     by this Act, is amended by striking ``plus'' at the end of 
     paragraph (17), by striking the period at the end of 
     paragraph (18) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(19) the energy efficient appliance credit determined 
     under section 45H(a).''.
       (c) Limitation on Carryback.--Section 39(d) (relating to 
     transition rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(14) No carryback of energy efficient appliance credit 
     before effective date.--No portion of the unused business 
     credit for any taxable year which is attributable to the 
     energy efficient appliance credit determined under section 
     45H may be carried to a taxable year ending on or before the 
     date of the enactment of such section.''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45H. Energy efficient appliance credit.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to appliances produced after the date of the 
     enactment of this Act, in taxable years ending after such 
     date.

     SEC. 303. CREDIT FOR RESIDENTIAL ENERGY EFFICIENT PROPERTY.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits) is 
     amended by inserting after section 25B the following new 
     section:

     ``SEC. 25C. RESIDENTIAL ENERGY EFFICIENT PROPERTY.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to the sum 
     of--
       ``(1) 15 percent of the qualified photovoltaic property 
     expenditures made by the taxpayer during such year,
       ``(2) 15 percent of the qualified solar water heating 
     property expenditures made by the taxpayer during such year,
       ``(3) 30 percent of the qualified fuel cell property 
     expenditures made by the taxpayer during such year,
       ``(4) 30 percent of the qualified wind energy property 
     expenditures made by the taxpayer during such year, and
       ``(5) the sum of the qualified Tier 2 energy efficient 
     building property expenditures made by the taxpayer during 
     such year.
       ``(b) Limitations.--
       ``(1) Maximum credit.--The credit allowed under subsection 
     (a) shall not exceed--
       ``(A) $2,000 for property described in paragraph (1), (2), 
     or (5) of subsection (d),
       ``(B) $500 for each 0.5 kilowatt of capacity of property 
     described in subsection (d)(4), and
       ``(C) for property described in subsection (d)(6)--
       ``(i) $75 for each electric heat pump water heater,
       ``(ii) $250 for each electric heat pump,
       ``(iii) $250 for each advanced natural gas, oil, or propane 
     furnace,
       ``(iv) $250 for each central air conditioner,
       ``(v) $75 for each natural gas, oil, or propane water 
     heater, and
       ``(vi) $250 for each geothermal heat pump.
       ``(2) Safety certifications.--No credit shall be allowed 
     under this section for an item of property unless--
       ``(A) in the case of solar water heating property, such 
     property is certified for performance and safety by the non-
     profit Solar Rating Certification Corporation or a comparable 
     entity endorsed by the government of the State in which such 
     property is installed,
       ``(B) in the case of a photovoltaic property, a fuel cell 
     property, or a wind energy property, such property meets 
     appropriate fire and electric code requirements, and
       ``(C) in the case of property described in subsection 
     (d)(6), such property meets the performance and quality 
     standards, and the certification requirements (if any), 
     which--
       ``(i) have been prescribed by the Secretary by regulations 
     (after consultation with the Secretary of Energy or the 
     Administrator of the Environmental Protection Agency, as 
     appropriate),
       ``(ii) in the case of the energy efficiency ratio (EER)--

       ``(I) require measurements to be based on published data 
     which is tested by manufacturers at 95 degrees Fahrenheit, 
     and
       ``(II) do not require ratings to be based on certified data 
     of the Air Conditioning and Refrigeration Institute, and

       ``(iii) are in effect at the time of the acquisition of the 
     property.
       ``(c) Carryforward of Unused Credit.--If the credit 
     allowable under subsection (a) exceeds the limitation imposed 
     by section 26(a) for such taxable year reduced by the sum of 
     the credits allowable under this subpart (other than this 
     section and section 25D), such excess shall be carried to the 
     succeeding taxable year and added to the credit allowable 
     under subsection (a) for such succeeding taxable year.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified solar water heating property expenditure.--
     The term `qualified solar water heating property expenditure' 
     means an expenditure for property to heat water for use in a 
     dwelling unit located in the United States and used as a 
     residence by the taxpayer if at least half of the energy used 
     by such property for such purpose is derived from the sun.
       ``(2) Qualified photovoltaic property expenditure.--The 
     term `qualified photovoltaic property expenditure' means an 
     expenditure for property which uses solar energy to generate 
     electricity for use in a dwelling unit located in the United 
     States and used as a residence by the taxpayer.
       ``(3) Solar panels.--No expenditure relating to a solar 
     panel or other property installed as a roof (or portion 
     thereof) shall fail to be treated as property described in 
     paragraph (1) or (2) solely because it constitutes a 
     structural component of the structure on which it is 
     installed.
       ``(4) Qualified fuel cell property expenditure.--The term 
     `qualified fuel cell property expenditure' means an 
     expenditure for qualified fuel cell property (as defined in 
     section 48(a)(4)) installed on or in connection with a 
     dwelling unit located in the United

[[Page S10311]]

     States and used as a principal residence (within the meaning 
     of section 121) by the taxpayer.
       ``(5) Qualified wind energy property expenditure.--The term 
     `qualified wind energy property expenditure' means an 
     expenditure for property which uses wind energy to generate 
     electricity for use in a dwelling unit located in the United 
     States and used as a residence by the taxpayer.
       ``(6) Qualified tier 2 energy efficient building property 
     expenditure.--
       ``(A) In general.--The term `qualified Tier 2 energy 
     efficient building property expenditure' means an expenditure 
     for any Tier 2 energy efficient building property.
       ``(B) Tier 2 energy efficient building property.--The term 
     `Tier 2 energy efficient building property' means--
       ``(i) an electric heat pump water heater which yields an 
     energy factor of at least 1.7 in the standard Department of 
     Energy test procedure,
       ``(ii) an electric heat pump which has a heating seasonal 
     performance factor (HSPF) of at least 9, a seasonal energy 
     efficiency ratio (SEER) of at least 15, and an energy 
     efficiency ratio (EER) of at least 12.5,
       ``(iii) an advanced natural gas, oil, or propane furnace 
     which achieves at least 95 percent annual fuel utilization 
     efficiency (AFUE),
       ``(iv) a central air conditioner which has a seasonal 
     energy efficiency ratio (SEER) of at least 15 and an energy 
     efficiency ratio (EER) of at least 12.5,
       ``(v) a natural gas, oil, or propane water heater which has 
     an energy factor of at least 0.80 in the standard Department 
     of Energy test procedure, and
       ``(vi) a geothermal heat pump which has an energy 
     efficiency ratio (EER) of at least 21.
       ``(7) Labor costs.--Expenditures for labor costs properly 
     allocable to the onsite preparation, assembly, or original 
     installation of the property described in paragraph (1), (2), 
     (4), (5), or (6) and for piping or wiring to interconnect 
     such property to the dwelling unit shall be taken into 
     account for purposes of this section.
       ``(8) Swimming pools, etc., used as storage medium.--
     Expenditures which are properly allocable to a swimming pool, 
     hot tub, or any other energy storage medium which has a 
     function other than the function of such storage shall not be 
     taken into account for purposes of this section.
       ``(e) Special Rules.--For purposes of this section--
       ``(1) Dollar amounts in case of joint occupancy.--In the 
     case of any dwelling unit which is jointly occupied and used 
     during any calendar year as a residence by 2 or more 
     individuals the following rules shall apply:
       ``(A) The amount of the credit allowable, under subsection 
     (a) by reason of expenditures (as the case may be) made 
     during such calendar year by any of such individuals with 
     respect to such dwelling unit shall be determined by treating 
     all of such individuals as 1 taxpayer whose taxable year is 
     such calendar year.
       ``(B) There shall be allowable, with respect to such 
     expenditures to each of such individuals, a credit under 
     subsection (a) for the taxable year in which such calendar 
     year ends in an amount which bears the same ratio to the 
     amount determined under subparagraph (A) as the amount of 
     such expenditures made by such individual during such 
     calendar year bears to the aggregate of such expenditures 
     made by all of such individuals during such calendar year.
       ``(2) Tenant-stockholder in cooperative housing 
     corporation.--In the case of an individual who is a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     individual shall be treated as having made his tenant-
     stockholder's proportionate share (as defined in section 
     216(b)(3)) of any expenditures of such corporation.
       ``(3) Condominiums.--
       ``(A) In general.--In the case of an individual who is a 
     member of a condominium management association with respect 
     to a condominium which the individual owns, such individual 
     shall be treated as having made the individual's 
     proportionate share of any expenditures of such association.
       ``(B) Condominium management association.--For purposes of 
     this paragraph, the term `condominium management association' 
     means an organization which meets the requirements of 
     paragraph (1) of section 528(c) (other than subparagraph (E) 
     thereof) with respect to a condominium project substantially 
     all of the units of which are used as residences.
       ``(4) Allocation in certain cases.--Except in the case of 
     qualified wind energy property expenditures, if less than 80 
     percent of the use of an item is for nonbusiness purposes, 
     only that portion of the expenditures for such item which is 
     properly allocable to use for nonbusiness purposes shall be 
     taken into account.
       ``(5) When expenditure made; amount of expenditure.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     an expenditure with respect to an item shall be treated as 
     made when the original installation of the item is completed.
       ``(B) Expenditures part of building construction.--In the 
     case of an expenditure in connection with the construction or 
     reconstruction of a structure, such expenditure shall be 
     treated as made when the original use of the constructed or 
     reconstructed structure by the taxpayer begins.
       ``(C) Amount.--The amount of any expenditure shall be the 
     cost thereof.
       ``(6) Property financed by subsidized energy financing.--
     For purposes of determining the amount of expenditures made 
     by any individual with respect to any dwelling unit, there 
     shall not be taken into account expenditures which are made 
     from subsidized energy financing (as defined in section 
     48(a)(5)(C)).
       ``(f) Basis Adjustments.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(g) Termination.--The credit allowed under this section 
     shall not apply to expenditures after December 31, 2007.''.
       (b) Credit Allowed Against Regular Tax and Alternative 
     Minimum Tax.--
       (1) In general.--Section 25C(b), as added by subsection 
     (a), is amended by adding at the end the following new 
     paragraph:
       ``(3) Limitation based on amount of tax.--The credit 
     allowed under subsection (a) for the taxable year shall not 
     exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under this subpart 
     (other than this section and section 25D) and section 27 for 
     the taxable year.''.
       (2) Conforming amendments.--
       (A) Section 25C(c), as added by subsection (a), is amended 
     by striking ``section 26(a) for such taxable year reduced by 
     the sum of the credits allowable under this subpart (other 
     than this section and section 25D)'' and inserting 
     ``subsection (b)(3)''.
       (B) Section 23(b)(4)(B) is amended by inserting ``and 
     section 25C'' after ``this section''.
       (C) Section 24(b)(3)(B) is amended by striking ``23 and 
     25B'' and inserting ``23, 25B, and 25C''.
       (D) Section 25(e)(1)(C) is amended by inserting ``25C,'' 
     after ``25B,''.
       (E) Section 25B(g)(2) is amended by striking ``section 23'' 
     and inserting ``sections 23 and 25C''.
       (F) Section 26(a)(1) is amended by striking ``and 25B'' and 
     inserting ``25B, and 25C''.
       (G) Section 904(h) is amended by striking ``and 25B'' and 
     inserting ``25B, and 25C''.
       (H) Section 1400C(d) is amended by striking ``and 25B'' and 
     inserting ``25B, and 25C''.
       (c) Additional Conforming Amendments.--
       (1) Section 23(c), as in effect for taxable years beginning 
     before January 1, 2004, is amended by striking ``section 
     1400C'' and inserting ``sections 25C and 1400C''.
       (2) Section 25(e)(1)(C), as in effect for taxable years 
     beginning before January 1, 2004, is amended by inserting ``, 
     25C,'' after ``sections 23''.
       (3) Section 1016(a), as amended by this Act, is amended by 
     striking ``and'' at the end of paragraph (29), by striking 
     the period at the end of paragraph (30) and inserting ``, 
     and'', and by adding at the end the following new paragraph:
       ``(31) to the extent provided in section 25C(f), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25C.''.
       (4) Section 1400C(d), as in effect for taxable years 
     beginning before January 1, 2004, is amended by inserting 
     ``and section 25C'' after ``this section''.
       (5) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 25B the following new item:

``Sec. 25C. Residential energy efficient property.''.
       (d) Effective Dates.--
       (1) In general.--Except as provided by paragraph (2), the 
     amendments made by this section shall apply to expenditures 
     after the date of the enactment of this Act, in taxable years 
     ending after such date.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 304. CREDIT FOR BUSINESS INSTALLATION OF QUALIFIED FUEL 
                   CELLS AND STATIONARY MICROTURBINE POWER PLANTS.

       (a) In General.--Section 48(a)(3)(A) (defining energy 
     property) is amended by striking ``or'' at the end of clause 
     (i), by adding ``or'' at the end of clause (ii), and by 
     inserting after clause (ii) the following new clause:
       ``(iii) qualified fuel cell property or qualified 
     microturbine property,''.
       (b) Qualified Fuel Cell Property; Qualified Microturbine 
     Property.--Section 48(a) (relating to energy credit) is 
     amended by redesignating paragraphs (4) and (5) as paragraphs 
     (5) and (6), respectively, and by inserting after paragraph 
     (3) the following new paragraph:
       ``(4) Qualified fuel cell property; qualified microturbine 
     property.--For purposes of this subsection--
       ``(A) Qualified fuel cell property.--
       ``(i) In general.--The term `qualified fuel cell property' 
     means a fuel cell power plant which--

       ``(I) generates at least 0.5 kilowatt of electricity using 
     an electrochemical process, and
       ``(II) has an electricity-only generation efficiency 
     greater than 30 percent.

       ``(ii) Limitation.--In the case of qualified fuel cell 
     property placed in service during

[[Page S10312]]

     the taxable year, the credit otherwise determined under 
     paragraph (1) for such year with respect to such property 
     shall not exceed an amount equal to $500 for each 0.5 
     kilowatt of capacity of such property.
       ``(iii) Fuel cell power plant.--The term `fuel cell power 
     plant' means an integrated system comprised of a fuel cell 
     stack assembly and associated balance of plant components 
     which converts a fuel into electricity using electrochemical 
     means.
       ``(iv) Termination.--The term `qualified fuel cell 
     property' shall not include any property placed in service 
     after December 31, 2007.
       ``(B) Qualified microturbine property.--
       ``(i) In general.--The term `qualified microturbine 
     property' means a stationary microturbine power plant which--

       ``(I) has a capacity of less than 2,000 kilowatts, and
       ``(II) has an electricity-only generation efficiency of not 
     less than 26 percent at International Standard Organization 
     conditions.

       ``(ii) Limitation.--In the case of qualified microturbine 
     property placed in service during the taxable year, the 
     credit otherwise determined under paragraph (1) for such year 
     with respect to such property shall not exceed an amount 
     equal $200 for each kilowatt of capacity of such property.
       ``(iii) Stationary microturbine power plant.--The term 
     `stationary microturbine power plant' means an integrated 
     system comprised of a gas turbine engine, a combustor, a 
     recuperator or regenerator, a generator or alternator, and 
     associated balance of plant components which converts a fuel 
     into electricity and thermal energy. Such term also includes 
     all secondary components located between the existing 
     infrastructure for fuel delivery and the existing 
     infrastructure for power distribution, including equipment 
     and controls for meeting relevant power standards, such as 
     voltage, frequency, and power factors.
       ``(iv) Termination.--The term `qualified microturbine 
     property' shall not include any property placed in service 
     after December 31, 2006.''.
       (c) Energy Percentage.--Section 48(a)(2)(A) (relating to 
     energy percentage) is amended to read as follows:
       ``(A) In general.--The energy percentage is--
       ``(i) in the case of qualified fuel cell property, 30 
     percent, and
       ``(ii) in the case of any other energy property, 10 
     percent.''.
       (d) Conforming Amendments.--
       (A) Section 29(b)(3)(A)(i)(III) is amended by striking 
     ``section 48(a)(4)(C)'' and inserting ``section 
     48(a)(5)(C)''.
       (B) Section 48(a)(1) is amended by inserting ``except as 
     provided in subparagraph (A)(ii) or (B)(ii) of paragraph 
     (4),'' before ``the energy''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date, under rules similar to the rules of section 48(m) of 
     the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of the Revenue 
     Reconciliation Act of 1990).

     SEC. 305. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

       (a) In General.--Part VI of subchapter B of chapter 1 
     (relating to itemized deductions for individuals and 
     corporations) is amended by inserting after section 179A the 
     following new section:

     ``SEC. 179B. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

       ``(a) In General.--There shall be allowed as a deduction 
     for the taxable year in which a building is placed in service 
     by a taxpayer, an amount equal to the energy efficient 
     commercial building property expenditures made by such 
     taxpayer with respect to the construction or reconstruction 
     of such building for the taxable year or any preceding 
     taxable year.
       ``(b) Maximum Amount of Deduction.--The amount of energy 
     efficient commercial building property expenditures taken 
     into account under subsection (a) shall not exceed an amount 
     equal to the product of--
       ``(1) $2.25, and
       ``(2) the square footage of the building with respect to 
     which the expenditures are made.
       ``(c) Energy Efficient Commercial Building Property 
     Expenditures.--For purposes of this section--
       ``(1) In general.--The term `energy efficient commercial 
     building property expenditures' means amounts paid or 
     incurred for energy efficient property installed on or in 
     connection with the construction or reconstruction of a 
     building--
       ``(A) for which depreciation is allowable under section 
     167,
       ``(B) which is located in the United States, and
       ``(C) which is the type of structure to which the Standard 
     90.1-2001 of the American Society of Heating, Refrigerating, 
     and Air Conditioning Engineers and the Illuminating 
     Engineering Society of North America is applicable.
     Such term includes expenditures for labor costs properly 
     allocable to the onsite preparation, assembly, or original 
     installation of the property.
       ``(2) Energy efficient property.--For purposes of paragraph 
     (1)--
       ``(A) In general.--The term `energy efficient property' 
     means any property which reduces total annual energy and 
     power costs with respect to the lighting, heating, cooling, 
     ventilation, and hot water supply systems of the building by 
     50 percent or more in comparison to a building which meets 
     the minimum requirements of Standard 90.1-2001 of the 
     American Society of Heating, Refrigerating, and Air 
     Conditioning Engineers and the Illuminating Engineering 
     Society of North America, using methods of calculation 
     described in subparagraph (B) and certified by qualified 
     individuals as provided under paragraph (5).
       ``(B) Methods of calculation.--The Secretary, in 
     consultation with the Secretary of Energy, shall promulgate 
     regulations which describe in detail methods for calculating 
     and verifying energy and power costs.
       ``(C) Computer software.--
       ``(i) In general.--Any calculation described in 
     subparagraph (B) shall be prepared by qualified computer 
     software.
       ``(ii) Qualified computer software.--For purposes of this 
     subparagraph, the term `qualified computer software' means 
     software--

       ``(I) for which the software designer has certified that 
     the software meets all procedures and detailed methods for 
     calculating energy and power costs as required by the 
     Secretary,
       ``(II) which provides such forms as required to be filed by 
     the Secretary in connection with energy efficiency of 
     property and the deduction allowed under this section, and
       ``(III) which provides a notice form which summarizes the 
     energy efficiency features of the building and its projected 
     annual energy costs.

       ``(3) Allocation of deduction for public property.--In the 
     case of energy efficient commercial building property 
     expenditures made by a public entity with respect to the 
     construction or reconstruction of a public building, the 
     Secretary shall promulgate regulations under which the value 
     of the deduction with respect to such expenditures which 
     would be allowable to the public entity under this section 
     (determined without regard to the tax-exempt status of such 
     entity) may be allocated to the person primarily responsible 
     for designing the energy efficient property. Such person 
     shall be treated as the taxpayer for purposes of this 
     section.
       ``(4) Notice to owner.--Any qualified individual providing 
     a certification under paragraph (5) shall provide an 
     explanation to the owner of the building regarding the energy 
     efficiency features of the building and its projected annual 
     energy costs as provided in the notice under paragraph 
     (2)(C)(ii)(III).
       ``(5) Certification.--
       ``(A) In general.--The Secretary shall prescribe procedures 
     for the inspection and testing for compliance of buildings by 
     qualified individuals described in subparagraph (B). Such 
     procedures shall be--
       ``(i) comparable, given the difference between commercial 
     and residential buildings, to the requirements in the 
     Mortgage Industry National Home Energy Rating Standards, and
       ``(ii) fuel neutral such that the same energy efficiency 
     measures allow a building to be eligible for the credit under 
     this section regardless of whether such building uses a gas 
     or oil furnace or boiler or an electric heat pump.
       ``(B) Qualified individuals.--Individuals qualified to 
     determine compliance shall be only those individuals who are 
     recognized by an organization certified by the Secretary for 
     such purposes. The Secretary may qualify a home energy 
     ratings organization, a local building regulatory authority, 
     a State or local energy office, a utility, or any other 
     organization which meets the requirements prescribed under 
     this paragraph.
       ``(C) Proficiency of qualified individuals.--The Secretary 
     shall consult with nonprofit organizations and State agencies 
     with expertise in energy efficiency calculations and 
     inspections to develop proficiency tests and training 
     programs to qualify individuals to determine compliance.
       ``(d) Basis Reduction.--For purposes of this subtitle, if a 
     deduction is allowed under this section with respect to any 
     energy efficient property, the basis of such property shall 
     be reduced by the amount of the deduction so allowed.
       ``(e) Regulations.--The Secretary shall promulgate such 
     regulations as necessary to take into account new 
     technologies regarding energy efficiency and renewable energy 
     for purposes of determining energy efficiency and savings 
     under this section.
       ``(f) Termination.--This section shall not apply with 
     respect to any energy efficient commercial building property 
     expenditures in connection with a building the construction 
     of which is not completed on or before December 31, 2009.''.
       (b) Conforming Amendments.--
       (1) Section 1016(a), as amended by this Act, is amended by 
     striking ``and'' at the end of paragraph (30), by striking 
     the period at the end of paragraph (31) and inserting ``, 
     and'', and by adding at the end the following new paragraph:
       ``(32) to the extent provided in section 179B(d).''.
       (2) Section 1245(a) is amended by inserting ``179B,'' after 
     ``179A,'' both places it appears in paragraphs (2)(C) and 
     (3)(C).
       (3) Section 1250(b)(3) is amended by inserting before the 
     period at the end of the first sentence ``or by section 
     179B''.
       (4) Section 263(a)(1) is amended by striking ``or'' at the 
     end of subparagraph (G), by striking the period at the end of 
     subparagraph (H) and inserting ``, or'', and by inserting 
     after subparagraph (H) the following new subparagraph:

[[Page S10313]]

       ``(I) expenditures for which a deduction is allowed under 
     section 179B.''.
       (5) Section 312(k)(3)(B) is amended by striking ``or 179A'' 
     each place it appears in the heading and text and inserting 
     ``, 179A, or 179B''.
       (c) Clerical Amendment.--The table of sections for part VI 
     of subchapter B of chapter 1 is amended by inserting after 
     section 179A the following new item:

``Sec. 179B. Energy efficient commercial buildings deduction.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 306. THREE-YEAR APPLICABLE RECOVERY PERIOD FOR 
                   DEPRECIATION OF QUALIFIED ENERGY MANAGEMENT 
                   DEVICES.

       (a) In General.--Section 168(e)(3)(A) (defining 3-year 
     property) is amended by striking ``and'' at the end of clause 
     (ii), by striking the period at the end of clause (iii) and 
     inserting ``, and'', and by adding at the end the following 
     new clause:
       ``(iv) any qualified energy management device.''.
       (b) Definition of Qualified Energy Management Device.--
     Section 168(i) (relating to definitions and special rules) is 
     amended by inserting at the end the following new paragraph:
       ``(15) Qualified energy management device.--
       ``(A) In general.--The term `qualified energy management 
     device' means any energy management device which is placed in 
     service before January 1, 2008, by a taxpayer who is a 
     supplier of electric energy or a provider of electric energy 
     services.
       ``(B) Energy management device.--For purposes of 
     subparagraph (A), the term `energy management device' means 
     any meter or metering device which is used by the taxpayer--
       ``(i) to measure and record electricity usage data on a 
     time-differentiated basis in at least 4 separate time 
     segments per day, and
       ``(ii) to provide such data on at least a monthly basis to 
     both consumers and the taxpayer.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 307. THREE-YEAR APPLICABLE RECOVERY PERIOD FOR 
                   DEPRECIATION OF QUALIFIED WATER SUBMETERING 
                   DEVICES.

       (a) In General.--Section 168(e)(3)(A) (defining 3-year 
     property), as amended by this Act, is amended by striking 
     ``and'' at the end of clause (iii), by striking the period at 
     the end of clause (iv) and inserting ``, and'', and by adding 
     at the end the following new clause:
       ``(v) any qualified water submetering device.''.
       (b) Definition of Qualified Water Submetering Device.--
     Section 168(i) (relating to definitions and special rules), 
     as amended by this Act, is amended by inserting at the end 
     the following new paragraph:
       ``(16) Qualified water submetering device.--
       ``(A) In general.--The term `qualified water submetering 
     device' means any water submetering device which is placed in 
     service before January 1, 2008, by a taxpayer who is an 
     eligible resupplier with respect to the unit for which the 
     device is placed in service.
       ``(B) Water submetering device.--For purposes of this 
     paragraph, the term `water submetering device' means any 
     submetering device which is used by the taxpayer--
       ``(i) to measure and record water usage data, and
       ``(ii) to provide such data on at least a monthly basis to 
     both consumers and the taxpayer.
       ``(C) Eligible resupplier.--For purposes of subparagraph 
     (A), the term `eligible resupplier' means any taxpayer who 
     purchases and installs qualified water submetering devices in 
     every unit in any multi-unit property.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 308. ENERGY CREDIT FOR COMBINED HEAT AND POWER SYSTEM 
                   PROPERTY.

       (a) In General.--Section 48(a)(3)(A) (defining energy 
     property), as amended by this Act, is amended by striking 
     ``or'' at the end of clause (ii), by adding ``or'' at the end 
     of clause (iii), and by inserting after clause (iii) the 
     following new clause:
       ``(iv) combined heat and power system property,''.
       (b) Combined Heat and Power System Property.--Section 48(a) 
     (relating to energy credit), as amended by this Act, is 
     amended by redesignating paragraphs (5) and (6) as paragraphs 
     (6) and (7), respectively, and by inserting after paragraph 
     (4) the following new paragraph:
       ``(5) Combined heat and power system property.--For 
     purposes of this subsection--
       ``(A) Combined heat and power system property.--The term 
     `combined heat and power system property' means property 
     comprising a system--
       ``(i) which uses the same energy source for the 
     simultaneous or sequential generation of electrical power, 
     mechanical shaft power, or both, in combination with the 
     generation of steam or other forms of useful thermal energy 
     (including heating and cooling applications),
       ``(ii) which has an electrical capacity of more than 50 
     kilowatts or a mechanical energy capacity of more than 67 
     horsepower or an equivalent combination of electrical and 
     mechanical energy capacities,
       ``(iii) which produces--

       ``(I) at least 20 percent of its total useful energy in the 
     form of thermal energy which is not used to produce 
     electrical or mechanical power (or combination thereof), and
       ``(II) at least 20 percent of its total useful energy in 
     the form of electrical or mechanical power (or combination 
     thereof),

       ``(iv) the energy efficiency percentage of which exceeds 60 
     percent (70 percent in the case of a system with an 
     electrical capacity in excess of 50 megawatts or a mechanical 
     energy capacity in excess of 67,000 horsepower, or an 
     equivalent combination of electrical and mechanical energy 
     capacities), and
       ``(v) which is placed in service before January 1, 2007.
       ``(B) Special rules.--
       ``(i) Energy efficiency percentage.--For purposes of 
     subparagraph (A)(iv), the energy efficiency percentage of a 
     system is the fraction--

       ``(I) the numerator of which is the total useful 
     electrical, thermal, and mechanical power produced by the 
     system at normal operating rates, and expected to be consumed 
     in its normal application, and
       ``(II) the denominator of which is the lower heating value 
     of the primary fuel source for the system.

       ``(ii) Determinations made on btu basis.--The energy 
     efficiency percentage and the percentages under subparagraph 
     (A)(iii) shall be determined on a Btu basis.
       ``(iii) Input and output property not included.--The term 
     `combined heat and power system property' does not include 
     property used to transport the energy source to the facility 
     or to distribute energy produced by the facility.
       ``(iv) Public utility property.--

       ``(I) Accounting rule for public utility property.--If the 
     combined heat and power system property is public utility 
     property (as defined in section 168(i)(10)), the taxpayer may 
     only claim the credit under this subsection if, with respect 
     to such property, the taxpayer uses a normalization method of 
     accounting.
       ``(II) Certain exception not to apply.--The matter 
     following paragraph (3)(D) shall not apply to combined heat 
     and power system property.

        ``(v) Nonapplication of certain rules.--For purposes of 
     determining if the term `combined heat and power system 
     property' includes technologies which generate electricity or 
     mechanical power using back-pressure steam turbines in place 
     of existing pressure-reducing valves or which make use of 
     waste heat from industrial processes such as by using organic 
     rankin, stirling, or kalina heat engine systems, subparagraph 
     (A) shall be applied without regard to clauses (i), (iii), 
     and (iv) thereof.
       ``(C) Extension of depreciation recovery period.--If a 
     taxpayer is allowed a credit under this section for a 
     combined heat and power system property which has a class 
     life of 15 years or less under section 168, such property 
     shall be treated as having a 22-year class life for purposes 
     of section 168.''.
       (c) Limitation on Carryback.--Section 39(d) (relating to 
     transition rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(15) No carryback of energy credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the energy credit with 
     respect to property described in section 48(a)(5) may be 
     carried back to a taxable year ending on or before the date 
     of the enactment of such section.''.
       (d) Conforming Amendments.--
       (A) Section 25C(e)(6), as added by this Act, is amended by 
     striking ``section 48(a)(5)(C)'' and inserting ``section 
     48(a)(6)(C)''.
       (B) Section 29(b)(3)(A)(i)(III), as amended by this Act, is 
     amended by striking ``section 48(a)(5)(C)'' and inserting 
     ``section 48(a)(6)(C)''.
       (e) Effective Date.--The amendments made by this subsection 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date, under rules similar to the rules of section 48(m) of 
     the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of the Revenue 
     Reconciliation Act of 1990).

     SEC. 309. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS TO 
                   EXISTING HOMES.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by this Act, is amended by inserting after section 
     25C the following new section:

     ``SEC. 25D. ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to 10 
     percent of the amount paid or incurred by the taxpayer for 
     qualified energy efficiency improvements installed during 
     such taxable year.
       ``(b) Limitation.--The credit allowed by this section with 
     respect to a dwelling for any taxable year shall not exceed 
     $300, reduced (but not below zero) by the sum of the credits 
     allowed under subsection (a) to the taxpayer with respect to 
     the dwelling for all preceding taxable years.

[[Page S10314]]

       ``(c) Carryforward of Unused Credit.--If the credit 
     allowable under subsection (a) exceeds the limitation imposed 
     by section 26(a) for such taxable year reduced by the sum of 
     the credits allowable under this subpart (other than this 
     section) for such taxable year, such excess shall be carried 
     to the succeeding taxable year and added to the credit 
     allowable under subsection (a) for such succeeding taxable 
     year.
       ``(d) Qualified Energy Efficiency Improvements.--For 
     purposes of this section, the term `qualified energy 
     efficiency improvements' means any energy efficient building 
     envelope component which is certified to meet or exceed the 
     prescriptive criteria for such component in the 2000 
     International Energy Conservation Code, or any combination of 
     energy efficiency measures which are certified as achieving 
     at least a 30 percent reduction in heating and cooling energy 
     usage for the dwelling (as measured in terms of energy cost 
     to the taxpayer), if--
       ``(1) such component or combination of measures is 
     installed in or on a dwelling which--
       ``(A) is located in the United States,
       ``(B) has not been treated as a qualifying new home for 
     purposes of any credit allowed under section 45G, and
       ``(C) is owned and used by the taxpayer as the taxpayer's 
     principal residence (within the meaning of section 121),
       ``(2) the original use of such component or combination of 
     measures commences with the taxpayer, and
       ``(3) such component or combination of measures reasonably 
     can be expected to remain in use for at least 5 years.
       ``(e) Certification.--
       ``(1) Methods of certification.--
       ``(A) Component-based method.--The certification described 
     in subsection (d) for any component described in such 
     subsection shall be determined on the basis of applicable 
     energy efficiency ratings (including product labeling 
     requirements) for affected building envelope components.
       ``(B) Performance-based method.--
       ``(i) In general.--The certification described in 
     subsection (d) for any combination of measures described in 
     such subsection shall be--

       ``(I) determined by comparing the projected heating and 
     cooling energy usage for the dwelling to such usage for such 
     dwelling in its original condition, and
       ``(II) accompanied by a written analysis documenting the 
     proper application of a permissible energy performance 
     calculation method to the specific circumstances of such 
     dwelling.

       ``(ii) Computer software.--Computer software shall be used 
     in support of a performance-based method certification under 
     clause (i). Such software shall meet procedures and methods 
     for calculating energy and cost savings in regulations 
     promulgated by the Secretary of Energy. Such regulations on 
     the specifications for software and verification protocols 
     shall be based on the 2001 California Residential Alternative 
     Calculation Method Approval Manual.
       ``(2) Provider.--A certification described in subsection 
     (d) shall be provided by--
       ``(A) in the case of the method described in paragraph 
     (1)(A), by a third party, such as a local building regulatory 
     authority, a utility, a manufactured home primary inspection 
     agency, or a home energy rating organization, or
       ``(B) in the case of the method described in paragraph 
     (1)(B), an individual recognized by an organization 
     designated by the Secretary for such purposes.
       ``(3) Form.--A certification described in subsection (d) 
     shall be made in writing on forms which specify in readily 
     inspectable fashion the energy efficient components and other 
     measures and their respective efficiency ratings, and which 
     include a permanent label affixed to the electrical 
     distribution panel of the dwelling.
       ``(4) Regulations.--
       ``(A) In general.--In prescribing regulations under this 
     subsection for certification methods described in paragraph 
     (1)(B), the Secretary, after examining the requirements for 
     energy consultants and home energy ratings providers 
     specified by the Mortgage Industry National Home Energy 
     Rating Standards, shall prescribe procedures for calculating 
     annual energy usage and cost reductions for heating and 
     cooling and for the reporting of the results. Such 
     regulations shall--
       ``(i) provide that any calculation procedures be fuel 
     neutral such that the same energy efficiency measures allow a 
     dwelling to be eligible for the credit under this section 
     regardless of whether such dwelling uses a gas or oil furnace 
     or boiler or an electric heat pump, and
       ``(ii) require that any computer software allow for the 
     printing of the Federal tax forms necessary for the credit 
     under this section and for the printing of forms for 
     disclosure to the owner of the dwelling.
       ``(B) Providers.--For purposes of paragraph (2)(B), the 
     Secretary shall establish requirements for the designation of 
     individuals based on the requirements for energy consultants 
     and home energy raters specified by the Mortgage Industry 
     National Home Energy Rating Standards.
       ``(f) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Dollar amounts in case of joint occupancy.--In the 
     case of any dwelling unit which is jointly occupied and used 
     during any calendar year as a residence by 2 or more 
     individuals the following rules shall apply:
       ``(A) The amount of the credit allowable under subsection 
     (a) by reason of expenditures for the qualified energy 
     efficiency improvements made during such calendar year by any 
     of such individuals with respect to such dwelling unit shall 
     be determined by treating all of such individuals as 1 
     taxpayer whose taxable year is such calendar year.
       ``(B) There shall be allowable, with respect to such 
     expenditures to each of such individuals, a credit under 
     subsection (a) for the taxable year in which such calendar 
     year ends in an amount which bears the same ratio to the 
     amount determined under subparagraph (A) as the amount of 
     such expenditures made by such individual during such 
     calendar year bears to the aggregate of such expenditures 
     made by all of such individuals during such calendar year.
       ``(2) Tenant-stockholder in cooperative housing 
     corporation.--In the case of an individual who is a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     individual shall be treated as having paid his tenant-
     stockholder's proportionate share (as defined in section 
     216(b)(3)) of the cost of qualified energy efficiency 
     improvements made by such corporation.
       ``(3) Condominiums.--
       ``(A) In general.--In the case of an individual who is a 
     member of a condominium management association with respect 
     to a condominium which the individual owns, such individual 
     shall be treated as having paid the individual's 
     proportionate share of the cost of qualified energy 
     efficiency improvements made by such association.
       ``(B) Condominium management association.--For purposes of 
     this paragraph, the term `condominium management association' 
     means an organization which meets the requirements of 
     paragraph (1) of section 528(c) (other than subparagraph (E) 
     thereof) with respect to a condominium project substantially 
     all of the units of which are used as residences.
       ``(4) Building envelope component.--The term `building 
     envelope component' means--
       ``(A) any insulation material or system which is 
     specifically and primarily designed to reduce the heat loss 
     or gain or a dwelling when installed in or on such dwelling,
       ``(B) exterior windows (including skylights), and
       ``(C) exterior doors.
       ``(5) Manufactured homes included.--For purposes of this 
     section, the term `dwelling' includes a manufactured home 
     which conforms to Federal Manufactured Home Construction and 
     Safety Standards (24 C.F.R. 3280).
       ``(g) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(h) Termination.--Subsection (a) shall not apply to 
     qualified energy efficiency improvements installed after 
     December 31, 2006.''.
       (b) Credit Allowed Against Regular Tax and Alternative 
     Minimum Tax.--
       (1) In general.--Section 25D(b), as added by subsection 
     (a), is amended by adding at the end the following new 
     paragraph:
       ``(3) Limitation based on amount of tax.--The credit 
     allowed under subsection (a) for the taxable year shall not 
     exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under this subpart 
     (other than this section) and section 27 for the taxable 
     year.''.
       (2) Conforming amendments.--
       (A) Section 25D(c), as added by subsection (a), is amended 
     by striking ``section 26(a) for such taxable year reduced by 
     the sum of the credits allowable under this subpart (other 
     than this section)'' and inserting ``subsection (b)(3)''.
       (B) Section 23(b)(4)(B), as amended by this Act, is amended 
     by striking ``section 25C'' and inserting ``sections 25C and 
     25D''.
       (C) Section 24(b)(3)(B), as amended by this Act, is amended 
     by striking ``and 25C'' and inserting ``25C, and 25D''.
       (D) Section 25(e)(1)(C), as amended by this Act, is amended 
     by inserting ``25D,'' after ``25C,''.
       (E) Section 25B(g)(2), as amended by this Act, is amended 
     by striking ``23 and 25C'' and inserting ``23, 25C, and 
     25D''.
       (F) Section 26(a)(1), as amended by this Act, is amended by 
     striking ``and 25C'' and inserting ``25C, and 25D''.
       (G) Section 904(h), as amended by this Act, is amended by 
     striking ``and 25C'' and inserting ``25C, and 25D''.
       (H) Section 1400C(d), as amended by this Act, is amended by 
     striking ``and 25C'' and inserting ``25C, and 25D''.
       (c) Additional Conforming Amendments.--
       (1) Section 23(c), as in effect for taxable years beginning 
     before January 1, 2004, and as amended by this Act, is 
     amended by inserting ``, 25D,'' after ``sections 25C''.
       (2) Section 25(e)(1)(C), as in effect for taxable years 
     beginning before January 1, 2004, and as amended by this Act, 
     is amended by inserting ``25D,'' after ``25C,''.
       (3) Section 1016(a), as amended by this Act, is amended by 
     striking ``and'' at the end of paragraph (31), by striking 
     the period at the end of paragraph (32) and inserting ``; 
     and'',

[[Page S10315]]

     and by adding at the end the following new paragraph:
       ``(33) to the extent provided in section 25D(g), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25D.''.
       (4) Section 1400C(d), as in effect for taxable years 
     beginning before January 1, 2004, and as amended by this Act, 
     is amended by striking ``section 25C'' and inserting 
     ``sections 25C and 25D''.
       (5) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1, as amended by this Act, is amended 
     by inserting after the item relating to section 25C the 
     following new item:

``Sec. 25D. Energy efficiency improvements to existing homes.''.
       (d) Effective Dates.--
       (1) In general.--Except as provided by paragraph (2), the 
     amendments made by this section shall apply to property 
     installed after the date of the enactment of this Act, in 
     taxable years ending after such date.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to taxable years beginning after December 31, 
     2003.

                    TITLE IV--CLEAN COAL INCENTIVES

Subtitle A--Credit for Emission Reductions and Efficiency Improvements 
        in Existing Coal-Based Electricity Generation Facilities

     SEC. 401. CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN COAL 
                   TECHNOLOGY UNIT.

       (a) Credit for Production From a Qualifying Clean Coal 
     Technology Unit.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

     ``SEC. 45I. CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN 
                   COAL TECHNOLOGY UNIT.

       ``(a) General Rule.--For purposes of section 38, the 
     qualifying clean coal technology production credit of any 
     taxpayer for any taxable year is equal to--
       ``(1) the applicable amount of clean coal technology 
     production credit, multiplied by
       ``(2) the applicable percentage of the sum of--
       ``(A) the kilowatt hours of electricity, plus
       ``(B) each 3,413 Btu of fuels or chemicals,
     produced by the taxpayer during such taxable year at a 
     qualifying clean coal technology unit, but only if such 
     production occurs during the 10-year period beginning on the 
     date the unit was returned to service after becoming a 
     qualifying clean coal technology unit.
       ``(b) Applicable Amount.--
       ``(1) In general.--For purposes of this section, the 
     applicable amount of clean coal technology production credit 
     is equal to $0.0034.
       ``(2) Inflation adjustment.--For calendar years after 2004, 
     the applicable amount of clean coal technology production 
     credit shall be adjusted by multiplying such amount by the 
     inflation adjustment factor for the calendar year in which 
     the amount is applied. If any amount as increased under the 
     preceding sentence is not a multiple of 0.01 cent, such 
     amount shall be rounded to the nearest multiple of 0.01 cent.
       ``(c) Applicable Percentage.--For purposes of this section, 
     with respect to any qualifying clean coal technology unit, 
     the applicable percentage is the percentage equal to the 
     ratio which the portion of the national megawatt capacity 
     limitation allocated to the taxpayer with respect to such 
     unit under subsection (e) bears to the total megawatt 
     capacity of such unit.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Qualifying clean coal technology unit.--The term 
     `qualifying clean coal technology unit' means a clean coal 
     technology unit of the taxpayer which--
       ``(A) on the date of the enactment of this section--
       ``(i) was a coal-based electricity generating steam 
     generator-turbine unit which was not a clean coal technology 
     unit, and
       ``(ii) had a nameplate capacity rating of not more than 300 
     megawatts,
       ``(B) becomes a clean coal technology unit as the result of 
     the retrofitting, repowering, or replacement of the unit with 
     clean coal technology during the 10-year period beginning on 
     the date of the enactment of this section,
       ``(C) is not receiving nor is scheduled to receive funding 
     under the Clean Coal Technology Program, the Power Plant 
     Improvement Initiative, or the Clean Coal Power Initiative 
     administered by the Secretary of Energy, and
       ``(D) receives an allocation of a portion of the national 
     megawatt capacity limitation under subsection (e).
       ``(2) Clean coal technology unit.--The term `clean coal 
     technology unit' means a unit which--
       ``(A) uses clean coal technology, including advanced 
     pulverized coal or atmospheric fluidized bed combustion, 
     pressurized fluidized bed combustion, integrated gasification 
     combined cycle, or any other technology, for the production 
     of electricity,
       ``(B) uses coal to produce 75 percent or more of its 
     thermal output as electricity,
       ``(C) has a design net heat rate of at least 500 less than 
     that of such unit as described in paragraph (1)(A),
       ``(D) has a maximum design net heat rate of not more than 
     9,500, and
       ``(E) meets the pollution control requirements of paragraph 
     (3).
       ``(3) Pollution control requirements.--
       ``(A) In general.--A unit meets the requirements of this 
     paragraph if--
       ``(i) its emissions of sulfur dioxide, nitrogen oxide, or 
     particulates meet the lower of the emission levels for each 
     such emission specified in--

       ``(I) subparagraph (B), or
       ``(II) the new source performance standards of the Clean 
     Air Act (42 U.S.C. 7411) which are in effect for the category 
     of source at the time of the retrofitting, repowering, or 
     replacement of the unit, and

       ``(ii) its emissions do not exceed any relevant emission 
     level specified by regulation pursuant to the hazardous air 
     pollutant requirements of the Clean Air Act (42 U.S.C. 7412) 
     in effect at the time of the retrofitting, repowering, or 
     replacement.
       ``(B) Specific levels.--The levels specified in this 
     subparagraph are--
       ``(i) in the case of sulfur dioxide emissions, 50 percent 
     of the sulfur dioxide emission levels specified in the new 
     source performance standards of the Clean Air Act (42 U.S.C. 
     7411) in effect on the date of the enactment of this section 
     for the category of source,
       ``(ii) in the case of nitrogen oxide emissions--

       ``(I) 0.1 pound per million Btu of heat input if the unit 
     is not a cyclone-fired boiler, and
       ``(II) if the unit is a cyclone-fired boiler, 15 percent of 
     the uncontrolled nitrogen oxide emissions from such boilers, 
     and

       ``(iii) in the case of particulate emissions, 0.02 pound 
     per million Btu of heat input.
       ``(4) Design net heat rate.--The design net heat rate with 
     respect to any unit, measured in Btu per kilowatt hour 
     (HHV)--
       ``(A) shall be based on the design annual heat input to and 
     the design annual net electrical power, fuels, and chemicals 
     output from such unit (determined without regard to such 
     unit's co-generation of steam),
       ``(B) shall be adjusted for the heat content of the design 
     coal to be used by the unit if it is less than 12,000 Btu per 
     pound according to the following formula:
     Design net heat rate = Unit net heat rate [l- {((12,000-
     design coal heat content, Btu per pound)/1,000) 0.013 ],
       ``(C) shall be corrected for the site reference conditions 
     of--
       ``(i) elevation above sea level of 500 feet,
       ``(ii) air pressure of 14.4 pounds per square inch absolute 
     (psia),
       ``(iii) temperature, dry bulb of 63 deg.F,
       ``(iv) temperature, wet bulb of 54 deg.F, and
       ``(v) relative humidity of 55 percent, and
       ``(D) if carbon capture controls have been installed with 
     respect to any qualifying unit and such controls remove at 
     least 50 percent of the unit's carbon dioxide emissions, 
     shall be adjusted up to the design heat rate level which 
     would have resulted without the installation of such 
     controls.
       ``(5) HHV.--The term `HHV' means higher heating value.
       ``(6) Application of certain rules.--The rules of 
     paragraphs (3), (4), and (5) of section 45(d) shall apply.
       ``(7) Inflation adjustment factor.--
       ``(A) In general.--The term `inflation adjustment factor' 
     means, with respect to a calendar year, a fraction the 
     numerator of which is the GDP implicit price deflator for the 
     preceding calendar year and the denominator of which is the 
     GDP implicit price deflator for the calendar year 2003.
       ``(B) GDP implicit price deflator.--The term `GDP implicit 
     price deflator' means, for any calendar year, the most recent 
     revision of the implicit price deflator for the gross 
     domestic product as of June 30 of such calendar year as 
     computed by the Department of Commerce before October 1 of 
     such calendar year.
       ``(8) Noncompliance with pollution laws.--For purposes of 
     this section, a unit which is not in compliance with the 
     applicable State and Federal pollution prevention, control, 
     and permit requirements for any period of time shall not be 
     considered to be a qualifying clean coal technology unit 
     during such period.
       ``(e) National Limitation on the Aggregate Capacity of 
     Qualifying Clean Coal Technology Units.--
       ``(1) In general.--For purposes of this section, the 
     national megawatt capacity limitation for qualifying clean 
     coal technology units is 4,000 megawatts.
       ``(2) Allocation of limitation.--The Secretary shall 
     allocate the national megawatt capacity limitation for 
     qualifying clean coal technology units in such manner as the 
     Secretary may prescribe under the regulations under paragraph 
     (3).
       ``(3) Regulations.--Not later than 6 months after the date 
     of the enactment of this section, the Secretary shall 
     prescribe such regulations as may be necessary or 
     appropriate--
       ``(A) to carry out the purposes of this subsection,
       ``(B) to limit the capacity of any qualifying clean coal 
     technology unit to which this section applies so that the 
     megawatt capacity allocated to any unit under this subsection 
     does not exceed 300 megawatts and the combined megawatt 
     capacity allocated to all such units when all such units are 
     placed in service during the 10-year period described in 
     subsection (d)(1)(B), does not exceed 4,000 megawatts,
       ``(C) to provide a certification process under which the 
     Secretary, in consultation with the Secretary of Energy, 
     shall approve and allocate the national megawatt capacity 
     limitation--
       ``(i) to encourage that units with the highest thermal 
     efficiencies, when adjusted for

[[Page S10316]]

     the heat content of the design coal and site reference 
     conditions described in subsection (d)(4)(C), and 
     environmental performance, be placed in service as soon as 
     possible, and
       ``(ii) to allocate capacity to taxpayers which have a 
     definite and credible plan for placing into commercial 
     operation a qualifying clean coal technology unit, 
     including--

       ``(I) a site,
       ``(II) contractual commitments for procurement and 
     construction or, in the case of regulated utilities, the 
     agreement of the State utility commission,
       ``(III) filings for all necessary preconstruction 
     approvals,
       ``(IV) a demonstrated record of having successfully 
     completed comparable projects on a timely basis, and

       ``(V) such other factors that the Secretary determines are 
     appropriate,

       ``(D) to allocate the national megawatt capacity limitation 
     to a portion of the capacity of a qualifying clean coal 
     technology unit if the Secretary determines that such an 
     allocation would maximize the amount of efficient production 
     encouraged with the available tax credits,
       ``(E) to set progress requirements and conditional 
     approvals so that capacity allocations for clean coal 
     technology units which become unlikely to meet the necessary 
     conditions for qualifying can be reallocated by the Secretary 
     to other clean coal technology units, and
       ``(F) to provide taxpayers with opportunities to correct 
     administrative errors and omissions with respect to 
     allocations and record keeping within a reasonable period 
     after discovery, taking into account the availability of 
     regulations and other administrative guidance from the 
     Secretary.''.
       (b) Credit Treated as Business Credit.--Section 38(b) 
     (relating to current year business credit), as amended by 
     this Act, is amended by striking ``plus'' at the end of 
     paragraph (18), by striking the period at the end of 
     paragraph (19) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(20) the qualifying clean coal technology production 
     credit determined under section 45I(a).''.
       (c) Transitional Rule.--Section 39(d) (relating to 
     transitional rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(16) No carryback of section 45i credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying clean 
     coal technology production credit determined under section 
     45I may be carried back to a taxable year ending on or before 
     the date of the enactment of such section.''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45I. Credit for production from a qualifying clean coal 
              technology unit.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to production after the date of the enactment of 
     this Act, in taxable years ending after such date.

 Subtitle B--Incentives for Early Commercial Applications of Advanced 
                        Clean Coal Technologies

     SEC. 411. CREDIT FOR INVESTMENT IN QUALIFYING ADVANCED CLEAN 
                   COAL TECHNOLOGY.

       (a) Allowance of Qualifying Advanced Clean Coal Technology 
     Unit Credit.--Section 46 (relating to amount of credit) is 
     amended by striking ``and'' at the end of paragraph (2), by 
     striking the period at the end of paragraph (3) and inserting 
     ``, and'', and by adding at the end the following new 
     paragraph:
       ``(4) the qualifying advanced clean coal technology unit 
     credit.''.
       (b) Amount of Qualifying Advanced Clean Coal Technology 
     Unit Credit.--Subpart E of part IV of subchapter A of chapter 
     1 (relating to rules for computing investment credit) is 
     amended by inserting after section 48 the following new 
     section:

     ``SEC. 48A. QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY UNIT 
                   CREDIT.

       ``(a) In General.--For purposes of section 46, the 
     qualifying advanced clean coal technology unit credit for any 
     taxable year is an amount equal to 10 percent of the 
     applicable percentage of the qualified investment in a 
     qualifying advanced clean coal technology unit for such 
     taxable year.
       ``(b) Qualifying Advanced Clean Coal Technology Unit.--
       ``(1) In general.--For purposes of subsection (a), the term 
     `qualifying advanced clean coal technology unit' means an 
     advanced clean coal technology unit of the taxpayer--
       ``(A)(i) in the case of a unit first placed in service 
     after the date of the enactment of this section, the original 
     use of which commences with the taxpayer, or
       ``(ii) in the case of the retrofitting or repowering of a 
     unit first placed in service before such date of enactment, 
     the retrofitting or repowering of which is completed by the 
     taxpayer after such date, or
       ``(B) which is depreciable under section 167,
       ``(C) which has a useful life of not less than 4 years,
       ``(D) which is located in the United States,
       ``(E) which is not receiving nor is scheduled to receive 
     funding under the Clean Coal Technology Program, the Power 
     Plant Improvement Initiative, or the Clean Coal Power 
     Initiative administered by the Secretary of Energy,
       ``(F) which is not a qualifying clean coal technology unit, 
     and
       ``(G) which receives an allocation of a portion of the 
     national megawatt capacity limitation under subsection (f).
       ``(2) Special rule for sale-leasebacks.--For purposes of 
     subparagraph (A) of paragraph (1), in the case of a unit 
     which--
       ``(A) is originally placed in service by a person, and
       ``(B) is sold and leased back by such person, or is leased 
     to such person, within 3 months after the date such unit was 
     originally placed in service, for a period of not less than 
     12 years,
     such unit shall be treated as originally placed in service 
     not earlier than the date on which such unit is used under 
     the leaseback (or lease) referred to in subparagraph (B). The 
     preceding sentence shall not apply to any property if the 
     lessee and lessor of such property make an election under 
     this sentence. Such an election, once made, may be revoked 
     only with the consent of the Secretary.
       ``(3) Noncompliance with pollution laws.--For purposes of 
     this subsection, a unit which is not in compliance with the 
     applicable State and Federal pollution prevention, control, 
     and permit requirements for any period of time shall not be 
     considered to be a qualifying advanced clean coal technology 
     unit during such period.
       ``(c) Applicable Percentage.--For purposes of this section, 
     with respect to any qualifying advanced clean coal technology 
     unit, the applicable percentage is the percentage equal to 
     the ratio which the portion of the national megawatt capacity 
     limitation allocated to the taxpayer with respect to such 
     unit under subsection (f) bears to the total megawatt 
     capacity of such unit.
       ``(d) Advanced Clean Coal Technology Unit.--For purposes of 
     this section--
       ``(1) In general.--The term `advanced clean coal technology 
     unit' means a new, retrofit, or repowering unit of the 
     taxpayer which--
       ``(A) is--
       ``(i) an eligible advanced pulverized coal or atmospheric 
     fluidized bed combustion technology unit,
       ``(ii) an eligible pressurized fluidized bed combustion 
     technology unit,
       ``(iii) an eligible integrated gasification combined cycle 
     technology unit, or
       ``(iv) an eligible other technology unit, and
       ``(B) meets the carbon emission rate requirements of 
     paragraph (6).
       ``(2) Eligible advanced pulverized coal or atmospheric 
     fluidized bed combustion technology unit.--The term `eligible 
     advanced pulverized coal or atmospheric fluidized bed 
     combustion technology unit' means a clean coal technology 
     unit using advanced pulverized coal or atmospheric fluidized 
     bed combustion technology which--
       ``(A) is placed in service after the date of the enactment 
     of this section and before January 1, 2013, and
       ``(B) has a design net heat rate of not more than 8,500 
     (8,900 in the case of units placed in service before 2009).
       ``(3) Eligible pressurized fluidized bed combustion 
     technology unit.--The term `eligible pressurized fluidized 
     bed combustion technology unit' means a clean coal technology 
     unit using pressurized fluidized bed combustion technology 
     which--
       ``(A) is placed in service after the date of the enactment 
     of this section and before January 1, 2017, and
       ``(B) has a design net heat rate of not more than 7,720 
     (8,900 in the case of units placed in service before 2009, 
     and 8,500 in the case of units placed in service after 2008 
     and before 2013).
       ``(4) Eligible integrated gasification combined cycle 
     technology unit.--The term `eligible integrated gasification 
     combined cycle technology unit' means a clean coal technology 
     unit using integrated gasification combined cycle technology, 
     with or without fuel or chemical co-production, which--
       ``(A) is placed in service after the date of the enactment 
     of this section and before January 1, 2017,
       ``(B) has a design net heat rate of not more than 7,720 
     (8,900 in the case of units placed in service before 2009, 
     and 8,500 in the case of units placed in service after 2008 
     and before 2013), and
       ``(C) has a net thermal efficiency (HHV) using coal with 
     fuel or chemical co-production of not less than 44.2 percent 
     (38.4 percent in the case of units placed in service before 
     2009, and 40.2 percent in the case of units placed in service 
     after 2008 and before 2013).
       ``(5) Eligible other technology unit.--The term `eligible 
     other technology unit' means a clean coal technology unit 
     using any other technology for the production of electricity 
     which is placed in service after the date of the enactment of 
     this section and before January 1, 2017.
       ``(6) Carbon emission rate requirements.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     a unit meets the requirements of this paragraph if--
       ``(i) in the case of a unit using design coal with a heat 
     content of not more than 9,000 Btu per pound, the carbon 
     emission rate is less than 0.60 pound of carbon per kilowatt 
     hour, and
       ``(ii) in the case of a unit using design coal with a heat 
     content of more than 9,000 Btu per pound, the carbon emission 
     rate is less than 0.54 pound of carbon per kilowatt hour.

[[Page S10317]]

       ``(B) Eligible other technology unit.--In the case of an 
     eligible other technology unit, subparagraph (A) shall be 
     applied by substituting `0.51' and `0.459' for `0.60' and 
     `0.54', respectively.
       ``(e) General Definitions.--Any term used in this section 
     which is also used in section 45I shall have the meaning 
     given such term in section 45I.
       ``(f) National Limitation on the Aggregate Capacity of 
     Advanced Clean Coal Technology Units.--
       ``(1) In general.--For purposes of subsection (b)(1)(G), 
     the national megawatt capacity limitation is--
       ``(A) for qualifying advanced clean coal technology units 
     using advanced pulverized coal or atmospheric fluidized bed 
     combustion technology, not more than 1,000 megawatts (not 
     more than 500 megawatts in the case of units placed in 
     service before 2009),
       ``(B) for such units using pressurized fluidized bed 
     combustion technology, not more than 500 megawatts (not more 
     than 250 megawatts in the case of units placed in service 
     before 2009),
       ``(C) for such units using integrated gasification combined 
     cycle technology, with or without fuel or chemical co-
     production, not more than 2,000 megawatts (not more than 750 
     megawatts in the case of units placed in service before 
     2009), and
       ``(D) for such units using other technology for the 
     production of electricity, not more than 500 megawatts (not 
     more than 250 megawatts in the case of units placed in 
     service before 2009).
       ``(2) Allocation of limitation.--The Secretary shall 
     allocate the national megawatt capacity limitation for 
     qualifying advanced clean coal technology units in such 
     manner as the Secretary may prescribe under the regulations 
     under paragraph (3).
       ``(3) Regulations.--Not later than 6 months after the date 
     of the enactment of this section, the Secretary shall 
     prescribe such regulations as may be necessary or 
     appropriate--
       ``(A) to carry out the purposes of this subsection and 
     section 45J,
       ``(B) to limit the capacity of any qualifying advanced 
     clean coal technology unit to which this section applies so 
     that the combined megawatt capacity of all such units to 
     which this section applies does not exceed 4,000 megawatts,
       ``(C) to provide a certification process described in 
     section 45I(e)(3)(C),
       ``(D) to carry out the purposes described in subparagraphs 
     (D), (E), and (F) of section 45I(e)(3), and
       ``(E) to reallocate capacity which is not allocated to any 
     technology described in subparagraphs (A) through (D) of 
     paragraph (1) because an insufficient number of qualifying 
     units request an allocation for such technology, to another 
     technology described in such subparagraphs in order to 
     maximize the amount of energy efficient production encouraged 
     with the available tax credits.
       ``(4) Selection criteria.--For purposes of this subsection, 
     the selection criteria for allocating the national megawatt 
     capacity limitation to qualifying advanced clean coal 
     technology units--
       ``(A) shall be established by the Secretary of Energy as 
     part of a competitive solicitation,
       ``(B) shall include primary criteria of minimum design net 
     heat rate, maximum design thermal efficiency, environmental 
     performance, and lowest cost to the Government, and
       ``(C) shall include supplemental criteria as determined 
     appropriate by the Secretary of Energy.
       ``(g) Qualified Investment.--For purposes of subsection 
     (a), the term `qualified investment' means, with respect to 
     any taxable year, the basis of a qualifying advanced clean 
     coal technology unit placed in service by the taxpayer during 
     such taxable year (in the case of a unit described in 
     subsection (b)(1)(A)(ii), only that portion of the basis of 
     such unit which is properly attributable to the retrofitting 
     or repowering of such unit).
       ``(h) Qualified Progress Expenditures.--
       ``(1) Increase in qualified investment.--In the case of a 
     taxpayer who has made an election under paragraph (5), the 
     amount of the qualified investment of such taxpayer for the 
     taxable year (determined under subsection (g) without regard 
     to this subsection) shall be increased by an amount equal to 
     the aggregate of each qualified progress expenditure for the 
     taxable year with respect to progress expenditure property.
       ``(2) Progress expenditure property defined.--For purposes 
     of this subsection, the term `progress expenditure property' 
     means any property being constructed by or for the taxpayer 
     and which it is reasonable to believe will qualify as a 
     qualifying advanced clean coal technology unit which is being 
     constructed by or for the taxpayer when it is placed in 
     service.
       ``(3) Qualified progress expenditures defined.--For 
     purposes of this subsection--
       ``(A) Self-constructed property.--In the case of any self-
     constructed property, the term `qualified progress 
     expenditures' means the amount which, for purposes of this 
     subpart, is properly chargeable (during such taxable year) to 
     capital account with respect to such property.
       ``(B) Nonself-constructed property.--In the case of 
     nonself-constructed property, the term `qualified progress 
     expenditures' means the amount paid during the taxable year 
     to another person for the construction of such property.
       ``(4) Other definitions.--For purposes of this subsection--
       ``(A) Self-constructed property.--The term `self-
     constructed property' means property for which it is 
     reasonable to believe that more than half of the construction 
     expenditures will be made directly by the taxpayer.
       ``(B) Nonself-constructed property.--The term `nonself-
     constructed property' means property which is not self-
     constructed property.
       ``(C) Construction, etc.--The term `construction' includes 
     reconstruction and erection, and the term `constructed' 
     includes reconstructed and erected.
       ``(D) Only construction of qualifying advanced clean coal 
     technology unit to be taken into account.--Construction shall 
     be taken into account only if, for purposes of this subpart, 
     expenditures therefor are properly chargeable to capital 
     account with respect to the property.
       ``(5) Election.--An election under this subsection may be 
     made at such time and in such manner as the Secretary may by 
     regulations prescribe. Such an election shall apply to the 
     taxable year for which made and to all subsequent taxable 
     years. Such an election, once made, may not be revoked except 
     with the consent of the Secretary.
       ``(i) Coordination With Other Credits.--This section shall 
     not apply to any property with respect to which the 
     rehabilitation credit under section 47 or the energy credit 
     under section 48 is allowed unless the taxpayer elects to 
     waive the application of such credit to such property.''.
       (c) Recapture.--Section 50(a) (relating to other special 
     rules) is amended by adding at the end the following new 
     paragraph:
       ``(6) Special rules relating to qualifying advanced clean 
     coal technology unit.--For purposes of applying this 
     subsection in the case of any credit allowable by reason of 
     section 48A, the following rules shall apply:
       ``(A) General rule.--In lieu of the amount of the increase 
     in tax under paragraph (1), the increase in tax shall be an 
     amount equal to the investment tax credit allowed under 
     section 38 for all prior taxable years with respect to a 
     qualifying advanced clean coal technology unit (as defined by 
     section 48A(b)(1)) multiplied by a fraction the numerator of 
     which is the number of years remaining to fully depreciate 
     under this title the qualifying advanced clean coal 
     technology unit disposed of, and the denominator of which is 
     the total number of years over which such unit would 
     otherwise have been subject to depreciation. For purposes of 
     the preceding sentence, the year of disposition of the 
     qualifying advanced clean coal technology unit shall be 
     treated as a year of remaining depreciation.
       ``(B) Property ceases to qualify for progress 
     expenditures.--Rules similar to the rules of paragraph (2) 
     shall apply in the case of qualified progress expenditures 
     for a qualifying advanced clean coal technology unit under 
     section 48A, except that the amount of the increase in tax 
     under subparagraph (A) of this paragraph shall be substituted 
     for the amount described in such paragraph (2).
       ``(C) Application of paragraph.--This paragraph shall be 
     applied separately with respect to the credit allowed under 
     section 38 regarding a qualifying advanced clean coal 
     technology unit.''.
       (d) Transitional Rule.--Section 39(d) (relating to 
     transitional rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(17) No carryback of section 48a credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying advanced 
     clean coal technology unit credit determined under section 
     48A may be carried back to a taxable year ending on or before 
     the date of the enactment of such section.''.
       (e) Technical Amendments.--
       (1) Section 49(a)(1)(C) is amended by striking ``and'' at 
     the end of clause (ii), by striking the period at the end of 
     clause (iii) and inserting ``, and'', and by adding at the 
     end the following new clause:
       ``(iv) the portion of the basis of any qualifying advanced 
     clean coal technology unit attributable to any qualified 
     investment (as defined by section 48A(g)).''.
       (2) Section 50(a)(4) is amended by striking ``and (2)'' and 
     inserting ``(2), and (6)''.
       (3) Section 50(c) is amended by adding at the end the 
     following new paragraph:
       ``(6) Nonapplication.--Paragraphs (1) and (2) shall not 
     apply to any qualifying advanced clean coal technology unit 
     credit under section 48A.''.
       (4) The table of sections for subpart E of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 48 the following new item:

``Sec. 48A. Qualifying advanced clean coal technology unit credit.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to periods after the date of the enactment of 
     this Act, under rules similar to the rules of section 48(m) 
     of the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of the Revenue 
     Reconciliation Act of 1990).

     SEC. 412. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED 
                   CLEAN COAL TECHNOLOGY UNIT.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

[[Page S10318]]

     ``SEC. 45J. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED 
                   CLEAN COAL TECHNOLOGY UNIT.

       ``(a) General Rule.--For purposes of section 38, the 
     qualifying advanced clean coal technology production credit 
     of any taxpayer for any taxable year is equal to--
       ``(1) the applicable amount of advanced clean coal 
     technology production credit, multiplied by
       ``(2) the applicable percentage (as determined under 
     section 48A(c)) of the sum of--
       ``(A) the kilowatt hours of electricity, plus
       ``(B) each 3,413 Btu of fuels or chemicals,
     produced by the taxpayer during such taxable year at a 
     qualifying advanced clean coal technology unit, but only if 
     such production occurs during the 10-year period beginning on 
     the date the unit was originally placed in service (or 
     returned to service after becoming a qualifying advanced 
     clean coal technology unit).
       ``(b) Applicable Amount.--For purposes of this section--
       ``(1) In general.--Except as provided in paragraph (2), the 
     applicable amount of advanced clean coal technology 
     production credit with respect to production from a 
     qualifying advanced clean coal technology unit shall be 
     determined as follows:
       ``(A) If the qualifying advanced clean coal technology unit 
     is producing electricity only:
       ``(i) In the case of a unit originally placed in service 
     before 2009, if--
       

------------------------------------------------------------------------
                                                       The applicable
                                                         amount is:
                                                   ---------------------
          ``The design net heat rate is:            For 1st 5   For 2d 5
                                                     years of   years of
                                                       such       such
                                                     service    service
------------------------------------------------------------------------
Not more than 8,500...............................    $.0060     $.0038
More than 8,500 but not more than 8,750...........    $.0025     $.0010
More than 8,750 but less than 8,900...............    $.0010    $.0010.
------------------------------------------------------------------------

       ``(ii) In the case of a unit originally placed in service 
     after 2008 and before 2013, if--
       

------------------------------------------------------------------------
                                                       The applicable
                                                         amount is:
                                                   ---------------------
          ``The design net heat rate is:            For 1st 5   For 2d 5
                                                     years of   years of
                                                       such       such
                                                     service    service
------------------------------------------------------------------------
Not more than 7,770...............................    $.0105     $.0090
More than 7,770 but not more than 8,125...........    $.0085     $.0068
More than 8,125 but less than 8,500...............    $.0075    $.0055.
------------------------------------------------------------------------

       ``(iii) In the case of a unit originally placed in service 
     after 2012 and before 2017, if--
       

------------------------------------------------------------------------
                                                       The applicable
                                                         amount is:
                                                   ---------------------
          ``The design net heat rate is:            For 1st 5   For 2d 5
                                                     years of   years of
                                                       such       such
                                                     service    service
------------------------------------------------------------------------
Not more than 7,380...............................    $.0140     $.0115
More than 7,380 but not more than 7,720...........    $.0120    $.0090.
------------------------------------------------------------------------

       ``(B) If the qualifying advanced clean coal technology unit 
     is producing fuel or chemicals:
       ``(i) In the case of a unit originally placed in service 
     before 2009, if--
       

------------------------------------------------------------------------
                                                       The applicable
                                                         amount is:
                                                   ---------------------
``The unit design net thermal efficiency (HHV) is:  For 1st 5   For 2d 5
                                                     years of   years of
                                                       such       such
                                                     service    service
------------------------------------------------------------------------
Not less than 40.6 percent........................    $.0060     $.0038
Less than 40.6 but not less than 40 percent.......    $.0025     $.0010
Less than 40 but not less than 38.4 percent.......    $.0010    $.0010.
------------------------------------------------------------------------

       ``(ii) In the case of a unit originally placed in service 
     after 2008 and before 2013, if--
       

------------------------------------------------------------------------
                                                       The applicable
                                                         amount is:
                                                   ---------------------
``The unit design net thermal efficiency (HHV) is:  For 1st 5   For 2d 5
                                                     years of   years of
                                                       such       such
                                                     service    service
------------------------------------------------------------------------
Not less than 43.6 percent........................    $.0105     $.0090
Less than 43.6 but not less than 42 percent.......    $.0085     $.0068
Less than 42 but not less than 40.2 percent.......    $.0075    $.0055.
------------------------------------------------------------------------

       ``(iii) In the case of a unit originally placed in service 
     after 2012 and before 2017, if--
       

------------------------------------------------------------------------
                                                       The applicable
                                                         amount is:
                                                   ---------------------
``The unit design net thermal efficiency (HHV) is:  For 1st 5   For 2d 5
                                                     years of   years of
                                                       such       such
                                                     service    service
------------------------------------------------------------------------
 
Not less than 44.2 percent........................    $.0140     $.0115
Less than 44.2 but not less than 43.9 percent.....    $.0120    $.0090.
------------------------------------------------------------------------

       ``(2) Special rule for units qualifying for greater 
     applicable amount when placed in service.--If, at the time a 
     qualifying advanced clean coal technology unit is placed in 
     service, production from the unit would be entitled to a 
     greater applicable amount if such unit had been placed in 
     service at a later date, the applicable amount for such unit 
     shall be such greater amount.
       ``(c) Inflation Adjustment.--For calendar years after 2004, 
     each dollar amount in subsection (b)(1) shall be adjusted by 
     multiplying such amount by the inflation adjustment factor 
     for the calendar year in which the amount is applied. If any 
     amount as increased under the preceding sentence is not a 
     multiple of 0.01 cent, such amount shall be rounded to the 
     nearest multiple of 0.01 cent.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) In general.--Any term used in this section which is 
     also used in section 45I or 48A shall have the meaning given 
     such term in such section.
       ``(2) Applicable rules.--The rules of paragraphs (3), (4), 
     and (5) of section 45(d) shall apply.''.
       (b) Credit Treated as Business Credit.--Section 38(b) 
     (relating to current year business credit), as amended by 
     this Act, is amended by striking ``plus'' at the end of 
     paragraph (19), by striking the period at the end of 
     paragraph (20) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(21) the qualifying advanced clean coal technology 
     production credit determined under section 45J(a).''.
       (c) Transitional Rule.--Section 39(d) (relating to 
     transitional rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(18) No carryback of section 45j credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying advanced 
     clean coal technology production credit determined under 
     section 45J may be carried back to a taxable year ending on 
     or before the date of the enactment of such section.''.
       (d) Denial of Double Benefit.--Section 29(d) (relating to 
     other definitions and special rules) is amended by adding at 
     the end the following new paragraph:
       ``(9) Denial of double benefit.--This section shall not 
     apply with respect to any qualified fuel the production of 
     which may be taken into account for purposes of determining 
     the credit under section 45J.''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45J. Credit for production from a qualifying advanced clean coal 
              technology unit.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to production after the date of the enactment of 
     this Act, in taxable years ending after such date.

     Subtitle C--Treatment of Persons Not Able To Use Entire Credit

     SEC. 421. TREATMENT OF PERSONS NOT ABLE TO USE ENTIRE CREDIT.

       (a) In General.--Section 45I, as added by this Act, is 
     amended by adding at the end the following new subsection:
       ``(f) Treatment of Person Not Able To Use Entire Credit.--
       ``(1) Allowance of credits.--
       ``(A) In general.--Any credit allowable under this section, 
     section 45J, or section 48A with respect to a facility owned 
     by a person described in subparagraph (B) may be transferred 
     or used as provided in this subsection, and the determination 
     as to whether the credit is allowable shall be made without 
     regard to the tax-exempt status of the person.
       ``(B) Persons described.--A person is described in this 
     subparagraph if the person is--
       ``(i) an organization described in section 501(c)(12)(C) 
     and exempt from tax under section 501(a),
       ``(ii) an organization described in section 1381(a)(2)(C),
       ``(iii) a public utility (as defined in section 
     136(c)(2)(B)),
       ``(iv) any State or political subdivision thereof, the 
     District of Columbia, or any agency or instrumentality of any 
     of the foregoing,
       ``(v) any Indian tribal government (within the meaning of 
     section 7871) or any agency or instrumentality thereof, or
       ``(vi) the Tennessee Valley Authority.
       ``(2) Transfer of credit.--
       ``(A) In general.--A person described in clause (i), (ii), 
     (iii), (iv), or (v) of paragraph (1)(B) may transfer any 
     credit to which paragraph (1)(A) applies through an 
     assignment to any other person not described in paragraph 
     (1)(B). Such transfer may be revoked only with the consent of 
     the Secretary.
       ``(B) Regulations.--The Secretary shall prescribe such 
     regulations as necessary to ensure that any credit described 
     in subparagraph (A) is claimed once and not reassigned by 
     such other person.
       ``(C) Transfer proceeds treated as arising from essential 
     government function.--Any proceeds derived by a person 
     described in clause (iii), (iv), or (v) of paragraph (1)(B) 
     from the transfer of any credit under subparagraph (A) shall 
     be treated as arising

[[Page S10319]]

     from the exercise of an essential government function.
       ``(3) Use of credit as an offset.--Notwithstanding any 
     other provision of law, in the case of a person described in 
     clause (i), (ii), or (v) of paragraph (1)(B), any credit to 
     which paragraph (1)(A) applies may be applied by such person, 
     to the extent provided by the Secretary of Agriculture, as a 
     prepayment of any loan, debt, or other obligation the entity 
     has incurred under subchapter I of chapter 31 of title 7 of 
     the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.), 
     as in effect on the date of the enactment of this section.
       ``(4) Use by tva.--
       ``(A) In general.--Notwithstanding any other provision of 
     law, in the case of a person described in paragraph 
     (1)(B)(vi), any credit to which paragraph (1)(A) applies may 
     be applied as a credit against the payments required to be 
     made in any fiscal year under section 15d(e) of the Tennessee 
     Valley Authority Act of 1933 (16 U.S.C. 831n-4(e)) as an 
     annual return on the appropriations investment and an annual 
     repayment sum.
       ``(B) Treatment of credits.--The aggregate amount of 
     credits described in paragraph (1)(A) with respect to such 
     person shall be treated in the same manner and to the same 
     extent as if such credits were a payment in cash and shall be 
     applied first against the annual return on the appropriations 
     investment.
       ``(C) Credit carryover.--With respect to any fiscal year, 
     if the aggregate amount of credits described paragraph (1)(A) 
     with respect to such person exceeds the aggregate amount of 
     payment obligations described in subparagraph (A), the excess 
     amount shall remain available for application as credits 
     against the amounts of such payment obligations in succeeding 
     fiscal years in the same manner as described in this 
     paragraph.
       ``(5) Credit not income.--Any transfer under paragraph (2) 
     or use under paragraph (3) of any credit to which paragraph 
     (1)(A) applies shall not be treated as income for purposes of 
     section 501(c)(12).
       ``(6) Treatment of unrelated persons.--For purposes of this 
     subsection, transfers among and between persons described in 
     clauses (i), (ii), (iii), (iv), and (v) of paragraph (1)(B) 
     shall be treated as transfers between unrelated parties.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to production after the date of the enactment of 
     this Act, in taxable years ending after such date.

                    TITLE V--OIL AND GAS PROVISIONS

     SEC. 501. OIL AND GAS FROM MARGINAL WELLS.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business credits), as amended by this 
     Act, is amended by adding at the end the following new 
     section:

     ``SEC. 45K. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL 
                   WELLS.

       ``(a) General Rule.--For purposes of section 38, the 
     marginal well production credit for any taxable year is an 
     amount equal to the product of--
       ``(1) the credit amount, and
       ``(2) the qualified crude oil production and the qualified 
     natural gas production which is attributable to the taxpayer.
       ``(b) Credit Amount.--For purposes of this section--
       ``(1) In general.--The credit amount is--
       ``(A) $3 per barrel of qualified crude oil production, and
       ``(B) 50 cents per 1,000 cubic feet of qualified natural 
     gas production.
       ``(2) Reduction as oil and gas prices increase.--
       ``(A) In general.--The $3 and 50 cents amounts under 
     paragraph (1) shall each be reduced (but not below zero) by 
     an amount which bears the same ratio to such amount 
     (determined without regard to this paragraph) as--
       ``(i) the excess (if any) of the applicable reference price 
     over $15 ($1.67 for qualified natural gas production), bears 
     to
       ``(ii) $3 ($0.33 for qualified natural gas production).
     The applicable reference price for a taxable year is the 
     reference price of the calendar year preceding the calendar 
     year in which the taxable year begins.
       ``(B) Inflation adjustment.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 2003, each of the dollar 
     amounts contained in subparagraph (A) shall be increased to 
     an amount equal to such dollar amount multiplied by the 
     inflation adjustment factor for such calendar year.
       ``(ii) Inflation adjustment factor.--For purposes of clause 
     (i)--

       ``(I) In general.--The term `inflation adjustment factor' 
     means, with respect to a calendar year, a fraction the 
     numerator of which is the GDP implicit price deflator for the 
     preceding calendar year and the denominator of which is the 
     GDP implicit price deflator for the calendar year 2002.
       ``(II) GDP implicit price deflator.--The term `GDP implicit 
     price deflator' means, for any calendar year, the most recent 
     revision of the implicit price deflator for the gross 
     domestic product as of June 30 of such calendar year as 
     computed by the Department of Commerce before October 1 of 
     such calendar year.

       ``(C) Reference price.--For purposes of this paragraph, the 
     term `reference price' means, with respect to any calendar 
     year--
       ``(i) in the case of qualified crude oil production, the 
     reference price determined under section 29(d)(2)(C), and
       ``(ii) in the case of qualified natural gas production, the 
     Secretary's estimate of the annual average wellhead price per 
     1,000 cubic feet for all domestic natural gas.
       ``(c) Qualified Crude Oil and Natural Gas Production.--For 
     purposes of this section--
       ``(1) In general.--The terms `qualified crude oil 
     production' and `qualified natural gas production' mean 
     domestic crude oil or domestic natural gas which is produced 
     from a qualified marginal well.
       ``(2) Limitation on amount of production which may 
     qualify.--
       ``(A) In general.--Crude oil or natural gas produced during 
     any taxable year from any well shall not be treated as 
     qualified crude oil production or qualified natural gas 
     production to the extent production from the well during the 
     taxable year exceeds 1,095 barrels or barrel equivalents.
       ``(B) Proportionate reductions.--
       ``(i) Short taxable years.--In the case of a short taxable 
     year, the limitations under this paragraph shall be 
     proportionately reduced to reflect the ratio which the number 
     of days in such taxable year bears to 365.
       ``(ii) Wells not in production entire year.--In the case of 
     a well which is not capable of production during each day of 
     a taxable year, the limitations under this paragraph 
     applicable to the well shall be proportionately reduced to 
     reflect the ratio which the number of days of production 
     bears to the total number of days in the taxable year.
       ``(3) Noncompliance with pollution laws.--Production from 
     any well during any period in which such well is not in 
     compliance with applicable Federal pollution prevention, 
     control, and permit requirements shall not be treated as 
     qualified crude oil production or qualified natural gas 
     production.
       ``(4) Definitions.--
       ``(A) Qualified marginal well.--The term `qualified 
     marginal well' means a domestic well--
       ``(i) the production from which during the taxable year is 
     treated as marginal production under section 613A(c)(6), or
       ``(ii) which, during the taxable year--

       ``(I) has average daily production of not more than 25 
     barrel equivalents, and
       ``(II) produces water at a rate not less than 95 percent of 
     total well effluent.

       ``(B) Crude oil, etc.--The terms `crude oil', `natural 
     gas', `domestic', and `barrel' have the meanings given such 
     terms by section 613A(e).
       ``(C) Barrel equivalent.--The term `barrel equivalent' 
     means, with respect to natural gas, a conversation ratio of 
     6,000 cubic feet of natural gas to 1 barrel of crude oil.
       ``(D) Domestic natural gas.--The term `domestic natural 
     gas' does not include Alaska natural gas (as defined in 
     section 45M(c)(1)).
       ``(d) Other Rules.--
       ``(1) Production attributable to the taxpayer.--In the case 
     of a qualified marginal well in which there is more than 1 
     owner of operating interests in the well and the crude oil or 
     natural gas production exceeds the limitation under 
     subsection (c)(2), qualifying crude oil production or 
     qualifying natural gas production attributable to the 
     taxpayer shall be determined on the basis of the ratio which 
     taxpayer's revenue interest in the production bears to the 
     aggregate of the revenue interests of all operating interest 
     owners in the production.
       ``(2) Operating interest required.--Any credit under this 
     section may be claimed only on production which is 
     attributable to the holder of an operating interest.
       ``(3) Production from nonconventional sources excluded.--In 
     the case of production from a qualified marginal well which 
     is eligible for the credit allowed under section 29 for the 
     taxable year, no credit shall be allowable under this section 
     unless the taxpayer elects not to claim the credit under 
     section 29 with respect to the well.''.
       (b) Credit Treated as Business Credit.--Section 38(b) 
     (relating to current year business credit), as amended by 
     this Act, is amended by striking ``plus'' at the end of 
     paragraph (20), by striking the period at the end of 
     paragraph (21) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(22) the marginal oil and gas well production credit 
     determined under section 45K(a).''.
       (c) No Carryback of Marginal Oil and Gas Well Production 
     Credit Before Effective Date.--Section 39(d) (relating to 
     transition rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(19) No carryback of marginal oil and gas well production 
     credit before effective date.--No portion of the unused 
     business credit for any taxable year which is attributable to 
     the marginal oil and gas well production credit determined 
     under section 45K may be carried back to a taxable year 
     ending on or before the date of the enactment of such 
     section.''.
       (d) Coordination With Section 29.--Section 29(a) (relating 
     to allowance of credit) is amended by striking ``There'' and 
     inserting ``At the election of the taxpayer, there''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45K. Credit for producing oil and gas from marginal wells.''.

[[Page S10320]]

       (f) Effective Date.--The amendments made by this section 
     shall apply to production in taxable years beginning after 
     the date of the enactment of this Act.

     SEC. 502. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR 
                   PROPERTY.

       (a) In General.--Section 168(e)(3)(C) (defining 7-year 
     property) is amended by striking ``and'' at the end of clause 
     (i), by redesignating clause (ii) as clause (iii), and by 
     inserting after clause (i) the following new clause:
       ``(ii) any natural gas gathering line, and''.
       (b) Natural Gas Gathering Line.--Section 168(i) (relating 
     to definitions and special rules), as amended by this Act, is 
     amended by adding at the end the following new paragraph:
       ``(17) Natural gas gathering line.--The term `natural gas 
     gathering line' means--
       ``(A) the pipe, equipment, and appurtenances used to 
     deliver natural gas from the wellhead or a commonpoint to the 
     point at which such gas first reaches--
       ``(i) a gas processing plant,
       ``(ii) an interconnection with a transmission pipeline 
     certificated by the Federal Energy Regulatory Commission as 
     an interstate transmission pipeline,
       ``(iii) an interconnection with an intrastate transmission 
     pipeline, or
       ``(iv) a direct interconnection with a local distribution 
     company, a gas storage facility, or an industrial consumer, 
     or
       ``(B) any other pipe, equipment, or appurtenances 
     determined to be a gathering line by the Federal Energy 
     Regulatory Commission.
       (c) Alternative System.--The table contained in section 
     168(g)(3)(B) (relating to special rule for certain property 
     assigned to classes) is amended by inserting after the item 
     relating to subparagraph (C)(i) the following new item:

``(C)(ii).........................................................10''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 503. EXPENSING OF CAPITAL COSTS INCURRED IN COMPLYING 
                   WITH ENVIRONMENTAL PROTECTION AGENCY SULFUR 
                   REGULATIONS.

       (a) In General.--Part VI of subchapter B of chapter 1 
     (relating to itemized deductions for individuals and 
     corporations), as amended by this Act, is amended by 
     inserting after section 179B the following new section:

     ``SEC. 179C. DEDUCTION FOR CAPITAL COSTS INCURRED IN 
                   COMPLYING WITH ENVIRONMENTAL PROTECTION AGENCY 
                   SULFUR REGULATIONS.

       ``(a) Treatment as Expense.--
       ``(1) In general.--A small business refiner may elect to 
     treat any qualified capital costs as an expense which is not 
     chargeable to capital account. Any qualified cost which is so 
     treated shall be allowed as a deduction for the taxable year 
     in which the cost is paid or incurred.
       ``(2) Limitation.--
       ``(A) In general.--The aggregate costs which may be taken 
     into account under this subsection for any taxable year may 
     not exceed the applicable percentage of the qualified capital 
     costs paid or incurred for the taxable year.
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A)--
       ``(i) In general.--Except as provided in clause (ii), the 
     applicable percentage is 75 percent.
       ``(ii) Reduced percentage.--In the case of a small business 
     refiner with average daily refinery runs or average retained 
     production for the period described in subsection (b)(2) in 
     excess of 155,000 barrels, the percentage described in clause 
     (i) shall be reduced (but not below zero) by the product of--

       ``(I) such percentage (before the application of this 
     clause), and
       ``(II) the ratio of such excess to 50,000 barrels.

       ``(b) Definitions.--For purposes of this section--
       ``(1) Qualified capital costs.--The term `qualified capital 
     costs' means any costs which--
       ``(A) are otherwise chargeable to capital account, and
       ``(B) are paid or incurred for the purpose of complying 
     with the Highway Diesel Fuel Sulfur Control Requirement of 
     the Environmental Protection Agency, as in effect on the date 
     of the enactment of this section, with respect to a facility 
     placed in service by the taxpayer before such date.
       ``(2) Small business refiner.--The term `small business 
     refiner' means, with respect to any taxable year, a refiner 
     of crude oil--
       ``(A) which, within the refinery operations of the 
     business, employs not more than 1,500 employees on any day 
     during such taxable year, and
       ``(B) the average daily refinery run or average retained 
     production of which for the 1-year period ending on the date 
     of the enactment of this section did not exceed 205,000 
     barrels.
       ``(c) Coordination With Other Provisions.--Section 280B 
     shall not apply to amounts which are treated as expenses 
     under this section.
       ``(d) Basis Reduction.--For purposes of this title, the 
     basis of any property shall be reduced by the portion of the 
     cost of such property taken into account under subsection 
     (a).
       ``(e) Controlled Groups.--For purposes of this section, all 
     persons treated as a single employer under subsection (b), 
     (c), (m), or (o) of section 414 shall be treated as a single 
     employer.''.
       (b) Conforming Amendments.--
       (1) Section 263(a)(1), as amended by this Act, is amended 
     by striking ``or'' at the end of subparagraph (H), by 
     striking the period at the end of subparagraph (I) and 
     inserting ``, or'', and by inserting after subparagraph (I) 
     the following new subparagraph:
       ``(J) expenditures for which a deduction is allowed under 
     section 179C.''.
       (2) Section 263A(c)(3) is amended by inserting ``179C,'' 
     after ``section''.
       (3) Section 312(k)(3)(B), as amended by this Act, is 
     amended by striking ``or 179B'' each place it appears in the 
     heading and text and inserting ``179B, or 179C''.
       (4) Section 1016(a), as amended by this Act, is amended by 
     striking ``and'' at the end of paragraph (32), by striking 
     the period at the end of paragraph (33) and inserting ``, 
     and'', and by adding at the end the following new paragraph:
       ``(34) to the extent provided in section 179C(d).''.
       (5) Section 1245(a), as amended by this Act, is amended by 
     inserting ``179C,'' after ``179B,'' both places it appears in 
     paragraphs (2)(C) and (3)(C).
       (6) The table of sections for part VI of subchapter B of 
     chapter 1, as amended by this Act, is amended by inserting 
     after the item relating to section 179B the following new 
     item:

``Sec. 179C. Deduction for capital costs incurred in complying with 
              Environmental Protection Agency sulfur regulations.''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to expenses paid or incurred after December 31, 
     2002, in taxable years ending after such date.

     SEC. 504. ENVIRONMENTAL TAX CREDIT.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business-related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

     ``SEC. 45L. ENVIRONMENTAL TAX CREDIT.

       ``(a) In General.--For purposes of section 38, the amount 
     of the environmental tax credit determined under this section 
     with respect to any small business refiner for any taxable 
     year is an amount equal to 5 cents for every gallon of low-
     sulfur diesel fuel produced at a facility by such small 
     business refiner during such taxable year.
       ``(b) Maximum Credit.--
       ``(1) In general.--For any small business refiner, the 
     aggregate amount determined under subsection (a) for any 
     taxable year with respect to any facility shall not exceed 
     the applicable percentage of the qualified capital costs paid 
     or incurred by such small business refiner with respect to 
     such facility during the applicable period, reduced by the 
     credit allowed under subsection (a) with respect to such 
     facility for any preceding year.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1)--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the applicable percentage is 25 percent.
       ``(B) Reduced percentage.--The percentage described in 
     subparagraph (A) shall be reduced in the same manner as under 
     section 179C(a)(2)(B)(ii).
       ``(c) Definitions.--For purposes of this section--
       ``(1) In general.--The terms `small business refiner' and 
     `qualified capital costs' have the same meaning as given in 
     section 179C.
       ``(2) Low-sulfur diesel fuel.--The term `low-sulfur diesel 
     fuel' means diesel fuel containing not more than 15 parts per 
     million of sulfur.
       ``(3) Applicable period.--The term `applicable period' 
     means, with respect to any facility, the period beginning on 
     the day after the date of the enactment of this section and 
     ending with the date which is 1 year after the date on which 
     the taxpayer must comply with the applicable EPA regulations 
     with respect to such facility.
       ``(4) Applicable epa regulations.--The term `applicable EPA 
     regulations' means the Highway Diesel Fuel Sulfur Control 
     Requirements of the Environmental Protection Agency, as in 
     effect on the date of the enactment of this section.
       ``(d) Certification.--
       ``(1) Required.--Not later than the date which is 30 months 
     after the first day of the first taxable year in which a 
     credit is allowed under this section with respect to a 
     facility, the small business refiner shall obtain a 
     certification from the Secretary, in consultation with the 
     Administrator of the Environmental Protection Agency, that 
     the taxpayer's qualified capital costs with respect to such 
     facility will result in compliance with the applicable EPA 
     regulations.
       ``(2) Contents of application.--An application for 
     certification shall include relevant information regarding 
     unit capacities and operating characteristics sufficient for 
     the Secretary, in consultation with the Administrator of the 
     Environmental Protection Agency, to determine that such 
     qualified capital costs are necessary for compliance with the 
     applicable EPA regulations.
       ``(3) Review period.--Any application shall be reviewed and 
     notice of certification, if applicable, shall be made within 
     60 days of receipt of such application. In the event the 
     Secretary does not notify the taxpayer of the results of such 
     certification within such period, the taxpayer may presume 
     the certification to be issued until so notified.

[[Page S10321]]

       ``(4) Statute of limitations.--With respect to the credit 
     allowed under this section--
       ``(A) the statutory period for the assessment of any 
     deficiency attributable to such credit shall not expire 
     before the end of the 3-year period ending on the date that 
     the period described in paragraph (3) ends with respect to 
     the taxpayer, and
       ``(B) such deficiency may be assessed before the expiration 
     of such 3-year period notwithstanding the provisions of any 
     other law or rule of law which would otherwise prevent such 
     assessment.
       ``(e) Controlled Groups.--For purposes of this section, all 
     persons treated as a single employer under subsection (b), 
     (c), (m), or (o) of section 414 shall be treated as a single 
     employer.
       ``(f) Cooperative Organizations.--
       ``(1) Apportionment of credit.--
       ``(A) In general.--In the case of a cooperative 
     organization described in section 1381(a), any portion of the 
     credit determined under subsection (a) for the taxable year 
     may, at the election of the organization, be apportioned 
     among patrons eligible to share in patronage dividends on the 
     basis of the quantity or value of business done with or for 
     such patrons for the taxable year.
       ``(B) Form and effect of election.--An election under 
     subparagraph (A) for any taxable year shall be made on a 
     timely filed return for such year. Such election, once made, 
     shall be irrevocable for such taxable year.
       ``(2) Treatment of organizations and patrons.--
       ``(A) Organizations.--The amount of the credit not 
     apportioned to patrons pursuant to paragraph (1) shall be 
     included in the amount determined under subsection (a) for 
     the taxable year of the organization.
       ``(B) Patrons.--The amount of the credit apportioned to 
     patrons pursuant to paragraph (1) shall be included in the 
     amount determined under subsection (a) for the first taxable 
     year of each patron ending on or after the last day of the 
     payment period (as defined in section 1382(d)) for the 
     taxable year of the organization or, if earlier, for the 
     taxable year of each patron ending on or after the date on 
     which the patron receives notice from the cooperative of the 
     apportionment.
       ``(3) Special rules for decrease in credits for taxable 
     year.--If the amount of the credit of a cooperative 
     organization determined under subsection (a) for a taxable 
     year is less than the amount of such credit shown on the 
     return of the cooperative organization for such year, an 
     amount equal to the excess of--
       ``(A) such reduction, over
       ``(B) the amount not apportioned to such patrons under 
     paragraph (1) for the taxable year,
     shall be treated as an increase in tax imposed by this 
     chapter on the organization. Such increase shall not be 
     treated as tax imposed by this chapter for purposes of 
     determining the amount of any credit under this chapter or 
     for purposes of section 55.''.
       (b) Credit Made Part of General Business Credit.--Section 
     38(b) (relating to current year business credit), as amended 
     by this Act, is amended by striking ``plus'' at the end of 
     paragraph (21), by striking the period at the end of 
     paragraph (22) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(23) in the case of a small business refiner, the 
     environmental tax credit determined under section 45L(a).''.
       (c) Denial of Double Benefit.--Section 280C (relating to 
     certain expenses for which credits are allowable), as amended 
     by this Act, is amended by adding at the end the following 
     new subsection:
       ``(e) Environmental Tax Credit.--No deduction shall be 
     allowed for that portion of the expenses otherwise allowable 
     as a deduction for the taxable year which is equal to the 
     amount of the credit determined for the taxable year under 
     section 45L(a).''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45L. Environmental tax credit.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to expenses paid or incurred after December 31, 
     2002, in taxable years ending after such date.

     SEC. 505. DETERMINATION OF SMALL REFINER EXCEPTION TO OIL 
                   DEPLETION DEDUCTION.

       (a) In General.--Paragraph (4) of section 613A(d) (relating 
     to limitations on application of subsection (c)) is amended 
     to read as follows:
       ``(4) Certain refiners excluded.--If the taxpayer or 1 or 
     more related persons engages in the refining of crude oil, 
     subsection (c) shall not apply to the taxpayer for a taxable 
     year if the average daily refinery runs of the taxpayer and 
     such persons for the taxable year exceed 60,000 barrels. For 
     purposes of this paragraph, the average daily refinery runs 
     for any taxable year shall be determined by dividing the 
     aggregate refinery runs for the taxable year by the number of 
     days in the taxable year.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 506. MARGINAL PRODUCTION INCOME LIMIT EXTENSION.

       Section 613A(c)(6)(H) (relating to temporary suspension of 
     taxable income limit with respect to marginal production) is 
     amended by striking ``2004'' and inserting ``2007''.

     SEC. 507. AMORTIZATION OF DELAY RENTAL PAYMENTS.

       (a) In General.--Section 167 (relating to depreciation) is 
     amended by redesignating subsection (h) as subsection (i) and 
     by inserting after subsection (g) the following new 
     subsection:
       ``(h) Amortization of Delay Rental Payments for Domestic 
     Oil and Gas Wells.--
       ``(1) In general.--Any delay rental payment paid or 
     incurred in connection with the development of oil or gas 
     wells within the United States (as defined in section 638) 
     shall be allowed as a deduction ratably over the 24-month 
     period beginning on the date that such payment was paid or 
     incurred.
       ``(2) Half-year convention.--For purposes of paragraph (1), 
     any payment paid or incurred during the taxable year shall be 
     treated as paid or incurred on the mid-point of such taxable 
     year.
       ``(3) Exclusive method.--Except as provided in this 
     subsection, no depreciation or amortization deduction shall 
     be allowed with respect to such payments.
       ``(4) Treatment upon abandonment.--If any property to which 
     a delay rental payment relates is retired or abandoned during 
     the 24-month period described in paragraph (1), no deduction 
     shall be allowed on account of such retirement or abandonment 
     and the amortization deduction under this subsection shall 
     continue with respect to such payment.
       ``(5) Delay rental payments.--For purposes of this 
     subsection, the term `delay rental payment' means an amount 
     paid for the privilege of deferring development of an oil or 
     gas well under an oil or gas lease.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred in taxable years 
     beginning after the date of the enactment of this Act.

     SEC. 508. AMORTIZATION OF GEOLOGICAL AND GEOPHYSICAL 
                   EXPENDITURES.

       (a) In General.--Section 167 (relating to depreciation), as 
     amended by this Act, is amended by redesignating subsection 
     (i) as subsection (j) and by inserting after subsection (h) 
     the following new subsection:
       ``(i) Amortization of Geological and Geophysical 
     Expenditures.--
       ``(1) In general.--Any geological and geophysical expenses 
     paid or incurred in connection with the exploration for, or 
     development of, oil or gas within the United States (as 
     defined in section 638) shall be allowed as a deduction 
     ratably over the 24-month period beginning on the date that 
     such expense was paid or incurred.
       ``(2) Special rules.--For purposes of this subsection, 
     rules similar to the rules of paragraphs (2), (3), and (4) of 
     subsection (h) shall apply.''.
       (b) Conforming Amendment.--Section 263A(c)(3) is amended by 
     inserting ``167(h), 167(i),'' after ``under section''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to costs paid or incurred in taxable years 
     beginning after the date of the enactment of this Act.

     SEC. 509. EXTENSION AND MODIFICATION OF CREDIT FOR PRODUCING 
                   FUEL FROM A NONCONVENTIONAL SOURCE.

       (a) In General.--Section 29 (relating to credit for 
     producing fuel from a nonconventional source) is amended by 
     adding at the end the following new subsection:
       ``(h) Extension for Other Facilities.--
       ``(1) Oil and gas.--In the case of a well or facility for 
     producing qualified fuels described in subparagraph (A) or 
     (B) of subsection (c)(1) which was drilled or placed in 
     service after the date of the enactment of this subsection 
     and before January 1, 2007, notwithstanding subsection (f), 
     this section shall apply with respect to such fuels produced 
     at such well or facility before the close of the 3-year 
     period beginning on the date that such well is drilled or 
     such facility is placed in service.
       ``(2) Facilities producing fuels from agricultural and 
     animal waste.--
       ``(A) In general.--In the case of facility for producing 
     liquid, gaseous, or solid fuels from qualified agricultural 
     and animal wastes, including such fuels when used as 
     feedstocks, which was placed in service after the date of the 
     enactment of this subsection and before January 1, 2007, this 
     section shall apply with respect to fuel produced at such 
     facility before the close of the 3-year period beginning on 
     the date such facility is placed in service.
       ``(B) Qualified agricultural and animal waste.--For 
     purposes of this paragraph, the term `qualified agricultural 
     and animal waste' means agriculture and animal waste, 
     including by-products, packaging, and any materials 
     associated with the processing, feeding, selling, 
     transporting, or disposal of agricultural or animal products 
     or wastes.
       ``(3) Wells producing viscous oil.--
       ``(A) In general.--In the case of a well for producing 
     viscous oil which was placed in service after the date of the 
     enactment of this subsection and before January 1, 2007, this 
     section shall apply with respect to fuel produced at such 
     well before the close of the 3-year period beginning on the 
     date such well is placed in service.
       ``(B) Viscous oil.--The term `viscous oil' means heavy oil, 
     as defined in section 613A(c)(6), except that--
       ``(i) `22 degrees' shall be substituted for `20 degrees' in 
     applying subparagraph (F) thereof, and

[[Page S10322]]

       ``(ii) in all cases, the oil gravity shall be measured from 
     the initial well-head samples, drill cuttings, or down hole 
     samples.
       ``(C) Waiver of unrelated person requirement.--In the case 
     of viscous oil, the requirement under subsection (a)(2)(A) of 
     a sale to an unrelated person shall not apply to any sale to 
     the extent that the viscous oil is not consumed in the 
     immediate vicinity of the wellhead.
       ``(4) Facilities producing refined coal.--
       ``(A) In general.--In the case of a facility described in 
     subparagraph (C) for producing refined coal which was placed 
     in service after the date of the enactment of this subsection 
     and before January 1, 2007, this section shall apply with 
     respect to fuel produced at such facility before the close of 
     the 5-year period beginning on the date such facility is 
     placed in service.
       ``(B) Refined coal.--For purposes of this paragraph, the 
     term `refined coal' means a fuel which is a liquid, gaseous, 
     or solid synthetic fuel produced from coal (including 
     lignite) or high carbon fly ash, including such fuel used as 
     a feedstock.
       ``(C) Covered facilities.--
       ``(i) In general.--A facility is described in this 
     subparagraph if such facility produces refined coal using a 
     technology which results in--

       ``(I) a qualified emission reduction, and
       ``(II) a qualified enhanced value.

       ``(ii) Qualified emission reduction.--For purposes of this 
     subparagraph, the term `qualified emission reduction' means a 
     reduction of at least 20 percent of the emissions of nitrogen 
     oxide and either sulfur dioxide or mercury released when 
     burning the refined coal (excluding any dilution caused by 
     materials combined or added during the production process), 
     as compared to the emissions released when burning the 
     feedstock coal or comparable coal predominantly available in 
     the marketplace as of January 1, 2003.
       ``(iii) Qualified enhanced value.--For purposes of this 
     subparagraph, the term `qualified enhanced value' means an 
     increase of at least 50 percent in the market value of the 
     refined coal (excluding any increase caused by materials 
     combined or added during the production process), as compared 
     to the value of the feedstock coal.
       ``(iv) Qualifying advanced clean coal technology units 
     excluded.--A facility described in this subparagraph shall 
     not include a qualifying advanced clean coal technology unit 
     (as defined in section 48A(b)).
       ``(5) Coalmine gas.--
       ``(A) In general.--This section shall apply to coalmine 
     gas--
       ``(i) captured or extracted by the taxpayer during the 
     period beginning after the date of the enactment of this 
     subsection and ending before January 1, 2007, and
       ``(ii) utilized as a fuel source or sold by or on behalf of 
     the taxpayer to an unrelated person during such period.
       ``(B) Coalmine gas.--For purposes of this paragraph, the 
     term `coalmine gas' means any methane gas which is--
       ``(i) liberated during or as a result of coal mining 
     operations, or
       ``(ii) extracted up to 10 years in advance of coal mining 
     operations as part of a specific plan to mine a coal deposit.
       ``(C) Special rule for advanced extraction.--In the case of 
     coalmine gas which is captured in advance of coal mining 
     operations, the credit under subsection (a) shall be allowed 
     only after the date the coal extraction occurs in the 
     immediate area where the coalmine gas was removed.
       ``(D) Noncompliance with pollution laws.--This paragraph 
     shall not apply to the capture or extraction of coalmine gas 
     from coal mining operations with respect to any period in 
     which such coal mining operations are not in compliance with 
     applicable State and Federal pollution prevention, control, 
     and permit requirements.
       ``(6) Special rules.--In determining the amount of credit 
     allowable under this section solely by reason of this 
     subsection--
       ``(A) Fuels treated as qualified fuels.--Any fuel described 
     in paragraph (2), (3), (4), or (5) shall be treated as a 
     qualified fuel for purposes of this section.
       ``(B) Daily limit.--The amount of qualified fuels sold 
     during any taxable year which may be taken into account by 
     reason of this subsection with respect to any project shall 
     not exceed an average barrel-of-oil equivalent of 200,000 
     cubic feet of natural gas per day. Days before the date the 
     project is placed in service shall not be taken into account 
     in determining such average.
       ``(C) Credit amount.--The dollar amount applicable under 
     subsection (a)(1) shall be $3 (and the inflation adjustment 
     under subsection (b)(2) shall not apply to such amount).''.
       (b) Clarification of Placed in Service Date for Certain 
     Landfill Gas Facilities.--Section 29(d) (relating to other 
     definitions and special rules) is amended by adding at the 
     end the following new paragraph:
       ``(9) Clarification of placed in service date for certain 
     landfill gas facilities.--
       ``(A) In general.--In the case of a landfill placed in 
     service on or before the date of the enactment of this 
     paragraph--
       ``(i) a facility for producing qualified fuel from such 
     landfill shall include all wells, pipes, and related 
     components used to collect landfill gas, and
       ``(ii) production of landfill gas from such landfill 
     attributable to wells, pipes, and related components placed 
     in service after such date of enactment shall be treated as 
     produced from a facility placed in service on the date such 
     wells, pipes, and related components were placed in service.
       ``(B) Landfill gas.--The term `landfill gas' means gas 
     described in subsection (c)(1)(B)(ii) and derived from the 
     biodegradation of municipal solid waste.''.
       (c) Extension for certain fuel produced at existing 
     facilities.--Section 29(f)(2) (relating to application of 
     section) is amended by inserting ``(January 1, 2006, in the 
     case of any coke, coke gas, or natural gas and byproducts 
     produced by coal gasification from lignite in a facility 
     described in paragraph (1)(B))'' after ``January 1, 2003''.
       (d) Study of Coalbed Methane.--
       (1) In general.--The Secretary of the Treasury shall 
     conduct a study regarding the effect of section 29 of the 
     Internal Revenue Code of 1986 on the production of coalbed 
     methane.
       (2) Contents of study.--The study under paragraph (1) shall 
     estimate the total amount of credits under section 29 of the 
     Internal Revenue Code of 1986 claimed annually and in the 
     aggregate which are related to the production of coalbed 
     methane since the date of the enactment of such section 29. 
     Such study shall report the annual value of such credits 
     allowable for coalbed methane compared to the average annual 
     wellhead price of natural gas (per thousand cubic feet of 
     natural gas). Such study shall also estimate the incremental 
     increase in production of coalbed methane which has resulted 
     from the enactment of such section 29, and the cost to the 
     Federal Government, in terms of the net tax benefits claimed, 
     per thousand cubic feet of incremental coalbed methane 
     produced annually and in the aggregate since such enactment.
       (e) Effective Date.--The amendments made by this section 
     shall apply to fuel sold after the date of the enactment of 
     this Act, in taxable years ending after such date.

     SEC. 510. NATURAL GAS DISTRIBUTION LINES TREATED AS 15-YEAR 
                   PROPERTY.

       (a) In General.--Section 168(e)(3)(E) (defining 15-year 
     property) is amended by striking ``and'' at the end of clause 
     (ii), by striking the period at the end of clause (iii) and 
     by inserting ``, and'', and by adding at the end the 
     following new clause:
       ``(iv) any natural gas distribution line.''.
       (b) Alternative System.--The table contained in section 
     168(g)(3)(B) (relating to special rule for certain property 
     assigned to classes), as amended by this Act, is amended by 
     adding after the item relating to subparagraph (E)(iii) the 
     following new item:

``(E)(iv).........................................................20''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 511. CREDIT FOR ALASKA NATURAL GAS.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

     ``SEC. 45M. ALASKA NATURAL GAS.

       ``(a) In General.--For purposes of section 38, the Alaska 
     natural gas credit for any taxable year is an amount equal to 
     the product of--
       ``(1) the credit amount, and
       ``(2) Alaska natural gas the production of which is 
     attributable to the taxpayer.
       ``(b) Credit Amount.--For purposes of this section--
       ``(1) In general.--The credit amount is $0.52 per 1,000,000 
     Btu of Alaska natural gas.
       ``(2) Reduction as gas prices increase.--
       ``(A) In general.--The dollar amount under paragraph (1) 
     shall be reduced (but not below zero) by an amount which 
     bears the same ratio to such amount (determined without 
     regard to this paragraph) as--
       ``(i) the excess (if any) of the applicable reference price 
     over $0.83, bears to
       ``(ii) $0.52.
       ``(B) Applicable reference price.--For purposes of this 
     paragraph--
       ``(i) In general.--The applicable reference price for any 
     calendar month in a taxable year is the reference price for 
     the calendar month in which production occurs.
       ``(ii) Reference price.--The term `reference price' means, 
     with respect to any calendar month, a published market price 
     for natural gas in United States dollars per 1,000,000 Btu 
     (reduced by any gas transportation costs and gas processing 
     costs as determined by the appropriate national regulatory 
     body for natural gas transportation) as determined under 
     regulations by the Secretary.
       ``(C) Inflation adjustment.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 2003, each of the dollar 
     amounts contained in paragraph (1) and subparagraph (A) of 
     this paragraph shall be increased to an amount equal to such 
     dollar amount multiplied by the inflation adjustment factor 
     for such calendar year.
       ``(ii) Inflation adjustment factor.--For purposes of clause 
     (i)--

       ``(I) In general.--The term `inflation adjustment factor' 
     means, with respect to a calendar year, a fraction the 
     numerator of which is the GDP implicit price deflator for the 
     preceding calendar year and the denominator of which is the 
     GDP implicit price deflator for the calendar year 2002.
       ``(II) GDP implicit price deflator.--The term `GDP implicit 
     price deflator' means, for any calendar year, the most recent 
     revision of the implicit price deflator for the gross 
     domestic product as of June 30 of such calendar year as 
     computed by the Department

[[Page S10323]]

     of Commerce before October 1 of such calendar year.

       ``(c) Alaska Natural Gas.--For purposes of this section--
       ``(1) In general.--The term `Alaska natural gas' means 
     natural gas entering the Alaska natural gas pipeline (as 
     defined in section 168(i)(18) (determined without regard to 
     subparagraph (B) thereof)) which is produced from a well--
       ``(A) located in the area of the State of Alaska lying 
     north of 64 degrees North latitude, determined by excluding 
     the area of the Alaska National Wildlife Refuge (including 
     the continental shelf thereof within the meaning of section 
     638(1)), and
       ``(B) pursuant to the applicable State and Federal 
     pollution prevention, control, and permit requirements from 
     such area (including the continental shelf thereof within the 
     meaning of section 638(1)).
       ``(2) Natural gas.--The term `natural gas' has the meaning 
     given such term by section 613A(e)(2).
       ``(d) Special Rules.--For purposes of this section--
       ``(1) Production attributable to the taxpayer.--
       ``(A) In general.--In the case of a well in which there is 
     more than 1 person or entity--
       ``(i) entitled to production of Alaska natural gas, or
       ``(ii) at the election of the taxpayer, entitled to the 
     value of production as either an operating interest owner or 
     a royalty interest owner,
     the portion of such production attributable to such person or 
     entity shall be determined on the basis of the ratio which 
     the person's or entity's interest in the production or the 
     value of production bears to the aggregate of the interests 
     of all operating interest owners and royalty interest owners 
     in the production or the value of production.
       ``(B) Partnership properties.--In the case of a 
     partnership, for purposes of applying subparagraph (A), 
     production shall be attributable to its partners based on 
     each partner's distributive share of Alaska natural gas which 
     is produced from partnership properties and attributable to 
     the partnership or its partners under subparagraph (A).
       ``(2) Pass-thru in the case of estates and trusts.--Under 
     regulations prescribed by the Secretary, rules similar to the 
     rules of subsection (d) of section 52 shall apply.
       ``(e) Application of Section.--This section shall apply to 
     Alaska natural gas during the period--
       ``(1) beginning with the later of--
       ``(A) January 1, 2010, or
       ``(B) the initial date for the interstate transportation of 
     such Alaska natural gas, and
       ``(2) ending with the date which is 15 years after the date 
     described in paragraph (1).''.
       (b) Credit Treated as Business Credit.--Section 38(b) 
     (relating to current year business credit), as amended by 
     this Act, is amended by striking ``plus'' at the end of 
     paragraph (22), by striking the period at the end of 
     paragraph (23) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(24) The Alaska natural gas credit determined under 
     section 45M(a).''.
       (c) Allowing Credit Against Entire Regular Tax and Minimum 
     Tax.--
       (1) In general.--Section 38(c) (relating to limitation 
     based on amount of tax), as amended by this Act, is amended 
     by redesignating paragraph (5) as paragraph (6) and by 
     inserting after paragraph (4) the following new paragraph:
       ``(5) Special rules for alaska natural gas credit.--
       ``(A) In general.--In the case of the Alaska natural gas 
     credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to the credit, and
       ``(ii) in applying paragraph (1) to the credit--

       ``(I) the amounts in subparagraphs (A) and (B) thereof 
     shall be treated as being zero, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the Alaska 
     natural gas credit).

       ``(B) Alaska natural gas credit.--For purposes of this 
     subsection, the term `Alaska natural gas credit' means the 
     credit allowable under subsection (a) by reason of section 
     45M(a).''.
       (2) Conforming amendments.--Subclause (II) of section 
     38(c)(2)(A)(ii), as amended by this Act, subclause (II) of 
     section 38(c)(3)(A)(ii), as amended by this Act, and 
     subclause (II) of section 38(c)(4)(A)(ii), as added by this 
     Act, are each amended by inserting ``or the Alaska natural 
     gas credit'' after ``producer credit''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45M. Alaska natural gas.''.

     SEC. 512. CERTAIN ALASKA NATURAL GAS PIPELINE PROPERTY 
                   TREATED AS 7-YEAR PROPERTY.

       (a) In General.--Section 168(e)(3)(C) (defining 7-year 
     property), as amended by this Act, is amended by striking 
     ``and'' at the end of clause (ii), by redesignating clause 
     (iii) as clause (iv), and by inserting after clause (ii) the 
     following new clause:
       ``(iii) any Alaska natural gas pipeline, and''.
       (b) Alaska Natural Gas Pipeline.--Section 168(i) (relating 
     to definitions and special rules), as amended by this Act, is 
     amended by adding at the end the following new paragraph:
       ``(18) Alaska natural gas pipeline.--The term `Alaska 
     natural gas pipeline' means the natural gas pipeline system 
     located in the State of Alaska which--
       ``(A) has a capacity of more than 500,000,000,000 Btu of 
     natural gas per day, and
       ``(B) is placed in service after December 31, 2014.
     Such term includes the pipe, trunk lines, related equipment, 
     and appurtenances used to carry natural gas, but does not 
     include any gas processing plant.''.
       (c) Alternative System.--The table contained in section 
     168(g)(3)(B) (relating to special rule for certain property 
     assigned to classes), as amended by this Act, is amended by 
     inserting after the item relating to subparagraph (C)(ii) the 
     following new item:

``(C)(iii)........................................................10''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2014, in taxable years ending after such date.

     SEC. 513. ARBITRAGE RULES NOT TO APPLY TO PREPAYMENTS FOR 
                   NATURAL GAS.

       (a) In General.--Section 148(b) (relating to higher 
     yielding investments) is amended by adding at the end the 
     following new paragraph:
       ``(4) Safe harbor for prepaid natural gas.--
       ``(A) In general.--The term `investment-type property' does 
     not include a prepayment under a qualified natural gas supply 
     contract.
       ``(B) Qualified natural gas supply contract.--For purposes 
     of this paragraph, the term `qualified natural gas supply 
     contract' means any contract to acquire natural gas for 
     resale by or for a utility owned by a governmental unit if 
     the amount of gas permitted to be acquired under the contract 
     for the utility during any year does not exceed the sum of--
       ``(i) the annual average amount during the testing period 
     of natural gas purchased (other than for resale) by customers 
     of such utility who are located within the service area of 
     such utility, and
       ``(ii) the amount of natural gas to be used to transport 
     the prepaid natural gas to the utility during such year.
       ``(C) Natural gas used to generate electricity.--Natural 
     gas used to generate electricity shall be taken into account 
     in determining the average under subparagraph (B)(i)--
       ``(i) only if the electricity is generated by a utility 
     owned by a governmental unit, and
       ``(ii) only to the extent that the electricity is sold 
     (other than for resale) to customers of such utility who are 
     located within the service area of such utility.
       ``(D) Adjustments for changes in customer base.--
       ``(i) New business customers.--If--

       ``(I) after the close of the testing period and before the 
     date of issuance of the issue, the utility owned by a 
     governmental unit enters into a contract to supply natural 
     gas (other than for resale) for use by a business at a 
     property within the service area of such utility, and
       ``(II) the utility did not supply natural gas to such 
     property during the testing period or the ratable amount of 
     natural gas to be supplied under the contract is 
     significantly greater than the ratable amount of gas supplied 
     to such property during the testing period,

     then a contract shall not fail to be treated as a qualified 
     natural gas supply contract by reason of supplying the 
     additional natural gas under the contract referred to in 
     subclause (I).
       ``(ii) Overall limitation.--The average under subparagraph 
     (B)(i) shall not exceed the annual amount of natural gas 
     reasonably expected to be purchased (other than for resale) 
     by persons who are located within the service area of such 
     utility and who, as of the date of issuance of the issue, are 
     customers of such utility.
       ``(E) Ruling requests.--The Secretary may increase the 
     average under subparagraph (B)(i) for any period if the 
     utility owned by the governmental unit establishes to the 
     satisfaction of the Secretary that, based on objective 
     evidence of growth in natural gas consumption or population, 
     such average would otherwise be insufficient for such period.
       ``(F) Adjustment for natural gas otherwise on hand.--
       ``(i) In general.--The amount otherwise permitted to be 
     acquired under the contract for any period shall be reduced 
     by--

       ``(I) the applicable share of natural gas held by the 
     utility on the date of issuance of the issue, and
       ``(II) the natural gas (not taken into account under 
     subclause (I)) which the utility has a right to acquire 
     during such period (determined as of the date of issuance of 
     the issue).

       ``(ii) Applicable share.--For purposes of clause (i), the 
     term `applicable share' means, with respect to any period, 
     the natural gas allocable to such period if the gas were 
     allocated ratably over the period to which the prepayment 
     relates.
       ``(G) Intentional acts.--Subparagraph (A) shall cease to 
     apply to any issue if the utility owned by the governmental 
     unit engages in any intentional act to render the volume of 
     natural gas acquired by such prepayment to be in excess of 
     the sum of--

[[Page S10324]]

       ``(i) the amount of natural gas needed (other than for 
     resale) by customers of such utility who are located within 
     the service area of such utility, and
       ``(ii) the amount of natural gas used to transport such 
     natural gas to the utility.
       ``(H) Testing period.--For purposes of this paragraph, the 
     term `testing period' means, with respect to an issue, the 
     most recent 5 calendar years ending before the date of 
     issuance of the issue.
       ``(I) Service area.--For purposes of this paragraph, the 
     service area of a utility owned by a governmental unit shall 
     be comprised of--
       ``(i) any area throughout which such utility provided at 
     all times during the testing period--

       ``(I) in the case of a natural gas utility, natural gas 
     transmission or distribution services, and
       ``(II) in the case of an electric utility, electricity 
     distribution services,

       ``(ii) any area within a county contiguous to the area 
     described in clause (i) in which retail customers of such 
     utility are located if such area is not also served by 
     another utility providing natural gas or electricity 
     services, as the case may be, and
       ``(iii) any area recognized as the service area of such 
     utility under State or Federal law.''.
       (b) Private Loan Financing Test Not To Apply to Prepayments 
     for Natural Gas.--Section 141(c)(2) (providing exceptions to 
     the private loan financing test) is amended by striking 
     ``or'' at the end of subparagraph (A), by striking the period 
     at the end of subparagraph (B) and inserting ``, or'', and by 
     adding at the end the following new subparagraph:
       ``(C) is a qualified natural gas supply contract (as 
     defined in section 148(b)(4)).''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to obligations issued after the date of the 
     enactment of this Act.

          TITLE VI--ELECTRIC UTILITY RESTRUCTURING PROVISIONS

     SEC. 601. MODIFICATIONS TO SPECIAL RULES FOR NUCLEAR 
                   DECOMMISSIONING COSTS.

       (a) Repeal of Limitation on Deposits Into Fund Based on 
     Cost of Service; Contributions After Funding Period.--
     Subsection (b) of section 468A (relating to special rules for 
     nuclear decommissioning costs) is amended to read as follows:
       ``(b) Limitation on Amounts Paid Into Fund.--The amount 
     which a taxpayer may pay into the Fund for any taxable year 
     shall not exceed the ruling amount applicable to such taxable 
     year.''.
       (b) Clarification of Treatment of Fund Transfers.--Section 
     468A(e) (relating to Nuclear Decommissioning Reserve Fund) is 
     amended by adding at the end the following new paragraph:
       ``(8) Treatment of fund transfers.--If, in connection with 
     the transfer of the taxpayer's interest in a nuclear power 
     plant, the taxpayer transfers the Fund with respect to such 
     power plant to the transferee of such interest and the 
     transferee elects to continue the application of this section 
     to such Fund--
       ``(A) the transfer of such Fund shall not cause such Fund 
     to be disqualified from the application of this section, and
       ``(B) no amount shall be treated as distributed from such 
     Fund, or be includable in gross income, by reason of such 
     transfer.''.
       (c) Treatment of Certain Decommissioning Costs.--
       (1) In general.--Section 468A is amended by redesignating 
     subsections (f) and (g) as subsections (g) and (h), 
     respectively, and by inserting after subsection (e) the 
     following new subsection:
       ``(f) Transfers Into Qualified Funds.--
       ``(1) In general.--Notwithstanding subsection (b), any 
     taxpayer maintaining a Fund to which this section applies 
     with respect to a nuclear power plant may transfer into such 
     Fund not more than an amount equal to the present value of 
     the excess of the total nuclear decommissioning costs with 
     respect to such nuclear power plant over the portion of such 
     costs taken into account in determining the ruling amount in 
     effect immediately before the transfer.
       ``(2) Deduction for amounts transferred.--
       ``(A) In general.--Except as provided in subparagraph (C), 
     the deduction allowed by subsection (a) for any transfer 
     permitted by this subsection shall be allowed ratably over 
     the remaining estimated useful life (within the meaning of 
     subsection (d)(2)(A)) of the nuclear power plant beginning 
     with the taxable year during which the transfer is made.
       ``(B) Denial of deduction for previously deducted 
     amounts.--No deduction shall be allowed for any transfer 
     under this subsection of an amount for which a deduction was 
     previously allowed or a corresponding amount was not included 
     in gross income. For purposes of the preceding sentence, a 
     ratable portion of each transfer shall be treated as being 
     from previously deducted or excluded amounts to the extent 
     thereof.
       ``(C) Transfers of qualified funds.--If--
       ``(i) any transfer permitted by this subsection is made to 
     any Fund to which this section applies, and
       ``(ii) such Fund is transferred thereafter,
     any deduction under this subsection for taxable years ending 
     after the date that such Fund is transferred shall be allowed 
     to the transferee and not the transferor. The preceding 
     sentence shall not apply if the transferor is an entity 
     exempt from tax under this chapter.
       ``(D) Special rules.--
       ``(i) Gain or loss not recognized.--No gain or loss shall 
     be recognized on any transfer permitted by this subsection.
       ``(ii) Transfers of appreciated property.--If appreciated 
     property is transferred in a transfer permitted by this 
     subsection, the amount of the deduction shall not exceed the 
     adjusted basis of such property.
       ``(3) New ruling amount required.--Paragraph (1) shall not 
     apply to any transfer unless the taxpayer requests from the 
     Secretary a new schedule of ruling amounts in connection with 
     such transfer.
       ``(4) No basis in qualified funds.--Notwithstanding any 
     other provision of law, the taxpayer's basis in any Fund to 
     which this section applies shall not be increased by reason 
     of any transfer permitted by this subsection.''.
       (2) New ruling amount to take into account total costs.--
     Subparagraph (A) of section 468A(d)(2) (defining ruling 
     amount) is amended to read as follows:
       ``(A) fund the total nuclear decommissioning costs with 
     respect to such power plant over the estimated useful life of 
     such power plant, and''.
       (d) Technical Amendment.--Section 468A(e)(2) (relating to 
     taxation of Fund) is amended--
       (1) by striking ``rate set forth in subparagraph (B)'' in 
     subparagraph (A) and inserting ``rate of 20 percent'',
       (2) by striking subparagraph (B), and
       (3) by redesignating subparagraphs (C) and (D) as 
     subparagraphs (B) and (C), respectively.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 602. TREATMENT OF CERTAIN INCOME OF COOPERATIVES.

       (a) Income From Open Access and Nuclear Decommissioning 
     Transactions.--
       (1) In general.--Section 501(c)(12)(C) (relating to list of 
     exempt organizations) is amended by striking ``or'' at the 
     end of clause (i), by striking clause (ii), and by adding at 
     the end the following new clauses:
       ``(ii) from any open access transaction (other than income 
     received or accrued directly or indirectly from a member),
       ``(iii) from any nuclear decommissioning transaction,
       ``(iv) from any asset exchange or conversion transaction, 
     or
       ``(v) from the prepayment of any loan, debt, or obligation 
     made, insured, or guaranteed under the Rural Electrification 
     Act of 1936.''.
       (2) Definitions and special rules.--Section 501(c)(12) is 
     amended by adding at the end the following new subparagraphs:
       ``(E) For purposes of subparagraph (C)(ii)--
       ``(i) The term `open access transaction' means any 
     transaction meeting the open access requirements of any of 
     the following subclauses with respect to a mutual or 
     cooperative electric company:

       ``(I) The provision or sale of electric transmission 
     service or ancillary services meets the open access 
     requirements of this subclause only if such services are 
     provided on a nondiscriminatory open access basis pursuant to 
     an open access transmission tariff filed with and approved by 
     FERC, including an acceptable reciprocity tariff, or under a 
     regional transmission organization agreement approved by 
     FERC.
       ``(II) The provision or sale of electric energy 
     distribution services or ancillary services meets the open 
     access requirements of this subclause only if such services 
     are provided on a nondiscriminatory open access basis to end-
     users served by distribution facilities owned by the mutual 
     or cooperative electric company (or its members).
       ``(III) The delivery or sale of electric energy generated 
     by a generation facility meets the open access requirements 
     of this subclause only if such facility is directly connected 
     to distribution facilities owned by the mutual or cooperative 
     electric company (or its members) which owns the generation 
     facility, and such distribution facilities meet the open 
     access requirements of subclause (II).

       ``(ii) Clause (i)(I) shall apply in the case of a 
     voluntarily filed tariff only if the mutual or cooperative 
     electric company files a report with FERC within 90 days 
     after the date of the enactment of this subparagraph relating 
     to whether or not such company will join a regional 
     transmission organization.
       ``(iii) A mutual or cooperative electric company shall be 
     treated as meeting the open access requirements of clause 
     (i)(I) if a regional transmission organization controls the 
     transmission facilities.
       ``(iv) References to FERC in this subparagraph shall be 
     treated as including references to the Public Utility 
     Commission of Texas with respect to any ERCOT utility (as 
     defined in section 212(k)(2)(B) of the Federal Power Act (16 
     U.S.C. 824k(k)(2)(B))) or references to the Rural Utilities 
     Service with respect to any other facility not subject to 
     FERC jurisdiction.
       ``(v) For purposes of this subparagraph--

       ``(I) The term `transmission facility' means an electric 
     output facility (other than a generation facility) which 
     operates at an electric voltage of 69 kilovolts or greater. 
     To the extent provided in regulations, such term includes any 
     output facility which FERC determines is a transmission 
     facility under standards applied by FERC under the Federal 
     Power Act (as in effect on the date of

[[Page S10325]]

     the enactment of the Energy Tax Incentives Act of 2003).
       ``(II) The term `regional transmission organization' 
     includes an independent system operator.
       ``(III) The term `FERC' means the Federal Energy Regulatory 
     Commission.

       ``(F) The term `nuclear decommissioning transaction' 
     means--
       ``(i) any transfer into a trust, fund, or instrument 
     established to pay any nuclear decommissioning costs if the 
     transfer is in connection with the transfer of the mutual or 
     cooperative electric company's interest in a nuclear power 
     plant or nuclear power plant unit,
       ``(ii) any distribution from any trust, fund, or instrument 
     established to pay any nuclear decommissioning costs, or
       ``(iii) any earnings from any trust, fund, or instrument 
     established to pay any nuclear decommissioning costs.
       ``(G) The term `asset exchange or conversion transaction' 
     means any voluntary exchange or involuntary conversion of any 
     property related to generating, transmitting, distributing, 
     or selling electric energy by a mutual or cooperative 
     electric company, the gain from which qualifies for deferred 
     recognition under section 1031 or 1033, but only if the 
     replacement property acquired by such company pursuant to 
     such section constitutes property which is used, or to be 
     used, for--
       ``(i) generating, transmitting, distributing, or selling 
     electric energy, or
       ``(ii) producing, transmitting, distributing, or selling 
     natural gas.''.
       (b) Treatment of Income From Load Loss Transactions.--
     Section 501(c)(12), as amended by subsection (a)(2), is 
     amended by adding after subparagraph (G) the following new 
     subparagraph:
       ``(H)(i) In the case of a mutual or cooperative electric 
     company described in this paragraph or an organization 
     described in section 1381(a)(2)(C), income received or 
     accrued from a load loss transaction shall be treated as an 
     amount collected from members for the sole purpose of meeting 
     losses and expenses.
       ``(ii) For purposes of clause (i), the term `load loss 
     transaction' means any wholesale or retail sale of electric 
     energy (other than to members) to the extent that the 
     aggregate sales during the recovery period do not exceed the 
     load loss mitigation sales limit for such period.
       ``(iii) For purposes of clause (ii), the load loss 
     mitigation sales limit for the recovery period is the sum of 
     the annual load losses for each year of such period.
       ``(iv) For purposes of clause (iii), a mutual or 
     cooperative electric company's annual load loss for each year 
     of the recovery period is the amount (if any) by which--
       ``(I) the megawatt hours of electric energy sold during 
     such year to members of such electric company are less than
       ``(II) the megawatt hours of electric energy sold during 
     the base year to such members.
       ``(v) For purposes of clause (iv)(II), the term `base year' 
     means--
       ``(I) the calendar year preceding the start-up year, or
       ``(II) at the election of the electric company, the second 
     or third calendar years preceding the start-up year.
       ``(vi) For purposes of this subparagraph, the recovery 
     period is the 7-year period beginning with the start-up year.
       ``(vii) For purposes of this subparagraph, the start-up 
     year is the calendar year which includes the date of the 
     enactment of this subparagraph or, if later, at the election 
     of the mutual or cooperative electric company--
       ``(I) the first year that such electric company offers 
     nondiscriminatory open access, or
       ``(II) the first year in which at least 10 percent of such 
     electric company's sales are not to members of such electric 
     company.
       ``(viii) A company shall not fail to be treated as a mutual 
     or cooperative company for purposes of this paragraph or as a 
     corporation operating on a cooperative basis for purposes of 
     section 1381(a)(2)(C) by reason of the treatment under clause 
     (i).
       ``(ix) In the case of a mutual or cooperative electric 
     company, income from any open access transaction received, or 
     accrued, indirectly from a member shall be treated as an 
     amount collected from members for the sole purpose of meeting 
     losses and expenses.''.
       (c) Exception From Unrelated Business Taxable Income.--
     Section 512(b) (relating to modifications) is amended by 
     adding at the end the following new paragraph:
       ``(18) Treatment of mutual or cooperative electric 
     companies.--In the case of a mutual or cooperative electric 
     company described in section 501(c)(12), there shall be 
     excluded income which is treated as member income under 
     subparagraph (H) thereof.''.
       (d) Cross Reference.--Section 1381 is amended by adding at 
     the end the following new subsection:
       ``(c) Cross Reference.--

  ``For treatment of income from load loss transactions of 
organizations described in subsection (a)(2)(C), see section 
501(c)(12)(H).''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 603. SALES OR DISPOSITIONS TO IMPLEMENT FEDERAL ENERGY 
                   REGULATORY COMMISSION OR STATE ELECTRIC 
                   RESTRUCTURING POLICY.

       (a) In General.--Section 451 (relating to general rule for 
     taxable year of inclusion) is amended by adding at the end 
     the following new subsection:
       ``(i) Special Rule for Sales or Dispositions To Implement 
     Federal Energy Regulatory Commission or State Electric 
     Restructuring Policy.--
       ``(1) In general.--For purposes of this subtitle, if a 
     taxpayer elects the application of this subsection to a 
     qualifying electric transmission transaction in any taxable 
     year--
       ``(A) any ordinary income derived from such transaction 
     which would be required to be recognized under section 1245 
     or 1250 for such taxable year (determined without regard to 
     this subsection), and
       ``(B) any income derived from such transaction in excess of 
     such ordinary income which is required to be included in 
     gross income for such taxable year (determined without regard 
     to this subsection),
     shall be so recognized and included ratably over the 8-
     taxable year period beginning with such taxable year.
       ``(2) Qualifying electric transmission transaction.--For 
     purposes of this subsection, the term `qualifying electric 
     transmission transaction' means any sale or other disposition 
     before January 1, 2008, of--
       ``(A) property used by the taxpayer in the trade or 
     business of providing electric transmission services, or
       ``(B) any stock or partnership interest in a corporation or 
     partnership, as the case may be, whose principal trade or 
     business consists of providing electric transmission 
     services,

     but only if such sale or disposition is to an independent 
     transmission company.
       ``(3) Independent transmission company.--For purposes of 
     this subsection, the term `independent transmission company' 
     means--
       ``(A) a regional transmission organization approved by the 
     Federal Energy Regulatory Commission,
       ``(B) a person--
       ``(i) who the Federal Energy Regulatory Commission 
     determines in its authorization of the transaction under 
     section 203 of the Federal Power Act (16 U.S.C. 824b) is not 
     a market participant within the meaning of such Commission's 
     rules applicable to regional transmission organizations, and
       ``(ii) whose transmission facilities to which the election 
     under this subsection applies are under the operational 
     control of a Federal Energy Regulatory Commission-approved 
     regional transmission organization before the close of the 
     period specified in such authorization, but not later than 
     January 1, 2008, or
       ``(C) in the case of facilities subject to the exclusive 
     jurisdiction of the Public Utility Commission of Texas, a 
     person which is approved by that Commission as consistent 
     with Texas State law regarding an independent transmission 
     organization.
       ``(4) Election.--An election under paragraph (1), once 
     made, shall be irrevocable.
       ``(5) Nonapplication of installment sales treatment.--
     Section 453 shall not apply to any qualifying electric 
     transmission transaction with respect to which an election to 
     apply this subsection is made.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to transactions occurring after the date of the 
     enactment of this Act.

                    TITLE VII--ADDITIONAL PROVISIONS

     SEC. 701. EXTENSION OF ACCELERATED DEPRECIATION AND WAGE 
                   CREDIT BENEFITS ON INDIAN RESERVATIONS.

       (a) Special Recovery Period for Property on Indian 
     Reservations.--Section 168(j)(8) (relating to termination) is 
     amended by striking ``2004'' and inserting ``2005''.
       (b) Indian Employment Credit.--Section 45A(f) (relating to 
     termination) is amended by striking ``2004'' and inserting 
     ``2005''.

     SEC. 702. STUDY OF EFFECTIVENESS OF CERTAIN PROVISIONS BY 
                   GAO.

       (a) Study.--The Comptroller General of the United States 
     shall undertake an ongoing analysis of--
       (1) the effectiveness of the alternative motor vehicles and 
     fuel incentives provisions under title II and the 
     conservation and energy efficiency provisions under title 
     III, and
       (2) the recipients of the tax benefits contained in such 
     provisions, including an identification of such recipients by 
     income and other appropriate measurements.
     Such analysis shall quantify the effectiveness of such 
     provisions by examining and comparing the Federal 
     Government's forgone revenue to the aggregate amount of 
     energy actually conserved and tangible environmental benefits 
     gained as a result of such provisions.
       (b) Reports.--The Comptroller General of the United States 
     shall report the analysis required under subsection (a) to 
     Congress not later than December 31, 2004, and annually 
     thereafter.

     SEC. 703. REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES ON 
                   RAILROADS AND INLAND WATERWAY TRANSPORTATION 
                   WHICH REMAIN IN GENERAL FUND.

       (a) Taxes on Trains.--
       (1) In general.--Subparagraph (A) of section 4041(a)(1) is 
     amended by striking ``or a diesel-powered train'' each place 
     it appears and by striking ``or train''.
       (2) Conforming amendments.--
       (A) Subparagraph (C) of section 4041(a)(1) is amended by 
     striking clause (ii) and by redesignating clause (iii) as 
     clause (ii).
       (B) Subparagraph (C) of section 4041(b)(1) is amended by 
     striking all that follows ``section 6421(e)(2)'' and 
     inserting a period.

[[Page S10326]]

       (C) Subsection (d) of section 4041 is amended by 
     redesignating paragraph (3) as paragraph (4) and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) Diesel fuel used in trains.--There is hereby imposed 
     a tax of 0.1 cent per gallon on any liquid other than 
     gasoline (as defined in section 4083)--
       ``(A) sold by any person to an owner, lessee, or other 
     operator of a diesel-powered train for use as a fuel in such 
     train, or
       ``(B) used by any person as a fuel in a diesel-powered 
     train unless there was a taxable sale of such fuel under 
     subparagraph (A).
     No tax shall be imposed by this paragraph on the sale or use 
     of any liquid if tax was imposed on such liquid under section 
     4081.''
       (D) Subsection (f) of section 4082 is amended by striking 
     ``section 4041(a)(1)'' and inserting ``subsections (d)(3) and 
     (a)(1) of section 4041, respectively''.
       (E) Paragraph (3) of section 4083(a) is amended by striking 
     ``or a diesel-powered train''.
       (F) Paragraph (3) of section 6421(f) is amended to read as 
     follows:
       ``(3) Gasoline used in trains.--In the case of gasoline 
     used as a fuel in a train, this section shall not apply with 
     respect to the Leaking Underground Storage Tank Trust Fund 
     financing rate under section 4081.''
       (G) Paragraph (3) of section 6427(l) is amended to read as 
     follows:
       ``(3) Refund of certain taxes on fuel used in diesel-
     powered trains.--For purposes of this subsection, the term 
     `nontaxable use' includes fuel used in a diesel-powered 
     train. The preceding sentence shall not apply to the tax 
     imposed by section 4041(d) and the Leaking Underground 
     Storage Tank Trust Fund financing rate under section 4081 
     except with respect to fuel sold for exclusive use by a State 
     or any political subdivision thereof.''
       (b) Fuel Used on Inland Waterways.--
       (1) In general.--Paragraph (1) of section 4042(b) is 
     amended by adding ``and'' at the end of subparagraph (A), by 
     striking ``, and'' at the end of subparagraph (B) and 
     inserting a period, and by striking subparagraph (C).
       (2) Conforming amendment.--Paragraph (2) of section 4042(b) 
     is amended by striking subparagraph (C).
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2004.

     SEC. 704. EXPANSION OF RESEARCH CREDIT.

       (a) Credit for Expenses Attributable to Certain 
     Collaborative Energy Research Consortia.--
       (1) In general.--Section 41(a) (relating to credit for 
     increasing research activities) is amended by striking 
     ``and'' at the end of paragraph (1), by striking the period 
     at the end of paragraph (2) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(3) 20 percent of the amounts paid or incurred by the 
     taxpayer in carrying on any trade or business of the taxpayer 
     during the taxable year (including as contributions) to an 
     energy research consortium.''.
       (2) Energy research consortium defined.--Section 41(f) 
     (relating to special rules) is amended by adding at the end 
     the following new paragraph:
       ``(6) Energy research consortium.--
       ``(A) In general.--The term `energy research consortium' 
     means any organization--
       ``(i) which is--

       ``(I) described in section 501(c)(3) and is exempt from tax 
     under section 501(a) and is organized and operated primarily 
     to conduct energy research, or
       ``(II) organized and operated primarily to conduct energy 
     research in the public interest (within the meaning of 
     section 501(c)(3)),

       ``(ii) which is not a private foundation,
       ``(iii) to which at least 5 unrelated persons paid or 
     incurred during the calendar year in which the taxable year 
     of the organization begins amounts (including as 
     contributions) to such organization for energy research, and
       ``(iv) to which no single person paid or incurred 
     (including as contributions) during such calendar year an 
     amount equal to more than 50 percent of the total amounts 
     received by such organization during such calendar year for 
     energy research.
       ``(B) Treatment of persons.--All persons treated as a 
     single employer under subsection (a) or (b) of section 52 
     shall be treated as related persons for purposes of 
     subparagraph (A)(iii) and as a single person for purposes of 
     subparagraph (A)(iv).''.
       (3) Conforming amendment.--Section 41(b)(3)(C) is amended 
     by inserting ``(other than an energy research consortium)'' 
     after ``organization''.
       (b) Repeal of Limitation on Contract Research Expenses Paid 
     to Small Businesses, Universities, and Federal 
     Laboratories.--Section 41(b)(3) (relating to contract 
     research expenses) is amended by adding at the end the 
     following new subparagraph:
       ``(D) Amounts paid to eligible small businesses, 
     universities, and federal laboratories.--
       ``(i) In general.--In the case of amounts paid by the 
     taxpayer to--

       ``(I) an eligible small business,
       ``(II) an institution of higher education (as defined in 
     section 3304(f)), or
       ``(III) an organization which is a Federal laboratory,

     for qualified research which is energy research, subparagraph 
     (A) shall be applied by substituting `100 percent' for `65 
     percent'.
       ``(ii) Eligible small business.--For purposes of this 
     subparagraph, the term `eligible small business' means a 
     small business with respect to which the taxpayer does not 
     own (within the meaning of section 318) 50 percent or more 
     of--

       ``(I) in the case of a corporation, the outstanding stock 
     of the corporation (either by vote or value), and
       ``(II) in the case of a small business which is not a 
     corporation, the capital and profits interests of the small 
     business.

       ``(iii) Small business.--For purposes of this 
     subparagraph--

       ``(I) In general.--The term `small business' means, with 
     respect to any calendar year, any person if the annual 
     average number of employees employed by such person during 
     either of the 2 preceding calendar years was 500 or fewer. 
     For purposes of the preceding sentence, a preceding calendar 
     year may be taken into account only if the person was in 
     existence throughout the year.
       ``(II) Startups, controlled groups, and predecessors.--
     Rules similar to the rules of subparagraphs (B) and (D) of 
     section 220(c)(4) shall apply for purposes of this clause.

       ``(iv) Federal laboratory.--For purposes of this 
     subparagraph, the term `Federal laboratory' has the meaning 
     given such term by section 4(6) of the Stevenson-Wydler 
     Technology Innovation Act of 1980 (15 U.S.C. 3703(6)), as in 
     effect on the date of the enactment of the Energy Tax 
     Incentives Act of 2003.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act.

                     TITLE VIII--REVENUE PROVISIONS

        Subtitle A--Provisions Designed To Curtail Tax Shelters

     SEC. 801. PENALTY FOR FAILING TO DISCLOSE REPORTABLE 
                   TRANSACTION.

       (a) In General.--Part I of subchapter B of chapter 68 
     (relating to assessable penalties) is amended by inserting 
     after section 6707 the following new section:

     ``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE 
                   TRANSACTION INFORMATION WITH RETURN OR 
                   STATEMENT.

       ``(a) Imposition of Penalty.--Any person who fails to 
     include on any return or statement any information with 
     respect to a reportable transaction which is required under 
     section 6011 to be included with such return or statement 
     shall pay a penalty in the amount determined under subsection 
     (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), the amount of the penalty under subsection (a) shall be 
     $50,000.
       ``(2) Listed transaction.--The amount of the penalty under 
     subsection (a) with respect to a listed transaction shall be 
     $100,000.
       ``(3) Increase in penalty for large entities and high net 
     worth individuals.--
       ``(A) In general.--In the case of a failure under 
     subsection (a) by--
       ``(i) a large entity, or
       ``(ii) a high net worth individual,
     the penalty under paragraph (1) or (2) shall be twice the 
     amount determined without regard to this paragraph.
       ``(B) Large entity.--For purposes of subparagraph (A), the 
     term `large entity' means, with respect to any taxable year, 
     a person (other than a natural person) with gross receipts in 
     excess of $10,000,000 for the taxable year in which the 
     reportable transaction occurs or the preceding taxable year. 
     Rules similar to the rules of paragraph (2) and subparagraphs 
     (B), (C), and (D) of paragraph (3) of section 448(c) shall 
     apply for purposes of this subparagraph.
       ``(C) High net worth individual.--For purposes of 
     subparagraph (A), the term `high net worth individual' means, 
     with respect to a reportable transaction, a natural person 
     whose net worth exceeds $2,000,000 immediately before the 
     transaction.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Reportable transaction.--The term `reportable 
     transaction' means any transaction with respect to which 
     information is required to be included with a return or 
     statement because, as determined under regulations prescribed 
     under section 6011, such transaction is of a type which the 
     Secretary determines as having a potential for tax avoidance 
     or evasion.
       ``(2) Listed transaction.--Except as provided in 
     regulations, the term `listed transaction' means a reportable 
     transaction which is the same as, or substantially similar 
     to, a transaction specifically identified by the Secretary as 
     a tax avoidance transaction for purposes of section 6011.
       ``(d) Authority To Rescind Penalty.--
       ``(1) In general.--The Commissioner of Internal Revenue may 
     rescind all or any portion of any penalty imposed by this 
     section with respect to any violation if--
       ``(A) the violation is with respect to a reportable 
     transaction other than a listed transaction,
       ``(B) the person on whom the penalty is imposed has a 
     history of complying with the requirements of this title,
       ``(C) it is shown that the violation is due to an 
     unintentional mistake of fact;
       ``(D) imposing the penalty would be against equity and good 
     conscience, and
       ``(E) rescinding the penalty would promote compliance with 
     the requirements of this title and effective tax 
     administration.
       ``(2) Discretion.--The exercise of authority under 
     paragraph (1) shall be at the sole discretion of the 
     Commissioner and may be delegated only to the head of the 
     Office of Tax Shelter Analysis. The Commissioner, in the 
     Commissioner's sole discretion, may establish a procedure to 
     determine if a penalty

[[Page S10327]]

     should be referred to the Commissioner or the head of such 
     Office for a determination under paragraph (1).
       ``(3) No appeal.--Notwithstanding any other provision of 
     law, any determination under this subsection may not be 
     reviewed in any administrative or judicial proceeding.
       ``(4) Records.--If a penalty is rescinded under paragraph 
     (1), the Commissioner shall place in the file in the Office 
     of the Commissioner the opinion of the Commissioner or the 
     head of the Office of Tax Shelter Analysis with respect to 
     the determination, including--
       ``(A) the facts and circumstances of the transaction,
       ``(B) the reasons for the rescission, and
       ``(C) the amount of the penalty rescinded.
       ``(5) Report.--The Commissioner shall each year report to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate--
       ``(A) a summary of the total number and aggregate amount of 
     penalties imposed, and rescinded, under this section, and
       ``(B) a description of each penalty rescinded under this 
     subsection and the reasons therefor.
       ``(e) Penalty Reported to SEC.--In the case of a person--
       ``(1) which is required to file periodic reports under 
     section 13 or 15(d) of the Securities Exchange Act of 1934 or 
     is required to be consolidated with another person for 
     purposes of such reports, and
       ``(2) which--
       ``(A) is required to pay a penalty under this section with 
     respect to a listed transaction, or
       ``(B) is required to pay a penalty under section 6662A with 
     respect to any reportable transaction at a rate prescribed 
     under section 6662A(c),

     the requirement to pay such penalty shall be disclosed in 
     such reports filed by such person for such periods as the 
     Secretary shall specify. Failure to make a disclosure in 
     accordance with the preceding sentence shall be treated as a 
     failure to which the penalty under subsection (b)(2) applies.
       ``(f) Coordination With Other Penalties.--The penalty 
     imposed by this section is in addition to any penalty imposed 
     under this title.''.
       (b) Conforming Amendment.--The table of sections for part I 
     of subchapter B of chapter 68 is amended by inserting after 
     the item relating to section 6707 the following:

``Sec. 6707A. Penalty for failure to include reportable transaction 
              information with return or statement.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns and statements the due date for which 
     is after the date of the enactment of this Act.

     SEC. 802. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS 
                   AND OTHER REPORTABLE TRANSACTIONS HAVING A 
                   SIGNIFICANT TAX AVOIDANCE PURPOSE.

       (a) In General.--Subchapter A of chapter 68 is amended by 
     inserting after section 6662 the following new section:

     ``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON 
                   UNDERSTATEMENTS WITH RESPECT TO REPORTABLE 
                   TRANSACTIONS.

       ``(a) Imposition of Penalty.--If a taxpayer has a 
     reportable transaction understatement for any taxable year, 
     there shall be added to the tax an amount equal to 20 percent 
     of the amount of such understatement.
       ``(b) Reportable Transaction Understatement.--For purposes 
     of this section--
       ``(1) In general.--The term `reportable transaction 
     understatement' means the sum of--
       ``(A) the product of--
       ``(i) the amount of the increase (if any) in taxable income 
     which results from a difference between the proper tax 
     treatment of an item to which this section applies and the 
     taxpayer's treatment of such item (as shown on the taxpayer's 
     return of tax), and
       ``(ii) the highest rate of tax imposed by section 1 
     (section 11 in the case of a taxpayer which is a 
     corporation), and
       ``(B) the amount of the decrease (if any) in the aggregate 
     amount of credits determined under subtitle A which results 
     from a difference between the taxpayer's treatment of an item 
     to which this section applies (as shown on the taxpayer's 
     return of tax) and the proper tax treatment of such item.

     For purposes of subparagraph (A), any reduction of the excess 
     of deductions allowed for the taxable year over gross income 
     for such year, and any reduction in the amount of capital 
     losses which would (without regard to section 1211) be 
     allowed for such year, shall be treated as an increase in 
     taxable income.
       ``(2) Items to which section applies.--This section shall 
     apply to any item which is attributable to--
       ``(A) any listed transaction, and
       ``(B) any reportable transaction (other than a listed 
     transaction) if a significant purpose of such transaction is 
     the avoidance or evasion of Federal income tax.
       ``(c) Higher Penalty for Nondisclosed Listed and Other 
     Avoidance Transactions.--
       ``(1) In general.--Subsection (a) shall be applied by 
     substituting `30 percent' for `20 percent' with respect to 
     the portion of any reportable transaction understatement with 
     respect to which the requirement of section 6664(d)(2)(A) is 
     not met.
       ``(2) Rules applicable to compromise of penalty.--
       ``(A) In general.--If the 1st letter of proposed deficiency 
     which allows the taxpayer an opportunity for administrative 
     review in the Internal Revenue Service Office of Appeals has 
     been sent with respect to a penalty to which paragraph (1) 
     applies, only the Commissioner of Internal Revenue may 
     compromise all or any portion of such penalty.
       ``(B) Applicable rules.--The rules of paragraphs (2), (3), 
     (4), and (5) of section 6707A(d) shall apply for purposes of 
     subparagraph (A).
       ``(d) Definitions of Reportable and Listed Transactions.--
     For purposes of this section, the terms `reportable 
     transaction' and `listed transaction' have the respective 
     meanings given to such terms by section 6707A(c).
       ``(e) Special Rules.--
       ``(1) Coordination with penalties, etc., on other 
     understatements.--In the case of an understatement (as 
     defined in section 6662(d)(2))--
       ``(A) the amount of such understatement (determined without 
     regard to this paragraph) shall be increased by the aggregate 
     amount of reportable transaction understatements for purposes 
     of determining whether such understatement is a substantial 
     understatement under section 6662(d)(1), and
       ``(B) the addition to tax under section 6662(a) shall apply 
     only to the excess of the amount of the substantial 
     understatement (if any) after the application of subparagraph 
     (A) over the aggregate amount of reportable transaction 
     understatements.
       ``(2) Coordination with other penalties.--
       ``(A) Application of fraud penalty.--References to an 
     underpayment in section 6663 shall be treated as including 
     references to a reportable transaction understatement.
       ``(B) No double penalty.--This section shall not apply to 
     any portion of an understatement on which a penalty is 
     imposed under section 6663.
       ``(3) Special rule for amended returns.--Except as provided 
     in regulations, in no event shall any tax treatment included 
     with an amendment or supplement to a return of tax be taken 
     into account in determining the amount of any reportable 
     transaction understatement if the amendment or supplement is 
     filed after the earlier of the date the taxpayer is first 
     contacted by the Secretary regarding the examination of the 
     return or such other date as is specified by the Secretary.
       ``(4) Cross reference.--

  ``For reporting of section 6662A(c) penalty to the Securities and 
Exchange Commission, see section 6707A(e).''.
       (b) Determination of Other Understatements.--Subparagraph 
     (A) of section 6662(d)(2) is amended by adding at the end the 
     following flush sentence:
     ``The excess under the preceding sentence shall be determined 
     without regard to items to which section 6662A applies.''.
       (c) Reasonable Cause Exception.--
       (1) In general.--Section 6664 is amended by adding at the 
     end the following new subsection:
       ``(d) Reasonable Cause Exception for Reportable Transaction 
     Understatements.--
       ``(1) In general.--No penalty shall be imposed under 
     section 6662A with respect to any portion of a reportable 
     transaction understatement if it is shown that there was a 
     reasonable cause for such portion and that the taxpayer acted 
     in good faith with respect to such portion.
       ``(2) Special rules.--Paragraph (1) shall not apply to any 
     reportable transaction understatement unless--
       ``(A) the relevant facts affecting the tax treatment of the 
     item are adequately disclosed in accordance with the 
     regulations prescribed under section 6011,
       ``(B) there is or was substantial authority for such 
     treatment, and
       ``(C) the taxpayer reasonably believed that such treatment 
     was more likely than not the proper treatment.
     A taxpayer failing to adequately disclose in accordance with 
     section 6011 shall be treated as meeting the requirements of 
     subparagraph (A) if the penalty for such failure was 
     rescinded under section 6707A(d).
       ``(3) Rules relating to reasonable belief.--For purposes of 
     paragraph (2)(C)--
       ``(A) In general.--A taxpayer shall be treated as having a 
     reasonable belief with respect to the tax treatment of an 
     item only if such belief--
       ``(i) is based on the facts and law that exist at the time 
     the return of tax which includes such tax treatment is filed, 
     and
       ``(ii) relates solely to the taxpayer's chances of success 
     on the merits of such treatment and does not take into 
     account the possibility that a return will not be audited, 
     such treatment will not be raised on audit, or such treatment 
     will be resolved through settlement if it is raised.
       ``(B) Certain opinions may not be relied upon.--
       ``(i) In general.--An opinion of a tax advisor may not be 
     relied upon to establish the reasonable belief of a taxpayer 
     if--

       ``(I) the tax advisor is described in clause (ii), or
       ``(II) the opinion is described in clause (iii).

       ``(ii) Disqualified tax advisors.--A tax advisor is 
     described in this clause if the tax advisor--

       ``(I) is a material advisor (within the meaning of section 
     6111(b)(1)) who participates in the organization, management, 
     promotion, or sale of the transaction or who is related 
     (within the meaning of section 267(b) or 707(b)(1)) to any 
     person who so participates,

[[Page S10328]]

       ``(II) is compensated directly or indirectly by a material 
     advisor with respect to the transaction,
       ``(III) has a fee arrangement with respect to the 
     transaction which is contingent on all or part of the 
     intended tax benefits from the transaction being sustained, 
     or
       ``(IV) as determined under regulations prescribed by the 
     Secretary, has a continuing financial interest with respect 
     to the transaction.

       ``(iii) Disqualified opinions.--For purposes of clause (i), 
     an opinion is disqualified if the opinion--

       ``(I) is based on unreasonable factual or legal assumptions 
     (including assumptions as to future events),
       ``(II) unreasonably relies on representations, statements, 
     findings, or agreements of the taxpayer or any other person,
       ``(III) does not identify and consider all relevant facts, 
     or
       ``(IV) fails to meet any other requirement as the Secretary 
     may prescribe.''.

       (2) Conforming amendment.--The heading for subsection (c) 
     of section 6664 is amended by inserting ``for Underpayments'' 
     after ``Exception''.
       (d) Conforming Amendments.--
       (1) Subparagraph (C) of section 461(i)(3) is amended by 
     striking ``section 6662(d)(2)(C)(iii)'' and inserting 
     ``section 1274(b)(3)(C)''.
       (2) Paragraph (3) of section 1274(b) is amended--
       (A) by striking ``(as defined in section 
     6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
       (B) by adding at the end the following new subparagraph:
       ``(C) Tax shelter.--For purposes of subparagraph (B), the 
     term `tax shelter' means--
       ``(i) a partnership or other entity,
       ``(ii) any investment plan or arrangement, or
       ``(iii) any other plan or arrangement,
     if a significant purpose of such partnership, entity, plan, 
     or arrangement is the avoidance or evasion of Federal income 
     tax.''.
       (3) Section 6662(d) is amended--
       (A) by striking subparagraphs (C) and (D) of paragraph (2), 
     and
       (B) by adding at the end the following:
       ``(3) Secretarial list.--For purposes of this subsection, 
     section 6664(d)(2), and section 6694(a)(1), the Secretary may 
     prescribe a list of positions for which the Secretary 
     believes there is not substantial authority or there is no 
     reasonable belief that the tax treatment is more likely than 
     not the proper tax treatment. Such list (and any revisions 
     thereof) shall be published in the Federal Register or the 
     Internal Revenue Bulletin.''.
       (4) Section 6664(c)(1) is amended by striking ``this part'' 
     and inserting ``section 6662 or 6663''.
       (5) Subsection (b) of section 7525 is amended by striking 
     ``section 6662(d)(2)(C)(iii)'' and inserting ``section 
     1274(b)(3)(C)''.
       (6)(A) The heading for section 6662 is amended to read as 
     follows:

     ``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON 
                   UNDERPAYMENTS.''.

       (B) The table of sections for part II of subchapter A of 
     chapter 68 is amended by striking the item relating to 
     section 6662 and inserting the following new items:

``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements 
              with respect to reportable transactions.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 803. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES 
                   RELATING TO TAXPAYER COMMUNICATIONS.

       (a) In General.--Section 7525(b) (relating to section not 
     to apply to communications regarding corporate tax shelters) 
     is amended to read as follows:
       ``(b) Section Not To Apply to Communications Regarding Tax 
     Shelters.--The privilege under subsection (a) shall not apply 
     to any written communication which is--
       ``(1) between a federally authorized tax practitioner and--
       ``(A) any person,
       ``(B) any director, officer, employee, agent, or 
     representative of the person, or
       ``(C) any other person holding a capital or profits 
     interest in the person, and
       ``(2) in connection with the promotion of the direct or 
     indirect participation of the person in any tax shelter (as 
     defined in section 1274(b)(3)(C)).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to communications made on or after the date of 
     the enactment of this Act.

     SEC. 804. DISCLOSURE OF REPORTABLE TRANSACTIONS.

       (a) In General.--Section 6111 (relating to registration of 
     tax shelters) is amended to read as follows:

     ``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.

       ``(a) In General.--Each material advisor with respect to 
     any reportable transaction shall make a return (in such form 
     as the Secretary may prescribe) setting forth--
       ``(1) information identifying and describing the 
     transaction,
       ``(2) information describing any potential tax benefits 
     expected to result from the transaction, and
       ``(3) such other information as the Secretary may 
     prescribe.
     Such return shall be filed not later than the date specified 
     by the Secretary.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Material advisor.--
       ``(A) In general.--The term `material advisor' means any 
     person--
       ``(i) who provides any material aid, assistance, or advice 
     with respect to organizing, promoting, selling, implementing, 
     or carrying out any reportable transaction, and
       ``(ii) who directly or indirectly derives gross income in 
     excess of the threshold amount for such aid, assistance, or 
     advice.
       ``(B) Threshold amount.--For purposes of subparagraph (A), 
     the threshold amount is--
       ``(i) $50,000 in the case of a reportable transaction 
     substantially all of the tax benefits from which are provided 
     to natural persons, and
       ``(ii) $250,000 in any other case.
       ``(2) Reportable transaction.--The term `reportable 
     transaction' has the meaning given to such term by section 
     6707A(c).
       ``(c) Regulations.--The Secretary may prescribe regulations 
     which provide--
       ``(1) that only 1 person shall be required to meet the 
     requirements of subsection (a) in cases in which 2 or more 
     persons would otherwise be required to meet such 
     requirements,
       ``(2) exemptions from the requirements of this section, and
       ``(3) such rules as may be necessary or appropriate to 
     carry out the purposes of this section.''.
       (b) Conforming Amendments.--
       (1) The item relating to section 6111 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6111. Disclosure of reportable transactions.''.

       (2)(A) So much of section 6112 as precedes subsection (c) 
     thereof is amended to read as follows:

     ``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS 
                   MUST KEEP LISTS OF ADVISEES.

       ``(a) In General.--Each material advisor (as defined in 
     section 6111) with respect to any reportable transaction (as 
     defined in section 6707A(c)) shall maintain, in such manner 
     as the Secretary may by regulations prescribe, a list--
       ``(1) identifying each person with respect to whom such 
     advisor acted as such a material advisor with respect to such 
     transaction, and
       ``(2) containing such other information as the Secretary 
     may by regulations require.

     This section shall apply without regard to whether a material 
     advisor is required to file a return under section 6111 with 
     respect to such transaction.''.
       (B) Section 6112 is amended by redesignating subsection (c) 
     as subsection (b).
       (C) Section 6112(b), as redesignated by subparagraph (B), 
     is amended--
       (i) by inserting ``written'' before ``request'' in 
     paragraph (1)(A), and
       (ii) by striking ``shall prescribe'' in paragraph (2) and 
     inserting ``may prescribe''.
       (D) The item relating to section 6112 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6112. Material advisors of reportable transactions must keep 
              lists of advisees.''.

       (3)(A) The heading for section 6708 is amended to read as 
     follows:

     ``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH 
                   RESPECT TO REPORTABLE TRANSACTIONS.''.

       (B) The item relating to section 6708 in the table of 
     sections for part I of subchapter B of chapter 68 is amended 
     to read as follows:

``Sec. 6708. Failure to maintain lists of advisees with respect to 
              reportable transactions.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions with respect to which material 
     aid, assistance, or advice referred to in section 
     6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as 
     added by this section) is provided after the date of the 
     enactment of this Act.

     SEC. 805. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER 
                   TAX SHELTERS.

       (a) In General.--Section 6707 (relating to failure to 
     furnish information regarding tax shelters) is amended to 
     read as follows:

     ``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING 
                   REPORTABLE TRANSACTIONS.

       ``(a) In General.--If a person who is required to file a 
     return under section 6111(a) with respect to any reportable 
     transaction--
       ``(1) fails to file such return on or before the date 
     prescribed therefor, or
       ``(2) files false or incomplete information with the 
     Secretary with respect to such transaction,

     such person shall pay a penalty with respect to such return 
     in the amount determined under subsection (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     penalty imposed under subsection (a) with respect to any 
     failure shall be $50,000.
       ``(2) Listed transactions.--The penalty imposed under 
     subsection (a) with respect to any listed transaction shall 
     be an amount equal to the greater of--
       ``(A) $200,000, or
       ``(B) 50 percent of the gross income derived by such person 
     with respect to aid, assistance, or advice which is provided 
     with respect to the listed transaction before the

[[Page S10329]]

     date the return including the transaction is filed under 
     section 6111.

     Subparagraph (B) shall be applied by substituting `75 
     percent' for `50 percent' in the case of an intentional 
     failure or act described in subsection (a).
       ``(c) Rescission Authority.--The provisions of section 
     6707A(d) (relating to authority of Commissioner to rescind 
     penalty) shall apply to any penalty imposed under this 
     section.
       ``(d) Reportable and Listed Transactions.--The terms 
     `reportable transaction' and `listed transaction' have the 
     respective meanings given to such terms by section 
     6707A(c).''.
       (b) Clerical Amendment.--The item relating to section 6707 
     in the table of sections for part I of subchapter B of 
     chapter 68 is amended by striking ``tax shelters'' and 
     inserting ``reportable transactions''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns the due date for which is after the 
     date of the enactment of this Act.

     SEC. 806. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN 
                   LISTS OF INVESTORS.

       (a) In General.--Subsection (a) of section 6708 is amended 
     to read as follows:
       ``(a) Imposition of Penalty.--
       ``(1) In general.--If any person who is required to 
     maintain a list under section 6112(a) fails to make such list 
     available upon written request to the Secretary in accordance 
     with section 6112(b)(1)(A) within 20 business days after the 
     date of the Secretary's request, such person shall pay a 
     penalty of $10,000 for each day of such failure after such 
     20th day.
       ``(2) Reasonable cause exception.--No penalty shall be 
     imposed by paragraph (1) with respect to the failure on any 
     day if such failure is due to reasonable cause.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to requests made after the date of the enactment 
     of this Act.

     SEC. 807. PENALTY ON PROMOTERS OF TAX SHELTERS.

       (a) Penalty on Promoting Abusive Tax Shelters.--Section 
     6700(a) is amended by adding at the end the following new 
     sentence: ``Notwithstanding the first sentence, if an 
     activity with respect to which a penalty imposed under this 
     subsection involves a statement described in paragraph 
     (2)(A), the amount of the penalty shall be equal to 50 
     percent of the gross income derived (or to be derived) from 
     such activity by the person on which the penalty is 
     imposed.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to activities after the date of the enactment of 
     this Act.

      Subtitle B--Provisions to Discourage Corporate Expatriation

     SEC. 821. TAX TREATMENT OF INVERTED CORPORATE ENTITIES.

       (a) In General.--Subchapter C of chapter 80 (relating to 
     provisions affecting more than one subtitle) is amended by 
     adding at the end the following new section:

     ``SEC. 7874. RULES RELATING TO INVERTED CORPORATE ENTITIES.

       ``(a) Inverted Corporations Treated as Domestic 
     Corporations.--
       ``(1) In general.--If a foreign incorporated entity is 
     treated as an inverted domestic corporation, then, 
     notwithstanding section 7701(a)(4), such entity shall be 
     treated for purposes of this title as a domestic corporation.
       ``(2) Inverted domestic corporation.--For purposes of this 
     section, a foreign incorporated entity shall be treated as an 
     inverted domestic corporation if, pursuant to a plan (or a 
     series of related transactions)--
       ``(A) the entity completes after March 20, 2002, the direct 
     or indirect acquisition of substantially all of the 
     properties held directly or indirectly by a domestic 
     corporation or substantially all of the properties 
     constituting a trade or business of a domestic partnership,
       ``(B) after the acquisition at least 80 percent of the 
     stock (by vote or value) of the entity is held--
       ``(i) in the case of an acquisition with respect to a 
     domestic corporation, by former shareholders of the domestic 
     corporation by reason of holding stock in the domestic 
     corporation, or
       ``(ii) in the case of an acquisition with respect to a 
     domestic partnership, by former partners of the domestic 
     partnership by reason of holding a capital or profits 
     interest in the domestic partnership, and
       ``(C) the expanded affiliated group which after the 
     acquisition includes the entity does not have substantial 
     business activities in the foreign country in which or under 
     the law of which the entity is created or organized when 
     compared to the total business activities of such expanded 
     affiliated group.

     Except as provided in regulations, an acquisition of 
     properties of a domestic corporation shall not be treated as 
     described in subparagraph (A) if none of the corporation's 
     stock was readily tradeable on an established securities 
     market at any time during the 4-year period ending on the 
     date of the acquisition.
       ``(b) Preservation of Domestic Tax Base in Certain 
     Inversion Transactions To Which Subsection (a) Does Not 
     Apply.--
       ``(1) In general.--If a foreign incorporated entity would 
     be treated as an inverted domestic corporation with respect 
     to an acquired entity if either--
       ``(A) subsection (a)(2)(A) were applied by substituting 
     `after December 31, 1996, and on or before March 20, 2002' 
     for `after March 20, 2002' and subsection (a)(2)(B) were 
     applied by substituting `more than 50 percent' for `at least 
     80 percent', or
       ``(B) subsection (a)(2)(B) were applied by substituting 
     `more than 50 percent' for `at least 80 percent',

     then the rules of subsection (c) shall apply to any inversion 
     gain of the acquired entity during the applicable period and 
     the rules of subsection (d) shall apply to any related party 
     transaction of the acquired entity during the applicable 
     period. This subsection shall not apply for any taxable year 
     if subsection (a) applies to such foreign incorporated entity 
     for such taxable year.
       ``(2) Acquired entity.--For purposes of this section--
       ``(A) In general.--The term `acquired entity' means the 
     domestic corporation or partnership substantially all of the 
     properties of which are directly or indirectly acquired in an 
     acquisition described in subsection (a)(2)(A) to which this 
     subsection applies.
       ``(B) Aggregation rules.--Any domestic person bearing a 
     relationship described in section 267(b) or 707(b) to an 
     acquired entity shall be treated as an acquired entity with 
     respect to the acquisition described in subparagraph (A).
       ``(3) Applicable period.--For purposes of this section--
       ``(A) In general.--The term `applicable period' means the 
     period--
       ``(i) beginning on the first date properties are acquired 
     as part of the acquisition described in subsection (a)(2)(A) 
     to which this subsection applies, and
       ``(ii) ending on the date which is 10 years after the last 
     date properties are acquired as part of such acquisition.
       ``(B) Special rule for inversions occurring before march 
     21, 2002.--In the case of any acquired entity to which 
     paragraph (1)(A) applies, the applicable period shall be the 
     10-year period beginning on January 1, 2003.
       ``(c) Tax on Inversion Gains May Not Be Offset.--If 
     subsection (b) applies--
       ``(1) In general.--The taxable income of an acquired entity 
     (or any expanded affiliated group which includes such entity) 
     for any taxable year which includes any portion of the 
     applicable period shall in no event be less than the 
     inversion gain of the entity for the taxable year.
       ``(2) Credits not allowed against tax on inversion gain.--
     Credits shall be allowed against the tax imposed by this 
     chapter on an acquired entity for any taxable year described 
     in paragraph (1) only to the extent such tax exceeds the 
     product of--
       ``(A) the amount of the inversion gain for the taxable 
     year, and
       ``(B) the highest rate of tax specified in section 
     11(b)(1).

     For purposes of determining the credit allowed by section 901 
     inversion gain shall be treated as from sources within the 
     United States.
       ``(3) Special rules for partnerships.--In the case of an 
     acquired entity which is a partnership--
       ``(A) the limitations of this subsection shall apply at the 
     partner rather than the partnership level,
       ``(B) the inversion gain of any partner for any taxable 
     year shall be equal to the sum of--
       ``(i) the partner's distributive share of inversion gain of 
     the partnership for such taxable year, plus
       ``(ii) income or gain required to be recognized for the 
     taxable year by the partner under section 367(a), 741, or 
     1001, or under any other provision of chapter 1, by reason of 
     the transfer during the applicable period of any partnership 
     interest of the partner in such partnership to the foreign 
     incorporated entity, and
       ``(C) the highest rate of tax specified in the rate 
     schedule applicable to the partner under chapter 1 shall be 
     substituted for the rate of tax under paragraph (2)(B).
       ``(4) Inversion gain.--For purposes of this section, the 
     term `inversion gain' means any income or gain required to be 
     recognized under section 304, 311(b), 367, 1001, or 1248, or 
     under any other provision of chapter 1, by reason of the 
     transfer during the applicable period of stock or other 
     properties by an acquired entity--
       ``(A) as part of the acquisition described in subsection 
     (a)(2)(A) to which subsection (b) applies, or
       ``(B) after such acquisition to a foreign related person.

     The Secretary may provide that income or gain from the sale 
     of inventories or other transactions in the ordinary course 
     of a trade or business shall not be treated as inversion gain 
     under subparagraph (B) to the extent the Secretary determines 
     such treatment would not be inconsistent with the purposes of 
     this section.
       ``(5) Coordination with section 172 and minimum tax.--Rules 
     similar to the rules of paragraphs (3) and (4) of section 
     860E(a) shall apply for purposes of this section.
       ``(6) Statute of limitations.--
       ``(A) In general.--The statutory period for the assessment 
     of any deficiency attributable to the inversion gain of any 
     taxpayer for any pre-inversion year shall not expire before 
     the expiration of 3 years from the date the Secretary is 
     notified by the taxpayer (in such manner as the Secretary may 
     prescribe) of the acquisition described in subsection 
     (a)(2)(A) to which such gain relates and such deficiency may 
     be assessed before the expiration of such 3-year period 
     notwithstanding

[[Page S10330]]

     the provisions of any other law or rule of law which would 
     otherwise prevent such assessment.
       ``(B) Pre-inversion year.--For purposes of subparagraph 
     (A), the term `pre-inversion year' means any taxable year 
     if--
       ``(i) any portion of the applicable period is included in 
     such taxable year, and
       ``(ii) such year ends before the taxable year in which the 
     acquisition described in subsection (a)(2)(A) is completed.
       ``(d) Special Rules Applicable to Related Party 
     Transactions.--
       ``(1) Annual application for agreements on return 
     positions.--
       ``(A) In general.--Each acquired entity to which subsection 
     (b) applies shall file with the Secretary an application for 
     an approval agreement under subparagraph (D) for each taxable 
     year which includes a portion of the applicable period. Such 
     application shall be filed at such time and manner, and shall 
     contain such information, as the Secretary may prescribe.
       ``(B) Secretarial action.--Within 90 days of receipt of an 
     application under subparagraph (A) (or such longer period as 
     the Secretary and entity may agree upon), the Secretary 
     shall--
       ``(i) enter into an agreement described in subparagraph (D) 
     for the taxable year covered by the application,
       ``(ii) notify the entity that the Secretary has determined 
     that the application was filed in good faith and 
     substantially complies with the requirements for the 
     application under subparagraph (A), or
       ``(iii) notify the entity that the Secretary has determined 
     that the application was not filed in good faith or does not 
     substantially comply with such requirements.
     If the Secretary fails to act within the time prescribed 
     under the preceding sentence, the entity shall be treated for 
     purposes of this paragraph as having received notice under 
     clause (ii).
       ``(C) Failures to comply.--If an acquired entity fails to 
     file an application under subparagraph (A), or the acquired 
     entity receives a notice under subparagraph (B)(iii), for any 
     taxable year, then for such taxable year--
       ``(i) there shall not be allowed any deduction, or addition 
     to basis or cost of goods sold, for amounts paid or incurred, 
     or losses incurred, by reason of a transaction between the 
     acquired entity and a foreign related person,
       ``(ii) any transfer or license of intangible property (as 
     defined in section 936(h)(3)(B)) between the acquired entity 
     and a foreign related person shall be disregarded, and
       ``(iii) any cost-sharing arrangement between the acquired 
     entity and a foreign related person shall be disregarded.
       ``(D) Approval agreement.--For purposes of subparagraph 
     (A), the term `approval agreement' means a prefiling, advance 
     pricing, or other agreement specified by the Secretary which 
     contains such provisions as the Secretary determines 
     necessary to ensure that the requirements of sections 163(j), 
     267(a)(3), 482, and 845, and any other provision of this 
     title applicable to transactions between related persons and 
     specified by the Secretary, are met.
       ``(E) Tax court review.--
       ``(i) In general.--The Tax Court shall have jurisdiction 
     over any action brought by an acquired entity receiving a 
     notice under subparagraph (B)(iii) to determine whether the 
     issuance of the notice was an abuse of discretion, but only 
     if the action is brought within 30 days after the date of the 
     mailing (determined under rules similar to section 6213) of 
     the notice.
       ``(ii) Court action.--The Tax Court shall issue its 
     decision within 30 days after the filing of the action under 
     clause (i) and may order the Secretary to issue a notice 
     described in subparagraph (B)(ii).
       ``(iii) Review.--An order of the Tax Court under this 
     subparagraph shall be reviewable in the same manner as any 
     other decision of the Tax Court.
       ``(2) Modifications of limitation on interest deduction.--
     In the case of an acquired entity to which subsection (b) 
     applies, section 163(j) shall be applied--
       ``(A) without regard to paragraph (2)(A)(ii) thereof, and
       ``(B) by substituting `25 percent' for `50 percent' each 
     place it appears in paragraph (2)(B) thereof.
       ``(e) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Rules for application of subsection (a)(2).--In 
     applying subsection (a)(2) for purposes of subsections (a) 
     and (b), the following rules shall apply:
       ``(A) Certain stock disregarded.--There shall not be taken 
     into account in determining ownership for purposes of 
     subsection (a)(2)(B)--
       ``(i) stock held by members of the expanded affiliated 
     group which includes the foreign incorporated entity, or
       ``(ii) stock of such entity which is sold in a public 
     offering or private placement related to the acquisition 
     described in subsection (a)(2)(A).
       ``(B) Plan deemed in certain cases.--If a foreign 
     incorporated entity acquires directly or indirectly 
     substantially all of the properties of a domestic corporation 
     or partnership during the 4-year period beginning on the date 
     which is 2 years before the ownership requirements of 
     subsection (a)(2)(B) are met with respect to such domestic 
     corporation or partnership, such actions shall be treated as 
     pursuant to a plan.
       ``(C) Certain transfers disregarded.--The transfer of 
     properties or liabilities (including by contribution or 
     distribution) shall be disregarded if such transfers are part 
     of a plan a principal purpose of which is to avoid the 
     purposes of this section.
       ``(D) Special rule for related partnerships.--For purposes 
     of applying subsection (a)(2) to the acquisition of a 
     domestic partnership, except as provided in regulations, all 
     partnerships which are under common control (within the 
     meaning of section 482) shall be treated as 1 partnership.
       ``(E) Treatment of certain rights.--The Secretary shall 
     prescribe such regulations as may be necessary--
       ``(i) to treat warrants, options, contracts to acquire 
     stock, convertible debt instruments, and other similar 
     interests as stock, and
       ``(ii) to treat stock as not stock.
       ``(2) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group as defined in 
     section 1504(a) but without regard to section 1504(b)(3), 
     except that section 1504(a) shall be applied by substituting 
     `more than 50 percent' for `at least 80 percent' each place 
     it appears.
       ``(3) Foreign incorporated entity.--The term `foreign 
     incorporated entity' means any entity which is, or but for 
     subsection (a)(1) would be, treated as a foreign corporation 
     for purposes of this title.
       ``(4) Foreign related person.--The term `foreign related 
     person' means, with respect to any acquired entity, a foreign 
     person which--
       ``(A) bears a relationship to such entity described in 
     section 267(b) or 707(b), or
       ``(B) is under the same common control (within the meaning 
     of section 482) as such entity.
       ``(5) Subsequent acquisitions by unrelated domestic 
     corporations.--
       ``(A) In general.--Subject to such conditions, limitations, 
     and exceptions as the Secretary may prescribe, if, after an 
     acquisition described in subsection (a)(2)(A) to which 
     subsection (b) applies, a domestic corporation stock of which 
     is traded on an established securities market acquires 
     directly or indirectly any properties of one or more acquired 
     entities in a transaction with respect to which the 
     requirements of subparagraph (B) are met, this section shall 
     cease to apply to any such acquired entity with respect to 
     which such requirements are met.
       ``(B) Requirements.--The requirements of the subparagraph 
     are met with respect to a transaction involving any 
     acquisition described in subparagraph (A) if--
       ``(i) before such transaction the domestic corporation did 
     not have a relationship described in section 267(b) or 
     707(b), and was not under common control (within the meaning 
     of section 482), with the acquired entity, or any member of 
     an expanded affiliated group including such entity, and
       ``(ii) after such transaction, such acquired entity--

       ``(I) is a member of the same expanded affiliated group 
     which includes the domestic corporation or has such a 
     relationship or is under such common control with any member 
     of such group, and
       ``(II) is not a member of, and does not have such a 
     relationship and is not under such common control with any 
     member of, the expanded affiliated group which before such 
     acquisition included such entity.

       ``(f) Regulations.--The Secretary shall provide such 
     regulations as are necessary to carry out this section, 
     including regulations providing for such adjustments to the 
     application of this section as are necessary to prevent the 
     avoidance of the purposes of this section, including the 
     avoidance of such purposes through--
       ``(1) the use of related persons, pass-through or other 
     noncorporate entities, or other intermediaries, or
       ``(2) transactions designed to have persons cease to be (or 
     not become) members of expanded affiliated groups or related 
     persons.''.
       (b) Treatment of Agreements.--
       (1) Confidentiality.--
       (A) Treatment as return information.--Section 6103(b)(2) 
     (relating to return information) is amended by striking 
     ``and'' at the end of subparagraph (C), by inserting ``and'' 
     at the end of subparagraph (D), and by inserting after 
     subparagraph (D) the following new subparagraph:
       ``(E) any approval agreement under section 7874(d)(1) to 
     which any preceding subparagraph does not apply and any 
     background information related to the agreement or any 
     application for the agreement,''.
       (B) Exception from public inspection as written 
     determination.--Section 6110(b)(1)(B) is amended by striking 
     ``or (D)'' and inserting ``, (D), or (E)''.
       (2) Reporting.--The Secretary of the Treasury shall include 
     with any report on advance pricing agreements required to be 
     submitted after the date of the enactment of this Act under 
     section 521(b) of the Ticket to Work and Work Incentives 
     Improvement Act of 1999 (Public Law 106-170) a report 
     regarding approval agreements under section 7874(d)(1) of the 
     Internal Revenue Code of 1986. Such report shall include 
     information similar to the information required with respect 
     to advance pricing agreements and shall be treated for 
     confidentiality purposes in the same manner as the reports on 
     advance pricing agreements are treated under section 
     521(b)(3) of such Act.
       (c) Information Reporting.--The Secretary of the Treasury 
     shall exercise the Secretary's authority under the Internal 
     Revenue Code of 1986 to require entities involved

[[Page S10331]]

     in transactions to which section 7874 of such Code (as added 
     by subsection (a)) applies to report to the Secretary, 
     shareholders, partners, and such other persons as the 
     Secretary may prescribe such information as is necessary to 
     ensure the proper tax treatment of such transactions.
       (d) Conforming Amendment.--The table of sections for 
     subchapter C of chapter 80 is amended by adding at the end 
     the following new item:

``Sec. 7874. Rules relating to inverted corporate entities.''.

       (e) Transition Rule for Certain Regulated Investment 
     Companies and Unit Investment Trusts.--Notwithstanding 
     section 7874 of the Internal Revenue Code of 1986 (as added 
     by subsection (a)), a regulated investment company, or other 
     pooled fund or trust specified by the Secretary of the 
     Treasury, may elect to recognize gain by reason of section 
     367(a) of such Code with respect to a transaction under which 
     a foreign incorporated entity is treated as an inverted 
     domestic corporation under section 7874(a) of such Code by 
     reason of an acquisition completed after March 20, 2002, and 
     before January 1, 2004.

     SEC. 822. EXCISE TAX ON STOCK COMPENSATION OF INSIDERS IN 
                   INVERTED CORPORATIONS.

       (a) In General.--Subtitle D is amended by adding at the end 
     the following new chapter:

 ``CHAPTER 48--STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS

``Sec. 5000A. Stock compensation of insiders in inverted corporations 
              entities.

     ``SEC. 5000A. STOCK COMPENSATION OF INSIDERS IN INVERTED 
                   CORPORATIONS.

       ``(a) Imposition of Tax.--In the case of an individual who 
     is a disqualified individual with respect to any inverted 
     corporation, there is hereby imposed on such person a tax 
     equal to 20 percent of the value (determined under subsection 
     (b)) of the specified stock compensation held (directly or 
     indirectly) by or for the benefit of such individual or a 
     member of such individual's family (as defined in section 
     267) at any time during the 12-month period beginning on the 
     date which is 6 months before the inversion date.
       ``(b) Value.--For purposes of subsection (a)--
       ``(1) In general.--The value of specified stock 
     compensation shall be--
       ``(A) in the case of a stock option (or other similar 
     right) or any stock appreciation right, the fair value of 
     such option or right, and
       ``(B) in any other case, the fair market value of such 
     compensation.
       ``(2) Date for determining value.--The determination of 
     value shall be made--
       ``(A) in the case of specified stock compensation held on 
     the inversion date, on such date,
       ``(B) in the case of such compensation which is canceled 
     during the 6 months before the inversion date, on the day 
     before such cancellation, and
       ``(C) in the case of such compensation which is granted 
     after the inversion date, on the date such compensation is 
     granted.
       ``(c) Tax To Apply Only If Shareholder Gain Recognized.--
     Subsection (a) shall apply to any disqualified individual 
     with respect to an inverted corporation only if gain (if any) 
     on any stock in such corporation is recognized in whole or 
     part by any shareholder by reason of the acquisition referred 
     to in section 7874(a)(2)(A) (determined by substituting `July 
     10, 2002' for `March 20, 2002') with respect to such 
     corporation.
       ``(d) Exception Where Gain Recognized on Compensation.--
     Subsection (a) shall not apply to--
       ``(1) any stock option which is exercised on the inversion 
     date or during the 6-month period before such date and to the 
     stock acquired in such exercise, and
       ``(2) any specified stock compensation which is sold, 
     exchanged, or distributed during such period in a transaction 
     in which gain or loss is recognized in full.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Disqualified individual.--The term `disqualified 
     individual' means, with respect to a corporation, any 
     individual who, at any time during the 12-month period 
     beginning on the date which is 6 months before the inversion 
     date--
       ``(A) is subject to the requirements of section 16(a) of 
     the Securities Exchange Act of 1934 with respect to such 
     corporation or any member of the expanded affiliated group 
     which includes such corporation, or
       ``(B) would be subject to such requirements if such 
     corporation or member were an issuer of equity securities 
     referred to in such section.
       ``(2) Inverted corporation; inversion date.--
       ``(A) Inverted corporation.--The term `inverted 
     corporation' means any corporation to which subsection (a) or 
     (b) of section 7874 applies determined--
       ``(i) by substituting `July 10, 2002' for `March 20, 2002' 
     in section 7874(a)(2)(A), and
       ``(ii) without regard to subsection (b)(1)(A).
     Such term includes any predecessor or successor of such a 
     corporation.
       ``(B) Inversion date.--The term `inversion date' means, 
     with respect to a corporation, the date on which the 
     corporation first becomes an inverted corporation.
       ``(3) Specified stock compensation.--
       ``(A) In general.--The term `specified stock compensation' 
     means payment (or right to payment) granted by the inverted 
     corporation (or by any member of the expanded affiliated 
     group which includes such corporation) to any person in 
     connection with the performance of services by a disqualified 
     individual for such corporation or member if the value of 
     such payment or right is based on (or determined by reference 
     to) the value (or change in value) of stock in such 
     corporation (or any such member).
       ``(B) Exceptions.--Such term shall not include--
       ``(i) any option to which part II of subchapter D of 
     chapter 1 applies, or
       ``(ii) any payment or right to payment from a plan referred 
     to in section 280G(b)(6).
       ``(4) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group (as defined in 
     section 1504(a) without regard to section 1504(b)(3)); except 
     that section 1504(a) shall be applied by substituting `more 
     than 50 percent' for `at least 80 percent' each place it 
     appears.
       ``(f) Special Rules.--For purposes of this section--
       ``(1) Cancellation of restriction.--The cancellation of a 
     restriction which by its terms will never lapse shall be 
     treated as a grant.
       ``(2) Payment or reimbursement of tax by corporation 
     treated as specified stock compensation.--Any payment of the 
     tax imposed by this section directly or indirectly by the 
     inverted corporation or by any member of the expanded 
     affiliated group which includes such corporation--
       ``(A) shall be treated as specified stock compensation, and
       ``(B) shall not be allowed as a deduction under any 
     provision of chapter 1.
       ``(3) Certain restrictions ignored.--Whether there is 
     specified stock compensation, and the value thereof, shall be 
     determined without regard to any restriction other than a 
     restriction which by its terms will never lapse.
       ``(4) Property transfers.--Any transfer of property shall 
     be treated as a payment and any right to a transfer of 
     property shall be treated as a right to a payment.
       ``(5) Other administrative provisions.--For purposes of 
     subtitle F, any tax imposed by this section shall be treated 
     as a tax imposed by subtitle A.
       ``(g) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       (b) Denial of Deduction.--
       (1) In general.--Paragraph (6) of section 275(a) is amended 
     by inserting ``48,'' after ``46,''.
       (2) $1,000,000 limit on deductible compensation reduced by 
     payment of excise tax on specified stock compensation.--
     Paragraph (4) of section 162(m) is amended by adding at the 
     end the following new subparagraph:
       ``(G) Coordination with excise tax on specified stock 
     compensation.--The dollar limitation contained in paragraph 
     (1) with respect to any covered employee shall be reduced 
     (but not below zero) by the amount of any payment (with 
     respect to such employee) of the tax imposed by section 5000A 
     directly or indirectly by the inverted corporation (as 
     defined in such section) or by any member of the expanded 
     affiliated group (as defined in such section) which includes 
     such corporation.''.
       (c) Conforming Amendments.--
       (1) The last sentence of section 3121(v)(2)(A) is amended 
     by inserting before the period ``or to any specified stock 
     compensation (as defined in section 5000A) on which tax is 
     imposed by section 5000A''.
       (2) The table of chapters for subtitle D is amended by 
     adding at the end the following new item:

``Chapter 48. Stock compensation of insiders in inverted 
              corporations.''.

       (d) Effective Date.--The amendments made by this section 
     shall take effect on July 11, 2002; except that periods 
     before such date shall not be taken into account in applying 
     the periods in subsections (a) and (e)(1) of section 5000A of 
     the Internal Revenue Code of 1986, as added by this section.

     SEC. 823. REINSURANCE OF UNITED STATES RISKS IN FOREIGN 
                   JURISDICTIONS.

       (a) In General.--Section 845(a) (relating to allocation in 
     case of reinsurance agreement involving tax avoidance or 
     evasion) is amended by striking ``source and character'' and 
     inserting ``amount, source, or character''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to any risk reinsured after April 11, 2002.

                  Subtitle C--Other Revenue Provisions

     SEC. 831. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

       (a) In General.--Chapter 77 (relating to miscellaneous 
     provisions) is amended by adding at the end the following new 
     section:

     ``SEC. 7528. INTERNAL REVENUE SERVICE USER FEES.

       ``(a) General Rule.--The Secretary shall establish a 
     program requiring the payment of user fees for--
       ``(1) requests to the Internal Revenue Service for ruling 
     letters, opinion letters, and determination letters, and
       ``(2) other similar requests.
       ``(b) Program Criteria.--
       ``(1) In general.--The fees charged under the program 
     required by subsection (a)--
       ``(A) shall vary according to categories (or subcategories) 
     established by the Secretary,
       ``(B) shall be determined after taking into account the 
     average time for (and difficulty

[[Page S10332]]

     of) complying with requests in each category (and 
     subcategory), and
       ``(C) shall be payable in advance.
       ``(2) Exemptions, etc.--
       ``(A) In general.--The Secretary shall provide for such 
     exemptions (and reduced fees) under such program as the 
     Secretary determines to be appropriate.
       ``(B) Exemption for certain requests regarding pension 
     plans.--The Secretary shall not require payment of user fees 
     under such program for requests for determination letters 
     with respect to the qualified status of a pension benefit 
     plan maintained solely by 1 or more eligible employers or any 
     trust which is part of the plan. The preceding sentence shall 
     not apply to any request--
       ``(i) made after the later of--

       ``(I) the fifth plan year the pension benefit plan is in 
     existence, or
       ``(II) the end of any remedial amendment period with 
     respect to the plan beginning within the first 5 plan years, 
     or

       ``(ii) made by the sponsor of any prototype or similar plan 
     which the sponsor intends to market to participating 
     employers.
       ``(C) Definitions and special rules.--For purposes of 
     subparagraph (B)--
       ``(i) Pension benefit plan.--The term `pension benefit 
     plan' means a pension, profit-sharing, stock bonus, annuity, 
     or employee stock ownership plan.
       ``(ii) Eligible employer.--The term `eligible employer' 
     means an eligible employer (as defined in section 
     408(p)(2)(C)(i)(I)) which has at least 1 employee who is not 
     a highly compensated employee (as defined in section 414(q)) 
     and is participating in the plan. The determination of 
     whether an employer is an eligible employer under 
     subparagraph (B) shall be made as of the date of the request 
     described in such subparagraph.
       ``(iii) Determination of average fees charged.--For 
     purposes of any determination of average fees charged, any 
     request to which subparagraph (B) applies shall not be taken 
     into account.
       ``(3) Average fee requirement.--The average fee charged 
     under the program required by subsection (a) shall not be 
     less than the amount determined under the following table:

                                                                Average
``Category                                                          fee
  Employee plan ruling and opinion............................$250 ....

  Exempt organization ruling..................................$350 ....

  Employee plan determination.................................$300 ....

  Exempt organization determination...........................$275 ....

  Chief counsel ruling........................................$200.....

       ``(c) Termination.--No fee shall be imposed under this 
     section with respect to requests made after September 30, 
     2013.''.
       (b) Conforming Amendments.--
       (1) The table of sections for chapter 77 is amended by 
     adding at the end the following new item:

``Sec. 7528. Internal Revenue Service user fees.''.

       (2) Section 10511 of the Revenue Act of 1987 is repealed.
       (3) Section 620 of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 is repealed.
       (c) Limitations.--Notwithstanding any other provision of 
     law, any fees collected pursuant to section 7528 of the 
     Internal Revenue Code of 1986, as added by subsection (a), 
     shall not be expended by the Internal Revenue Service unless 
     provided by an appropriations Act.
       (d) Effective Date.--The amendments made by this section 
     shall apply to requests made after the date of the enactment 
     of this Act.

     SEC. 832. ADDITION OF VACCINES AGAINST HEPATITIS A TO LIST OF 
                   TAXABLE VACCINES.

       (a) In General.--Section 4132(a)(1) (defining taxable 
     vaccine) is amended by redesignating subparagraphs (I), (J), 
     (K), and (L) as subparagraphs (J), (K), (L), and (M), 
     respectively, and by inserting after subparagraph (H) the 
     following new subparagraph:
       ``(I) Any vaccine against hepatitis A.''.
       (b) Conforming Amendment.--Section 9510(c)(1)(A) is amended 
     by striking ``October 18, 2000'' and inserting ``April 2, 
     2003''.
       (c) Effective Date.--
       (1) Sales, etc.--The amendments made by this section shall 
     apply to sales and uses on or after the first day of the 
     first month which begins more than 4 weeks after the date of 
     the enactment of this Act.
       (2) Deliveries.--For purposes of paragraph (1) and section 
     4131 of the Internal Revenue Code of 1986, in the case of 
     sales on or before the effective date described in such 
     paragraph for which delivery is made after such date, the 
     delivery date shall be considered the sale date.

     SEC. 843. INDIVIDUAL EXPATRIATION TO AVOID TAX.

       (a) Expatriation To Avoid Tax.--
       (1) In general.--Subsection (a) of section 877 (relating to 
     treatment of expatriates) is amended to read as follows:
       ``(a) Treatment of Expatriates.--
       ``(1) In general.--Every nonresident alien individual to 
     whom this section applies and who, within the 10-year period 
     immediately preceding the close of the taxable year, lost 
     United States citizenship shall be taxable for such taxable 
     year in the manner provided in subsection (b) if the tax 
     imposed pursuant to such subsection (after any reduction in 
     such tax under the last sentence of such subsection) exceeds 
     the tax which, without regard to this section, is imposed 
     pursuant to section 871.
       ``(2) Individuals subject to this section.--This section 
     shall apply to any individual if--
       ``(A) the average annual net income tax (as defined in 
     section 38(c)(1)) of such individual for the period of 5 
     taxable years ending before the date of the loss of United 
     States citizenship is greater than $122,000,
       ``(B) the net worth of the individual as of such date is 
     $2,000,000 or more, or
       ``(C) such individual fails to certify under penalty of 
     perjury that he has met the requirements of this title for 
     the 5 preceding taxable years or fails to submit such 
     evidence of such compliance as the Secretary may require.

     In the case of the loss of United States citizenship in any 
     calendar year after 2003, such $122,000 amount shall be 
     increased by an amount equal to such dollar amount multiplied 
     by the cost-of-living adjustment determined under section 
     1(f)(3) for such calendar year by substituting `2002' for 
     `1992' in subparagraph (B) thereof. Any increase under the 
     preceding sentence shall be rounded to the nearest multiple 
     of $1,000.''.
       (2) Revision of exceptions from alternative tax.--
     Subsection (c) of section 877 (relating to tax avoidance not 
     presumed in certain cases) is amended to read as follows:
       ``(c) Exceptions.--
       ``(1) In general.--Subparagraphs (A) and (B) of subsection 
     (a)(2) shall not apply to an individual described in 
     paragraph (2) or (3).
       ``(2) Dual citizens.--
       ``(A) In general.--An individual is described in this 
     paragraph if--
       ``(i) the individual became at birth a citizen of the 
     United States and a citizen of another country and continues 
     to be a citizen of such other country, and
       ``(ii) the individual has had no substantial contacts with 
     the United States.
       ``(B) Substantial contacts.--An individual shall be treated 
     as having no substantial contacts with the United States only 
     if the individual--
       ``(i) was never a resident of the United States (as defined 
     in section 7701(b)),
       ``(ii) has never held a United States passport, and
       ``(iii) was not present in the United States for more than 
     30 days during any calendar year which is 1 of the 10 
     calendar years preceding the individual's loss of United 
     States citizenship.
       ``(3) Certain minors.--An individual is described in this 
     paragraph if--
       ``(A) the individual became at birth a citizen of the 
     United States,
       ``(B) neither parent of such individual was a citizen of 
     the United States at the time of such birth,
       ``(C) the individual's loss of United States citizenship 
     occurs before such individual attains age 18\1/2\, and
       ``(D) the individual was not present in the United States 
     for more than 30 days during any calendar year which is 1 of 
     the 10 calendar years preceding the individual's loss of 
     United States citizenship.''.
       (3) Conforming amendment.--Section 2107(a) is amended to 
     read as follows:
       ``(a) Treatment of Expatriates.--A tax computed in 
     accordance with the table contained in section 2001 is hereby 
     imposed on the transfer of the taxable estate, determined as 
     provided in section 2106, of every decedent nonresident not a 
     citizen of the United States if the date of death occurs 
     during a taxable year with respect to which the decedent is 
     subject to tax under section 877(b).''.
       (b) Special Rules for Determining When an Individual is no 
     Longer a United States Citizen or Long-Term Resident.--
     Section 7701 (relating to definitions) is amended by 
     redesignating subsection (n) as subsection (o) and by 
     inserting after subsection (m) the following new subsection:
       ``(n) Special Rules for Determining When an Individual is 
     no Longer a United States Citizen or Long-Term Resident.--An 
     individual who would not (but for this subsection) be treated 
     as a citizen or resident of the United States shall continue 
     to be treated as a citizen or resident of the United States 
     until such individual--
       ``(1) gives notice of an expatriating act or termination of 
     residency (with the requisite intent to relinquish 
     citizenship or terminate residency) to the Secretary of State 
     or the Secretary of Homeland Security, and
       ``(2) provides a statement in accordance with section 
     6039G.''.
       (c) Physical Presence in the United States for More Than 30 
     Days.--Section 877 (relating to expatriation to avoid tax) is 
     amended by adding at the end the following new subsection:
       ``(g) Physical Presence.--This section shall not apply to 
     any individual for any taxable year during the 10-year period 
     referred to in subsection (a) in which such individual is 
     present (within the meaning of section 7701(b)(7) without 
     regard to subparagraphs (B), (C), and (D) thereof) in the 
     United States for more than 30 days in the calendar year 
     ending in such taxable year, and such individual shall be 
     treated for purposes of this title as a citizen or resident 
     of the United States for such taxable year.''.
       (d) Transfers Subject to Gift Tax.--Subsection (a) of 
     section 2501 (relating to taxable transfers) is amended by 
     adding at the end the following:
       ``(6) Transfers of certain stock.--
       ``(A) In general.--Paragraph (3) shall not apply to the 
     transfer of stock described in subparagraph (B) by any 
     individual to whom section 877(b) applies, and section 
     2511(a)

[[Page S10333]]

     shall be applied without regard to whether such stock is 
     property which is situated within the United States.
       ``(B) Valuation.--For purposes of subparagraph (A), the 
     value of stock shall be determined as provided in section 
     2103, except that--
       ``(i) if the donor owned (within the meaning of section 
     958(a)) at the time of such transfer 10 percent or more of 
     the total combined voting power of all classes of stock 
     entitled to vote of a foreign corporation, and
       ``(ii) if such donor owned (within the meaning of section 
     958(a)), or is considered to have owned (by applying the 
     ownership rules of section 958(b)), at the time of such 
     transfer, more than 50 percent of--

       ``(I) the total combined voting power of all classes of 
     stock entitled to vote of such corporation, or
       ``(II) the total value of the stock of such corporation,

     then the portion of the fair market value of the stock of 
     such foreign corporation transferred by such donor which is 
     included for purposes of subparagraph (A) shall be the amount 
     which bears the same ratio to such value as the fair market 
     value of any assets owned by such foreign corporation and 
     situated in the United States at the time of such transfer 
     bears to the total fair market value of all assets owned by 
     such foreign corporation at such time. For purposes of the 
     preceding sentence, a donor shall be treated as owning stock 
     of a foreign corporation at the time of such transfer if, at 
     such time, by trust or otherwise, within the meaning of 
     sections 2035 to 2038, inclusive, he owned such stock.''.
       (e) Enhanced Information Reporting From Individuals Losing 
     United States Citizenship.--
       (1) In general.--Subsection (a) of section 6039G is amended 
     to read as follows:
       ``(a) In General.--Notwithstanding any other provision of 
     law, any individual to whom section 877(b) applies for any 
     taxable year shall provide a statement for such taxable year 
     which includes the information described in subsection 
     (b).''.
       (2) Information to be provided.--Subsection (b) of section 
     6039G is amended to read as follows:
       ``(b) Information To Be Provided.--Information required 
     under subsection (a) shall include--
       ``(1) the taxpayer's TIN,
       ``(2) the mailing address of such individual's principal 
     foreign residence,
       ``(3) the foreign country, in which such individual is 
     residing,
       ``(4) the foreign country of which such individual is a 
     citizen,
       ``(5) information detailing the income, assets, and 
     liabilities of such individual,
       ``(6) the number of days that the individual was present in 
     the United States during the taxable year, and
       ``(7) such other information as the Secretary may 
     prescribe.''.
       (3) Increase in penalty.--Subsection (d) of section 6039G 
     is amended to read as follows:
       ``(d) Penalty.--If--
       ``(1) an individual is required to file a statement under 
     subsection (a) for any taxable year, and
       ``(2) fails to file such a statement with the Secretary on 
     or before the date such statement is required to be filed or 
     fails to include all the information required to be shown on 
     the statement or includes incorrect information,

     such individual shall pay a penalty of $5,000 unless it is 
     shown that such failure is due to reasonable cause and not to 
     willful neglect.''.
       (4) Conforming amendment.--Section 6039G is amended by 
     striking subsections (c), (f), and (g) and by redesignating 
     subsections (d) and (e) as subsection (c) and (d), 
     respectively.
       (f) Effective Date.--The amendments made by this section 
     shall apply to individuals who expatriate after February 27, 
     2003.
                                 ______
                                 
  SA 1425. Ms. CANTWELL submitted an amendment intended to be proposed 
to amendment SA 1412 proposed by Mr. Domenici (for himself, Ms. 
Landrieu, Mr. Thomas, Ms. Murkowski, Mr. Campbell, Mr. Smith, Mr. 
Alexander, Mr. Kyl, Mr. Nelson of Nebraska, Mr. Hagel, Mr. Talent, Mr. 
Bunning, and Mr. Coleman) to the bill S. 14, to enhance the energy 
security of the United States, and for other purposes; which was 
ordered to lie on the table; as follows:

       Strike section 1141 and insert the following:

     SEC. 1141. NET METERING.

       (a) Adoption of Standard.--Section 111(d) of the Public 
     Utility Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)) 
     is amended by adding at the end the following:
       ``(11) Net metering.--
       ``(A) In general.--On the request of any electric consumer 
     served by an electric utility, the electric utility shall 
     make available to the electric consumer net metering as 
     provided in section 115(i).
       ``(B) Consideration by state regulatory authorities.--
     Notwithstanding subsections (b) and (c) of section 112, not 
     later than 1 year after the date of enactment of this 
     paragraph, a State regulatory authority may consider and make 
     a determination concerning whether it is in the public 
     interest to decline to implement subparagraph (A) in the 
     State.
       ``(C) Incentives.--Nothing in this paragraph precludes a 
     State from establishing incentives to encourage on-site 
     generating facilities and net metering in addition to the 
     requirement under this subsection.
       ``(D) Reports.--Not later than 1 year after the date of 
     enactment of this paragraph and annually thereafter, the 
     Secretary shall submit to Congress a report that--
       ``(i) describes the status of implementation by the States 
     of subparagraph (A);
       ``(ii) contains a list of pre-approved systems and 
     equipment eligible for uniform interconnection treatment; and
       ``(iii) describes the public benefits that have been 
     derived from net metering and interconnection standards.''.
       (b) Special Rules for Net Metering.--Section 115 of the 
     Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 
     2625) is amended by adding at the end the following:
       ``(i) Net Metering.--
       ``(1) Definitions.--In this subsection:
       ``(A) Eligible on-site generating facility.--The term 
     `eligible on-site generating facility' means--
       ``(i) a facility on the site of a residential electric 
     consumer with a maximum generating capacity of 25 kilowatts 
     or less that is fueled by solar energy, wind energy, or fuel 
     cells; and
       ``(ii) a facility on the site of a commercial electric 
     consumer with a maximum generating capacity of 1000 kilowatts 
     or less that is fueled solely by a renewable energy resource, 
     landfill gas, or a high-efficiency system.
       ``(B) High efficiency system.--The term `high efficiency 
     system' means a system that is comprised of--
       ``(i) fuel cells; or
       ``(ii) combined heat and power.
       ``(C) Net metering service.--The term `net metering 
     service' means service to an electric consumer, as provided 
     in section 111(d)(11), under which electric energy generated 
     by that electric consumer from an eligible on-site generating 
     facility and delivered to the local distribution facilities 
     may be used to offset electric energy provided by the 
     electric utility to the electric consumer during the 
     applicable billing period.
       ``(D) Renewable energy resource.--The term `renewable 
     energy resource' means solar, wind, biomass, micro-freeflow-
     hydro, or geothermal energy.
       ``(2) Net metering service.--For the purposes of 
     undertaking the consideration and making the determination 
     with respect to the standard concerning net metering 
     established by section 111(d)(11), the term `net metering 
     service' means a service provided in accordance with this 
     subsection.
       ``(3) Charges by an electric utility.--An electric 
     utility--
       ``(A) shall charge the owner or operator of an on-site 
     generating facility rates and charges that are identical to 
     those that would be charged other electric consumers of the 
     electric utility in the same rate class; and
       ``(B) shall not charge the owner or operator of an on-site 
     generating facility any additional standby, capacity, 
     interconnection, or other rate or charge.
       ``(4) Measurement of quantities.--An electric utility that 
     sells electric energy to the owner or operator of an on-site 
     generating facility shall measure the quantity of electric 
     energy produced by the on-site facility and the quantity of 
     electric energy consumed by the owner or operator of an on-
     site generating facility during a billing period with a 
     single bi-directional meter or otherwise in accordance with 
     reasonable metering practices.
       ``(5) Quantity sold in excess of quantity supplied.--If the 
     quantity of electric energy sold by the electric utility to 
     an on-site generating facility exceeds the quantity of 
     electric energy supplied by the on-site generating facility 
     to the electric utility during the billing period, the 
     electric utility may bill the owner or operator for the net 
     quantity of electric energy sold, in accordance with 
     reasonable metering practices.
       ``(6) Quantity supplied in excess of quantity sold.--If the 
     quantity of electric energy supplied by the on-site 
     generating facility to the electric utility exceeds the 
     quantity of electric energy sold by the electric utility to 
     the on-site generating facility during the billing period--
       ``(A) the electric utility may bill the owner or operator 
     of the on-site generating facility for the appropriate 
     charges for the billing period in accordance with paragraph 
     (5); and
       ``(B) the owner or operator of the on-site generating 
     facility shall be credited for the excess kilowatt-hours 
     generated during the billing period with--
       ``(i) a kilowatt-hour credit appearing on the bill for the 
     following billing period; or
       ``(ii) a cash refund.
       ``(7) Compliance with standards.--An eligible on-site 
     generating facility and net metering system used by an 
     electric consumer shall meet all applicable safety, 
     performance, reliability, and interconnection standards 
     established by the National Electrical Code, the Institute of 
     Electrical and Electronics Engineers, and Underwriters 
     Laboratories.
       ``(8) Requirements.-- The Commission, after consideration 
     of all applicable safety, performance, reliability, and 
     interconnection standards established by the National 
     Electrical Code, the Institute of Electrical and Electronics 
     Engineers, and Underwriters Laboratories, and consultation 
     with State

[[Page S10334]]

     regulatory authorities and unregulated electric utilities, 
     and after notice and opportunity for comment, shall 
     promulgate additional control, testing, and interconnection 
     requirements for on-site generating facilities and net 
     metering systems that the Commission determines are necessary 
     to protect public safety and system reliability.''.
                                 ______
                                 
  SA 1426. Mr. LIEBERMAN submitted an amendment intended to be proposed 
by him to the bill S. 14, to enhance the energy security of the United 
States, and for other purposes; which was ordered to lie on the table; 
as follows:

       On page 203, between lines 5 and 6, insert the following:

     SEC. 6____. NATIONWIDE MEDIA CAMPAIGN TO DECREASE OIL 
                   CONSUMPTION.

       (a) In General.--The Secretary of Energy, acting through 
     the Assistant Secretary for Energy Efficiency and Renewable 
     Energy (referred to in this section as the ``Secretary''), 
     shall develop and conduct a national media campaign for the 
     purpose of decreasing oil consumption in the United States 
     over the next decade.
       (b) Contract With Entity.--The Secretary shall carry out 
     subsection (a) directly or through--
       (1) contracts with 1 or more nationally recognized media 
     firms for the development and distribution of monthly 
     television, radio, and newspaper public service 
     announcements; or
       (2) collective agreements with 1 or more nationally 
     recognized institutes, businesses, or nonprofit organizations 
     for the funding, development, and distribution of monthly 
     television, radio, and newspaper public service 
     announcements.
       (c) Use of Funds.--
       (1) In general.--Amounts made available to carry out this 
     section shall be used for the following:
       (A) Advertising costs.--
       (i) The purchase of media time and space.
       (ii) Creative and talent costs.
       (iii) Testing and evaluation of advertising.
       (iv) Evaluation of the effectiveness of the media campaign.
       (v) The negotiated fees for the winning bidder on requests 
     from proposals issued either by the Secretary for purposes 
     otherwise authorized in this section.
       (vi) Entertainment industry outreach, interactive outreach, 
     media projects and activities, public information, news media 
     outreach, and corporate sponsorship and participation.
       (B) Administrative costs.--Operational and management 
     expenses.
       (2) Limitations.--In carrying out this section, the 
     Secretary shall allocate not less than 85 percent of funds 
     made available under subsection (e) for each fiscal year for 
     the advertising functions specified under paragraph (1)(A).
       (d) Reports.--The Secretary shall annually submit to 
     Congress a report that describes--
       (1) the strategy of the national media campaign and whether 
     specific objectives of the campaign were accomplished, 
     including--
       (A) determinations concerning the rate of change of oil 
     consumption, in both absolute and per capita terms; and
       (B) an evaluation that enables consideration whether the 
     media campaign contributed to reduction of oil consumption;
       (2) steps taken to ensure that the national media campaign 
     operates in an effective and efficient manner consistent with 
     the overall strategy and focus of the campaign;
       (3) plans to purchase advertising time and space;
       (4) policies and practices implemented to ensure that 
     Federal funds are used responsibly to purchase advertising 
     time and space and eliminate the potential for waste, fraud, 
     and abuse; and
       (5) all contracts or cooperative agreements entered into 
     with a corporation, partnership, or individual working on 
     behalf of the national media campaign.
       (e) Authorization of Appropriations.--There is authorized 
     to be appropriated to carry out this section $100,000,000 for 
     each of fiscal years 2004 through 2008.
                                 ______
                                 
  SA 1427. Mr. BAUCUS (for himself and Mr. Grassley) submitted an 
amendment intended to be proposed to amendment SA 1424 submitted by Mr. 
Grassley (for himself, Mr. Baucus, Mr. Domenici, and Mr. Bingaman) and 
intended to be proposed to the bill S. 14, to enhance the energy 
security of the United States, and for other purposes; which was 
ordered to lie on the table; as follows:

       On page 263, after line 18, insert:

     SEC. ____. PAYMENT OF DIVIDENDS ON STOCK OF COOPERATIVES 
                   WITHOUT REDUCING PATRONAGE DIVIDENDS.

       (a) In General.--Subsection (a) of section 1388 (relating 
     to patronage dividend defined) is amended by adding at the 
     end the following new sentence: ``For purposes of paragraph 
     (3), net earnings shall not be reduced by amounts paid during 
     the year as dividends on capital stock or other proprietary 
     capital interests of the organization to the extent that the 
     articles of incorporation or bylaws of such organization or 
     other contract with patrons provide that such dividends are 
     in addition to amounts otherwise payable to patrons which are 
     derived from business done with or for patrons during the 
     taxable year.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions in taxable years beginning after 
     the date of the enactment of this Act.
                                 ______
                                 
  SA 1428. Mr. INHOFE (for himself and Mr. Reid) submitted an amendment 
intended to be proposed by him to the bill S. 14, to enhance the energy 
security of the United States, and for other purposes; which was 
ordered to lie on the table; as follows:

       On page 145, between lines 18 and 19, insert the following:

              Subtitle D--Nuclear Infrastructure Security

     SEC. 436. DEFINITIONS.

       Section 11 of the Atomic Energy Act of 1954 (42 U.S.C. 
     2014) is amended--
       (1) by redesignating subsection jj. as subsection ii.; and
       (2) by adding at the end the following:
       ``jj. Designated Nuclear Facility.--The term `designated 
     nuclear facility' means a facility that the Commission 
     classifies as a designated nuclear facility under section 
     170C(b).
       ``kk. Private Security Force.--The term `private security 
     force', with respect to a designated nuclear facility, means 
     personnel hired or contracted by the licensee or certificate 
     holder of the designated nuclear facility to provide security 
     at the designated nuclear facility.''.

     SEC. 436A. DESIGNATED NUCLEAR FACILITY SECURITY.

       (a) In General.--Chapter 14 of the Atomic Energy Act of 
     1954 (42 U.S.C. 2201 et seq.) is amended by adding at the end 
     the following:

     ``SEC. 170C. PROTECTION OF DESIGNATED NUCLEAR FACILITIES.

       ``(a) Definitions.--In this section:
       ``(1) Certificate holder.--The term `certificate holder' 
     means the holder of a certificate of compliance issued by the 
     Commission under this Act.
       ``(2) Federal security coordinator.--The term `Federal 
     security coordinator' means a Federal security coordinator as 
     assigned under this Act.
       ``(3) Design basis threat.--The term `design basis threat' 
     means the threat components or capability of an adversary 
     against which a nuclear facility is responsible for defending 
     under regulations, orders, or other directives of the 
     Commission.
       ``(4) Licensee.--The term `licensee' means the holder of a 
     license issued by the Commission.
       ``(b) Classes of Designated Nuclear Facility.--
       ``(1) In general.--Not later than 18 months after the date 
     of enactment of this section, the Commission shall, by 
     regulation, establish classes of designated nuclear facility.
       ``(2) Classification.--The Commission shall classify 
     facilities licensed by the Commission or issued a certificate 
     by the Commission, including--
       ``(A) commercial nuclear power plants;
       ``(B) independent spent fuel storage installations;
       ``(C) decommissioned nuclear power plants;
       ``(D) fuel processing facilities;
       ``(E) gaseous diffusion facilities; and
       ``(F) any other facility that the Commission determines 
     should be classified as a designated nuclear facility.
       ``(3) Factors.--In determining whether to classify a 
     facility as a designated nuclear facility, the Commission 
     shall consider--
       ``(A) the nature or type of facility;
       ``(B) the nature or type of potential radiological release 
     from the facility; and
       ``(C) other factors relating to protecting public health 
     and safety, the environment, and the common defense and 
     security.
       ``(c) Security Examination.--
       ``(1) In general.--The Commission and the Secretary of 
     Homeland Security, in consultation with other agencies and 
     State and local governments as appropriate, shall examine--
       ``(A) potential threats to nuclear facilities, as 
     appropriate, including consideration of--
       ``(i) threats comparable to the events of September 11, 
     2001;
       ``(ii) cyber threats, chemical threats, and biological 
     threats;
       ``(iii) attacks on nuclear facilities by multiple 
     coordinated teams of a large number of individuals;
       ``(iv) attacks by several persons, including persons 
     employed at the nuclear facility, some of whom may have 
     sophisticated knowledge of the operations of the nuclear 
     facility;
       ``(v) attacks by individuals willing to commit suicide to 
     carry out the attacks;
       ``(vi) intrusions originating from water or from the air; 
     and
       ``(vii) fire, especially fire of a long duration;
       ``(B) classification of threats against nuclear facilities, 
     as appropriate, as--
       ``(i) a type of threat falling under the responsibilities 
     of the Federal Government, including an act by an enemy of 
     the United States, whether a foreign government or any other 
     person;
       ``(ii) a type of threat falling under the responsibility of 
     a State or local government; or
       ``(iii) a type of threat the defense against which should 
     be the responsibility of a licensee or certificate holder;
       ``(C) the national security response capability, 
     including--
       ``(i) identification of the obligations and authorities of 
     the United States for protection of areas (including 
     waterways, ports,

[[Page S10335]]

     roadways, airspace, or facilities in the vicinity of a 
     nuclear facility) in the event of a terrorist threat or a 
     terrorist attack against a nuclear facility, as appropriate;
       ``(ii) identification of the Federal, State, and local 
     agencies responsible for carrying out the obligations and 
     authorities of the United States identified under clause (i); 
     and
       ``(iii) coordination between the Federal, State and local 
     agencies identified under clause (ii), the Commission, and 
     licensees or certificate holders of nuclear facilities, for 
     protection of nuclear facilities and adjacent areas in the 
     event of a terrorist threat or a terrorist attack;
       ``(D) coordination of Federal, State, and local security 
     efforts to protect against terrorist or other criminal 
     attacks at nuclear facilities, as appropriate;
       ``(E) the adequacy of planning to protect the public health 
     and safety at and around nuclear facilities, as appropriate, 
     in the event of a terrorist attack against a nuclear 
     facility, including--
       ``(i) matters relating to the adequacy of emergency 
     planning zones;
       ``(ii) matters relating to the adequacy and coordination of 
     Federal, State, and local emergency planning and other 
     measures; and
       ``(iii) matters relating to the adequacy of security plans 
     for those nuclear facilities;
       ``(F) the system of threat levels, consistent with the 
     Homeland Security Advisory System, used to categorize the 
     threats pertinent to nuclear facilities, as appropriate, 
     including--
       ``(i) procedures to ensure coordinated Federal, State, and 
     local responses to changing threat levels for those nuclear 
     facilities;
       ``(ii) monitoring of threats against those nuclear 
     facilities; and
       ``(iii) procedures to notify licensees and certificate 
     holders of those nuclear facilities of changes in threat 
     levels;
       ``(H) the hiring and training standards for members of 
     private security forces at nuclear facilities, as 
     appropriate;
       ``(I) the coordination of Federal resources to expedite and 
     improve the process of conducting background checks under 
     section 149;
       ``(J) the establishment by the Secretary of Homeland 
     Security of a program to provide technical assistance and 
     training for the National Guard, State law enforcement 
     agencies, and local law enforcement agencies to respond, as 
     appropriate, to threats against nuclear facilities, as 
     appropriate, including recommendations for the establishment 
     of a grant program to assist State and local governments in 
     carrying out any recommendations under paragraph (3); and
       ``(K) options for protecting spent fuel storage areas, such 
     as dry cask storage, and associated infrastructure.
       ``(2) Completion.--The Commission and the Secretary of 
     Homeland Security shall complete the security examination 
     under paragraph (1) not later than 1 year after the date of 
     enactment of this section.
       ``(3) Report.--Not later than 180 days after completion of 
     the security examination under paragraph (1), the Commission 
     and the Secretary of Homeland Security shall submit to the 
     President and Congress, in classified and unclassified form, 
     a report with recommendations and findings.
       ``(d) Revision of Design Basis Threats.--
       ``(1) In general.--Not later than 180 days after completion 
     of the report under subsection (c)(3), the Commission shall 
     by regulation revise the design basis threats promulgated 
     before the date of enactment of this section as the 
     Commission determines to be appropriate based on the security 
     examination.
       ``(2) Applicability.--A revised design basis threat under 
     paragraph (1) shall apply to such classes of designated 
     nuclear facility as the Commission determines to be 
     appropriate.
       ``(3) Protection of safeguards information.--
       ``(A) In general.--In promulgating any regulations under 
     this subsection, the Commission shall ensure protection of 
     information in accordance with chapter 12, section 181, and 
     any other applicable law.
       ``(B) Effect of section.--Nothing in this section 
     supersedes any law governing the disclosure of classified 
     information or safeguards information.
       ``(C) Reports to congress on withheld information.--
       ``(i) Report.--Not later than 60 days after the effective 
     date of the regulations required by this subsection, the 
     Commission shall submit to Congress a report, in classified 
     and unclassified form, describing any classified information, 
     safeguards information, or other information that the 
     Commission considered in promulgating the regulations but did 
     not make available to the public because of the sensitive 
     nature of the information.
       ``(ii) Orders to licensees or certificate holders.--
     Periodically, but not less than once every 6 months, the 
     Commission shall submit to Congress a report, in classified 
     and unclassified form, identifying any orders or instructions 
     to operators, licensees, or certificate holders issued under 
     the regulations required by this subsection that were not 
     made public because of their classified content, safeguards 
     content, or sensitive content.
       ``(e) Threat Levels.--Not later than 150 days after the 
     date of submission of the report under subsection (c)(3), the 
     Commission shall establish a system for the determination of 
     threat levels pertinent to--
       ``(1) such classes of designated nuclear facility as the 
     Commission determines to be appropriate; and
       ``(2) materials subject to this Act as designated by the 
     Commission.
       ``(f) Security Plans.--
       ``(1) In general.--Pursuant to any action taken by the 
     Commission under subsection (d)(1) to revise a design basis 
     threat, not later than 30 days after the revised design basis 
     threat under subsection (d) becomes effective, the Commission 
     shall require each licensee or certificate holder of a 
     designated nuclear facility that is subject to the revised 
     design basis threat to--
       ``(A) revise the security plan of that designated nuclear 
     facility to ensure that that designated nuclear facility 
     protects against the appropriate design basis threats; and
       ``(B) submit the security plan to the Commission for 
     review.
       ``(2) Review schedule.--The Commission shall establish a 
     priority schedule for conducting reviews of security plans 
     based on--
       ``(A) the proximity of the designated nuclear facility to 
     large population areas; and
       ``(B) other critical factors identified by the Commission.
       ``(3) Upgrades to security.--The Commission shall ensure 
     that the licensee or certificate holder of each designated 
     nuclear facility that is subject to the revised design basis 
     threat makes any changes to security and the security plan 
     required from the Commission review on a schedule established 
     by the Commission, but not to exceed 18 months after 
     completion of the review.
       ``(g) Emergency Response Plans and Preparedness.--
       ``(1) In general.--The Commission and the Secretary of 
     Homeland Security, in consultation with other Federal, State, 
     and local government agencies, as appropriate, shall review 
     and update the requirements in effect on the date of 
     enactment of this section for on-site and off-site emergency 
     response plans and preparedness for response to an emergency 
     involving a designated nuclear facility in such classes of 
     designated nuclear facility as the Commission determines to 
     be appropriate to ensure that the requirements--
       ``(A) are adequate to protect public health and safety;
       ``(B) provide reasonable assurance that the plans can and 
     will be implemented; and
       ``(C) provide reasonable assurance that adequate protective 
     measures can and will be taken in the event of such an 
     emergency.
       ``(2) Requirements.--At a minimum, the updated requirements 
     applicable to a designated nuclear facility under paragraph 
     (1) shall provide for--
       ``(A) the establishment of, clear definition of, assignment 
     of, and assurance of the ability to carry out, 
     responsibilities of emergency response organizations and 
     personnel among the licensee or certificate holder, State and 
     local organizations, and other supporting organizations;
       ``(B) methods and procedures for the clear and prompt 
     notification of State and local response organizations and 
     the public by the licensee or certificate holder;
       ``(C) methods and procedures for prompt communication and 
     coordination among emergency response organizations and 
     personnel and the public;
       ``(D) dissemination of information to the public, including 
     pre-emergency education on a periodic basis and in the event 
     of an actual emergency;
       ``(E) adequate emergency facilities and equipment at and 
     around the designated nuclear facility;
       ``(F) the use of appropriate methods, systems, and 
     equipment for assessing and monitoring actual and potential 
     impacts of an emergency, including a radiological emergency;
       ``(G) a range of protective actions for the public, 
     including appropriate evacuation and sheltering and the 
     prophylactic use of potassium iodide;
       ``(H) means for controlling radiological exposures and 
     other hazardous exposures;
       ``(I) appropriate medical services;
       ``(J) recovery and reentry plans; and
       ``(K) radiological emergency response training.
       ``(3) Factors.--The updated requirements under paragraph 
     (1) shall address relevant factors, including--
       ``(A) population density, topography, land characteristics, 
     access routes, and jurisdictional boundaries;
       ``(B) unique aspects of an emergency resulting from a 
     terrorist attack;
       ``(C) available technology and technical innovations; and
       ``(D) other factors, as determined by the Commission or the 
     Secretary of Homeland Security.
       ``(4) Stakeholder involvement.--In updating requirements 
     under paragraph (1), the Commission and the Secretary of 
     Homeland Security shall include requirements for appropriate 
     stakeholder involvement in the planning and exercise process, 
     including the involvement of--
       ``(A) local governments;
       ``(B) large employers;
       ``(C) facilities such as schools, hospitals, nursing homes, 
     and prisons;
       ``(D) advocacy groups; and
       ``(E) other interested groups and individuals near a 
     designated nuclear facility.
       ``(5) Regulations.--
       ``(A) In general.--The Commission and the Secretary of 
     Homeland Security shall promulgate regulations implementing 
     this subsection not later than 180 days following the 
     completion of the report under subsection (c)(3).

[[Page S10336]]

       ``(B) Effective date.--The regulations shall take effect 
     not later than 90 days after the date of promulgation.
       ``(6) Reviews.--
       ``(A) In general.--Not later than 60 days after the 
     effective date of the regulations under paragraph (5), the 
     Commission, in coordination with the Secretary of Homeland 
     Security and, as appropriate, in consultation with other 
     Federal, State, and local government agencies, shall begin 
     reviewing on-site and off-site emergency response plans and 
     preparedness capabilities for compliance with the 
     regulations.
       ``(B) Review schedule.--The Commission, in coordination 
     with the Secretary of Homeland Security, shall establish a 
     priority schedule for conducting reviews of emergency 
     response plans and preparedness capabilities under 
     subparagraph (A) based on the relative vulnerability of the 
     designated nuclear facilities that are subject to the 
     regulations and the proximity of the designated nuclear 
     facilities to high population density areas.
       ``(C) Report.--The Commission, in coordination with the 
     Secretary of Homeland Security, shall submit to Congress a 
     report, in classified and unclassified form, describing the 
     results of each review conducted under subparagraph (A).
       ``(7) Effect of subsection.--Nothing in this subsection 
     limits the authority of the Commission or the Secretary of 
     Homeland Security to take other actions for protection of the 
     public health and safety, the environment, or the common 
     defense and security under any other authority of the 
     Commission or the Secretary of Homeland Security.
       ``(h) Employee Security.--
       ``(1) Review.--Not later than 180 days after the date of 
     enactment of this section, the Commission shall review and 
     update as appropriate the access and training standards for 
     employees of nuclear facilities.
       ``(2) Disqualification of individuals who present national 
     security risks.--The Commission shall establish 
     qualifications and procedures, in addition to fingerprinting 
     for criminal history record checks conducted under section 
     149, to ensure that no individual who presents a threat to 
     national security is employed at a designated nuclear 
     facility in such classes of designated nuclear facility as 
     the Commission determines to be appropriate.
       ``(i) Federal Security Coordinators.--
       ``(1) Regional offices.--Not later than 18 months after the 
     date of enactment of this section, the Commission shall 
     assign a Federal security coordinator, under the employment 
     of the Commission, to each region of the Commission.
       ``(2) Responsibilities.--The Federal security coordinator 
     shall be responsible for--
       ``(A) communicating with the Commission and other Federal, 
     State, and local authorities concerning threats, including 
     threats against a designated nuclear facility in such classes 
     of designated nuclear facilities as the Commission determines 
     to be appropriate;
       ``(B) ensuring that a designated nuclear facility in such 
     classes of designated nuclear facility as the Commission 
     determines to be appropriate maintains security consistent 
     with the security plan in accordance with the appropriate 
     threat level; and
       ``(C) assisting in the coordination of security measures 
     among--
       ``(i) the private security force at a designated nuclear 
     facility in such classes of designated nuclear facilities as 
     the Commission determines to be appropriate; and
       ``(ii) Federal, State, and local authorities, as 
     appropriate.
       ``(3) Additional federal security coordinators.--
       ``(A) In general.--The Commission may assign an additional 
     Federal security coordinator, as the Commission considers 
     appropriate, to a Commission office on the site of a 
     designated nuclear facility.
       ``(B) Request by governor.--The Governor of any State that 
     contains a designated nuclear facility may request the 
     assignment of an additional Federal security coordinator to 1 
     or more designated nuclear facilities in that State.
       ``(j) National Security Capability.--
       ``(1) In general.--Not later than 18 months after the date 
     of enactment of this section, the President shall identify 
     the national security support capability to protect 
     designated nuclear facilities against terrorist threats and 
     attacks.
       ``(2) Elements.--The national security support capability 
     shall use capabilities of such Federal agencies identified in 
     the report under subsection (c)(3), or of other Federal, 
     State, and local agencies, as the President determines to be 
     appropriate.
       ``(3) Capabilities.--
       ``(A) In general.--The national security support capability 
     shall provide assistance to the private security force at 
     each designated nuclear facility in such classes of 
     designated nuclear facilities as the Commission determines to 
     be appropriate, appropriate State and local agencies 
     including emergency response and law enforcement agencies, 
     and where appropriate, the National Guard, in accordance with 
     the obligations and authorities of the United States, as 
     identified in the report to Congress required under 
     subsection (c)(3).
       ``(B) Coordination.--The President shall ensure that 
     effective coordination exists between Federal agencies, the 
     Commission, and State and local governments in planning and 
     deployment for prevention, deterrence, and response to actual 
     or potential terrorist attacks against such classes of 
     designated nuclear facility as the Commission considers 
     appropriate.
       ``(4) Training program.--
       ``(A) In general.--The President shall establish a program 
     to provide technical assistance and training to Federal 
     agencies, the National Guard, and State and local law 
     enforcement and emergency response agencies in responding to 
     threats against a designated nuclear facility.
       ``(B) Grants.--The President may provide grants to State 
     and local governments to assist in carrying out subparagraph 
     (A).
       ``(5) Authorization of appropriations.--There are 
     authorized to be appropriated such sums as are necessary to 
     carry out this subsection.
       ``(k) Classified Information.--Nothing in this section 
     supersedes any law governing the disclosure of classified 
     information or safeguards information.''.
       (b) Fingerprinting for Criminal History Record Checks.--
     Section 149 of the Atomic Energy Act of 1954 (42 U.S.C. 2169) 
     is amended--
       (1) in subsection a.--
       (A) by striking ``a. The Nuclear'' and all that follows 
     through ``section 147.'' and inserting the following:
       ``a. In General.--
       ``(1) Requirements.--
       ``(A) In general.--The Commission shall require--
       ``(i) each licensee, certificate holder, or applicant for a 
     license or certificate to operate a utilization facility 
     under section 103 or 104(b); and
       ``(ii) each licensee or applicant for a license to possess 
     or use radioactive material or other property subject to 
     regulation by the Commission that the Commission determines 
     to be of such significance to the public health and safety or 
     the common defense and security as to warrant fingerprinting 
     and background checks;

     to fingerprint each individual described in subparagraph (B).
       ``(B) Individuals required to be fingerprinted.--The 
     Commission shall require to be fingerprinted each individual 
     who--
       ``(i) is permitted unescorted access to--

       ``(I) a utilization facility; or
       ``(II) radioactive material or other property identified by 
     the Commission under subparagraph (A)(ii); or

       ``(ii) is permitted access to safeguards information under 
     section 147.'';
       (B) by striking ``All fingerprints'' and inserting the 
     following:
       ``(2) Submission to the attorney general.--All 
     fingerprints'';
       (C) by striking ``The costs'' and inserting the following;
       ``(3) Costs.--The costs'';
       (D) by striking ``Notwithstanding'' and inserting the 
     following:
       ``(4) Provision to licensee, certificate holder, or 
     applicant.--Notwithstanding''; and
       (E) by striking ``licensee or applicant'' each place it 
     appears and inserting ``licensee, certificate holder, or 
     applicant for a license or certificate'';
       (2) by redesignating subsection d. as subsection e.; and
       (3) by inserting after subsection c. the following:
       ``d. Use of Other Biometric Methods.--Any requirement for a 
     person to conduct fingerprinting under this section may be 
     satisfied by using any other biometric method for 
     identification approved for use by the Attorney General.''.

     SEC. 436B. OFFICE OF NUCLEAR SECURITY AND INCIDENT RESPONSE.

       (a) In General.--Title II of the Energy Reorganization Act 
     of 1974 (42 U.S.C. 5841 et seq.) is amended by adding at the 
     end the following:

     ``SEC. 212. OFFICE OF NUCLEAR SECURITY AND INCIDENT RESPONSE.

       ``(a) Definitions.--In this section:
       ``(1) Certificate holder.--The term `certificate holder' 
     has the meaning given the term in section 170C(a) of the 
     Atomic Energy Act of 1954.
       ``(2) Designated nuclear facility.--The term `designated 
     nuclear facility' has the meaning given the term in section 
     11 of the Atomic Energy Act of 1954 (42 U.S.C. 2014).
       ``(3) Director.--The term `Director' means the Director of 
     Nuclear Security and Incident Response appointed under 
     subsection (c) to head the Office.
       ``(4) Licensee.--The term `licensee' has the meaning given 
     the term in section 170C(a) of the Atomic Energy Act of 1954.
       ``(5) Office.--The term `Office' means the Office of 
     Nuclear Security and Incident Response established by 
     subsection (b).
       ``(b) Establishment of Office.--There is established in the 
     Commission the Office of Nuclear Security and Incident 
     Response.
       ``(c) Director.--
       ``(1) Appointment.--The Commission may appoint and remove 
     from office a Director of Nuclear Security and Incident 
     Response.
       ``(2) Duties.--
       ``(A) In general.--The Director shall perform such 
     functions as the Commission delegates to the Director.
       ``(B) Functions.--The functions delegated to the Director 
     may include--
       ``(i) carrying out security, safeguards, and incident 
     responses relating to--

       ``(I) any facility subject to the jurisdiction of the 
     Commission under the Atomic Energy Act of 1954 (42 U.S.C. 
     2011 et seq.);
       ``(II) any property subject to the jurisdiction of the 
     Commission under the Atomic

[[Page S10337]]

     Energy Act of 1954 (42 U.S.C. 2011 et seq.) that--

       ``(aa) is significant to the common defense and security; 
     or
       ``(bb) is being transported to or from a facility described 
     in clause (i); and

       ``(III) any other activity of a licensee or certificate 
     holder, subject to the requirements of the Atomic Energy Act 
     of 1954 (42 U.S.C. 2011 et seq.), that is significant to the 
     common defense and security;

       ``(ii) for a facility or material licensed or certified 
     under the Atomic Energy Act of 1954 (42 U.S.C. 2011 et 
     seq.)--

       ``(I) developing contingency plans for dealing with 
     threats, thefts, and sabotage; and
       ``(II) monitoring, reviewing, and evaluating security and 
     safeguards;

       ``(iii) recommending upgrades to internal accounting 
     systems for special nuclear and other materials licensed or 
     certified under the Atomic Energy Act of 1954 (42 U.S.C. 2011 
     et seq.); and
       ``(iv) developing and recommending standards and amendments 
     to the standards of the Commission relating to the duties 
     described in clauses (i) through (iii); and
       ``(E) carrying out such other duties of the Commission 
     regarding safeguards and physical security functions and 
     incident response functions as the Commission determines to 
     be appropriate.
       ``(3) Consultation.--In carrying out the duties under 
     paragraph (2), the Director shall, to the extent practicable, 
     consult and coordinate with other Federal agencies.
       ``(d) Security Response Evaluations.--
       ``(1) In general.--Not later than 1 year after the date of 
     enactment of this section, the Commission shall establish a 
     security response evaluation program to assess the ability of 
     each designated nuclear facility that is part of a class of 
     designated nuclear facilities that the Commission considers 
     appropriate to defend against threats in accordance with the 
     security plan for the designated nuclear facility.
       ``(2) Frequency of evaluations.--Not less than once every 3 
     years, the Commission shall conduct and document security 
     response evaluations at each designated nuclear facility that 
     is part of a class of designated nuclear facilities that the 
     Commission considers appropriate to assess the ability of the 
     private security force of the designated nuclear facility to 
     defend against applicable design basis threats.
       ``(3) Security exemption.--The Commission may suspend 
     activities under this section if the Commission determines 
     that the security response evaluations would compromise 
     security at any designated nuclear facility in accordance 
     with a heightened threat level.
       ``(4) Activities.--The security response evaluation shall 
     include force-on-force exercises that simulate the security 
     threats consistent with the design basis threats applicable 
     to the designated nuclear facility.
       ``(5) Performance criteria.--The Commission shall establish 
     performance criteria for judging the security response 
     evaluations.
       ``(6) Corrective action.--
       ``(A) In general.--When any of the performance criteria 
     established under paragraph (5) are not satisfied--
       ``(i) the licensee or certificate holder shall promptly 
     correct any defects in performance identified by the 
     Commission in the security response evaluation; and
       ``(ii) the Commission shall conduct an additional security 
     response evaluation within 9 months to confirm that the 
     licensee or certificate holder satisfies the performance 
     criteria established under paragraph (5).
       ``(B) 2 consecutive failures to satisfy performance 
     criteria.--
       ``(i) In general.--If a designated nuclear facility fails 
     to satisfy the performance criteria established under 
     paragraph (5) in 2 consecutive security response evaluations, 
     the Commission shall issue an order specifying the corrective 
     actions that must be taken by the licensee or certificate 
     holder of the designated nuclear facility.
       ``(ii) Failure to take corrective action.--If the licensee 
     or certificate holder of a designated nuclear facility does 
     not take the corrective action specified by the Commission 
     within 30 days after the date of issuance of an order under 
     clause (i), the Commission shall assess a civil penalty under 
     section 234 of the Atomic Energy Act of 1954 (42 U.S.C. 
     2282).
       ``(C) Effect.--Nothing in this paragraph limits any 
     enforcement authority of the Commission to take action in 
     response to deficiencies identified through security 
     evaluations.
       ``(7) Reports.--Not less often than once every year, the 
     Commission shall submit to Congress and the President a 
     report, in classified form and unclassified form, that 
     describes the results of each security response evaluation 
     under this paragraph for the previous year.
       ``(e) Emergency Response Exercises.--
       ``(1) In general.--Not less than once every 2 years, the 
     Commission, in coordination with the Secretary of Homeland 
     Security and, as appropriate, in consultation with other 
     Federal, State, and local response agencies and stakeholders, 
     shall observe and evaluate emergency response exercises to 
     determine whether--
       ``(A) on-site and off-site emergency response plans for, 
     and capabilities for response to an emergency involving, each 
     designated nuclear facility in such classes of designated 
     nuclear facility as the Commission determines to be 
     appropriate are adequate to protect public health and safety; 
     and
       ``(B) there is reasonable assurance that--
       ``(i) those plans and capabilities can and will be 
     implemented; and
       ``(ii) adequate protective measures can and will be taken 
     in the event of an emergency.
       ``(2) Assessment of ability to respond.--Exercises under 
     paragraph (1) shall assess the ability of Federal, State, and 
     local emergency response agencies and emergency response 
     personnel of a licensee or certificate holder to respond 
     adequately to an emergency involving the designated nuclear 
     facility.
       ``(3) High population density areas.--The Commission, in 
     coordination with the Secretary of Homeland Security and, as 
     appropriate, in consultation with other Federal, State, and 
     local agencies and stakeholders, may observe and evaluate 
     exercises more frequently at designated nuclear facilities 
     located in high population density areas.
       ``(4) Performance-based approach.--The Commission, in 
     cooperation with the Secretary of Homeland Security, shall 
     promptly establish performance criteria for use in evaluating 
     the results of the exercises under paragraph (1), including 
     criteria relating to--
       ``(A) response times and capabilities;
       ``(B) coordination and communication among response 
     personnel and organizations;
       ``(C) emergency equipment, public notification systems, and 
     communications networks;
       ``(D) feasible evacuation of individuals; and
       ``(E) other matters determined by the Commission or the 
     Secretary of Homeland Security.
       ``(5) Scenarios.--The evaluations under paragraph (1) shall 
     assess the ability of the emergency response plans to protect 
     public health and safety and provide reasonable assurance 
     that adequate protective measures can and will be taken in 
     responding to a broad range of accident scenarios, 
     including--
       ``(A) fast-breaking events that occur with little or no 
     warning;
       ``(B) radiological releases of significant magnitude;
       ``(C) significant spontaneous evacuations;
       ``(D) significant shadow evacuations;
       ``(E) terrorist attacks; and
       ``(F) other scenarios determined by the Commission or the 
     Secretary of Homeland Security.
       ``(6) Deficiencies.--
       ``(A) Notification.--The Commission, in coordination with 
     the Secretary of Homeland Security, shall promptly notify 
     licensees or certificate holders, the Governor of any State 
     that may be affected, and any other appropriate Federal, 
     State, or local agencies or stakeholders of any weaknesses or 
     deficiencies in an emergency response plan or in emergency 
     preparedness capabilities identified as the result of an 
     evaluation under paragraph (1).
       ``(B) Failure to correct.--If weaknesses or deficiencies in 
     emergency response plans or in preparedness capabilities are 
     not promptly corrected, the Commission shall take appropriate 
     action under section 107 or other enforcement authorities 
     available to the Commission to--
       ``(i) ensure adequate protection of public health and 
     safety; and
       ``(ii) provide reasonable assurance that plans can and will 
     be implemented and that adequate protective measures can and 
     will be taken in the event of an emergency.
       ``(7) Report.--Not less than once annually, the Commission 
     and the Secretary of Homeland Security shall submit to the 
     President and Congress a report, in classified and 
     unclassified form, that describes--
       ``(A) the results of each exercise evaluated in the 
     previous year; and
       ``(B) each revision of an emergency response plan or 
     emergency preparedness capabilities made under paragraph (6) 
     in the previous year that is substantive in nature.
       ``(8) Maintenance.--The Commission shall take such action 
     as is necessary to ensure that adequate emergency response 
     plans and capabilities are maintained during the intervals 
     between exercises.
       ``(9) Effect of subsection.--Nothing in this subsection 
     limits the authority of the Commission or the Secretary of 
     Homeland Security to take other actions for protection of the 
     public health and safety, the environment, or the common 
     defense and security under any other authority of the 
     Commission or the Secretary of Homeland Security.
       ``(f) Effect.--Nothing in this section limits any authority 
     of the Secretary of Energy relating to the security and 
     safeguarding of special nuclear materials, high-level 
     radioactive waste, and nuclear facilities resulting from all 
     activities under the jurisdiction of the Secretary.''.
       (b) Conforming Amendments.--Title II of the Energy 
     Reorganization Act of 1974 is amended--
       (1) in section 203(b) (42 U.S.C. 5843(b))--
       (A) in paragraph (1), by striking ``licensing and 
     regulation involving'' and inserting ``licensing, regulation, 
     and, except as otherwise provided under section 212, carrying 
     out safety reviews, safeguards, and physical security of''; 
     and
       (B) in paragraph (2), by striking ``and safeguards''; and
       (2) in section 204(b) (42 U.S.C. 5844(b))--
       (A) in paragraph (1)--
       (i) by striking ``including'' and inserting ``not 
     including''; and
       (ii) by striking ``and materials.'' and inserting ``and 
     materials, to the extent that the safeguards and security 
     functions are

[[Page S10338]]

     delegated to the Office of Nuclear Security and Incident 
     Response under section 212.'';
       (B) in paragraph (2)--
       (i) by striking ``and safeguards''; and
       (ii) by striking ``, as amended,'' and all that follows 
     through the period and inserting ``(42 U.S.C. 2011 et 
     seq.)''.

     SEC. 436C. GUARDING OF NUCLEAR FACILITIES, EQUIPMENT, AND 
                   MATERIAL.

       (a) Transporting of Short-Barreled Shotgun or Rifle.--
     Section 922 of title 18, United States Code, is amended--
       (1) in subsection (a)(4), by striking ``or licensed 
     collector,'' and inserting the following: ``licensed 
     collector, or a licensee or certificate holder under title I 
     of the Atomic Energy Act of 1954 (42 U.S.C. 2011 et seq.), or 
     an employee or contractor of such a licensee or certificate 
     holder, that holds the license or certificate for the purpose 
     of establishing and maintaining an on-site physical 
     protection system and security organization required by 
     Federal law or for the purpose of licensee-authorized or 
     certificate holder-authorized training or transportation of 
     nuclear material or equipment authorized under the Atomic 
     Energy Act of 1954 (42 U.S.C. 2011 et seq.),''; and
       (2) in subsection (o)(2)--
       (A) in subparagraph (A), by striking ``or'' at the end;
       (B) in subparagraph (B), by striking the period at the end 
     and inserting ``; or''; and
       (C) by adding at the end the following:
       ``(C) a transfer to a licensee or certificate holder under 
     title I of the Atomic Energy Act of 1954 (42 U.S.C. 2011 et 
     seq.) for purposes of establishing and maintaining an on-site 
     physical protection system and security organization required 
     by Federal law, or possession by an employee or contractor of 
     the licensee or certificate holder on-site for such purposes 
     or off-site for purposes of licensee-authorized or 
     certificate holder-authorized training or transportation of 
     nuclear materials or equipment authorized under the Atomic 
     Energy Act of 1954 (42 U.S.C. 2011 et seq.).''.
       (b) Authorization for Importation of Firearm or 
     Ammunition.--Section 925(d)(1) of title 18, United States 
     Code, is amended--
       (1) by inserting ``(A)'' before ``is being''; and
       (2) by inserting after the semicolon the following: ``or
       ``(B) is being imported or brought in for transfer to a 
     licensee or certificate holder under title I of the Atomic 
     Energy Act of 1954 (42 U.S.C. 2011 et seq.) for purposes of 
     establishing and maintaining an on-site physical protection 
     system and security organization required by Federal law;''.
       (c) Interstate Transportation of Firearms.--Section 926A of 
     title 18, United States Code, is amended--
       (1) by striking ``Notwithstanding'' and inserting the 
     following:
       ``(a) In General.--Notwithstanding''; and
       (2) by adding at the end the following:
       ``(b) Licensees and Certificate Holders of the Nuclear 
     Regulatory Commission.--Notwithstanding any other provision 
     of any law or any rule or regulation of a State or any 
     political subdivision of a State, a licensee or certificate 
     holder under title I of the Atomic Energy Act of 1954 (42 
     U.S.C. 2011 et seq.), or an employee or contractor of such a 
     licensee or certificate holder, that is not otherwise 
     prohibited by this chapter from transporting, shipping, 
     receiving, or possessing a firearm shall be entitled to 
     transport and possess a firearm for purposes of establishing 
     and maintaining an onsite physical protection system and 
     security organization required by Federal law, and for 
     purposes of licensee-authorized or certificate holder-
     authorized training or transportation of nuclear material or 
     equipment authorized under the Atomic Energy Act of 1954 (42 
     U.S.C. 2011 et seq.).''.
       (d) Importation of Firearms.--Section 5844 of the Internal 
     Revenue Code of 1986 (26 U.S.C. 5844) is amended--
       (1) in paragraph (2), by striking ``or'' at the end;
       (2) in paragraph (3), by inserting ``or'' after the 
     semicolon; and
       (3) by inserting after paragraph (3) the following:
       ``(4) a machinegun or short-barreled shotgun being imported 
     or brought in for transfer to a licensee or certificate 
     holder under title I of the Atomic Energy Act of 1954 (42 
     U.S.C. 2011 et seq.) for purposes of establishing and 
     maintaining an on-site physical protection system and 
     security organization required by Federal law;''.
       (e) Semiautomatic Assault Weapons; Large Capacity 
     Ammunition Feeding Devices.--Section 922 of title 18, United 
     States Code, is amended--
       (1) in subsection (v)(4)(B)--
       (A) by inserting ``or certificate holder'' after 
     ``licensee'' each place that term appears;
       (B) by inserting ``or certificate holder-authorized'' after 
     ``licensee-authorized''; and
       (C) by inserting ``or equipment'' after ``materials''; and
       (2) in subsection (w)(3)(B)--
       (A) by inserting ``or certificate holder'' after 
     ``licensee'' each place that term appears;
       (B) by inserting ``or certificate holder-authorized'' after 
     ``licensee-authorized''; and
       (C) by inserting ``or equipment'' after ``materials''.

     SEC. 436D. SENSITIVE RADIOACTIVE MATERIAL SECURITY.

       Chapter 14 of the Atomic Energy Act of 1954 (42 U.S.C. 2201 
     et seq.) (as amended by section 436A) is amended by adding at 
     the end the following:

     ``SEC. 170D. SENSITIVE RADIOACTIVE MATERIAL SECURITY.

       ``(a) Definitions.--In this section:
       ``(1) Sensitive radioactive material.--
       ``(A) In general.--The term `sensitive radioactive 
     material' means--
       ``(i) a material--

       ``(I) that is a source material, by-product material, or 
     special nuclear material; or
       ``(II) that is any other radioactive material (regardless 
     of whether the material is or has been licensed or otherwise 
     regulated under this Act) produced or made radioactive before 
     or after the date of enactment of this section; and

       ``(ii) that is in such a form or quantity or concentration 
     that the Commission determines should be classified as 
     `sensitive radioactive material' that warrants improved 
     security and protection against loss, theft, or sabotage.
       ``(B) Exclusion.--The term `sensitive radioactive material' 
     does not include nuclear fuel or spent nuclear fuel.
       ``(2) Security threat.--The term `security threat' means--
       ``(A) a threat of sabotage or theft of sensitive 
     radioactive material;
       ``(B) a threat of use of sensitive radioactive material in 
     a radiological dispersal device; and
       ``(C) any other threat of terrorist or other criminal 
     activity involving sensitive radioactive material that could 
     harm the health or safety of the public due primarily to 
     radiological properties of the sensitive radioactive 
     material, as determined by the Commission.
       ``(b) Duties.--
       ``(1) In general.--The Commission, in consultation with 
     Secretary of Homeland Security, Secretary of Energy, Director 
     of Central Intelligence, Director of the Federal Bureau of 
     Investigation, Director of the Customs Service, and 
     Administrator of the Environmental Protection Agency, shall--
       ``(A) evaluate the security of sensitive radioactive 
     material against security threats; and
       ``(B) recommend administrative and legislative actions to 
     be taken to provide an acceptable level of security against 
     security threats.
       ``(2) Considerations.--In carrying out paragraph (1), the 
     Commission shall consider actions, as appropriate to--
       ``(A) determine the radioactive materials that should be 
     classified as sensitive radioactive materials;
       ``(B) develop a classification system for sensitive 
     radioactive materials that--
       ``(i) is based on the potential for use by terrorists of 
     sensitive radioactive material and the extent of the threat 
     to public health and safety posed by that potential; and
       ``(ii) takes into account--

       ``(I) radioactivity levels of sensitive radioactive 
     material;
       ``(II) the dispersibility of sensitive radioactive 
     material;
       ``(III) the chemical and material form of sensitive 
     radioactive material;
       ``(IV) the need to maintain access by physicians and other 
     medical professionals to sensitive radioactive material and 
     pharmaceuticals containing sensitive radioactive material for 
     use in connection with medical diagnosis or treatment; and
       ``(V) other appropriate factors;

       ``(C) develop a national system for recovery of sensitive 
     radioactive material that is lost or stolen, taking into 
     account the classification system established under 
     subparagraph (B);
       ``(D) provide for the storage of sensitive radioactive 
     material that is not currently in use in a safe and secure 
     manner;
       ``(E) develop a national tracking system for sensitive 
     radioactive material, taking into account the classification 
     system established under subparagraph (B);
       ``(F) develop methods to ensure the return or proper 
     disposal of sensitive radioactive material;
       ``(G) consider export controls on sensitive radioactive 
     materials so that, to the extent feasible, exports from the 
     United States of sensitive radioactive materials are made to 
     foreign recipients that are willing and able to control the 
     sensitive radioactive materials in a manner that is not 
     inimical to the common defense and security of the United 
     States; and
       ``(H) establish procedures to improve the security of 
     sensitive radioactive material in use, transportation, and 
     storage.
       ``(3) Procedures to improve security.--The procedures to 
     improve the security of sensitive radioactive material under 
     paragraph (2)(H) may include--
       ``(A) periodic audits or inspections by the Commission to 
     ensure that sensitive radioactive material is properly 
     secured and can be fully accounted for;
       ``(B) evaluation by the Commission of security measures 
     taken by persons that possess sensitive radioactive material;
       ``(C) imposition of increased fines for violations of 
     regulations relating to security and safety measures 
     applicable to persons that possess sensitive radioactive 
     material;
       ``(D) conduct of background checks on individuals with 
     access to sensitive radioactive material;
       ``(E) measures to ensure the physical security of 
     facilities in which sensitive radioactive material is stored; 
     and

[[Page S10339]]

       ``(F) screening of shipments of sensitive radioactive 
     material to facilities that are particularly at risk for 
     sabotage to ensure that the shipments do not contain 
     explosives.
       ``(c) Report.--Not later than 1 year after the date of 
     enactment of this section, and not less frequently than once 
     every 3 years thereafter, the Commission shall submit to the 
     President and Congress a report in unclassified form (with a 
     classified annex, if necessary) describing the administrative 
     and legislative actions recommended under subsection (b)(1).
       ``(d) Administrative Action.--Not later than 60 days after 
     the date of submission of the report under subsection (c), 
     the Commission shall take such actions as are appropriate 
     to--
       ``(1) revise the system for licensing sensitive radioactive 
     materials; and
       ``(2) delegate the authority of the Commission to implement 
     regulatory programs and requirements to States that enter 
     into agreements with the Commission to perform inspections 
     and other functions on a cooperative basis as the Commission 
     considers appropriate.''.

     SEC. 436E. UNAUTHORIZED INTRODUCTION OF DANGEROUS WEAPONS.

       Section 229a. of the Atomic Energy Act of 1954 (42 U.S.C. 
     2278a(a)) is amended in the first sentence by inserting ``or 
     subject to the licensing authority of the Commission or to 
     certification by the Commission under this Act or any other 
     Act'' before the period at the end.

     SEC. 436F. SABOTAGE OF NUCLEAR FACILITIES OR FUEL.

       Section 236a. of the Atomic Energy Act of 1954 (42 U.S.C. 
     2284(a)) is amended--
       (1) in the first sentence, by striking ``or who 
     intentionally and willfully attempts'' and inserting ``or who 
     attempts or conspires'';
       (2) in paragraph (2), by striking ``storage facility'' and 
     inserting ``storage, treatment, or disposal facility'';
       (3) in paragraph (3)--
       (A) by striking ``such a utilization facility'' and 
     inserting ``a utilization facility licensed under this Act''; 
     and
       (B) by striking ``or'' at the end;
       (4) in paragraph (4)--
       (A) by striking ``facility licensed'' and inserting 
     ``uranium conversion or nuclear fuel fabrication facility 
     licensed or certified''; and
       (B) by striking the period at the end and inserting a 
     semicolon; and
       (5) by inserting after paragraph (4) the following:
       ``(5) any production, utilization, waste storage, waste 
     treatment, waste disposal, uranium enrichment, or nuclear 
     fuel fabrication facility subject to licensing or 
     certification under this Act during construction of the 
     facility, if the destruction or damage caused or attempted to 
     be caused could adversely affect public health and safety 
     during the operation of the facility;
       ``(6) any primary facility or backup facility from which a 
     radiological emergency preparedness alert and warning system 
     is activated; or
       ``(7) any radioactive material or other property subject to 
     regulation by the Nuclear Regulatory Commission that, before 
     the date of the offense, the Nuclear Regulatory Commission 
     determines, by order or regulation published in the Federal 
     Register, is of significance to the public health and safety 
     or to common defense and security;''.

     SEC. 436G. EVALUATION OF ADEQUACY OF ENFORCEMENT PROVISIONS.

       Not later than 90 days after the date of enactment of this 
     Act, the Attorney General and the Nuclear Regulatory 
     Commission shall submit to Congress a report that assesses 
     the adequacy of the criminal enforcement provisions in 
     chapter 18 of the Atomic Energy Act of 1954 (42 U.S.C. 221 et 
     seq.).

     SEC. 436H. PROTECTION OF WHISTLEBLOWERS.

       Section 211(a)(2) of the Energy Reorganization Act (42 
     U.S.C. 5851) is amended--
       (1) in subparagraph (C), by striking ``and'' at the end;
       (2) in subparagraph (D), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end the following:
       ``(E) a contractor or subcontractor of the Commission.''.

     SEC. 436I. TECHNICAL AND CONFORMING AMENDMENT.

       The table of contents of the Atomic Energy Act of 1954 (42 
     U.S.C. prec. 2011) is amended by adding at the end of the 
     items relating to chapter 14 the following:

``Sec.
``170B. Uranium supply.
``170C. Protection of designated nuclear facilities.102. Section 102 
              head.
``170D. Sensitive radioactive material security.''.

     SEC. 436J. AUTHORIZATION OF APPROPRIATIONS.

       (a) In General.--There are authorized to be appropriated 
     such sums as are necessary to carry out the amendments made 
     by this title.
       (b) Aggregate Amount of Charges.--Section 6101 of the 
     Omnibus Budget Reconciliation Act of 1990 (42 U.S.C. 
     2214(c)(2)(A)) is amended--
       (1) in clause (i), by striking ``and'' at the end;
       (2) in clause (ii), by striking the period at the end and 
     inserting ``; and'' and
       (3) by adding at the end the following:
       ``(iii) amounts appropriated to the Commission for homeland 
     security activities of the Commission for the fiscal year, 
     except for the costs of fingerprinting and background checks 
     required by section 149 of the Atomic Energy Act of 1954 (42 
     U.S.C. 2169) and the costs of conducting security 
     inspections.''.
                                 ______
                                 
  SA 1429. Mr. BREAUX submitted an amendment intended to be proposed by 
him to the bill S. 14, to enhance the energy security of the United 
States, and for other purposes; which was ordered to lie on the table; 
as follows:

       On page 89, line 24, insert ``(including roofing)'' after 
     ``system''.
       On page 91, line 11, strike ``and''.
       On page 91, line 15, strike the period and insert ``, 
     and''.
       On page 91, between lines 15 and 16, insert the following:

       ``(III) which has a roof which meets the requirements for 
     reflective roofs under the Energy Star program of the 
     Environmental Protection Agency.

       On page 104, line 19, strike ``and''.
       On page 104, between lines 19 and 20, insert the following:
       ``(5) 30 percent of the qualified energy efficient 
     reflective metal roof expenditures made by the taxpayer 
     during such year, and
       On page 104, line 20, strike ``(5)'' and insert ``(6)''.
       On page 106, line 5, strike ``or a wind energy property'' 
     and insert ``a wind energy property, or a reflective metal 
     roof''.
       On page 106, line 9, strike ``(d)(6)'' and insert 
     ``(d)(7)''.
       On page 108, between lines 22 and 23, insert the following:
       ``(6) Qualified energy efficient reflective metal roof 
     expenditure.--The term `qualified energy efficient reflective 
     metal roof expenditure' means an expenditure for pigmented 
     coated metal roofs which meet or exceed solar reflectivity 
     standards established for reflective roof products under the 
     Energy Star program of the Environmental Protection Agency 
     and which are installed on a dwelling unit located in the 
     United States and used as a residence by the taxpayer.
       On page 108, line 23, strike ``(6)'' and insert ``(7)''.
       On page 110, line 8, strike ``(7)'' and insert ``(8)''.
       On page 110, line 11, strike ``or (6)'' and insert ``(6), 
     or (7)''.
       On page 110, line 15, strike ``(8)'' and insert ``(9)''.
       On page 139, line 8, insert ``, or, in the case of roofs, 
     in accordance with the requirements for reflective roof 
     products under the Energy Star program of the Environmental 
     Protection Agency'' before the comma.
       On page 145, line 19, insert ``(including roofing)'' after 
     ``system''.
                                 ______
                                 
  SA 1430. Mr. BREAUX submitted an amendment intended to be proposed by 
him to the bill S. 14, to enhance the energy security of the United 
States, and for other purposes; which was ordered to lie on the table; 
as follows:

       At the end of title VII of Division B, insert the 
     following:

     SEC. ____. CREDIT FOR ELECTRICITY PRODUCED FROM WIND ALLOWED 
                   AGAINST REGULAR AND MINIMUM TAX.

       (a) In General.--Subsection (c) of section 38 (relating to 
     limitation based on amount of tax), as amended by this Act, 
     is amended by redesignating paragraph (6) as paragraph (7) 
     and by inserting after paragraph (5) the following new 
     paragraph:
       ``(6) Special rules for credit for electricity produced 
     from wind.--
       ``(A) In general.--In the case of the wind electricity 
     credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to such credit, and
       ``(ii) in applying paragraph (1) to such credit--

       ``(I) the tentative minimum tax shall be treated as being 
     zero, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the wind 
     electricity credit).

       ``(B) Wind electricity credit.--For purposes of this 
     subsection, the term `wind electricity credit' means the 
     credit determined under sections 45 to the extent that such 
     credit is attributable to electricity produced--
       ``(i) at a facility using wind to produce electricity which 
     is originally placed in service after the date of the 
     enactment of this paragraph, and
       ``(ii) during the 4-year period beginning on the date that 
     such facility was originally placed in service.''.
       (b) Conforming Amendments.--Subclause (II) of section 
     38(c)(2)(A)(ii), as amended by this Act, subclause (II) of 
     section 38(c)(3)(A)(ii), as amended by this Act, subclause 
     (II) of section 38(c)(4)(A)(ii), as added by this Act, and 
     subclause (II) of section 38(c)(5)(A)(ii), as added by this 
     Act, are each amended by inserting ``or the wind electricity 
     credit'' after ``Alaska natural gas credit''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.
                                 ______
                                 
  SA 1431. Mr. GRASSLEY (for himself and Mr. Baucus) submitted an 
amendment intended to be proposed by him

[[Page S10340]]

to the bill S. 14, to enhance the energy security of the United States, 
and for other purposes; which was ordered to lie on the table; as 
follows:

       In division B, beginning on page 66, line 4, strike all 
     through page 67, line 9.
       Beginning on page 67, line 16, strike all through page 69, 
     line 25, and insert the following:
       ``(a) General Rule.--For purposes of section 38, the 
     biodiesel fuels credit determined under this section for the 
     taxable year is an amount equal to the sum of--
       ``(1) the biodiesel mixture credit, plus
       ``(2) the biodiesel credit.
       ``(b) Definition of Biodiesel Mixture Credit and Biodiesel 
     Credit.--For purposes of this section--
       ``(1) Biodiesel mixture credit.--
       ``(A) In general.--The biodiesel mixture credit of any 
     taxpayer for any taxable year is 50 cents for each gallon of 
     biodiesel used by the taxpayer in the production of a 
     qualified biodiesel mixture.
       ``(B) Qualified biodiesel mixture.--The term `qualified 
     biodiesel mixture' means a mixture of biodiesel and diesel 
     fuel which--
       ``(i) is sold by the taxpayer producing such mixture to any 
     person for use as a fuel, or
       ``(ii) is used as a fuel by the taxpayer producing such 
     mixture.
       ``(C) Sale or use must be in trade or business, etc.--
     Biodiesel used in the production of a qualified biodiesel 
     mixture shall be taken into account--
       ``(i) only if the sale or use described in subparagraph (B) 
     is in a trade or business of the taxpayer, and
       ``(ii) for the taxable year in which such sale or use 
     occurs.
       ``(D) Casual off-farm production not eligible.--No credit 
     shall be allowed under this section with respect to any 
     casual off-farm production of a qualified biodiesel mixture.
       ``(2) Biodiesel credit.--
       ``(A) In general.--The biodiesel credit of any taxpayer for 
     any taxable year is 50 cents for each gallon of biodiesel 
     which is not in a mixture with diesel fuel and which during 
     the taxable year--
       ``(i) is used by the taxpayer as a fuel in a trade or 
     business, or
       ``(ii) is sold by the taxpayer at retail to a person and 
     placed in the fuel tank of such person's vehicle.
       ``(B) User credit not to apply to biodiesel sold at 
     retail.--No credit shall be allowed under subparagraph (A)(i) 
     with respect to any biodiesel which was sold in a retail sale 
     described in subparagraph (A)(ii).
       ``(3) Credit for agri-biodiesel.--
       ``(A) In general.--Subject to subparagraph (B), in the case 
     of any biodiesel which is agri-biodiesel, paragraphs (1)(A) 
     and (2)(A) shall be applied by substituting `$1.00' for `50 
     cents'.
       ``(B) Certification for agri-biodiesel.--Subparagraph (A) 
     shall apply only if the taxpayer described in paragraph 
     (1)(A) or (2)(A) obtains a certification (in such form and 
     manner as prescribed by the Secretary) from the producer of 
     the agri-biodiesel which identifies the product produced.
       On page 70, line 11, insert ``derived from plant or animal 
     matter'' after ``acids''.
       On page 71, strike lines 1 through 3.
       On page 71, line 4, strike ``(4)'' and insert ``(3)''.
       On page 71, lines 17 through 19, strike ``biodiesel mixture 
     rate applicable under subsection (b)(1)(B)'' and insert 
     ``rate applicable under subsection (b)(1)(A)''.
       On page 72, line 3, strike ``(5)'' and insert ``(4)''.
       On page 73, between lines 3 and 4, insert the following:
       (2)(A) Section 87, as amended by this Act, is amended--
       (i) by striking ``and'' at the end of paragraph (1),
       (ii) by striking the period at the end of paragraph (2) and 
     inserting ``, and'',
       (iii) by adding at the end the following new paragraph:
       ``(3) the biodiesel fuels credit determined with respect to 
     the taxpayer for the taxable year under section 40B(a).'', 
     and
       (iv) by striking ``fuel credit'' in the heading and 
     inserting ``and biodiesel fuels credits''.
       (B) The item relating to section 87 in the table of 
     sections for part II of subchapter B of chapter 1 is amended 
     by striking ``fuel credit'' and inserting ``and biodiesel 
     fuels credits''.
       On page 73, line 4, strike ``(2)'' and insert ``(3)''.
       On page 73, line 11, strike ``(3)'' and insert ``(4)''.
       On page 76, strike lines 1 through 11 and insert the 
     following:
       ``(1) In general.--For purposes of this section, the 
     biodiesel mixture credit is the product of the applicable 
     amount and the number of gallons of biodiesel used by the 
     taxpayer in producing any qualified biodiesel mixture.
       ``(2) Applicable amount.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the applicable amount is 50 cents.
       ``(B) Amount for agri-biodiesel.--
       ``(i) In general.--Subject to clause (ii), in the case of 
     any biodiesel which is agri-biodiesel, the applicable amount 
     is $1.00.
       ``(ii) Certification for agri-biodiesel.--Clause (i) shall 
     apply only if the taxpayer described in paragraph (1) obtains 
     a certification (in such form and manner as prescribed by the 
     Secretary) from the producer of the agri-biodiesel which 
     identifies the product produced.
       On page 76, line 21, strike ``agri-biodiesel'' and insert 
     ``biodiesel''.
       On page 77, lines 1 and 2, strike ``agri-biodiesel'' and 
     insert ``biodiesel''.
       On page 77, line 8, strike ``agri-biodiesel'' and insert 
     ``biodiesel''.
       On page 77, between lines 14 and 15, insert the following:
       (b) Registration Requirement.--Section 4101(a) (relating to 
     registration) is amended by inserting ``and every person 
     producing biodiesel (as defined in section 40B(d)(1)) or 
     alcohol (as defined in section 6426(b)(4)(A))'' after 
     ``4091''.
       On page 77, line 15, strike ``(b)'' and insert ``(c)''.
       Beginning on page 79, line 16, strike all through page 80, 
     line 17, and insert the following:
       ``(e) Alcohol or Biodiesel Used To Produce Alcohol Fuel and 
     Biodiesel Mixtures or Used as Fuels.--Except as provided in 
     subsection (k)--
       ``(1) Used to produce a mixture.--If any person produces a 
     mixture described in section 6426 in such person's trade or 
     business, the Secretary shall pay (without interest) to such 
     person an amount equal to the alcohol fuel mixture credit or 
     the biodiesel mixture credit with respect to such mixture.
       ``(2) Used as fuel.--If alcohol (as defined in section 
     40(d)(1)) or biodiesel (as defined in section 40B(d)(1)) or 
     agri-biodiesel (as defined in section 40B(d)(2)) which is not 
     in a mixture with a taxable fuel (as defined in section 
     4083(a)(1))--
       ``(A) is used by any person as a fuel in a trade or 
     business, or
       ``(B) is sold by any person at retail to another person and 
     placed in the fuel tank of such person's vehicle,

     the Secretary shall pay (without interest) to such person an 
     amount equal to the alcohol credit (as determined under 
     section 40(b)(2)) or the biodiesel credit (as determined 
     under section 40B(b)(2)) with respect to such fuel.
       ``(3) Coordination with other repayment provisions.--No 
     amount shall be payable under paragraph (1) with respect to 
     any mixture with respect to which an amount is allowed as a 
     credit under section 6426.
       ``(4) Termination.--This subsection shall not apply with 
     respect to--
       ``(A) any alcohol fuel mixture (as defined in section 
     6426(b)(3)) or alcohol (as so defined) sold or used after 
     December 31, 2010, and
       ``(B) any qualified biodiesel mixture (within the meaning 
     of section 6426(c)(1)) or biodiesel (as so defined) or agri-
     biodiesel (as so defined) sold or used after December 31, 
     2005.''.
       On page 82, line 4, strike ``(e)'' and insert ``(e)(1)''.
       On page 84, line 8, strike ``(c)'' and insert ``(d)''.
       On page 84, line 11, strike ``(d)'' and insert ``(e)''.
       Beginning on page 86, line 25, strike ``with the'' and all 
     that follows through page 87, line 2, and insert the 
     following: ``with the latest standards of chapter 4 of the 
     International Energy Conservation Code approved by the 
     Department of Energy before the construction of such 
     qualifying new home and any applicable Federal minimum 
     efficiency standards for equipment,''.
       On page 88, between lines 11 and 12, insert the following:
       ``(3) Provider limitation.--Any eligible contractor who 
     directly or indirectly provides the guarantee of energy 
     savings under a guarantee-based method of certification 
     described in subsection (d)(1)(D) shall not be eligible to 
     receive the credit allowed by this section.
       On page 89, line 2, insert ``or system'' after ``cooling 
     equipment''.
       On page 90, line 10, strike ``or'' and insert a comma.
       On page 90, line 11, insert ``or a guarantee-based 
     method,'' after ``method,''.
       On page 91, strike lines 12 through 15 and insert the 
     following:

       ``(II) constructed in accordance with the latest standards 
     of chapter 4 of the International Energy Conservation Code 
     approved by the Department of Energy before the construction 
     of such qualifying new home and any applicable Federal 
     minimum efficiency standards for equipment.

       On page 91, line 22, strike ``Such'' and all that follows 
     through page 92, line 2.
       On page 92, between lines 2 and 3, insert the following:
       ``(D) Guarantee-based method.--
       ``(i) In general.--A guarantee-based method is a method 
     which guarantees in writing to the homeowner energy savings 
     of either 30 percent or 50 percent over the 2000 
     International Energy Conservation Code for heating and 
     cooling costs. The guarantee shall be provided for a minimum 
     of 2 years and shall fully reimburse the homeowner any 
     heating and cooling costs in excess of the guaranteed amount.
       ``(ii) Computer software.--Computer software shall be 
     selected by the provider to support the guarantee-based 
     method certification under clause (i). Such software shall 
     meet procedures and methods for calculating energy and cost 
     savings in regulations promulgated by the Secretary of 
     Energy.
       On page 92, line 9, insert ``or a guarantee-based method'' 
     after ``method''.
       On page 94, line 13, insert ``and guarantee-based'' after 
     ``based''.
       On page 105, strike lines 6 through 19 and insert the 
     following:
       ``(C) for property described in subsection (d)(6)--
       ``(i) $150 for each electric heat pump water heater,
       ``(ii) $125 for each advanced natural gas, oil, propane 
     furnace, or hot water boiler,

[[Page S10341]]

       ``(iii) $150 for each advanced natural gas, oil, or propane 
     water heater,
       ``(iv) $50 for each natural gas, oil, or propane water 
     heater,
       ``(v) $50 for an advanced main air circulating fan,
       ``(vi) $150 for each advanced combination space and water 
     heating system,
       ``(vii) $50 for each combination space and water heating 
     system, and
       ``(viii) $250 for each geothermal heat pump.
       On page 106, line 18, insert ``for property described in 
     subsection (d)(6)(B)(viii)'' after ``(EER)''.
       On page 109, strike lines 12 through 17.
       On page 109, line 18, strike ``(iii)'' and insert ``(ii)''.
       On page 109, lines 18 and 19, strike ``or propane furnace'' 
     and insert ``propane furnace, or hot water boiler''.
       On page 109, strike lines 22 through 25.
       On page 110, strike lines 1 through 7 and insert the 
     following:
       ``(iii) an advanced natural gas, oil, or propane water 
     heater which has an energy factor of at least 0.80 in the 
     standard Department of Energy test procedure,
       ``(iv) a natural gas, oil, or propane water heater which 
     has an energy factor of at least 0.65 but less than 0.80 in 
     the standard Department of Energy test procedure,
       ``(v) an advanced main air circulating fan used in a new 
     natural gas, propane, or oil-fired furnace, including main 
     air circulating fans that use a brushless permanent magnet 
     motor or another type of motor which achieves similar or 
     higher efficiency at half and full speed, as determined by 
     the Secretary,
       ``(vi) an advanced combination space and water heating 
     system which has a combined energy factor of at least 0.80 
     and a combined annual fuel utilization efficiency (AFUE) of 
     at least 78 percent in the standard Department of Energy test 
     procedure,
       ``(vii) a combination space and water heating system which 
     has a combined energy factor of at least 0.65 but less than 
     0.80 and a combined annual fuel utilization efficiency (AFUE) 
     of at least 78 percent in the standard Department of Energy 
     test procedure, and
       ``(viii) a geothermal heat pump which has an energy 
     efficiency ratio (EER) of at least 21.
       On page 139, strike lines 7 and 8 and insert the following: 
     ``meet or exceed the latest prescriptive criteria for such 
     component in the International Energy Conservation Code 
     approved by the Department of Energy before the installation 
     of such component,''.
       On page 141, line 10, strike ``Such'' and all that follows 
     through line 15.
       On page 141, line 19, strike ``by''.
       On page 146, strike lines 17 through 19 and insert the 
     following:
       (1) In general.--Section 25D(b), as added by subsection 
     (a), is amended--
       (A) by striking ``The credit'' and inserting the following:
       ``(1) Dollar amount.--The credit'', and
       (B) by adding at the end the following new paragraph:
       On page 146, line 20, strike ``(3)'' and insert ``(2)''.
       On page 147, line 9, strike ``(b)(3)'' and insert 
     ``(b)(2)''.
       On page 153, strike lines 13 and 14 and insert the 
     following:
       ``(B) uses an input of at least 75 percent coal to produce 
     at least 50 percent of its thermal output as electricity,
       On page 157, line 2, strike ``section 45(d)'' and insert 
     ``section 45(e)''.
       On page 177, line 21, strike ``(2), and (6)'' and insert 
     ``, (2), and (6)''.
       On page 180, after line 10, strike ``40.6'' both places it 
     appears and insert ``40.2''.
       On page 180, after line 10, strike ``40'' both places it 
     appears and insert ``39''.
       On page 181, between lines 3 and 4, strike ``43.6'' both 
     places it appears and insert ``43.9''.
       On page 181, between lines 6 and 7, strike ``44.2'' both 
     places it appears and insert ``46.3''.
       On page 181, between lines 6 and 7, strike ``43.9'' and 
     insert ``44.2''.
       On page 182, line 11, strike ``section 45(d)'' and insert 
     ``section 45(e)''.
       On page 198, line 25, insert ``with respect to any 
     facility'' after ``taxable year''.
       On page 199, line 2, insert ``with respect to such 
     facility'' after ``taxable year''.
       On page 199, line 9, strike ``a small business refiner'' 
     and insert ``any facility''.
       On page 200, line 16, insert ``for all facilities of the 
     taxpayer'' after ``of which ''.
       On page 200, line 18, strike ``205,000'' and insert 
     ``410,000''.
       On page 219, line 24, insert ``, as amended by this Act,'' 
     after ``rules)''.
       On page 220, line 1, strike ``(9)'' and insert ``(10)''.
       On page 222, strike lines 1 through 4 and insert the 
     following:
       (e) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to fuel sold 
     after the date of the enactment of this Act, in taxable years 
     ending after such date.
       (2) Existing facilities.--The amendments made by subsection 
     (c) shall apply to fuel sold after December 31, 2002, in 
     taxable years ending after such date.
       On page 227, line 1, strike ``the taxpayer'' and insert 
     ``such person or entity''.
       On page 227, beginning on line 10, strike ``operating'' and 
     all that follows through ``production.'' on line 12, and 
     insert the following: ``such persons or entities. Production 
     otherwise attributable to a United States tax-exempt person 
     or entity by reason of a royalty interest shall be 
     attributable to such person or entity with respect to whom 
     royalty-in-value production remains or to whom royalty-in-
     kind production is sold.''.
       On page 228, line 7, strike ``15 years'' and insert ``25 
     years''.
       On page 231, strike lines 4 and 5 and insert the following:
       ``(B) is--
       ``(i) placed in service after December 31, 2012, or
       ``(ii) treated as placed in service on January 1, 2013, if 
     the taxpayer who places such system in service before January 
     1, 2013, elects such treatment.
       On page 231, strike lines 14 through 17 and insert the 
     following:
       ``(d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service on or after the 
     date of the enactment of this Act.
       On page 237, between lines 18 and 19, insert the following:

     SEC. 514. EXTENSION OF ENHANCED OIL RECOVERY CREDIT TO 
                   CERTAIN ALASKA FACILITIES.

       (a) In General.--Section 43(c)(1) (defining qualified 
     enhanced oil recovery costs) is amended by adding at the end 
     the following new subparagraph:
       ``(D) Any amount which is paid or incurred during the 
     taxable year to construct a gas treatment plant which--
       ``(i) is located in the area of the United States (within 
     the meaning of section 638(1)) lying north of 64 degrees 
     North latitude,
       ``(ii) prepares Alaska natural gas (as defined in section 
     45M(c)(1)) for transportation through a pipeline with a 
     capacity of at least 2,000,000,000,000 Btu of natural gas per 
     day, and
       ``(iii) produces carbon dioxide which is injected into 
     hydrocarbon-bearing geological formations.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to costs paid or incurred in taxable years 
     beginning after December 31, 2003.
                                 ______
                                 
  SA 1432. Mr. FRIST proposed an amendment to the bill S. 14, to 
enhance the energy security of the United States, and for other 
purposes; (instructions on pending motion to commit) as follows:

       Strike all after the first word and insert in lieu thereof 
     the following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as ``The Energy Policy Act of 2003''.

     SEC. 2. TABLE OF CONTENTS.

       The table of contents for this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.

                          TITLE I--OIL AND GAS

                   Subtitle A--Production Incentives

Sec. 101. Permanent authority to operate the Strategic Petroleum 
              Reserve and other energy programs.
Sec. 102. Study on inventory of petroleum and natural gas storage.
Sec. 103. Program on oil and gas royalties in kind.
Sec. 104. Marginal property production incentives.
Sec. 105. Comprehensive inventory of OCS oil and natural gas resources.
Sec. 106. Royalty relief for deep water production.
Sec. 107. Alaska offshore royalty suspension.
Sec. 108. Orphaned, abandoned, or idled wells on Federal lands.
Sec. 109. Incentives for natural gas production from deep wells in the 
              shallow waters of the Gulf of Mexico.
Sec. 110. Alternate energy-related uses on the Outer Continental Shelf.
Sec. 111. Coastal impact assistance.
Sec. 112. National Energy Resource Database.
Sec. 113. Oil and gas lease acreage limitation.
Sec. 114. Assessment of dependence of State of Hawaii on oil.

                  Subtitle B--Access to Federal Lands

Sec. 121. Office of Federal Energy Permit Coordination.
Sec. 122. Pilot Project to improve Federal permit coordination.
Sec. 123. Federal onshore leasing programs for oil and gas.
Sec. 124. Estimates of oil and gas resources underlying onshore Federal 
              lands.
Sec. 125. Split-Estate Federal oil and gas leasing and development 
              practices.
Sec. 126. Coordination of Federal agencies to establish priority energy 
              transmission rights-of-way.

                Subtitle C--Alaska Natural Gas Pipeline

Sec. 131. Short title.
Sec. 132. Definitions.
Sec. 133. Issuance of certificate of public convenience and necessity.
Sec. 134. Environmental reviews.
Sec. 135. Pipeline expansion.
Sec. 136. Federal coordinator.
Sec. 137. Judicial review.
Sec. 138. State jurisdiction over in-state delivery of natural gas.
Sec. 139. Study of alternative means of construction.
Sec. 140. Clarification of ANGTA status and authorities.

[[Page S10342]]

Sec. 141. Sense of Congress.
Sec. 142. Participation of small business concerns.
Sec. 143. Alaska pipeline construction training program.
Sec. 144. Loan guarantee.
Sec. 145. Sense of Congress on natural gas demand.

                             TITLE II--COAL

                Subtitle A--Clean Coal Power Initiative

Sec. 201. Authorization of appropriations.
Sec. 202. Project criteria.
Sec. 203. Reports.
Sec. 204. Clean Coal Centers of Excellence.

                    Subtitle B--Federal Coal Leases

Sec. 211. Repeal of the 160-acre limitation for coal leases.
Sec. 212. Mining plans.
Sec. 213. Payment of advance royalties under coal leases.
Sec. 214. Elimination of deadline for submission of coal lease 
              operation and reclamation plan.
Sec. 215. Application of amendments.

                     Subtitle C--Powder River Basin

Sec. 221. Resolution of Federal resource development conflicts in the 
              Powder River Basin.

                        TITLE III--INDIAN ENERGY

Sec. 301. Short title.
Sec. 302. Office of Indian energy policy and programs.
Sec. 303. Indian energy.

                      ``TITLE XXVI--INDIAN ENERGY

``Sec. 2601. Definitions.
``Sec. 2602. Indian tribal energy resource development.
``Sec. 2603. Indian tribal energy resource regulation.
``Sec. 2604. Leases, business agreements, and rights-of-way involving 
              energy development or transmission.
``Sec. 2605. Federal Power Marketing Administrations.
``Sec. 2606. Indian mineral development review.
``Sec. 2607. Wind and hydropower feasibility study.
Sec. 304. Four Corners transmission line project.
Sec. 305. Energy efficiency in federally assisted housing.
Sec. 306. Consultation with Indian tribes.

                           TITLE IV--NUCLEAR

                 Subtitle A--Price-Anderson Amendments

Sec. 401. Short title.
Sec. 402. Extension of indemnification authority.
Sec. 403. Maximum assessment.
Sec. 404. Department of energy liability limit.
Sec. 405. Incidents outside the United States.
Sec. 406. Reports.
Sec. 407. Inflation adjustment.
Sec. 408. Treatment of modular reactors.
Sec. 409. Applicability.
Sec. 410. Civil penalties.

          Subtitle B--Deployment of Commercial Nuclear Plants

Sec. 421. Short title.
Sec. 422. Definitions.
Sec. 423. Responsibilities of the Secretary of Energy.
Sec. 424. Limitations.
Sec. 425. Regulations.

      Subtitle C--Advanced Reactor Hydrogen Co-Generation Project

Sec. 431. Project establishment.
Sec. 432. Project definition.
Sec. 433. Project management.
Sec. 434. Project requirements.
Sec. 435. Authorization of appropriations.

                   Subtitle D--Miscellaneous Matters

Sec. 441. Uranium sales and transfers.
Sec. 442. Decommissioning Pilot Program.

                       TITLE V--RENEWABLE ENERGY

                     Subtitle A--General Provisions

Sec. 501. Assessment of renewable energy resources.
Sec. 502. Renewable energy production incentive.
Sec. 503. Renewable energy on Federal lands.
Sec. 504. Federal purchase requirement.
Sec. 505. Insular area renewable and energy efficient plans.

                 Subtitle B--Hydroelectric Relicensing

Sec. 511. Alternative conditions and fishways.

                     Subtitle C--Geothermal Energy

Sec. 521. Competitive lease sale requirements.
Sec. 522. Geothermal leasing and permitting on Federal lands.
Sec. 523. Leasing and permitting on federal lands withdrawn for 
              military purposes.
Sec. 524. Reinstatement of leases terminated for failure to pay rent.
Sec. 525. Royalty reduction and relief.
Sec. 526. Royalty exemption for direct use of low temperature 
              geothermal energy resources.

                       Subtitle D--Biomass Energy

Sec. 531. Definitions.
Sec. 532. Biomass Commercial Utilization Grant Program.
Sec. 533. Improved Biomass Utilization Grant Program.
Sec. 534. Report.

                      TITLE VI--ENERGY EFFICIENCY

                      Subtitle A--Federal Programs

Sec. 601. Energy management requirements.
Sec. 602. Energy use measurement and accountability.
Sec. 603. Federal building performance standards.
Sec. 604. Energy savings performance contracts.
Sec. 605. Procurement of energy efficient products.
Sec. 606. Congressional building efficiency.
Sec. 607. Increased Federal use of recovered mineral components in 
              federally funded projects involving procurement of cement 
              or concrete.
Sec. 608. Utility energy service contracts.
Sec. 609. Study of energy efficiency standards.

                  Subtitle B--State and Local Programs

Sec. 611. Low Income Community Energy efficiency Pilot Program.
Sec. 612. Energy efficient public buildings.
Sec. 613. Energy Efficient Appliance Rebate Programs.

                     Subtitle C--Consumer Products

Sec. 621. Energy conservation standards for additional products.
Sec. 622. Energy labeling.
Sec. 623. Energy Star Program.
Sec. 624. HVAC Maintenance Consumer Education Program.

                       Subtitle D--Public Housing

Sec. 631. Capacity building for energy-efficient, affordable housing.
Sec. 632. Increase of CDBG public services cap for energy conservation 
              and efficiency activities.
Sec. 633. FHA mortgage insurance incentives for energy efficient 
              housing.
Sec. 634. Public housing capital fund.
Sec. 635. Grants for energy-conserving improvements for assisted 
              housing.
Sec. 636. North American Development Bank.
Sec. 637. Energy-efficient appliances.
Sec. 638. Energy efficiency standards.
Sec. 639. Energy strategy for HUD.

                    TITLE VII--TRANSPORTATION FUELS

                 Subtitle A--Alternative Fuel Programs

Sec. 701. Use of alternative fuels by dual-fueled vehicles.
Sec. 702. Fuel use credits.
Sec. 703. Neighborhood electric vehicles.
Sec. 704. Credits for medium and heavy duty dedicated vehicles.
Sec. 705. Alternative fuel infrastructure.
Sec. 706. Incremental cost allocation.
Sec. 707. Review of Alternative Fuel Programs.
Sec. 708. High occupancy vehicle exception.
Sec. 709. Alternate compliance and flexibility.

                  Subtitle B--Automobile Fuel Economy

Sec. 711. Automobile fuel economy standards.
Sec. 712. Dual-fueled automobiles.
Sec. 713. Federal fleet fuel economy.
Sec. 714. Railroad efficiency.
Sec. 715. Reduction of engine idling in heavy-use vehicles.

                          TITLE VIII--HYDROGEN

                  Subtitle A--Basic Research Programs

Sec. 801. Short Title.
Sec. 802. Matsunaga act amendment.
Sec. 803. Hydrogen transportation and fuel initiative.
Sec. 804. Interagency task force and coordination plan.
Sec. 805. Review by the national academies.

                   Subtitle B--Demonstration Programs

Sec. 811. Definitions.
Sec. 812. Hydrogen vehicle demonstration program.
Sec. 813. Stationary fuel cell demonstration program.
Sec. 814. Hydrogen demonstration programs in national parks.
Sec. 815. International demonstration program.
Sec. 816. Tribal stationary hybrid power demonstration.
Sec. 817. Distributed Generation Pilot Program.

                      Subtitle C--Federal Programs

Sec. 821. Public education and training.
Sec. 822. Hydrogen transition strategic planning.
Sec. 823. Minimum federal fleet requirement.
Sec. 824. Stationary fuel cell purchase requirement.
Sec. 825. Department of energy strategy.

                   TITLE IX--RESEARCH AND DEVELOPMENT

Sec. 901. Short title.
Sec. 902. Goals.
Sec. 903. Definitions.

                     Subtitle A--Energy Efficiency

Sec. 911. Energy efficiency.
Sec. 912. Next generation lighting initiative.
Sec. 913. National building performance initiative.
Sec. 914. Secondary electric vehicle battery use program.
Sec. 915. Energy efficiency science initiative.

       Subtitle B--Distributed Energy and Electric Energy Systems

Sec. 921. Distributed energy and electric energy systems.
Sec. 922. Hybrid distributed power systems.
Sec. 923. High Power Density Industry Program.
Sec. 924. Micro-cogeneration energy technology.

[[Page S10343]]

Sec. 925. Distributed energy technology demonstration program.
Sec. 926. Office of electric transmission and distribution.
Sec. 927. Electric Transmission and Distribution Programs.

                      Subtitle C--Renewable Energy

Sec. 931. Renewable energy.
Sec. 932. Bioenergy Programs.
Sec. 933. Biodiesel Engine Testing Program.
Sec. 934. Concentrating Solar Power Research Program.
Sec. 935. Miscellaneous projects.

                       Subtitle D--Nuclear Energy

Sec. 941. Nuclear energy.
Sec. 942. Nuclear Energy Research Programs.
Sec. 943. Advanced fuel cycle initiative.
Sec. 944. University nuclear science and engineering support.
Sec. 945. Security of nuclear facilities.
Sec. 946. Alternatives to industrial radioactive sources.

                       Subtitle E--Fossil Energy

Sec. 951. Fossil energy.
Sec. 952. Oil and Gas Research Programs.
Sec. 953. Research and development for coal mining technologies.
Sec. 954. Coal and Related Technologies Program.
Sec. 955. Complex well technology testing facility.

                          Subtitle F--Science

Sec. 961. Science.
Sec. 962. United States participation in ITER.
Sec. 963. Spallation neutron source.
Sec. 964. Support for science and energy facilities and infrastructure.
Sec. 965. Catalysis Research Program.
Sec. 966. Nanoscale science and engineering research.
Sec. 967. Advanced scientific computing for energy missions.
Sec. 968. Genomes to Life Program.
Sec. 969. Fission and Fusion Energy Materials Research Program.
Sec. 970. Energy-Water Supply Technologies Program.

                   Subtitle G--Energy and Environment

Sec. 971. United States-Mexico energy technology cooperation.
Sec. 972. Coal technology loan.

                         Subtitle H--Management

Sec. 981. Availability of funds.
Sec. 982. Cost sharing.
Sec. 983. Merit review of proposals.
Sec. 984. External Technical Review of Departmental Programs.
Sec. 985. Improved coordination of technology transfer activities.
Sec. 986. Technology Infrastructure Program.
Sec. 987. Small business advocacy and assistance.
Sec. 988. Mobility of scientific and technical personnel.
Sec. 989. National Academy of Sciences Report.
Sec. 990. Outreach.
Sec. 991. Competitive award of management contracts.
Sec. 992. Reprogramming.
Sec. 993. Construction with other laws.
Sec. 994. Improved coordination and management of civilian science and 
              technology programs.
Sec. 995. Educational Programs in science and mathematics.
Sec. 996. Other transactions authority.
Sec. 997. Report on Research and Development Program Evaluation 
              Methodologies.

                    TITLE X--PERSONNEL AND TRAINING

Sec. 1001. Workforce trends and traineeship grants.
Sec. 1002. Research fellowships in energy research.
Sec. 1003. Training guidelines for electric energy industry personnel.
Sec. 1004. National center on energy management and building 
              technologies.
Sec. 1005. Improved access to energy-related scientific and technical 
              careers.
Sec. 1006. National power plant operations technology and education 
              center.
Sec. 1007. Federal mine inspectors.

                         TITLE XI--ELECTRICITY

Sec. 1101. Definitions.

                        Subtitle A--Reliability

Sec. 1111. Electric reliability standards.

                      Subtitle B--Regional Markets

Sec. 1121. Implementation date for proposed rulemaking for standard 
              market design.
Sec. 1122. Sense of the Congress on Regional Transmission 
              Organizations.
Sec. 1123. Federal utility participation in regional transmission 
              organizations.
Sec. 1124. Regional consideration of competitive wholesale markets.

   Subtitle C--Improving Transmission Access and Protecting Service 
                              Obligations

Sec. 1131. Service obligation security and parity.
Sec. 1132. Open non-discriminatory access.
Sec. 1133. Transmission infrastructure investment.

Subtitle D--Amendments to the Public Utility Regulatory Policies Act of 
                                  1978

Sec. 1141. Net metering.
Sec. 1142. Smart metering.
Sec. 1143. Adoption of additional standards.
Sec. 1144. Technical assistance.
Sec. 1145. Cogeneration and small power production purchase and sale 
              requirements.
Sec. 1146. Recovery of costs.

Subtitle E--Provisions Regarding the Public Utility Holding Company Act 
                                of 1935

Sec. 1151. Definitions.
Sec. 1152. Repeal of the Public Utility Holding Company Act of 1935.
Sec. 1153. Federal access to books and records.
Sec. 1154. State access to books and records.
Sec. 1155. Exemption authority.
Sec. 1156. Affiliate transactions.
Sec. 1157. Applicability.
Sec. 1158. Effect on other regulations.
Sec. 1159. Enforcement.
Sec. 1160. Savings provisions.
Sec. 1161. Implementation.
Sec. 1162. Transfer of resources.
Sec. 1163. Effective date.
Sec. 1164. Conforming amendment to the Federal Power Act.

   Subtitle F--Market Transparency, Anti-Manipulation and Enforcement

Sec. 1171. Market transparency rules.
Sec. 1172. Market manipulation.
Sec. 1173. Enforcement.
Sec. 1174. Refund effective date.

                    Subtitle G--Consumer Protections

Sec. 1181. Consumer privacy.
Sec. 1182. Unfair trade practices.
Sec. 1183. Definitions.

                    Subtitle H--Technical Amendments

Sec. 1191. Technical amendments.

                          TITLE I--OIL AND GAS

                    Subtitle A--Production Incentives

     SEC. 101. PERMANENT AUTHORITY TO OPERATE THE STRATEGIC 
                   PETROLEUM RESERVE AND OTHER ENERGY PROGRAMS.

       (a) Amendment to Title I of the Energy Policy and 
     Conservation Act.--Title I of the Energy Policy and 
     Conservation Act (42 U.S.C. 6211 et seq.) is amended--
       (1) by striking section 166 (42 U.S.C. 6246) and 
     inserting--


                   ``AUTHORIZATION OF APPROPRIATIONS

       ``Sec. 166. There are authorized to be appropriated to the 
     Secretary such sums as may be necessary to carry out this 
     part and part D, to remain available until expended.'';
       (2) by striking section 186 (42 U.S.C. 6250(e)); and
       (3) by striking part E (42 U.S.C. 6251); relating to the 
     expiration of title I of the Act).
       (b) Amendment to Title II of the Energy Policy and 
     Conservation Act.--Title II of the Energy Policy and 
     Conservation Act (42 U.S.C. 6271 et seq.) is amended--
       (1) by striking section 256(h) (42 U.S.C. 6276(h)) and 
     inserting--
       ``(g) Authorization of Appropriations.--There are 
     authorized to be appropriated to the Secretary such sums as 
     may be necessary to carry out this part, to remain available 
     until expended.'';
       (2) by inserting before section 273 (42 U.S.C. 6283) the 
     following:

          ``Part C--Summer Fill and Fuel Budgeting Programs'';

       (3) by striking section 273(e) (42 U.S.C. 6283(e)); 
     relating to the expiration of summer fill and fuel budgeting 
     programs); and
       (4) by striking part D (42 U.S.C. 6285); relating to the 
     expiration of title II of the Act).
       (c) Technical Amendments.--The table of contents for the 
     Energy Policy and Conservation Act is amended--
       (1) by amending the items relating to part D of title I to 
     read as follows:

              ``PART D--NORTHEAST HOME HEATING OIL RESERVE

``Sec. 181. Establishment.
``Sec. 182. Authority.
``Sec. 183. Conditions for release; plan.
``Sec. 184. Northeast Home Heating Oil Reserve Account.
``Sec. 185. Exemptions.'';
       (2) by amending the items relating to part C of title II to 
     read as follows:

           ``PART C--SUMMER FILL AND FUEL BUDGETING PROGRAMS

``Sec. 273. Summer fill and fuel budgeting programs.'';
     and
       (3) by striking the items relating to part D of title II.
       (d) Northeast Home Heating Oil.--Section 183(b)(1) of the 
     Energy Policy and Conservation Act (42 U.S.C. 6250(b)(1)) is 
     amended by striking all after ``increases'' through to ``mid-
     October through March'' and inserting ``by more than 60 
     percent over its 5-year rolling average for the months of 
     mid-October through March (considered as a heating season 
     average)''.

       SEC. 102. STUDY ON INVENTORY OF PETROLEUM AND NATURAL GAS 
                   STORAGE.

       (a) Definition.--For purposes of this section ``petroleum'' 
     means crude oil, motor gasoline, jet fuel, distillates and 
     propane.
       (b) Study.--The Secretary of Energy shall conduct a study 
     on petroleum and natural gas storage capacity and operational 
     inventory levels, nationwide and by major geographical 
     regions.
       (c) Contents.--The study shall address--
       (1) historical normal ranges for petroleum and natural gas 
     inventory levels;
       (2) historical and projected storage capacity trends;
       (3) estimated operation inventory levels below which 
     outages, delivery slowdown, rationing, interruptions in 
     service or other indicators of shortage begin to appear;
       (4) explanations for inventory levels dropping below normal 
     ranges; and
       (5) the ability of industry to meet U.S. demand for 
     petroleum and natural gas without

[[Page S10344]]

     shortages or price spikes, when inventory levels are below 
     normal ranges.
       (d) Report to Congress.--Not later than one year from 
     enactment of this Act, the Secretary of Energy shall submit a 
     report to Congress on the results of the study, including 
     findings and any recommendations for preventing future supply 
     shortages.

     SEC. 103. PROGRAM ON OIL AND GAS ROYALTIES IN KIND.

       (a) Applicability of Section.--Notwithstanding any other 
     provision of law, the provisions of this section shall apply 
     to all royalties-in-kind accepted by the Secretary (referred 
     to in this section as ``Secretary'') under any Federal oil or 
     gas lease or permit under section 36 of the Mineral Leasing 
     Act (30 U.S.C. 192), section 27 of the Outer Continental 
     Shelf Lands Act (43 U.S.C. 1353), or any other mineral 
     leasing law beginning on the date of the enactment of this 
     Act through September 30, 2013.
       (b) Terms and Conditions.--All royalty accruing to the 
     United States under any Federal oil or gas lease or permit 
     under the Mineral Leasing Act (30 U.S.C. 181 et seq.) or the 
     Outer Continental Shelf Lands Act (43 U.S.C. 1331 et seq.) 
     shall, on the demand of the Secretary, be paid in oil or gas. 
     If the Secretary makes such a demand, the following 
     provisions apply to such payment:
       (1) Delivery by, or on behalf of, the lessee of the royalty 
     amount and quality due under the lease satisfies the lessee's 
     royalty obligation for the amount delivered, except that 
     transportation and processing reimbursements paid to, or 
     deductions claimed by, the lessee shall be subject to review 
     and audit.
       (2) Royalty production shall be placed in marketable 
     condition by the lessee at no cost to the United States.
       (3) The Secretary may--
       (A) sell or otherwise dispose of any royalty production 
     taken in kind (other than oil or gas transferred under 
     section 27(a)(3) of the Outer Continental Shelf Lands Act (43 
     U.S.C. 1353(a)(3)) for not less than the market price; and
       (B) transport or process (or both) any royalty production 
     taken in kind.
       (4) The Secretary may, notwithstanding section 3302 of 
     title 31, United States Code, retain and use a portion of the 
     revenues from the sale of oil and gas royalties taken in kind 
     that otherwise would be deposited to miscellaneous receipts, 
     without regard to fiscal year limitation, or may use royalty 
     production, to pay the cost of--
       (A) transporting the royalty production;
       (B) processing the royalty production;
       (C) disposing of the royalty production; or
       (D) any combination of transporting, processing, and 
     disposing of the royalty production.
       (5) The Secretary may not use revenues from the sale of oil 
     and gas royalties taken in kind to pay for personnel, travel, 
     or other administrative costs of the Federal Government.
       (6) Notwithstanding the provisions of paragraph 5, the 
     Secretary may use a portion of the revenues from the sale of 
     oil royalties taken in kind, without fiscal year limitation, 
     to pay transportation costs, salaries, and other 
     administrative costs directly related to filling the 
     Strategic Petroleum Reserve.
       (c) Reimbursement of Cost.--If the lessee, pursuant to an 
     agreement with the United States or as provided in the lease, 
     processes the royalty gas or delivers the royalty oil or gas 
     at a point not on or adjacent to the lease area, the 
     Secretary shall--
       (1) reimburse the lessee for the reasonable costs of 
     transportation (not including gathering) from the lease to 
     the point of delivery or for processing costs; or
       (2) allow the lessee to deduct such transportation or 
     processing costs in reporting and paying royalties in value 
     for other Federal oil and gas leases.
       (d) Benefit to the United States Required.--The Secretary 
     may receive oil or gas royalties in kind only if the 
     Secretary determines that receiving such royalties provides 
     benefits to the United States greater than or equal to those 
     likely to have been received had royalties been taken in 
     value.
       (e) Report to Congress.--
       (1) No later than September 30, 2005, the Secretary shall 
     provide a report to Congress that addresses--
       (A) actions taken to develop business processes and 
     automated systems to fully support the royalty-in-kind 
     capability to be used in tandem with the royalty-in-value 
     approach in managing Federal oil and gas revenue; and
       (B) future royalty-in-kind business operation plans and 
     objectives.
       (2) For each of the fiscal years 2004 through 2013 in which 
     the United States takes oil or gas royalties in kind from 
     production in any State or from the Outer Continental Shelf, 
     excluding royalties taken in kind and sold to refineries 
     under subsections (h), the Secretary shall provide a report 
     to Congress describing--
       (A) the methodology or methodologies used by the Secretary 
     to determine compliance with subsection (d) , including 
     performance standard for comparing amounts received by the 
     United States derived from such royalties-in-kind to amount 
     likely to have been received had royalties been taken in 
     value;
       (B) an explanation of the evaluation that led the Secretary 
     to take royalties-in-kind from a lease or group of leases, 
     including the expected revenue effect of taking royalties-in-
     kind;
       (C) actual amounts received by the United States derived 
     from taking royalties-in-kind and cost and savings incurred 
     by the United States associated with taking royalties-in-
     kind, including but not limited to administrative savings and 
     any new or increased administrative costs; and
       (D) an evaluation of other relevant public benefits or 
     detriments associated with taking royalties-in-kind.
       (f) Deduction of Expenses.--
       (1) Before making payments under section 35 of the Mineral 
     Leasing Act (30 U.S.C. 191) or section 8(g) of the Outer 
     Continental Shelf Lands Act (43 U.S.C. 1337(g)) of revenues 
     derived from the sale of royalty production taken in kind 
     from a lease, the Secretary of the Interior shall deduct 
     amounts paid or deducted under subsections (b)(4) and (c), 
     and shall deposit such amounts to miscellaneous receipts.
       (2) If the Secretary allows the lessee to deduct 
     transportation or processing costs under subsection (c), the 
     Secretary may not reduce any payments to recipients of 
     revenues derived from any other Federal oil and gas lease as 
     a consequence of that deduction.
       (g) Consultation With States.--The Secretary shall 
     consult--
       (1) with a State before conducting a royalty-in-kind 
     program under this section within the State, and may delegate 
     management of any portion of the Federal royalty in-kind 
     program to such State except as otherwise prohibited by 
     Federal law; and
       (2) annually with any State from which Federal oil or gas 
     royalty is being taken in kind to ensure to the maximum 
     extent practicable that the royalty-in-kind program provides 
     revenues to the State greater than or equal to those likely 
     to have been received had royalties been taken in value.
       (h) Provisions for Small Refineries.--
       (1) If the Secretary determines that sufficient supplies of 
     crude oil are not available in the open market to refineries 
     not having their own source of supply for crude oil, the 
     Secretary may grant preference to such refineries in the sale 
     of any royalty oil accruing or reserved to the United States 
     under Federal oil and gas leases issued under any mineral 
     leasing law, for processing or use in such refineries at 
     private sale at not less than the market price.
       (2) In disposing of oil under this subsection, the 
     Secretary may prorate such oil among such refineries in the 
     area in which the oil is produced.
       (i) Disposition to Federal Agencies.--
       (1) Any royalty oil or gas taken by the Secretary in kind 
     from onshore oil and gas leases may be sold at not less than 
     market price to any department or agency of the United 
     States.
       (2) Any royalty oil or gas taken in kind from Federal oil 
     and gas leases on the outer Continental Shelf may be disposed 
     of only under section 27 of the Outer Continental Shelf Lands 
     Act (43 U.S.C. 1353).
       (j) Preference for Federal Low-Income Energy Assistance 
     Programs.--In disposing of royalty oil or gas taken in kind 
     under this section, the Secretary may grant a preference to 
     any person, including any State or Federal agency, for the 
     purpose of providing additional resources to any Federal low-
     income energy assistance program.

     SEC. 104. MARGINAL PROPERTY PRODUCTION INCENTIVES.

       (a) Marginal Property Defined.--Until such time as the 
     Secretary of the Interior issues rules under subsection (e) 
     that prescribe a different definition, for purposes of this 
     section, the term ``marginal property'' means an onshore 
     unit, communitization agreement, or lease not within a unit 
     or communitization agreement that produces on average the 
     combined equivalent of less than 15 barrels of oil per well 
     per day or 90 million British thermal units of gas per well 
     per day calculated based on the average over the three most 
     recent production months, including only those wells that 
     produce more than half the days in the three most recent 
     production months.
       (b) Conditions for Reduction of Royalty Rate.--Until such 
     time as the Secretary of the Interior promulgates rules under 
     subsection (e) that prescribe different thresholds or 
     standards, the Secretary shall reduce the royalty rate on--
       (1) oil production from marginal properties as prescribed 
     in subsection (c) when the spot price of West Texas 
     Intermediate crude oil at Cushing, Oklahoma, is, on average, 
     less than $15 per barrel for 90 consecutive trading days; and
       (2) gas production from marginal properties as prescribed 
     in subsection (c) when the spot price of natural gas 
     delivered at Henry Hub, Louisiana, is, on average, less than 
     $2.00 per million British thermal units for 90 consecutive 
     trading days.
       (c) Reduced Royalty Rate.--
       (1) When a marginal property meets the conditions specified 
     in subsection (b), the royalty rate shall be the lesser of--
       (A) 5 percent; or
       (B) the applicable rate under any other statutory or 
     regulatory royalty relief provision that applies to the 
     affected production.
       (2) The reduced royalty rate under this subsection shall be 
     effective on the first day of the production month following 
     the date on which the applicable price standard prescribed in 
     subsection (b) is met.
       (d) Termination of Reduced Royalty Rate.--A royalty rate 
     prescribed in subsection (d)(1)(A) shall terminate--
       (1) on oil production from a marginal property, on the 
     first day of the production month following the date on 
     which--
       (A) the spot price of West Texas Intermediate crude oil at 
     Cushing, Oklahoma, on average, exceeds $15 per barrel for 90 
     consecutive trading days, or

[[Page S10345]]

       (B) the property no longer qualifies as a marginal property 
     under subsection (a); and
       (2) on gas production from a marginal property, on the 
     first day of the production month following the date on 
     which--
       (A) the spot price of natural gas delivered at Henry Hub, 
     Louisiana, on average, exceeds $2.00 per million British 
     thermal units for 90 consecutive trading days, or
       (B) the property no longer qualifies as a marginal property 
     under subsection (a).
       (e) Rules Prescribing Different Relief.--
       (1) The Secretary of the Interior, after consultation with 
     the Secretary of Energy, may by rule prescribe different 
     parameters, standards, and requirements for, and a different 
     degree or extent of, royalty relief for marginal properties 
     in lieu of those prescribed in subsections (a) through (d).
       (2) The Secretary of the Interior, after consultation with 
     the Secretary of Energy, and within 1 year after the date of 
     enactment of this Act, shall, by rule,--
       (A) prescribe standards and requirements for, and the 
     extent of royalty relief for, marginal properties for oil and 
     gas leases on the outer Continental Shelf; and
       (B) define what constitutes a marginal property on the 
     outer Continental Shelf for purposes of this section.
       (3) In promulgating rules under this subsection, the 
     Secretary of the Interior may consider--
       (A) oil and gas prices and market trends;
       (B) production costs;
       (C) abandonment costs;
       (D) Federal and State tax provisions and their effects on 
     production economics;
       (E) other royalty relief programs; and
       (F) other relevant matters.
       (f) Savings Provision.--Nothing in this section shall 
     prevent a lessee from receiving royalty relief or a royalty 
     reduction pursuant to any other law or regulation that 
     provides more relief than the amounts provided by this 
     section.

     SEC. 105. COMPREHENSIVE INVENTORY OF OCS OIL AND NATURAL GAS 
                   RESOURCES.

       (a) In General.--The Secretary of the Interior shall 
     conduct an inventory and analysis of oil and natural gas 
     resources beneath all of the waters of the United States 
     Outer Continental Shelf (``OCS''). The inventory and analysis 
     shall--
       (1) use available data on oil and gas resources in areas 
     offshore of Mexico and Canada that will provide information 
     on trends of oil and gas accumulation in areas of the OCS;
       (2) use any available technology, except drilling, but 
     including 3-D seismic technology to obtain accurate resource 
     estimates;
       (3) analyze how resource estimates in OCS areas have 
     changed over time in regards to gathering geological and 
     geophysical data, initial exploration, or full field 
     development, including areas such as the deepwater and 
     subsalt areas in the Gulf of Mexico;
       (4) estimate the effect that understated oil and gas 
     resource inventories have on domestic energy investments; and
       (5) identify and explain how legislative, regulatory, and 
     administrative programs or processes restrict or impede the 
     development of identified resources and the extent that they 
     affect domestic supply, such as moratoria, lease terms and 
     conditions, operational stipulations and requirements, 
     approval delays by the federal government and coastal states, 
     and local zoning restrictions for onshore processing 
     facilities and pipeline landings.
       (b) Reports.--The Secretary of Interior shall submit a 
     report to the Congress on the inventory of estimates and the 
     analysis of restrictions or impediments, together with any 
     recommendations, within six months of the date of enactment 
     of the section. The report shall be publically available and 
     updated at least every five years.

     SEC. 106. ROYALTY RELIEF FOR DEEP WATER PRODUCTION.

       (a) In General.--For all tracts located in water depths of 
     greater than 400 meters in the Western and Central Planning 
     Area of the Gulf of Mexico, including that portion of the 
     Eastern Planning Area of the Gulf of Mexico encompassing 
     whole lease blocks lying west of 87 degrees, 30 minutes West 
     longitude, any oil or gas lease sale under the Outer 
     Continental Shelf Lands Act (43 U.S.C. 1331 et seq.) 
     occurring within 5 years after the date of the enactment of 
     this Act shall use the bidding system authorized in section 
     8(a)(1)(H) of the Outer Continental Shelf Lands Act (43 
     U.S.C. 1337(a)(1)(H)), except that the suspension of 
     royalties shall be set at a volume of not less than--
       (1) 5 million barrels of oil equivalent for each lease in 
     water depths of 400 to 800 meters;
       (2) 9 million barrels of oil equivalent for each lease in 
     water depths of 800 to 1,600 meters; and
       (3) 12 million barrels of oil equivalent for each lease in 
     water depths greater than 1,600 meters.

     SEC. 107. ALASKA OFFSHORE ROYALTY SUSPENSION.

       Section 8(a)(3)(B) of the Outer Continental Shelf Lands Act 
     (43 U.S.C. 1337), is amended with the following: add ``and in 
     the Planning Areas offshore Alaska'' after ``West longitude'' 
     and before ``the Secretary''.

     SEC. 108. ORPHANED, ABANDONED OR IDLED WELLS ON FEDERAL 
                   LANDS.

       (a) In General.--The Secretary of the Interior, in 
     cooperation with the Secretary of Agriculture, shall 
     establish a program within 1 year after the date of enactment 
     of this Act to remediate, reclaim, and close orphaned, 
     abandoned, or idled oil and gas wells located on lands 
     administered by the land management agencies within the 
     Department of the Interior and Agriculture. The program 
     shall--
       (1) include a means of ranking orphaned, abandoned, or 
     idled well sites for priority in remediation, reclamation and 
     closure, based on public health and safety, potential 
     environmental harm, and other land use priorities;
       (2) provide for identification and recovery of the costs of 
     remediation, reclamation and closure from persons or other 
     entities currently providing a bond or other financial 
     assurance required under State or Federal law for an oil or 
     gas well that is orphaned, abandoned or idled; and
       (3) provide for recovery from the persons or entities 
     identified under paragraph (2), or their sureties or 
     guarantors, of the costs of remediation, reclamation, and 
     closure of such wells.
       (b) Cooperation and Consultations.--In carrying out this 
     program, the Secretary of the Interior shall work 
     cooperatively with the Secretary of Agriculture and the 
     States within which the Federal lands are located and consult 
     with the Secretary of Energy and the Interstate Oil and Gas 
     Compact Commission.
       (c) Plan.--Within 1 year after the date of enactment of the 
     section, the Secretary of the Interior, in cooperation with 
     the Secretary of Agriculture, shall prepare a plan for 
     carrying out the program established under subsection (a) and 
     transmit copies of the plan to the Congress.
       (d) Technical Assistance Program for Non-Federal Lands.--
       (1) The Secretary of Energy shall establish a program to 
     provide technical assistance to the various oil and gas 
     producing States to facilitate State efforts over a 10-year 
     period to ensure a practical and economical remedy for 
     environmental problems caused by orphaned or abandoned oil 
     and gas exploration or production well sites on State or 
     private lands.
       (2) The Secretary shall work with the States, through the 
     Interstate Oil and Gas Compact Commission, to assist the 
     States in quantifying and mitigating environmental risks of 
     onshore orphaned abandoned oil or gas wells on State and 
     private lands.
       (3) The program shall include--
       (A) mechanisms to facilitate identification, if possible, 
     of the persons or other entities currently providing a bond 
     or other form of financial assurance required under State or 
     Federal law for an oil or gas well that is orphaned or 
     abandoned;
       (B) criteria for ranking orphaned or abandoned well sites 
     based on factors such as public health and safety, potential 
     environmental harm, and other land use priorities; and
       (C) information and training programs on best practices for 
     remediation of different types of sites.
       (e) Definition.--For purposes of this section, a well is 
     idled if it has been non-operational for 7 years and there is 
     no anticipated beneficial use of the well.
       (f) Authorization.--To carry out this section there is 
     authorized to be appropriated to the Secretary of the 
     Interior $25,000,000 for each of the fiscal years 2004 
     through 2008. Of the amounts authorized, $5,000,000 is 
     authorized for activities under subsection (d).

     SEC. 109. INCENTIVES FOR NATURAL GAS PRODUCTION FROM DEEP 
                   WELLS IN THE SHALLOW WATERS OF THE GULF OF 
                   MEXICO.

       (a) Royalty Incentive Regulations.--Not later than 90 days 
     after enactment, the Secretary of the Interior shall 
     promulgate final regulations providing royalty incentives for 
     natural gas produced from deep wells, as defined by the 
     Secretary, on oil and gas leases issued under the Outer 
     Continental Shelf Lands Act (43 U.S.C. 1331 et seq.) and 
     issued prior to January 1, 2001, in shallow waters of the 
     Gulf of Mexico, wholly west of 87 degrees, 30 minutes West 
     longitude that are less than 200 meters deep.
       (b) Royalty Incentive Regulations for Ultra-Deep Gas 
     Wells.--
       (1) No later than 90 days after the date of enactment of 
     this Act, in addition to any other regulations that may 
     provide royalty incentives for natural gas produced from deep 
     wells on oil and gas leases issued pursuant to the Outer 
     Continental Shelf Lands Act (43 U.S.C. 1331 et seq.), the 
     Secretary of the Interior shall promulgate new regulations 
     granting royalty relief suspension volumes of not less than 
     35 billion cubic feet with respect to the production of 
     natural gas from `ultra deep wells' on leases issued prior to 
     January 1, 2001, in shallow waters less than 200 meters deep 
     located in the Gulf of Mexico wholly west of 87 degrees, 30 
     minutes West longitude. For purposes of this subsection, the 
     term `ultra deep wells' means wells drilled with a perforated 
     interval, the top of which is at least 20,000 feet true 
     vertical depth below the datum at mean sea level.
       (2) The Secretary shall not grant the royalty incentives 
     outlined in this subsection if the average annual NYMEX 
     natural gas price exceeds for one full calendar year the 
     threshold price of $5 per million Btu, adjusted from the year 
     2000 for inflation.
       (3) This subsection shall have no force or effect after the 
     end of the 5-year period beginning on the date of the 
     enactment of this Act.

[[Page S10346]]

     SEC. 110. ALTERNATE ENERGY-RELATED USES ON THE OUTER 
                   CONTINENTAL SHELF.

       (a) Amendment to Outer Continental Shelf Lands Act.--
     Section 8 of the Outer Continental Shelf Lands Act (43 U.S.C. 
     1337) is amended by adding at the end the following new 
     subsection:
       ``(p) Easements or Rights-of-way for Energy and Related 
     Purposes.--
       ``(1) The Secretary may grant an easement or right-of-way 
     on the outer Continental Shelf for activities not otherwise 
     authorized in this Act, the Deepwater Port Act of 1974 (33 
     U.S.C. 1501 et seq.), or the Ocean Thermal Energy Conversion 
     Act of 1980 (42 U.S.C. 9101 et seq.), or other applicable law 
     when such activities--
       ``(A) support exploration, development, or production of 
     oil or natural gas, except that such easements or rights-of-
     way shall not be granted in areas where oil and gas 
     preleasing, leasing and related activities are prohibited by 
     a Congressional moratorium or a withdrawal pursuant to 
     section 12 of this Act;
       ``(B) support transportation of oil or natural gas;
       ``(C) produce or support production, transportation, or 
     transmission of energy from sources other than oil and gas; 
     or
       ``(D) use facilities currently or previously used for 
     activities authorized under this Act.
       ``(2) The Secretary shall promulgate regulations to ensure 
     that activities authorized under this subsection are 
     conducted in a manner that provides for safety, protection of 
     the environment, conservation of the natural resources of the 
     outer Continental Shelf, appropriate coordination with other 
     Federal agencies, and a fair return to the Federal government 
     for any easement or right-of-way granted under this 
     subsection. Such regulations shall establish procedures for--
       (A) public notice and comment on proposals to be permitted 
     pursuant to this subsection;
       (B) consultation and review by State and local governments 
     that may be impacted by activities to be permitted pursuant 
     to this subsection;
       (C) consideration of the coastal zone management program 
     being developed or administered by an affected coastal State 
     pursuant to section 305 or section 306 of the Coastal Zone 
     Management Act of 1972 (16 U.S.C. 1454, 1455); and
       (D) consultation with the Secretary of Defense and other 
     appropriate agencies prior to the issuance of an easement or 
     right-of-way under this subsection concerning issues related 
     to national security and navigational obstruction.
       (3) The Secretary shall require the holder of an easement 
     or right-of-way granted under this subsection to furnish a 
     surety bond or other form of security, as prescribed by the 
     Secretary, and to comply with such other requirements as the 
     Secretary may deem necessary to protect the interests of the 
     United States.
       ``(4) This subsection shall not apply to any area within 
     the exterior boundaries of any unit of the National Park 
     System, National Wildlife Refuge System, or National Marine 
     Sanctuary System, or any National Monument.
       ``(5) Nothing in this subsection shall be construed to 
     amend or repeal, expressly by implication, the applicability 
     of any other law, including but not limited to, the Coastal 
     Zone Management Act (16 U.S.C. 1455 et seq.) or the National 
     Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).''.
       (b) Conforming Amendment.--The text of the heading for 
     section 8 of the Outer Continental Shelf Lands Act is amended 
     to read as follows: ``Leases, Easements, and Rights-of-Way on 
     the Outer Continental Shelf.''.

     SEC. 111. COASTAL IMPACT ASSISTANCE.

       The Outer Continental Shelf Lands Act (43 U.S.C. 1331 et 
     seq.) is amended by adding at the end:

     ``SEC. 32. COASTAL IMPACT ASSISTANCE FAIRNESS PROGRAM.

       ``(a) Definitions.--When used in this section:
       ``(1) The term `coastal political subdivision' means a 
     county, parish, or any equivalent subdivision of a Producing 
     Coastal State in all or part of which subdivision lies within 
     the coastal zone (as defined in section 304(1) of the Coastal 
     Zone Management Act (16 U.S.C. 1453(1))) and within a 
     distance of 200 miles from the geographic center of any 
     leased tract.
       ``(2) The term `coastal population' means the population of 
     all political subdivisions, as determined by the most recent 
     official data of the Census Bureau, contained in whole or in 
     part within the designated coastal boundary of a State as 
     defined in a State's coastal zone management program under 
     the Coastal Zone Management Act (16 U.S.C. 1451 et seq.).
       ``(3) The term `Coastal State' has the same meaning as 
     provided by subsection 304(4) of the Coastal Zone Management 
     Act (16 U.S.C. 1453(4)).
       ``(4) The term `coastline' has the same meaning as the term 
     `coast line' as defined in subsection 2(c) of the Submerged 
     Lands Act (43 U.S.C. 1301(c)).
       ``(5) The term `distance' means the minimum great circle 
     distance, measured in statute miles.
       ``(6) The term `leased tract' means a tract maintained 
     under section 6 or leased under section 8 for the purpose of 
     drilling for, developing, and producing oil and natural gas 
     resources.
       ``(7) The term `Producing Coastal State' means a Coastal 
     State with a coastal seaward boundary within 200 miles from 
     the geographic center of a leased tract other than a leased 
     tract within any area of the Outer Continental Shelf where a 
     moratorium on new leasing was in effect as of January 1, 2002 
     unless the lease was issued prior to the establishment of 
     the moratorium and was in production on January 1, 2002.
       ``(8) The term `qualified Outer Continental Shelf revenues' 
     means all amounts received by the United States from each 
     leased tract or portion of a leased tract lying seaward of 
     the zone defined and governed by section 8(g) of this Act, or 
     lying within such zone but to which section 8(g) does not 
     apply, the geographic center of which lies within a distance 
     of 200 miles from any part of the coastline of any Producing 
     Coastal State, including bonus bids, rents, royalties 
     (including payments for royalties taken in kind and sold), 
     net profit share payments, and related late payment interest. 
     Such term shall only apply to leases issued after January 1, 
     2003 and revenues from existing leases that occurs after 
     January 1, 2003. Such term does not include any revenues from 
     a leased tract or portion of a leased tract that is included 
     within any area of the Outer Continental Shelf where a 
     moratorium on new leasing was in effect as of January 1, 
     2002, unless the lease was issued prior to the establishment 
     of the moratorium and was in production on January 1, 2002.
       ``(9) The term `Secretary' means the Secretary of 
     Interior.''
       ``(b) Authorization.--For fiscal years 2004 through 2009, 
     an amount equal to not more than 12.5 percent of qualified 
     Outer Continental Shelf revenues is authorized to be 
     appropriated for the purposes of this section.
       ``(c) Impact Assistance Payments to States and Political 
     Subdivisions.--The Secretary shall make payments from the 
     amounts available under this section to Producing Coastal 
     States with an approved Coastal Impact Assistance Plan, and 
     to coastal political subdivisions as follows:
       ``(1) Of the amounts appropriated, the allocation for each 
     Producing Coastal State shall be calculated based on the 
     ratio of qualified Outer Continental Shelf revenues generated 
     off the coastline of the Producing Coastal State to the 
     qualified Outer Continental Shelf revenues generated off the 
     coastlines of all Producing Coastal States for each fiscal 
     year. Where there is more than one Producing Coastal State 
     within 200 miles of a leased tract, the amount of each 
     Producing Coastal State's allocation for such leased tract 
     shall be inversely proportional to the distance between the 
     nearest point on the coastline of such State and the 
     geographic center of each leased tract or portion of the 
     leased tract (to the nearest whole mile) that is within 200 
     miles of that coastline, as determined by the Secretary.
       ``(2) Thirty-five percent of each Producing Coastal State's 
     allocable share as determined under paragraph (1) shall be 
     paid directly to the coastal political subdivisions by the 
     Secretary based on the following formula:
       ``(A) Twenty-five percent shall be allocated based on the 
     ratio of such coastal political subdivision's coastal 
     population to the coastal population of all coastal political 
     subdivisions in the Producing Coastal State.
       ``(B) Twenty-five percent shall be allocated based on the 
     ratio of such coastal political subdivision's coastline miles 
     to the coastline miles of a coastal political subdivision in 
     the Producing Coastal State except that for those coastal 
     political subdivisions in the State of Louisiana without a 
     coastline, the coastline for purposes of this element of the 
     formula shall be the average length of the coastline of the 
     remaining coastal subdivisions in the state.
       ``(C) Fifty percent shall be allocated based on the 
     relative distance of such coastal political subdivision from 
     any leased tract used to calculate the Producing Coastal 
     State's allocation using ratios that are inversely 
     proportional to the distance between the point in the coastal 
     political subdivision closest to the geographic center of 
     each leased tract or portion, as determined by the Secretary, 
     except that in the State of Alaska, the funds for this 
     element of the formula shall be divided equally among the two 
     closest coastal political subdivisions. For purposes of the 
     calculations under this subparagraph, a leased tract or 
     portion of a leased tract shall be excluded if the leased 
     tract or portion is located in a geographic area where a 
     moratorium on new leasing was in effect on January 1, 2002, 
     unless the lease was issued prior to the establishment of the 
     moratorium and was in production on January 1, 2002.
       ``(3) Any amount allocated to a Producing Coastal State or 
     coastal political subdivision but not disbursed because of a 
     failure to have an approved Coastal Impact Assistance Plan 
     under this section shall be allocated equally by the 
     Secretary among all other Producing Coastal States in a 
     manner consistent with this subsection except that the 
     Secretary shall hold in escrow such amount until the final 
     resolution of any appeal regarding the disapproval of a plan 
     submitted under this section. The Secretary may waive the 
     provisions of this paragraph and hold a Producing Coastal 
     State's allocable share in escrow if the Secretary determines 
     that such State is making a good faith effort to develop and 
     submit, or update, a Coastal Impact Assistance Plan.
       ``(4) For purposes of this subsection, calculations of 
     payments for fiscal years 2004

[[Page S10347]]

     through 2006 shall be made using qualified Outer Continental 
     Shelf revenues received in fiscal year 2003, and calculations 
     of payments for fiscal years 2007 through 2009 shall be made 
     using qualified Outer Continental Shelf revenues received in 
     fiscal year 2006.
       ``(d) Coastal Impact Assistance Plan.--
       ``(1) The Governor of each Producing Coastal State shall 
     prepare, and submit to the Secretary, a Coastal Impact 
     Assistance Plan. The Governor shall solicit local input and 
     shall provide for public participation in the development of 
     the plan. The plan shall be submitted to the Secretary by 
     July 1, 2004. Amounts received by Producing Coastal States 
     and coastal political subdivisions may be used only for the 
     purposes specified in the Producing Coastal State's Coastal 
     Impact Assistance Plan.
       ``(2) The Secretary shall approve a plan under paragraph 
     (1) prior to disbursement of amounts under this section. The 
     Secretary shall approve the plan if the Secretary determines 
     that the plan is consistent with the uses set forth in 
     subsection (f) of this section and if the plan contains--
       ``(A) the name of the State agency that will have the 
     authority to represent and act for the State in dealing with 
     the Secretary for purposes of this section;
       ``(B) a program for the implementation of the plan which 
     describes how the amounts provided under this section will be 
     used;
       ``(C) a contact for each political subdivision and 
     description of how coastal political subdivisions will use 
     amounts provided under this section, including a 
     certification by the Governor that such uses are consistent 
     with the requirements of this section;
       ``(D) certification by the Governor that ample opportunity 
     has been accorded for public participation in the development 
     and revision of the plan; and
       ``(E) measures for taking into account other relevant 
     Federal resources and programs.
       ``(3) The Secretary shall approve or disapprove each plan 
     or amendment within 90 days of its submission.
       ``(4) Any amendment to the plan shall be prepared in 
     accordance with the requirements of this subsection and shall 
     be submitted to the Secretary for approval or disapproval.
       ``(e) Authorized Uses.--Producing Coastal States and 
     coastal political subdivisions shall use amounts provided 
     under this section, including any such amounts deposited in a 
     State or coastal political subdivision administered trust 
     fund dedicated to uses consistent with this subsection, in 
     compliance with Federal and State law and only for one or 
     more of the following purposes--
       ``(1) projects and activities for the conservation, 
     protection or restoration of coastal areas including 
     wetlands;
       ``(2) mitigating damage to fish, wildlife or natural 
     resources;
       ``(3) planning assistance and administrative costs of 
     complying with the provisions of this section;
       ``(4) implementation of federally approved marine, coastal, 
     or comprehensive conservation management plans; and
       ``(5) mitigating impacts of Outer Continental Shelf 
     activities through funding onshore infrastructure and public 
     service needs.
       (f) Compliance With Authorized Uses.--If the Secretary 
     determines that any expenditure made by a Producing Coastal 
     State or coastal political subdivision is not consistent with 
     the uses authorized in subsection (e) of this section, the 
     Secretary shall not disburse any further amounts under this 
     section to that Producing Coastal State or coastal political 
     subdivision until the amounts used for the inconsistent 
     expenditure have been repaid or obligated for authorized 
     uses.

     SEC. 112. NATIONAL ENERGY RESOURCE DATABASE.

       (a) Short Title.--This section may be cited as the 
     ``National Energy Data Preservation Program Act of 2003''.
       (b) Program.--The Secretary of the Interior (in this 
     section, referred to as ``Secretary'') shall carry out a 
     National Energy Data Preservation Program in accordance with 
     this section--
       (1) to archive geologic, geophysical, and engineering data 
     and samples related to energy resources including oil, gas, 
     coal, and geothermal resources;
       (2) to provide a national catalog of such archival 
     material; and
       (3) to provide technical assistance related to the archival 
     material.
       (c) Energy Data Archive System.--
       (1) The Secretary shall establish, as a component of the 
     Program, an energy data archive system, which shall provide 
     for the storage, preservation, and archiving of subsurface, 
     and in limited cases surface, geological, geophysical and 
     engineering data and samples. The Secretary, in consultation 
     with the Association of American State Geologists and 
     interested members of the public, shall develop guidelines 
     relating to the energy data archive system, including the 
     types of data and samples to be preserved.
       (2) The system shall be comprised of State agencies and 
     agencies within the Department of the Interior that maintain 
     geological and geophysical data and samples regarding energy 
     resources and that are designated by the Secretary in 
     accordance with this subsection. The Program shall provide 
     for the storage of data and samples through data repositories 
     operated by such agencies.
       (3) The Secretary may not designate a State agency as a 
     component of the energy data archive system unless it is the 
     agency that acts as the geological survey in the State.
       (4) The energy data archive system shall provide for the 
     archiving of relevant subsurface data and samples obtained 
     during energy exploration and production operations on 
     Federal lands--
       (A) in the most appropriate repository designated under 
     paragraph (2), with preference being given to archiving data 
     in the State in which the data was collected; and
       (B) consistent with all applicable law and requirements 
     relating to confidentiality and proprietary data.
       (5)(A) Subject to the availability of appropriations, the 
     Secretary shall provide financial assistance to a State 
     agency that is designated under paragraph (2) for providing 
     facilities to archive energy material.
       (B) The Secretary, in consultation with the Association of 
     American State Geologists and interested members of the 
     public, shall establish procedures for providing assistance 
     under this paragraph. The procedures shall be designed to 
     ensure that such assistance primarily supports the expansion 
     of data and material archives and the collection and 
     preservation of new data and samples.
       (d) National Catalog.--
       (1) As soon as practicable after the date of the enactment 
     of this section, the Secretary shall develop and maintain, as 
     a component of the Program, a national catalog that 
     identifies--
       (A) energy data and samples available in the energy data 
     archive system established under subsection (c);
       (B) the repository for particular material in such system; 
     and (C) the means of accessing the material.
       (2) The Secretary shall make the national catalog 
     accessible to the public on the site of the Survey on the 
     World Wide Web, consistent with all applicable requirements 
     related to confidentiality and proprietary data.
       (3) The Secretary may carry out the requirements of this 
     subsection by contract or agreement with appropriate persons.
       (e) Technical Assistance.--
       (1) Subject to the availability of appropriations, as a 
     component of the Program, the Secretary shall provide 
     financial assistance to any State agency designated under 
     subsection (c)(2) to provide technical assistance to enhance 
     understanding, interpretation, and use of materials archived 
     in the energy data archive system established under 
     subsection (c).
       (2) The Secretary, in consultation with the Association of 
     American State Geologists and interested members of the 
     public, shall develop a process, which shall involve the 
     participation of representatives of relevant Federal and 
     State agencies, for the approval of financial assistance to 
     State agencies under this subsection.
       (f) Costs.--
       (1) The Federal share of the cost of an activity carried 
     out with assistance under subsections (c) or (e) shall be no 
     more than 50 percent of the total cost of that activity.
       (2) The Secretary--
       (A) may accept private contributions of property and 
     services for technical assistance and archive activities 
     conducted under this section; and (B) may apply the value of 
     such contributions to the non-Federal share of the costs of 
     such technical assistance and archive activities.
       (g) Reports.--
       (1) Within year after the date of the enactment of this 
     Act, the Secretary shall submit an initial report to the 
     Congress setting forth a plan for the implementation of the 
     Program.
       (2) Not later than 90 days after the end of the first 
     fiscal year beginning after the submission of the report 
     under paragraph (1) and after the end of each fiscal year 
     thereafter, the Secretary shall submit a report to the 
     Congress describing the status of the Program and evaluating 
     progress achieved during the preceding fiscal year in 
     developing and carrying out the Program.
       (3) The Secretary shall consult with the Association of 
     American State Geologists and interested members of the 
     public in preparing the reports required by this subsection.
       (h) Definitions.--As used in this section, the term:
       (1) ``Association of American State Geologists'' means the 
     organization of the chief executives of the State geological 
     surveys.
       (2) ``Secretary'' means the Secretary of the Interior 
     acting through the Director of the United States Geological 
     Survey.
       (3) ``Program'' means the National Energy Data Preservation 
     Program carried out under this section.
       (4) ``Survey'' means the United States Geological Survey.
       (i) Maintenance of State Effort.--It is the intent of the 
     Congress that the States not use this section as an 
     opportunity to reduce State resources applied to the 
     activities that are the subject of the Program.
       (j) Authorization of Appropriations.--There is authorized 
     to be appropriated to the Secretary $30,000,000 for each of 
     fiscal years 2003 through 2007 for carrying out this section.

     SEC. 113. OIL AND GAS LEASE ACREAGE LIMITATION.

       Section 27(d)(1) of the Mineral Leasing Act (30 U.S.C. 
     184(d)(1)) is amended by inserting after ``acreage held in 
     special tar sands area'' the following: ``as well as acreage 
     under any lease any portion of which has been committed to a 
     federally approved unit or cooperative plan or 
     communitization agreement,

[[Page S10348]]

     or for which royalty, including compensatory royalty or 
     royalty-in-kind, was paid in the preceding calendar year,''.

     SEC. 114. ASSESSMENT OF DEPENDENCE OF STATE OF HAWAII ON OIL.

       (a) Assessment. The Secretary of Energy shall assess the 
     economic implication of the dependence of the State of Hawaii 
     on oil as the principal source of energy for the State, 
     including--
       (1) the short- and long-term prospects for crude oil supply 
     disruption and price volatility and potential impacts on the 
     economy of Hawaii;
       (2) the economic relationship between oil-fired generation 
     of electricity from residual fuel and refined petroleum 
     products consumed for ground, marine, and air transportation;
       (3) the technical and economic feasibility of increasing 
     the contribution of renewable energy resources for generation 
     of electricity, on an island-by-island basis, including--
       (A) siting and facility configuration;
       (B) environmental, operational, and safety considerations;
       (C) the availability of technology;
       (D) effects on the utility system including reliability;
       (E) infrastructure and transport requirements;
       (F) community support; and
       (G) other factors affection the economic impact of such an 
     increase and any effect on the economic relationship 
     described in paragraph (2);
       (4) the technical and economic feasibility of using 
     liquefied natural gas to displace residual fuel oil for 
     electric generation, including neighbor island opportunities, 
     and the effect of such displacement on the economic 
     relationship described in paragraph (2) including--
       (A) the availability of supply;
       (B) siting and facility configuration for onshore and 
     offshore liquefied natural gas receiving terminals;
       (C) the factors described in subparagraphs (B) through (F) 
     of paragraph (3); and
       (D) other economic factors;
       (5) the technical and economic feasibility of using 
     renewable energy sources (including hydrogen) for ground, 
     marine, and air transportation energy applications to 
     displace the use of refined petroleum products, on an island-
     by-island basis, and the economic impact of such displacement 
     on the relationship described in (2); and
       (6) an island-by-island approach to--
       (A) the development of hydrogen from renewable resources; 
     and
       (B) the application of hydrogen to the energy needs of 
     Hawaii
       (b) Contracting Authority.--The Secretary of Energy may 
     carry out the assessment under subsection (a) directly or, in 
     whole or in part, through one or more contracts with 
     qualified public or private entities.
       (c) Report.--Not later than 300 days after the date of 
     enactment of this Act, the Secretary of Energy shall prepare, 
     in consultation with agencies of the State of Hawaii and 
     other stakeholders, as appropriate, and submit to Congress, 
     as report detailing the findings, conclusions, and 
     recommendations resulting from the assessment.
       (d) Appropriation.--The are authorized to be appropriated 
     such sums as are necessary to carry out this section.

                  Subtitle B--Access to Federal Lands

     SEC. 121. OFFICE OF FEDERAL ENERGY PERMIT COORDINATION.

       (a) Establishment.--The President shall establish the 
     Office of Federal Energy Permit Coordination (in this 
     section, referred to as ``Office'') within the Executive 
     Office of the President in the same manner and mission as the 
     White House Energy Projects Task Force established by 
     Executive Order 13212.
       (b) Staffing.--The Office shall be staffed by functional 
     experts from relevant federal agencies and departments on a 
     nonreimbursable basis to carry out the mission of this 
     office.
       (c) Reporting.--The Office shall provide an annual report 
     to Congress, detailing the activities put in place to 
     coordinate and expedite Federal decisions on energy projects. 
     The report shall list accomplishments in improving the 
     federal decision making process and shall include any 
     additional recommendations or systemic changes needed to 
     establish a more effective and efficient federal permitting 
     process.

     SEC. 122. PILOT PROJECT TO IMPROVE FEDERAL PERMIT 
                   COORDINATION.

       (a) Creation of Pilot Project.--The Secretary of the 
     Interior (in this section, referred to as ``Secretary'') 
     shall establish a Federal Permit Streamlining Pilot Project. 
     The Secretary shall enter into a Memorandum of Understanding 
     with the Secretary of Agriculture, Administrator of the 
     Environmental Protection Agency, and the Chief of the Corps 
     of Engineers within 90 days after enactment of this Act. The 
     Secretary may also request that the Governors of Wyoming, 
     Montana, Colorado, and New Mexico be signatories to the 
     Memorandum of Understanding.
       (b) Designation of Qualified Staff.--Once the Pilot Project 
     has been established by the Secretary, all Federal signatory 
     parties shall assign an employee on a nonreimbursable basis 
     to each of the field offices identified in section (c), who 
     has expertise in the regulatory issues pertaining to their 
     office, including, as applicable, particular expertise in 
     Endangered Species Act section 7 consultations and the 
     preparation of Biological Opinions, Clean Water Act 404 
     permits, Clean Air Act regulatory matters, planning under the 
     National Forest Management Act, and the preparation of 
     analyses under the National Environmental Policy Act. 
     Assigned staff shall report to the Bureau of Land Management 
     (BLM) Field Managers in the offices to which they are 
     assigned, and shall be responsible for all issues related to 
     the jurisdiction of their home office or agency, and 
     participate as part of the team of employees working on 
     proposed energy projects, planning, and environmental 
     analyses.
       (c) Field Offices.--The following BLM Field Offices shall 
     serve as the Federal Permit Streamlining Pilot Project 
     offices:
       (1) Rawlins, Wyoming;
       (2) Buffalo, Wyoming;
       (3) Miles City, Montana;
       (4) Farmington, New Mexico;
       (5) Carlsbad, New Mexico; and
       (6) Glenwood Springs, Colorado.
       (d) Reports.--The Secretary shall submit a report to the 
     Congress 3 years following the date of enactment of this 
     section, outlining the results of the Pilot Project to date 
     and including a recommendation to the President as to whether 
     the Pilot Project should be implemented nationwide.
       (e) Additional Personnel.--The Secretary shall assign to 
     each of the BLM Field Offices listed in subsection (c) such 
     additional personnel as is necessary to ensure the effective 
     implementation of--
       (1) the Pilot Project; and
       (2) other programs administered by such offices, including 
     inspection and enforcement related to energy development on 
     federal lands, pursuant to the multiple use mandate of the 
     Federal Land Policy and Management Act of 1976 (43 U.S.C. 
     1701 et seq.).
       (f) Savings Provision.--Nothing in this section shall 
     affect the operation of any federal or state law or any 
     delegation of authority made by a Secretary or head of an 
     Agency whose employees are participating in the program 
     provided for by this section.
       (g) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as may be necessary to implement 
     this section.

     SEC. 123. FEDERAL ONSHORE LEASING PROGRAMS FOR OIL AND GAS.

       (a) Timely Action on Leases and Permits.--To ensure timely 
     action on oil and gas leases and applications for permits to 
     drill on lands otherwise available for leasing, the Secretary 
     of the Interior shall--
       (1) ensure expeditious compliance with the requirements of 
     section 102(2)(C) of the National Environmental Policy Act of 
     1969 (42 U.S.C. 4332(2)(C));
       (2) improve consultation and coordination with the States; 
     and
       (3) improve the collection, storage, and retrieval of 
     information related to such leasing activities.
       (b) Improved Enforcement.--The Secretary shall improve 
     inspection and enforcement of oil and gas activities, 
     including enforcement of terms and conditions in permits to 
     drill.
       (c) Authorization of Appropriations.--For each of the 
     fiscal years 2004 through 2007, in addition to amounts 
     otherwise authorized to be appropriated for the purpose of 
     carrying out section 17 of the Mineral Leasing Act (30 U.S.C. 
     226), there are authorized to be appropriated to the 
     Secretary of the Interior--
       (1) $40,000,000 for the purpose of carrying out paragraphs 
     (1) through (3) of subsection (a); and
       (2) $20,000,000 for the purpose of carrying out subsection 
     (b).

     SEC. 124. ESTIMATES OF OIL AND GAS RESOURCES UNDERLYING 
                   ONSHORE FEDERAL LANDS.

       Section 604 of the Energy Act of 2000 (42 U.S.C. 6217) is 
     amended by striking ``(a) In General'' and all thereafter and 
     inserting
       ``(a) In General.--The Secretary of the Interior, in 
     consultation with the Secretaries of Agriculture and Energy, 
     shall conduct an inventory of all onshore Federal lands and 
     take measures necessary to update and revise this inventory. 
     The inventory shall identify for all federal lands
       ``(1) the United States Geological Survey estimates of the 
     oil and gas resources underlying these lands;
       ``(2) the extent and nature of any restrictions or 
     impediments to the exploration, production and transportation 
     of such resources, including
       ``(A) existing land withdrawals and the underlying purpose 
     for each withdrawal;
       ``(B) restrictions or impediments affecting timeliness of 
     granting leases;
       ``(C) post-lease restrictions or impediments such as 
     conditions of approval, applications for permits to drill, 
     applicable environmental permits;
       ``(D) permits or restrictions associated with transporting 
     the resources; and
       ``(E) identification of the authority for each restriction 
     or impediment together with the impact on additional 
     processing or review time and potential remedies; and
       ``(3) the estimates of oil and gas resources not available 
     for exploration and production by virtue of the restrictions 
     identified above.
       ``(b) Reports.--The Secretary shall provide a progress 
     report to the Congress by October 1, 2006 and shall complete 
     the inventory by October 1, 2010.
       ``(c) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     to implement this section.

[[Page S10349]]

     SEC. 125. SPLIT-ESTATE FEDERAL OIL AND GAS LEASING AND 
                   DEVELOPMENT PRACTICES.

       (a) Review.--In consultation with affected private surface 
     owners, oil and gas industry and other interested parties, 
     the Secretary of the Interior shall undertake a review of the 
     current policies and practices with respect to management of 
     Federal subsurface oil and gas development activities and 
     their effects on the privately owned surface. This review 
     shall include
       (1) a comparison of the rights and responsibilities under 
     existing mineral and land law for the owner of a Federal 
     mineral lease, the private surface owners and the Department;
       (2) a comparison of the surface owner consent provisions in 
     section 714 of the Surface Mining Control and Reclamation Act 
     (30 U.S.C. 1304) concerning surface mining of federal coal 
     deposits and the surface owner consent provisions for oil and 
     gas development, including coalbed methane production; and
       (3) recommendations for administrative or legislative 
     action necessary to facilitate reasonable access for Federal 
     oil and gas activities while addressing surface owner 
     concerns and minimizing impacts to private surface.
       (b) Report.--The Secretary of the Interior shall report the 
     results of such review to the Congress no later than 180 days 
     after enactment of this section.

     SEC. 126. COORDINATION OF FEDERAL AGENCIES TO ESTABLISH 
                   PRIORITY ENERGY TRANSMISSION RIGHTS-OF-WAY.

       (a) Definitions.--For purposes of this section:
       (1) The term ``utility corridor'' means any linear strip of 
     land across Federal lands of approved width, but limited by 
     technological, environmental, and topographical factors for 
     use by a utility facility.
       (2) The term ``Federal authorization'' means any 
     authorization required under Federal law in order to site a 
     utility facility, including but not limited to such permits, 
     special use authorizations, certifications, opinions, or 
     other approvals as may be required, issued by a Federal 
     agency.
       (3) The term ``Federal lands'' means all lands owned by the 
     United States, except
       (A) lands in the National Park System;
       (B) lands held in trust for an Indian or Indian tribe; and
       (C) lands on the Outer Continental Shelf.
       (4) The term ``Secretary'' means the Secretary of Energy.
       (5) The term ``utility facility'' means any privately, 
     publicly, or cooperatively owned line, facility, or system 
     (A) for the transportation of oil and natural gas, synthetic 
     liquid or gaseous fuels, any refined product produced 
     therefrom, or for transportation of products in support of 
     production, or for storage and terminal facilities in 
     connection therewith; or (B) for the generation, transmission 
     and distribution of electric energy.
       (b) Utility Corridors.--
       (1) No later than 24 months after the date of enactment of 
     this section, the Secretary of the Interior, with respect to 
     public lands, and the Secretary of Agriculture, with respect 
     to National Forest System lands, in consultation with the 
     Secretary, shall--
       (A) designate utility corridors pursuant to section 503 of 
     the Federal Land Policy and Management Act (43 U.S.C. 1763) 
     in the eleven contiguous Western States, as identified in 
     section 103(o) of such Act (43 U.S.C. 1702(o)); and
       (B) incorporate the utility corridors designated under 
     paragraph (A) into the relevant departmental and agency land 
     use and resource management plans or their equivalent.
       (2) The Secretary shall coordinate with the affected 
     Federal agencies to jointly identify potential utility 
     corridors on Federal lands in the other States and jointly 
     develop a schedule for the designation, environmental review 
     and incorporation of such utility corridors into relevant 
     departmental and agency land use and resource management 
     plans or their equivalent.
       (c) Federal Permit Coordination.--The Secretary, in 
     consultation with the Secretary of the Interior, the 
     Secretary of Agriculture, and the Secretary of Defense, shall 
     develop a memorandum of understanding (``MOU'') for the 
     purpose of coordinating all applicable Federal authorizations 
     and environmental reviews related to a proposed or existing 
     utility facility. To the maximum extent practicable under 
     applicable law, the Secretary shall coordinate the process 
     developed in the MOU with any Indian tribes, multi-State 
     entities, and State agencies that are responsible for 
     conducting any separate permitting and environmental reviews 
     of the affected utility facility to ensure timely review and 
     permit decisions. The MOU shall provide for--
       (1) the coordination among affected Federal agencies to 
     ensure that the necessary Federal authorizations are 
     conducted concurrently with applicable State siting processes 
     and are considered within a specific time frame to be 
     identified in the MOU;
       (2) an agreement among the affected Federal agencies to 
     prepare a single environmental review document to be used as 
     the basis for all Federal authorization decisions; and
       (3) a process to expedite applications to construct or 
     modify utility facilities within utility corridors.

                 Subtitle C Alaska Natural Gas Pipeline

     SEC. 131. SHORT TITLE.

       This subtitle may be cited as the ``Alaska Natural Gas 
     Pipeline Act''.

     SEC. 132. DEFINITIONS.

       In this subtitle, the following definitions apply:
       (1) The term ``Alaska natural gas'' means natural gas 
     derived from the area of the State of Alaska lying north of 
     64 degrees North latitude.
       (2) The term ``Alaska natural gas transportation project'' 
     means any natural gas pipeline system that carries Alaska 
     natural gas to the border between Alaska and Canada 
     (including related facilities subject to the jurisdiction 
     of the Commission) that is authorized under either
       (A) the Alaska Natural Gas Transportation Act of 1976 (15 
     U.S.C. 719 et seq.); or
       (B) section 133.
       (3) The term ``Alaska natural gas transportation system'' 
     means the Alaska natural gas transportation project 
     authorized under the Alaska Natural Gas Transportation Act of 
     1976 and designated and described in section 2 of the 
     President's decision.
       (4) The term ``Commission'' means the Federal Energy 
     Regulatory Commission.
       (5) The term ``President's decision'' means the decision 
     and report to Congress on the Alaska natural gas 
     transportation system issued by the President on September 
     22, 1977, pursuant to section 7 of the Alaska Natural Gas 
     Transportation Act of 1976 (15 U.S.C. 719(e) and approved by 
     Public Law 95 158 (91 Stat.1268)).

       SEC. 133. ISSUANCE OF CERTIFICATE OF PUBLIC CONVENIENCE AND 
                   NECESSITY.

       (a) Authority of the Commission.--Notwithstanding the 
     provisions of the Alaska Natural Gas Transportation Act of 
     1976 (15 U.S.C. 719 et seq.), the Commission may, pursuant to 
     section 7(c) of the Natural Gas Act (15 U.S.C. 717f(c)), 
     consider and act on an application for the issuance of a 
     certificate of public convenience and necessity authorizing 
     the construction and operation of an Alaska natural gas 
     transportation project other than the Alaska natural gas 
     transportation system.
       (b) Issuance of Certificate.--
       (1) The Commission shall issue a certificate of public 
     convenience and necessity authorizing the construction and 
     operation of an Alaska natural gas transportation project 
     under this section if the applicant has satisfied the 
     requirements of section 7(e) of the Natural Gas Act (15 
     U.S.C. 717f(e)).
       (2) In considering an application under this section, the 
     Commission shall presume that--
       (A) a public need exists to construct and operate the 
     proposed Alaska natural gas transportation project; and
       (B) sufficient downstream capacity will exist to transport 
     the Alaska natural gas moving through such project to markets 
     in the contiguous United States.
       (c) Expedited Approval Process.--The Commission shall issue 
     a final order granting or denying any application for a 
     certificate of public convenience and necessity under section 
     7(c) of the Natural Gas Act (15 U.S.C. 717f(c)) and this 
     section not more than 60 days after the issuance of the final 
     environmental impact statement for that project pursuant to 
     section 134.
       (d) Prohibition on Certain Pipeline Route.--No license, 
     permit, lease, right-of-way, authorization, or other approval 
     required under Federal law for the construction of any 
     pipeline to transport natural gas from lands within the 
     Prudhoe Bay oil and gas lease area may be granted for any 
     pipeline that follows a route that traverses--
       (1) the submerged lands (as defined by the Submerged Lands 
     Act) beneath, or the adjacent shoreline of, the Beaufort Sea; 
     and
       (2) enters Canada at any point north of 68 degrees North 
     latitude.
       (e) Open Season.--Except where an expansion is ordered 
     pursuant to section 135, initial or expansion capacity on any 
     Alaska natural gas transportation project shall be allocated 
     in accordance with procedures to be established by the 
     Commission in regulations governing the conduct of open 
     seasons for such project. Such procedures shall include the 
     criteria for and timing of any open seasons; promote 
     competition in the exploration, development, and production 
     of Alaska natural gas; and, for any open season for capacity 
     beyond the initial capacity, provide the opportunity for the 
     transportation of natural gas other than from the Prudhoe Bay 
     and Point Thompson units. The Commission shall issue such 
     regulations not later than 120 days after the date of 
     enactment of this Act.
       (f) Projects in the Contiguous United States.--Applications 
     for additional or expanded pipeline facilities that may be 
     required to transport Alaska natural gas from Canada to 
     markets in the contiguous United States may be made pursuant 
     to the Natural Gas Act. To the extent such pipeline 
     facilities include the expansion of any facility constructed 
     pursuant to the Alaska Natural Gas Transportation Act of 
     1976, the provisions of that Act shall continue to apply.
       (g) Study of In-State Needs.--The holder of the certificate 
     of public convenience and necessity issued, modified, or 
     amended by the Commission for an Alaska natural gas 
     transportation project shall demonstrate that it has 
     conducted a study of Alaska in-State needs, including tie-in 
     points along the Alaska natural gas transportation project 
     for in-State access.
       (h) Alaska Royalty Gas.--The Commission, upon the request 
     of the State of Alaska and after a hearing, may provide for 
     reasonable access to the Alaska natural gas transportation 
     project for the State of Alaska or its designee for the 
     transportation of the

[[Page S10350]]

     State's royalty gas for local consumption needs within the 
     State; except that the rates of existing shippers of 
     subscribed capacity on such project shall not be increased as 
     a result of such access.
       (i) Regulations.--The Commission may issue regulations to 
     carry out the provisions of this section.

       SEC. 134. ENVIRONMENTAL REVIEWS.

       (a) Compliance With NEPA.--The issuance of a certificate of 
     public convenience and necessity authorizing the construction 
     and operation of any Alaska natural gas transportation 
     project under section 133 shall be treated as a major Federal 
     action significantly affecting the quality of the human 
     environment within the meaning of section 102(2)(c) of the 
     National Environmental Policy Act of 1969 (42 U.S.C. 
     4332(2)(c)).
       (b) Designation of Lead Agency.--The Commission shall be 
     the lead agency for purposes of complying with the National 
     Environmental Policy Act of 1969, and shall be responsible 
     for preparing the statement required by section 102(2)(c) of 
     that Act (42 U.S.C. 4332(2)(c)) with respect to an Alaska 
     natural gas transportation project under section 133. The 
     Commission shall prepare a single environmental statement 
     under this section, which shall consolidate the environmental 
     reviews of all Federal agencies considering any aspect of the 
     project.
       (c) Other Agencies.--All Federal agencies considering 
     aspects of the construction and operation of an Alaska 
     natural gas transportation project under section 133 shall 
     cooperate with the Commission, and shall comply with 
     deadlines established by the Commission in the preparation of 
     the statement under this section. The statement prepared 
     under this section shall be used by all such agencies to 
     satisfy their responsibilities under section 102(2)(c) of the 
     National Environmental Policy Act of 1969 (42 U.S.C. 
     4332(2)(c)) with respect to such project.
       (d) Expedited Process.--The Commission shall issue a draft 
     statement under this section not later than 12 months after 
     the Commission determines the application to be complete and 
     shall issue the final statement not later than 6 months after 
     the Commission issues the draft statement, unless the 
     Commission for good cause finds that additional time is 
     needed.

       SEC. 135. PIPELINE EXPANSION.

       (a) Authority.--With respect to any Alaska natural gas 
     transportation project, upon the request of one or more 
     persons and after giving notice and an opportunity for a 
     hearing, the Commission may order the expansion of such 
     project if it determines that such expansion is required by 
     the present and future public convenience and necessity.
       (b) Requirements.--Before ordering an expansion, the 
     Commission shall--
       (1) approve or establish rates for the expansion service 
     that are designed to ensure the recovery, on an incremental 
     or rolled-in basis, of the cost associated with the expansion 
     (including a reasonable rate of return on investment);
       (2) ensure that the rates as established do not require 
     existing shippers on the Alaska natural gas transportation 
     project to subsidize expansion shippers;
       (3) find that the proposed shipper will comply with, and 
     the proposed expansion and the expansion of service will be 
     undertaken and implemented based on, terms and conditions 
     consistent with the then-effective tariff of the Alaska 
     natural gas transportation project;
       (4) find that the proposed facilities will not adversely 
     affect the financial or economic viability of the Alaska 
     natural gas transportation project;
       (5) find that the proposed facilities will not adversely 
     affect the overall operations of the Alaska natural gas 
     transportation project;
       (6) find that the proposed facilities will not diminish the 
     contract rights of existing shippers to previously subscribed 
     certificated capacity;
       (7) ensure that all necessary environmental reviews have 
     been completed; and
       (8) find that adequate downstream facilities exist or are 
     expected to exist to deliver incremental Alaska natural gas 
     to market.
       (c) Requirement for a Firm Transportation Agreement.--Any 
     order of the Commission issued pursuant to this section shall 
     be null and void unless the person or persons requesting the 
     order executes a firm transportation agreement with the 
     Alaska natural gas transportation project within a reasonable 
     period of time as specified in such order.
       (d) Limitation.--Nothing in this section shall be construed 
     to expand or otherwise affect any authorities of the 
     Commission with respect to any natural gas pipeline located 
     outside the State of Alaska.
       (e) Regulations.--The Commission may issue regulations to 
     carry out the provisions of this section.

     SEC. 136. FEDERAL COORDINATOR.

       (a) Establishment.--There is established, as an independent 
     office in the executive branch, the Office of the Federal 
     Coordinator for Alaska Natural Gas Transportation Projects.
       (b) Federal Coordinator.--The Office shall be headed by a 
     Federal Coordinator for Alaska Natural Gas Transportation 
     Projects, who shall--
       (1) be appointed by the President, by and with the advice 
     and consent of the Senate;
       (2) for a term equal to the period required to design, 
     permit and construction the project plus one year; and
       (3) be compensated at the rate prescribed for level III of 
     the Executive Schedule (5 U.S.C. 5314).
       (c) Duties.--The Federal Coordinator shall be responsible 
     for--
       (1) coordinating the expeditious discharge of all 
     activities by Federal agencies with respect to an Alaska 
     natural gas transportation project; and
       (2) ensuring the compliance of Federal agencies with the 
     provisions of this subtitle.
       (d) Reviews and Actions of Other Federal Agencies.--
       (1) All reviews conducted and actions taken by any Federal 
     officer or agency relating to an Alaska natural gas 
     transportation project authorized under this section shall be 
     expedited, in a manner consistent with completion of the 
     necessary reviews and approvals by the deadlines set forth in 
     this subtitle.
       (2) No Federal officer or agency shall have the authority 
     to include terms and conditions that are permitted, but not 
     required, by law on any certificate, right-of-way, permit, 
     lease, or other authorization issued to an Alaska natural gas 
     transportation project if the Federal Coordinator determines 
     that the terms and conditions would prevent or impair in any 
     significant respect the expeditious construction and 
     operation, or an expansion, of the project.
       (3) Unless required by law, no Federal officer or agency 
     shall add to, amend, or abrogate any certificate, right-of-
     way, permit, lease, or other authorization issued to an 
     Alaska natural gas transportation project if the Federal 
     Coordinator determines that such action would prevent or 
     impair in any significant respect the expeditious 
     construction and operation of, or an expansion of, the 
     project.
       (4) The Federal Coordinator's authority shall not include 
     the ability to override--
       (A) the implementation or enforcement of regulations issued 
     by the Commission pursuant to Section 133(e); or
       (B) an order by the Commission to expand the project 
     pursuant to Section 135.
       (5) Nothing in this section shall give the Federal 
     Coordinator the authority to impose additional terms, 
     conditions or requirements beyond those imposed by the 
     Commission or any agency with respect to construction and 
     operation, or an expansion of, the project.
       (e) State Coordination.--The Federal Coordinator shall 
     enter into a Joint Surveillance and Monitoring Agreement, 
     approved by the President and the Governor of Alaska, with 
     the State of Alaska similar to that in effect during 
     construction of the Trans-Alaska Oil Pipeline to monitor the 
     construction of the Alaska natural gas transportation 
     project. The Federal Government shall have primary 
     surveillance and monitoring responsibility where the Alaska 
     natural gas transportation project crosses Federal lands and 
     private lands, and the State government shall have primary 
     surveillance and monitoring responsibility where the Alaska 
     natural gas transportation project crosses State lands.
       (f) Transfer of Federal Inspector Functions and 
     Authority.--Upon appointment of the Federal Coordinator by 
     the President, all of the functions and authority of the 
     Office of Federal Inspector of Construction for the Alaska 
     Natural Gas Transportation System vested in the Secretary of 
     Energy pursuant to section 3012(b) of Public Law 102-486 (15 
     U.S.C. 719e(b)), including all functions and authority 
     described and enumerated in the Reorganization Plan No. 1 of 
     1979 (44 Fed. Reg. 33,663), Executive Order No. 12142 of June 
     21, 1979 (44 Fed. Reg. 36,927), and section 5 of the 
     President's decision, shall be transferred to the Federal 
     Coordinator.

     SEC. 137. JUDICIAL REVIEW.

       (a) Exclusive Jurisdiction.--Except for review by the 
     Supreme Court of the United States on writ of certiorari, the 
     United States Court of Appeals for the District of Columbia 
     Circuit shall have original and exclusive jurisdiction to 
     determine--
       (1) the validity of any final order or action (including a 
     failure to act) of any Federal agency or officer under this 
     subtitle;
       (2) the constitutionality of any provision of this 
     subtitle, or any decision made or action taken under this 
     subtitle; or
       (3) the adequacy of any environmental impact statement 
     prepared under the National Environmental Policy Act of 1969 
     with respect to any action under this subtitle.
       (b) Deadline for Filing Claim.--Claims arising under this 
     subtitle may be brought not later than 60 days after the date 
     of the decision or action giving rise to the claim.
       (c) Expedited Consideration.--The United States Court of 
     Appeals for the District of Columbia Circuit shall set any 
     action brought under subsection (a) for expedited 
     consideration, taking into account the national interest of 
     enhancing national energy security by providing access to the 
     significant gas reserves in Alaska needed to meet the 
     anticipated demand for natural gas.
       (d) Amendment to ANGTA.--Section 10(c) of the Alaska 
     Natural Gas Transportation Act of 1976 (15 U.S.C. 719h) is 
     amended by inserting after paragraph (1) the following:
       ``(2) The United States Court of Appeals for the District 
     of Columbia Circuit shall set any action brought under this 
     section for expedited consideration, taking into account the 
     national interest described in section 2.''.

     SEC. 138. STATE JURISDICTION OVER IN-STATE DELIVERY OF 
                   NATURAL GAS.

       (a) Local Distribution.--Any facility receiving natural gas 
     from the Alaska natural gas transportation project for 
     delivery to consumers within the State of Alaska shall be 
     deemed to be a local distribution facility within the meaning 
     of section 1(b) of the

[[Page S10351]]

     Natural Gas Act (15 U.S.C. 717(b)), and therefore not subject 
     to the jurisdiction of the Commission.
       (b) Additional Pipelines.--Nothing in this subtitle, except 
     as provided in section 133(d), shall preclude or affect a 
     future gas pipeline that may be constructed to deliver 
     natural gas to Fairbanks, Anchorage, Matanuska-Susitna 
     Valley, or the Kenai peninsula or Valdez or any other site in 
     the State of Alaska for consumption within or distribution 
     outside the State of Alaska.
       (c) Rate Coordination.--Pursuant to the Natural Gas Act, 
     the Commission shall establish rates for the transportation 
     of natural gas on the Alaska natural gas transportation 
     project. In exercising such authority, the Commission, 
     pursuant to section 17(b) of the Natural Gas Act (15 U.S.C. 
     717p(b)), shall confer with the State of Alaska regarding 
     rates (including rate settlements) applicable to natural gas 
     transported on and delivered from the Alaska natural gas 
     transportation project for use within the State of Alaska.

     SEC. 139. STUDY OF ALTERNATIVE MEANS OF CONSTRUCTION.

       (a) Requirement of Study.--If no application for the 
     issuance of a certificate or amended certificate of public 
     convenience and necessity authorizing the construction and 
     operation of an Alaska natural gas transportation project has 
     been filed with the Commission not later than 18 months after 
     the date of enactment of this Act, the Secretary of Energy 
     shall conduct a study of alternative approaches to the 
     construction and operation of the project.
       (b) Scope of Study.--The study shall consider the 
     feasibility of establishing a Government corporation to 
     construct an Alaska natural gas transportation project, and 
     alternative means of providing Federal financing and 
     ownership (including alternative combinations of Government 
     and private corporate ownership) of the project.
       (c) Consultation.--In conducting the study, the Secretary 
     of Energy shall consult with the Secretary of the Treasury 
     and the Secretary of the Army (acting through the Commanding 
     General of the Corps of Engineers).
       (d) Report.--If the Secretary of Energy is required to 
     conduct a study under subsection (a), the Secretary shall 
     submit a report containing the results of the study, the 
     Secretary's recommendations, and any proposals for 
     legislation to implement the Secretary's recommendations to 
     Congress.

     SEC. 140. CLARIFICATION OF ANGTA STATUS AND AUTHORITIES.

       (a) Savings Clause.--Nothing in this subtitle affects any 
     decision, certificate, permit, right-of-way, lease, or other 
     authorization issued under section 9 of the Alaska Natural 
     Gas Transportation Act of 1976 (15 U.S.C. 719(g)) or any 
     Presidential findings or waivers issued in accordance with 
     that Act.
       (b) Clarification of Authority To Amend Terms and 
     Conditions To Meet Current Project Requirements.--Any Federal 
     officer or agency responsible for granting or issuing any 
     certificate, permit, right-of-way, lease, or other 
     authorization under section 9 of the Alaska Natural Gas 
     Transportation Act of 1976 (15 U.S.C. 719(g)) may add to, 
     amend, or abrogate any term or condition included in such 
     certificate, permit, right-of-way, lease, or other 
     authorization to meet current project requirements (including 
     the physical design, facilities, and tariff specifications), 
     so long as such action does not compel a change in the basic 
     nature and general route of the Alaska natural gas 
     transportation system as designated and described in section 
     2 of the President's decision, or would otherwise prevent or 
     impair in any significant respect the expeditious 
     construction and initial operation of such transportation 
     system.
       (c) Updated Environmental Reviews.--The Secretary of Energy 
     shall require the sponsor of the Alaska natural gas 
     transportation system to submit such updated environmental 
     data, reports, permits, and impact analyses as the Secretary 
     determines are necessary to develop detailed terms, 
     conditions, and compliance plans required by section 5 of the 
     President's decision.

     SEC. 141. SENSE OF CONGRESS.

       It is the sense of Congress that an Alaska natural gas 
     transportation project will provide significant economic 
     benefits to the United States and Canada. In order to 
     maximize those benefits, Congress urges the sponsors of the 
     pipeline project to make every effort to use steel that is 
     manufactured or produced in North America and to negotiate a 
     project labor agreement to expedite construction of the 
     pipeline.

     SEC. 142. PARTICIPATION OF SMALL BUSINESS CONCERNS.

       (a) Sense of Congress.--It is the sense of Congress that an 
     Alaska natural gas transportation project will provide 
     significant economic benefits to the United States and 
     Canada. In order to maximize those benefits, Congress urges 
     the sponsors of the pipeline project to maximize the 
     participation of small business concerns in contracts and 
     subcontracts awarded in carrying out the project.
       (b) Study.--
       (1) The Comptroller General shall conduct a study on the 
     extent to which small business concerns participate in the 
     construction of oil and gas pipelines in the United States.
       (2) Not later than 1 year after the date of enactment of 
     this Act, the Comptroller General shall transmit to Congress 
     a report containing the results of the study.
       (3) The Comptroller General shall update the study at least 
     once every 5 years and transmit to Congress a report 
     containing the results of the update.
       (4) After the date of completion of the construction of an 
     Alaska natural gas transportation project, this subsection 
     shall no longer apply.
       (c) Small Business Concern Defined.--In this section, the 
     term ``small business concern'' has the meaning given such 
     term in section 3(a) of the Small Business Act (15 U.S.C. 
     632(a)).

     SEC. 143. ALASKA PIPELINE CONSTRUCTION TRAINING PROGRAM.

       (a) Establishment of Program.--The Secretary of Labor (in 
     this section referred to as the ``Secretary'') may make 
     grants to the Alaska Department of Labor and Workforce 
     Development to--
       (1) develop a plan to train, through the workforce 
     investment system established in the State of Alaska under 
     the Workforce Investment Act of 1998 (112 Stat. 936 et seq.), 
     adult and dislocated workers, including Alaska Natives, in 
     urban and rural Alaska in the skills required to construct 
     and operate an Alaska gas pipeline system; and
       (2) implement the plan developed pursuant to paragraph (1).
       (b) Requirements for Planning Grants.--The Secretary may 
     make a grant under subsection (a)(1) only if--
       (1) the Governor of Alaska certifies in writing to the 
     Secretary that there is a reasonable expectation that 
     construction of an Alaska gas pipeline will commence within 3 
     years after the date of such certification; and
       (2) the Secretary of the Interior concurs in writing to the 
     Secretary with the certification made under paragraph (1).
       (c) Requirements for Implementation Grants.--The Secretary 
     may make a grant under subsection (a)(2) only if--
       (1) the Secretary has approved a plan developed pursuant to 
     subsection (a)(1);
       (2) the Governor of Alaska requests the grant funds and 
     certifies in writing to the Secretary that there is a 
     reasonable expectation that the construction of an Alaska gas 
     pipeline system will commence within 2 years after the date 
     of such certification; and
       (3) the Secretary of the Interior concurs in writing to the 
     Secretary with the certification made under paragraph (2) 
     after considering--
       (A) the status of necessary State and Federal permits;
       (B) the availability of financing for the pipeline project; 
     and
       (C) other relevant factors and circumstances.
       (d) Authorization of Appropriations.--There is authorized 
     to be appropriated to the Secretary such sums as may be 
     necessary, but not to exceed $20,000,000, to carry out this 
     section.

     SEC. 144. LOAN GUARANTEES.

       (a) Authority.--
       (1) The Secretary may enter agreements with 1 or more 
     holders of a certificate of public convenience and necessity 
     issued under section 133(b) of this Act or section 9 of the 
     Alaska Natural Gas Transportation Act of 1976 (15 U.S.C. 
     719g) to issue Federal guarantee instruments with respect to 
     loans and other debt obligations for a qualified 
     infrastructure project.
       (2) Subject to the requirements of this section, the 
     Secretary may also enter into agreements with 1 or more 
     owners of the Canadian portion of a qualified infrastructure 
     project to issue Federal guarantee instruments with respect 
     to loans and other debt obligations for a qualified 
     infrastructure project as though such owner were a holder 
     described in paragraph (1).
       (3) The authority of the Secretary to issue Federal 
     guarantee instruments under this section for a qualified 
     infrastructure project shall expire on the date that is 2 
     years after the date on which the final certificate of public 
     convenience and necessity (including any Canadian 
     certificates of public convenience and necessity) is issued 
     for the project. A final certificate shall be considered to 
     have been issued when all certificates of public convenience 
     and necessity have been issued that are required for the 
     initial transportation of commercially economic quantities of 
     natural gas from Alaska to the continental United States.
       (b) Conditions.--
       (1) The Secretary may issue a Federal guarantee instrument 
     for a qualified infrastructure project only after a 
     certificate of public convenience and necessity under section 
     133(b) of this Act or an amended certificate under section 9 
     of the Alaska Natural Gas Transportation Act of 1976 (15 
     U.S.C. 719g) has been issued for the project.
       (2) The Secretary may issue a Federal guarantee instrument 
     under this section for a qualified infrastructure project 
     only if the loan or other debt obligation guaranteed by the 
     instrument has been issued by an eligible lender.
       (3) The Secretary shall not require as a condition of 
     issuing a Federal guarantee instrument under this section any 
     contractual commitment or other form of credit support of the 
     sponsors (other than equity contribution commitments and 
     completion guarantees), or any throughput or other guarantee 
     from prospective shippers greater than such guarantees as 
     shall be required by the project owners.
       (c) Limitations on Amounts.--
       (1) The amount of loans and other debt obligations 
     guaranteed under this section for a

[[Page S10352]]

     qualified infrastructure project shall not exceed 80 percent 
     of the total capital costs of the project, including interest 
     during construction.
       (2) The principal amount of loans and other debt 
     obligations guaranteed under this section shall not exceed, 
     in the aggregate, $18,000,000,000, which amount shall be 
     indexed for United States dollar inflation from the date of 
     enactment of this Act, as measured by the Consumer Price 
     Index.
       (d) Loan Terms and Fees.--
       (1) The Secretary may issue Federal guarantee instruments 
     under this section that take into account repayment profiles 
     and grace periods justified by project cash flows and 
     project-specific considerations. The term of any loan 
     guaranteed under this section shall not exceed 30 years.
       (2) An eligible lender may assess and collect from the 
     borrower such other fees and costs associated with the 
     application and origination of the loan or other debt 
     obligation as are reasonable and customary for a project 
     finance transaction in the oil and gas sector.
       (e) Regulations.--The Secretary may issue regulations to 
     carry out this section.
       (f) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as may be necessary to cover the 
     cost of loan guarantees, as defined by section 502(5) of the 
     Federal Credit Reform Act of 1990 (2 U.S.C. 661a(5)). Such 
     sums shall remain available until expended.
       (g) Definitions.--In this section, the following 
     definitions apply:
       (1) The term ``Consumer Price Index'' means the Consumer 
     Price Index for all-urban consumers, United States city 
     average, as published by the Bureau of Labor Statistics, or 
     if such index shall cease to be published, any successor 
     index or reasonable substitute thereof.
       (2) The term ``eligible lender'' means any non-Federal 
     qualified institutional buyer (as defined by section 
     230.144A(a) of title 17, Code of Federal Regulations (or any 
     successor regulation), known as Rule 144A(a) of the 
     Securities and Exchange Commission and issued under the 
     Securities Act of 1933), including--
       (A) a qualified retirement plan (as defined in section 
     4974(c) of the Internal Revenue Code of 1986 (26 U.S.C. 
     4974(c)) that is a qualified institutional buyer; and
       (B) a governmental plan (as defined in section 414(d) of 
     the Internal Revenue Code of 1986 (26 U.S.C. 414(d)) that is 
     a qualified institutional buyer.
       (3) The term ``Federal guarantee instrument'' means any 
     guarantee or other pledge by the Secretary to pledge the full 
     faith and credit of the United States to pay all of the 
     principal and interest on any loan or other debt obligation 
     entered into by a holder of a certificate of public 
     convenience and necessity.
       (4) The term ``qualified infrastructure project'' means an 
     Alaskan natural gas transportation project consisting of the 
     design, engineering, finance, construction, and completion of 
     pipelines and related transportation and production systems 
     (including gas treatment plants), and appurtenances thereto, 
     that are used to transport natural gas from the Alaska North 
     Slope to the continental United States.
       (5) The term ``Secretary'' means the Secretary of Energy.

     SEC. 145. SENSE OF CONGRESS ON NATURAL GAS DEMAND.

       It is the sense of Congress that:
       (1) North American demand for natural gas will increase 
     dramatically over the course of the next several decades.
       (2) Both the Alaska Natural Gas Pipeline and the McKenzie 
     Delta Natural Gas project in Canada will be necessary to help 
     meet the increased demand for natural gas in North America.
       (3) Federal and state officials should work together with 
     officials in Canada to ensure both projects can move forward 
     in a mutually beneficial fashion.
       (4) Federal and state officials should acknowledge that the 
     smaller scope, fewer permitting requirements and lower cost 
     of the McKenzie Delta project means it will most likely be 
     completed before the Alaska Natural Gas Pipeline.
       (5) Lower 48 and Canadian natural gas production alone will 
     not be able to meet all domestic demand in the coming 
     decades.
       (6) As a result, natural gas delivered from Alaska's North 
     Slope will not displace or reduce the commercial viability of 
     Canadian natural gas produced from the McKenzie Delta nor 
     production from the Lower 48.

                             TITLE II--COAL

                Subtitle A--Clean Coal Power Initiative

     SEC. 201. AUTHORIZATION OF APPROPRIATIONS.

       Clean Coal Power Initiative.--There is authorized to be 
     appropriated to the Secretary of Energy (in this subtitle, 
     referred to as ``Secretary'') to carry out the activities 
     authorized by this subtitle $200,000,000 for each of the 
     fiscal years 2003 through 2011, to remain available until 
     expended.

     SEC. 202. PROJECT CRITERIA.

       (a) In General.--The Secretary shall not provide funding 
     under this subtitle for any project that does not advance 
     efficiency, environmental performance, and cost 
     competitiveness well beyond the level of technologies that 
     are in operation or have been demonstrated as of the date of 
     the enactment of this Act.
       (b) Technical Criteria for Gasification.--In allocating the 
     funds made available under section 201, the Secretary shall 
     ensure that at least 80 percent of the funds are used for 
     coal-based gasification technologies or coal-based projects 
     that include gasification combined cycle, gasification fuel 
     cells, gasification co-production, or hybrid gasification/
     combustion. The Secretary shall set technical milestones 
     specifying emissions levels that coal gasification projects 
     must be designed to and reasonably expected to achieve. The 
     milestones shall get more restrictive through the life of the 
     program. The milestones shall be designed to achieve by 2020 
     coal gasification projects able to--
       (1) remove 99 percent of sulfur dioxide;
       (2) emit no more than .05 lbs of NOx per million BTU;
       (3) achieve substantial reductions in mercury emissions; 
     and
       (4) achieve a thermal efficiency of--
       (A) 60 percent for coal of more than 9,000 Btu;
       (B) 59 percent for coal of 7,000 to 9,000 Btu; and
       (C) 57 percent for coal of less than 7,000 Btu.
       (c) Technical Criteria for Other Projects.--For projects 
     not described in subsection (b), the Secretary shall set 
     technical milestones specifying emissions levels that the 
     projects must be designed to and reasonably expected to 
     achieve. The milestones shall get more restrictive through 
     the life of the program. The milestones shall be designed to 
     achieve by 2010 projects able to--
       (1) remove 97 percent of sulfur dioxide;
       (2) emit no more than .08 lbs of NOx per million BTU;
       (3) achieve substantial reductions in mercury emissions; 
     and
       (4) achieve a thermal efficiency of--
       (A) 45 percent for coal of more than 9,000 Btu;
       (B) 44 percent for coal of 7,000 to 9,000 Btu; and
       (C) 42 percent for coal of less than 7,000 Btu.
       (d) Existing Units.--In the case of projects at existing 
     units, in lieu of the thermal efficiency requirements set 
     forth in paragraphs (b)(4) and (c)(4), the projects shall be 
     designed to achieve an overall thermal design efficiency 
     improvement compared to the efficiency of the unit as 
     operated, of not less than--
       (A) 7 percent for coal of more than 9,000 Btu;
       (B) 6 percent for coal of 7,000 to 9,000 Btu; or
       (C) 4 percent for coal of less than 7,000 Btu.
       (e) Permitted Uses.--In allocating funds made available in 
     this section, the Secretary may allocate funds to projects 
     that include, as part of the project, the separation and 
     capture of carbon dioxide.
       (f) Consultation.--Before setting the technical milestones 
     under subsections (b) and (c), the Secretary shall consult 
     with the Administrator of the Environmental Protection Agency 
     and interested entities, including coal producers, industries 
     using coal, organizations to promote coal or advanced coal 
     technologies, environmental organizations, and organizations 
     representing workers.
       (g) Financial Criteria.--The Secretary shall not provide a 
     funding award under this title unless the recipient has 
     documented to the satisfaction of the Secretary that--
       (1) the award recipient is financially viable without the 
     receipt of additional Federal funding;
       (2) the recipient will provide sufficient information to 
     the Secretary for the Secretary to ensure that the award 
     funds are spent efficiently and effectively; and
       (3) a market exists for the technology being demonstrated 
     or applied, as evidenced by statements of interest in writing 
     from potential purchasers of the technology.
       (h) Financial Assistance.--The Secretary shall provide 
     financial assistance to projects that meet the requirements 
     of this section and are likely to--
       (1) achieve overall cost reductions in the utilization of 
     coal to generate useful forms of energy;
       (2) improve the competitiveness of coal among various forms 
     of energy; and
       (3) demonstrate methods and equipment that are applicable 
     to 25 percent of the electricity generating facilities that 
     use coal as the primary feedstock as of the date of the 
     enactment of this Act.
       (i) Federal Share.--The Federal share of the cost of a coal 
     or related technology project funded by the Secretary shall 
     not exceed 50 percent.
       (j) Applicability.--No technology, or level of emission 
     reduction, shall be treated as adequately demonstrated for 
     purposes of section 111 of the Clean Air Act, achievable for 
     purposes of section 169 of that Act, or achievable in 
     practice for purposes of section 171 of that Act solely by 
     reason of the use of such technology, or the achievement of 
     such emission reduction, by one or more facilities receiving 
     assistance under this title.

     SEC. 203. REPORTS.

       (a) Ten-Year Plan.--By September 30, 2004, the Secretary 
     shall transmit to Congress a report, with respect to section 
     202(a), a 10-year plan containing--
       (1) a detailed assessment of whether the aggregate funding 
     levels provided under section 201 are appropriate funding 
     levels for that program;
       (2) a detailed description of how proposals will be 
     solicited and evaluated, including a list of all activities 
     expected to be undertaken;
       (3) a detailed list of technical milestones for each coal 
     and related technology that will be pursued; and

[[Page S10353]]

       (4) a detailed description of how the program will avoid 
     problems enumerated in General Accounting Office reports on 
     the Clean Coal Technology Program, including problems that 
     have resulted in unspent funds and projects that failed 
     either financially or scientifically.
       (b) Technical Milestones.--Not later than 1 year after the 
     date of the enactment of this Act, and once every 2 years 
     thereafter through 2011, the Secretary, in consultation with 
     other appropriate Federal agencies, shall transmit to the 
     Congress, a report describing--
       (1) the technical milestones set forth in section 212 and 
     how those milestones ensure progress toward meeting the 
     requirements of subsections (b) and (c) of section 212; and
       (2) the status of projects funded under this title.

     SEC. 204. CLEAN COAL CENTERS OF EXCELLENCE.

       As part of the program authorized in section 211, the 
     Secretary shall award competitive, merit-based grants to 
     universities for the establishment of Centers of Excellence 
     for Energy Systems of the Future. The Secretary shall provide 
     grants to universities that can show the greatest potential 
     for advancing new clean coal technologies.

                    Subtitle B--Federal Coal Leases

     SEC. 211. REPEAL OF THE 160-ACRE LIMITATION FOR COAL LEASES.

       Section 3 of the Mineral Leasing Act (30 U.S.C. 203) is 
     amended by striking all the text in the first sentence after 
     ``upon'' and inserting the following: ``a finding by the 
     Secretary that it (1) would be in the interest of the United 
     States, (2) would not displace a competitive interest in the 
     lands, and (3) would not include lands or deposits that can 
     be developed as part of another potential or existing 
     operation, secure modifications of the original coal lease by 
     including additional coal lands or coal deposits contiguous 
     or cornering to those embraced in such lease, but in no event 
     shall the total area added by such modifications to an 
     existing coal lease exceed 320 acres, or add acreage larger 
     than that in the original lease.''.

     SEC. 212. MINING PLANS.

       Section 2(d)(2) of the Mineral Leasing Act (30 U.S.C. 
     202a(2)) is amended--
       (1) by inserting ``(A)'' after ``(2)''; and
       (2) by adding at the end the following:
       ``(B) The Secretary may establish a period of more than 
     forty years if the Secretary determines that the longer 
     period will ensure the maximum economic recovery of a coal 
     deposit, or the longer period is in the interest of the 
     orderly, efficient, or economic development of a coal 
     resource.''.

     SEC. 213. PAYMENT OF ADVANCE ROYALTIES UNDER COAL LEASES.

       Section 7(b) of the Mineral Leasing Act of 1920 (30 U.S.C. 
     207(b)) is amended by striking all after ``Secretary).'' 
     through to ``a lease.'' and inserting: ``The aggregate number 
     of years during the period of any lease for which advance 
     royalties may be accepted in lieu of the condition of 
     continued operation shall not exceed twenty. The amount of 
     any production royalty paid for any year shall be reduced 
     (but not below 0) by the amount of any advance royalties paid 
     under such lease to the extent that such advance royalties 
     have not been used to reduce production royalties for a prior 
     year.''.

     SEC. 214. ELIMINATION OF DEADLINE FOR SUBMISSION OF COAL 
                   LEASE OPERATION AND RECLAMATION PLAN.

       Section 7(c) of the Mineral Leasing Act (30 U.S.C. 207(c)) 
     is amended by striking ``and not later than three years after 
     a lease is issued,''.

     SEC. 215. APPLICATION OF AMENDMENTS.

       The amendments made by this Act apply with respect to any 
     coal lease issued on or after the date of enactment of this 
     Act, and, with respect to any coal lease issued before the 
     date of enactment of this Act, upon the date of readjustment 
     of the lease as provided for by section 7(a) of the Mineral 
     Leasing Act, or upon request by the lessee, prior to such 
     date.

         Subtitle C--Powder River Basin Shared Mineral Estates

     SEC. 221. RESOLUTION OF FEDERAL RESOURCE DEVELOPMENT 
                   CONFLICTS IN THE POWDER RIVER BASIN.

       The Secretary of the Interior shall--
       (1) undertake a review of existing authorities to resolve 
     conflicts between the development of Federal coal and the 
     development of Federal and non-Federal coalbed methane in the 
     Powder River Basin in Wyoming and Montana; and
       (2) not later than 6 months after the enactment of this 
     Act, report to the Congress on alternatives to resolve these 
     conflicts and identification of a preferred alternative with 
     specific legislative language, if any, required to implement 
     the preferred alternative.

                        TITLE III--INDIAN ENERGY

     SEC. 301. SHORT TITLE.

       This title may be cited as the ``Indian Tribal Energy 
     Development and Self-Determination Act of 2003''.

     SEC. 302. OFFICE OF INDIAN ENERGY POLICY AND PROGRAMS.

       (a) In General.--Title II of the Department of Energy 
     Organization Act (42 U.S.C. 7131 et seq.) is amended by 
     adding at the end the following:


             ``OFFICE OF INDIAN ENERGY POLICY AND PROGRAMS

       ``Sec. 217. (a) Establishment.--There is established within 
     the Department an Office of Indian Energy Policy and Programs 
     (referred to in this section as the `Office'). The Office 
     shall be headed by a Director, who shall be appointed by the 
     Secretary and compensated at a rate equal to that of level IV 
     of the Executive Schedule under section 5315 of title 5, 
     United States Code.
       ``(b) Duties of Director.--The Director shall in accordance 
     with Federal policies promoting Indian self-determination and 
     the purposes of this Act, provide, direct, foster, 
     coordinate, and implement energy planning, education, 
     management, conservation, and delivery programs of the 
     Department that--
       ``(1) promote Indian tribal energy development, efficiency, 
     and use;
       ``(2) reduce or stabilize energy costs;
       ``(3) enhance and strengthen Indian tribal energy and 
     economic infrastructure relating to natural resource 
     development and electrification; and
       ``(4) electrify Indian tribal land and the homes of tribal 
     members.


                ``COMPREHENSIVE INDIAN ENERGY ACTIVITIES

       ``Sec. 218. (a) Indian Energy Education Planning and 
     Management Assistance.--
       ``(1) The Director shall establish programs within the 
     Office of Indian Energy Policy and Programs to assist Indian 
     tribes in meeting energy education, research and development, 
     planning, and management needs.
       ``(2) In carrying out this section, the Director may 
     provide grants, on a competitive basis, to an Indian tribe or 
     tribal consortium for use in carrying out--
       ``(A) energy, energy efficiency, and energy conservation 
     programs;
       ``(B) studies and other activities supporting tribal 
     acquisition of energy supplies, services, and facilities;
       ``(C) planning, construction, development, operation, 
     maintenance, and improvement of tribal electrical generation, 
     transmission, and distribution facilities located on Indian 
     land; and
       ``(D) development, construction, and interconnection of 
     electric power transmission facilities located on Indian land 
     with other electric transmission facilities.
       ``(3)(A) The Director may develop, in consultation with 
     Indian tribes, a formula for providing grants under this 
     section.
       ``(B) In providing a grant under this subsection, the 
     Director shall give priority to an application received from 
     an Indian tribe with inadequate electric service (as 
     determined by the Director).
       ``(4) The Secretary may promulgate such regulations as the 
     Secretary determines are necessary to carry out this 
     subsection.
       ``(5) There is authorized to be appropriated to carry out 
     this section $20,000,000 for each of fiscal years 2004 
     through 2011.
       ``(b) Loan Guarantee Program.--
       ``(1) Subject to paragraph (3), the Secretary may provide 
     loan guarantees (as defined in section 502 of the Federal 
     Credit Reform Act of 1990 (2 U.S.C. 661a)) for not more than 
     90 percent of the unpaid principal and interest due on any 
     loan made to any Indian tribe for energy development.
       ``(2) A loan guaranteed under this subsection shall be made 
     by--
       ``(A) a financial institution subject to examination by the 
     Secretary; or
       ``(B) an Indian tribe, from funds of the Indian tribe.
       ``(3) The aggregate outstanding amount guaranteed by the 
     Secretary at any time under this subsection shall not exceed 
     $2,000,000,000.
       ``(4) The Secretary may promulgate such regulations as the 
     Secretary determines are necessary to carry out this 
     subsection.
       ``(5) There are authorized to be appropriated such sums as 
     are necessary to carry out this subsection, to remain 
     available until expended.
       ``(6) Not later than 1 year from the date of enactment of 
     this section, the Secretary shall report to the Congress on 
     the financing requirements of Indian tribes for energy 
     development on Indian land.
       ``(c) Indian Energy Preference.--
       ``(1) In purchasing electricity or any other energy product 
     or byproduct, a Federal agency or department may give 
     preference to an energy and resource production enterprise, 
     partnership, consortium, corporation, or other type of 
     business organization the majority of the interest in which 
     is owned and controlled by 1 or more Indian tribes.
       ``(2) In carrying out this subsection, a Federal agency or 
     department shall not--
       ``(A) pay more than the prevailing market price for an 
     energy product or byproduct; and
       ``(B) obtain less than prevailing market terms and 
     conditions.''.
       (b) Conforming Amendments.--
       (1) The table of contents of the Department of Energy 
     Organization Act (42 U.S.C. prec. 7101) is amended--
       (A) in the item relating to section 209, by striking 
     ``Section'' and inserting ``Sec.''; and
       (B) by striking the items relating to sections 213 through 
     216 and inserting the following:

``Sec. 213. Establishment of policy for National Nuclear Security 
              Administration.
``Sec. 214. Establishment of security, counterintelligence, and 
              intelligence policies.
``Sec. 215. Office of Counterintelligence.
``Sec. 216. Office of Intelligence.
``Sec. 217. Office of Indian Energy Policy and Programs.
``Sec. 218. Comprehensive Indian Energy Activities.''.
       (2) Section 5315 of title 5, United States Code, is amended 
     by inserting ``Director, Office of Indian Energy Policy and 
     Programs,

[[Page S10354]]

     Department of Energy.'' after ``Inspector General, Department 
     of Energy.''.

     SEC. 303. INDIAN ENERGY.

       Title XXVI of the Energy Policy Act of 1992 (25 U.S.C. 3501 
     et seq.) is amended to read as follows:

                      ``TITLE XXVI--INDIAN ENERGY

     ``SEC. 2601. DEFINITIONS.

       ``For purposes of this title:
       ``(1) The term `Director' means the Director of the Office 
     of Indian Energy Policy and Programs.
       ``(2) The term `Indian land' means--
       ``(A) any land located within the boundaries of an Indian 
     reservation, pueblo, or rancheria;
       ``(B) any land not located within the boundaries of an 
     Indian reservation, pueblo, or rancheria, the title to which 
     is held--
       ``(i) in trust by the United States for the benefit of an 
     Indian tribe;
       ``(ii) by an Indian tribe, subject to restriction by the 
     United States against alienation; or
       ``(iii) by a dependent Indian community; and
       ``(C) land conveyed to a Native Corporation under the 
     Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.).
       ``(3) The term `Indian reservation' includes--
       ``(A) an Indian reservation in existence in any State or 
     States as of the date of enactment of this paragraph;
       ``(B) a public domain Indian allotment;
       ``(C) a former reservation in the State of Oklahoma;
       ``(D) a parcel of land owned by a Native Corporation under 
     the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et 
     seq.); and
       ``(E) a dependent Indian community located within the 
     borders of the United States,
       regardless of whether the community is located--
       ``(i) on original or acquired territory of the community; 
     or
       ``(ii) within or outside the boundaries of any particular 
     State.
       ``(4) The term `Indian tribe' has the meaning given the 
     term in section 4 of the Indian Self-Determination and 
     Education Assistance Act (25 U.S.C. 450b).
       ``(5) The term `Native Corporation' has the meaning given 
     the term in section 3 of the Alaska Native Claims Settlement 
     Act (43 U.S.C. 1602).
       ``(6) The term `organization' means a partnership, joint 
     venture, limited liability company, or other unincorporated 
     association or entity that is established to develop Indian 
     energy resources.
       ``(7) The term `Program' means the Indian energy resource 
     development program established under section 2602(a).
       ``(8) The term `Secretary' means the Secretary of the 
     Interior.
       ``(9) The term `tribal consortium' means an organization 
     that consists of 2 or more entities, at least 1 of which is 
     an Indian tribe.
       ``(10) The term `tribal land' means any land or interests 
     in land owned by any Indian tribe, band, nation, pueblo, 
     community, rancheria, colony or other group, title to which 
     is held in trust by the United States or which is subject to 
     a restriction against alienation imposed by the United 
     States.
       ``(11) The term `vertical integration of energy resources' 
     means any project or activity that promotes the location and 
     operation of a facility (including any pipeline, gathering 
     system, transportation system or facility, or electric 
     transmission facility), on or near Indian land to process, 
     refine, generate electricity from, or otherwise develop 
     energy resources on, Indian land.

     ``SEC. 2602. INDIAN TRIBAL ENERGY RESOURCE DEVELOPMENT.

       ``(a) In General.--To assist Indian tribes in the 
     development of energy resources and further the goal of 
     Indian self-determination, the Secretary shall establish and 
     implement an Indian energy resource development program to 
     assist Indian tribes and tribal consortia in achieving the 
     purposes of this title.
       ``(b) Grants and Loans.--In carrying out the Program, the 
     Secretary shall
       ``(1) provide development grants to Indian tribes and 
     tribal consortia for use in developing or obtaining the 
     managerial and technical capacity needed to develop energy 
     resources on Indian land;
       ``(2) provide grants to Indian tribes and tribal consortia 
     for use in carrying out projects to promote the vertical 
     integration of energy resources, and to process, use, or 
     develop those energy resources, on Indian land; and
       ``(3) provide low-interest loans to Indian tribes and 
     tribal consortia for use in the promotion of energy resource 
     development and vertical integration or energy resources on 
     Indian land.
       ``(c) Authorization of Appropriations.--There are 
     authorized to be appropriated to carry out this section such 
     sums as are necessary for each of fiscal years 2004 through 
     2014.

     ``SEC. 2603. INDIAN TRIBAL ENERGY RESOURCE REGULATION.

       ``(a) Grants.--The Secretary may provide to Indian tribes 
     and tribal consortia, on an annual basis, grants for use in 
     developing, administering, implementing, and enforcing tribal 
     laws (including regulations) governing the development and 
     management of energy resources on Indian land.
       ``(b) Use of Funds.--Funds from a grant provided under this 
     section may be used by an Indian tribe or tribal consortium 
     for--
       ``(1) the development of a tribal energy resource inventory 
     or tribal energy resource on Indian land;
       ``(2) the development of a feasibility study or other 
     report necessary to the development of energy resources on 
     Indian land;
       ``(3) the development and enforcement of tribal laws and 
     the development of technical infrastructure to protect the 
     environment under applicable law; or
       ``(4) the training of employees that--
       ``(A) are engaged in the development of energy resources on 
     Indian land; or
       ``(B) are responsible for protecting the environment.
       ``(c) Other Assistance.--To the maximum extent practicable, 
     the Secretary and the Secretary of Energy shall make 
     available to Indian tribes and tribal consortia scientific 
     and technical data for use in the development and management 
     of energy resources on Indian land.

     ``SEC. 2604. LEASES, BUSINESS AGREEMENTS, AND RIGHTS-OF-WAY 
                   INVOLVING ENERGY DEVELOPMENT OR TRANSMISSION.

       ``(a) Leases and Agreements.--Subject to the provisions of 
     this section--
       ``(1) an Indian tribe may, at its discretion, enter into a 
     lease or business agreement for the purpose of energy 
     development, including a lease or business agreement for--
       ``(A) exploration for, extraction of, processing of, or 
     other development of energy resources on tribal land; and
       ``(B) construction or operation of an electric generation, 
     transmission, or distribution facility located on tribal 
     land; or a facility to process or refine energy resources 
     developed on tribal land; and
       ``(2) a lease or business agreement described in paragraph 
     (1) shall not require the approval of the Secretary under 
     section 2103 of the Revised Statutes (25 U.S.C. 81) or any 
     other provision of law, if--
       ``(A) the lease or business agreement is executed in 
     accordance with a tribal energy resource agreement approved 
     by the Secretary under subsection (e);
       ``(B) the term of the lease or business agreement does not 
     exceed--
       ``(i) 30 years; or
       ``(ii) in the case of a lease for the production of oil and 
     gas resources, 10 years and as long thereafter as oil or gas 
     is produced in paying quantities; and
       ``(C) the Indian tribe has entered into a tribal energy 
     resource agreement with the Secretary, as described in 
     subsection (e), relating to the development of energy 
     resources on tribal land (including an annual trust asset 
     evaluation of the activities of the Indian tribe conducted in 
     accordance with the agreement).
       ``(b) Rights-of-Way for Pipelines or Electric Transmission 
     or Distribution Lines.--An Indian tribe may grant a right-of-
     way over tribal land for a pipeline or an electric 
     transmission or distribution line without specific approval 
     by the Secretary if--
       ``(1) the right-of-way is executed in accordance with a 
     tribal energy resource agreement approved by the Secretary 
     under subsection (e);
       ``(2) the term of the right-of-way does not exceed 30 
     years;
       ``(3) the pipeline or electric transmission or distribution 
     line serves--
       ``(A) an electric generation, transmission, or distribution 
     facility located on tribal land; or
       ``(B) a facility located on tribal land that processes or 
     refines energy resources developed on tribal land; and
       ``(4) the Indian tribe has entered into a tribal energy 
     resource agreement with the Secretary, as described in 
     subsection (e), relating to the development of energy 
     resources on tribal land (including an annual trust asset 
     evaluation of the activities of the Indian tribe conducted in 
     accordance with the agreement).
       ``(c) Renewals.--A lease or business agreement entered into 
     or a right-of-way granted by an Indian tribe under this 
     section may be renewed at the discretion of the Indian tribe 
     in accordance with this section.
       ``(d) Validity.--No lease, business agreement, or right-of-
     way under this section shall be valid unless the lease, 
     business agreement, or right-of-way is authorized in 
     accordance with tribal energy resource agreements approved by 
     the Secretary under subsection (e).
       ``(e) Tribal Energy Resource Agreements.--
       ``(1) On promulgation of regulations under paragraph (9), 
     an Indian tribe may submit to the Secretary for approval a 
     tribal energy resource agreement governing leases, business 
     agreements, and rights-of-way under this section.
       ``(2)(A) Not later than 180 days after the date on which 
     the Secretary receives a tribal energy resource agreement 
     submitted by an Indian tribe under paragraph (1) (or such 
     later date as may be agreed to by the Secretary and the 
     Indian tribe), the Secretary shall approve or disapprove the 
     tribal energy resource agreement.
       ``(B) The Secretary shall approve a tribal energy resource 
     agreement submitted under paragraph (1) if--
       ``(i) the Secretary determines that the Indian tribe has 
     demonstrated that the Indian tribe has sufficient capacity to 
     regulate the development of energy resources of the Indian 
     tribe; and
       ``(ii) the tribal energy resource agreement includes 
     provisions that, with respect to a

[[Page S10355]]

     lease, business agreement, or right-of-way under this 
     section--
       ``(I) ensure the acquisition of necessary information from 
     the applicant for the lease, business agreement, or right-of-
     way;
       ``(II) address the term of the lease or business agreement 
     or the term of conveyance of the right-of-way;
       ``(III) address amendments and renewals;
       ``(IV) address consideration for the lease, business 
     agreement, or right-of-way;
       ``(V) address technical or other relevant requirements;
       ``(VI) establish requirements for environmental review in 
     accordance with subparagraph (C);
       ``(VII) ensure compliance with all applicable environmental 
     laws;
       ``(VIII) identify final approval authority;
       ``(IX) provide for public notification of final approvals;
       ``(X) establish a process for consultation with any 
     affected States concerning potential off-reservation impacts 
     associated with the lease, business agreement, or right-of-
     way; and
       ``(XI) describe the remedies for breach of the lease, 
     agreement, or right-of-way.
       ``(C) Tribal energy resource agreements submitted under 
     paragraph (1) shall establish, and include provisions to 
     ensure compliance with, an environmental review process that, 
     with respect to a lease, business agreement, or right-of-way 
     under this section, provides for--
       ``(i) the identification and evaluation of all significant 
     environmental impacts (as compared with a no-action 
     alternative), including effects on cultural resources;
       ``(ii) the identification of proposed mitigation;
       ``(iii) a process for ensuring that the public is informed 
     of and has an opportunity to comment on any proposed lease, 
     business agreement, or right-of-way before tribal approval of 
     the lease, business agreement, or right-of-way (or any 
     amendment to or renewal of the lease, business agreement, or 
     right-of-way); and
       ``(iv) sufficient administrative support and technical 
     capability to carry out the environmental review process.
       ``(D) A tribal energy resource agreement negotiated between 
     the Secretary and an Indian tribe in accordance with this 
     subsection shall include--
       ``(i) provisions requiring the Secretary to conduct an 
     annual trust asset evaluation to monitor the performance of 
     the activities of the Indian tribe associated with the 
     development of energy resources on tribal land by the Indian 
     tribe; and
       ``(ii) in the case of a finding by the Secretary of 
     imminent jeopardy to a physical trust asset, provisions 
     authorizing the Secretary to reassume responsibility for 
     activities associated with the development of energy 
     resources on tribal land.
       ``(3) The Secretary shall provide notice and opportunity 
     for public comment on tribal energy resource agreements 
     submitted under paragraph (1).
       ``(4) If the Secretary disapproves a tribal energy resource 
     agreement submitted by an Indian tribe under paragraph (1), 
     the Secretary shall--
       ``(A) notify the Indian tribe in writing of the basis for 
     the disapproval;
       ``(B) identify what changes or other actions are required 
     to address the concerns of the Secretary; and
       ``(C) provide the Indian tribe with an opportunity to 
     revise and resubmit the tribal energy resource agreement.
       ``(5) If an Indian tribe executes a lease or business 
     agreement or grants a right-of-way in accordance with a 
     tribal energy resource agreement approved under this 
     subsection, the Indian tribe shall, in accordance with the 
     process and requirements set forth in the Secretary's 
     regulations adopted pursuant to subsection (e)(9), provide to 
     the Secretary--
       ``(A) a copy of the lease, business agreement, or right-of-
     way document (including all amendments to and renewals of the 
     document); and
       ``(B) in the case of a tribal energy resource agreement or 
     a lease, business agreement, or right-of-way that permits 
     payment to be made directly to the Indian tribe, 
     documentation of those payments sufficient to enable the 
     Secretary to discharge the trust responsibility of the United 
     States as appropriate under applicable law.
       ``(6) The Secretary shall continue to have a trust 
     obligation to ensure that the rights of an Indian tribe are 
     protected in the event of a violation of the terms of any 
     lease, business agreement or right-of-way by any other party 
     to the lease, business agreement, or right-of-way.
       ``(7)(A) The United States shall not be liable for any loss 
     or injury sustained by any party (including an Indian tribe 
     or any member of an Indian tribe) to a lease, business 
     agreement, or right-of-way executed in accordance with tribal 
     energy resource agreements approved under this subsection.
       ``(B) On approval of a tribal energy resource agreement of 
     an Indian tribe under paragraph (1), the Indian tribe shall 
     be stopped from asserting a claim against the United States 
     on the grounds that the Secretary should not have approved 
     the Tribal energy resource agreement.
       ``(8)(A) In this paragraph, the term `interested party' 
     means any person or entity the interests of which have 
     sustained or will sustain a significant adverse impact as a 
     result of the failure of an Indian tribe to comply with a 
     tribal energy resource agreement of the Indian tribe approved 
     by the Secretary under paragraph (2).
       ``(B) After exhaustion of tribal remedies, and in 
     accordance with the process and requirements set forth in 
     regulations adopted by the Secretary pursuant to subsection 
     (e)(9), an interested party may submit to the Secretary a 
     petition to review compliance of an Indian tribe with a 
     tribal energy resource agreement of the Indian tribe approved 
     under this subsection.
       ``(C) If the Secretary determines that an Indian tribe is 
     not in compliance with a tribal energy resource agreement 
     approved under this subsection, the Secretary shall take such 
     action as is necessary to compel compliance, including--
       ``(i) suspending a lease, business agreement, or right-of-
     way under this section until an Indian tribe is in compliance 
     with the approved tribal energy resource agreement; and
       ``(ii) rescinding approval of the tribal energy resource 
     agreement and reassuming the responsibility for approval of 
     any future leases, business agreements, or rights-of-way 
     associated with an energy pipeline or distribution line 
     described in subsections (a) and (b).
       ``(D) If the Secretary seeks to compel compliance of an 
     Indian tribe with an approved tribal energy resource 
     agreement under subparagraph (C)(ii), the Secretary shall--
       ``(i) make a written determination that describes the 
     manner in which the tribal energy resource agreement has been 
     violated;
       ``(ii) provide the Indian tribe with a written notice of 
     the violation together with the written determination; and
       ``(iii) before taking any action described in subparagraph 
     (C)(ii) or seeking any other remedy, provide the Indian tribe 
     with a hearing and a reasonable opportunity to attain 
     compliance with the tribal energy resource agreement.
       ``(E)(i) An Indian tribe described in subparagraph (D) 
     shall retain all rights to appeal as provided in regulations 
     promulgated by the Secretary.
       ``(ii) The decision of the Secretary with respect to an 
     appeal described in clause (i), after any agency appeal 
     provided for by regulation, shall constitute a final agency 
     action.
       ``(9) Not later than 180 days after the date of enactment 
     of the Indian Tribal Energy Development and Self-
     Determination Act of 2003, the Secretary shall promulgate 
     regulations that implement the provisions of this subsection, 
     including--
       ``(A) criteria to be used in determining the capacity of an 
     Indian tribe described in paragraph (2)(B)(i), including the 
     experience of the Indian tribe in managing natural resources 
     and financial and administrative resources available for use 
     by the Indian tribe in implementing the approved tribal 
     energy resource agreement of the Indian tribe; and
       ``(B) a process and requirements in accordance with which 
     an Indian tribe may--
       ``(i) voluntarily rescind an approved tribal energy 
     resource agreement approved by the Secretary under this 
     subsection; and
       ``(ii) return to the Secretary the responsibility to 
     approve any future leases, business agreements, and rights-
     of-way described in this subsection.
       ``(f) No Effect on Other Law.--Nothing in this section 
     affects the application of--
       ``(1) any Federal environmental law;
       ``(2) the Surface Mining Control and Reclamation Act of 
     1977 (30 U.S.C. 1201 et seq.); or
       ``(3) except as otherwise provided in this title, the 
     Indian Mineral Development Act of 1982 (25 U.S.C. 2101 et 
     seq.).

     ``SEC. 2605. FEDERAL POWER MARKETING ADMINISTRATIONS.

       ``(a) Definitions.--In this section:
       ``(1) The term `Administrator' means the Administrator of 
     the Bonneville Power Administration and the Administrator of 
     the Western Area Power Administration.
       ``(2) The term `power marketing administration' means
       ``(A) the Bonneville Power Administration;
       ``(B) the Western Area Power Administration; and
       ``(C) any other power administration the power allocation 
     of which is used by or for the benefit of an Indian tribe 
     located in the service area of the administration.
       ``(b) Encouragement of Indian Tribal Energy Development.--
     Each Administrator shall encourage Indian tribal energy 
     development by taking such actions as are appropriate, 
     including administration of programs of the Bonneville Power 
     Administration and the Western Area Power Administration, in 
     accordance with this section.
       ``(c) Action by the Administrator.--In carrying out this 
     section, and in accordance with existing law--
       ``(1) each Administrator shall consider the unique 
     relationship that exists between the United States and Indian 
     tribes;
       ``(2) power allocations from the Western Area Power 
     Administration to Indian tribes may be used to meet firming 
     and reserve needs of Indian-owned energy projects on Indian 
     land;
       ``(3) the Administrator of the Western Area Power 
     Administration may purchase power from Indian tribes to meet 
     the firming and reserve requirements of the Western Area 
     Power Administration; and
       ``(4) each Administrator shall not pay more than the 
     prevailing market price for an energy product nor obtain less 
     than prevailing market terms and conditions.
       ``(d) Assistance for Transmission System Use.--
       ``(1) An Administrator may provide technical assistance to 
     Indian tribes seeking to

[[Page S10356]]

     use the high-voltage transmission system for delivery of 
     electric power.
       ``(2) The costs of technical assistance provided under 
     paragraph (1) shall be funded by the Secretary of Energy 
     using nonreimbursable funds appropriated for that purpose, or 
     by the applicable Indian tribes.
       ``(e) Power Allocation Study.--Not later than 2 years after 
     the date of enactment of the Indian Tribal Energy Development 
     and Self-Determination Act of 2003, the Secretary of Energy 
     shall submit to the Congress a report that--
       ``(1) describes the use by Indian tribes of Federal power 
     allocations of the Western Area Power Administration (or 
     power sold by the Southwestern Power Administration) and the 
     Bonneville Power Administration to or for the benefit of 
     Indian tribes in service areas of those administrations; and
       ``(2) identifies--
       ``(A) the quantity of power allocated to Indian tribes by 
     the Western Area Power Administration;
       ``(B) the quantity of power sold to Indian tribes by other 
     power marketing administrations; and
       ``(C) barriers that impede tribal access to and use of 
     Federal power, including an assessment of opportunities to 
     remove those barriers and improve the ability of power 
     marketing administrations to facilitate the use of Federal 
     power by Indian tribes.
       ``(f) Authorization of Appropriations.--There is authorized 
     to be appropriated to carry out this section $750,000, which 
     shall remain available until expended and shall not be 
     reimbursable.

     ``SEC. 2606. INDIAN MINERAL DEVELOPMENT REVIEW.

       ``(a) In General.--The Secretary shall conduct a review of 
     all activities being conducted under the Indian Mineral 
     Development Act of 1982 (25 U.S.C. 2101 et seq.) as of that 
     date.
       ``(b) Report.--Not later than 1 year after the date of 
     enactment of the Indian Tribal Energy Development and Self-
     Determination Act of 2003, the Secretary shall submit to the 
     Congress a report that includes--
       ``(1) the results of the review;
       ``(2) recommendations to ensure that Indian tribes have the 
     opportunity to develop Indian energy resources; and
       ``(3) an analysis of the barriers to the development of 
     energy resources on Indian land (including legal, fiscal, 
     market, and other barriers), along with recommendations for 
     the removal of those barriers.

     ``SEC. 2607. WIND AND HYDROPOWER FEASIBILITY STUDY.

       ``(a) Study.--The Secretary, in coordination with the 
     Secretary of the Army and the Secretary of the Interior, 
     shall conduct a study of the cost and feasibility of 
     developing a demonstration project that would use wind energy 
     generated by Indian tribes and hydropower generated by the 
     Army Corps of Engineers on the Missouri River to supply 
     firming power to the Western Area Power Administration.
       ``(b) Scope of Study.--The study shall--
       ``(1) determine the feasibility of the blending of wind 
     energy and hydropower generated from the Missouri River dams 
     operated by the Army Corps of Engineers;
       ``(2) review historical purchase requirements and projected 
     purchase requirements for firming and the patterns of 
     availability and use of firming energy;
       ``(3) assess the wind energy resource potential on tribal 
     land and projected cost savings through a blend of wind and 
     hydropower over a 30-year period;
       ``(4) determine seasonal capacity needs and associated 
     transmission upgrades for integration of tribal wind 
     generation; and
       ``(5) include an independent tribal engineer as a study 
     team member.
       ``(c) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary and Secretary of the 
     Army shall submit to Congress a report that describes the 
     results of the study, including--
       ``(1) an analysis of the potential energy cost or benefits 
     to the customers of the Western Area Power Administration 
     through the blend of wind and hydropower;
       ``(2) an evaluation of whether a combined wind and 
     hydropower system can reduce reservoir fluctuation, enhance 
     efficient and reliable energy production, and provide 
     Missouri River management flexibility;
       ``(3) recommendations for a demonstration project that 
     could be carried out by the Western Area Power Administration 
     in partnership with an Indian tribal government or tribal 
     consortium to demonstrate the feasibility and potential of 
     using wind energy produced on Indian land to supply firming 
     energy to the Western Area Power Administration or any other 
     Federal power marketing agency; and
       ``(4) an identification of--
       ``(A) the economic and environmental costs or benefits to 
     be realized through such a Federal-tribal partnership; and
       ``(B) the manner in which such a partnership could 
     contribute to the energy security of the United States.
       ``(d) Funding.--
       ``(1) There is authorized to be appropriated to carry out 
     this section $500,000, to remain available until expended.
       ``(2) Costs incurred by the Secretary in carrying out this 
     section shall be nonreimbursable.''.

     SEC. 304. FOUR CORNERS TRANSMISSION LINE PROJECT.

       The Dine Power Authority, an enterprise of the Navajo 
     Nation, shall be eligible to receive grants and other 
     assistance as authorized by section 302 of this title and 
     section 2602 of the Energy Policy Act of 1992, as amended by 
     this title, for activities associated with the development of 
     a transmission line from the Four Corners Area to southern 
     Nevada, including related power generation opportunities.

     SEC. 305. ENERGY EFFICIENCY IN FEDERALLY ASSISTED HOUSING.

       (a) In General.--The Secretary of Housing and Urban 
     Development shall promote energy conservation in housing that 
     is located on Indian land and assisted with Federal resources 
     through--
       (1) the use of energy-efficient technologies and 
     innovations (including the procurement of energy-efficient 
     refrigerators and other appliances);
       (2) the promotion of shared savings contracts; and
       (3) the use and implementation of such other similar 
     technologies and innovations as the Secretary of Housing and 
     Urban Development considers to be appropriate.
       (b) Amendment.--Section 202(2) of the Native American 
     Housing and Self-Determination Act of 1996 (25 U.S.C. 
     4132(2)) is amended by inserting `improvement to achieve 
     greater energy efficiency,' after `planning,'.

     SEC. 306. CONSULTATION WITH INDIAN TRIBES.

       In carrying out this Act and the amendments made by this 
     Act, the Secretary of Energy and the Secretary shall, as 
     appropriate and to the maximum extent practicable, involve 
     and consult with Indian tribes in a manner that is consistent 
     with the Federal trust and the government-to-government 
     relationships between Indian tribes and the United States.

                       TITLE IV--NUCLEAR MATTERS

               Subtitle A--Price-Anderson Act Amendments

     SEC. 401. SHORT TITLE.

       This subtitle may be cited as the ``Price-Anderson 
     Amendments Act of 2003''.

     SEC. 402. EXTENSION OF INDEMNIFICATION AUTHORITY.

       (a) Indemnification of Nuclear Regulatory Commission 
     Licensees.--Section 170c. of the Atomic Energy Act of 1954 
     (42 U.S.C. 2210(c)) is amended--
       (1) in the subsection heading, by striking ``Licenses'' and 
     inserting ``Licensees'';
       (2) by striking ``licenses issued between August 30, 1954, 
     and December 31, 2003'' and inserting ``licenses issued after 
     August 30, 1954''; and
       (3) by striking ``With respect to any production or 
     utilization facility for which a construction permit is 
     issued between August 30, 1954, and December 31, 2003, the 
     requirements of this subsection shall apply to any license 
     issued for such facility subsequent to December 31, 2003.''
       (b) Indemnification of Department of Energy Contractors.--
     Section 170d.(1)(A) of the Atomic Energy Act of 1954 (42 
     U.S.C. 2210(d)(1)(A)) is amended by striking ``, until 
     December 31, 2004,''.
       (c) Indemnification of Nonprofit Educational 
     Institutions.--Section 170k. of the Atomic Energy Act of 1954 
     (42 U.S.C. 2210(k)) is amended--
       (1) by striking ``licenses issued between August 30, 1954, 
     and August 1, 2002'' and replacing it with ``licenses issued 
     after August 30, 1954''; and
       (2) by striking ``With respect to any production or 
     utilization facility for which a construction permit is 
     issued between August 30, 1954, and August 1, 2002, the 
     requirements of this subsection shall apply to any license 
     issued for such facility subsequent to August 1, 2002.''

     SEC. 403. MAXIMUM ASSESSMENT.

       Section 170 of the Atomic Energy Act of 1954 (42 U.S.C. 
     2210) is amended--
       (1) in the second proviso of the third sentence of 
     subsection b.(1)--
       (A) by striking ``$63,000,000'' and inserting 
     ``$94,000,000''; and
       (B) by striking ``$10,000,000 in any 1 year'' and inserting 
     ``$15,000,000 in any 1 year (subject to adjustment for 
     inflation under subsection t.)''; and
       (2) in subsection t.(1)--
       (A) by inserting ``total and annual'' after ``amount of the 
     maximum'';
       (B) by striking ``the date of the enactment of the Price-
     Anderson Amendments Act of 1988'' and inserting ``July 1, 
     2003''; and
       (C) by striking ``such date of enactment'' and inserting 
     ``July 1, 2003''.

     SEC. 404. DEPARTMENT OF ENERGY LIABILITY LIMIT.

       (a) Indemnification of Department of Energy Contractors.--
     Section 170d. of the Atomic Energy Act of 1954 (42 U.S.C. 
     2210(d)) is amended by striking paragraph (2) and inserting 
     the following:
       ``(2) In an agreement of indemnification entered into under 
     paragraph (1), the Secretary--
       ``(A) may require the contractor to provide and maintain 
     financial protection of such a type and in such amounts as 
     the Secretary shall determine to be appropriate to cover 
     public liability arising out of or in connection with the 
     contractual activity; and
       ``(B) shall indemnify the persons indemnified against such 
     liability above the amount of the financial protection 
     required, in the amount of $10,000,000,000 (subject to 
     adjustment for inflation under subsection t.), in the 
     aggregate, for all persons indemnified in connection with the 
     contract and for each nuclear incident, including such legal 
     costs

[[Page S10357]]

     of the contractor as are approved by the Secretary.''.
       (b) Contract Amendments.--Section 170d. of the Atomic 
     Energy Act of 1954 (42 U.S.C. 2210(d)) is further amended by 
     striking paragraph (3) and inserting the following--
       ``(3) All agreements of indemnification under which the 
     Department of Energy (or its predecessor agencies) may be 
     required to indemnify any person under this section shall be 
     deemed to be amended, on the date of enactment of the Price-
     Anderson Amendments Act of 2003, to reflect the amount of 
     indemnity for public liability and any applicable financial 
     protection required of the contractor under this 
     subsection.''.
       (c) Liability Limit.--Section 170e.(1)(B) of the Atomic 
     Energy Act of 1954 (42 U.S.C. 2210(e)(1)(B)) is amended by:
       (1) striking ``the maximum amount of financial protection 
     required under subsection b. or''; and
       (2) striking ``paragraph (3) of subsection d., whichever 
     amount is more'' and inserting ``paragraph (2) of subsection 
     d.''.

     SEC. 405. INCIDENTS OUTSIDE THE UNITED STATES.

       (a) Amount of Indemnification.--Section 170d.(5) of the 
     Atomic Energy Act of 1954 (42 U.S.C. 2210(d)(5)) is amended 
     by striking ``$100,000,000'' and inserting ``$500,000,000''.
       (b) Liability Limit.--Section 170e.(4) of the Atomic Energy 
     Act of 1954 (42 U.S.C. 2210(e)(4)) is amended by striking 
     ``$100,000,000'' and inserting ``$500,000,000''.

     SEC. 406. REPORTS.

       Section 170p. of the Atomic Energy Act of 1954 (42 U.S.C. 
     2210(p)) is amended by striking ``August 1, 1998'' and 
     inserting ``August 1, 2013''.

     SEC. 407. INFLATION ADJUSTMENT.

       Section 170t. of the Atomic Energy Act of 1954 (42 U.S.C. 
     2210(t)) is amended--
       (1) by redesignating paragraph (2) as paragraph (3); and
       (2) by adding after paragraph (1) the following:
       ``(2) The Secretary shall adjust the amount of 
     indemnification provided under an agreement of 
     indemnification under subsection d. not less than once during 
     each 5-year period following July 1, 2003, in accordance with 
     the aggregate percentage change in the Consumer Price Index 
     since--
       ``(A) that date, in the case of the first adjustment under 
     this paragraph; or
       ``(B) the previous adjustment under this paragraph.''.

     SEC. 408. TREATMENT OF MODULAR REACTORS.

       Section 170b. of the Atomic Energy Act of 1954 (42 U.S.C. 
     2210(b)) is amended by adding at the end the following:
       ``(5)(A) For purposes of this section only, the Commission 
     shall consider a combination of facilities described in 
     subparagraph (B) to be a single facility having a rated 
     capacity of 100,000 electrical kilowatts or more.
       ``(B) A combination of facilities referred to in 
     subparagraph (A) is 2 or more facilities located at a single 
     site, each of which has a rated capacity of 100,000 
     electrical kilowatts or more but not more than 300,000 
     electrical kilowatts, with a combined rated capacity of not 
     more than 1,300,000 electrical kilowatts.''.

     SEC. 409. APPLICABILITY.

       The amendments made by sections 403, 404, and 405 do not 
     apply to a nuclear incident that occurs before the date of 
     the enactment of this Act.

     SEC. 410. CIVIL PENALTIES.

       (a) Repeal of Automatic Remission.--Section 234Ab.(2) of 
     the Atomic Energy Act of 1954 (42 U.S.C. 2282a(b)(2)) is 
     amended by striking the last sentence.
       (b) Limitation for Not-for-Profit Institutions.--Subsection 
     d. of section 234A of the Atomic Energy Act of 1954 (42 
     U.S.C. 2282a(d)) is amended to read as follows:
       ``d.(1) Notwithstanding subsection a., in the case of any 
     not-for-profit contractor, subcontractor, or supplier, the 
     total amount of civil penalties paid under subsection a. may 
     not exceed the total amount of fees paid within any one-year 
     period (as determined by the Secretary) under the contract 
     under which the violation occurs.
       ``(2) For purposes of this section, the term ``not-for-
     profit'' means that no part of the net earnings of the 
     contractor, subcontractor, or supplier inures to the benefit 
     of any natural person or for-profit artificial person.''.
       (c) Effective Date.--The amendments made by this section 
     shall not apply to any violation of the Atomic Energy Act of 
     1954 occurring under a contract entered into before the date 
     of enactment of this section.

              Subtitle B--Deployment of New Nuclear Plants

     SEC. 421. SHORT TITLE.

       This subtitle may be cited as the ``Nuclear Energy Finance 
     Act of 2003.''

     SEC. 422. DEFINITIONS.

       For purposes of this subtitle:
       (1) The term ``advanced reactor design'' means a nuclear 
     reactor that enhances safety, efficiency, proliferation 
     resistance, or waste reduction compared to commercial nuclear 
     reactors in use in the United States on the date of enactment 
     of this Act.
       (2) The term ``eligible project costs'' means all costs 
     incurred by a project developer that are reasonably related 
     to the development and construction of a project under this 
     subtitle, including costs resulting from regulatory or 
     licensing delays.
       (3) The term ``financial assistance'' means a loan 
     guarantee, purchase agreement, or any combination of the 
     foregoing.
       (4) The term ``loan guarantee'' means any guarantee or 
     other pledge by the Secretary to pay all or part of the 
     principal and interest on a loan or other debt obligation 
     issued by a project developer and funded by a lender.
       (5) The term ``project'' means any commercial nuclear power 
     facility for the production of electricity that uses one or 
     more advanced reactor designs.
       (6) The term ``project developer'' means an individual, 
     corporation, partnership, joint venture, trust, or other 
     entity that is primarily liable for payment of a project's 
     eligible costs.
       (7) The term ``purchase agreement'' means a contract to 
     purchase the electric energy produced by a project under this 
     subtitle.
       (8) The term ``Secretary'' means the Secretary of Energy.

     SEC. 423. RESPONSIBILITIES OF THE SECRETARY.

       (a) Financial Assistance.--Subject to the requirements of 
     the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.), 
     the Secretary may, subject to appropriations, make available 
     to project developers for eligible project costs such 
     financial assistance as the Secretary determines is necessary 
     to supplement private-sector financing for projects if he 
     determines that such projects are needed to contribute to 
     energy security, fuel or technology diversity, or clean air 
     attainment goals. The Secretary shall prescribe such terms 
     and conditions for financial assistance as the Secretary 
     deems necessary or appropriate to protect the financial 
     interests of the United States.
       (b) Requirements.--Approval criteria for financial 
     assistance shall include--
       (1) the creditworthiness of the project;
       (2) the extent to which financial assistance would 
     encourage public-private partnerships and attract private-
     sector investment;
       (3) the likelihood that financial assistance would hasten 
     commencement of the project; and,
       (4) any other criteria the Secretary deems necessary or 
     appropriate.
       (c) Confidentiality.--The Secretary shall protect the 
     confidentiality of any information that is certified by a 
     project developer to be commercially sensitive.
       (d) Full Faith and Credit.--All financial assistance 
     provided by the Secretary under this subtitle shall be 
     general obligations of the United States backed by its full 
     faith and credit.

     SEC. 424. LIMITATIONS.

       (a) Financial Assistance.--The total financial assistance 
     per project provided by this subtitle shall not exceed fifty 
     percent of eligible project costs.
       (b) Generation.--The total electrical generation capacity 
     of all projects provided by this subtitle shall not exceed 
     8,400 megawatts.

     SEC. 425. REGULATIONS.

       Not later than 12 months from the date of enactment of this 
     Act, the Secretary shall issue regulations to implement this 
     subtitle.

     Subtitle C--Advanced Reactor Hydrogen Co-Generation Project ,

     SEC. 431. PROJECT ESTABLISHMENT.

       The Secretary is directed to establish an Advanced Reactor 
     Hydrogen Co-Generation Project.

     SEC. 432. PROJECT DEFINITION.

       The project shall conduct the research, development, 
     design, construction, and operation of a hydrogen production 
     co-generation testbed that, relative to the current 
     commercial reactors, enhances safety features, reduces waste 
     production, enhances thermal efficiencies, increases 
     proliferation resistance, and has the potential for improved 
     economics and physical security in reactor siting. This 
     testbed shall be constructed so as to enable research and 
     development on advanced reactors of the type selected and on 
     alternative approaches for reactor-based production of 
     hydrogen.

     SEC. 433. PROJECT MANAGEMENT.

       (a) Management.--The project shall be managed within the 
     Department by the Office of Nuclear Energy Science and 
     Technology.
       (b) Lead Laboratory.--The lead laboratory for the program, 
     providing the site for the reactor construction, shall be the 
     Idaho National Engineering and Environmental Laboratory 
     (``INEEL'').
       (c) Steering Committee.--The Secretary shall establish a 
     national steering committee with membership from the national 
     laboratories, universities, and industry to provide advice to 
     the Secretary and the Director of the Office of Nuclear 
     Energy, Science and Technology on technical and program 
     management aspects of the project.
       (d) Collaboration.--Project activities shall be conducted 
     at INEEL, other national laboratories, universities, domestic 
     industry, and international partners.

     SEC. 434. PROJECT REQUIREMENTS.

       (a) Research and Development.--The project shall include 
     planning, research and development, design, and construction 
     of an advanced, next-generation, nuclear energy system 
     suitable for enabling further research and development on 
     advanced reactor technologies and alternative approaches for 
     reactor-based generation of hydrogen.
       (1) The project shall utilize, where appropriate, extensive 
     reactor test capabilities resident at INEEL.
       (2) The project shall be designed to explore technical, 
     environmental, and economic feasibility of alternative 
     approaches for reactor-based hydrogen production.

[[Page S10358]]

       (3) The industrial lead for the project must be a United 
     States-based company.
       (b) International Collaboration.--The Secretary shall seek 
     international cooperation, participation, and financial 
     contribution in this program.
       (1) The project may contract for assistance from 
     specialists or facilities from member countries of the 
     Generation IV International Forum, the Russian Federation, or 
     other international partners where such specialists or 
     facilities provide access to cost-effective and relevant 
     skills or test capabilities.
       (2) International activities shall be coordinated with the 
     Generation IV International Forum.
       (3) The Secretary may combine this project with the 
     Generation IV Nuclear Energy Systems Program.
       (c) Demonstration.--The overall project, which may involve 
     demonstration of selected project objectives in a partner 
     nation, must demonstrate both electricity and hydrogen 
     production and may provide flexibility, where technically and 
     economically feasible in the design and construction, to 
     enable tests of alternative reactor core and cooling 
     configurations.
       (d) Partnerships.--The Secretary shall establish cost-
     shared partnerships with domestic industry or international 
     participants for the research, development, design, 
     construction and operation of the demonstration facility, and 
     preference in determining the final project structure shall 
     be given to an overall project which retains United States 
     leadership while maximizing cost sharing opportunities and 
     minimizing federal funding responsibilities.
       (e) Target Date.--The Secretary shall select technologies 
     and develop the project to provide initial testing of either 
     hydrogen production or electricity generation by 2010 or 
     provide a report to Congress why this date is not feasible.
       (f) Waiver of Construction Timelines.--The Secretary is 
     authorized to conduct the Advanced Reactor Hydrogen Co-
     Generation Project without the constraints of DOE Order 413.3 
     as deemed necessary to meet the specified operational date.
       (g) Competition.--The Secretary may fund up to two teams 
     for up to one year to develop detailed proposals for 
     competitive evaluation and selection of a single proposal and 
     concept for further progress. The Secretary shall define the 
     format of the competitive evaluation of proposals.
       (h) Use of Facilities.--Research facilities in industry, 
     national laboratories, or universities either within the 
     United States or with cooperating international partners may 
     be used to develop the enabling technologies for the 
     demonstration facility. Utilization of domestic university-
     based testbeds shall be encouraged to provide educational 
     opportunities for student development.
       (i) Role of Nuclear Regulatory Commission.--The Secretary 
     shall seek active participation of the Nuclear Regulatory 
     Commission throughout the project to develop risk-based 
     criteria for any future commercial development of a similar 
     reactor architecture.
       (j) Report.--A comprehensive project plan shall be 
     developed no later than April 30, 2004. The project plan 
     shall be updated annually with each annual budget submission.

     SEC. 435. AUTHORIZATION OF APPROPRIATIONS.

       (a) Research, Development and Design Programs.--The 
     following sums are authorized to be appropriated to the 
     Secretary for all activities under this subtitle except for 
     reactor construction:
       (1) For fiscal year 2004, $35,000,000;
       (2) For each of fiscal years 2005-2008, $150,000,000; and
       (3) For fiscal years beyond 2008, such funds as are needed 
     are authorized to be appropriated.
       (b) Reactor Construction.--The following sum is authorized 
     to be appropriated to the Secretary for all project-related 
     construction activities, to be available until expended, 
     $500,000,000.

                   Subtitle D--Miscellaneous Matters

     SEC. 441. URANIUM SALES AND TRANSFERS.

       Section 3112 of the USEC Privatization Act (42 U.S.C. 
     2297h-10) is amended by striking subsections (d) and (e) and 
     inserting the following:
       ``(d)(1)(A) The aggregate annual deliveries of uranium in 
     any form (including natural uranium concentrates, natural 
     uranium hexafluoride, enriched uranium, and depleted uranium) 
     sold or transferred for commercial nuclear power end uses by 
     the United States Government shall not exceed 3,000,000 
     pounds U3O8 equivalent per year through 
     calendar year 2009. Such aggregate annual deliveries shall 
     not exceed 5,000,000 pounds U3O8 
     equivalent per year in calendar years 2010 and 2011. Such 
     aggregate annual deliveries shall not exceed 7,000,000 pounds 
     U3O8 equivalent in calendar year 2012. 
     Such aggregate annual deliveries shall not exceed 10,000,000 
     pounds U3O8 equivalent per year in 
     calendar year 2013 and each year thereafter. Any sales or 
     transfers by the United States Government to commercial end 
     users shall be limited to long-term contracts of no less than 
     3 years duration.
       ``(B) The recovery and extraction of the uranium component 
     from contaminated uranium bearing materials from United 
     States Government sites by commercial entities shall be the 
     preferred method of making uranium available under this 
     subsection. The uranium component contained in such 
     contaminated materials shall be counted against the annual 
     maximum deliveries set forth in this section, provided that 
     uranium is sold to end users.
       ``(C) Sales or transfers of uranium by the United States 
     Government for the following purposes are exempt from the 
     provisions of this paragraph--
       ``(i) sales or transfers provided for under existing law 
     for use by the Tennessee Valley Authority in relation to the 
     Department of Energy's high-enriched uranium or tritium 
     programs;
       ``(ii) sales or transfers to the Department of Energy 
     research reactor sales program;
       ``(iii) the transfer of up to 3,293 metric tons of uranium 
     to the United States Enrichment Corporation to replace 
     uranium that the Secretary transferred, prior to 
     privatization of the United States Enrichment Corporation in 
     July 1998, to the Corporation on or about June 30, 1993, 
     April 20, 1998, and May 18, 1998, and that does not meet 
     commercial specifications;
       ``(iv) the sale or transfer of any uranium for emergency 
     purposes in the event of a disruption in supply to end users 
     in the United States;
       ``(v) the sale or transfer of any uranium in fulfillment of 
     the United States Government's obligations to provide 
     security of supply with respect to implementation of the 
     Russian HEU Agreement; and
       ``(vi) the sale or transfer of any enriched uranium for use 
     in an advanced commercial nuclear power plant in the United 
     States with nonstandard fuel requirements.
       ``(D) The Secretary may transfer or sell enriched uranium 
     to any person for national security purposes, as determined 
     by the Secretary.
       ``(2) Except as provided in subsections (b) and (c), and in 
     paragraph (1)(B), clauses (i) through (iii) of paragraph 
     (1)(C), and paragraph (1)(D) of this subsection, no sale or 
     transfer of uranium in any form shall be made by the United 
     States Government unless--
       ``(A) the President determines that the material is not 
     necessary for national security needs;
       ``(B) the price paid to the Secretary, if the transaction 
     is a sale, will not be less than the fair market value of the 
     material, as determined at the time that such material is 
     contracted for sale;
       ``(C) prior to any sale or transfer, the Secretary solicits 
     the written views of the Department of State and the National 
     Security Council with regard to whether such sale or transfer 
     would have any adverse effect on national security interests 
     of the United States, including interests related to the 
     implementation of the Russian HEU Agreement; and
       ``(D) neither the Department of State nor the National 
     Security Council objects to such sale or transfer.

     The Secretary shall endeavor to determine whether a sale or 
     transfer is permitted under this paragraph within 30 days. 
     The Secretary's determinations pursuant to this paragraph 
     shall be made available to interested members of the public 
     prior to authorizing any such sale or transfer.
       ``(3) Within 1 year after the date of enactment of this 
     subsection and annually thereafter the Secretary shall 
     undertake an assessment for the purpose of reviewing 
     available excess Government uranium inventories, and 
     determining, consistent with the procedures and limitations 
     established in this subsection, the level of inventory to be 
     sold or transferred to end users.
       ``(4) Within 5 years after the date of enactment of this 
     subsection and biennially thereafter the Secretary shall 
     report to the Congress on the implementation of this 
     subsection. The report shall include a discussion of all 
     sales or transfers made by the United States Government, the 
     impact of such sales or transfers on the domestic uranium 
     industry, the spot market uranium price, and the national 
     security interests of the United States, and any steps taken 
     to remediate any adverse impacts of such sales or transfers.
       ``(5) For purposes of this subsection, the term `United 
     States Government' does not include the Tennessee Valley 
     Authority.''.

     SEC. 442. DECOMMISSIONING PILOT PROGRAM.

       (a) Pilot Program.--The Secretary shall establish a 
     decommissioning pilot program to decommission and 
     decontaminate the sodium-cooled fast breeder experimental 
     test-site reactor located in northwest Arkansas in accordance 
     with the decommissioning activities contained in the August 
     31, 1998 Department of Energy report on the reactor.
       (b) Authorization of Appropriations.--There is authorized 
     to be appropriated to carry out this section $16,000,000.

                       TITLE V--RENEWABLE ENERGY

                     Subtitle A--General Provisions

     SEC. 501. ASSESSMENT OF RENEWABLE ENERGY RESOURCES.

       (a) Resource Assessment.--Not later than 6 months after the 
     date of enactment of this title, and each year thereafter, 
     the Secretary of Energy shall review the available 
     assessments of renewable energy resources within the United 
     States, including solar, wind, biomass, ocean (tidal and 
     thermal), geothermal, and hydroelectric energy resources, and 
     undertake new assessments as necessary, taking into account 
     changes in market conditions, available technologies, and 
     other relevant factors.
       (b) Contents of Reports.--Not later than 1 year after the 
     date of enactment of this title, and each year thereafter, 
     the Secretary

[[Page S10359]]

     shall publish a report based on the assessment under 
     subsection (a). The report shall contain--
       (1) a detailed inventory describing the available amount 
     and characteristics of the renewable energy resources; and
       (2) such other information as the Secretary believes would 
     be useful in developing such renewable energy resources, 
     including descriptions of surrounding terrain, population and 
     load centers, nearby energy infrastructure, location of 
     energy and water resources, and available estimates of the 
     costs needed to develop each resource, together with an 
     identification of any barriers to providing adequate 
     transmission for remote sources of renewable energy resources 
     to current and emerging markets, recommendations for removing 
     or addressing such barriers, and ways to provide access to 
     the grid that do not unfairly disadvantage renewable or other 
     energy producers.
       (c) Authorization of Appropriations.--For the purposes of 
     this section, there are authorized to be appropriated to the 
     Secretary of Energy $10,000,000 for each of fiscal years 2004 
     through 2008.

     SEC. 502. RENEWABLE ENERGY PRODUCTION INCENTIVE.

       (a) Incentive Payments.--Section 1212(a) of the Energy 
     Policy Act of 1992 (42 U.S.C. 13317(a)) is amended by 
     striking ``and which satisfies'' and all that follows through 
     ``Secretary shall establish.'' and inserting ``. If there are 
     insufficient appropriations to make full payments for 
     electric production from all qualified renewable energy 
     facilities in any given year, the Secretary shall assign 60 
     percent of appropriated funds for that year to facilities 
     that use solar, wind, geothermal, or closed-loop (dedicated 
     energy crops) biomass technologies to generate electricity, 
     and assign the remaining 40 percent to other projects. The 
     Secretary may, after transmitting to the Congress an 
     explanation of the reasons therefor, alter the percentage 
     requirements of the preceding sentence.''.
       (b) Qualified Renewable Energy Facility.--Section 1212(b) 
     of the Energy Policy Act of 1992 (42 U.S.C. 13317(b)) is 
     amended--
       (1) by striking ``a State or any political'' and all that 
     follows through ``nonprofit electrical cooperative'' and 
     inserting ``a not-for-profit electric cooperative, a public 
     utility described in section 115 of the Internal Revenue Code 
     of 1986, a State, Commonwealth, territory, or possession of 
     the United States or the District of Columbia, or a political 
     subdivision thereof, or an Indian tribal government of 
     subdivision thereof,''; and
       (2) by inserting ``landfill gas,'' after ``wind, 
     biomass,''.
       (c) Eligibility Window.--Section 1212(c) of the Energy 
     Policy Act of 1992 (42 U.S.C. 13317(c)) is amended by 
     striking ``during the 10-fiscal year period beginning with 
     the first full fiscal year occurring after the enactment of 
     this section'' and inserting ``after October 1, 2003, and 
     before October 1, 2013''.
       (d) Amount of Payment.--Section 1212(e)(1) of the Energy 
     Policy Act of 1992 (42 U.S.C. 13317(e)(1)) is amended by 
     inserting ``landfill gas,'' after ``wind, biomass,''.
       (e) Sunset.--Section 1212(f) of the Energy Policy Act of 
     1992 (42 U.S.C. 13317(f)) is amended by striking ``the 
     expiration of'' and all that follows through ``of this 
     section'' and inserting ``September 30, 2023''.
       (f) Authorization of Appropriations.--Section 1212(g) of 
     the Energy Policy Act of 1992 (42 U.S.C. 13317(g)) is amended 
     to read as follows:
       ``(g) Authorization of Appropriations.--
       ``(1) In general.--Subject to paragraph (2), there are 
     authorized to be appropriated such sums as may be necessary 
     to carry out this section for fiscal years 2003 through 2023.
       ``(2) Availability of funds.--Funds made available under 
     paragraph (1) shall remain available until expended.''.

     SEC. 503. RENEWABLE ENERGY ON FEDERAL LANDS.

       (a) Report.--Within 24 months after the date of enactment 
     of this Act, the Secretary of the Interior, in cooperation 
     with the Secretary of Agriculture, shall develop and report 
     to the Congress recommendations on opportunities to develop 
     renewable energy on public lands under the jurisdiction of 
     the Secretary of the Interior and National Forest System 
     lands under the jurisdiction of the Secretary of Agriculture. 
     The report shall include--
       (1) 5-year plans developed by the Secretary of the Interior 
     and the Secretary of Agriculture, respectively, for 
     encouraging the development of renewable energy consistent 
     with applicable law and management plans; and
       (2) an analysis of--
       (A) the use of rights-of-way, leases, or other methods to 
     develop renewable energy on such lands;
       (B) the anticipated benefits of grants, loans, tax credits, 
     or other provisions to promote renewable energy development 
     on such lands; and
       (C) any issues that the Secretary of the Interior or the 
     Secretary of Agriculture have encountered in managing 
     renewable energy projects on such lands, or believe are 
     likely to arise in relation to the development of renewable 
     energy on such lands;
       (3) a list, developed in consultation with the Secretary of 
     Energy and the Secretary of Defense, of lands under the 
     jurisdiction of the Department of Energy or Defense that 
     would be suitable for development for renewable energy, and 
     any recommended statutory and regulatory mechanisms for such 
     development; and
       (4) any recommendations pertaining to the issues addressed 
     in the report.
       (b) National Academy of Sciences Study.--
       (1) Not later than 90 days after the date of the enactment 
     of this section, the Secretary of the Interior shall contract 
     with the National Academy of Sciences to--
       (A) study the potential for the development of wind, solar, 
     and ocean (tidal and thermal) energy on the Outer Continental 
     Shelf;
       (B) assess existing Federal authorities for the development 
     of such resources; and
       (C) recommend statutory and regulatory mechanisms for such 
     development.
       (2) The results of the study shall be transmitted to the 
     Congress within 24 months after the date of the enactment of 
     this section.

     SEC. 504. FEDERAL PURCHASE REQUIREMENT.

       (a) Requirement.--The President, acting through the 
     Secretary of Energy, shall seek to ensure that, to the extent 
     economically feasible and technically practicable, of the 
     total amount of electric energy the Federal Government 
     consumes during any fiscal year, the following amounts shall 
     be renewable energy--
       (1) not less than 3 percent in fiscal years 2005 through 
     2007,
       (2) not less than 5 percent in fiscal years 2008 through 
     2010, and
       (3) not less than 7.5 percent in fiscal year 2011 and each 
     fiscal year thereafter.
       (b) Definition.--For purposes of this section--
       (1) the term ``biomass'' means any solid, nonhazardous, 
     cellulosic material that is derived from--
       (A) any of the following forest-related resources: mill 
     residues, precommercial thinnings, slash, and brush, or 
     nonmerchantable material;
       (B) solid wood waste materials, including waste pallets, 
     crates, dunnage, manufacturing and construction wood wastes 
     (other than pressure-treated, chemically-treated, or painted 
     wood wastes), and landscape or right-of-way tree trimmings, 
     but not including municipal solid waste (garbage), gas 
     derived from the biodegradation of solid waste, or paper that 
     is commonly recycled; or
       (C) agriculture wastes, including orchard tree crops, 
     vineyard, grain, legumes, sugar, and other crop by-products 
     or residues, and livestock waste nutrients; or
       (D) a plant that is grown exclusively as a fuel for the 
     production of electricity.
       (2) the term ``renewable energy'' means electric energy 
     generated from solar, wind, biomass, geothermal, municipal 
     solid waste, or new hydroelectric generation capacity 
     achieved from increased efficiency or additions of new 
     capacity at an existing hydroelectric project.
       (c) Calculation.--For purposes of determining compliance 
     with the requirement of this section, the amount of renewable 
     energy shall be doubled if--
       (1) the renewable energy is produced and used on-site at a 
     Federal facility;
       (2) the renewable energy is produced on Federal lands and 
     used at a Federal facility; or
       (3) the renewable energy is produced on Indian land as 
     defined in Title XXVI of the Energy Policy Act of 1992 (25 
     U.S.C. 3501 et seq.) and used at a Federal facility.
       (d) Report.--Not later than April 15, 2005, and every 2 
     years thereafter, the Secretary of Energy shall provide a 
     report to the Congress on the progress of the Federal 
     Government in meeting the goals established by this section.

     SEC. 505. INSULAR AREA RENEWABLE AND ENERGY EFFICIENCY PLANS.

       The Secretary of Energy shall update the energy surveys, 
     estimates, and assessments for the insular areas of Puerto 
     Rico, the Virgin Islands, Guam, American Samoa, the 
     Commonwealth of the Northern Mariana Islands, the Republic of 
     the Marshall Islands, the Federated States of Micronesia, and 
     the Republic of Palau undertaken pursuant to section 604 of 
     Public Law 96-597 (48 U.S.C. 1492) and revise the 
     comprehensive energy plan for the insular areas to reduce 
     reliance on energy imports and increase use of renewable 
     energy resources and energy efficiency opportunities. The 
     update and revision shall by undertaken in consultation with 
     the Secretary of the Interior and the chief executive officer 
     of each insular area and shall be completed and submitted to 
     Congress and to the chief executive officer of each insular 
     area by December 31, 2005.

                  Subtitle B--Hydroelectric Licensing

     SEC. 511. ALTERNATIVE CONDITIONS AND FISHWAYS.

       (a) Federal Reservations.--Section 4(e) of the Federal 
     Power Act (16 U.S.C. 797(e)) is amended by inserting after 
     ``adequate protection and utilization of such reservation.'' 
     at the end of the first proviso the following: ``The license 
     applicant shall be entitled to a determination on the record, 
     after opportunity for an agency trial-type hearing of any 
     disputed issues of material fact, with respect to such 
     conditions.''.
       (b) Fishways.--Section 18 of the Federal Power Act (16 
     U.S.C. 811) is amended by inserting after ``and such fishways 
     as may be prescribed by the Secretary of Commerce.'' the 
     following: ``The license applicant shall be entitled to a 
     determination on the record, after opportunity for an agency 
     trial-type hearing of any disputed issues of material fact, 
     with respect to such fishways.''.
       (c) Alternative Conditions and Prescriptions.--Part I of 
     the Federal Power Act (16

[[Page S10360]]

     U.S.C. 791a et seq.) is amended by adding the following new 
     section at the end thereof:

     ``SEC. 33. ALTERNATIVE CONDITIONS AND PRESCRIPTIONS.

       ``(a) Alternative Conditions.--
       ``(1) Whenever any person applies for a license for any 
     project works within any reservation of the United States, 
     and the Secretary of the Department under whose supervision 
     such reservation falls (referred to in this subsection as 
     `the Secretary') deems a condition to such license to be 
     necessary under the first proviso of section 4(e), the 
     license applicant may propose an alternative condition.
       ``(2) Notwithstanding the first proviso of section 4(e), 
     the Secretary shall accept the proposed alternative condition 
     referred to in paragraph (1), and the Commission shall 
     include in the license such alternative condition, if the 
     Secretary determines, based on substantial evidence provided 
     by the license applicant or otherwise available to the 
     Secretary, that such alternative condition--
       ``(A) provides for the adequate protection and utilization 
     of the reservation; and
       ``(B) will either--
       ``(i) cost less to implement; or
       ``(ii) result in improved operation of the project works 
     for electricity production, as compared to the condition 
     initially deemed necessary by the Secretary.
       ``(3) The Secretary concerned shall submit into the public 
     record of the Commission proceeding with any condition under 
     section 4(e) or alternative condition it accepts under this 
     section, a written statement explaining the basis for such 
     condition, and reason for not accepting any alternative 
     condition under this section. The written statement must 
     demonstrate that the Secretary gave equal consideration to 
     the effects of the condition adopted and alternatives not 
     accepted on energy supply, distribution, cost, and use; flood 
     control; navigation; water supply; and air quality (in 
     addition to the preservation of other aspects of 
     environmental quality); based on such information as may be 
     available to the Secretary, including information voluntarily 
     provided in a timely manner by the applicant and others. The 
     Secretary shall also submit, together with the aforementioned 
     written statement, all studies, data, and other factual 
     information available to the Secretary and relevant to the 
     Secretary's decision.
       ``(4) Nothing in this section shall prohibit other 
     interested parties from proposing alternative conditions.
       ``(5) If the Secretary does not accept an applicant's 
     alternative condition under this section, and the Commission 
     finds that the Secretary's condition would be inconsistent 
     with the purposes of this part, or other applicable law, the 
     Commission may refer the dispute to the Commission's Dispute 
     Resolution Service. The Dispute Resolution Service shall 
     consult with the Secretary and the Commission and issue a 
     non-binding advisory within 90 days. The Secretary may accept 
     the Dispute Resolution Service advisory unless the Secretary 
     finds that the recommendation will not adequately protect the 
     reservation. The Secretary shall submit the advisory and the 
     Secretary's final written determination into the record of 
     the Commission's proceeding.
       ``(b) Alternative Prescriptions.--
       ``(1) Whenever the Secretary of the Interior or the 
     Secretary of Commerce prescribes a fishway under section 18, 
     the license applicant or licensee may propose an alternative 
     to such prescription to construct, maintain, or operate a 
     fishway. The alternative may include a fishway or an 
     alternative to a fishway.
       ``(2) Notwithstanding section 18, the Secretary of the 
     Interior or the Secretary of Commerce, as appropriate, shall 
     accept and prescribe, and the Commission shall require, the 
     proposed alternative referred to in paragraph (1), if the 
     Secretary of the appropriate department determines, based on 
     substantial evidence provided by the licensee or otherwise 
     available to the Secretary, that such alternative--
       ``(A) will be no less protective of the fish resources than 
     the fishway initially prescribed by the Secretary; and
       ``(B) will either--
       ``(i) cost less to implement; or
       ``(ii) result in improved operation of the project works 
     for electricity production, as compared to the fishway 
     initially deemed necessary by the Secretary.
       ``(3) The Secretary concerned shall submit into the public 
     record of the Commission proceeding with any prescription 
     under section 18 or alternative prescription it accepts under 
     this section, a written statement explaining the basis for 
     such prescription, and reason for not accepting any 
     alternative prescription under this section. The written 
     statement must demonstrate that the Secretary gave equal 
     consideration to the effects of the condition adopted and 
     alternatives not accepted on energy supply, distribution, 
     cost, and use; flood control; navigation; water supply; and 
     air quality (in addition to the preservation of other aspects 
     of environmental quality); based on such information as may 
     be available to the Secretary, including information 
     voluntarily provided in a timely manner by the applicant and 
     others. The Secretary shall also submit, together with the 
     aforementioned written statement, all studies, data, and 
     other factual information available to the Secretary and 
     relevant to the Secretary's decision.
       ``(4) Nothing in this section shall prohibit other 
     interested parties from proposing alternative prescriptions.
       ``(5) If the Secretary concerned does not accept an 
     applicant's alternative prescription under this section, and 
     the Commission finds that the Secretary's prescription would 
     be inconsistent with the purposes of this part, or other 
     applicable law, the Commission may refer the dispute to the 
     Commission's Dispute Resolution Service. The Dispute 
     Resolution Service shall consult with the Secretary and the 
     Commission and issue a non-binding advisory within 90 days. 
     The Secretary may accept the Dispute Resolution Service 
     advisory unless the Secretary finds that the recommendation 
     will not adequately protect the fish resources. The Secretary 
     shall submit the advisory and the Secretary's final written 
     determination into the record of the Commission's 
     proceeding.''.

                     Subtitle C--Geothermal Energy

     SEC. 521. COMPETITIVE LEASE SALE REQUIREMENTS.

       (a) In General.--Section 4 of the Geothermal Steam Act of 
     1970 (30 U.S.C. 1003) is amended by striking the text and 
     inserting the following:
       ``(a) Nominations.--The Secretary shall accept nominations 
     at any time from companies and individuals of lands to be 
     leased under this Act.
       ``(b) Competitive Lease Sale Required.--The Secretary shall 
     hold a competitive lease sale at least once every 2 years for 
     lands in a State in which there are nominations pending under 
     subsection (a) where such lands are otherwise available for 
     leasing.
       ``(c) Noncompetitive Leasing.--The Secretary shall make 
     available for a period of 2 years for noncompetitive leasing 
     any tract for which a competitive lease sale is held, but for 
     which the Secretary does not receive any bids in the 
     competitive lease sale.''.
       (b) Pending Lease Applications.--It shall be a priority for 
     the Secretary of the Interior and, with respect to National 
     Forest lands, the Secretary of Agriculture, to ensure timely 
     completion of administrative actions necessary to conduct 
     competitive lease sales for lands with pending applications 
     for geothermal leasing as of the date of enactment of this 
     section where such lands are otherwise available for leasing.

     SEC. 522. GEOTHERMAL LEASING AND PERMITTING ON FEDERAL LANDS.

       (a) In General.--Not later than 180 days after the date of 
     the enactment of this section, the Secretary of the Interior 
     and the Secretary of Agriculture shall enter into and submit 
     to the Congress a memorandum of understanding in accordance 
     with this section regarding leasing and permitting for 
     geothermal development of public lands and National Forest 
     System lands under their respective jurisdictions.
       (b) Lease and Permit Applications.--The memorandum of 
     understanding shall--
       (1) identify known geothermal resources areas on lands 
     included in the National Forest System and, when necessary, 
     require review of management plans to consider leasing under 
     the Geothermal Steam Act of 1970 (30 U.S.C. 1001 et seq.) as 
     a land use; and
       (2) establish an administrative procedure for processing 
     geothermal lease applications, including lines of authority, 
     steps in application processing, and time limits for 
     application processing.
       (c) Data Retrieval System.--The memorandum of understanding 
     shall establish a joint data retrieval system that is capable 
     of tracking lease and permit applications and providing to 
     the applicant information as to their status within the 
     Departments of the Interior and Agriculture, including an 
     estimate of the time required for administrative action.

     SEC. 523. LEASING AND PERMITTING ON FEDERAL LANDS WITHDRAWN 
                   FOR MILITARY PURPOSES.

       Not later than 1 year after the date of the enactment of 
     this Act, the Secretary of the Interior and the Secretary of 
     Defense, in consultation with interested states, counties, 
     representatives of the geothermal industry, and interested 
     members of the public, shall submit to the Congress a joint 
     report concerning leasing and permitting activities for 
     geothermal energy on Federal lands withdrawn for military 
     purposes. Such report shall--
       (1) describe any differences, including differences in 
     royalty structure and revenue sharing with states and 
     counties, between--
       (A) the implementation of the Geothermal Steam Act of 1970 
     (30 U.S.C. 1001 et seq.) and other applicable Federal law by 
     the Secretary of the Interior; and
       (B) the administration of geothermal leasing under section 
     2689 of title 10, United States Code, by the Secretary of 
     Defense;
       (2) identify procedures for interagency coordination to 
     ensure efficient processing and administration of leases or 
     contracts for geothermal energy on federal lands withdrawn 
     for military purposes, consistent with the defense purposes 
     of such withdrawals; and
       (3) provide recommendations for legislative or 
     administrative actions that could facilitate program 
     administration, including a common royalty structure.

     SEC. 524. REINSTATEMENT OF LEASES TERMINATED FOR FAILURE TO 
                   PAY RENT.

       Section 5(c) of the Geothermal Steam Act of 1970 (30 U.S.C. 
     1004(c)), is amended in the last sentence by inserting ``or 
     was inadvertent,'' after ``reasonable diligence,''.

     SEC. 525. ROYALTY REDUCTION AND RELIEF.

       (a) Rulemaking.--Within one year after the date of 
     enactment of this Act, the Secretary shall promulgate a final 
     regulation providing a methodology for determining the

[[Page S10361]]

     amount or value of the steam for purposes of calculating the 
     royalty due to be paid on such production pursuant to section 
     5 of the Geothermal Steam Act of 1970 (30 U.S.C. 1004). The 
     final regulation shall provide for a simplified methodology 
     for calculating the royalty. In undertaking the rulemaking, 
     the Secretary shall consider the use of a percent of revenue 
     method and shall ensure that the final rule will result in 
     the same level of royalty revenues as the regulation in 
     effect on the date of enactment of this provision.
       (b) Low Temperature Direct Use.--Notwithstanding the 
     provisions of section 5(a) of the Geothermal Steam Act of 
     1979 (30 U.S.C. 1004(a)), with respect to the direct use of 
     low temperature geothermal resources for purposes other than 
     the generation of electricity, the Secretary shall establish 
     a schedule of fees and collect fees pursuant to such schedule 
     in lieu of royalties based upon the total amount of 
     geothermal resources used. The schedule of fees shall ensure 
     that there is a fair return to the public for the use of the 
     low temperature geothermal resource. With the consent of the 
     lessee, the Secretary may modify the terms of a lease in 
     existence on the date of enactment of this Act in order to 
     reflect the provisions of this subsection.

                       Subtitle D--Biomass Energy

     SEC. 531. DEFINITIONS.

       For the purposes of this subtitle:
       (1) The term ``eligible operation'' means a facility that 
     is located within the boundaries of an eligible community and 
     uses biomass from federal or Indian lands as a raw material 
     to produce electric energy, sensible heat, transportation 
     fuels, or substitutes for petroleum-based products.
       (2) The term ``biomass'' means pre-commercial thinnings of 
     trees and woody plants, or non-merchantable material, from 
     preventative treatments to reduce hazardous fuels, or reduce 
     or contain disease or insect infestations.
       (3) The term ``green ton'' means 2,000 pounds of biomass 
     that has not been mechanically or artificially dried.
       (4) The term ``Secretary'' means--
       (A) with respect to lands within the National Forest 
     System, the Secretary of Agriculture; or
       (B) with respect to Federal lands under the jurisdiction of 
     the Secretary of the Interior and Indian lands, the Secretary 
     of the Interior.
       (5) The term ``eligible community'' means any Indian 
     Reservation, or any county, town, township, municipality, or 
     other similar unit of local government that has a population 
     of not more than 50,000 individuals and is determined by the 
     Secretary to be located in an area near federal of Indian 
     lands which is at significant risk of catastrophic wildfire, 
     disease, or insect infestation or which suffers from disease 
     or insect infestation.
       (6) The term ``Indian tribe'' has the meaning given the 
     term in section 4(e) of the Indian Self-Determination and 
     Education Assistance Act (25 U.S.C. 450b(e)).
       (7) The term ``person'' includes--
       (A) an individual;
       (B) a community;
       (C) an Indian tribe;
       (D) a small business or a corporation that is incorporated 
     in the United States; or
       (E) a nonprofit organization.

     SEC. 532. BIOMASS COMMERCIAL UTILIZATION GRANT PROGRAM.

       (a) In General.--The Secretary may make grants to any 
     person that owns or operates an eligible operation to offset 
     the costs incurred to purchase biomass for use by such 
     eligible operation with priority given to operations using 
     biomass from the highest risk areas.
       (b) Limitation.--No grant provided under this subsection 
     shall be paid at a rate that exceeds $20 per green ton of 
     biomass delivered.
       (c) Records.--Each grant recipient shall keep such records 
     as the Secretary may require to fully and correctly disclose 
     the use of the grant funds and all transactions involved in 
     the purchase of biomass. Upon notice by the Secretary, the 
     grant recipient shall provide the Secretary reasonable access 
     to examine the inventory and records of any eligible 
     operation receiving grant funds.
       (d) Authorization of Appropriations.--For the purposes of 
     this section, there are authorized to be appropriated 
     $12,500,000 each to the Secretary of the Interior and the 
     Secretary of Agriculture for each fiscal year from 2004 
     through 2008, to remain available until expended.

     SEC. 533. IMPROVED BIOMASS UTILIZATION GRANT PROGRAM.

       (a) In General.--The Secretary may make grants to persons 
     in eligible communities to offset the costs of developing or 
     researching proposals to improve the use of biomass or add 
     value to biomass utilization.
       (b) Selection.--Grant recipients shall be selected based on 
     the potential for the proposal to--
       (1) develop affordable thermal or electric energy resources 
     for the benefit of an eligible community;
       (2) provide opportunities for the creation or expansion of 
     small businesses within an eligible community;
       (3) create new job opportunities within an eligible 
     community, and
       (4) reduce the hazardous fuels from the highest risk areas.
       (c) Limitation.--No grant awarded under this subsection 
     shall exceed $500,000.
       (d) Authorization of Appropriations.--For the purposes of 
     this section, there are authorized to be appropriated 
     $12,500,000 each to the Secretary of the Interior and the 
     Secretary of Agriculture for each fiscal year from 2004 
     through 2008, to remain available until expended.

     SEC. 534. REPORT.

       Not later than 3 years after the date of enactment of this 
     subtitle, the Secretary of the Interior and the Secretary of 
     Agriculture shall jointly submit to the Congress a report 
     that describes the interim results of the programs authorized 
     under this subtitle.

      Subtitle E.--General Provisions Relating to Renewable Fuels

     SEC. 534. RENEWABLE CONTENT OF GASOLINE.

       (a) In General.--Section 211 of the Clean Air Act (42 
     U.S.C. 7545) is amended--
       (1) by redesignating subsection (o) as subsection (r); and
       (2) by inserting after subsection (n) the following:
       ``(o) Renewable Fuel Program.--
       ``(1) Definitions.--In this section:
       ``(A) Cellulosic biomass ethanol.--The term `cellulosic 
     biomass ethanol' means ethanol derived from any 
     lignocellulosic or hemicellulosic matter that is available on 
     a renewable or recurring basis, including--
       ``(i) dedicated energy crops and trees;
       ``(ii) wood and wood residues;
       ``(iii) plants;
       ``(iv) grasses;
       ``(v) agricultural residues;
       ``(vi) fibers;
       ``(vii) animal wastes and other waste materials; and
       ``(viii) municipal solid waste.
       ``(B) Renewable fuel.--
       ``(i) In general.--The term `renewable fuel' means motor 
     vehicle fuel that--

       ``(I)(aa) is produced from grain, starch, oilseeds, or 
     other biomass; or
       ``(bb) is natural gas produced from a biogas source, 
     including a landfill, sewage waste treatment plant, feedlot, 
     or other place where decaying organic material is found; and
       ``(II) is used to replace or reduce the quantity of fossil 
     fuel present in a fuel mixture used to operate a motor 
     vehicle.

       ``(ii) Inclusion.--The term `renewable fuel' includes--

       ``(I) cellulosic biomass ethanol; and
       ``(II) biodiesel (as defined in section 312(f) of the 
     Energy Policy Act of 1992 (42 U.S.C. 13220(f))).

       ``(C) Small refinery.--The term `small refinery' means a 
     refinery for which the average aggregate daily crude oil 
     throughput for a calendar year (as determined by dividing the 
     aggregate throughput for the calendar year by the number of 
     days in the calendar year) does not exceed 75,000 barrels.
       ``(2) Renewable fuel program.--
       ``(A) Regulations.--
       ``(i) In general.--Not later than 1 year after the date of 
     enactment of this paragraph, the Administrator shall 
     promulgate regulations to ensure that gasoline sold or 
     introduced into commerce in the United States (except in 
     Alaska and Hawaii), on an annual average basis, contains the 
     applicable volume of renewable fuel determined in accordance 
     with subparagraph (B).
       ``(ii) Provisions of regulations.--Regardless of the date 
     of promulgation, the regulations promulgated under clause 
     (i)--

       ``(I) shall contain compliance provisions applicable to 
     refiners, blenders, distributors, and importers, as 
     appropriate, to ensure that the requirements of this 
     paragraph are met; but
       ``(II) shall not--

       ``(aa) restrict cases in geographic areas in which 
     renewable fuel may be used; or
       ``(bb) impose any per-gallon obligation for the use of 
     renewable fuel.
       ``(iii) Requirement in case of failure to promulgate 
     regulations.--If the Administrator does not promulgate 
     regulations under clause (i), the percentage of renewable 
     fuel in gasoline sold or dispensed to consumers in the United 
     States, on a volume basis, shall be 1.8 percent for calendar 
     year 2005.
       ``(B) Applicable volume.--
       ``(i) Calendar years 2005 through 2012.--For the purpose of 
     subparagraph (A), the applicable volume for any of calendar 
     years 2005 through 2012 shall be determined in accordance 
     with the following table:

                                                   Applicable volume of
``Calendar year:                                         renewable fuel
                                              (in billions of gallons):
  2005.........................................................2.6 ....

  2006.........................................................2.9 ....

  2007.........................................................3.2 ....

  2008.........................................................3.5 ....

  2009.........................................................3.9 ....

  2010.........................................................4.3 ....

  2011.........................................................4.7 ....

  2012.........................................................5.0.....

       ``(ii) Calendar year 2013 and thereafter.--For the purpose 
     of subparagraph (A), the applicable volume for calendar year 
     2013 and each calendar year thereafter shall be equal to the 
     product obtained by multiplying--

       ``(I) the number of gallons of gasoline that the 
     Administrator estimates will be sold or introduced into 
     commerce in the calendar year; and
       ``(II) the ratio that--

       ``(aa) 5,000,000,000 gallons of renewable fuel; bears to
       ``(bb) the number of gallons of gasoline sold or introduced 
     into commerce in calendar year 2012.
       ``(3) Applicable percentages.--
       ``(A) Provision of estimate of volumes of gasoline sales.--
     Not later than October 31

[[Page S10362]]

     of each of calendar years 2004 through 2011, the 
     Administrator of the Energy Information Administration shall 
     provide to the Administrator of the Environmental Protection 
     Agency an estimate of the volumes of gasoline sold or 
     introduced into commerce in the United States during the 
     following calendar year.
       ``(B) Determination of applicable percentages.--
       ``(i) In general.--Not later than November 30 of each of 
     calendar years 2005 through 2012, based on the estimate 
     provided under subparagraph (A), the Administrator of the 
     Environmental Protection Agency shall determine and publish 
     in the Federal Register, with respect to the following 
     calendar year, the renewable fuel obligation that ensures 
     that the requirements of paragraph (2) are met.
       ``(ii) Required elements.--The renewable fuel obligation 
     determined for a calendar year under clause (i) shall--

       ``(I) be applicable to refiners, blenders, and importers, 
     as appropriate;
       ``(II) be expressed in terms of a volume percentage of 
     gasoline sold or introduced into commerce; and
       ``(III) subject to subparagraph (C)(i), consist of a single 
     applicable percentage that applies to all categories of 
     persons specified in subclause (I).

       ``(C) Adjustments.--In determining the applicable 
     percentage for a calendar year, the Administrator shall make 
     adjustments--
       ``(i) to prevent the imposition of redundant obligations on 
     any person specified in subparagraph (B)(ii)(I); and
       ``(ii) to account for the use of renewable fuel during the 
     previous calendar year by small refineries that are exempt 
     under paragraph (9).
       ``(4) Cellulosic biomass ethanol.--For the purpose of 
     paragraph (2), 1 gallon of cellulosic biomass ethanol shall 
     be considered to be the equivalent of 1.5 gallons of 
     renewable fuel.
       ``(5) Credit program.--
       ``(A) In general.--The regulations promulgated under 
     paragraph (2)(A) shall provide--
       ``(i) for the generation of an appropriate amount of 
     credits by any person that refines, blends, or imports 
     gasoline that contains a quantity of renewable fuel that is 
     greater than the quantity required under paragraph (2);
       ``(ii) for the generation of an appropriate amount of 
     credits for biodiesel; and
       ``(iii) for the generation of credits by small refineries 
     in accordance with paragraph (9)(C).
       ``(B) Use of credits.--A person that generates credits 
     under subparagraph (A) may use the credits, or transfer all 
     or a portion of the credits to another person, for the 
     purpose of complying with paragraph (2).
       ``(C) Duration of credits.--A credit generated under this 
     paragraph shall be valid to show compliance--
       ``(i) subject to clause (ii), for the calendar year in 
     which the credit was generated or the following calendar 
     year; or
       ``(ii) if the Administrator promulgates regulations under 
     paragraph (6), for the calendar year in which the credit was 
     generated or any of the following 2 calendar years.
       ``(D) Inability to generate or purchase sufficient 
     credits.--The regulations promulgated under paragraph (2)(A) 
     shall include provisions allowing any person that is unable 
     to generate or purchase sufficient credits to meet the 
     requirements of paragraph (2) to carry forward a renewable 
     fuel deficit on condition that the person, in the calendar 
     year following the year in which the renewable fuel deficit 
     is created--
       ``(i) achieves compliance with the renewable fuel 
     requirement under paragraph (2); and
       ``(ii) generates or purchases additional renewable fuel 
     credits to offset the renewable fuel deficit of the previous 
     year.
       ``(6) Seasonal variations in renewable fuel use.--
       ``(A) Study.--For each of calendar years 2005 through 2012, 
     the Administrator of the Energy Information Administration 
     shall conduct a study of renewable fuel blending to determine 
     whether there are excessive seasonal variations in the use of 
     renewable fuel.
       ``(B) Regulation of excessive seasonal variations.--If, for 
     any calendar year, the Administrator of the Energy 
     Information Administration, based on the study under 
     subparagraph (A), makes the determinations specified in 
     subparagraph (C), the Administrator of the Environmental 
     Protection Agency shall promulgate regulations to ensure that 
     35 percent or more of the quantity of renewable fuel 
     necessary to meet the requirements of paragraph (2) is used 
     during each of the 2 periods specified in subparagraph (D) of 
     each subsequent calendar year.
       ``(C) Determinations.--The determinations referred to in 
     subparagraph (B) are that--
       ``(i) less than 35 percent of the quantity of renewable 
     fuel necessary to meet the requirements of paragraph (2) has 
     been used during 1 of the 2 periods specified in subparagraph 
     (D) of the calendar year; and
       ``(ii) a pattern of excessive seasonal variation described 
     in clause (i) will continue in subsequent calendar years.
       ``(D) Periods.--The 2 periods referred to in this paragraph 
     are--
       ``(i) April through September; and
       ``(ii) January through March and October through December.
       ``(E) Exclusion.--Renewable fuel blended or consumed in 
     calendar year 2005 in a State that has received a waiver 
     under section 209(b) shall not be included in the study under 
     subparagraph (A).
       ``(7) Waivers.--
       ``(A) In general.--The Administrator, in consultation with 
     the Secretary of Agriculture and the Secretary of Energy, may 
     waive the requirements of paragraph (2) in whole or in part 
     on petition by 1 or more States by reducing the national 
     quantity of renewable fuel required under paragraph (2)--
       ``(i) based on a determination by the Administrator, after 
     public notice and opportunity for comment, that 
     implementation of the requirement would severely harm the 
     economy or environment of a State, a region, or the United 
     States; or
       ``(ii) based on a determination by the Administrator, after 
     public notice and opportunity for comment, that there is an 
     inadequate domestic supply or distribution capacity to meet 
     the requirement.
       ``(B) Petitions for waivers.--The Administrator, in 
     consultation with the Secretary of Agriculture and the 
     Secretary of Energy, shall approve or disapprove a State 
     petition for a waiver of the requirements of paragraph (2) 
     within 90 days after the date on which the petition is 
     received by the Administrator.
       ``(C) Termination of waivers.--A waiver granted under 
     subparagraph (A) shall terminate after 1 year, but may be 
     renewed by the Administrator after consultation with the 
     Secretary of Agriculture and the Secretary of Energy.
       ``(8) Study and waiver for initial year of program.--
       ``(A) In general.--Not later than 180 days after the date 
     of enactment of this paragraph, the Secretary of Energy shall 
     conduct for the Administrator a study assessing whether the 
     renewable fuel requirement under paragraph (2) will likely 
     result in significant adverse impacts on consumers in 2005, 
     on a national, regional, or State basis.
       ``(B) Required evaluations.--The study shall evaluate 
     renewable fuel--
       ``(i) supplies and prices;
       ``(ii) blendstock supplies; and
       ``(iii) supply and distribution system capabilities.
       ``(C) Recommendations by the secretary.--Based on the 
     results of the study, the Secretary of Energy shall make 
     specific recommendations to the Administrator concerning 
     waiver of the requirements of paragraph (2), in whole or in 
     part, to prevent any adverse impacts described in 
     subparagraph (A).
       ``(D) Waiver.--
       ``(i) In general.--Not later than 270 days after the date 
     of enactment of this paragraph, the Administrator shall, if 
     and to the extent recommended by the Secretary of Energy 
     under subparagraph (C), waive, in whole or in part, the 
     renewable fuel requirement under paragraph (2) by reducing 
     the national quantity of renewable fuel required under 
     paragraph (2) in calendar 2005.
       ``(ii) No effect on waiver authority.--Clause (i) does not 
     limit the authority of the Administrator to waive the 
     requirements of paragraph (2) in whole, or in part, under 
     paragraph (7).
       ``(9) Small refineries.--
       ``(A) Temporary exemption.--
       ``(i) In general.--The requirements of paragraph (2) shall 
     not apply to small refineries until calendar year 2011.
       ``(ii) Extension of exemption.--

       ``(I) Study by secretary of energy.--Not later than 
     December 31, 2007, the Secretary of Energy shall conduct for 
     the Administrator a study to determine whether compliance 
     with the requirements of paragraph (2) would impose a 
     disproportionate economic hardship on small refineries.
       ``(II) Extension of exemption.--In the case of a small 
     refinery that the Secretary of Energy determines under 
     subclause (I) would be subject to a disproportionate economic 
     hardship if required to comply with paragraph (2), the 
     Administrator shall extend the exemption under clause (i) for 
     the small refinery for a period of not less than 2 additional 
     years.

       ``(B) Petitions based on disproportionate economic 
     hardship.--
       ``(i) Extension of exemption.--A small refinery may at any 
     time petition the Administrator for an extension of the 
     exemption under subparagraph (A) for the reason of 
     disproportionate economic hardship.
       ``(ii) Evaluation of petitions.--In evaluating a petition 
     under clause (i), the Administrator, in consultation with the 
     Secretary of Energy, shall consider the findings of the study 
     under subparagraph (A)(ii) and other economic factors.
       ``(iii) Deadline for action on petitions.--The 
     Administrator shall act on any petition submitted by a small 
     refinery for a hardship exemption not later than 90 days 
     after the date of receipt of the petition.
       ``(C) Credit program.--If a small refinery notifies the 
     Administrator that the small refinery waives the exemption 
     under subparagraph (A), the regulations promulgated under 
     paragraph (2)(A) shall provide for the generation of credits 
     by the small refinery under paragraph (5) beginning in the 
     calendar year following the date of notification.
       ``(D) Opt-in for small refineries.--A small refinery shall 
     be subject to the requirements of paragraph (2) if the small 
     refinery notifies the Administrator that the small refinery 
     waives the exemption under subparagraph (A).

[[Page S10363]]

       ``(10) Ethanol market concentration analysis.--
       ``(A) Analysis.--
       ``(i) In general.--Not later than 180 days after the date 
     of enactment of this paragraph, and annually thereafter, the 
     Federal Trade Commission shall perform a market concentration 
     analysis of the ethanol production industry using the 
     Herfindahl-Hirschman Index to determine whether there is 
     sufficient competition among industry participants to avoid 
     price-setting and other anticompetitive behavior.
       ``(ii) Scoring.--For the purpose of scoring under clause 
     (i) using the Herfindahl-Hirschman Index, all marketing 
     arrangements among industry participants shall be considered.
       ``(B) Report.--Not later than December 1, 2004, and 
     annually thereafter, the Federal Trade Commission shall 
     submit to Congress and the Administrator a report on the 
     results of the market concentration analysis performed under 
     subparagraph (A)(i).
       ``(p) Renewable Fuel Safe Harbor.--
       ``(1) In general.--
       ``(A) Safe harbor.--Notwithstanding any other provision of 
     Federal or State law, no renewable fuel (as defined in 
     subsection (o)(1)) used or intended to be used as a motor 
     vehicle fuel, nor any motor vehicle fuel containing renewable 
     fuel, shall be deemed to be defective in design or 
     manufacture by reason of the fact that the fuel is, or 
     contains, renewable fuel, if--
       ``(i) the fuel does not violate a control or prohibition 
     imposed by the Administrator under this section; and
       ``(ii) the manufacturer of the fuel is in compliance with 
     all requests for information under subsection (b).
       ``(B) Safe harbor not applicable.--In any case in which 
     subparagraph (A) does not apply to a quantity of fuel, the 
     existence of a design defect or manufacturing defect with 
     respect to the fuel shall be determined under otherwise 
     applicable law.
       ``(2) Exception.--This subsection does not apply to ethers.
       ``(3) Applicability.--This subsection applies with respect 
     to all claims filed on or after the date of enactment of this 
     subsection.''.
       (b) Penalties and Enforcement.--Section 211(d) of the Clean 
     Air Act (42 U.S.C. 7545(d)) is amended--
       (1) in paragraph (1)--
       (A) in the first sentence, by striking ``or (n)'' each 
     place it appears and inserting ``(n), or (o)''; and
       (B) in the second sentence, by striking ``or (m)'' and 
     inserting ``(m), or (o)''; and
       (2) in the first sentence of paragraph (2), by striking 
     ``and (n)'' each place it appears and inserting ``(n), and 
     (o)''.
       (c) Exclusion From Ethanol Waiver.--Section 211(h) of the 
     Clean Air Act (42 U.S.C. 7545(h)) is amended--
       (1) by redesignating paragraph (5) as paragraph (6); and
       (2) by inserting after paragraph (4) the following:
     ``(5) Exclusion from ethanol waiver.--
       ``(A) Promulgation of regulations.--Upon notification, 
     accompanied by supporting documentation, from the Governor of 
     a State that the Reid vapor pressure limitation established 
     by paragraph (4) will increase emissions that contribute to 
     air pollution in any area in the State, the Administrator 
     shall, by regulation, apply, in lieu of the Reid vapor 
     pressure limitation established by paragraph (4), the Reid 
     vapor pressure limitation established by paragraph (1) to all 
     fuel blends containing gasoline and 10 percent denatured 
     anhydrous ethanol that are sold, offered for sale, dispensed, 
     supplied, offered for supply, transported, or introduced into 
     commerce in the area during the high ozone season.
       ``(B) Deadline for promulgation.--The Administrator shall 
     promulgate regulations under subparagraph (A) not later than 
     90 days after the date of receipt of a notification from a 
     Governor under that subparagraph.
       ``(C) Effective date.--
       ``(i) In general.--With respect to an area in a State for 
     which the Governor submits a notification under subparagraph 
     (A), the regulations under that subparagraph shall take 
     effect on the later of--

       ``(I) the first day of the first high ozone season for the 
     area that begins after the date of receipt of the 
     notification; or
       ``(II) 1 year after the date of receipt of the 
     notification.

       ``(ii) Extension of effective date based on determination 
     of insufficient supply.--

       ``(I) In general.--If, after receipt of a notification with 
     respect to an area from a Governor of a State under 
     subparagraph (A), the Administrator determines, on the 
     Administrator's own motion or on petition of any person and 
     after consultation with the Secretary of Energy, that the 
     promulgation of regulations described in subparagraph (A) 
     would result in an insufficient supply of gasoline in the 
     State, the Administrator, by regulation--

       ``(aa) shall extend the effective date of the regulations 
     under clause (i) with respect to the area for not more than 1 
     year; and
       ``(bb) may renew the extension under item (aa) for 2 
     additional periods, each of which shall not exceed 1 year.

       ``(II) Deadline for action on petitions.--The Administrator 
     shall act on any petition submitted under subclause (I) not 
     later than 180 days after the date of receipt of the 
     petition.''.

     SEC. 535. RENEWABLE FUEL.

       (a) In General.--The Clean Air Act is amended by inserting 
     after section 211 (42 U.S.C. 7411) the following:

     ``SEC. 212. RENEWABLE FUEL.

       ``(a) Definitions.--In this section:
       ``(1) Municipal solid waste.--The term `municipal solid 
     waste' has the meaning given the term `solid waste' in 
     section 1004 of the Solid Waste Disposal Act (42 U.S.C. 
     6903).
       ``(2) RFG state.--The term `RFG State' means a State in 
     which is located 1 or more covered areas (as defined in 
     section 211(k)(10)(D)).
       ``(3) Secretary.--The term `Secretary' means the Secretary 
     of Energy.
       ``(b) Survey of Renewable Fuel Market.--
       ``(1) Survey and report.--Not later than December 1, 2006, 
     and annually thereafter, the Administrator shall--
       ``(A) conduct, with respect to each conventional gasoline 
     use area and each reformulated gasoline use area in each 
     State, a survey to determine the market shares of--
       ``(i) conventional gasoline containing ethanol;
       ``(ii) reformulated gasoline containing ethanol;
       ``(iii) conventional gasoline containing renewable fuel; 
     and
       ``(iv) reformulated gasoline containing renewable fuel; and
       ``(B) submit to Congress, and make publicly available, a 
     report on the results of the survey under subparagraph (A).
       ``(2) Recordkeeping and reporting requirements.--
       ``(A) In general.--The Administrator may require any 
     refiner, blender, or importer to keep such records and make 
     such reports as are necessary to ensure that the survey 
     conducted under paragraph (1) is accurate.
       ``(B) Reliance on existing requirements.--To avoid 
     duplicative requirements, in carrying out subparagraph (A), 
     the Administrator shall rely, to the maximum extent 
     practicable, on reporting and recordkeeping requirements in 
     effect on the date of enactment of this section.
       ``(3) Confidentiality.--Activities carried out under this 
     subsection shall be conducted in a manner designed to protect 
     confidentiality of individual responses.
       ``(c) Commercial Byproducts From Municipal Solid Waste Loan 
     Guarantee Program.--
       ``(1) Establishment of program.--The Secretary shall 
     establish a program to provide guarantees of loans by private 
     institutions for the construction of facilities for the 
     processing and conversion of municipal solid waste into fuel 
     ethanol and other commercial byproducts.
       ``(2) Requirements.--The Secretary may provide a loan 
     guarantee under paragraph (1) to an applicant if--
       ``(A) without a loan guarantee, credit is not available to 
     the applicant under reasonable terms or conditions sufficient 
     to finance the construction of a facility described in 
     paragraph (1);
       ``(B) the prospective earning power of the applicant and 
     the character and value of the security pledged provide a 
     reasonable assurance of repayment of the loan to be 
     guaranteed in accordance with the terms of the loan; and
       ``(C) the loan bears interest at a rate determined by the 
     Secretary to be reasonable, taking into account the current 
     average yield on outstanding obligations of the United States 
     with remaining periods of maturity comparable to the maturity 
     of the loan.
       ``(4) Criteria.--In selecting recipients of loan guarantees 
     from among applicants, the Secretary shall give preference to 
     proposals that--
       ``(A) meet all applicable Federal and State permitting 
     requirements;
       ``(B) are most likely to be successful; and
       ``(C) are located in local markets that have the greatest 
     need for the facility because of--
       ``(i) the limited availability of land for waste disposal; 
     or
       ``(ii) a high level of demand for fuel ethanol or other 
     commercial byproducts of the facility.
       ``(5) Maturity.--A loan guaranteed under paragraph (1) 
     shall have a maturity of not more than 20 years.
       ``(6) Terms and conditions.--The loan agreement for a loan 
     guaranteed under paragraph (1) shall provide that no 
     provision of the loan agreement may be amended or waived 
     without the consent of the Secretary.
       ``(7) Assurance of repayment.--The Secretary shall require 
     that an applicant for a loan guarantee under paragraph (1) 
     provide an assurance of repayment in the form of a 
     performance bond, insurance, collateral, or other means 
     acceptable to the Secretary in an amount equal to not less 
     than 20 percent of the amount of the loan.
       ``(8) Guarantee fee.--The recipient of a loan guarantee 
     under paragraph (1) shall pay the Secretary an amount 
     determined by the Secretary to be sufficient to cover the 
     administrative costs of the Secretary relating to the loan 
     guarantee.
       ``(9) Full faith and credit.--
       ``(A) In general.--The full faith and credit the United 
     States is pledged to the payment of all guarantees made under 
     this subsection.
       ``(B) Conclusive evidence.--Any guarantee made by the 
     Secretary under this subsection shall be conclusive evidence 
     of the eligibility of the loan for the guarantee with respect 
     to principal and interest.

[[Page S10364]]

       ``(C) Validity.--The validity of the guarantee shall be 
     incontestable in the hands of a holder of the guaranteed 
     loan.
       ``(10) Reports.--Until each guaranteed loan under this 
     subsection has been repaid in full, the Secretary shall 
     annually submit to Congress a report on the activities of the 
     Secretary under this subsection.
       ``(11) Authorization of appropriations.--There are 
     authorized to be appropriated such sums as are necessary to 
     carry out this subsection.
       ``(12) Termination of authority.--The authority of the 
     Secretary to issue a new loan guarantee under paragraph (1) 
     terminates on the date that is 10 years after the date of 
     enactment of this section.
       ``(d) Authorization of Appropriations for Resource 
     Center.--There is authorized to be appropriated, for a 
     resource center to further develop bioconversion technology 
     using low-cost biomass for the production of ethanol at the 
     Center for Biomass-Based Energy at the University of 
     Mississippi and the University of Oklahoma, $4,000,000 for 
     each of fiscal years 2004 through 2006.
       ``(e) Renewable Fuel Production Research and Development 
     Grants.--
       ``(1) In general.--The Administrator shall provide grants 
     for the research into, and development and implementation of, 
     renewable fuel production technologies in RFG States with low 
     rates of ethanol production, including low rates of 
     production of cellulosic biomass ethanol.
       ``(2) Eligibility.--
       ``(A) In general.--The entities eligible to receive a grant 
     under this subsection are academic institutions in RFG 
     States, and consortia made up of combinations of academic 
     institutions, industry, State government agencies, or local 
     government agencies in RFG States, that have proven 
     experience and capabilities with relevant technologies.
       ``(B) Application.--To be eligible to receive a grant under 
     this subsection, an eligible entity shall submit to the 
     Administrator an application in such manner and form, and 
     accompanied by such information, as the Administrator may 
     specify.
       ``(4) Authorization of appropriations.--There is authorized 
     to be appropriated to carry out this subsection $25,000,000 
     for each of fiscal years 2004 through 2008.
       ``(f) Cellulosic Biomass Ethanol Conversion Assistance--
       ``(1) In general.--The Secretary may provide grants to 
     merchant producers of cellulosic biomass ethanol in the 
     United States to assist the producers in building eligible 
     production facilities described in paragraph (2) for the 
     production of cellulosic biomass ethanol.
       ``(2) Eligible production facilities.--A production 
     facility shall be eligible to receive a grant under this 
     subsection if the production facility--
       ``(A) is located in the United States; and
       ``(B) uses cellulosic biomass feedstocks derived from 
     agricultural residues or municipal solid waste.
       ``(3) Authorization of appropriations.--There is authorized 
     to be appropriated to carry out this subsection--
       ``(A) $100,000,000 for fiscal year 2004;
       ``(B) $250,000,000 for fiscal year 2005; and
       ``(C) $400,000000 for fiscal year 2006.''.
       (b) Conforming Amendment.--The table of contents for the 
     Clean Air Act (42 U.S.C. 7401 prec.) is amended by inserting 
     after the item relating to section 211 the following:

``212. Renewable fuels.''.

     SEC. 536. SURVEY OF RENEWABLE FUELS CONSUMPTION.

       Section 205 of the Department of Energy Organization Act 
     (42 U.S.C. 7135) is amended by adding at the end the 
     following:
       ``(m) Survey of Renewable Fuels Consumption.--
       ``(1) In general.--In order to improve the ability to 
     evaluate the effectiveness of the Nation's renewable fuels 
     mandate, the Administrator shall conduct and publish the 
     results of a survey of renewable fuels consumption in the 
     motor vehicle fuels market in the United States monthly, and 
     in a manner designed to protect the confidentiality of 
     individual responses.
       ``(2) Elements of survey.--In conducting the survey, the 
     Administrator shall collect information retrospectively to 
     1998, on a national basis and a regional basis, including--
       ``(A) the quantity of renewable fuels produced;
       ``(B) the cost of production;
       ``(C) the cost of blending and marketing;
       ``(D) the quantity of renewable fuels blended;
       ``(E) the quantity of renewable fuels imported; and
       ``(F) market price data.''.

                 Subtitle F--Federal Reformulated Fuels

     SEC. 537. SHORT TITLE.

       This subtitle may be cited as the ``Federal Reformulated 
     Fuels Act of 2003''.

     SEC. 538. LEAKING UNDERGROUND STORAGE TANKS.

       (a) Use of LUST Funds for Remediation of Contamination From 
     Ether Fuel Additives.--Section 9003(h) of the Solid Waste 
     Disposal Act (42 U.S.C. 6991b(h)) is amended--
       (1) in paragraph (7)(A)--
       (A) by striking ``paragraphs (1) and (2) of this 
     subsection'' and inserting ``paragraphs (1), (2), and (12)''; 
     and
       (B) by inserting ``and section 9010'' before ``if''; and
       (2) by adding at the end the following:
       ``(12) Remediation of contamination from ether fuel 
     additives.--
       ``(A) In general.--The Administrator and the States may use 
     funds made available under section 9013(1) to carry out 
     corrective actions with respect to a release of methyl 
     tertiary butyl ether or other ether fuel additive that 
     presents a threat to human health, welfare, or the 
     environment.
       ``(B) Applicable authority.--Subparagraph (A) shall be 
     carried out--
       ``(i) in accordance with paragraph (2), except that a 
     release with respect to which a corrective action is carried 
     out under subparagraph (A) shall not be required to be from 
     an underground storage tank; and
       ``(ii) in the case of a State, in accordance with a 
     cooperative agreement entered into by the Administrator and 
     the State under paragraph (7).''.
       (b) Release Prevention and Compliance.--Subtitle I of the 
     Solid Waste Disposal Act (42 U.S.C. 6991 et seq.) is amended 
     by striking section 9010 and inserting the following:

     ``SEC. 9010. RELEASE PREVENTION AND COMPLIANCE.

       ``Funds made available under section 9013(2) from the 
     Leaking Underground Storage Tank Trust Fund may be used for 
     conducting inspections, or for issuing orders or bringing 
     actions under this subtitle--
       ``(1) by a State (pursuant to section 9003(h)(7)) acting 
     under--
       ``(A) a program approved under section 9004; or
       ``(B) State requirements regulating underground storage 
     tanks that are similar or identical to this subtitle, as 
     determined by the Administrator; and
       ``(2) by the Administrator, acting under this subtitle or a 
     State program approved under section 9004.

     ``SEC. 9011. AUTHORIZATION OF APPROPRIATIONS.

       ``In addition to amounts made available under section 
     2007(f), there are authorized to be appropriated from the 
     Leaking Underground Storage Tank Trust Fund, notwithstanding 
     section 9508(c)(1) of the Internal Revenue Code of 1986--
       ``(1) to carry out section 9003(h)(12), $200,000,000 for 
     fiscal year 2003, to remain available until expended; and
       ``(2) to carry out section 9010--
       ``(A) $50,000,000 for fiscal year 2003; and
       ``(B) $30,000,000 for each of fiscal years 2004 through 
     2008.''.
       (c) Technical Amendments.--(1) Section 1001 of the Solid 
     Waste Disposal Act (42 U.S.C. prec. 6901) is amended by 
     striking the item relating to section 9010 and inserting the 
     following:

``Sec. 9010. Release prevention and compliance.
``Sec. 9011. Authorization of appropriations.''.
       (2) Section 9001(3)(A) of the Solid Waste Disposal Act (42 
     U.S.C. 6991(3)(A)) is amended by striking ``sustances'' and 
     inserting ``substances''.
       (3) Section 9003(f)(1) of the Solid Waste Disposal Act (42 
     U.S.C. 6991b(f)(1)) is amended by striking ``subsection (c) 
     and (d) of this section'' and inserting ``subsections (c) and 
     (d)''.
       (4) Section 9004(a) of the Solid Waste Disposal Act (42 
     U.S.C. 6991c(a)) is amended in the second sentence by 
     striking ``referred to'' and all that follows and inserting 
     ``referred to in subparagraph (A) or (B), or both, of section 
     9001(2).''.
       (5) Section 9005 of the Solid Waste Disposal Act (42 U.S.C. 
     6991d) is amended--
       (A) in subsection (a), by striking ``study taking'' and 
     inserting ``study, taking'';
       (B) in subsection (b)(1), by striking ``relevent'' and 
     inserting ``relevant''; and
       (C) in subsection (b)(4), by striking ``Evironmental'' and 
     inserting ``Environmental''.

     SEC. 539. RESTRICTIONS ON THE USE OF MTBE.

       (a) Findings.--Congress finds that--
       (1) since 1979, methyl tertiary butyl ether (referred to in 
     this section as ``MTBE'') has been used nationwide at low 
     levels in gasoline to replace lead as an octane booster or 
     anti-knocking agent;
       (2) Public Law 101-549 (commonly known as the ``Clean Air 
     Act Amendments of 1990'') (42 U.S.C. 7401 et seq.) 
     established a fuel oxygenate standard under which 
     reformulated gasoline must contain at least 2 percent oxygen 
     by weight;
       (3) at the time of the adoption of the fuel oxygenate 
     standard, Congress was aware that--
       (A) significant use of MTBE could result from the adoption 
     of that standard; and
       (B) the use of MTBE would likely be important to the cost-
     effective implementation of that standard;
       (4) Congress is aware that gasoline and its component 
     additives have leaked from storage tanks, with consequences 
     for water quality;
       (5) the fuel industry responded to the fuel oxygenate 
     standard established by Public Law 101-549 by making 
     substantial investments in--
       (A) MTBE production capacity; and
       (B) systems to deliver MTBE-containing gasoline to the 
     marketplace;
       (6) when leaked or spilled into the environment, MTBE may 
     cause serious problems of drinking water quality;
       (7) in recent years, MTBE has been detected in water 
     sources throughout the United States;
       (8) MTBE can be detected by smell and taste at low 
     concentrations;

[[Page S10365]]

       (9) while small quantities of MTBE can render water 
     supplies unpalatable, the precise human health effects of 
     MTBE consumption at low levels are yet unknown as of the date 
     of enactment of this Act;
       (10) in the report entitled ``Achieving Clean Air and Clean 
     Water: The Report of the Blue Ribbon Panel on Oxygenates in 
     Gasoline'' and dated September 1999, Congress was urged--
       (A) to eliminate the fuel oxygenate standard;
       (B) to greatly reduce use of MTBE; and
       (C) to maintain the environmental performance of 
     reformulated gasoline;
       (11) Congress has--
       (A) reconsidered the relative value of MTBE in gasoline; 
     and
       (B) decided to eliminate use of MTBE as a fuel additive;
       (12) the timeline for elimination of use of MTBE as a fuel 
     additive must be established in a manner that achieves an 
     appropriate balance among the goals of--
       (A) environmental protection;
       (B) adequate energy supply; and
       (C) reasonable fuel prices; and
       (13) it is appropriate for Congress to provide some limited 
     transition assistance--
       (A) to merchant producers of MTBE who produced MTBE in 
     response to a market created by the oxygenate requirement 
     contained in the Clean Air Act (42 U.S.C. 7401 et seq.); and
       (B) for the purpose of mitigating any fuel supply problems 
     that may result from elimination of a widely-used fuel 
     additive.
       (b) Purposes.--The purposes of this section are--
       (1) to eliminate use of MTBE as a fuel oxygenate; and
       (2) to provide assistance to merchant producers of MTBE in 
     making the transition from producing MTBE to producing other 
     fuel additives.
       (c) Authority for Water Quality Protection From Fuels.--
     Section 211(c) of the Clean Air Act (42 U.S.C. 7545(c)) is 
     amended--
       (1) in paragraph (1)(A)--
       (A) by inserting ``fuel or fuel additive or'' after 
     ``Administrator any''; and
       (B) by striking ``air pollution which'' and inserting ``air 
     pollution, or water pollution, that'';
       (2) in paragraph (4)(B), by inserting ``or water quality 
     protection,'' after ``emission control,''; and
       (3) by adding at the end the following:
       ``(5) Restrictions on use of mtbe.--
       ``(A) In general.--Subject to subparagraph (E), not later 
     than 4 years after the date of enactment of this paragraph, 
     the use of methyl tertiary butyl ether in motor vehicle fuel 
     in any State other than a State described in subparagraph (C) 
     is prohibited.
       ``(B) Regulations.--The Administrator shall promulgate 
     regulations to effect the prohibition in subparagraph (A).
       ``(C) States that authorize use.--A State described in this 
     subparagraph is a State that submits to the Administrator a 
     notice that the State authorizes use of methyl tertiary butyl 
     ether in motor vehicle fuel sold or used in the State.
       ``(D) Publication of notice.--The Administrator shall 
     publish in the Federal Register each notice submitted by a 
     State under subparagraph (C).
       ``(E) Trace quantities.--In carrying out subparagraph (A), 
     the Administrator may allow trace quantities of methyl 
     tertiary butyl ether, not to exceed 0.5 percent by volume, to 
     be present in motor vehicle fuel in cases that the 
     Administrator determines to be appropriate.
       ``(6) MTBE merchant producer conversion assistance.--
       ``(A) In general.--
       ``(i) Grants.--The Secretary of Energy, in consultation 
     with the Administrator, may make grants to merchant producers 
     of methyl tertiary butyl ether in the United States to assist 
     the producers in the conversion of eligible production 
     facilities described in subparagraph (C) to the production 
     of--
       ``(i) iso-octane or alkylates, unless the Administrator, in 
     consultation with the Secretary of Energy, determines that 
     transition assistance for the production of iso-octane or 
     alkylates is inconsistent with the criteria specified in 
     subparagraph (B); and
       ``(ii) any other fuel additive that meets the criteria 
     specified in subparagraph (B).
       ``(B) Criteria.--The criteria referred to in subparagraph 
     (A) are that--
       ``(i) use of the fuel additive is consistent with this 
     subsection;
       ``(ii) the Administrator has not determined that the fuel 
     additive may reasonably be anticipated to endanger public 
     health or the environment;
       ``(iii) the fuel additive has been registered and tested, 
     or is being tested, in accordance with the requirements of 
     this section; and
       ``(iv) the fuel additive will contribute to replacing 
     quantities of motor vehicle fuel rendered unavailable as a 
     result of paragraph (5).
       ``(C) Eligible production facilities.--A production 
     facility shall be eligible to receive a grant under this 
     paragraph if the production facility--
       ``(i) is located in the United States; and
       ``(ii) produced methyl tertiary butyl ether for consumption 
     in nonattainment areas during the period--

       ``(I) beginning on the date of enactment of this paragraph; 
     and
       ``(II) ending on the effective date of the prohibition on 
     the use of methyl tertiary butyl ether under paragraph (5).

       ``(D) Authorization of appropriations.--There is authorized 
     to be appropriated to carry out this paragraph $250,000,000 
     for each of fiscal years 2004 through 2007.''.
       (d) No Effect on Law Concerning State Authority.--The 
     amendments made by subsection (c) have no effect on the law 
     in effect on the day before the date of enactment of this Act 
     concerning the authority of States to limit the use of methyl 
     tertiary butyl ether in motor vehicle fuel.

     SEC. 540. ELIMINATION OF OXYGEN CONTENT REQUIREMENT FOR 
                   REFORMULATED GASOLINE.

       (a) Elimination.--
       (1) In general.--Section 211(k) of the Clean Air Act (42 
     U.S.C. 7545(k)) is amended--
       (A) in paragraph (2)--
       (i) in the second sentence of subparagraph (A), by striking 
     ``(including the oxygen content requirement contained in 
     subparagraph (B))'';
       (ii) by striking subparagraph (B); and
       (iii) by redesignating subparagraphs (C) and (D) as 
     subparagraphs (B) and (C), respectively;
       (B) in paragraph (3)(A), by striking clause (v); and
       (C) in paragraph (7)--
       (i) in subparagraph (A)--

       (I) by striking clause (i); and

       (II) by redesignating clauses (ii) and (iii) as clauses (i) 
     and (ii), respectively; and

       (ii) in subparagraph (C)--

       (I) by striking clause (ii); and
       (II) by redesignating clause (iii) as clause (ii).

       (2) Applicability.--The amendments made by paragraph (1) 
     apply--
       (A) in the case of a State that has received a waiver under 
     section 209(b) of the Clean Air Act (42 U.S.C. 7543(b)), 
     beginning on the date of enactment of this Act; and
       (B) in the case of any other State, beginning 270 days 
     after the date of enactment of this Act.
       (b) Maintenance of Toxic Air Pollutant Emission 
     Reductions.--Section 211(k)(1) of the Clean Air Act (42 
     U.S.C. 7545(k)(1)) is amended--
       (1) by striking ``Within 1 year after the enactment of the 
     Clean Air Act Amendments of 1990,'' and inserting the 
     following:
       ``(A) In general.--Not later than November 15, 1991,''; and
       (2) by adding at the end the following:
       ``(B) Maintenance of toxic air pollutant emissions 
     reductions from reformulated gasoline.--
       ``(i) Definition of padd.--In this subparagraph the term 
     `PADD' means a Petroleum Administration for Defense District.
       ``(ii) Regulations concerning emissions of toxic air 
     pollutants.--Not later than 270 days after the date of 
     enactment of this subparagraph, the Administrator shall 
     establish by regulation, for each refinery or importer (other 
     than a refiner or importer in a State that has received a 
     waiver under section 209(b) with respect to gasoline produced 
     for use in that State), standards for toxic air pollutants 
     from use of the reformulated gasoline produced or distributed 
     by the refiner or importer that maintain the reduction of the 
     average annual aggregate emissions of toxic air pollutants 
     for reformulated gasoline produced or distributed by the 
     refiner or importer during calendar years 1999 and 2000 (as 
     determined on the basis of data collected by the 
     Administrator with respect to the refiner or importer).
       ``(iii) Standards applicable to specific refineries or 
     importers.--

       ``(I) Applicability of standards.--For any calendar year, 
     the standards applicable to a refiner or importer under 
     clause (ii) shall apply to the quantity of gasoline produced 
     or distributed by the refiner or importer in the calendar 
     year only to the extent that the quantity is less than or 
     equal to the average annual quantity of reformulated gasoline 
     produced or distributed by the refiner or importer during 
     calendar years 1999 and 2000.
       ``(II) Applicability of other standards.--For any calendar 
     year, the quantity of gasoline produced or distributed by a 
     refiner or importer that is in excess of the quantity subject 
     to subclause (I) shall be subject to standards for emissions 
     of toxic air pollutants promulgated under subparagraph (A) 
     and paragraph (3)(B).

       ``(iv) Credit program.--The Administrator shall provide for 
     the granting and use of credits for emissions of toxic air 
     pollutants in the same manner as provided in paragraph (7).
       ``(v) Regional protection of toxics reduction baselines.--

       ``(I) In general.--Not later than 60 days after the date of 
     enactment of this subparagraph, and not later than April 1 of 
     each calendar year that begins after that date of enactment, 
     the Administrator shall publish in the Federal Register a 
     report that specifies, with respect to the previous calendar 
     year--

       ``(aa) the quantity of reformulated gasoline produced that 
     is in excess of the average annual quantity of reformulated 
     gasoline produced in 1999 and 2000; and
       ``(bb) the reduction of the average annual aggregate 
     emissions of toxic air pollutants in each PADD, based on 
     retail survey data or data from other appropriate sources.

       ``(II) Effect of failure to maintain aggregate toxics 
     reductions.--If, in any calendar year, the reduction of the 
     average annual aggregate emissions of toxic air pollutants in 
     a PADD fails to meet or exceed the reduction of the average 
     annual aggregate emissions of toxic air pollutants in the

[[Page S10366]]

     PADD in calendar years 1999 and 2000, the Administrator, not 
     later than 90 days after the date of publication of the 
     report for the calendar year under subclause (I), shall--

       ``(aa) identify, to the maximum extent practicable, the 
     reasons for the failure, including the sources, volumes, and 
     characteristics of reformulated gasoline that contributed to 
     the failure; and
       ``(bb) promulgate revisions to the regulations promulgated 
     under clause (ii), to take effect not earlier than 180 days 
     but not later than 270 days after the date of promulgation, 
     to provide that, notwithstanding clause (iii)(II), all 
     reformulated gasoline produced or distributed at each refiner 
     or importer shall meet the standards applicable under clause 
     (iii)(I) beginning not later than April 1 of the calendar 
     year following publication of the report under subclause (I) 
     and in each calendar year thereafter.
       ``(vi) Regulations to control hazardous air pollutants from 
     motor vehicles and motor vehicle fuels.--Not later than July 
     1, 2004, the Administrator shall promulgate final regulations 
     to control hazardous air pollutants from motor vehicles and 
     motor vehicle fuels, as provided for in section 80.1045 of 
     title 40, Code of Federal Regulations (as in effect on the 
     date of enactment of this subparagraph).''.
       (c) Commingling.--
       (1) In general.--Section 211(k) of the Clean Air Act (42 
     U.S.C. 7545(k)) is amended by adding at the end the 
     following:
       ``(11) Commingling.--The regulations under paragraph (1) 
     shall permit the commingling at a retail station of 
     reformulated gasoline containing ethanol and reformulated 
     gasoline that does not contain ethanol if, each time such 
     commingling occurs--
       ``(A) the retailer notifies the Administrator before the 
     commingling, identifying the exact location of the retail 
     station and the specific tank in which the commingling will 
     take place; and
       ``(B) the retailer certifies that the reformulated gasoline 
     resulting from the commingling will meet all applicable 
     requirements for reformulated gasoline, including content and 
     emission performance standards.
       (d) Consolidation in Reformulated Gasoline Regulations.--
     Not later than 180 days after the date of enactment of this 
     Act, the Administrator of the Environmental Protection Agency 
     shall revise the reformulated gasoline regulations under 
     subpart D of part 80 of title 40, Code of Federal 
     Regulations, to consolidate the regulations applicable to 
     VOC-Control Regions 1 and 2 under section 80.41 of that title 
     by eliminating the less stringent requirements applicable to 
     gasoline designated for VOC-Control Region 2 and instead 
     applying the more stringent requirements applicable to 
     gasoline designated for VOC-Control Region 1.
       (e) Savings Clause.--
       (1) In general.--Nothing in this section or any amendment 
     made by this section affects or prejudices any legal claim or 
     action with respect to regulations promulgated by the 
     Administrator before the date of enactment of this Act 
     regarding--
       (A) emissions of toxic air pollutants from motor vehicles; 
     or
       (B) the adjustment of standards applicable to a specific 
     refinery or importer made under those regulations.
       (2) Adjustment of standards.--
       (A) Applicability.--The Administrator may apply any 
     adjustments to the standards applicable to a refinery or 
     importer under subparagraph (B)(iii)(I) of section 211(k)(1) 
     of the Clean Air Act (as added by subsection (b)(2)), except 
     that--
       (i) the Administrator shall revise the adjustments to be 
     based only on calendar years 1999 and 2000;
       (ii) any such adjustment shall not be made at a level below 
     the average percentage of reductions of emissions of toxic 
     air pollutants for reformulated gasoline supplied to PADD I 
     during calendar years 1999 and 2000; and
       (iii) in the case of an adjustment based on toxic air 
     pollutant emissions from reformulated gasoline significantly 
     below the national annual average emissions of toxic air 
     pollutants from all reformulated gasoline--

       (I) the Administrator may revise the adjustment to take 
     account of the scope of the prohibition on methyl tertiary 
     butyl ether imposed by paragraph (5) of section 211(c) of the 
     Clean Air Act (as added by section 203(c)); and
       (II) any such adjustment shall require the refiner or 
     importer, to the maximum extent practicable, to maintain the 
     reduction achieved during calendar years 1999 and 2000 in the 
     average annual aggregate emissions of toxic air pollutants 
     from reformulated gasoline produced or distributed by the 
     refiner or importer.

     SEC. 541. PUBLIC HEALTH AND ENVIRONMENTAL IMPACTS OF FUELS 
                   AND FUEL ADDITIVES.

       Section 211(b) of the Clean Air Act (42 U.S.C. 7545(b)) is 
     amended--
       (1) in paragraph (2)--
       (A) by striking ``may also'' and inserting ``shall, on a 
     regular basis,''; and
       (B) by striking subparagraph (A) and inserting the 
     following:
       ``(A) to conduct tests to determine potential public health 
     and environmental effects of the fuel or additive (including 
     carcinogenic, teratogenic, or mutagenic effects); and''; and
       (2) by adding at the end the following:
       ``(4) Study on certain fuel additives and blendstocks.--
       ``(A) In general.--Not later than 2 years after the date of 
     enactment of this paragraph, the Administrator shall--
       ``(i) conduct a study on the effects on public health 
     (including the effects on children, pregnant women, minority 
     or low-income communities, and other sensitive populations), 
     air quality, and water resources of increased use of, and the 
     feasibility of using as substitutes for methyl tertiary butyl 
     ether in gasoline--

       ``(I) ethyl tertiary butyl ether;
       ``(II) tertiary amyl methyl ether;
       ``(III) di-isopropyl ether;
       ``(IV) tertiary butyl alcohol;
       ``(V) other ethers and heavy alcohols, as determined by 
     then Administrator;
       ``(VI) ethanol;
       ``(VII) iso-octane; and
       ``(VIII) alkylates; and

       ``(ii) conduct a study on the effects on public health 
     (including the effects on children, pregnant women, minority 
     or low-income communities, and other sensitive populations), 
     air quality, and water resources of the adjustment for 
     ethanol-blended reformulated gasoline to the volatile organic 
     compounds performance requirements that are applicable under 
     paragraphs (1) and (3) of section 211(k); and
       ``(iii) submit to the Committee on Environment and Public 
     Works of the Senate and the Committee on Energy and Commerce 
     of the House of Representatives a report describing the 
     results of the studies under clauses (i) and (ii).
       ``(B) Contracts for study.--In carrying out this paragraph, 
     the Administrator may enter into 1 or more contracts with 
     nongovernmental entities such as--
       ``(i) the national energy laboratories; and
       ``(ii) institutions of higher education (as defined in 
     section 101 of the Higher Education Act of 1965 (20 U.S.C. 
     1001)).''.

     SEC. 542. ANALYSES OF MOTOR VEHICLE FUEL CHANGES.

       Section 211 of the Clean Air Act (42 U.S.C. 7545) (as 
     amended by section 5__1(a)) is amended by inserting after 
     subsection (p) the following:
       ``(q) Analyses of Motor Vehicle Fuel Changes and Emissions 
     Model.--
       ``(1) Anti-backsliding analysis.--
       ``(A) Draft analysis.--Not later than 4 years after the 
     date of enactment of this paragraph, the Administrator shall 
     publish for public comment a draft analysis of the changes in 
     emissions of air pollutants and air quality due to the use of 
     motor vehicle fuel and fuel additives resulting from 
     implementation of the amendments made by the Reliable Fuels 
     Act.
       ``(B) Final analysis.--After providing a reasonable 
     opportunity for comment but not later than 5 years after the 
     date of enactment of this paragraph, the Administrator shall 
     publish the analysis in final form.
       ``(2) Emissions model.--For the purposes of this 
     subsection, as soon as the necessary data are available, the 
     Administrator shall develop and finalize an emissions model 
     that reasonably reflects the effects of gasoline 
     characteristics or components on emissions from vehicles in 
     the motor vehicle fleet during calendar year 2006.''.

     SEC. 543. ADDITIONAL OPT-IN AREAS UNDER REFORMULATED GASOLINE 
                   PROGRAM.

       Section 211(k)(6) of the Clean Air Act (42 U.S.C. 
     7545(k)(6)) is amended--
       (1) by striking ``(6) Opt-in areas.--(A) Upon'' and 
     inserting the following:
       ``(6) Opt-in areas.--
       ``(A) Classified areas.--
       ``(i) In general.--Upon'';
       (2) in subparagraph (B), by striking ``(B) If'' and 
     inserting the following:
       ``(ii) Effect of insufficient domestic capacity to produce 
     reformulated gasoline.--If'';
       (3) in subparagraph (A)(ii) (as redesignated by paragraph 
     (2))--
       (A) in the first sentence, by striking ``subparagraph (A)'' 
     and inserting ``clause (i)''; and
       (B) in the second sentence, by striking ``this paragraph'' 
     and inserting ``this subparagraph''; and
       (4) by adding at the end the following:
       ``(B) Ozone transport region.--
       ``(i) Application of prohibition.--

       ``(I) In general.--On application of the Governor of a 
     State in the ozone transport region established by section 
     184(a), the Administrator, not later than 180 days after the 
     date of receipt of the application, shall apply the 
     prohibition specified in paragraph (5) to any area in the 
     State (other than an area classified as a marginal, moderate, 
     serious, or severe ozone nonattainment area under subpart 2 
     of part D of title I) unless the Administrator determines 
     under clause (iii) that there is insufficient capacity to 
     supply reformulated gasoline.
       ``(II) Publication of application.--As soon as practicable 
     after the date of receipt of an application under subclause 
     (I), the Administrator shall publish the application in the 
     Federal Register.

       ``(ii) Period of applicability.--Under clause (i), the 
     prohibition specified in paragraph (5) shall apply in a 
     State--

       ``(I) commencing as soon as practicable but not later than 
     2 years after the date of approval by the Administrator of 
     the application of the Governor of the State; and
       ``(II) ending not earlier than 4 years after the 
     commencement date determined under subclause (I).

       ``(iii) Extension of commencement date based on 
     insufficient capacity.--

       ``(I) In general.--If, after receipt of an application from 
     a Governor of a State under

[[Page S10367]]

     clause (i), the Administrator determines, on the 
     Administrator's own motion or on petition of any person, 
     after consultation with the Secretary of Energy, that there 
     is insufficient capacity to supply reformulated gasoline, the 
     Administrator, by regulation--

       ``(aa) shall extend the commencement date with respect to 
     the State under clause (ii)(I) for not more than 1 year; and
       ``(bb) may renew the extension under item (aa) for 2 
     additional periods, each of which shall not exceed 1 year.

       ``(II) Deadline for action on petitions.--The Administrator 
     shall act on any petition submitted under subclause (I) not 
     later than 180 days after the date of receipt of the 
     petition.''.

     SEC. 544. FEDERAL ENFORCEMENT OF STATE FUELS REQUIREMENTS.

       Section 211(c)(4)(C) of the Clean Air Act (42 U.S.C. 
     7545(c)(4)(C)) is amended--
       (1) by striking ``(C) A State'' and inserting the 
     following:
       ``(C) Authority of state to control fuels and fuel 
     additives for reasons of necessity.--
       ``(i) In general.--A State''; and
       (2) by adding at the end the following:
       ``(ii) Enforcement by the administrator.--In any case in 
     which a State prescribes and enforces a control or 
     prohibition under clause (i), the Administrator, at the 
     request of the State, shall enforce the control or 
     prohibition as if the control or prohibition had been adopted 
     under the other provisions of this section.''.

     SEC. 545. FUEL SYSTEM REQUIREMENTS HARMONIZATION STUDY.

       (a) Study.--
       (1) In general.--The Administrator of the Environmental 
     Protection Agency and the Secretary of Energy shall jointly 
     conduct a study of Federal, State, and local requirements 
     concerning motor vehicle fuels, including--
       (A) requirements relating to reformulated gasoline, 
     volatility (measured in Reid vapor pressure), oxygenated 
     fuel, and diesel fuel; and
       (B) other requirements that vary from State to State, 
     region to region, or locality to locality.
       (2) Required elements.--The study shall assess--
       (A) the effect of the variety of requirements described in 
     paragraph (1) on the supply, quality, and price of motor 
     vehicle fuels available to the consumer;
       (B) the effect of the requirements described in paragraph 
     (1) on achievement of--
       (i) national, regional, and local air quality standards and 
     goals; and
       (ii) related environmental and public health protection 
     standards and goals (including the protection of children, 
     pregnant women, minority or low-income communities, and other 
     sensitive populations);
       (C) the effect of Federal, State, and local motor vehicle 
     fuel regulations, including multiple motor vehicle fuel 
     requirements, on--
       (i) domestic refiners;
       (ii) the fuel distribution system; and
       (iii) industry investment in new capacity;
       (D) the effect of the requirements described in paragraph 
     (1) on emissions from vehicles, refiners, and fuel handling 
     facilities;
       (E) the feasibility of developing national or regional 
     motor vehicle fuel slates for the 48 contiguous States that, 
     while protecting and improving air quality at the national, 
     regional, and local levels, could--
       (i) enhance flexibility in the fuel distribution 
     infrastructure and improve fuel fungibility;
       (ii) reduce price volatility and costs to consumers and 
     producers;
       (iii) provide increased liquidity to the gasoline market; 
     and
       (iv) enhance fuel quality, consistency, and supply; and
       (F) the feasibility of providing incentives, and the need 
     for the development of national standards necessary, to 
     promote cleaner burning motor vehicle fuel.
       (b) Report.--
       (1) In general.--Not later than June 1, 2007, the 
     Administrator of the Environmental Protection Agency and the 
     Secretary of Energy shall submit to Congress a report on the 
     results of the study conducted under subsection (a).
       (2) Recommendations.--
       (A) In general.--The report shall contain recommendations 
     for legislative and administrative actions that may be 
     taken--
       (i) to improve air quality;
       (ii) to reduce costs to consumers and producers; and
       (iii) to increase supply liquidity.
       (B) Required considerations.--The recommendations under 
     subparagraph (A) shall take into account the need to provide 
     advance notice of required modifications to refinery and fuel 
     distribution systems in order to ensure an adequate supply of 
     motor vehicle fuel in all States.
       (3) Consultation.--In developing the report, the 
     Administrator of the Environmental Protection Agency and the 
     Secretary of Energy shall consult with--
       (A) the Governors of the States;
       (B) automobile manufacturers;
       (C) State and local air pollution control regulators;
       (D) public health experts;
       (E) motor vehicle fuel producers and distributors; and
       (F) the public.

                      TITLE VI--ENERGY EFFICIENCY

                      Subtitle A--Federal Programs

     SEC. 601. ENERGY MANAGEMENT REQUIREMENTS.

       (a) Energy Reduction Goals.--Section 543(a)(1) of the 
     National Energy Conservation Policy Act (42 U.S.C. 
     8253(a)(1)) is amended by striking ``its Federal buildings so 
     that'' and all that follows through the end and inserting 
     ``the Federal buildings of the agency (including each 
     industrial or laboratory facility) so that the energy 
     consumption per gross square foot of the Federal buildings of 
     the agency in fiscal years 2004 through 2013 is reduced, as 
     compared with the energy consumption per gross square foot of 
     the Federal buildings of the agency in fiscal year 2000, by 
     the percentage specified in the following table:
``Fiscal Year                                      Percentage reduction
2004.............................................................2 ....

2005.............................................................4 ....

2006.............................................................6 ....

2007.............................................................8 ....

2008............................................................10 ....

2009............................................................12 ....

2010............................................................14 ....

2011............................................................16 ....

2012............................................................18 ....

2013.........................................................20.''.....

       (b) Effective Date.--The energy reduction goals and 
     baseline established in paragraph (1) of section 543(a) of 
     the National Energy Conservation Policy Act, as amended by 
     subsection (a) of this section, supersede all previous goals 
     and baselines under such paragraph, and related reporting 
     requirements.
       (c) Review of Energy Performance Requirements.--Section 
     543(a) of the National Energy Conservation Policy Act (42 
     U.S.C. 8253(a)) is further amended by adding at the end the 
     following:
       ``(3) Not later than December 31, 2011, the Secretary shall 
     review the results of the implementation of the energy 
     performance requirement established under paragraph (1) and 
     submit to Congress recommendations concerning energy 
     performance requirements for fiscal years 2014 through 
     2022.''.
       (d) Exclusions.--Section 543(c)(1) of the National Energy 
     Conservation Policy Act (42 U.S.C. 8253(c)(1)) is amended by 
     striking ``An agency may exclude'' and all that follows 
     through the end and inserting--
       ``(A) An agency may exclude, from the energy performance 
     requirement for a fiscal year established under subsection 
     (a) and the energy management requirement established under 
     subsection (b), any Federal building or collection of Federal 
     buildings, if the head of the agency finds that--
       ``(i) compliance with those requirements would be 
     impracticable;
       ``(ii) the agency has completed and submitted all federally 
     required energy management reports;
       ``(iii) the agency has achieved compliance with the energy 
     efficiency requirements of this Act, the Energy Policy Act of 
     1992, Executive Orders, and other Federal law; and
       ``(iv) the agency has implemented all practicable, life-
     cycle cost-effective projects with respect to the Federal 
     building or collection of Federal buildings to be excluded.
       ``(B) A finding of impracticability under subparagraph 
     (A)(i) shall be based on--
       ``(i) the energy intensiveness of activities carried out in 
     the Federal building or collection of Federal buildings; or
       ``(ii) the fact that the Federal building or collection of 
     Federal buildings is used in the performance of a national 
     security function.''.
       (e) Review by Secretary.--Section 543(c)(2) of the National 
     Energy Conservation Policy Act (42 U.S.C. 8253(c)(2)) is 
     amended--
       (1) by striking ``impracticability standards'' and 
     inserting ``standards for exclusion''; and
       (2) by striking ``a finding of impracticability'' and 
     inserting ``the exclusion''.
       (f) Criteria.--Section 543(c) of the National Energy 
     Conservation Policy Act (42 U.S.C. 8253(c)) is further 
     amended by adding at the end the following:
       ``(3) Not later than 180 days after the date of enactment 
     of this paragraph, the Secretary shall issue guidelines that 
     establish criteria for exclusions under paragraph (1).''.
       (g) Retention of Energy Savings.--Section 546 of the 
     National Energy Conservation Policy Act (42 U.S.C. 8256) is 
     amended by adding at the end the following new subsection:
       ``(e) Retention of Energy Savings.--An agency may retain 
     any funds appropriated to that agency for energy 
     expenditures, at buildings subject to the requirements of 
     section 543(a) and (b), that are not made because of energy 
     savings. Except as otherwise provided by law, such funds may 
     be used only for energy efficiency or unconventional and 
     renewable energy resources projects.''.
       (h) Reports.--Section 548(b) of the National Energy 
     Conservation Policy Act (42 U.S.C. 8258(b)) is amended--
       (1) in the subsection heading, by inserting ``The President 
     and'' before ``Congress''; and
       (2) by inserting ``President and'' before ``Congress''.
       (i) Conforming Amendment.--Section 550(d) of the National 
     Energy Conservation Policy Act (42 U.S.C. 8258b(d)) is 
     amended in the second sentence by striking ``the 20 percent 
     reduction goal established under section 543(a) of the 
     National Energy Conservation Policy Act (42 U.S.C. 
     8253(a)).'' and inserting ``each of the energy reduction 
     goals established under section 543(a).''.

[[Page S10368]]

     SEC. 602. ENERGY USE MEASUREMENT AND ACCOUNTABILITY.

       Section 543 of the National Energy Conservation Policy Act 
     (42 U.S.C. 8253) is further amended by adding at the end the 
     following:
       ``(e) Metering of Energy Use.--
       ``(1) Deadline.--By October 1, 2010, in accordance with 
     guidelines established by the Secretary under paragraph (2), 
     all Federal buildings shall, for the purposes of efficient 
     use of energy and reduction in the cost of electricity used 
     in such buildings, be metered or submetered. Each agency 
     shall use, to the maximum extent practicable, advanced meters 
     or advanced metering devices that provide data at least daily 
     and that measure at least hourly consumption of electricity 
     in the Federal buildings of the agency. Such data shall be 
     incorporated into existing Federal energy tracking systems 
     and made available to Federal facility energy managers.
       ``(2) Guidelines.--
       ``(A) In general.--Not later than 180 days after the date 
     of enactment of this subsection, the Secretary, in 
     consultation with the Department of Defense, the General 
     Services Administration, representatives from the metering 
     industry, utility industry, energy services industry, energy 
     efficiency industry, national laboratories, universities, and 
     Federal facility energy managers, shall establish guidelines 
     for agencies to carry out paragraph (1).
       ``(B) Requirements for guidelines.--The guidelines shall--
       ``(i) take into consideration--

       ``(I) the cost of metering and submetering and the reduced 
     cost of operation and maintenance expected to result from 
     metering and submetering;
       ``(II) the extent to which metering and submetering are 
     expected to result in increased potential for energy 
     management, increased potential for energy savings and energy 
     efficiency improvement, and cost and energy savings due to 
     utility contract aggregation; and
       ``(III) the measurement and verification protocols of the 
     Department of Energy;

       ``(ii) include recommendations concerning the amount of 
     funds and the number of trained personnel necessary to gather 
     and use the metering information to track and reduce energy 
     use;
       ``(iii) establish priorities for types and locations of 
     buildings to be metered and submetered based on cost 
     effectiveness and a schedule of one or more dates, not later 
     than 1 year after the date of issuance of the guidelines, on 
     which the requirements specified in paragraph (1) shall take 
     effect; and
       ``(iv) establish exclusions from the requirements specified 
     in paragraph (1) based on the de minimis quantity of energy 
     use of a Federal building, industrial process, or structure.
       ``(3) Plan.--No later than 6 months after the date 
     guidelines are established under paragraph (2), in a report 
     submitted by the agency under section 548(a), each agency 
     shall submit to the Secretary a plan describing how the 
     agency will implement the requirements of paragraph (1), 
     including--
       ``(A) how the agency will designate personnel primarily 
     responsible for achieving the requirements; and
       ``(B) demonstration by the agency, complete with 
     documentation, of any finding that advanced meters or 
     advanced metering devices, as defined in paragraph (1), are 
     not practicable.''.

     SEC. 603. FEDERAL BUILDING PERFORMANCE STANDARDS.

       Section 305(a) of the Energy Conservation and Production 
     Act (42 U.S.C. 6834(a)) is amended--
       (1) in paragraph (2)(A), by striking ``CABO Model Energy 
     Code, 1992'' and inserting ``the 2000 International Energy 
     Conservation Code''; and
       (2) by adding at the end the following:
       ``(3) Revised federal building energy efficiency 
     performance standards.--
       ``(A) In general.--Not later than 1 year after the date of 
     enactment of this paragraph, the Secretary of Energy shall 
     establish, by rule, revised Federal building energy 
     efficiency performance standards that require that, if cost-
     effective, for new Federal buildings--
       ``(i) such buildings be designed so as to achieve energy 
     consumption levels at least 30 percent below those of the 
     most recent version of the International Energy Conservation 
     Code, as appropriate; and
       ``(ii) sustainable design principles are applied to the 
     siting, design, and construction of all new and replacement 
     buildings.
       ``(B) Additional revisions.--Not later than 1 year after 
     the date of approval of amendments to ASHRAE Standard 90.1 or 
     the 2000 International Energy Conservation Code, the 
     Secretary of Energy shall determine, based on the cost-
     effectiveness of the requirements under the amendments, 
     whether the revised standards established under this 
     paragraph should be updated to reflect the amendments.
       ``(C) Statement on compliance of new buildings.--In the 
     budget request of the Federal agency for each fiscal year and 
     each report submitted by the Federal agency under section 
     548(a) of the National Energy Conservation Policy Act (42 
     U.S.C. 8258(a)), the head of each Federal agency shall 
     include
       ``(i) a list of all new Federal buildings owned, operated, 
     or controlled by the Federal agency; and
       ``(ii) a statement concerning whether the Federal buildings 
     meet or exceed the revised standards established under this 
     paragraph.''.

     SEC. 604. ENERGY SAVINGS PERFORMANCE CONTRACTS.

       (a) Permanent Extension.--Section 801(c) of the National 
     Energy Conservation Policy Act (42 U.S.C. 8287(c)) is 
     repealed.
       (b) Replacement Facilities.--Section 801(a) of the National 
     Energy Conservation Policy Act (42 U.S.C. 8287(a)) is amended 
     by adding at the end the following new paragraph:
       ``(3)(A) In the case of an energy savings contract or 
     energy savings performance contract providing for energy 
     savings through the construction and operation of one or more 
     buildings or facilities to replace one or more existing 
     buildings or facilities, benefits ancillary to the purpose of 
     such contract under paragraph (1) may include savings 
     resulting from reduced life-cycle costs of operation and 
     maintenance at such replacement buildings or facilities when 
     compared with costs of operation and maintenance at the 
     buildings or facilities being replaced, established through a 
     methodology set forth in the contract.
       ``(B) Notwithstanding paragraph (2)(B), aggregate annual 
     payments by an agency under an energy savings contract or 
     energy savings performance contract referred to in 
     subparagraph (A) may take into account (through the 
     procedures developed pursuant to this section) savings 
     resulting from reduced costs of operation and maintenance as 
     described in that subparagraph.''.
       (c) Energy Savings.--Section 804(2) of the National Energy 
     Conservation Policy Act (42 U.S.C. 8287c(2)) is amended to 
     read as follows:
       ``(2) The term `energy savings' means--
       ``(A) a reduction in the cost of energy or water, from a 
     base cost established through a methodology set forth in the 
     contract, used in an existing federally owned building or 
     buildings or other federally owned facilities as a result 
     of--
       ``(i) the lease or purchase of operating equipment, 
     improvements, altered operation and maintenance, or technical 
     services;
       ``(ii) the increased efficient use of existing energy 
     sources by co-generation or heat recovery, excluding any co-
     generation process for other than a federally owned building 
     or buildings or other federally owned facilities; or
       ``(iii) the increased efficient use of existing water 
     sources; or
       ``(B) in the case of a replacement building or facility 
     described in section 801(a)(3), a reduction in the cost of 
     energy, from a base cost established through a methodology 
     set forth in the contract, that would otherwise be utilized 
     in one or more existing federally owned buildings or other 
     federally owned facilities by reason of the construction and 
     operation of the replacement building or facility.''.
       (d) Energy Savings Contract.--Section 804(3) of the 
     National Energy Conservation Policy Act (42 U.S.C. 8287c(3)) 
     is amended to read as follows:
       ``(3) The terms `energy savings contract' and `energy 
     savings performance contract' mean a contract which provides 
     for--
       ``(A) the performance of services for the design, 
     acquisition, installation, testing, and, where appropriate, 
     operation, maintenance and repair, of an identified energy or 
     water conservation measure or series of measures at one or 
     more locations; or
       ``(B) energy savings through the construction and operation 
     of one or more buildings or facilities to replace one or more 
     existing buildings or facilities. Such contracts shall, with 
     respect to an agency facility that is a public building as 
     such term is defined in section 13(1) of the Public Buildings 
     Act of 1959 (40 U.S.C. 612(1)), be in compliance with the 
     prospectus requirements and procedures of section 7 of the 
     Public Buildings Act of 1959 (40 U.S.C. 606).''.
       (e) Energy or Water Conservation Measure.--Section 804(4) 
     of the National Energy Conservation Policy Act (42 U.S.C. 
     8287c(4)) is amended to read as follows:
       ``(4) The term `energy or water conservation measure' 
     means--
       ``(A) an energy conservation measure, as defined in section 
     551(4) (42 U.S.C. 8259(4)); or
       ``(B) a water conservation measure that improves water 
     efficiency, is life-cycle cost-effective, and involves water 
     conservation, water recycling or reuse, more efficient 
     treatment of wastewater or stormwater, improvements in 
     operation or maintenance efficiencies, retrofit activities, 
     or other related activities, not at a Federal hydroelectric 
     facility.''.
       (f) Pilot Program for Non-building Applications.--
       (1) The Secretary of Defense, and the heads of other 
     interested Federal agencies, are authorized to enter into up 
     to 10 energy savings performance contracts under Title VIII 
     of the National Energy Conservation Policy Act (42 U.S.C. 
     8287 et seq.) for the purpose of achieving energy or water 
     savings, secondary savings, and benefits incidental to those 
     purposes, in non-building applications, provided that the 
     aggregate payments to be made by the Federal government under 
     such contracts shall not exceed $100,000,000.
       (2) The Secretary of Energy, in consultation with the 
     Secretary of Defense and the heads of other interested 
     Federal agencies, shall select projects that demonstrate the 
     applicability and benefits of energy savings performance 
     contracting to a range of non-building applications.
       (3) For the purposes of this subsection:
       (A) The term ``non-building application'' means--

[[Page S10369]]

       (i) any class of vehicles, devices, or equipment that is 
     transportable under its own power by land, sea, or air that 
     consumes energy from any fuel source for the purpose of such 
     transportability, or to maintain a controlled environment 
     within such vehicle, device, or equipment; or
       (ii) any Federally owned equipment used to generate 
     electricity or transport water.
       (B) The term ``secondary savings'', means additional energy 
     or cost savings that are a direct consequence of the energy 
     or water savings that result from the financing and 
     implementation of the energy savings performance contract, 
     including, but not limited to, energy or cost savings that 
     result from a reduction in the need for fuel delivery and 
     logistical support, or the increased efficiency in the 
     production of electricity.
       (4) Not later than 3 years after the date of enactment of 
     this section, the Secretary of Energy shall report to the 
     Congress on the progress and results of the projects funded 
     pursuant to this section. Such report shall include a 
     description of projects undertaken; the energy, water and 
     cost savings, secondary savings and other benefits that 
     resulted from such projects; and recommendations on whether 
     the pilot program should be extended, expanded, or authorized 
     permanently as a part of the program authorized under Title 
     VIII of the National Energy Conservation Policy act (42 
     U.S.C. 8287 et seq.).
       (5) Section 546(c)(3) of the National Energy Conservation 
     Policy Act (42 U.S.C. 8256) is amended by striking the word 
     ``facilities'', and inserting the words ``facilities, 
     equipment and vehicles'', in lieu thereof.
       (g) Review.--Within 180 days after the date of the 
     enactment of this section, the Secretary of Energy shall 
     complete a review of the Energy Savings Performance Contract 
     program to identify statutory, regulatory, and administrative 
     obstacles that prevent Federal agencies from fully utilizing 
     the program. In addition, this review shall identify all 
     areas for increasing program flexibility and effectiveness, 
     including audit and measurement verification requirements, 
     accounting for energy use in determining savings, contracting 
     requirements, including the identification of additional 
     qualified contractors, and energy efficiency services 
     covered. The Secretary shall report these findings to the 
     Committee on Energy and Commerce of the House of 
     Representatives and the Committee on Energy and Natural 
     Resources of the Senate, and shall implement identified 
     administrative and regulatory changes to increase program 
     flexibility and effectiveness to the extent that such changes 
     are consistent with statutory authority.

     SEC. 605. PROCUREMENT OF ENERGY EFFICIENT PRODUCTS.

       Part 3 of title V of the National Energy Conservation 
     Policy Act is amended by adding at the end the following:

     ``SEC. 552. FEDERAL PROCUREMENT OF ENERGY EFFICIENT PRODUCTS.

       ``(a) Definitions.--In this section:
       ``(1) The term `Energy Star product' means a product that 
     is rated for energy efficiency under an Energy Star program.
       ``(2) The term `Energy Star program' means the program 
     established by section 324A of the Energy Policy and 
     Conservation Act.
       ``(3) The term `executive agency' has the meaning given the 
     term in section 4 of the Office of Federal Procurement Policy 
     Act (41 U.S.C. 403).
       ``(4) The term `FEMP designated product' means a product 
     that is designated under the Federal Energy Management 
     Program of the Department of Energy as being among the 
     highest 25 percent of equivalent products for energy 
     efficiency.
       ``(b) Procurement of Energy Efficient Products.--
       ``(1) Requirement.--To meet the requirements of an 
     executive agency for an energy consuming product, the head of 
     the executive agency shall, except as provided in paragraph 
     (2), procure an Energy Star product or a FEMP designated 
     product.
       ``(2) Exceptions.--The head of an executive agency is not 
     required to procure an Energy Star product or FEMP designated 
     product under paragraph (1) if the head of the executive 
     agency finds in writing that--
       ``(A) an Energy Star product or FEMP designated product is 
     not cost-effective over the life of the product taking energy 
     cost savings into account; or
       ``(B) no Energy Star product or FEMP designated product is 
     reasonably available that meets the functional requirements 
     of the executive agency.
       ``(3) Procurement planning.--The head of an executive 
     agency shall incorporate into the specifications for all 
     procurements involving energy consuming products and systems, 
     including guide specifications, project specifications, and 
     construction, renovation, and services contracts that include 
     provision of energy consuming products and systems, and into 
     the factors for the evaluation of offers received for the 
     procurement, criteria for energy efficiency that are 
     consistent with the criteria used for rating Energy Star 
     products and for rating FEMP designated products.
       ``(c) Listing of Energy Efficient Products in Federal 
     Catalogs.--Energy Star products and FEMP designated products 
     shall be clearly identified and prominently displayed in any 
     inventory or listing of products by the General Services 
     Administration or the Defense Logistics Agency. The General 
     Services Administration or the Defense Logistics Agency shall 
     supply only Energy Star products or FEMP designated products 
     for all product categories covered by the Energy Star program 
     or the Federal Energy Management Program, except in cases 
     where the agency ordering a product specifies in writing that 
     no Energy Star product or FEMP designated product is 
     available to meet the buyer's functional requirements, or 
     that no Energy Star product or FEMP designated product is 
     cost-effective for the intended application over the life of 
     the product, taking energy cost savings into account.
       ``(d) Designation of Electric Motors.--In the case of 
     electric motors of 1 to 500 horsepower, agencies shall select 
     only premium efficient motors that meet a standard designated 
     by the Secretary. The Secretary shall designate such a 
     standard within 120 days after the date of the enactment of 
     this section, after considering the recommendations of 
     associated electric motor manufacturers and energy efficiency 
     groups.
       ``(e) Regulations.--Not later than 180 days after the date 
     of the enactment of this section, the Secretary shall issue 
     guidelines to carry out this section.''.
       (b) Conforming Amendment.--The table of contents in section 
     1(b) of the National Energy Conservation Policy Act (42 
     U.S.C. 8201 note) is amended by inserting after the item 
     relating to the end of the items relating to part 3 of title 
     V the following:

``Sec. 552. Federal procurement of energy efficient products.''.

     SEC. 606. CONGRESSIONAL BUILDING EFFICIENCY.

       (a) In General.--Part 3 of title V of the National Energy 
     Conservation Policy Act is further amended by adding at the 
     end:

     ``SEC. 553. CONGRESSIONAL BUILDING EFFICIENCY.

       ``(a) In General.--The Architect of the Capitol--
       ``(1) shall develop, update, and implement a cost-effective 
     energy conservation and management plan (referred to in this 
     section as the `plan') for all facilities administered by the 
     Congress (referred to in this section as `congressional 
     buildings') to meet the energy performance requirements for 
     Federal buildings established under section 543(a)(1); and
       ``(2) shall submit the plan to Congress, not later than 180 
     days after the date of enactment of this section.
       ``(b) Plan Requirements.--The plan shall include--
       ``(1) a description of the life-cycle cost analysis used to 
     determine the cost-effectiveness of proposed energy 
     efficiency projects;
       ``(2) a schedule of energy surveys to ensure complete 
     surveys of all congressional buildings every 5 years to 
     determine the cost and payback period of energy and water 
     conservation measures;
       ``(3) a strategy for installation of life-cycle cost-
     effective energy and water conservation measures;
       ``(4) the results of a study of the costs and benefits of 
     installation of submetering in congressional buildings; and
       ``(5) information packages and `how-to' guides for each 
     Member and employing authority of Congress that detail 
     simple, cost-effective methods to save energy and taxpayer 
     dollars in the workplace.
       ``(c) Annual Report.--The Architect shall submit to 
     Congress annually a report on congressional energy management 
     and conservation programs required under this section that 
     describes in detail--
       ``(1) energy expenditures and savings estimates for each 
     facility;
       ``(2) energy management and conservation projects; and
       ``(3) future priorities to ensure compliance with this 
     section.''.
       (b) Table of Contents Amendment.--The table of contents in 
     section 1(b) of the National Energy Conservation Policy Act 
     is amended by adding at the end of the items relating to part 
     3 of title V the following new item:

``Sec. 553. Energy and water savings measures in congressional 
              buildings.''.
       (c) Repeal.--Section 310 of the Legislative Branch 
     Appropriations Act, 1999 (40 U.S.C. 166i), is repealed.
       (d) Energy Infrastructure.--The Architect of the Capitol, 
     building on the Master Plan Study completed in July 2000, 
     shall commission a study to evaluate the energy 
     infrastructure of the Capital Complex to determine how the 
     infrastructure could be augmented to become more energy 
     efficient, using unconventional and renewable energy 
     resources, in a way that would enable the Complex to have 
     reliable utility service in the event of power fluctuations, 
     shortages, or outages.
       (e) Authorization.--There are authorized to be appropriated 
     to the Architect of the Capitol to carry out subsection (d), 
     not more than $2,000,000 for fiscal year 2004.

     SEC. 607. INCREASED USE OF RECOVERED MINERAL COMPONENT IN 
                   FEDERALLY FUNDED PROJECTS INVOLVING PROCUREMENT 
                   OF CEMENT OR CONCRETE.

       (a) Amendment.--Subtitle F of the Solid Waste Disposal Act 
     (42 U.S.C. 6961 et seq.) is amended by adding at the end the 
     following new section:

     ``SEC. 6005. INCREASED USE OF RECOVERED MINERAL COMPONENT IN 
                   FEDERALLY FUNDED PROJECTS INVOLVING PROCUREMENT 
                   OF CEMENT OR CONCRETE.

       ``(a) Definitions.--In this section:
       ``(1) Agency head.--The term `agency head' means--

[[Page S10370]]

       ``(A) the Secretary of Transportation; and
       ``(B) the head of each other Federal agency that on a 
     regular basis procures, or provides Federal funds to pay or 
     assist in paying the cost of procuring, material for cement 
     or concrete projects.
       ``(2) Cement or concrete project.--The term `cement or 
     concrete project' means a project for the construction or 
     maintenance of a highway or other transportation facility or 
     a Federal, State, or local government building or other 
     public facility that--
       ``(A) involves the procurement of cement or concrete; and
       ``(B) is carried out in whole or in part using Federal 
     funds.
       ``(3) Recovered mineral component.--The term `recovered 
     mineral component' means
       ``(A) ground granulated blast furnace slag;
       ``(B) coal combustion fly ash; and
       ``(C) any other waste material or byproduct recovered or 
     diverted from solid waste that the Administrator, in 
     consultation with an agency head, determines should be 
     treated as recovered mineral component under this section for 
     use in cement or concrete projects paid for, in whole or in 
     part, by the agency head.
       ``(b) Implementation of Requirements.--
       ``(1) In general.--Not later than 1 year after the date of 
     enactment of this section, the Administrator and each agency 
     head shall take such actions as are necessary to implement 
     fully all procurement requirements and incentives in effect 
     as of the date of enactment of this section (including 
     guidelines under section 6002) that provide for the use of 
     cement and concrete incorporating recovered mineral component 
     in cement or concrete projects.
       ``(2) Priority.--In carrying out paragraph (1) an agency 
     head shall give priority to achieving greater use of 
     recovered mineral component in cement or concrete projects 
     for which recovered mineral components historically have not 
     been used or have been used only minimally.
       ``(3) Conformance.--The Administrator and each agency head 
     shall carry out this subsection in accordance with section 
     6002.
       ``(c) Full Implementation Study.--
       ``(1) In general.--The Administrator, in cooperation with 
     the Secretary of Transportation and the Secretary of Energy, 
     shall conduct a study to determine the extent to which 
     current procurement requirements, when fully implemented in 
     accordance with subsection (b), may realize energy savings 
     and environmental benefits attainable with substitution of 
     recovered mineral component in cement used in cement or 
     concrete projects.
       ``(2) Matters to be addressed.--The study shall--
       ``(A) quantify the extent to which recovered mineral 
     components are being substituted for Portland cement, 
     particularly as a result of current procurement requirements, 
     and the energy savings and environmental benefits associated 
     with that substitution;
       ``(B) identify all barriers in procurement requirements to 
     fuller realization of energy savings and environmental 
     benefits, including barriers resulting from exceptions from 
     current law; and
       ``(C)(i) identify potential mechanisms to achieve greater 
     substitution of recovered mineral component in types of 
     cement or concrete projects for which recovered mineral 
     components historically have not been used or have been used 
     only minimally;
       ``(ii) evaluate the feasibility of establishing guidelines 
     or standards for optimized substitution rates of recovered 
     mineral component in those cement or concrete projects; and
       ``(iii) identify any potential environmental or economic 
     effects that may result from greater substitution of 
     recovered mineral component in those cement or concrete 
     projects.
       ``(3) Report.--Not later than 30 months after the date of 
     enactment of this section, the Administrator shall submit to 
     the Committee on Appropriations and Committee on Environment 
     and Public Works of the Senate and the Committee on 
     Appropriations, Committee on Energy and Commerce, and 
     Committee on Transportation and Infrastructure of the House 
     of Representatives a report on the study.
       ``(d) Additional Procurement Requirements.--Unless the 
     study conducted under subsection (c) identifies any effects 
     or other problems described in subsection (c)(2)(C)(iii) that 
     warrant further review or delay, the Administrator and each 
     agency head shall, within 1 year of the release of the report 
     in accordance with subsection (c)(3), take additional actions 
     authorized under this section to establish procurement 
     requirements and incentives that provide for the use of 
     cement and concrete with increased substitution of recovered 
     mineral component in the construction and maintenance of 
     cement or concrete projects, so as to--
       ``(1) realize more fully the energy savings and 
     environmental benefits associated with increased 
     substitution; and
       ``(2) eliminate barriers identified under subsection (c).
       ``(e) Effect of Section.--Nothing in this section affects 
     the requirements of section 6002 (including the guidelines 
     and specifications for implementing those requirements).''.
       (b) Table of Contents Amendment.--The table of contents of 
     the Solid Waste Disposal Act is amended by adding after the 
     item relating to section 6004 the following new item:

``Sec. 6005. Increased use of recovered mineral component in federally 
              funded projects involving procurement of cement or 
              concrete.''.

     SEC. 608. UTILITY ENERGY SERVICE CONTRACTS.

       Section 546(c)(1) of the National Energy Conservation 
     Policy Act (42 U.S.C. 8256(c)) is amended to read as follows:
       ``(1) Agencies are authorized and encouraged to participate 
     in programs, including utility energy services contracts, 
     conducted by gas, water and electric utilities and generally 
     available to customers of such utilities, for the purposes of 
     increased energy efficiency, water conservation or the 
     management of electricity demand.''.

     SEC. 609. STUDY OF ENERGY EFFICIENCY STANDARDS.

       The Secretary of Energy shall contract with the National 
     Academy of Sciences for a study, to be completed within one 
     year of enactment of this section, to examine whether the 
     goals of energy efficiency standards are best served by 
     measurement of energy consumed, and efficiency improvements, 
     at the actual site of energy consumption, or through the full 
     fuel cycle, beginning at the source of energy production. The 
     Secretary shall submit the report of the Academy to the 
     Congress.

                  Subtitle B--State and Local Programs

     SEC. 611. LOW INCOME COMMUNITY ENERGY EFFICIENCY PILOT 
                   PROGRAM.

       (a) Grants.--The Secretary of Energy is authorized to make 
     grants to units of local government, private, non-profit 
     community development organizations, and Indian tribe 
     economic development entities to improve energy efficiency, 
     identify and develop alternative, renewable and distributed 
     energy supplies, and increase energy conservation in low 
     income rural and urban communities.
       (b) Purpose of Grants.--The Secretary may make grants on a 
     competitive basis for--
       (1) investments that develop alternative, renewable and 
     distributed energy supplies;
       (2) energy efficiency projects and energy conservation 
     programs;
       (3) studies and other activities that improve energy 
     efficiency in low income rural and urban communities;
       (4) planning and development assistance for increasing the 
     energy efficiency of buildings and facilities; and
       (5) technical and financial assistance to local government 
     and private entities on developing new renewable and 
     distributed sources of power or combined heat and power 
     generation.
       (c) Definition.--For purposes of this section, the term 
     ``Indian tribe'' means any Indian tribe, band, nation, or 
     other organized group or community, including any Alaskan 
     Native village or regional or village corporation as defined 
     in or established pursuant to the Alaska Native Claims 
     Settlement Act (43 U.S.C. 1601 et seq.), which is recognized 
     as eligible for the special programs and services provided by 
     the United States to Indians because of their status as 
     Indians.
       (d) Authorization of Appropriations.--For the purposes of 
     this section there are authorized to be appropriated to the 
     Secretary of Energy $20,000,000 for fiscal year 2004 and each 
     fiscal year thereafter through fiscal year 2006.

     SEC. 612. ENERGY EFFICIENT PUBLIC BUILDINGS.

       (a) Grants.--The Secretary of Energy may make grants to the 
     State agency responsible for developing State energy 
     conservation plans under section 362 of the Energy Policy and 
     Conservation Act (42 U.S.C. 6322), or, if no such agency 
     exists, a State agency designated by the Governor of the 
     State, to assist units of local government in the State in 
     improving the energy efficiency of public buildings and 
     facilities--
       (1) through construction of new energy efficient public 
     buildings that use at least 30 percent less energy than a 
     comparable public building constructed in compliance with 
     standards prescribed in chapter 8 of the 2000 International 
     Energy Conservation Code, or a similar State code intended to 
     achieve substantially equivalent efficiency levels; or
       (2) through renovation of existing public buildings to 
     achieve reductions in energy use of at least 30 percent as 
     compared to the baseline energy use in such buildings prior 
     to renovation, assuming a 3-year, weather-normalized average 
     for calculating such baseline.
       (b) Administration.--State energy offices receiving grants 
     under this section shall--
       (1) maintain such records and evidence of compliance as the 
     Secretary may require; and
       (2) develop and distribute information and materials and 
     conduct programs to provide technical services and assistance 
     to encourage planning, financing, and design of energy 
     efficient public buildings by units of local government.
       (c) Authorization of Appropriations.--For the purposes of 
     this section, there are authorized to be appropriated to the 
     Secretary of Energy such sums as may be necessary for each of 
     fiscal years 2003 through 2012. Not more than 30 percent of 
     appropriated funds shall be used for administration.

     SEC. 613. ENERGY EFFICIENT APPLIANCE REBATE PROGRAMS.

       (a) Definitions.--In this section:
       (1) The term ``eligible State'' means a State that meets 
     the requirements of subsection (b).

[[Page S10371]]

       (2) The term ``Energy Star program'' means the program 
     established by section 324A of the Energy Policy and 
     Conservation Act.
       (3) The term ``residential Energy Star product'' means a 
     product for a residence that is rated for energy efficiency 
     under the Energy Star program.
       (4) The term ``State energy office'' means the State agency 
     responsible for developing State energy conservation plans 
     under section 362 of the Energy Policy and Conservation Act 
     (42 U.S.C. 6322).
       (5) The term ``State program'' means a State energy 
     efficient appliance rebate program described in subsection 
     (b)(1).
       (b) Eligible States.--A State shall be eligible to receive 
     an allocation under subsection (c) if the State--
       (1) establishes (or has established) a State energy 
     efficient appliance rebate program to provide rebates to 
     residential consumers for the purchase of residential Energy 
     Star products to replace used appliances of the same type;
       (2) submits an application for the allocation at such time, 
     in such form, and containing such information as the 
     Secretary may require; and
       (3) provides assurances satisfactory to the Secretary that 
     the State will use the allocation to supplement, but not 
     supplant, funds made available to carry out the State 
     program.
       (c) Amount of Allocations.--
       (1) Subject to paragraph (2), for each fiscal year, the 
     Secretary shall allocate to the State energy office of each 
     eligible State to carry out subsection (d) an amount equal to 
     the product obtained by multiplying the amount made available 
     under subsection (f) for the fiscal year by the ratio that 
     the population of the State in the most recent calendar year 
     for which data are available bears to the total population of 
     all eligible States in that calendar year.
       (2) For each fiscal year, the amounts allocated under this 
     subsection shall be adjusted proportionately so that no 
     eligible State is allocated a sum that is less than an amount 
     determined by the Secretary.
       (d) Use of Allocated Funds.--The allocation to a State 
     energy office under subsection (c) may be used to pay up to 
     50 percent of the cost of establishing and carrying out a 
     State program.
       (e) Issuance of Rebates.--Rebates may be provided to 
     residential consumers that meet the requirements of the State 
     program. The amount of a rebate shall be determined by the 
     State energy office, taking into consideration
       (1) the amount of the allocation to the State energy office 
     under subsection (c);
       (2) the amount of any Federal or State tax incentive 
     available for the purchase of the residential Energy Star 
     product; and
       (3) the difference between the cost of the residential 
     Energy Star product and the cost of an appliance that is not 
     a residential Energy Star product, but is of the same type 
     as, and is the nearest capacity, performance, and other 
     relevant characteristics (as determined by the State energy 
     office) to the residential Energy Star product.
       (f) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section $50,000,000 for 
     each of the fiscal years 2004 through 2008.

                     Subtitle C--Consumer Products

     SEC. 621. ENERGY CONSERVATION STANDARDS FOR ADDITIONAL 
                   PRODUCTS.

       (a) Definitions.--Section 321 of the Energy Policy and 
     Conservation Act (42 U.S.C. 6291) is amended--
       (1) in subparagraph (30)(S), by striking the period and 
     adding at the end the following: ``but does not include any 
     lamps specifically designed to be used for special purpose 
     applications, and also does not include any lamp not 
     described in subparagraph (D) that is excluded by the 
     Secretary, by rule.''; and
       (2) by adding at the end the following:
       ``(32) The term `battery charger' means a device that 
     charges batteries for consumer products.
       ``(33) The term `commercial refrigerator, freezer and 
     refrigerator-freezer' means a refrigerator, freezer or 
     refrigerator-freezer that--
       ``(A) is not a consumer product regulated under this Act; 
     and
       ``(B) incorporates most components involved in the vapor-
     compression cycle and the refrigerated compartment in a 
     single package.
       ``(34) The term `external power supply' means an external 
     power supply circuit that is used to convert household 
     electric current into either DC current or lower-voltage AC 
     current to operate a consumer product.
       ``(35) The term `illuminated exit sign' means a sign that--
       ``(A) is designed to be permanently fixed in place to 
     identify an exit; and
       ``(B) consists of an electrically powered integral light 
     source that illuminates the legend `EXIT' and any directional 
     indicators and provides contrast between the legend, any 
     directional indicators, and the background.
       ``(36)(A) Except as provided in subparagraph (B), the term 
     `low-voltage dry-type transformer' means a transformer that--
       ``(i) has an input voltage of 600 volts or less;
       ``(ii) is air-cooled;
       ``(iii) does not use oil as a coolant; and
       ``(iv) is rated for operation at a frequency of 60 Hertz.
       ``(B) The term `low-voltage dry-type transformer' does not 
     include--
       ``(i) transformers with multiple voltage taps, with the 
     highest voltage tap equaling at least 20 percent more than 
     the lowest voltage tap;
       ``(ii) transformers, such as those commonly known as drive 
     transformers, rectifier transformers, auto-transformers, 
     Uninterruptible Power System transformers, impedance 
     transformers, harmonic transformers, regulating transformers, 
     sealed and nonventilating transformers, machine tool 
     transformers, welding transformers, grounding transformers, 
     or testing transformers, that are designed to be used in a 
     special purpose application and are unlikely to be used in 
     general purpose applications; or
       ``(iii) any transformer not listed in clause (ii) that is 
     excluded by the Secretary by rule because the transformer is 
     designed for a special application and the application of 
     standards to the transformer would not result in significant 
     energy savings.
       ``(37)(A) Except as provided in subsection (B), the term 
     `distribution transformer' means a transformer that--
       ``(i) has an input voltage of 34.5 kilovolts or less;
       ``(ii) has an output voltage of 600 volts or less; and
       ``(iii) is rated for operation at a frequency of 60 Hertz.
       ``(B) The term `distribution transformer' does not 
     include--
       ``(i) transformers with multiple voltage taps, with the 
     highest voltage tap equaling at least 15 percent more than 
     the lowest voltage tap;
       ``(ii) transformers, such as those commonly known as drive 
     transformers, rectifier transformers, autotransformers, 
     Uninterruptible Power System transformers, impedance 
     transformers, harmonic transformers, regulating transformers, 
     sealed and nonventilating transformers, machine tool 
     transformers, welding transformers, grounding transformers, 
     or testing transformers, that are designed to be used in a 
     special purpose application, and are unlikely to be used in 
     general purpose applications; or
       ``(iii) any transformer not listed in clause (ii) that is 
     excluded by the Secretary by rule because the transformer is 
     designed for a special application, is unlikely to be used in 
     general purpose applications, and the application of 
     standards to the transformer would not result in significant 
     energy savings.
       ``(38) The term `standby mode' means the lowest amount of 
     electric power used by a household appliance when not 
     performing its active functions, as defined on an individual 
     product basis by the Secretary.
       ``(39) The term `torchiere' means a portable electric lamp 
     with a reflector bowl that directs light upward so as to give 
     indirect illumination.
       ``(40) The term `transformer' means a device consisting of 
     two or more coils of insulated wire that transfers 
     alternating current by electromagnetic induction from one 
     coil to another to change the original voltage or current 
     value.
       ``(41) The term `unit heater' means a self-contained fan-
     type heater designed to be installed within the heated space, 
     except that such term does not include a warm air furnace.
       ``(42) The term `traffic signal module' means a standard 8-
     inch (200mm) or 12-inch (300mm) traffic signal indication, 
     consisting of a light source, a lens, and all other parts 
     necessary for operation, that communicates movement messages 
     to drivers through red, amber, and green colors.''
       (b) Test Procedures.--Section 323 of the Energy Policy and 
     Conservation Act (42 U.S.C. 6293) is amended--
       (1) in subsection (b), by adding at the end the following:
       ``(9) Test procedures for illuminated exit signs shall be 
     based on the test method used under Version 2.0 of the Energy 
     Star program of the Environmental Protection Agency for 
     illuminated exit signs.
       ``(10) Test procedures for low voltage dry-type 
     distribution transformers shall be based on the `Standard 
     Test Method for Measuring the Energy Consumption of 
     Distribution Transformers' prescribed by the National 
     Electrical Manufacturers Association (NEMA TP 2-1998). The 
     Secretary may review and revise this test procedure.
       ``(11) Test procedures for traffic signal modules shall be 
     based on the test method used under the Energy Star program 
     of the Environmental Protection Agency for traffic signal 
     modules, as in effect on the date of enactment of this 
     paragraph.
       ``(12) Test procedures for medium base compact fluorescent 
     lamps shall be based on the test methods used under the 
     August 9, 2001 version of the Energy Star program of the 
     Environmental Protection Agency and Department of Energy for 
     compact fluorescent lamps. Covered products shall meet all 
     test requirements for regulated parameters in section 
     325(bb). However, covered products may be marketed prior to 
     completion of lamp life and lumen maintenance at 40 percent 
     of rated life testing provided manufacturers document 
     engineering predictions and analysis that support expected 
     attainment of lumen maintenance at 40 percent rated life and 
     lamp life time.''; and
       (2) by adding at the end the following:
       ``(f) Additional Consumer and Commercial Products.--The 
     Secretary shall within 24 months after the date of enactment 
     of this subsection prescribe testing requirements for 
     suspended ceiling fans, refrigerated bottled or canned 
     beverage vending machines, and commercial refrigerators, 
     freezers and

[[Page S10372]]

     refrigerator-freezers. Such testing requirements shall be 
     based on existing test procedures used in industry to the 
     extent practical and reasonable. In the case of suspended 
     ceiling fans, such test procedures shall include efficiency 
     at both maximum output and at an output no more than 50 
     percent of the maximum output.''.
       (c) New Standards.--Section 325 of the Energy Policy and 
     Conservation Act (42 U.S.C. 6295) is amended by adding at the 
     end the following:
       ``(u) Standby Mode Electric Energy Consumption.--
       ``(1) Initial rulemaking.--
       ``(A) The Secretary shall, within 18 months after the date 
     of enactment of this subsection, prescribe by notice and 
     comment, definitions of standby mode and test procedures for 
     the standby mode power use of battery chargers and external 
     power supplies. In establishing these test procedures, the 
     Secretary shall consider, among other factors, existing test 
     procedures used for measuring energy consumption in standby 
     mode and assess the current and projected future market for 
     battery chargers and external power supplies. This assessment 
     shall include estimates of the significance of potential 
     energy savings from technical improvements to these products 
     and suggested product classes for standards. Prior to the end 
     of this time period, the Secretary shall hold a scoping 
     workshop to discuss and receive comments on plans for 
     developing energy conservation standards for standby mode 
     energy use for these products.
       ``(B) The Secretary shall, within 3 years after the date of 
     enactment of this subsection, issue a final rule that 
     determines whether energy conservation standards shall be 
     promulgated for battery chargers and external power supplies 
     or classes thereof. For each product class, any such 
     standards shall be set at the lowest level of standby energy 
     use that--
       ``(i) meets the criteria of subsections (o), (p), (q), (r), 
     (s) and (t); and
       ``(ii) will result in significant overall annual energy 
     savings, considering both standby mode and other operating 
     modes.
       ``(2) Designation of additional covered products.--
       ``(A) Not later than 180 days after the date of enactment 
     of this subsection, the Secretary shall publish for public 
     comment and public hearing a notice to determine whether any 
     non-covered products should be designated as covered products 
     for the purpose of instituting a rulemaking under this 
     section to determine whether an energy conservation standard 
     restricting standby mode energy consumption, should be 
     promulgated; except that any restriction on standby mode 
     energy consumption shall be limited to major sources of such 
     consumption.
       ``(B) In making the determinations pursuant to subparagraph 
     (A) of whether to designate new covered products and 
     institute rulemakings, the Secretary shall, among other 
     relevant factors and in addition to the criteria in section 
     322(b), consider--
       ``(i) standby mode power consumption compared to overall 
     product energy consumption; and
       ``(ii) the priority and energy savings potential of 
     standards which may be promulgated under this subsection 
     compared to other required rulemakings under this section and 
     the available resources of the Department to conduct such 
     rulemakings.
       ``(C) Not later than 1 year after the date of enactment of 
     this subsection, the Secretary shall issue a determination of 
     any new covered products for which he intends to institute 
     rulemakings on standby mode pursuant to this section and he 
     shall state the dates by which he intends to initiate those 
     rulemakings.
       ``(3) Review of standby energy use in covered products.--In 
     determining pursuant to section 323 whether test procedures 
     and energy conservation standards pursuant to this section 
     should be revised, the Secretary shall consider for covered 
     products which are major sources of standby mode energy 
     consumption whether to incorporate standby mode into such 
     test procedures and energy conservation standards, taking 
     into account, among other relevant factors, the criteria for 
     non-covered products in subparagraph (B) of paragraph (2) of 
     this subsection.
       ``(4) Rulemaking.--
       ``(A) Any rulemaking instituted under this subsection or 
     for covered products under this section which restricts 
     standby mode power consumption shall be subject to the 
     criteria and procedures for issuing energy conservation 
     standards set forth in this section and the criteria set 
     forth in subparagraph (B) of paragraph (2) of this 
     subsection.
       ``(B) No standard can be proposed for new covered products 
     or covered products in a standby mode unless the Secretary 
     has promulgated applicable test procedures for each product 
     pursuant to section 323.
       ``(C) The provisions of section 327 shall apply to new 
     covered products which are subject to the rulemakings for 
     standby mode after a final rule has been issued.
       ``(5) Effective date.--Any standard promulgated under this 
     subsection shall be applicable to products manufactured or 
     imported 3 years after the date of promulgation.
       ``(6) Voluntary programs.--The Secretary and the 
     Administrator shall collaborate and develop programs, 
     including programs pursuant to section 324A (relating to 
     Energy Star Programs) and other voluntary industry agreements 
     or codes of conduct, which are designed to reduce standby 
     mode energy use.
       ``(v) Suspended Ceiling Fans, Vending Machines, and 
     Commercial Refrigerators, Freezers and Refrigerator-
     Freezers.--The Secretary shall within 36 months after the 
     date on which testing requirements are prescribed by the 
     Secretary pursuant to section 323(f), prescribe, by rule, 
     energy conservation standards for suspended ceiling fans, 
     refrigerated bottled or canned beverage vending machines, and 
     commercial refrigerators, freezers and refrigerator-freezers. 
     In establishing standards under this subsection, the 
     Secretary shall use the criteria and procedures contained in 
     subsections (l) and (m). Any standard prescribed under this 
     subsection shall apply to products manufactured 3 years after 
     the date of publication of a final rule establishing such 
     standard.
       ``(w) Illuminated Exit Signs.--Illuminated exit signs 
     manufactured on or after January 1, 2005 shall meet the 
     Version 2.0 Energy Star Program performance requirements for 
     illuminated exit signs prescribed by the Environmental 
     Protection Agency.
       ``(x) Torchieres.--Torchieres manufactured on or after 
     January 1, 2005--
       ``(1) shall consume not more than 190 watts of power; and
       ``(2) shall not be capable of operating with lamps that 
     total more than 190 watts.
       ``(y) Distribution Transformers.--The efficiency of low 
     voltage dry-type transformers manufactured on or after 
     January 1, 2005 shall be the Class I Efficiency Levels for 
     distribution transformers specified in Table 4-2 of the 
     `Guide for Determining Energy Efficiency for Distribution 
     Transformers' published by the National Electrical 
     Manufacturers Association (NEMA TP-1-2002).
       ``(z) Traffic Signal Modules.--Traffic signal modules 
     manufactured on or after January 1, 2006 shall meet the 
     performance requirements used under the Energy Star program 
     of the Environmental Protection Agency for traffic signals, 
     as in effect on the date of enactment of this paragraph, and 
     shall be installed with compatible, electrically-connected 
     signal control interface devices and conflict monitoring 
     systems.
       ``(aa) Unit Heaters.--Unit heaters manufactured on or after 
     the date that is three years after the date of enactment of 
     the Energy Policy Act of 2003 shall be equipped with an 
     intermittent ignition device and shall have either power 
     venting or an automatic flue damper.
       ``(bb) Medium Base Compact Fluorescent Lamps.--Bare lamp 
     and covered lamp (no reflector) medium base compact 
     fluorescent lamps manufactured on or after January 1, 2005 
     shall meet the following requirements prescribed by the 
     August 9, 2001 version of the Energy Star Program 
     Requirements for CFLs, Energy Star Eligibility Criteria, 
     Energy-Efficiency Specification issued by the Environmental 
     Protection Agency and Department of Energy: minimum initial 
     efficacy; lumen maintenance at 1000 hours; lumen maintenance 
     at 40 percent of rated life; rapid cycle stress test; and 
     lamp life. The Secretary may, by rule, establish requirements 
     for color quality (CRI); power factor; operating frequency; 
     and maximum allowable start time based on the requirements 
     prescribed by the August 9, 2001 version of the Energy Star 
     Program Requirements for CFLs. The Secretary may, by rule, 
     revise these requirements or establish other requirements 
     considering energy savings, cost effectiveness, and consumer 
     satisfaction.
       ``(cc) Effective Date.--The provisions of section 327 shall 
     apply--
       ``(1) to products for which standards are to be set 
     pursuant to subsection (v) of this section on the date on 
     which a final rule is issued by the Department of Energy, 
     except that any state or local standards prescribed or 
     enacted for any such product prior to the date on which such 
     final rule is issued shall not be preempted until the 
     standard set pursuant to subsection (v) for that product 
     takes effect; and
       ``(2) to products for which standards are set in 
     subsections (w) through (bb) of this section on the date of 
     enactment of the Energy Policy Act of 2003, except that any 
     state or local standards prescribed or enacted prior to the 
     date of enactment of the Energy Policy Act of 2003 shall not 
     be preempted until the standards set in subsections (w) 
     through (bb) take effect.''.

     SEC. 622. ENERGY LABELING.

       (a) Rulemaking on Effectiveness of Consumer Product 
     Labeling.--Paragraph (2) of section 324(a) of the Energy 
     Policy and Conservation Act (42 U.S.C. 6294(a)(2)) is amended 
     by adding at the end the following:
       ``(F) Not later than 3 months after the date of enactment 
     of this subparagraph, the Commission shall initiate a 
     rulemaking to consider the effectiveness of the current 
     consumer products labeling program in assisting consumers in 
     making purchasing decisions and improving energy efficiency 
     and to consider changes to the labeling rules that would 
     improve the effectiveness of consumer product labels. Such 
     rulemaking shall be completed within 2 years after the date 
     of enactment of this subparagraph.''.
       (b) Rulemaking on Labeling for Additional Products.--
     Section 324(a) of the Energy Policy and Conservation Act (42 
     U.S.C. 6294(a)) is further amended by adding at the end the 
     following:
       ``(5) The Secretary or the Commission, as appropriate, may 
     for covered products referred to in subsections (u) through 
     (aa) of section 325, prescribe, by rule, pursuant to this 
     section, labeling requirements for such

[[Page S10373]]

     products after a test procedure has been set pursuant to 
     section 323. In the case of products to which TP-1 standards 
     under section 325(y) apply, labeling requirements shall be 
     based on the ``Standard for the Labeling of Distribution 
     Transformer Efficiency'' prescribed by the National 
     Electrical Manufacturers Association (NEMA TP-3) as in effect 
     upon the date of enactment of this Act.''.

     SEC. 623. ENERGY STAR PROGRAM.

       (a) Amendment.--The Energy Policy and Conservation Act (42 
     U.S.C. 6201 et. seq.) is amended by inserting the following 
     after section 324:

     ``SEC. 324A. ENERGY STAR PROGRAM.

       ``There is established at the Department of Energy and the 
     Environmental Protection Agency a voluntary program to 
     identify and promote energy-efficient products and buildings 
     in order to reduce energy consumption, improve energy 
     security, and reduce pollution through voluntary labeling of 
     or other forms of communication about products and buildings 
     that meet the highest energy efficiency standards. 
     Responsibilities under the program shall be divided between 
     the Department of Energy and the Environmental Protection 
     Agency consistent with the terms of agreements between the 
     two agencies. The Administrator and the Secretary shall--
       ``(1) promote Energy Star compliant technologies as the 
     preferred technologies in the marketplace for achieving 
     energy efficiency and to reduce pollution;
       ``(2) work to enhance public awareness of the Energy Star 
     label, including special outreach to small businesses;
       ``(3) preserve the integrity of the Energy Star label;
       ``(4) solicit the comments of interested parties in 
     establishing a new Energy Star product category, 
     specifications, or criteria, or in revising a product 
     category, and upon adoption of a new or revised product 
     category, specifications, or criteria, publish a notice of 
     any changes in product categories, specifications or criteria 
     along with an explanation of such changes, and, where 
     appropriate, responses to comments submitted by interested 
     parties; and
       ``(5) unless waived or reduced by mutual agreement between 
     the Administrator, the Secretary, and the affected parties, 
     provide not less than 12 months lead time prior to 
     implementation of changes in product categories, 
     specifications, or criteria as may be adopted pursuant to 
     this section.''.
       (b) Table of Contents Amendment.--The table of contents of 
     the Energy Policy and Conservation Act is amended by 
     inserting after the item relating to section 324 the 
     following new item:

``Sec. 324A. Energy Star program.''.

     SEC. 624. HVAC MAINTENANCE CONSUMER EDUCATION PROGRAM.

       Section 337 of the Energy Policy and Conservation Act (42 
     U.S.C. 6307) is amended by adding at the end the following:
       ``(c) HVAC Maintenance.--For the purpose of ensuring that 
     installed air conditioning and heating systems operate at 
     their maximum rated efficiency levels, the Secretary shall, 
     within 180 days of the date of enactment of this subsection, 
     carry out a program to educate homeowners and small business 
     owners concerning the energy savings resulting from properly 
     conducted maintenance of air conditioning, heating, and 
     ventilating systems. The Secretary shall carry out the 
     program in a cost-shared manner in cooperation with the 
     Administrator of the Environmental Protection Agency and such 
     other entities as the Secretary considers appropriate, 
     including industry trade associations, industry members, and 
     energy efficiency organizations.
       ``(d) Small Business Education and Assistance.--The 
     Administrator of the Small Business Administration, in 
     consultation with the Secretary of Energy and the 
     Administrator of the Environmental Protection Agency, shall 
     develop and coordinate a Government-wide program, building on 
     the existing Energy Star for Small Business Program, to 
     assist small business to become more energy efficient, 
     understand the cost savings obtainable through efficiencies, 
     and identify financing options for energy efficiency 
     upgrades. The Secretary and the Administrator shall make the 
     program information available directly to small businesses 
     and through other Federal agencies, including the Federal 
     Emergency Management Program, and the Department of 
     Agriculture.''.

                       Subtitle D--Public Housing

     SEC. 631. CAPACITY BUILDING FOR ENERGY-EFFICIENT, AFFORDABLE 
                   HOUSING.

       Section 4(b) of the HUD Demonstration Act of 1993 (42 
     U.S.C. 9816 note) is amended--
       (1) in paragraph (1), by inserting before the semicolon at 
     the end the following: ``, including capabilities regarding 
     the provision of energy efficient, affordable housing and 
     residential energy conservation measures''; and
       (2) in paragraph (2), by inserting before the semicolon the 
     following: ``, including such activities relating to the 
     provision of energy efficient, affordable housing and 
     residential energy conservation measures that benefit low-
     income families''.

     SEC. 632. INCREASE OF CDBG PUBLIC SERVICES CAP FOR ENERGY 
                   CONSERVATION AND EFFICIENCY ACTIVITIES.

       Section 105(a)(8) of the Housing and Community Development 
     Act of 1974 (42 U.S.C. 5305(a)(8)) is amended--
       (1) by inserting ``or efficiency'' after ``energy 
     conservation'';
       (2) by striking ``, and except that'' and inserting ``; 
     except that''; and
       (3) by inserting before the semicolon at the end the 
     following: ``; and except that each percentage limitation 
     under this paragraph on the amount of assistance provided 
     under this title that may be used for the provision of public 
     services is hereby increased by 10 percent, but such 
     percentage increase may be used only for the provision of 
     public services concerning energy conservation or 
     efficiency''.

     SEC. 633. FHA MORTGAGE INSURANCE INCENTIVES FOR ENERGY 
                   EFFICIENT HOUSING.

       (a) Single Family Housing Mortgage Insurance.--Section 
     203(b)(2) of the National Housing Act (12 U.S.C. 1709(b)(2)) 
     is amended, in the first undesignated and indented paragraph 
     beginning after subparagraph (B)(iii) (relating to solar 
     energy systems)--
       (1) by inserting ``or paragraph (10)'' before the first 
     comma; and
       (2) by striking ``20 percent'' and inserting ``30 
     percent''.
       (b) Multifamily Housing Mortgage Insurance.--Section 207(c) 
     of the National Housing Act (12 U.S.C. 1713(c)) is amended, 
     in the second undesignated paragraph beginning after 
     paragraph (3) (relating to solar energy systems and 
     residential energy conservation measures), by striking ``20 
     percent'' and inserting ``30 percent''.
       (c) Cooperative Housing Mortgage Insurance.--Section 213(p) 
     of the National Housing Act (12 U.S.C. 1715e(p)) is amended 
     by striking ``20 per centum'' and inserting ``30 percent''.
       (d) Rehabilitation and Neighborhood Conservation Housing 
     Mortgage Insurance.--Section 220(d)(3)(B)(iii) of the 
     National Housing Act (12 U.S.C. 1715k(d)(3)(B)(iii)) is 
     amended by striking ``20 per centum'' and inserting ``30 
     percent''.
       (e) Low-income Multifamily Housing Mortgage Insurance.--
     Section 221(k) of the National Housing Act (12 U.S.C. 
     1715l(k)) is amended by striking ``20 per centum'' and 
     inserting ``30 percent''.
       (f) Elderly Housing Mortgage Insurance.--The proviso at the 
     end of section 231(c)(2) of the National Housing Act (12 
     U.S.C. 1715v(c)(2)) is amended by striking ``20 per centum'' 
     and inserting ``30 percent''.
       (g) Condominium Housing Mortgage Insurance.--Section 234(j) 
     of the National Housing Act (12 U.S.C. 1715y(j)) is amended 
     by striking ``20 per centum'' and inserting ``30 percent''.

     SEC. 634. PUBLIC HOUSING CAPITAL FUND.

       Section 9 of the United States Housing Act of 1937 (42 
     U.S.C. 1437g) is amended--
       (1) in subsection (d)(1)--
       (A) in subparagraph (I), by striking ``and'' at the end;
       (B) in subparagraph (J), by striking the period at the end 
     and inserting a semicolon; and
       (C) by adding at the end the following new subparagraphs:
       ``(K) improvement of energy and water-use efficiency by 
     installing fixtures and fittings that conform to the American 
     Society of Mechanical Engineers/American National Standards 
     Institute standards A112.19.2-1998 and A112.18.1-2000, or any 
     revision thereto, applicable at the time of installation, and 
     by increasing energy efficiency and water conservation by 
     such other means as the Secretary determines are appropriate; 
     and
       ``(L) integrated utility management and capital planning to 
     maximize energy conservation and efficiency measures.''; and
       (2) in subsection (e)(2)(C)--
       (A) by striking ``The'' and inserting the following:
       ``(i) in general.--The''; and
       (B) by adding at the end the following:
       ``(ii) Third party contracts.--Contracts described in 
     clause (i) may include contracts for equipment conversions to 
     less costly utility sources, projects with resident-paid 
     utilities, and adjustments to frozen base year consumption, 
     including systems repaired to meet applicable building and 
     safety codes and adjustments for occupancy rates increased by 
     rehabilitation.
       ``(iii) Term of contract.--The total term of a contract 
     described in clause (i) shall not exceed 20 years to allow 
     longer payback periods for retrofits, including windows, 
     heating system replacements, wall insulation, site-based 
     generations, advanced energy savings technologies, including 
     renewable energy generation, and other such retrofits.''.

     SEC. 635. GRANTS FOR ENERGY-CONSERVING IMPROVEMENTS FOR 
                   ASSISTED HOUSING.

       Section 251(b)(1) of the National Energy Conservation 
     Policy Act (42 U.S.C. 8231(1)) is amended--
       (1) by striking ``financed with loans'' and inserting 
     ``assisted'';
       (2) by inserting after ``1959,'' the following: ``which are 
     eligible multifamily housing projects (as such term is 
     defined in section 512 of the Multi-family Assisted Housing 
     Reform and Affordability Act of 1997 (42 U.S.C. 1437f note)) 
     and are subject to mortgage restructuring and rental 
     assistance sufficiency plans under such Act,''; and
       (3) by inserting after the period at the end of the first 
     sentence the following new sentence: ``Such improvements may 
     also include the installation of energy and water conserving 
     fixtures and fittings that conform to the American Society of 
     Mechanical Engineers/American National Standards Institute 
     standards A112.19.2-1998 and A112.18.1-2000, or any revision 
     thereto, applicable at the time of installation.''.

[[Page S10374]]

     SEC. 636. NORTH AMERICAN DEVELOPMENT BANK.

       Part 2 of subtitle D of title V of the North American Free 
     Trade Agreement Implementation Act (22 U.S.C. 290m 290m-3) is 
     amended by adding at the end the following:

     ``SEC. 545. SUPPORT FOR CERTAIN ENERGY POLICIES.

       ``Consistent with the focus of the Bank's Charter on 
     environmental infrastructure projects, the Board members 
     representing the United States should use their voice and 
     vote to encourage the Bank to finance projects related to 
     clean and efficient energy, including energy conservation, 
     that prevent, control, or reduce environmental pollutants or 
     contaminants.''.

     SEC. 637. ENERGY-EFFICIENT APPLIANCES.

       In purchasing appliances, a public housing agency shall 
     purchase energy-efficient appliances that are Energy Star 
     products or FEMP-designated products, as such terms are 
     defined in section 553 of the National Energy Policy and 
     Conservation Act (as amended by this Act), unless the 
     purchase of energy-efficient appliances is not cost-effective 
     to the agency.

     SEC. 638. ENERGY EFFICIENCY STANDARDS.

       Section 109 of the Cranston-Gonzalez National Affordable 
     Housing Act (42 U.S.C. 12709) is amended--
       (1) in subsection (a)--
       (A) in paragraph (1)--
       (i) by striking ``1 year after the date of the enactment of 
     the Energy Policy Act of 1992'' and inserting ``September 30, 
     2003'';
       (ii) in subparagraph (A), by striking ``and'' at the end;
       (iii) in subparagraph (B), by striking the period at the 
     end and inserting ``; and''; and
       (iv) by adding at the end the following:
       ``(C) rehabilitation and new construction of public and 
     assisted housing funded by HOPE VI revitalization grants 
     under section 24 of the United States Housing Act of 1937 (42 
     U.S.C. 1437v), where such standards are determined to be cost 
     effective by the Secretary of Housing and Urban 
     Development.''; and
       (B) in paragraph (2), by striking ``Council of American'' 
     and all that follows through ``90.1-1989')'' and inserting 
     ``2000 International Energy Conservation Code'';
       (2) in subsection (b)--
       (A) by striking ``1 year after the date of the enactment of 
     the Energy Policy Act of 1992'' and inserting ``September 30, 
     2003''; and
       (B) by striking ``CABO'' and all that follows through 
     ``1989'' and inserting ``the 2000 International Energy 
     Conservation Code''; and
       (3) in subsection (c)--
       (A) in the heading, by striking ``MODEL ENERGY CODE'' and 
     inserting ``INTERNATIONAL ENERGY CONSERVATION CODE''; and
       (B) by striking ``CABO'' and all that follows through 
     ``1989'' and inserting ``the 2000 International Energy 
     Conservation Code''.

     SEC. 639. ENERGY STRATEGY FOR HUD.

       The Secretary of Housing and Urban Development shall 
     develop and implement an integrated strategy to reduce 
     utility expenses through cost-effective energy conservation 
     and efficiency measures and energy efficient design and 
     construction of public and assisted housing. The energy 
     strategy shall include the development of energy reduction 
     goals and incentives for public housing agencies. The 
     Secretary shall submit a report to Congress, not later than 
     one year after the date of the enactment of this Act, on the 
     energy strategy and the actions taken by the Department of 
     Housing and Urban Development to monitor the energy usage of 
     public housing agencies and shall submit an update every two 
     years thereafter on progress in implementing the strategy.

                    TITLE VII--TRANSPORTATION FUELS

                 Subtitle A--Alternative Fuel Programs

     SEC. 701. USE OF ALTERNATIVE FUELS BY DUAL-FUELED VEHICLES.

       Section 400AA(a)(3)(E) of the Energy Policy and 
     Conservation Act (42 U.S.C. 6374(a)(3)(E)) is amended to read 
     as follows:
       ``(E)(i) Dual fueled vehicles acquired pursuant to this 
     section shall be operated on alternative fuels unless the 
     Secretary determines that an agency qualifies for a waiver of 
     such requirement for vehicles operated by the agency in a 
     particular geographic area where--
       ``(I) the alternative fuel otherwise required to be used in 
     the vehicle is not reasonably available to retail purchasers 
     of the fuel, as certified to the Secretary by the head of the 
     agency; or
       ``(II) the cost of the alternative fuel otherwise required 
     to be used in the vehicle is unreasonably more expensive 
     compared to gasoline, as certified to the Secretary by the 
     head of the agency.
       ``(ii) The Secretary shall monitor compliance with this 
     subparagraph by all such fleets and shall report annually to 
     the Congress on the extent to which the requirements of this 
     subparagraph are being achieved. The report shall include 
     information on annual reductions achieved from the use of 
     petroleum-based fuels and the problems, if any, encountered 
     in acquiring alternative fuels.''.

     SEC. 702. FUEL USE CREDITS.

       (a) In General.--Section 312 of the Energy Policy Act of 
     1992 (42 U.S.C. 13220) is amended to read as follows:

     ``SEC. 312. FUEL USE CREDITS.

       ``(a) Allocation.--
       ``(1) The Secretary shall allocate one credit under this 
     section to a fleet or covered person for each qualifying 
     volume of alternative fuel or biodiesel purchased for use in 
     an on-road motor vehicle operated by the fleet that weighs 
     more than 8,500 pounds gross vehicle weight rating.
       ``(2) No credits shall be allocated under this section for 
     purchase of an alternative fuel or biodiesel that is required 
     by Federal or State law.
       ``(3) A fleet or covered person seeking a credit under this 
     section shall provide written documentation to the Secretary 
     supporting the allocation of a credit to such fleet or 
     covered person under this section.
       ``(b) Use.--At the request of a fleet or covered person 
     allocated a credit under subsection (a), the Secretary shall, 
     for the year in which the purchase of a qualifying volume is 
     made, treat that purchase as the acquisition of one 
     alternative fueled vehicle the fleet or covered person is 
     required to acquire under this title, title IV, or title V.
       ``(c) Treatment.--A credit provided to a fleet or covered 
     person under this section shall be considered a credit under 
     section 508.
       ``(d) Issuance of Rule.--Not later than 6 months after the 
     date of enactment of this section, the Secretary shall issue 
     a rule establishing procedures for the implementation of this 
     section.
       ``(e) Definitions.--For the purposes of this section
       ``(1) the term `biodiesel' means a diesel fuel substitute 
     produced from non-petroleum renewable resources that meets 
     the registration requirements for fuels and fuel additives 
     established by the Environmental Protection Agency under 
     section 211 of the Clean Air Act; and
       ``(2) the term `qualifying volume' means--
       ``(A) in the case of biodiesel, when used as a component of 
     fuel containing at least 20 percent biodiesel by volume, 450 
     gallons, or if the Secretary determines by rule that the 
     average annual alternative fuel use in light duty vehicles by 
     fleets and covered persons exceeds 450 gallons or gallon 
     equivalents, the amount of such average annual alternative 
     fuel use; or
       ``(B) in the case of an alternative fuel, the amount of 
     such fuel determined by the Secretary to have an equivalent 
     energy content to the amount of biodiesel defined as a 
     qualifying volume pursuant to subparagraph (A).''.
       (b) Table of Contents Amendment.--The table of contents of 
     the Energy Policy Act of 1992 is amended by adding at the end 
     of the items relating to title III the following new item:

``Sec. 312. Fuel use credits.''

     SEC. 703. NEIGHBORHOOD ELECTRIC VEHICLES.

       Section 301 of the Energy Policy Act of 1992 (42 U.S.C. 
     13211) is amended--
       (1) in paragraph (3), by striking ``or a dual fueled 
     vehicle'' and inserting ``, a dual fueled vehicle, or a 
     neighborhood electric vehicle'';
       (2) by striking ``and'' at the end of paragraph (13);
       (3) by striking the period at the end of paragraph (14) and 
     inserting ``; and''; and
       (4) by adding at the end the following:
       ``(15) the term `neighborhood electric vehicle' means a 
     motor vehicle--
       ``(A) which meets the definition of a low-speed vehicle, as 
     such term is defined in part 571 of title 49, Code of Federal 
     Regulations;
       ``(B) which meets the definition of a zero-emission 
     vehicle, as such term is defined in section 86.1702-99 of 
     title 40, Code of Federal Regulations;
       ``(C) which meets the requirements of Federal Motor Vehicle 
     Safety Standard No. 500; and
       ``(D) which has a top speed of not greater than 25 miles 
     per hour.''.

     SEC. 704. CREDITS FOR MEDIUM AND HEAVY DUTY DEDICATED 
                   VEHICLES.

       Section 508 of the Energy Policy Act of 1992 (42 U.S.C. 
     13258) is amended by adding at the end the following:
       ``(e) Credit for Purchase of Medium and Heavy Duty 
     Dedicated Vehicles.--
       ``(1) Definitions.--In this subsection:
       ``(A) The term `medium duty dedicated vehicle' means a 
     dedicated vehicle that has a gross vehicle weight rating of 
     more than 8,500 pounds but not more than 14,000 pounds.
       ``(B) The term `heavy duty dedicated vehicle' means a 
     dedicated vehicle that has a gross vehicle weight rating of 
     more than 14,000 pounds.
       ``(2) Credits for medium duty vehicles.--The Secretary 
     shall issue 2 full credits to a fleet or covered person under 
     this title, if the fleet or covered person acquires a medium 
     duty dedicated vehicle.
       ``(3) Credits for heavy duty vehicles.--The Secretary shall 
     issue 3 full credits to a fleet or covered person under this 
     title, if the fleet or covered person acquires a heavy duty 
     dedicated vehicle.
       ``(4) Use of credits.--At the request of a fleet or covered 
     person allocated a credit under this subsection, the 
     Secretary shall, for the year in which the acquisition of the 
     dedicated vehicle is made, treat that credit as the 
     acquisition of 1 alternative fueled vehicle that the fleet or 
     covered person is required to acquire under this title.''.

     SEC. 705. ALTERNATIVE FUEL INFRASTRUCTURE.

       Section 508 of the Energy Policy Act of 1992 (42 U.S.C. 
     13258) is further amended by adding at the end the following:
       ``(f) Credit for Investment in Alternative Fuel 
     Infrastructure.--
       ``(1) Definitions.--In this subsection, the term 
     `qualifying infrastructure' means--
       ``(A) equipment required to refuel or recharge alternative 
     fueled vehicles;

[[Page S10375]]

       ``(B) facilities or equipment required to maintain, repair, 
     or operate alternative fueled vehicles;
       ``(C) such other activities the Secretary considers to 
     constitute an appropriate expenditure in support of the 
     operation, maintenance, or further widespread adoption of or 
     utilization of alternative fueled vehicles.
       ``(2) Issuance of credits.--The Secretary shall issue a 
     credit to a fleet or covered person under this title for 
     investment in qualifying infrastructure if the qualifying 
     infrastructure is open to the general public during regular 
     business hours.
       ``(3) Amount.--For the purposes of credits under this 
     subsection--
       ``(A) 1 credit shall be equal to a minimum investment of 
     $25,000 in cash or equivalent expenditure, as determined by 
     the Secretary; and
       ``(B) except in the case of a Federal or State fleet, no 
     part of the investment may be provided by Federal or State 
     funds.
       ``(4) Use of credits.--At the request of a fleet or covered 
     person allocated a credit under this subsection, the 
     Secretary shall, for the year in which the investment is 
     made, treat that credit as the acquisition of 1 alternative 
     fueled vehicle that the fleet or covered person is required 
     to acquire under this title.''.

     SEC. 706. INCREMENTAL COST ALLOCATION.

       Section 303(c) of the Energy Policy Act of 1992 (42 U.S.C. 
     13212(c) is amended by striking ``may'' and inserting 
     ``shall''.

     SEC. 707. REVIEW OF ALTERNATIVE FUEL PROGRAMS.

       (a) In General.--Not later than 1 year after the date of 
     enactment of this section, the Secretary shall complete a 
     study to determine the effect that titles III, IV, and V of 
     the Energy Policy Act of 1992 (42 U.S.C. 13211 et seq.) have 
     had on the development of alternative fueled vehicle 
     technology, its availability in the market, and the cost of 
     light duty motor vehicles that are alternative fueled 
     vehicles.
       (b) Topics.--As part of such study, the Secretary shall 
     specifically identify--
       (1) the number of alternative fueled vehicles acquired by 
     fleets or covered persons required to acquire alternative 
     fueled vehicles;
       (2) the amount, by type, of alternative fuel actually used 
     in alternative fueled vehicles acquired by fleets or covered 
     persons;
       (3) the amount of petroleum displaced by the use of 
     alternative fuels in alternative fueled vehicles acquired by 
     fleets or covered persons;
       (4) the cost of compliance with vehicle acquisition 
     requirements by fleets or covered persons; and
       (5) the existence of obstacles preventing compliance with 
     vehicle acquisition requirements and increased use of 
     alternative fuel in alternative fueled vehicles acquired by 
     fleets or covered persons.
       (c) Report.--Upon completion of the study, the Secretary 
     shall submit to the Congress a report that describes the 
     results of the study conducted under this section and 
     includes any recommendations of the Secretary for legislative 
     or administrative changes concerning the alternative fueled 
     vehicle requirements under titles III, IV and V of the Energy 
     Policy Act of 1992 (42 U.S.C. 13211 et seq.). Such study 
     shall be updated on a regular basis as deemed necessary by 
     the Secretary.

     SEC. 708. HIGH OCCUPANCY VEHICLE EXCEPTION.

       Notwithstanding section 102(a)(1) of title 23, United 
     States Code, a State may permit a vehicle with fewer than 2 
     occupants to operate in high occupancy vehicle lanes if such 
     vehicle is a dedicated vehicle (as defined in section 301 of 
     the Energy Policy Act of 1992 (42 U.S.C. 13211)).

     SEC. 709. ALTERNATIVE COMPLIANCE AND FLEXIBILITY.

       (a) Alternative Compliance.--Title V of the Energy Policy 
     Act of 1992 is amended by adding at the end the following:

     ``SEC. 515. ALTERNATIVE COMPLIANCE.

       ``(a) Application for Waiver.--Any covered person subject 
     to the requirements of section 501 and any State subject to 
     the requirement of section 507(o) may petition the Secretary 
     for a waiver of the applicable requirements of section 501 or 
     507(o).
       ``(b) Grant of Waiver.--The Secretary may grant a waiver of 
     the requirements of section 501 or 507(o) upon a showing that 
     the fleet owned, operated, leased, or otherwise controlled by 
     the State or covered person--
       ``(1) will achieve a reduction in its annual consumption of 
     petroleum fuels equal to the reduction in consumption of 
     petroleum that would result from compliance with section 501 
     or 507(o); and
       ``(2) is in compliance with all applicable vehicle emission 
     standards established by the Administrator under the Clean 
     Air Act.
       ``(c) Revocation of Waiver.--The Secretary shall revoke any 
     waiver granted under this section if the State or covered 
     person fails to comply with the requirements of subsection 
     (b).''.
       (b) Credit for Hybrid Vehicles, Dedicated Alternative Fuel 
     Vehicles, and Infrastructure.--Section 507 of the Energy 
     Policy Act of 1992 (42 U.S.C. 13258) (as amended by section 
     705) is amended by adding at the end the following:
       ``(r) Credits for New Qualified Hybrid Motor Vehicles.--
       ``(1) Definitions.--In this subsection:
       ``(A) 2000 model year city fuel efficiency.--The term `2000 
     model year city fuel efficiency', with respect to a motor 
     vehicle, means fuel efficiency determined in accordance with 
     the following tables:
       ``(i) In the case of a passenger automobile:

                                               The 2000 model year city
``If vehicle inertia weight class is:               fuel efficiency is:
                                                     1,500 or 43.7 mpg 
                                                              38.3 mpg 
                                                              34.1 mpg 
                                                              30.7 mpg 
                                                              27.9 mpg 
                                                              25.6 mpg 
                                                              22.0 mpg 
                                                              19.3 mpg 
                                                              17.2 mpg 
                                                              15.5 mpg 
                                                              14.1 mpg 
                                                              12.9 mpg 
                                                              11.9 mpg 
                                                     7,000 to 11.1 mpg.
       ``(ii) In the case of a light truck:

                                               The 2000 model year city
``If vehicle inertia weight class is:               fuel efficiency is:
                                                     1,500 or 37.6 mpg 
                                                              33.7 mpg 
                                                              30.6 mpg 
                                                              28.0 mpg 
                                                              25.9 mpg 
                                                              24.1 mpg 
                                                              21.3 mpg 
                                                              19.0 mpg 
                                                              17.3 mpg 
                                                              15.8 mpg 
                                                              14.6 mpg 
                                                              13.6 mpg 
                                                              12.8 mpg 
                                                     7,000 to 12.0 mpg.

       ``(B) Administrator.--The term `Administrator' means the 
     Administrator of the Environmental Protection Agency.
       ``(C) Energy storage device.--The term `energy storage 
     device' means an onboard rechargeable energy storage system 
     or similar storage device.
       ``(D) Fuel efficiency.--The term `fuel efficiency' means 
     the percentage increased fuel efficiency specified in table 1 
     in paragraph (2)(C) over the average 2000 model year city 
     fuel efficiency of vehicles in the same weight class.
       ``(E) Maximum available power.--The term `maximum available 
     power', with respect to a new qualified hybrid motor vehicle 
     that is a passenger vehicle or light truck, means the 
     quotient obtained by dividing--
       ``(i) the maximum power available from the electrical 
     storage device of the new qualified hybrid motor vehicle, 
     during a standard 10-second pulse power or equivalent test; 
     by
       ``(ii) the sum of--

       ``(I) the maximum power described in clause (i); and
       ``(II) the net power of the internal combustion or heat 
     engine, as determined in accordance with standards 
     established by the Society of Automobile Engineers.

       ``(F) Motor vehicle.--The term `motor vehicle' has the 
     meaning given the term in section 216 of the Clean Air Act 
     (42 U.S.C. 7550).
       ``(G) New qualified hybrid motor vehicle.--The term `new 
     qualified hybrid motor vehicle' means a motor vehicle that--
       ``(i) draws propulsion energy from both--

       ``(I) an internal combustion engine (or heat engine that 
     uses combustible fuel); and
       ``(II) an energy storage device;

       ``(ii) in the case of a passenger automobile or light 
     truck--

       ``(I) in the case of a 2001 or later model vehicle, 
     receives a certificate of conformity under the Clean Air Act 
     (42 U.S.C. 7401 et seq.) and produces emissions at a level 
     that is at or below the standard established by a qualifying 
     California standard described in section 243(e)(2) of the 
     Clean Air Act (42 U.S.C. 7583(e)(2)) for that make and model 
     year; and
       ``(II) in the case of a 2004 or later model vehicle, is 
     certified by the Administrator as producing emissions at a 
     level that is at or below the level established for Bin 5 
     vehicles in the Tier 2 regulations promulgated by the 
     Administrator under section 202(i) of the Clean Air Act (42 
     U.S.C. 7521(i)) for that make and model year vehicle; and

       ``(iii) employs a vehicle braking system that recovers 
     waste energy to charge an energy storage device.
       ``(H) Vehicle inertia weight class.--The term `vehicle 
     inertia weight class' has the meaning given the term in 
     regulations promulgated by the Administrator for purposes of 
     the administration of title II of the Clean Air Act (42 
     U.S.C. 7521 et seq.).
       ``(2) Allocation.--
       ``(A) In general.--The Secretary shall allocate a partial 
     credit to a fleet or covered person under this title if the 
     fleet or person acquires a new qualified hybrid motor vehicle 
     that is eligible to receive a credit under each of the tables 
     in subparagraph (C).
       ``(B) Amount.--The amount of a partial credit allocated 
     under subparagraph (A) for a vehicle described in that 
     subparagraph shall be equal to the sum of--
       ``(i) the partial credits determined under table 1 in 
     subparagraph (C); and
       ``(ii) the partial credits determined under table 2 in 
     subparagraph (C).
       ``(C) Tables.--The tables referred to in subparagraphs (A) 
     and (B) are as follows:

                               ``Table 1

``Partial credit for increased fuel efficiency:       Amount of credit:
  At least 125% but less than 150% of 2000 model year city fuel 
    efficiency................................................0.14 ....

[[Page S10376]]

  At least 150% but less than 175% of 2000 model year city fuel 
    efficiency................................................0.21 ....

  At least 175% but less than 200% of 2000 model year city fuel 
    efficiency................................................0.28 ....

  At least 200% but less than 225% of 2000 model year city fuel 
    efficiency................................................0.35 ....

  At least 225% but less than 250% of 2000 model year city fuel 
    efficiency................................................0.50.....

                               ``Table 2

``Partial credit for `Maximum Available Power':       Amount of credit:
  At least 5% but less than 10%..............................0.125 ....

  At least 10% but less than 20%.............................0.250 ....

  At least 20% but less than 30%.............................0.375 ....

  At least 30% or more.......................................0.500.....

       ``(D) Use of credits.--At the request of a fleet or covered 
     person allocated a credit under this subsection, the 
     Secretary shall, for the year in which the acquisition of the 
     qualified hybrid motor vehicle is made, treat that credit as 
     the acquisition of 1 alternative fueled vehicle that the 
     fleet or covered person is required to acquire under this 
     title.
       ``(3) Regulations.--The Secretary shall promulgate 
     regulations under which any Federal fleet that acquires a new 
     qualified hybrid motor vehicle will receive partial credits 
     determined under the tables contained in paragraph (2)(C) for 
     purposes of meeting the requirements of section 303.
       ``(s) Credit for Substantial Contribution Towards Use of 
     Dedicated Vehicles in Noncovered Fleets.--
       ``(1) Definitions.--In this subsection:
       ``(A) Dedicated vehicle.--The term `dedicated vehicle' 
     includes--
       ``(i) a light, medium, or heavy duty vehicle; and
       ``(ii) a neighborhood electric vehicle.
       ``(B) Medium or heavy duty vehicle.--The term `medium or 
     heavy duty vehicle' includes a vehicle that--
       ``(i) operates solely on alternative fuel; and
       ``(ii)(I) in the case of a medium duty vehicle, has a gross 
     vehicle weight rating of more than 8,500 pounds but not more 
     than 14,000 pounds; or
       ``(II) in the case of a heavy duty vehicle, has a gross 
     vehicle weight rating of more than 14,000 pounds.
       ``(C) Substantial contribution.--The term `substantial 
     contribution' (equal to 1 full credit) means not less than 
     $15,000 in cash or in kind services, as determined by the 
     Secretary.
       ``(2) Issuance of credits.--The Secretary shall issue a 
     credit to a fleet or covered person under this title if the 
     fleet or person makes a substantial contribution toward the 
     acquisition and use of dedicated vehicles by a person that 
     owns, operates, leases, or otherwise controls a fleet that is 
     not covered by this title.
       ``(3) Multiple credits for medium and heavy duty dedicated 
     vehicles.--The Secretary shall issue 2 full credits to a 
     fleet or covered person under this title if the fleet or 
     person acquires a medium or heavy duty dedicated vehicle.
       ``(4) Use of credits.--At the request of a fleet or covered 
     person allocated a credit under this subsection, the 
     Secretary shall, for the year in which the acquisition of the 
     dedicated vehicle is made, treat that credit as the 
     acquisition of 1 alternative fueled vehicle that the fleet or 
     covered person is required to acquire under this title.
       ``(5) Limitation.--Per vehicle credits acquired under this 
     subsection shall not exceed the per vehicle credits allowed 
     under this section to a fleet for qualifying vehicles in each 
     of the weight categories (light, medium, or heavy duty).
       ``(t) Credit for Substantial Investment in Alternative Fuel 
     Infrastructure.--
       ``(1) Definitions.--In this section, the term `qualifying 
     infrastructure' means--
       ``(A) equipment required to refuel or recharge alternative 
     fueled vehicles;
       ``(B) facilities or equipment required to maintain, repair, 
     or operate alternative fueled vehicles;
       ``(C) training programs, educational materials, or other 
     activities necessary to provide information regarding the 
     operation, maintenance, or benefits associated with 
     alternative fueled vehicles; and
       ``(D) such other activities the Secretary considers to 
     constitute an appropriate expenditure in support of the 
     operation, maintenance, or further widespread adoption of or 
     utilization of alternative fueled vehicles.
       ``(2) Issuance of credits.--The Secretary shall issue a 
     credit to a fleet or covered person under this title for 
     investment in qualifying infrastructure if the qualifying 
     infrastructure is open to the general public during regular 
     business hours.
       ``(3) Amount.--For the purposes of credits under this 
     subsection--
       ``(A) 1 credit shall be equal to a minimum investment of 
     $25,000 in cash or in kind services, as determined by the 
     Secretary; and
       ``(B) except in the case of a Federal or State fleet, no 
     part of the investment may be provided by Federal or State 
     funds.
       ``(4) Use of credits.--At the request of a fleet or covered 
     person allocated a credit under this subsection, the 
     Secretary shall, for the year in which the investment is 
     made, treat that credit as the acquisition of 1 alternative 
     fueled vehicle that the fleet or covered person is required 
     to acquire under this title.''.
       (c) Lease Condensate Fuels.--Section 301 of the Energy 
     Policy Act of 1992 (42 U.S.C. 13211) is amended--
       (1) in paragraph (2), by inserting ``mixtures containing 50 
     percent or more by volume of lease condensate or fuels 
     extracted from lease condensate;'' after ``liquified 
     petroleum gas;'';
       (2) in paragraph (15), by inserting ``mixtures containing 
     50 percent or more by volume of lease condensate or fuels 
     extracted from lease condensate;'' after ``liquified 
     petroleum gas;''; and
       (3) by adding at the end the following:
       ``(16) the term `lease condensate' means a mixture, 
     primarily of pentanes and heavier hydrocarbons, which is 
     recovered as a liquid from natural gas in lease separation 
     facilities.''.

                  Subtitle B--Automobile Fuel Economy

     SEC. 711. AUTOMOBILE FUEL ECONOMY STANDARDS.

       (a) Title 49 Amendment.--Section 32902(f) of title 49, 
     United States Code, is amended to read as follows:
       ``(f) Considerations.--When deciding maximum feasible 
     average fuel economy under this section, the Secretary of 
     Transportation shall consider the following matters:
       ``(1) technological feasibility;
       ``(2) economic practicability;
       ``(3) the effect of other motor vehicle standards of the 
     Government on fuel economy;
       ``(4) the need of the United States to conserve energy;
       ``(5) the effects of fuel economy standards on motor 
     vehicle and passenger safety; and
       ``(6) the effects of compliance with average fuel economy 
     standards on levels of employment in the United States.''.
       (b) Clarification of Authority.--Section 32902(b) of title 
     49, United States Code, is amended by inserting before the 
     period at the end the following: ``or such other number as 
     the Secretary prescribes under subsection (c)''.
       (c) Environmental Assessment.--When issuing final 
     regulations setting forth increased average fuel economy 
     standards under section 32902(a) or section 32902(c) of title 
     49, United States Code, the Secretary of Transportation shall 
     also issue an environmental assessment of the effects of the 
     increased standards on the environment under the National 
     Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
       (d) Authorization of Appropriations.--For the purposes of 
     this section, there are authorized to be appropriated to the 
     Secretary of Transportation $5,000,000 for each of fiscal 
     years 2004 through 2008.

     SEC. 712. DUAL-FUELED AUTOMOBILES.

       (a) Manufacturing Incentives.--Section 32905 of title 49, 
     United States Code, is amended--
       (1) in subsections (b) and (d), by striking ``1993-2004'' 
     and inserting ``1993-2008'';
       (2) in subsection (f), by striking ``2001'' and inserting 
     ``2005'';
       (3) in subsection (f)(1), by striking ``2004'' and 
     inserting ``2008''; and
       (4) in subsection (g), by striking ``September 30, 2000'' 
     and inserting ``September 30, 2004''.
       (b) Maximum Fuel Economy Increase.--Subsection (a)(1) of 
     section 32906 of title 49, United States Code, is amended--
       (1) in subparagraph (A), by striking ``the model years 
     1993-2004'' and inserting ``model years 1993-2008''; and
       (2) in subparagraph (B), by striking ``the model years 
     2005-2008'' and inserting ``model years 2009-2012''.

     SEC. 713. FEDERAL FLEET FUEL ECONOMY.

       Section 32917 of title 49, United States Code, is amended 
     to read as follows:

     ``Sec. 32917. Standards for executive agency automobiles

       ``(a) Baseline Average Fuel Economy.--The head of each 
     executive agency shall determine, for all automobiles in the 
     agency's fleet of automobiles that were leased or bought as a 
     new vehicle in fiscal year 1999, the average fuel economy for 
     such automobiles. For the purposes of this section, the 
     average fuel economy so determined shall be the baseline 
     average fuel economy for the agency's fleet of automobiles.
       ``(b) Increase of Average Fuel Economy.--The head of an 
     executive agency shall manage the procurement of automobiles 
     for that agency in such a manner that not later than 
     September 30, 2005, the average fuel economy of the new 
     automobiles in the agency's fleet of automobiles is not less 
     than 3 miles per gallon higher than the baseline average fuel 
     economy determined under subsection (a) for that fleet.
       ``(c) Calculation of Average Fuel Economy.--Average fuel 
     economy shall be calculated for the purposes of this section 
     in accordance with guidance which the Secretary of 
     Transportation shall prescribe for the implementation of this 
     section.
       ``(d) Definitions.--In this section:
       ``(1) The term `automobile' does not include any vehicle 
     designed for combat-related missions, law enforcement work, 
     or emergency rescue work.
       ``(2) The term `executive agency' has the meaning given 
     that term in section 105 of title 5.
       ``(3) The term `new automobile', with respect to the fleet 
     of automobiles of an executive agency, means an automobile 
     that is leased for at least 60 consecutive days or bought, by 
     or for the agency, after September 30, 1999.''.

[[Page S10377]]

     SEC. 714. RAILROAD EFFICIENCY.

       (a) Establishment.--The Secretary of Energy, in cooperation 
     with the Secretary of Transportation and the Administrator of 
     the Environmental Protection Agency, shall establish a cost-
     shared, public-private research partnership to develop and 
     demonstrate railroad locomotive technologies that increase 
     fuel economy, reduce emissions, and lower costs of operation. 
     Such partnership shall involve the Federal Government, 
     railroad carriers, locomotive manufacturers and equipment 
     suppliers, and the Association of American Railroads.
       (b) Authorization of Appropriations.--For the purposes of 
     this section, there are authorized to be appropriated to the 
     Secretary of Energy $25,000,000 for fiscal year 2004, 
     $35,000,000 for fiscal year 2005, and $50,000,000 for fiscal 
     year 2006.

     SEC. 715. REDUCTION OF ENGINE IDLING IN HEAVY-DUTY VEHICLES.

       (a) Identification.--Not later than 180 days after the date 
     of enactment of this section, the Secretary of Energy, in 
     consultation with the Secretary of Transportation and the 
     Administrator of the Environmental Protection Agency, shall 
     commence a study to analyze the potential fuel savings and 
     emissions reductions resulting from use of idling reduction 
     technologies as they are applied to heavy-duty vehicles. Upon 
     completion of the study, the Secretary of Energy shall, by 
     rule, certify those idling reduction technologies with the 
     greatest economic or technical feasibility and the greatest 
     potential for fuel savings and emissions reductions, and 
     publish a list of such certified technologies in the Federal 
     Register.
       (b) Vehicle Weight Exemption.--Section 127(a) of Title 23, 
     United States Code, is amended by adding at the end the 
     following: ``In order to promote reduction of fuel use and 
     emissions due to engine idling, the maximum gross vehicle 
     weight limit and the axle weight limit for any motor vehicle 
     equipped with an idling reduction technology certified by the 
     U.S. Department of Energy will be increased by an amount 
     necessary to compensate for the additional weight of the 
     idling reduction system, provided that the weight increase 
     shall be no greater than 400 pounds.''
       (c) Definitions.--For the purposes of this section:
       (1) The term ``idling reduction technology'' means a device 
     or system of devices utilized to reduce long-duration idling 
     of a vehicle.
       (2) The term ``heavy-duty vehicle'' means a vehicle that 
     has a gross vehicle weight rating greater than 8,500 pounds 
     and is powered by a diesel engine.
       (3) The term ``long-duration idling'' means the operation 
     of a main drive engine, for a period greater than 30 
     consecutive minutes, where the main drive engine is not 
     engaged in gear. Such term does not apply to routine 
     stoppages associated with traffic movement or congestion.

     SEC. 716. PROVISION NOT TO TAKE EFFECT.

       Section 711 shall not take effect.

     SEC. 717. REVISED CONSIDERATIONS FOR DECISIONS ON MAXIMUM 
                   FEASIBLE AVERAGE FUEL ECONOMY.

       Section 32902(f) of title 49, United States Code, is 
     amended to read as follows:
       ``(f) Considerations for Decisions on Maximum Feasible 
     Average Fuel Economy.--When deciding maximum feasible average 
     fuel economy under this section, the Secretary of 
     Transportation shall consider the following matters:
       ``(1) Technological feasibility.
       ``(2) Economic practicability.
       ``(3) The effect of other motor vehicle standards of the 
     Government on fuel economy.
       ``(4) The need of the United States to conserve energy.
       ``(5) The desirability of reducing United States dependence 
     on imported oil.
       ``(6) The effects of the average fuel economy standards on 
     motor vehicle and passenger safety.
       ``(7) The effects of increased fuel economy on air quality.
       ``(8) The adverse effects of average fuel economy standards 
     on the relative competitiveness of manufacturers.
       ``(9) The effects of compliance with average fuel economy 
     standards on levels of employment in the United States.
       ``(10) The cost and lead time necessary for the 
     introduction of the necessary new technologies.
       ``(11) The potential for advanced technology vehicles, such 
     as hybrid and fuel cell vehicles, to contribute to the 
     achievement of significant reductions in fuel consumption.
       ``(12) The extent to which the necessity for vehicle 
     manufacturers to incur near-term costs to comply with the 
     average fuel economy standards adversely affects the 
     availability of resources for the development of advanced 
     technology for the propulsion of motor vehicles.
       ``(13) The report of the National Research Council that is 
     entitled `Effectiveness and Impact of Corporate Average Fuel 
     Economy Standards', issued in January 2002.''.

     SEC. 718. INCREASED FUEL ECONOMY STANDARDS.

       (a) New Regulations Required.--
       (1) Non-passenger automobiles.--
       (A) Requirement for new regulations.--The Secretary of 
     Transportation shall issue, under section 32902 of title 49, 
     United States Code, new regulations setting forth increased 
     average fuel economy standards for non-passenger automobiles. 
     The regulations shall be determined on the basis of the 
     maximum feasible average fuel economy levels for the non-
     passenger automobiles, taking into consideration the matters 
     set forth in subsection (f) of such section. The new 
     regulations under this paragraph shall apply for model years 
     after the 2007 model year, subject to subsection (b).
       (B) Time for issuing regulations.--The Secretary of 
     Transportation shall issue the final regulations under 
     subparagraph (A) not later than April 1, 2006.
       (2) Passenger automobiles.--
       (A) Requirement for new regulations.--The Secretary of 
     Transportation shall issue, under section 32902 of title 49, 
     United States Code, new regulations setting forth increased 
     average fuel economy standards for passenger automobiles, 
     taking into consideration the matters set forth in subsection 
     (f) of such section.
       (B) Time for issuing regulations.--The Secretary of 
     Transportation shall issue the final regulations under 
     subparagraph (A) not later than 2\1/2\ years after the date 
     of the enactment of this Act.
       (b) Phased Increases.--The regulations issued pursuant to 
     subsection (a) shall specify standards that take effect 
     successively over several vehicle model years not exceeding 
     15 vehicle model years.
       (c) Clarification of Authority To Amend Passenger 
     Automobile Standard.--Section 32902(b) of title 49, United 
     States Code, is amended by inserting before the period at the 
     end the following: ``or such other number as the Secretary 
     prescribes under subsection (c)''.
       (d) Environmental Assessment.--When issuing final 
     regulations setting forth increased average fuel economy 
     standards under section 32902(a) or section 32902(c) of title 
     49, United States Code, the Secretary of Transportation shall 
     also issue an environmental assessment of the effects of the 
     increased standards on the environment under the National 
     Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
       (e) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary of Transportation 
     $5,000,000 for each of fiscal years 2004 through 2008 for 
     carrying out this section and for administering the 
     regulations issued pursuant to this section.

     SEC. 719. EXPEDITED PROCEDURES FOR CONGRESSIONAL INCREASE IN 
                   FUEL ECONOMY STANDARDS.

       (a) Condition for Applicability.--If the Secretary of 
     Transportation fails to issue final regulations with respect 
     to non-passenger automobiles under section 719 or fails to 
     issue final regulations with respect to passenger automobiles 
     under such section, on or before the date by which such final 
     regulations are required by such section to be issued, 
     respectively, then this section shall apply with respect to a 
     bill described in subsection (b).
       (b) Bill.--A bill referred to in this subsection is a bill 
     that satisfies the following requirements:
       (1) Introduction.--The bill is introduced by one or more 
     Members of Congress not later than 60 days after the date 
     referred to in subsection (a).
       (2) Title.--The title of the bill is as follows: ``A bill 
     to establish new average fuel economy standards for certain 
     motor vehicles.''.
       (3) Text.--The bill provides after the enacting clause only 
     the text specified in subparagraph (A) or (B) or any 
     provision described in subparagraph (C), as follows:
       (A) Non-passenger automobiles.--In the case of a bill 
     relating to a failure timely to issue final regulations 
     relating to non-passenger automobiles, the following text:
     ``That, section 32902 of title 49, United States Code, is 
     amended by adding at the end the following new subsection:
       `` `(__) Non-passenger automobiles.--The average fuel 
     economy standard for non-passenger automobiles manufactured 
     by a manufacturer in a model year after model year ____ shall 
     be ____ miles per gallon.' '', the first blank space being 
     filled in with a subsection designation, the second blank 
     space being filled in with the number of a year, and the 
     third blank space being filled in with a number.
       (B) Passenger automobiles.--In the case of a bill relating 
     to a failure timely to issue final regulations relating to 
     passenger automobiles, the following text:
     ``That, section 32902(b) of title 49, United States Code, is 
     amended to read as follows:
       `` `(b) Passenger Automobiles.--Except as provided in this 
     section, the average fuel economy standard for passenger 
     automobiles manufactured by a manufacturer in a model year 
     after model year ____ shall be ____ miles per gallon.' '', 
     the first blank space being filled in with the number of a 
     year and the second blank space being filled in with a 
     number.
       (C) Substitute text.--Any text substituted by an amendment 
     that is in order under subsection (c)(3).
       (c) Expedited Procedures.--A bill described in subsection 
     (b) shall be considered in a House of Congress in accordance 
     with the procedures provided for the consideration of joint 
     resolutions in paragraphs (3) through (8) of section 8066(c) 
     of the Department of Defense Appropriations Act, 1985 (as 
     contained in section 101(h) of Public Law 98-473; 98 Stat. 
     1936), with the following exceptions:
       (1) References to resolution.--The references in such 
     paragraphs to a resolution shall be deemed to refer to the 
     bill described in subsection (b).

[[Page S10378]]

       (2) Committees of jurisdiction.--The committees to which 
     the bill is referred under this subsection shall--
       (A) in the Senate, be the Committee on Commerce, Science, 
     and Transportation; and
       (B) in the House of Representatives, be the Committee on 
     Energy and Commerce.
       (3) Amendments.--
       (A) Amendments in order.--Only four amendments to the bill 
     are in order in each House, as follows:
       (i) Two amendments proposed by the majority leader of that 
     House.
       (ii) Two amendments proposed by the minority leader of that 
     House.
       (B) Form and content.--To be in order under subparagraph 
     (A), an amendment shall propose to strike all after the 
     enacting clause and substitute text that only includes the 
     same text as is proposed to be stricken except for one or 
     more different numbers in the text.
       (C) Debate, et cetera.--Subparagraph (B) of section 
     8066(c)(5) of the Department of Defense Appropriations Act, 
     1985 (98 Stat. 1936) shall apply to the consideration of each 
     amendment proposed under this paragraph in the same manner as 
     such subparagraph (B) applies to debatable motions.

                  Subtitle C--Advanced Clean Vehicles

     SEC. 731. HYBRID VEHICLES RESEARCH AND DEVELOPMENT.

       (a) Rechargeable Energy Storage Systems and Other 
     Technologies.--The Secretary of Energy shall accelerate 
     research and development directed toward the improvement of 
     batteries and other rechargeable energy storage systems, 
     power electronics, hybrid systems integration, and other 
     technologies for use in hybrid vehicles.
       (b) Authorization of Appropriations.--Funds are hereby 
     authorized to be appropriated for each of fiscal years 2004, 
     2005, and 2006 in the amount $50,000,000 for research and 
     development activities under this section.

     SEC. 732. DIESEL FUELED VEHICLES RESEARCH AND DEVELOPMENT.

       (a) Diesel Combustion and After Treatment Technologies.--
     The Secretary of Energy shall accelerate research and 
     development directed toward the improvement of diesel 
     combustion and after treatment technologies for use in diesel 
     fueled motor vehicles.
       (b) Goals.--The Secretary shall carry out subsection (a) 
     with a view to achieving the following goals:
       (1) Compliance with certain emission standards by 2010.--
     Developing and demonstrating diesel technologies that, not 
     later than 2010, meet the following standards:
       (A) Tier-2 emission standards.--The tier 2 emission 
     standards.
       (B) Heavy-duty emission standards of 2007.--The heavy-duty 
     emission standards of 2007.
       (2) Post-2010 highly efficient technologies.--Developing 
     the next generation of low emissions, high efficiency diesel 
     engine technologies, including homogeneous charge compression 
     ignition technology.
       (c) Authorization of Appropriations.--Funds are hereby 
     authorized to be appropriated for each of fiscal years 2004, 
     2005, and 2006 in the amount of $75,000,000 for research and 
     development of advanced combustion engines and advanced 
     fuels.

     SEC. 733. PROCUREMENT OF ALTERNATIVE FUELED PASSENGER 
                   AUTOMOBILES.

       (a) Vehicle Fleets Not Covered by Requirement in Energy 
     Policy Act of 1992.--The head of each agency of the executive 
     branch shall coordinate with the Administrator of General 
     Services to ensure that only alternative fueled vehicles are 
     procured by or for each agency fleet of passenger automobiles 
     that is not in a fleet of vehicles to which section 303 of 
     the Energy Policy Act of 1992 (42 U.S.C. 13212) applies.
       (b) Waiver Authority.--The head of an agency, in 
     consultation with the Administrator, may waive the 
     applicability of the policy regarding the procurement of 
     alternative fueled vehicles in subsection (a) to--
       (1) the procurement for such agency of any vehicles 
     described in subparagraphs (A) through (F) of section 
     303(b)(3) of the Energy Policy Act of 1992 (42 U.S.C. 
     13212(b)(3)); or
       (2) a procurement of vehicles for such agency if the 
     procurement of alternative fueled vehicles cannot meet the 
     requirements of the agency for vehicles due to insufficient 
     availability of the alternative fuel used to power such 
     vehicles.
       (c) Applicability to Procurements After Fiscal Year 2004.--
     This subsection applies with respect to procurements of 
     alternative fueled vehicles in fiscal year 2005 and 
     subsequent fiscal years.

     SEC. 734. PROCUREMENT OF HYBRID LIGHT DUTY TRUCKS.

       (a) Vehicle Fleets Not Covered by Requirement in Energy 
     Policy Act of 1992.--
       (1) Hybrid vehicles.--The head of each agency of the 
     executive branch shall coordinate with the Administrator of 
     General Services to ensure that only hybrid vehicles are 
     procured by or for each agency fleet of light duty trucks 
     that is not in a fleet of vehicles to which section 303 of 
     the Energy Policy Act of 1992 (42 U.S.C. 13212) applies.
       (2) Waiver authority.--The head of an agency, in 
     consultation with the Administrator, may waive the 
     applicability of the policy regarding the procurement of 
     hybrid vehicles in paragraph (1) to that agency to the extent 
     that the head of that agency determines necessary--
       (A) to meet specific requirements of the agency for 
     capabilities of light duty trucks;
       (B) to procure vehicles consistent with the standards 
     applicable to the procurement of fleet vehicles for the 
     Federal Government;
       (C) to adjust to limitations on the commercial availability 
     of light duty trucks that are hybrid vehicles; or
       (D) to avoid the necessity of procuring a hybrid vehicle 
     for the agency when each of the hybrid vehicles available for 
     meeting the requirements of the agency has a cost to the 
     United States that exceeds the costs of comparable nonhybrid 
     vehicles by a factor that is significantly higher than the 
     difference between--
       (i) the real cost of the hybrid vehicle to retail 
     purchasers, taking into account the benefit of any tax 
     incentives available to retail purchasers for the purchase of 
     the hybrid vehicle; and
       (ii) the costs of the comparable nonhybrid vehicles to 
     retail purchasers.
       (3) Applicability to procurements after fiscal year 2004.--
     This subsection applies with respect to procurements of light 
     duty trucks in fiscal year 2005 and subsequent fiscal years.
       (b) Inapplicability to Department of Defense.--This section 
     does not apply to the Department of Defense, which is subject 
     to comparable requirements under section 318 of the National 
     Defense Authorization Act for Fiscal Year 2002 (Public Law 
     107-107; 115 Stat. 1055; 10 U.S.C. 2302 note).

     SEC. 735. DEFINITIONS.

       In this subtitle:
       (1) Alternative fueled vehicle.--The term ``alternative 
     fueled vehicle'' means--
       (A) an alternative fueled vehicle, as defined in section 
     301(3) of the Energy Policy Act of 1992 (42 U.S.C. 13211(3));
       (B) a motor vehicle that operates on a blend of fuel that 
     is at least 20 percent (by volume) biodiesel, as defined in 
     section 312(f) of the Energy Policy Act of 1992 (42 U.S.C. 
     13220(f)); and
       (C) a motor vehicle that operates on a blend of fuel that 
     is at least 20 percent (by volume) bioderived hydrocarbons 
     (including aliphatic compounds) produced from agricultural 
     and animal waste.
       (2) Heavy-duty emission standards of 2007.--The term 
     ``heavy-duty emission standards of 2007'' means the motor 
     vehicle emission standards promulgated by the Administrator 
     of the Environmental Protection Agency on January 18, 2001, 
     under section 202 of the Clean Air Act to apply to heavy-duty 
     vehicles of model years beginning with the 2007 vehicle model 
     year.
       (3) Hybrid vehicle.--The term ``hybrid vehicle'' means--
       (A) a motor vehicle that draws propulsion energy from on 
     board sources of stored energy that are both--
       (i) an internal combustion or heat engine using combustible 
     fuel; and
       (ii) a rechargeable energy storage system; and
       (B) any other vehicle that is defined as a hybrid vehicle 
     in regulations prescribed by the Secretary of Energy for the 
     administration of title III of the Energy Policy Act of 1992.
       (4) Motor vehicle.--The term ``motor vehicle'' means any 
     vehicle that is manufactured primarily for use on public 
     streets, roads, and highways (not including a vehicle 
     operated exclusively on a rail or rails) and that has at 
     least four wheels.
       (5) Tier 2 emission standards defined.--The term ``tier 2 
     emission standards'' means the motor vehicle emission 
     standards promulgated by the Administrator of the 
     Environmental Protection Agency on February 10, 2000, under 
     section 202 of the Clean Air Act (42 U.S.C. 7521) to apply to 
     passenger automobiles, light trucks, and larger passenger 
     vehicles of model years after the 2003 vehicle model year.
       (6) Terms defined in epa regulations.--The terms 
     ``passenger automobile'' and ``light truck'' have the 
     meanings given such terms in regulations prescribed by the 
     Administrator of the Environmental Protection Agency for 
     purposes of the administration of title II of the Clean Air 
     Act (42 U.S.C. 7521 et seq.).

                          TITLE VIII--HYDROGEN

                  Subtitle A--Basic Research Programs

     SEC. 801. SHORT TITLE.

       This subtitle may be cited as the ``George E. Brown, Jr. 
     and Robert S. Walker Hydrogen Future Act of 2003''.

     SEC. 802. MATSUNAGA ACT AMENDMENT.

       The Spark M. Matsunaga Hydrogen Research, Development, and 
     Demonstration Act of 1990 (42 U.S.C. 12401 et seq.) is 
     amended by striking sections 102 through 109 and inserting 
     the following:

     ``SEC. 102. DEFINITIONS.

       ``In this Act--
       ``(1) the term `advisory committee' means the Hydrogen and 
     Fuel Cell Technical Advisory Committee established under 
     section 107;
       ``(2) the term `Department' means the Department of Energy;
       ``(3) the term `fuel cell' means a device that directly 
     converts the chemical energy of a fuel into electricity by an 
     electrochemical process;
       ``(4) the term `infrastructure' means the equipment, 
     systems, or facilities used to produce, distribute, deliver, 
     or store hydrogen; and
       ``(5) the term `Secretary' means the Secretary of Energy.

[[Page S10379]]

     ``SEC. 103. HYDROGEN RESEARCH AND DEVELOPMENT.

       ``(a) In General.--The Secretary shall conduct a research 
     and development program on technologies related to the 
     production, distribution, storage, and use of hydrogen 
     energy, fuel cells, and related infrastructure.
       ``(b) Goal.--The goal of such program shall be to enable 
     the safe, economic, and environmentally sound use of hydrogen 
     energy, fuel cells, and related infrastructure for 
     transportation, commercial, industrial, residential, and 
     electric power generation applications.
       ``(c) Focus.--In carrying out activities under this 
     section, the Secretary shall focus on critical technical 
     issues including, but not limited to--
       ``(1) the production of hydrogen from diverse energy 
     sources, with emphasis on cost-effective production from 
     renewable energy sources;
       ``(2) the delivery of hydrogen, including safe delivery in 
     fueling stations and use of existing hydrogen pipelines;
       ``(3) the storage of hydrogen, including storage of 
     hydrogen in surface transportation;
       ``(4) fuel cell technologies for transportation, stationary 
     and portable applications, with emphasis on cost-reduction of 
     fuel cell stacks; and
       ``(5) the use of hydrogen energy and fuel cells, including 
     use in--
       ``(A) isolated villages, islands, and areas in which other 
     energy sources are not available or are very expensive; and
       ``(B) foreign markets, particularly where an energy 
     infrastructure is not well developed.
       ``(d) Codes and Standards.--The Secretary shall facilitate 
     the development of domestic and international codes and 
     standards and seek to resolve other critical regulatory and 
     technical barriers preventing the introduction of hydrogen 
     energy and fuel cells into the marketplace.
       ``(e) Solicitation.--The Secretary shall carry out the 
     research and development activities authorized under this 
     section through solicitation of proposals, and evaluation 
     using competitive merit review.
       ``(f) Cost Sharing.--The Secretary shall require a 
     commitment from non-Federal sources of at least 20 percent of 
     the cost of proposed research and development projects. The 
     Secretary may reduce or eliminate the cost sharing 
     requirement--
       ``(1) if the Secretary determines that the research and 
     development is of a basic or fundamental nature, or
       ``(2) for technical analyses, outreach activities, and 
     educational programs that the Secretary does not expect to 
     result in a marketable product.

     ``SEC. 104. DEMONSTRATION PROGRAMS.

       ``(a) Requirement.--In conjunction with activities 
     conducted under section 103, the Secretary shall conduct 
     demonstrations of hydrogen energy and fuel cell technologies 
     in order to evaluate the commercial potential of such 
     technologies.
       ``(b) Solicitation.--The Secretary shall carry out the 
     demonstrations authorized under this section through 
     solicitation of proposals, and evaluation using competitive 
     merit review.
       ``(c) Cost Sharing.--The Secretary shall require a 
     commitment from non-Federal sources of at least 50 percent of 
     the costs directly relating to a demonstration project under 
     this section. The Secretary may reduce such non-Federal 
     requirement if the Secretary determines that the reduction is 
     appropriate considering the technological risks involved in 
     the project.

     ``SEC. 105. TECHNOLOGY TRANSFER.

       ``The Secretary shall conduct programs to--
       ``(1) transfer critical hydrogen energy and fuel cell 
     technologies to the private sector in order to promote wider 
     understanding of such technologies and wider use of research 
     progress under this Act;
       ``(2) accelerate wider application of hydrogen energy and 
     fuel cell technologies in foreign countries in order to 
     increase the global market for the technologies and foster 
     global development without harmful environmental effects;
       ``(3) foster the exchange of generic, nonproprietary 
     information and technology developed pursuant to this Act, 
     among industry, academia, and the Federal agencies; and
       ``(4) inventory and assess the technical and commercial 
     viability of technologies related to production, 
     distribution, storage, and use of hydrogen energy and fuel 
     cells.

     ``SEC. 106. COORDINATION AND CONSULTATION.

       ``The Secretary shall have overall management 
     responsibility for carrying out programs under this Act. In 
     carrying out such programs, the Secretary--
       ``(1) shall establish a central point for the coordination 
     of all hydrogen energy and fuel cell research, development, 
     and demonstration activities of the Department;
       ``(2) in carrying out the Secretary's authorities pursuant 
     to this Act, shall consult with other Federal agencies as 
     appropriate, and may obtain the assistance of any Federal 
     agency, on a reimbursable basis or otherwise and with the 
     consent of such agency; and
       ``(3) shall attempt to ensure that activities under this 
     Act do not unnecessarily duplicate any available research and 
     development results or displace or compete with privately 
     funded hydrogen and fuel cell energy activities.

     ``SEC. 107. ADVISORY COMMITTEE.

       ``(a) Establishment.--There is hereby established the 
     Hydrogen and Fuel Cell Technical Advisory Committee, to 
     advise the Secretary on the programs under this Act.
       ``(b) Membership.--The advisory committee shall be 
     comprised of not fewer than 12 nor more than 25 members 
     appointed by the Secretary based on their technical and other 
     qualifications from domestic industry, automakers, 
     universities, professional societies, Federal laboratories, 
     financial institutions, and environmental and other 
     organizations as the Secretary deems appropriate. The 
     advisory committee shall have a chairperson, who shall be 
     elected by the members from among their number.
       ``(c) Terms.--Members of the advisory committee shall be 
     appointed for terms of 3 years, with each term to begin not 
     later than 3 months after the date of enactment of the Energy 
     Policy Act of 2003, except that one-third of the members 
     first appointed shall serve for 1 year, and one-third of the 
     members first appointed shall serve for 2 years, as 
     designated by the Secretary at the time of appointment.
       ``(d) Review.--The advisory committee shall review and make 
     any necessary recommendations to the Secretary on--
       ``(1) implementation and conduct of programs under this 
     Act;
       ``(2) economic, technological, and environmental 
     consequences of the deployment of technologies related to 
     production, distribution, storage, and use of hydrogen 
     energy, and fuel cells;
       ``(3) means for resolving barriers to implementing hydrogen 
     and fuel cell technologies; and
       ``(4) the coordination plan and any updates thereto 
     prepared by the Secretary pursuant to section 108.
       ``(e) Response.--The Secretary shall consider any 
     recommendations made by the advisory committee, and shall 
     provide a response to the advisory committee within 30 days 
     after receipt of such recommendations. Such response shall 
     either describe the implementation of the advisory 
     committee's recommendations or provide an explanation of the 
     reasons that any such recommendations will not be 
     implemented.
       ``(f) Support.--The Secretary shall provide such staff, 
     funds and other support as may be necessary to enable the 
     advisory committee to carry out its functions. In carrying 
     out activities pursuant to this section, the advisory 
     committee may also obtain the assistance of any Federal 
     agency, on a reimbursable basis or otherwise and with the 
     consent of such agency.

     ``SEC. 108. COORDINATION PLAN.

       ``(a) Plan.--The Secretary, in consultation with other 
     Federal agencies, shall prepare and maintain on an ongoing 
     basis a comprehensive plan for activities under this Act.
       ``(b) Development.--In developing such plan, the Secretary 
     shall--
       ``(1) consider the guidance of the National Hydrogen Energy 
     Roadmap published by the Department in November 2002 and any 
     updates thereto;
       ``(2) consult with the advisory committee; and
       ``(3) consult with interested parties from domestic 
     industry, automakers, universities, professional societies, 
     Federal laboratories, financial institutions, and 
     environmental and other organizations as the Secretary deems 
     appropriate.
       ``(c) Contents.--At a minimum, the plan shall provide--
       ``(1) an assessment of the effectiveness of the programs 
     authorized under this Act, including a summary of 
     recommendations of the advisory committee for improvements in 
     such programs;
       ``(2) a description of proposed research, development, and 
     demonstration activities planned by the Department for the 
     next five years;
       ``(3) a description of the role Federal laboratories, 
     institutions of higher education, small businesses, and other 
     private sector firms are expected to play in such programs;
       ``(4) cost and performance milestones that will be used to 
     evaluate the programs for the next five years;
       ``(5) any significant technical, regulatory, and other 
     hurdles that stand in the way of achieving such cost and 
     performance milestones, and how the programs will address 
     those hurdles; and
       (6) to the extent practicable, an analysis of Federal, 
     State, local, and private sector hydrogen research, 
     development, and demonstration activities to identify areas 
     for increased intergovernmental and private-public sector 
     collaboration.
       ``(d) Report.--Not later than January 1, 2005, and 
     biennially thereafter, the Secretary shall transmit to 
     Congress the comprehensive plan developed for the programs 
     authorized under this Act, or any updates thereto.

     ``SEC. 109. AUTHORIZATION OF APPROPRIATIONS.

       ``There are authorized to be appropriated to carry out the 
     purposes of this Act--
       ``(1) such sums as may be necessary for fiscal years 1992 
     through 2003;
       ``(2) $105,000,000 for fiscal year 2004;
       ``(3) $150,000,000 for fiscal year 2005;
       ``(4) $175,000,000 for fiscal year 2006;
       ``(5) $200,000,000 for fiscal year 2007; and
       ``(6) $225,000,000 for fiscal year 2008.''.

     SEC. 803. HYDROGEN TRANSPORTATION AND FUEL INITIATIVE.

       (a) Vehicle Technologies.--The Secretary shall carry out a 
     research, development, demonstration, and commercial 
     application program on advanced hydrogen-powered vehicle 
     technologies. Such program shall address--

[[Page S10380]]

       (1) engine and emission control systems;
       (2) energy storage, electric propulsion, and hybrid 
     systems;
       (3) automotive materials;
       (4) hydrogen-carrier fuels; and
       (5) other advanced vehicle technologies.
       (b) Hydrogen Fuel Initiative.--In coordination with the 
     program authorized in subsection (a), the Secretary of 
     Energy, in partnership with the private sector, shall conduct 
     a research, development, demonstration and commercial 
     application program designed to enable the rapid and 
     coordinated introduction of hydrogen-fueled vehicles and 
     associated infrastructure into commerce. Such program shall 
     address--
       (1) production of hydrogen from diverse energy resources, 
     including--
       (A) renewable energy resources;
       (B) fossil fuels, in conjunction with carbon capture and 
     sequestration;
       (C) hydrogen-carrier fuels; and
       (D) nuclear energy;
       (2) delivery of hydrogen or hydrogen-carrier fuels, 
     including--
       (A) transmission by pipeline and other distribution 
     methods; and
       (B) safe, convenient, and economic refueling of vehicles, 
     either at central refueling stations or through distributed 
     on-site generation;
       (3) storage of hydrogen or hydrogen-carrier fuels, 
     including development of materials for safe and economic 
     storage in gaseous, liquid or solid forms at refueling 
     facilities or onboard vehicles;
       (4) development of advanced vehicle technologies, such as 
     efficient fuel cells and direct hydrogen combustion engines, 
     and related component technologies such as advanced materials 
     and control systems; and
       (5) development of necessary codes, standards, and safety 
     practices to accompany the production, distribution, storage 
     and use of hydrogen or hydrogen-carrier fuels in 
     transportation.
       (c) Matsunaga Act.--In carrying out programs and projects 
     under subsections (a) and (b), the Secretary shall ensure 
     that such programs and projects are consistent with, and do 
     not unnecessarily duplicate, activities carried out under the 
     programs authorized under the Spark M. Matsunaga Hydrogen 
     Research, Development, and Demonstration Act of 1990 (42 
     U.S.C. 12401 et seq.).
       (d) Advisory Committee.--The Hydrogen and Fuel Cell 
     Technical Advisory Committee authorized under section 107 of 
     the Spark M. Matsunaga Hydrogen Research, Development, and 
     Demonstration Act of 1990 (42 U.S.C. 12408), as amended in 
     this title, shall also advise the Secretary on the programs 
     and activities carried out under this section.
       (e) Solicitation.--The Secretary shall carry out the 
     programs authorized under this section through solicitation 
     of proposals, and evaluation using competitive merit review.
       (f) Cost Sharing.--The Secretary shall require a commitment 
     from non-Federal sources of at least 50 percent of the costs 
     directly relating to a demonstration project under this 
     section. The Secretary may reduce such non-Federal 
     requirement if the Secretary determines that the reduction is 
     appropriate considering the technological risks involved in 
     the project.
       (g) Authorization of Appropriations.--For the purposes of 
     this section, there are authorized to be appropriated to the 
     Secretary--
       (1) for activities pursuant to subsection (a), to remain 
     available until expended--
       (A) $100,000,000 for each of fiscal years 2004 and 2005;
       (B) $110,000,000 for each of fiscal years 2006 and 2007; 
     and
       (C) $120,000,000 for fiscal year 2008; and
       (2) for activities pursuant to subsection (b), to remain 
     available until expended--
       (A) $125,000,000 for fiscal year 2004;
       (B) $150,000,000 for fiscal year 2005;
       (C) $175,000,000 for fiscal year 2006; and
       (D) $200,000,000 for each of fiscal years 2007 and 2008.

     SEC. 804. INTERAGENCY TASK FORCE AND COORDINATION PLAN.

       (a) Establishment.--Not later than 120 days after the date 
     of enactment of this Act, the Secretary shall establish an 
     interagency task force to coordinate Federal hydrogen and 
     fuel cell energy activities.
       (b) Composition.--The task force shall be chaired by a 
     designee of the Secretary, and shall include representatives 
     of--
         (1) the Office of Science and Technology Policy;
       (2) the Department of Transportation;
       (3) the Department of Defense;
       (4) the Department of Commerce (including the National 
     Institute for Standards and Technology);
       (5) the Environmental Protection Agency;
       (6) the National Aeronautics and Space Administration;
       (7) the Department of State; and
       (8) other Federal agencies as the Director considers 
     appropriate.
       (c) Coordination Plan.--The task force shall prepare a 
     comprehensive coordination plan for Federal hydrogen and fuel 
     cell energy activities, which shall include a summary of such 
     activities.
       (d) Report.--Not later than one year after it is 
     established, the task force shall report to Congress on the 
     coordination plan in subsection (c) and on the interagency 
     coordination of Federal hydrogen and fuel cell energy 
     activities.

     SEC. 805. REVIEW BY THE NATIONAL ACADEMIES.

       Not later than two years after the date of enactment of 
     this Act, and every four years thereafter, the Secretary 
     shall enter into a contract with the National Academies. Such 
     contract shall require the National Academies to perform a 
     review of the progress made through Federal hydrogen and fuel 
     cell energy programs and activities, including the need for 
     modified or additional programs, and to report to the 
     Congress on the results of such review. There are authorized 
     to be appropriated to the Secretary such sums as may be 
     necessary to carry out the requirements of this section.

                   Subtitle B--Demonstration Programs

     SEC. 811. DEFINITIONS.

       For the purposes of this subtitle and subtitle C--
       (1) the term ``fuel cell'' means a device that directly 
     converts the chemical energy of a fuel into electricity by an 
     electrochemical process;
       (2) the term ``hydrogen-carrier fuel'' means any 
     hydrocarbon fuel that is capable of being thermochemically 
     processed or otherwise reformed to produce hydrogen;
       (3) the term ``infrastructure'' means the equipment, 
     systems, or facilities used to produce, distribute, deliver, 
     or store hydrogen or hydrogen-carrier fuels;
       (4) the term ``institution of higher education'' has the 
     meaning given that term in section 101(a) of the Higher 
     Education Act of 1965 (20 U.S.C. 1001(a)); and
       (5) the term ``Secretary'' means the Secretary of Energy.

     SEC. 812. HYDROGEN VEHICLE DEMONSTRATION PROGRAM.

       (a) In General.--The Secretary shall establish a program 
     for demonstration and commercial application of hydrogen-
     powered vehicles and associated hydrogen fueling 
     infrastructure in a variety of transportation-related 
     applications, including--
       (1) fuel cell vehicles in light-duty vehicle fleets;
       (2) heavy-duty fuel cell on-road and off-road vehicles, 
     including mass transit buses;
       (3) use of hydrogen-powered vehicles and hydrogen fueling 
     infrastructure (including multiple hydrogen refueling 
     stations) along major transportation routes or in entire 
     regions; and
       (4) other similar projects as the Secretary may deem 
     necessary to contribute to the rapid demonstration and 
     deployment of hydrogen-based technologies in widespread use 
     for transportation.
       (b) Eligibility.--Federal, state, tribal, and local 
     governments, academic and other non-profit organizations, 
     private entities, and consortia of these entities shall be 
     eligible for these projects.
       (c) Selection.--In selecting projects under this section, 
     the Secretary shall--
       (1) consult with Federal, State, local and private fleet 
     managers to identify potential projects where hydrogen-
     powered vehicles may be placed into service;
       (2) identify not less than 10 sites at which to carry out 
     projects under this program, 2 of which must be based at 
     Federal facilities; and
       (3) select projects based on the following factors--
       (A) geographic diversity;
       (B) a diverse set of operating environments, duty cycles, 
     and likely weather conditions;
       (C) the interest and capability of the participating 
     agencies, entities, or fleets;
       (D) the availability and appropriateness of potential sites 
     for refueling infrastructure and for maintenance of the 
     vehicle fleet;
       (E) the existence of traffic congestion in the area 
     expected to be served by the hydrogen-powered vehicles;
       (F) proximity to non-attainment areas as defined in section 
     171 of the Clean Air Act (42 U.S.C. 7501); and
       (G) such other criteria as the Secretary determines to be 
     appropriate in order to carry out the purposes of the 
     program.
       (d) Infrastructure.--In funding projects under this 
     section, the Secretary shall also support the installation of 
     refueling infrastructure at sites necessary for success of 
     the project, giving preference to those infrastructure 
     projects that include co-production of both--
       (1) hydrogen for use in transportation; and
       (2) electricity that can be consumed on site.
       (e) Operation and Maintenance Period.--Vehicles purchased 
     for projects under this section shall be operated and 
     maintained by the participating agencies or entities in 
     regular duty cycles for a period of not less than 12 months.
       (f) Training and Technical Support.--In funding proposals 
     under this section, the Secretary shall also provide funding 
     for training and technical support as may be necessary to 
     assure the success of such projects, including training and 
     technical support in--
       (1) the installation, operation, and maintenance of fueling 
     infrastructure;
       (2) the operation and maintenance of fuel cell vehicles; 
     and
       (3) data collection necessary to monitor project 
     performance.
       (g) Cost-sharing.--Except as otherwise provided, the 
     Secretary shall require a commitment from non-Federal sources 
     of at least 50 percent of the costs directly relating to a 
     demonstration project under this section. The Secretary may 
     reduce such non-Federal requirement if the Secretary 
     determines that the reduction is appropriate considering the 
     technological risks involved in the project.
       (h) Authorization of Appropriations.--For the purposes of 
     this section, there are

[[Page S10381]]

     authorized to be appropriated to the Secretary $50,000,000 
     for each of fiscal years 2006 through 2010, to remain 
     available until expended.

     SEC. 813. STATIONARY FUEL CELL DEMONSTRATION PROGRAM.

       (a) In General.--The Secretary shall establish a program 
     for demonstration and commercial application of hydrogen fuel 
     cells in stationary applications, including--
       (1) fuel cells for use in residential and commercial 
     buildings;
       (2) portable fuel cells, including auxiliary power units in 
     trucks;
       (3) small form and micro fuel cells of 20 watts or less;
       (4) distributed generation systems with fuel cells using 
     renewable energy; and
       (5) other similar projects as the Secretary may deem 
     necessary to contribute to the rapid demonstration and 
     deployment of hydrogen-based technologies in widespread use.
       (b) Competitive Evaluation.--Proposals submitted in 
     response to solicitations issued pursuant to this section 
     shall be evaluated on a competitive basis using peer review. 
     The Secretary is not required to make an award under this 
     section in the absence of a meritorious proposal.
       (c) Preference.--The Secretary shall give preference, in 
     making an award under this section, to proposals that--
       (1) are submitted jointly from consortia that include two 
     or more participants from institutions of higher education, 
     industry, State, tribal, or local governments, and Federal 
     laboratories; and
       (2) reflect proven experience and capability with 
     technologies relevant to the projects proposed.
       (d) Training and Technical Support.--In funding proposals 
     under this section, the Secretary shall also provide funding 
     for training and technical support as may be necessary to 
     assure the success of such projects, including training and 
     technical support in the installation, operation, and 
     maintenance of fuel cells and the collection of data to 
     monitor project performance.
       (e) Cost-sharing.--Except as otherwise provided, the 
     Secretary shall require a commitment from non-Federal sources 
     of at least 50 percent of the costs directly relating to a 
     demonstration project under this section. The Secretary may 
     reduce such non-Federal requirement if the Secretary 
     determines that the reduction is appropriate considering the 
     technological risks involved in the project.
       (f) Authorization of Appropriations.--For the purposes of 
     this section, there are authorized to be appropriated to the 
     Secretary $50,000,000 for each of fiscal years 2006 through 
     2010, to remain available until expended.

     SEC. 814. HYDROGEN DEMONSTRATION PROGRAMS IN NATIONAL PARKS.

       (a) Study.--Not later than 1 year after the date of 
     enactment of this section, the Secretary of the Interior and 
     the Secretary of Energy shall jointly study and report to 
     Congress on--
       (1) the energy needs and uses at National Parks; and
       (2) the potential for fuel cell and other hydrogen-based 
     technologies to meet such energy needs in--
       (A) stationary applications, including power generation, 
     combined heat and power for buildings and campsites, and 
     standby and backup power systems; and
       (B) transportation-related applications, including support 
     vehicles, passenger vehicles and heavy-duty trucks and buses.
       (b) Pilot Projects.--Based on the results of the study 
     conducted under subsection (a), the Secretary of the Interior 
     shall fund not fewer than 3 pilot projects in national parks 
     to provide for demonstration of fuel cells or other hydrogen-
     based technologies in those applications where the greatest 
     potential for such use in National Parks has been identified. 
     Such pilot projects shall be geographically distributed 
     throughout the United States.
       (c) Definition.--For the purpose of this section, the term 
     ``National Parks'' means those areas of land and water now or 
     hereafter administered by the Secretary of the Interior 
     through the National Park Service for park, monument, 
     historic, parkway, recreational, or other purposes.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary of the Interior 
     $1,000,000 for fiscal year 2004, and $15,000,000 for fiscal 
     year 2005, to remain available until expended.

     SEC. 815. INTERNATIONAL DEMONSTRATION PROGRAM.

       (a) In General.--The Secretary, in consultation with the 
     Administrator of the U.S. Agency for International 
     Development, shall conduct demonstrations of fuel cells and 
     associated hydrogen fueling infrastructure in countries other 
     than the United States, particularly in areas where an energy 
     infrastructure is not already well developed.
       (b) Eligible Technologies.--The program may demonstrate--
       (1) fuel cell vehicles in light-duty vehicle fleets;
       (2) heavy-duty fuel cell on-road and off-road vehicles;
       (3) stationary fuel cells in residential and commercial 
     buildings; or
       (4) portable fuel cells, including auxiliary power units in 
     trucks.
       (c) Participants.--
       (1) Eligibility.--Foreign nations, non-profit 
     organizations, and private companies shall be eligible for 
     these pilot projects.
       (2) Cooperation.--Eligible entities may perform the 
     projects in cooperation with United States non-profit 
     organizations and private companies.
       (3) Cost-sharing.--The Secretary may require a commitment 
     from participating private companies and from participating 
     foreign countries.
       (d) Authorization of Appropriations.--For activities 
     conducted under this section, there are authorized to be 
     appropriated to the Secretary $25,000,000 for each of fiscal 
     years 2006 through 2010, to remain available until expended.

     SEC. 816. TRIBAL STATIONARY HYBRID POWER DEMONSTRATION.

       (a) In General.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary, in cooperation with 
     Indian tribes, shall develop and transmit to Congress a 
     strategy for a demonstration and commercial application 
     program to develop hybrid distributed power systems on Indian 
     lands that combine--
       (1) one renewable electric power generating technology of 2 
     megawatts or less located near the site of electric energy 
     use; and
       (2) fuel cell power generation suitable for use in 
     distributed power systems.
       (b) Definition.--For the purposes of this section, the 
     terms ``Indian tribe'' and ``Indian land'' have the meaning 
     given such terms under Title XXVI of the Energy Policy Act of 
     1992 (25 U.S.C. 3501 et seq.), as amended by this Act.
       (c) Authorization of Appropriations.--For activities under 
     this section, there are authorized to be appropriated to the 
     Secretary of Energy $1,000,000 for fiscal year 2005, and 
     $5,000,000 for each of fiscal years 2006 through 2008.

     SEC. 817. DISTRIBUTED GENERATION PILOT PROGRAM.

       (a) Establishment.--The Secretary shall support a 
     demonstration program to develop, deploy, and commercialize 
     distributed generation systems to significantly reduce the 
     cost of producing hydrogen from renewable energy for use in 
     fuel cells. Such program shall provide the necessary 
     infrastructure to test these distributed generation 
     technologies at pilot scales in a real-world environment.
       (b) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary of Energy, to remain 
     available until expended, for the purposes of carrying out 
     this section--
       (1) $10,000,000 for fiscal year 2004;
       (2) $15,000,000 for fiscal year 2005; and
       (3) $20,000,000 for each of fiscal years 2006 through 2008.

                      Subtitle C--Federal Programs

     SEC. 821. PUBLIC EDUCATION AND TRAINING.

       (a) Education.--The Secretary shall conduct a public 
     education program designed to increase public interest in and 
     acceptance of hydrogen energy and fuel cell technologies.
       (b) Training.--The Secretary shall conduct a program to 
     promote university-based training in critical skills for 
     research in, production of, and use of hydrogen energy and 
     fuel cell technologies. Such program may include research 
     fellowships at institutions of higher education, centers of 
     excellence in critical technologies, internships in industry, 
     and such other measures as the Secretary deems appropriate.
       (c) Authorization of Appropriations.--For activities 
     pursuant to this section, there are authorized to be 
     appropriated to the Secretary $7,000,000 for each of fiscal 
     years 2004 through 2008.

     SEC. 822. HYDROGEN TRANSITION STRATEGIC PLANNING.

       (a) In General.--Not later than September 30, 2004, the 
     head of each federal agency with annual outlays of greater 
     than $20,000,000 shall submit to the Director of the Office 
     of Management and Budget and to the Congress a hydrogen 
     transition strategic plan containing a comprehensive 
     assessment of how the transition to a hydrogen-based economy 
     could assist the mission, operation and regulatory program of 
     the agency.
       (b) Contents.--At a minimum, each plan shall contain--
       (1) a description of areas within the agency's control 
     where using hydrogen and/or fuel cells could benefit the 
     operation of the agency, assist in the implementation of its 
     regulatory functions or enhance the agency's mission; and
       (2) a description of any agency management practices, 
     procurement policies, regulations, policies, or guidelines 
     that may inhibit the agency's transition to use of fuel cells 
     and hydrogen as an energy source.
       (c) Duration and Revision.--The strategic plan shall cover 
     a period of not less than the five years following the fiscal 
     year in which it is submitted, and shall be updated and 
     revised at least every three years.

     SEC. 823. MINIMUM FEDERAL FLEET REQUIREMENT.

       (a) Section 303(b) of the Energy Policy Act of 1992 (42 
     U.S.C. 13212(b)) is amended by adding at the end the 
     following:
       ``(4) Hydrogen vehicles.--
       ``(A) Of the number of vehicles acquired under paragraph 
     (1)(D) by a Federal fleet of 100 or more vehicles, not less 
     than--
       ``(i) 5 percent in fiscal years 2006 and 2007;
       ``(ii) 10 percent in fiscal years 2008 and 2009;
       ``(iii) 15 percent in fiscal years 2010 and 2011; and
       ``(iv) 20 percent in fiscal years 2012 and thereafter,

     shall be hydrogen-powered vehicles that meet standards for 
     performance, reliability, cost, and maintenance established 
     by the Secretary.

[[Page S10382]]

       ``(B) The Secretary may establish a lesser percentage, or 
     waive the requirement under subparagraph (A) for any fiscal 
     year entirely, if hydrogen-powered vehicles meeting the 
     standards set by the Secretary pursuant to subparagraph (A) 
     are not available at a purchase price that is less than 150 
     percent of the purchase price of other comparable alternative 
     fueled vehicles.
       ``(C) The Secretary may by rule, delay the implementation 
     of the requirements under subparagraph (A) in the event that 
     the Secretary determines that hydrogen-powered vehicles are 
     not commercially or economically available, or that fuel for 
     such vehicles is not commercially or economically available.
       ``(D) The Secretary, in consultation with the Administrator 
     of General Services, may for reasons of refueling 
     infrastructure use and cost optimization, elect to allocate 
     the acquisitions necessary to achieve the requirements in 
     subparagraph (A) to certain Federal fleets in lieu of 
     requiring each Federal fleet to achieve the requirements in 
     subparagraph (A).''.
       (b) Refueling.--Section 304 of the Energy Policy Act of 
     1992 (42 U.S.C. 13213) is amended--
       (1) by redesignating subsection (b) as subsection (c);
       (2) in the second sentence of subsection (a), by striking 
     ``If publicly'' and inserting the following:
       ``(b) Commercial Arrangements.--
       ``(1) In general.--If publicly''; and
       (3) in subsection (b) (as designated by paragraph (2)), by 
     adding at the end the following:
       ``(2) Mandatory arrangements.--
       ``(A) In general.--In a case in which publicly available 
     fueling facilities are not convenient or accessible to the 
     locations of 2 or more Federal fleets for which hydrogen-
     powered vehicles are required to be purchased under section 
     303(b)(4), the Federal agency for which the Federal fleets 
     are maintained (or the Federal agencies for which the Federal 
     fleets are maintained, acting jointly under a memorandum of 
     agreement providing for cost sharing) shall enter into a 
     commercial arrangement as provided in paragraph (1).
       ``(B) Sunset.--Subparagraph (A) ceases to be effective at 
     the end of fiscal year 2013.''.

     SEC. 824. STATIONARY FUEL CELL PURCHASE REQUIREMENT.

       (a) Requirement.--The President, acting through the 
     Secretary of Energy, shall seek to ensure that, to the extent 
     economically practicable and technically feasible, of the 
     total amount of electric energy the Federal Government 
     consumes during any fiscal year, the following amounts shall 
     be generated by fuel cells--
       (1) not less than 1 percent in fiscal years 2006 through 
     2008;
       (2) not less than 2 percent in fiscal years 2009 and 2010; 
     and
       (3) not less than 3 percent in fiscal year 2011 and each 
     fiscal year thereafter.
       (b) Compliance.--In complying with the requirements of 
     subsection (a), Federal agencies are encouraged to--
       (1) use innovative purchasing practices;
       (2) use fuel cells at the site of electricity usage and in 
     combined heat and power applications; and
       (3) use fuel cells in stand alone power functions, such as 
     but not limited to battery power and backup power.
       (c) Definitions.--For purposes of this section--
       (1) the term ``fuel cells'' means an integrated system 
     comprised of a fuel cell stack assembly and balance of plant 
     components that converts a fuel into electricity using an 
     electrochemical means; and
       (2) the term ``electrical energy'' includes on and off grid 
     power, including premium power applications, standby power 
     applications and electricity generation.
       (d) Authorization of Appropriations.--For the purposes of 
     this section, there are authorized to be appropriated to the 
     Secretary of Energy $30,000,000 for fiscal year 2004, 
     $70,000,000 for fiscal year 2005, and $100,000,000 for each 
     of fiscal years 2006 and thereafter.

     SEC. 825. DEPARTMENT OF ENERGY STRATEGY.

       Not later than 1 year after the date of enactment of this 
     Act, the Secretary shall publish and transmit to Congress a 
     plan identifying critical technologies, enabling strategies 
     and applications, technical targets, and associated 
     timeframes that support the commercialization of hydrogen-
     fueled fuel cell vehicles.

                   TITLE IX--RESEARCH AND DEVELOPMENT

     SEC. 901. SHORT TITLE.

       This Title may be cited as the ``Energy Research, 
     Development, Demonstration, and Commercial Application Act of 
     2003''.

     SEC. 902. GOALS.

       (a) In General.--In order to achieve the purposes of this 
     title, the Secretary shall conduct a balanced set of programs 
     of energy research, development, demonstration, and 
     commercial application, focused on--
       (1) increasing the efficiency of all energy intensive 
     sectors through conservation and improved technologies,
       (2) promoting diversity of energy supply,
       (3) decreasing the nation's dependence on foreign energy 
     supplies,
       (4) improving United States energy security, and
       (5) decreasing the environmental impact of energy-related 
     activities.
       (b) Goals.--The Secretary shall publish measurable cost and 
     performance-based goals with each annual budget submission in 
     at least the following areas:
       (1) energy efficiency for buildings, energy-consuming 
     industries, and vehicles;
       (2) electric energy generation (including distributed 
     generation), transmission, and storage;
       (3) renewable energy technologies including wind power, 
     photovoltaics, solar thermal systems, geothermal energy, 
     hydrogen-fueled systems, biomass-based systems, biofuels, and 
     hydropower;
       (4) fossil energy including power generation, onshore and 
     offshore oil and gas resource recovery, and transportation; 
     and
       (5) nuclear energy including programs for existing and 
     advanced reactors, and education of future specialists.
       (c) Public Comment.--The Secretary shall provide mechanisms 
     for input on the annually published goals from industry, 
     university, and other public sources.
       (d) Effect of Goals.--Nothing in subsection (a) or the 
     annually published goals creates any new authority for any 
     Federal agency, or may be used by a Federal agency to support 
     the establishment of regulatory standards or regulatory 
     requirements.

     SEC. 903. DEFINITIONS.

       For purposes of this title:
       (1) The term ``Department'' means the Department of Energy.
       (2) The term ``departmental mission'' means any of the 
     functions vested in the Secretary of Energy by the Department 
     of Energy Organization Act (42 U.S.C. 7101 et seq.) or other 
     law.
       (3) The term ``institution of higher education'' has the 
     meaning given that term in section 101(a) of the Higher 
     Education Act of 1965 (20 U.S.C. 1001(a)).
       (4) The term ``National Laboratory'' means any of the 
     following laboratories owned by the Department:
       (A) Ames Laboratory.
       (B) Argonne National Laboratory.
       (C) Brookhaven National Laboratory.
       (D) Fermi National Accelerator Laboratory.
       (E) Idaho National Engineering and Environmental 
     Laboratory.
       (F) Lawrence Berkeley National Laboratory.
       (G) Lawrence Livermore National Laboratory.
       (H) Los Alamos National Laboratory.
       (I) National Energy Technology Laboratory.
       (J) National Renewable Energy Laboratory.
       (K) Oak Ridge National Laboratory.
       (L) Pacific Northwest National Laboratory.
       (M) Princeton Plasma Physics Laboratory.
       (N) Sandia National Laboratories.
       (O) Stanford Linear Accelerator Center.
       (P) Thomas Jefferson National Accelerator Facility.
       (5) The term ``nonmilitary energy laboratory'' means the 
     laboratories listed in (4) with the exclusion of (4)(G), 
     (4)(H), and (4)(N).
       (6) The term ``Secretary'' means the Secretary of Energy.
       (7) The term ``single-purpose research facility'' means any 
     of the primarily single-purpose entities owned by the 
     Department or any other organization of the Department 
     designated by the Secretary.

                     Subtitle A--Energy Efficiency

     SEC. 911. ENERGY EFFICIENCY.

       (a) In General.--The following sums are authorized to be 
     appropriated to the Secretary for energy efficiency and 
     conservation research, development, demonstration, and 
     commercial application activities, including activities 
     authorized under this subtitle:
       (1) for fiscal year 2004, $616,000,000;
       (2) for fiscal year 2005, $695,000,000;
       (3) for fiscal year 2006, $772,000,000;
       (4) for fiscal year 2007, $865,000,000; and
       (5) for fiscal year 2008, $920,000,000.
       (b) Allocations.--From amounts authorized under subsection 
     (a), the following sums are authorized:
       (1) For activities under section 912--
       (A) for fiscal year 2004, $20,000,000; and
       (B) for fiscal year 2005, $30,000,000.
       (2) For activities under section 914--
       (A) for fiscal year 2004, $4,000,000; and
       (B) for each of fiscal years 2005 through 2008, $7,000,000.
       (3) For activities under section 915--
       (A) for fiscal year 2004, $20,000,000;
       (B) for fiscal year 2005, $25,000,000;
       (C) for fiscal year 2006, $30,000,000;
       (D) for fiscal year 2007, $35,000,000; and
       (E) for fiscal year 2008, $40,000,000.
       (c) Extended Authorization.--There are authorized to be 
     appropriated to the Secretary for activities under section 
     912, $50,000,000 for each of fiscal years 2006 through 2013.
       (d) None of the funds authorized to be appropriated under 
     this section may be used for--
       (1) the promulgation and implementation of energy 
     efficiency regulations;
       (2) the Weatherization Assistance Program under part A of 
     title IV of the Energy Conservation and Production Act;
       (3) the State Energy Program under part D of title III of 
     the Energy Policy and Conservation Act; or
       (4) the Federal Energy Management Program under part 3 of 
     title V of the National Energy Conservation Policy Act.

     SEC. 912. NEXT GENERATION LIGHTING INITIATIVE.

       (a) In General.--The Secretary shall carry out a Next 
     Generation Lighting Initiative in

[[Page S10383]]

     accordance with this section to support research, 
     development, demonstration, and commercial application 
     activities related to advanced solid-state lighting 
     technologies based on white light emitting diodes.
       (b) Objectives.--The objectives of the initiative shall be 
     to develop advanced solid-state organic and inorganic 
     lighting technologies based on white light emitting diodes 
     that, compared to incandescent and fluorescent lighting 
     technologies, are longer lasting; more energy-efficient; 
     cost-competitive and have less environmental impact.
       (c) Industry Alliance.--The Secretary shall, within 3 
     months from the date of enactment of this section, 
     competitively select an Industry Alliance to represent 
     participants who are private, for-profit firms which, as a 
     group, are broadly representative of United States solid 
     state lighting research, development, infrastructure, and 
     manufacturing expertise as a whole.
       (d) Research.--
       (1) The Secretary shall carry out the research activities 
     of the Next Generation Lighting Initiative through 
     competitively awarded grants to researchers, including 
     Industry Alliance participants, national laboratories and 
     institutions of higher education.
       (2) The Secretary shall annually solicit from the Industry 
     Alliance--
       (A) comments to identify solid-state lighting technology 
     needs;
       (B) assessment of the progress of the Initiative's research 
     activities; and
       (C) assistance in annually updating solid-state lighting 
     technology roadmaps.
       (3) The information and roadmaps under (2) shall be 
     available to the public.
       (e) Development, Demonstration, and Commercial 
     Application.--The Secretary shall carry out a development, 
     demonstration, and commercial application program for the 
     Next Generation Lighting Initiative through competitively 
     selected awards. The Secretary may give preference to 
     participants of the Industry Alliance selected pursuant to 
     subsection (c).
       (f) Cost Sharing.--The Secretary shall require cost sharing 
     according to 42 U.S.C. 13542.
       (g) Intellectual Property.--The Secretary may require, in 
     accordance with the authorities provided in 35 U.S.C. 
     202(a)(ii), 42 U.S.C. 2182 and 42 U.S.C. 5908, that for any 
     new invention from subsection (d)--
       (1) that the Industry Alliance members who are active 
     participants in research, development and demonstration 
     activities related to the advanced solid-state lighting 
     technologies that are the subject of this legislation shall 
     be granted first option to negotiate with the invention 
     owner, at least in the field of solid-state lighting, non-
     exclusive licenses and royalties on terms that are reasonable 
     under the circumstances;
       (2) that the invention owner must offer to negotiate 
     licenses with the Industry Alliance participants cited in 
     (1), in good faith, for at least 1 year after U.S. patents 
     are issued on any such new invention; and
       (3) such other terms as the Secretary determines are 
     required to promote accelerated commercialization of 
     inventions made under the Initiative.
       (h) National Academy Review.--The Secretary shall enter 
     into an arrangement with the National Academy of Sciences to 
     conduct periodic reviews of the Next Generation Lighting 
     Initiative.
       (i) Definitions.--As used in this section:
       (1) The term ``advanced solid-state lighting'' means a 
     semiconducting device package and delivery system that 
     produces white light using externally applied voltage.
       (2) The term ``research'' includes basic research on the 
     technologies, materials and manufacturing processes required 
     for white light emitting diodes.
       (3) The term ``Industry Alliance'' means an entity selected 
     by the Secretary under subsection (c).
       (4) The term ``white light emitting diode'' means a 
     semiconducting package, utilizing either organic or inorganic 
     materials, that produces white light using externally applied 
     voltage.

     SEC. 913. NATIONAL BUILDING PERFORMANCE INITIATIVE.

       (a) Interagency Group.--Not later than 90 days after the 
     date of enactment of this Act, the Director of the Office of 
     Science and Technology Policy shall establish an interagency 
     group to develop, in coordination with the advisory committee 
     established under subsection (e), a National Building 
     Performance Initiative (in this section referred to as the 
     ``Initiative''). The interagency group shall be co-chaired by 
     appropriate officials of the Department and the Department of 
     Commerce, who shall jointly arrange for the provision of 
     necessary administrative support to the group.
       (b) Integration of Efforts.--The Initiative shall integrate 
     Federal, State, and voluntary private sector efforts to 
     reduce the costs of construction, operation, maintenance, and 
     renovation of commercial, industrial, institutional, and 
     residential buildings.
       (c) Plan.--Not later than 1 year after the date of 
     enactment of this Act, the interagency group shall submit to 
     Congress a plan for carrying out the appropriate Federal role 
     in the Initiative. The plan shall include--
       (1) research, development, demonstration, and commercial 
     application of systems and materials for new construction and 
     retrofit relating to the building envelope and building 
     system components; and
       (2) the collection, analysis, and dissemination of research 
     results and other pertinent information on enhancing building 
     performance to industry, government entities, and the public.
       (d) Department of Energy Role.--Within the Federal portion 
     of the Initiative, the Department shall be the lead agency 
     for all aspects of building performance related to use and 
     conservation of energy.
       (e) Advisory Committee.--The Director of the Office of 
     Science and Technology Policy shall establish an advisory 
     committee to--
       (1) analyze and provide recommendations on potential 
     private sector roles and participation in the Initiative; and
       (2) review and provide recommendations on the plan 
     described in subsection (c).
       (f) Construction.--Nothing in this section provides any 
     Federal agency with new authority to regulate building 
     performance.

     SEC. 914. SECONDARY ELECTRIC VEHICLE BATTERY USE PROGRAM.

       (a) Definitions.--For purposes of this section:
       (1) The term ``battery'' means an energy storage device 
     that previously has been used to provide motive power in a 
     vehicle powered in whole or in part by electricity.
       (2) The term ``associated equipment'' means equipment 
     located where the batteries will be used that is necessary to 
     enable the use of the energy stored in the batteries.
       (b) Program.--The Secretary shall establish and conduct a 
     research, development, demonstration, and commercial 
     application program for the secondary use of batteries. Such 
     program shall be--
       (1) designed to demonstrate the use of batteries in 
     secondary applications, including utility and commercial 
     power storage and power quality;
       (2) structured to evaluate the performance, including 
     useful service life and costs, of such batteries in field 
     operations, and the necessary supporting infrastructure, 
     including reuse and disposal of batteries; and
       (3) coordinated with ongoing secondary battery use programs 
     at the National Laboratories and in industry.
       (c) Solicitation.--Not later than 180 days after the date 
     of the enactment of this Act, the Secretary shall solicit 
     proposals to demonstrate the secondary use of batteries and 
     associated equipment and supporting infrastructure in 
     geographic locations throughout the United States. The 
     Secretary may make additional solicitations for proposals if 
     the Secretary determines that such solicitations are 
     necessary to carry out this section.
       (d) Selection of Proposals.--
       (1) The Secretary shall, not later than 90 days after the 
     closing date established by the Secretary for receipt of 
     proposals under subsection (c), select up to 5 proposals 
     which may receive financial assistance under this section 
     once the Department is in receipt of appropriated funds.
       (2) In selecting proposals, the Secretary shall consider 
     diversity of battery type, geographic and climatic diversity, 
     and life-cycle environmental effects of the approaches.
       (3) No one project selected under this section shall 
     receive more than 25 percent of the funds authorized for this 
     Program.
       (4) The Secretary shall consider the extent of involvement 
     of State or local government and other persons in each 
     demonstration project to optimize use of Federal resources.
       (5) The Secretary may consider such other criteria as the 
     Secretary considers appropriate.
       (e) Conditions.--The Secretary shall require that--
       (1) relevant information be provided to the Department, the 
     users of the batteries, the proposers, and the battery 
     manufacturers; and
       (2) the proposer provide at least 50 percent of the costs 
     associated with the proposal.

     SEC. 915. ENERGY EFFICIENCY SCIENCE INITIATIVE.

       (a) Establishment.--The Secretary shall establish an Energy 
     Efficiency Science Initiative to be managed by the Assistant 
     Secretary in the Department with responsibility for energy 
     conservation under section 203(a)(9) of the Department of 
     Energy Organization Act (42 U.S.C. 7133(a)(9)), in 
     consultation with the Director of the Office of Science, for 
     grants to be competitively awarded and subject to peer review 
     for research relating to energy efficiency.
       (b) Report.--The Secretary shall submit to the Congress, 
     along with the President's annual budget request under 
     section 1105(a) of title 31, United States Code, a report on 
     the activities of the Energy Efficiency Science Initiative, 
     including a description of the process used to award the 
     funds and an explanation of how the research relates to 
     energy efficiency.

       Subtitle B--Distributed Energy and Electric Energy Systems

     SEC. 921. DISTRIBUTED ENERGY AND ELECTRIC ENERGY SYSTEMS.

       (a) In General.--
       (1) The following sums are authorized to be appropriated to 
     the Secretary for distributed energy and electric energy 
     systems activities, including activities authorized under 
     this subtitle:
       (A) for fiscal year 2004, $190,000,000;
       (B) for fiscal year 2005, $200,000,000;
       (C) for fiscal year 2006, $220,000,000;
       (D) for fiscal year 2007, $240,000,000; and
       (E) for fiscal year 2008, $260,000,000.
       (2) For the Initiative in subsection 927(e), there are 
     authorized to be appropriated--
       (A) for fiscal year 2004, $15,000,000;
       (B) for fiscal year 2005, $20,000,000;

[[Page S10384]]

       (C) for fiscal year 2006, $30,000,000;
       (D) for fiscal year 2007, $35,000,000; and
       (E) for fiscal year 2008, $40,000,000.
       (b) Micro-Cogeneration Energy Technology.--From amounts 
     authorized under subsection (a), $20,000,000 for each of 
     fiscal years 2004 and 2005 shall be available for activities 
     under section 924.

     SEC. 922. HYBRID DISTRIBUTED POWER SYSTEMS.

       Not later than 1 year after the date of enactment of this 
     Act, the Secretary shall develop and transmit to the Congress 
     a strategy for a comprehensive research, development, 
     demonstration, and commercial application program to develop 
     hybrid distributed power systems that combine--
       (1) one or more renewable electric power generation 
     technologies of 10 megawatts or less located near the site of 
     electric energy use; and
       (2) nonintermittent electric power generation technologies 
     suitable for use in a distributed power system.

     SEC. 923. HIGH POWER DENSITY INDUSTRY PROGRAM.

       The Secretary shall establish a comprehensive research, 
     development, demonstration, and commercial application 
     program to improve energy efficiency of high power density 
     facilities, including data centers, server farms, and 
     telecommunications facilities. Such program shall consider 
     technologies that provide significant improvement in thermal 
     controls, metering, load management, peak load reduction, or 
     the efficient cooling of electronics.

     SEC. 924. MICRO-COGENERATION ENERGY TECHNOLOGY.

       The Secretary shall make competitive, merit-based grants to 
     consortia for the development of micro-cogeneration energy 
     technology. The consortia shall explore the use of small-
     scale combined heat and power in residential heating 
     appliances, the use of excess power to operate other 
     appliances within the residence and supply of excess 
     generated power to the power grid.

     SEC. 925. DISTRIBUTED ENERGY TECHNOLOGY DEMONSTRATION 
                   PROGRAM.

       The Secretary, within the sums authorized under section 
     921(a)(1), may provide financial assistance to coordinating 
     consortia of interdisciplinary participants for 
     demonstrations designed to accelerate the utilization of 
     distributed energy technologies, such as fuel cells, 
     microturbines, reciprocating engines, thermally activated 
     technologies, and combined heat and power systems, in highly 
     energy intensive commercial applications.

     SEC. 926. OFFICE OF ELECTRIC TRANSMISSION AND DISTRIBUTION.

       (a) Creation of an Office of Electric Transmission and 
     Distribution.--Title II of the Department of Energy 
     Organization Act is amended by inserting the following after 
     section 217 (42 U.S.C. 7144d):


          ``OFFICE OF ELECTRIC TRANSMISSION AND DISTRIBUTION.

       ``Sec. 218. (a) There is established within the Department 
     an Office of Electric Transmission and Distribution. This 
     Office shall be headed by a Director, who shall be appointed 
     by the Secretary. The Director shall be compensated at the 
     annual rate prescribed for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code.
       ``(b) The Director shall--
       ``(1) coordinate and develop a comprehensive, multi-year 
     strategy to improve the Nation's electricity transmission and 
     distribution;
       ``(2) ensure that the recommendations of the Secretary's 
     National Transmission Grid Study are implemented;
       ``(3) carry out the research, development, and 
     demonstration functions;
       ``(4) grant authorizations for electricity import and 
     export;
       ``(5) perform other electricity transmission and 
     distribution-related functions assigned by the Secretary; and
       ``(6) develop programs for workforce training in power and 
     transmission engineering.''.
       (b) Conforming Amendments.--
       (1) The table of contents of the Department of Energy Act 
     is amended by inserting after the item relating to section 
     217 the following new item:

``218.  Office of Electric Transmission and Distribution.''.

       (2) Section 5315 of title 5, United States Code, is amended 
     by inserting ``Director, Office of Electric Transmission and 
     Distribution, Department of Energy.'' after ``Inspector 
     General, Department of Energy.''.

     SEC. 927. ELECTRIC TRANSMISSION AND DISTRIBUTION PROGRAMS.

       (a) Demonstration Program.--The Secretary, acting through 
     the Director of the Office of Electric Transmission and 
     Distribution, shall establish a comprehensive research, 
     development, and demonstration program to ensure the 
     reliability, efficiency, and environmental integrity of 
     electrical transmission and distribution systems. This 
     program shall include--
       (1) advanced energy and energy storage technologies, 
     materials, and systems, giving priority to new transmission 
     technologies, including composite conductor materials and 
     other technologies that enhance reliability, operational 
     flexibility, or power-carrying capability;
       (2) advanced grid reliability and efficiency technology 
     development;
       (3) technologies contributing to significant load 
     reductions;
       (4) advanced metering, load management, and control 
     technologies;
       (5) technologies to enhance existing grid components;
       (6) the development and use of high-temperature 
     superconductors to--
       (A) enhance the reliability, operational flexibility, or 
     power-carrying capability of electric transmission or 
     distribution systems; or
       (B) increase the efficiency of electric energy generation, 
     transmission, distribution, or storage systems;
       (7) integration of power systems, including systems to 
     deliver high-quality electric power, electric power 
     reliability, and combined heat and power;
       (8) supply of electricity to the power grid by small scale, 
     distributed and residential-based power generators;
       (9) the development and use of advanced grid design, 
     operation and planning tools;
       (10) any other infrastructure technologies, as appropriate; 
     and
       (11) technology transfer and education.
       (b) Program Plan.--Not later than 1 year after the date of 
     the enactment of this legislation, the Secretary, in 
     consultation with other appropriate Federal agencies, shall 
     prepare and transmit to Congress a 5-year program plan to 
     guide activities under this section. In preparing the program 
     plan, the Secretary shall consult with utilities, energy 
     services providers, manufacturers, institutions of higher 
     education, other appropriate State and local agencies, 
     environmental organizations, professional and technical 
     societies, and any other persons the Secretary considers 
     appropriate.
       (c) Implementation.--The Secretary shall consider 
     implementing this program using a consortium of industry, 
     university and national laboratory participants.
       (d) Report.--Not later than 2 years after the transmittal 
     of the plan under subsection (b), the Secretary shall 
     transmit a report to Congress describing the progress made 
     under this section and identifying any additional resources 
     needed to continue the development and commercial application 
     of transmission and distribution of infrastructure 
     technologies.
       (e) Power Delivery Research Initiative.--The Secretary 
     shall establish a research, development and demonstration 
     initiative specifically focused on power delivery utilizing 
     components incorporating high temperature superconductivity.
       (1) Goals of this Initiative shall be to--
       (A) establish world-class facilities to develop high 
     temperature superconductivity power applications in 
     partnership with manufacturers and utilities;
       (B) provide technical leadership for establishing 
     reliability for high temperature superconductivity power 
     applications including suitable modeling and analysis;
       (C) facilitate commercial transition toward direct current 
     power transmission, storage, and use for high power systems 
     utilizing high temperature superconductivity; and
       (D) facilitate the integration of very low impedance high 
     temperature superconducting wires and cables in existing 
     electric networks to improve system performance, power flow 
     control and reliability.
       (2) The Initiative shall include--
       (A) feasibility analysis, planning, research, and design to 
     construct demonstrations of superconducting links in high 
     power, direct current and controllable alternating current 
     transmission systems;
       (B) public-private partnerships to demonstrate deployment 
     of high temperature superconducting cable into testbeds 
     simulating a realistic transmission grid and under varying 
     transmission conditions, including actual grid insertions; 
     and
       (C) testbeds developed in cooperation with national 
     laboratories, industries, and universities to demonstrate 
     these technologies, prepare the technologies for commercial 
     introduction, and address cost or performance roadblocks to 
     successful commercial use.
       (f) Transmission and Distribution Grid Planning and 
     Operations Initiative.--The Secretary shall establish a 
     research, development and demonstration initiative 
     specifically focused on tools needed to plan, operate and 
     expand the transmission and distribution grids in the 
     presence of competitive market mechanisms for energy, load 
     demand, customer response and ancillary services. Goals of 
     this Initiative shall be to--
       (1) develop and utilize a geographically distributed 
     Center, consisting of research universities and national 
     laboratories, with expertise and facilities to develop the 
     underlying theory and software for power system application, 
     and to assure commercial development in partnership with 
     software vendors and utilities;
       (2) provide technical leadership in engineering and 
     economic analysis for reliability and efficiency of power 
     systems planning and operations in the presence of 
     competitive markets for electricity;
       (3) model, simulate and experiment with new market 
     mechanisms and operating practices to understand and optimize 
     such new methods before actual use; and
       (4) provide technical support and technology transfer to 
     electric utilities and other participants in the domestic 
     electric industry and marketplace.

                      Subtitle C--Renewable Energy

     SEC. 931. RENEWABLE ENERGY.

       (a) In General.--The following sums are authorized to be 
     appropriated to the Secretary for renewable energy research, 
     development, demonstration, and commercial application 
     activities, including activities authorized under this 
     subtitle:

[[Page S10385]]

       (1) for fiscal year 2004, $480,000,000;
       (2) for fiscal year 2005, $550,000,000;
       (3) for fiscal year 2006, $610,000,000;
       (4) for fiscal year 2007, $659,000,000; and
       (5) for fiscal year 2008, $710,000,000.
       (b) Bioenergy.--From the amounts authorized under 
     subsection (a), the following sums are authorized to be 
     appropriated to carry out section 932:
       (1) for fiscal year 2004, $135,425,000;
       (2) for fiscal year 2005, $155,600,000;
       (3) for fiscal year 2006, $167,650,000;
       (4) for fiscal year 2007, $180,000,000; and
       (5) for fiscal year 2008, $192,000,000.
       (c) Biodiesel Engine Testing.--From amounts authorized 
     under subsection (a), $5,000,000 is authorized to be 
     appropriated in each of fiscal years 2004 and 2008 to carry 
     out section 933.
       (d) Concentrating Solar Power.--From amounts authorized 
     under subsection (a), the following sums are authorized to be 
     appropriated to carry out section 934:
       (1) for fiscal year 2004, $20,000,000;
       (2) for fiscal year 2005, $40,000,000; and
       (3) for each of fiscal years 2006, 2007 and 2008, 
     $50,000,000.
       (e) Limits on Use of Funds.--
       (1) None of the funds authorized to be appropriated under 
     this section may be used for Renewable Support and 
     Implementation.
       (2) Of the funds authorized under subsection (b), not less 
     than $5,000,000 for each fiscal year shall be made available 
     for grants to Historically Black Colleges and Universities, 
     Tribal Colleges, and Hispanic-Serving Institutions.
       (f) Consultation.--In carrying out this section, the 
     Secretary, in consultation with the Secretary of Agriculture, 
     shall demonstrate the use of advanced wind power technology, 
     including combined use with coal gasification; biomass; 
     geothermal energy systems; and other renewable energy 
     technologies to assist in delivering electricity to rural and 
     remote locations.

     SEC. 932. BIOENERGY PROGRAMS.

       (a) In General.--The Secretary shall conduct a program of 
     research, development, demonstration, and commercial 
     application for bioenergy, including--
       (1) biopower energy systems;
       (2) biofuels;
       (3) bioproducts;
       (4) integrated biorefineries that may produce biopower, 
     biofuels and bioproducts;
       (5) cross-cutting research and development in feedstocks; 
     and
       (6) economic analysis.
       (b) Biofuels and Bioproducts.--The goals of the biofuels 
     and bioproducts programs shall be to develop, in partnership 
     with industry--
       (1) advanced biochemical and thermo-chemical conversion 
     technologies capable of making fuels from cellulosic 
     feedstocks that are price-competitive with gasoline or diesel 
     in either internal combustion engines or fuel cell-powered 
     vehicles; and
       (2) advanced biotechnology processes capable of making 
     biofuels and bioproducts with emphasis on development of 
     biorefinery technologies using enzyme-based processing 
     systems.
       (c) Definition.--For purposes of (b), the term ``cellulosic 
     feedstock'' means any portion of a crop not normally used in 
     food production or any non-food crop grown for the purpose of 
     producing biomass feedstock.

     SEC. 933. BIODIESEL ENGINE TESTING PROGRAM.

       (a) In General.--Not later that 180 days after enactment of 
     this Act, the Secretary shall initiate a partnership with 
     diesel engine, diesel fuel injection system, and diesel 
     vehicle manufacturers and diesel and biodiesel fuel providers 
     to include biodiesel testing in advanced diesel engine and 
     fuel system technology.
       (b) Scope.--The study shall provide for testing to 
     determine the impact of biodiesel on current and future 
     emission control technologies, with emphasis on--
       (1) the impact of biodiesel on emissions warranty, in-use 
     liability, and anti-tampering provisions;
       (2) the impact of long-term use of biodiesel on engine 
     operations;
       (3) the options for optimizing these technologies for both 
     emissions and performance when switching between biodiesel 
     and diesel fuel; and
       (4) the impact of using biodiesel in these fueling systems 
     and engines when used as a blend with 2006 Environmental 
     Protection Agency-mandated diesel fuel containing a maximum 
     of 15-parts-per-million sulfur content.
       (c) Report.--Not later than 2 years after the date of 
     enactment, the Secretary shall provide an interim report to 
     Congress on the findings of this study, including a 
     comprehensive analysis of impacts from biodiesel on engine 
     operation for both existing and expected future diesel 
     technologies, and recommendations for ensuring optimal 
     emissions reductions and engine performance with biodiesel.
       (d) Definition.--For purposes of this section, the term 
     ``biodiesel'' means a diesel fuel substitute produced from 
     non-petroleum renewable resources that meets the registration 
     requirements for fuels and fuel additives established by the 
     Environmental Protection Agency under section 211 of the 
     Clean Air Act (42 U.S.C. 7545) and that meets the American 
     Society for Testing and Materials D6751-02a ``Standard 
     Specification for Biodiesel Fuel (B100) Blend Stock for 
     Distillate Fuels''.

     SEC. 934. CONCENTRATING SOLAR POWER RESEARCH PROGRAM.

       (a) In General.--The Secretary shall conduct a program of 
     research and development to evaluate the potential of 
     concentrating solar power for hydrogen production, including 
     co-generation approaches for both hydrogen and electricity. 
     Such program shall take advantage of existing facilities to 
     the extent possible and shall include--
       (1) development of optimized technologies that are common 
     to both electricity and hydrogen production;
       (2) evaluation of thermo-chemical cycles for hydrogen 
     production at the temperatures attainable with concentrating 
     solar power;
       (3) evaluation of materials issues for the thermo-chemical 
     cycles in (2);
       (4) system architectures and economics studies; and
       (5) coordination with activities in the Advanced Reactor 
     Hydrogen Co-generation Project on high temperature materials, 
     thermo-chemical cycle and economic issues.
       (b) Assessment.--In carrying out the program under this 
     section, the Secretary is directed to assess conflicting 
     guidance on the economic potential of concentrating solar 
     power for electricity production received from the National 
     Research Council report entitled ``Renewable Power Pathways: 
     A Review of the U.S. Department of Energy's Renewable Energy 
     Programs'' in 2000 and subsequent DOE-funded reviews of that 
     report and provide an assessment of the potential impact of 
     this technology before, or concurrent with, submission of the 
     fiscal year 2006 budget.
       (c) Report.--Not later than 5 years after the date of 
     enactment of this section, the Secretary shall provide a 
     report to Congress on the economic and technical potential 
     for electricity or hydrogen production, with or without co-
     generation, with concentrating solar power, including the 
     economic and technical feasibility of potential construction 
     of a pilot demonstration facility suitable for commercial 
     production of electricity and/or hydrogen from concentrating 
     solar power.

     SEC. 935. MISCELLANEOUS PROJECTS.

       The Secretary shall conduct research, development, 
     demonstration, and commercial application programs for--
       (1) ocean energy, including wave energy;
       (2) the combined use of renewable energy technologies with 
     one another and with other energy technologies, including the 
     combined use of wind power and coal gasification 
     technologies; and
       (3) renewable energy technologies for cogeneration of 
     hydrogen and electricity.

                       Subtitle D--Nuclear Energy

     SEC. 941. NUCLEAR ENERGY.

       (a) Core Programs.--The following sums are authorized to be 
     appropriated to the Secretary for nuclear energy research, 
     development, demonstration, and commercial application 
     activities, including activities authorized under this 
     subtitle, other than those described in subsection (b):
       (1) for fiscal year 2004, $273,000,000;
       (2) for fiscal year 2005, $305,000,000;
       (3) for fiscal year 2006, $330,000,000;
       (4) for fiscal year 2007, $355,000,000; and
       (5) for fiscal year 2008, $495,000,000.
       (b) Nuclear Infrastructure Support.--The following sums are 
     authorized to be appropriated to the Secretary for activities 
     under section 942(f):
       (1) for fiscal year 2004, $125,000,000;
       (2) for fiscal year 2005, $130,000,000;
       (3) for fiscal year 2006, $135,000,000;
       (4) for fiscal year 2007, $140,000,000; and
       (5) for fiscal year 2008, $145,000,000.
       (c) Allocations.--From amounts authorized under subsection 
     (a), the following sums are authorized:
       (1) For activities under section 943--
       (A) for fiscal year 2004, $140,000,000;
       (B) for fiscal year 2005, $145,000,000;
       (C) for fiscal year 2006, $150,000,000;
       (D) for fiscal year 2007, $155,000,000; and
       (E) for fiscal year 2008, $275,000,000.
       (2) For activities under section 944--
       (A) for fiscal year 2004, $33,000,000;
       (B) for fiscal year 2005, $37,900,000;
       (C) for fiscal year 2006, $43,600,000;
       (D) for fiscal year 2007, $50,100,000; and
       (E) for fiscal year 2008, $56,000,000.
       (3) For activities under section 946, for each of fiscal 
     years 2004 through 2008, $6,000,000.
       (d) None of the funds authorized under this section may be 
     used for decommissioning the Fast Flux Test Facility.

     SEC. 942. NUCLEAR ENERGY RESEARCH PROGRAMS.

       (a) Nuclear Energy Research Initiative.--The Secretary 
     shall carry out a Nuclear Energy Research Initiative for 
     research and development related to nuclear energy.
       (b) Nuclear Energy Plant Optimization Program.--The 
     Secretary shall carry out a Nuclear Energy Plant Optimization 
     Program to support research and development activities 
     addressing reliability, availability, productivity, component 
     aging, safety and security of existing nuclear power plants.
       (c) Nuclear Power 2010 Program.--The Secretary shall carry 
     out a Nuclear Power 2010 Program, consistent with 
     recommendations in the October 2001 report entitled ``A 
     Roadmap to Deploy New Nuclear Power Plants in the United 
     States by 2010'' issued by the Nuclear Energy Research 
     Advisory Committee of the Department. The Program shall 
     include--
       (1) utilization of the expertise and capabilities of 
     industry, universities, and National Laboratories in 
     evaluation of advanced nuclear fuel cycles and fuels testing;
       (2) consideration of a variety of reactor designs suitable 
     for both developed and developing nations;

[[Page S10386]]

       (3) participation of international collaborators in 
     research, development, and design efforts as appropriate; and
       (4) encouragement for university and industry 
     participation.
       (d) Generation IV Nuclear Energy Systems Initiative.--The 
     Secretary shall carry out a Generation IV Nuclear Energy 
     Systems Initiative to develop an overall technology plan and 
     to support research and development necessary to make an 
     informed technical decision about the most promising 
     candidates for eventual commercial application. The 
     Initiative shall examine advanced proliferation-resistant and 
     passively safe reactor designs, including designs that--
       (1) are economically competitive with other electric power 
     generation plants;
       (2) have higher efficiency, lower cost, and improved safety 
     compared to reactors in operation on the date of enactment of 
     this Act;
       (3) use fuels that are proliferation resistant and have 
     substantially reduced production of high-level waste per unit 
     of output; and
       (4) use improved instrumentation.
       (e) Reactor Production of Hydrogen.--The Secretary shall 
     carry out research to examine designs for high-temperature 
     reactors capable of producing large-scale quantities of 
     hydrogen using thermo-chemical processes.
       (f) Nuclear Infrastructure Support.--The Secretary shall 
     develop and implement a strategy for the facilities of the 
     Office of Nuclear Energy, Science, and Technology and shall 
     transmit a report containing the strategy along with the 
     President's budget request to the Congress for fiscal year 
     2006. Such strategy shall provide a cost-effective means 
     for--
       (1) maintaining existing facilities and infrastructure, as 
     needed;
       (2) closing unneeded facilities;
       (3) making facility upgrades and modifications; and
       (4) building new facilities.

     SEC. 943. ADVANCED FUEL CYCLE INITIATIVE.

       (a) In General.--The Secretary, through the Director of the 
     Office of Nuclear Energy, Science and Technology, shall 
     conduct an advanced fuel recycling technology research and 
     development program to evaluate proliferation-resistant fuel 
     recycling and transmutation technologies which minimize 
     environmental or public health and safety impacts as an 
     alternative to aqueous reprocessing technologies deployed as 
     of the date of enactment of this Act in support of evaluation 
     of alternative national strategies for spent nuclear fuel and 
     the Generation IV advanced reactor concepts, subject to 
     annual review by the Secretary's Nuclear Energy Research 
     Advisory Committee or other independent entity, as 
     appropriate. Opportunities to enhance progress of this 
     program through international cooperation should be sought.
       (b) Reports.--The Secretary shall report on the activities 
     of the advanced fuel recycling technology research and 
     development program as part of the Department's annual budget 
     submission.

     SEC. 944. UNIVERSITY NUCLEAR SCIENCE AND ENGINEERING SUPPORT.

       (a) Establishment.--The Secretary shall support a program 
     to invest in human resources and infrastructure in the 
     nuclear sciences and engineering and related fields 
     (including health physics and nuclear and radiochemistry), 
     consistent with departmental missions related to civilian 
     nuclear research and development.
       (b) Duties.--In carrying out the program under this 
     section, the Secretary shall establish fellowship and faculty 
     assistance programs, as well as provide support for 
     fundamental research and encourage collaborative research 
     among industry, national laboratories, and universities 
     through the Nuclear Energy Research Initiative. The Secretary 
     is encouraged to support activities addressing the entire 
     fuel cycle through involvement of both the Offices of Nuclear 
     Energy, Science and Technology and Civilian Radioactive Waste 
     Management. The Secretary shall support communication and 
     outreach related to nuclear science, engineering and nuclear 
     waste management.
       (c) Maintaining University Research and Training Reactors 
     and Associated Infrastructure.--Activities under this section 
     may include--
       (1) converting research reactors currently using high-
     enrichment fuels to low-enrichment fuels, upgrading 
     operational instrumentation, and sharing of reactors among 
     institutions of higher education;
       (2) providing technical assistance, in collaboration with 
     the United States nuclear industry, in relicensing and 
     upgrading training reactors as part of a student training 
     program; and
       (3) providing funding for reactor improvements as part of a 
     focused effort that emphasizes research, training, and 
     education.
       (d) University-National Laboratory Interactions.--The 
     Secretary shall develop sabbatical fellowship and visiting 
     scientist programs to encourage sharing of personnel between 
     national laboratories and universities.
       (e) Operating and Maintenance Costs.--Funding for a 
     research project provided under this section may be used to 
     offset a portion of the operating and maintenance costs of a 
     research reactor at an institution of higher education used 
     in the research project.

     SEC. 945. SECURITY OF NUCLEAR FACILITIES.

       The Secretary, through the Director of the Office of 
     Nuclear Energy, Science and Technology shall conduct a 
     research and development program on cost-effective 
     technologies for increasing the safety of nuclear facilities 
     from natural phenomena and the security of nuclear facilities 
     from deliberate attacks.

     SEC. 946. ALTERNATIVES TO INDUSTRIAL RADIOACTIVE SOURCES.

       (a) Survey.--Not later than August 1, 2004, the Secretary 
     shall provide to the Congress results of a survey of 
     industrial applications of large radioactive sources. The 
     survey shall--
       (1) consider well-logging sources as one class of 
     industrial sources;
       (2) include information on current domestic and 
     international Department, Department of Defense, State 
     Department and commercial programs to manage and dispose of 
     radioactive sources; and
       (3) discuss available disposal options for currently 
     deployed or future sources and, if deficiencies are noted for 
     either deployed or future sources, recommend legislative 
     options that Congress may consider to remedy identified 
     deficiencies.
       (b) Plan.--In conjunction with the survey in subsection 
     (a), the Secretary shall establish a research and development 
     program to develop alternatives to such sources that reduce 
     safety, environmental, or proliferation risks to either 
     workers using the sources or the public. Miniaturized 
     particle accelerators for well-logging or other industrial 
     applications and portable accelerators for production of 
     short-lived radioactive materials at an industrial site shall 
     be considered as part of the research and development 
     efforts. Details of the program plan shall be provided to the 
     Congress by August 1, 2004.

                       Subtitle E--Fossil Energy

     SEC. 951. FOSSIL ENERGY.

       (a) In General.--The following sums are authorized to be 
     appropriated to the Secretary for fossil energy research, 
     development, demonstration, and commercial application 
     activities, including activities authorized under this 
     subtitle:
       (1) for fiscal year 2004, $523,000,000;
       (2) for fiscal year 2005, $542,000,000;
       (3) for fiscal year 2006, $558,000,000;
       (4) for fiscal year 2007, $585,000,000; and
       (5) for fiscal year 2008, $600,000,000.
       (b) Allocations.--From amounts authorized under subsection 
     (a), the following sums are authorized:
       (1) For activities under section 952(b)(2), $28,000,000 for 
     each of the fiscal years 2004 through 2008.
       (2) For activities under section 953--
       (A) for fiscal year 2004, $12,000,000;
       (B) for fiscal year 2005, $15,000,000; and
       (C) for each of fiscal years 2006 through 2008, 
     $20,000,000.
       (3) For activities under section 954, to remain available 
     until expended--
       (A) for fiscal year 2004, $200,000,000;
       (B) for fiscal year 2005, $210,000,000; and
       (C) for fiscal year 2006, $220,500,000.
       (4) For the Office of Arctic Energy under section 3197 of 
     the Floyd D. Spence National Defense Authorization Act for 
     Fiscal Year 2001 (Public Law 106-398), $25,000,000 for each 
     of fiscal years 2004 through 2008.
       (c) Extended Authorization.--There are authorized to be 
     appropriated to the Secretary for the Office of Arctic Energy 
     under section 3197 of the Floyd D. Spence National Defense 
     Authorization Act for Fiscal Year 2001 (Public Law 106-398), 
     $25,000,000 for each of fiscal years 2009 through 2012.
       (d) Limits on Use of Funds.--
       (1) None of the funds authorized under this section may be 
     used for Fossil Energy Environmental Restoration or Import/
     Export Authorization.
       (2) Of the funds authorized under subsection (b)(2), not 
     less than 20 percent of the funds appropriated for each 
     fiscal year shall be dedicated to research and development 
     carried out at institutions of higher education.

     SEC. 952. OIL AND GAS RESEARCH PROGRAMS.

       (a) Oil and Gas Research.--The Secretary shall conduct a 
     program of research, development, demonstration, and 
     commercial application on oil and gas, including--
       (1) exploration and production;
       (2) gas hydrates;
       (3) reservoir life and extension;
       (4) transportation and distribution infrastructure;
       (5) ultraclean fuels;
       (6) heavy oil and shale; and
       (7) related environmental research.
       (b) Fuel Cells.--
       (1) The Secretary shall conduct a program of research, 
     development, demonstration, and commercial application on 
     fuel cells for low-cost, high-efficiency, fuel-flexible, 
     modular power systems.
       (2) The demonstrations shall include fuel cell proton 
     exchange membrane technology for commercial, residential, and 
     transportation applications, and distributed generation 
     systems, utilizing improved manufacturing production and 
     processes.
       (c) Natural Gas and Oil Deposits Report.--Not later than 2 
     years after the date of the enactment of this Act, and every 
     2 years thereafter, the Secretary of the Interior, in 
     consultation with other appropriate Federal agencies, shall 
     transmit a report to the Congress of the latest estimates of 
     natural gas and oil reserves, reserves growth, and 
     undiscovered resources in Federal and State waters off the 
     coast of Louisiana and Texas.
       (d) Integrated Clean Power and Energy Research.--
       (1) The Secretary shall establish a national center or 
     consortium of excellence in clean

[[Page S10387]]

     energy and power generation, utilizing the resources of the 
     existing Clean Power and Energy Research Consortium, to 
     address the nation's critical dependence on energy and the 
     need to reduce emissions.
       (2) The center or consortium will conduct a program of 
     research, development, demonstration and commercial 
     application on integrating the following six focus areas--
       (A) efficiency and reliability of gas turbines for power 
     generation;
       (B) reduction in emissions from power generation;
       (C) promotion of energy conservation issues;
       (D) effectively utilizing alternative fuels and renewable 
     energy;
       (E) development of advanced materials technology for oil 
     and gas exploration and utilization in harsh environments; 
     and
       (F) education on energy and power generation issues.

     SEC. 953. RESEARCH AND DEVELOPMENT FOR COAL MINING 
                   TECHNOLOGIES.

       (a) Establishment.--The Secretary shall carry out a program 
     for research and development on coal mining technologies. The 
     Secretary shall cooperate with appropriate Federal agencies, 
     coal producers, trade associations, equipment manufacturers, 
     institutions of higher education with mining engineering 
     departments, and other relevant entities.
       (b) Program.--The research and development activities 
     carried out under this section shall--
       (1) be guided by the mining research and development 
     priorities identified by the Mining Industry of the Future 
     Program and in the recommendations form relevant reports of 
     the National Academy of Sciences on mining technologies;
       (2) include activities exploring minimization of 
     contaminants in mined coal that contribute to environmental 
     concerns including development and demonstration of 
     electromagnetic wave imaging ahead of mining operations;
       (3) develop and demonstrate coal bed electromagnetic wave 
     imaging and techniques for horizontal drilling in order to 
     increase methane recovery efficiency, prevent spoilage of 
     domestic coal reserves and minimize water disposal associated 
     with methane extraction; and
       (4) expand mining research capabilities at institutions of 
     higher education.

     SEC. 954. COAL AND RELATED TECHNOLOGIES PROGRAM.

       (a) In General.--In addition to the program authorized 
     under Title II of this Act, the Secretary of Energy shall 
     conduct a program of technology research, development and 
     demonstration and commercial application for coal and power 
     systems, including programs to facilitate production and 
     generation of coal-based power through--
       (1) innovations for existing plants;
       (2) integrated gasification combined cycle;
       (3) advanced combustion systems;
       (4) turbines for synthesis gas derived from coal;
       (5) carbon capture and sequestration research and 
     development;
       (6) coal-derived transportation fuels and chemicals;
       (7) solid fuels and feedstocks; and
       (8) advanced coal-related research.
       (b) Cost and Performance Goals.--In carrying out programs 
     authorized by this section, the Secretary shall identify cost 
     and performance goals for coal-based technologies that would 
     permit the continued cost-competitive use of coal for 
     electricity generation, as chemical feedstocks, and as 
     transportation fuel in 2007, 2015, and the years after 2020. 
     In establishing such cost and performance goals, the 
     Secretary shall--
       (1) consider activities and studies undertaken to date by 
     industry in cooperation with the Department of Energy in 
     support of such assessment;
       (2) consult with interested entities, including coal 
     producers, industries using coal, organizations to promote 
     coal and advanced coal technologies, environmental 
     organizations and organizations representing workers;
       (3) not later than 120 days after the date of enactment of 
     this section, publish in the Federal Register proposed draft 
     cost and performance goals for public comments; and
       (4) not later than 180 days after the date of enactment of 
     this section and every four years thereafter, submit to 
     Congress a report describing final cost and performance goals 
     for such technologies that includes a list of technical 
     milestones as well as an explanation of how programs 
     authorized in this section will not duplicate the activities 
     authorized under the Clean Coal Power Initiative authorized 
     under Title II of this Act.

     SEC. 955. COMPLEX WELL TECHNOLOGY TESTING FACILITY.

       The Secretary of Energy, in coordination with industry 
     leaders in extended research drilling technology, shall 
     establish a Complex Well Technology Testing Facility at the 
     Rocky Mountain Oilfield Testing Center to increase the range 
     of extended drilling technologies.

                          Subtitle F--Science

     SEC. 961. SCIENCE.

       (a) In General.--The following sums are authorized to be 
     appropriated to the Secretary for research, development, 
     demonstration, and commercial application activities of the 
     Office of Science, including activities authorized under this 
     subtitle, including the amounts authorized under the 
     amendment made by section 967(c)(2)(D), and including basic 
     energy sciences, advanced scientific and computing research, 
     biological and environmental research, fusion energy 
     sciences, high energy physics, nuclear physics, and research 
     analysis and infrastructure support:
       (1) for fiscal year 2004, $3,785,000,000;
       (2) for fiscal year 2005, $4,153,000,000;
       (3) for fiscal year 2006, $4,586,000,000;
       (4) for fiscal year 2007, $5,000,000,000; and
       (5) For fiscal year 2008, $5,400,000,000.
       (b) Allocations.--From amounts authorized under subsection 
     (a), the following sums are authorized:
       (1) For activities of the Fusion Energy Sciences Program, 
     including activities under section 962--
       (A) for fiscal year 2004, $335,000,000;
       (B) for fiscal year 2005, $349,000,000;
       (C) for fiscal year 2006, $362,000,000;
       (D) for fiscal year 2007, $377,000,000; and
       (E) for fiscal year 2008, $393,000,000.
       (2) For the Spallation Neutron Source--
       (A) for construction in fiscal year 2004, $124,600,000;
       (B) for construction in fiscal year 2005, $79,800,000;
       (C) for completion of construction in fiscal year 2006, 
     $41,100,000; and
       (D) for other project costs (including research and 
     development necessary to complete the project, preoperations 
     costs, and capital equipment related to construction), 
     $103,279,000 for the period encompassing fiscal years 2003 
     through 2006, to remain available until expended through 
     September 30, 2006.
       (3) For Catalysis Research activities under section 965--
       (A) for fiscal year 2004, $33,000,000;
       (B) for fiscal year 2005, $35,000,000;
       (C) for fiscal year 2006, $36,500,000;
       (D) for fiscal year 2007, $38,200,000; and
       (E) for fiscal year 2008, $40,100,000.
       (4) For Nanoscale Science and Engineering Research 
     activities under section 966--
       (A) for fiscal year 2004, $270,000,000;
       (B) for fiscal year 2005, $290,000,000;
       (C) for fiscal year 2006, $310,000,000;
       (D) for fiscal year 2007, $330,000,000; and
       (E) for fiscal year 2008, $375,000,000.
       (5) For activities under subsection 966(c), from the 
     amounts authorized under subparagraph (4)--
       (A) for fiscal year 2004, $135,000,000;
       (B) for fiscal year 2005, $150,000,000;
       (C) for fiscal year 2006, $120,000,000;
       (D) for fiscal year 2007, $100,000,000; and
       (E) for fiscal year 2008, $125,000,000.
       (6) For activities in the Genomes to Life Program under 
     section 968--
       (A) for fiscal year 2004, $100,000,000;
       (B) for fiscal year 2005, $170,000,000;
       (C) for fiscal year 2006, $325,000,000;
       (D) for fiscal year 2007, $415,000,000; and
       (E) for fiscal year 2008, $455,000,000.
       (7) For construction and ancillary equipment of the Genomes 
     to Life User Facilities under section 968(d), of funds 
     authorized under (6)--
       (A) for fiscal year 2004, $16,000,000;
       (B) for fiscal year 2005, $70,000,000;
       (C) for fiscal year 2006, $175,000,000;
       (D) for fiscal year 2007, $215,000,000; and
       (E) for fiscal year 2008, $205,000,000.
       (8) For activities in the Water Supply Technologies Program 
     under section 970, $30,000,000 for each of fiscal years 2004 
     through 2008.
       (c) In addition to the funds authorized under subsection 
     (b)(1), the following sums are authorized for construction 
     costs associated with the ITER project under section 962--
       (1) for fiscal year 2006, $55,000,000;
       (2) for fiscal year 2007, $95,000,000; and
       (3) for fiscal year 2008, $115,000,000.

     SEC. 962. UNITED STATES PARTICIPATION IN ITER.

       (a) Participation.--
       (1) The Secretary of Energy is authorized to undertake full 
     scientific and technological cooperation in the International 
     Thermonuclear Experimental Reactor project (referred to in 
     this title as ``ITER'').
       (2) In the event that ITER fails to go forward within a 
     reasonable period of time, the Secretary shall send to 
     Congress a plan, including costs and schedules, for 
     implementing the domestic burning plasma experiment known as 
     the Fusion Ignition Research Experiment. Such a plan shall be 
     developed with full consultation with the Fusion Energy 
     Sciences Advisory Committee and be reviewed by the National 
     Research Council.
       (3) It is the intent of Congress that such sums shall be 
     largely for work performed in the United States and that such 
     work contributes the maximum amount possible to the U.S. 
     scientific and technological base.
       (b) Planning.--
       (1) Not later than 180 days of the date of enactment of 
     this act, the Secretary shall present to Congress a plan, 
     with proposed cost estimates, budgets and potential 
     international partners, for the implementation of the goals 
     of this section. The plan shall ensure that--
       (A) existing fusion research facilities are more fully 
     utilized;
       (B) fusion science, technology, theory, advanced 
     computation, modeling and simulation are strengthened;
       (C) new magnetic and inertial fusion research facilities 
     are selected based on scientific innovation, cost 
     effectiveness, and their potential to advance the goal of 
     practical fusion energy at the earliest date possible, and 
     those that are selected are funded at a cost-effective rate;

[[Page S10388]]

       (D) communication of scientific results and methods between 
     the fusion energy science community and the broader 
     scientific and technology communities is improved;
       (E) inertial confinement fusion facilities are utilized to 
     the extent practicable for the purpose of inertial fusion 
     energy research and development; and
       (F) attractive alternative inertial and magnetic fusion 
     energy approaches are more fully explored.
       (2) Such plan shall also address the status of and, to the 
     degree possible, costs and schedules for--
       (A) in coordination with the program in section 969, the 
     design and implementation of international or national 
     facilities for the testing of fusion materials; and
       (B) the design and implementation of international or 
     national facilities for the testing and development of key 
     fusion technologies.

     SEC. 963. SPALLATION NEUTRON SOURCE.

       (a) Definition.--For the purposes of this section, the term 
     ``Spallation Neutron Source'' means Department Project 9909E 
     09334, Oak Ridge National Laboratory, Oak Ridge, Tennessee.
       (b) Report.--The Secretary shall report on the Spallation 
     Neutron Source as part of the Department's annual budget 
     submission, including a description of the achievement of 
     milestones, a comparison of actual costs to estimated costs, 
     and any changes in estimated project costs or schedule.
       (c) Authorization of Appropriations.--The total amount 
     obligated by the Department, including prior year 
     appropriations, for the Spallation Neutron Source may not 
     exceed--
       (1) $1,192,700,000 for costs of construction;
       (2) $219,000,000 for other project costs; and
       (3) $1,411,700,000 for total project cost.

     SEC. 964. SUPPORT FOR SCIENCE AND ENERGY FACILITIES AND 
                   INFRASTRUCTURE.

       (a) Facility and Infrastructure Policy.--The Secretary 
     shall develop and implement a strategy for facilities and 
     infrastructure supported primarily from the Office of 
     Science, the Office of Energy Efficiency and Renewable 
     Energy, the Office of Fossil Energy, or the Office of Nuclear 
     Energy, Science and Technology Programs at all national 
     laboratories and single-purpose research facilities. Such 
     strategy shall provide cost-effective means for--
       (1) maintaining existing facilities and infrastructure, as 
     needed;
       (2) closing unneeded facilities;
       (3) making facility modifications; and
       (4) building new facilities.
       (b) Report.--
       (1) The Secretary shall prepare and transmit, along with 
     the President's budget request to the Congress for fiscal 
     year 2006, a report containing the strategy developed under 
     subsection (a).
       (2) For each national laboratory and single-purpose 
     research facility, for the facilities primarily used for 
     science and energy research, such report shall contain--
       (A) the current priority list of proposed facilities and 
     infrastructure projects, including cost and schedule 
     requirements;
       (B) a current ten-year plan that demonstrates the 
     reconfiguration of its facilities and infrastructure to meet 
     its missions and to address its long-term operational costs 
     and return on investment;
       (C) the total current budget for all facilities and 
     infrastructure funding; and
       (D) the current status of each facility and infrastructure 
     project compared to the original baseline cost, schedule, and 
     scope.

     SEC. 965. CATALYSIS RESEARCH PROGRAM.

       (a) Establishment.--The Secretary, through the Office of 
     Science, shall support a program of research and development 
     in catalysis science consistent with the Department's 
     statutory authorities related to research and development. 
     The program shall include efforts to--
       (1) enable catalyst design using combinations of 
     experimental and mechanistic methodologies coupled with 
     computational modeling of catalytic reactions at the 
     molecular level;
       (2) develop techniques for high throughput synthesis, 
     assay, and characterization at nanometer and sub-nanometer 
     scales in situ under actual operating conditions:
       (3) synthesize catalysts with specific site architectures;
       (4) conduct research on the use of precious metals for 
     catalysis; and
       (5) translate molecular understanding to the design of 
     catalytic compounds.
       (b) Duties of the Office of Science.--In carrying out this 
     program, the Director of the Office of Science shall--
       (1) support both individual investigators and 
     multidisciplinary teams of investigators to pioneer new 
     approaches in catalytic design;
       (2) develop, plan, construct, acquire, share, or operate 
     special equipment or facilities for the use of investigators 
     in collaboration with national user facilities such as 
     nanoscience and engineering centers;
       (3) support technology transfer activities to benefit 
     industry and other users of catalysis science and 
     engineering; and
       (4) coordinate research and development activities with 
     industry and other federal agencies.
       (c) Triennial Assessment.--The National Academy of Sciences 
     shall review the catalysis program every three years to 
     report on gains made in the fundamental science of catalysis 
     and its progress towards developing new fuels for energy 
     production and material fabrication processes.

     SEC. 966. NANOSCALE SCIENCE AND ENGINEERING RESEARCH.

       (a) Establishment.--The Secretary, acting through the 
     Office of Science, shall support a program of research, 
     development, demonstration, and commercial application in 
     nanoscience and nanoengineering. The program shall include 
     efforts to further the understanding of the chemistry, 
     physics, materials science, and engineering of phenomena on 
     the scale of nanometers and to apply this knowledge to the 
     Department's mission areas.
       (b) Duties of the Office of Science.--In carrying out the 
     program under this section, the Office of Science shall--
       (1) support both individual investigators and teams of 
     investigators, including multidisciplinary teams;
       (2) carry out activities under subsection (c);
       (3) support technology transfer activities to benefit 
     industry and other users of nanoscience and nanoengineering; 
     and
       (4) coordinate research and development activities with 
     other DOE programs, industry and other Federal agencies.
       (c) Nanoscience and Nanoengineering Research Centers and 
     Major Instrumentation.--
       (1) The Secretary shall carry out projects to develop, 
     plan, construct, acquire, operate, or support special 
     equipment, instrumentation, or facilities for investigators 
     conducting research and development in nanoscience and 
     nanoengineering.
       (2) Projects under paragraph (1) may include the 
     measurement of properties at the scale of nanometers, 
     manipulation at such scales, and the integration of 
     technologies based on nanoscience or nanoengineering into 
     bulk materials or other technologies.
       (3) Facilities under paragraph (1) may include electron 
     microcharacterization facilities, microlithography 
     facilities, scanning probe facilities, and related 
     instrumentation.
       (4) The Secretary shall encourage collaborations among DOE 
     programs, institutions of higher education, laboratories, and 
     industry at facilities under this subsection.

     SEC. 967. ADVANCED SCIENTIFIC COMPUTING FOR ENERGY MISSIONS.

       (a) In General.--The Secretary, acting through the Office 
     of Science, shall support a program to advance the Nation's 
     computing capability across a diverse set of grand challenge, 
     computationally based, science problems related to 
     departmental missions.
       (b) Duties of the Office of Science.--In carrying out the 
     program under this section, the Office of Science shall--
       (1) advance basic science through computation by developing 
     software to solve grand challenge science problems on new 
     generations of computing platforms in collaboration with 
     other DOE program offices;
       (2) enhance the foundations for scientific computing by 
     developing the basic mathematical and computing systems 
     software needed to take full advantage of the computing 
     capabilities of computers with peak speeds of 100 teraflops 
     or more, some of which may be unique to the scientific 
     problem of interest;
       (3) enhance national collaboratory and networking 
     capabilities by developing software to integrate 
     geographically separated researchers into effective research 
     teams and to facilitate access to and movement and analysis 
     of large (petabyte) data sets;
       (4) maintain a robust scientific computing hardware 
     infrastructure to ensure that the computing resources needed 
     to address departmental missions are available; and
       (5) explore new computing approaches and technologies that 
     promise to advance scientific computing including 
     developments in quantum computing.
       (c) High-Performance Computing Act of 1991 Amendments.--The 
     High-Performance Computing Act of 1991 is amended--
       (1) in section 4 (15 U.S.C. 5503)--
       (A) in paragraph (3) by striking ``means'' and inserting 
     ``and `networking and information technology' mean'', and by 
     striking ``(including vector supercomputers and large scale 
     parallel systems)''; and
       (B) in paragraph (4), by striking ``packet switched''; and
       (2) in section 203 (15 U.S.C. 5523)--
       (A) in subsection (a), by striking all after ``As part of 
     the'' and inserting: ``Networking and Information Technology 
     Research and Development Program, the Secretary of Energy 
     shall conduct basic and applied research in networking and 
     information technology, with emphasis on supporting 
     fundamental research in the physical sciences and 
     engineering, and energy applications; providing supercomputer 
     access and advanced communication capabilities and facilities 
     to scientific researchers; and developing tools for 
     distributed scientific collaboration.'';
       (B) in subsection (b), by striking ``Program'' and 
     inserting ``Networking and Information Technology Research 
     and Development Program''; and
       (C) by amending subsection (e) to read as follows:
       ``(e) Authorization of Appropriations.--There are 
     authorized to be appropriated to the Secretary of Energy to 
     carry out the Networking and Information Technology Research 
     and Development Program such sums as may be necessary for 
     fiscal years 2004 through 2008.''.
       (d) Coordination.--The Secretary shall ensure that the 
     program under this section is integrated and consistent 
     with--

[[Page S10389]]

       (1) the Accelerated Strategic Computing Initiative of the 
     National Nuclear Security Administration; and
       (2) other national efforts related to advanced scientific 
     computing for science and engineering.

     SEC. 968. GENOMES TO LIFE PROGRAM.

       (a) Establishment.--The Secretary shall carry out a program 
     of research, development, demonstration, and commercial 
     application, to be known as the Genomes to Life Program, in 
     systems biology and proteomics consistent with the 
     Department's statutory authorities.
       (b) Planning.--
       (1) The Secretary shall prepare a program plan describing 
     how knowledge and capabilities would be developed by the 
     program and applied to Department missions relating to energy 
     security, environmental cleanup, and national security.
       (2) The program plan will be developed in consultation with 
     other relevant Department technology programs.
       (3) The program plan shall focus science and technology on 
     long-term goals, including--
       (A) contributing to U.S. independence from foreign energy 
     sources, including production of hydrogen;
       (B) converting carbon dioxide to organic carbon;
       (C) advancing environmental cleanup;
       (D) providing the science and technology for new 
     biotechnology industries; and
       (E) improving national security and combating bioterrorism.
       (4) The program plan shall establish specific short-term 
     goals and update these goals with the Secretary's annual 
     budget submission.
       (c) Program Execution.--In carrying out the program under 
     this Act, the Secretary shall--
       (1) support individual investigators and multidisciplinary 
     teams of investigators;
       (2) subject to subsection (d), develop, plan, construct, 
     acquire, or operate special equipment or facilities for the 
     use of investigators conducting research, development, 
     demonstration, or commercial application in systems biology 
     and proteomics;
       (3) support technology transfer activities to benefit 
     industry and other users of systems biology and proteomics; 
     and
       (4) coordinate activities by the Department with industry 
     and other federal agencies.
       (d) Genomes to Life User Facilities and Ancillary 
     Equipment.--
       (1) Within the funds authorized to be appropriated pursuant 
     to this Act, the amounts specified under section 961(b)(7) 
     shall, subject to appropriations, be available for projects 
     to develop, plan, construct, acquire, or operate special 
     equipment, instrumentation, or facilities for investigators 
     conducting research, development, demonstration, and 
     commercial application in systems biology and proteomics and 
     associated biological disciplines.
       (2) Projects under paragraph (1) may include--
       (A) the identification and characterization of multiprotein 
     complexes;
       (B) characterization of gene regulatory networks;
       (C) characterization of the functional repertoire of 
     complex microbial communities in their natural environments 
     at the molecular level; and
       (D) development of computational methods and capabilities 
     to advance understanding of complex biological systems and 
     predict their behavior.
       (3) Facilities under paragraph (1) may include facilities, 
     equipment, or instrumentation for--
       (A) the production and characterization of proteins;
       (B) whole proteome analysis;
       (C) characterization and imaging of molecular machines; and
       (D) analysis and modeling of cellular systems.
       (4) The Secretary shall encourage collaborations among 
     universities, laboratories and industry at facilities under 
     this subsection. All facilities under this subsection shall 
     have a specific mission of technology transfer to other 
     institutions.

     SEC. 969. FISSION AND FUSION ENERGY MATERIALS RESEARCH 
                   PROGRAM.

       In the President's fiscal year 2006 budget request, the 
     Secretary shall establish a research and development program 
     on material science issues presented by advanced fission 
     reactors and the Department's fusion energy program. The 
     program shall develop a catalog of material properties 
     required for these applications, develop theoretical models 
     for materials possessing the required properties, benchmark 
     models against existing data, and develop a roadmap to guide 
     further research and development in this area.

     SEC. 970. ENERGY-WATER SUPPLY TECHNOLOGIES PROGRAM.

       (a) Establishment.--There is established within the Office 
     of Science, Office of Biological and Environmental Research, 
     the ``Energy-Water Supply Technologies Program,'' to study 
     energy-related issues associated with water resources and 
     municipal waterworks and to study water supply issues related 
     to energy production.
       (b) Definitions.--
       (1) The term ``Foundation'' means the American Water Works 
     Association Research Foundation.
       (2) The term ``Indian tribe'' has the meaning given the 
     term in section 4 of the Indian Self-Determination and 
     Education Assistance Act (25 U.S.C. 450b).
       (3) The term ``Program'' means the Water Supply 
     Technologies Program established by section 970(a).
       (c) Program Areas.--The program shall conduct research and 
     development, including--
       (1) arsenic removal under subsection (d);
       (2) desalination research program under subsection (e);
       (3) the water and energy sustainability program under 
     subsection (f); and
       (4) other energy-intensive water supply and treatment 
     technologies and other technologies selected by the 
     Secretary.
       (d) Arsenic Removal Program.--
       (1) As soon as practicable after the date of enactment of 
     this Act, the Secretary shall enter into a contract with the 
     Foundation to utilize the facilities, institutions and 
     relationships established in the ``Consolidated 
     Appropriations Resolution, 2003'' as described in Senate 
     Report 107-220 that will carry out a research program to 
     develop and demonstrate innovative arsenic removal 
     technologies.
       (2) In carrying out the arsenic removal program, the 
     Foundation shall, to the maximum extent practicable, conduct 
     research on means of--
       (A) reducing energy costs incurred in using arsenic removal 
     technologies;
       (B) minimizing materials, operating, and maintenance costs 
     incurred in using arsenic removal technologies; and
       (C) minimizing any quantities of waste (especially 
     hazardous waste) that result from use of arsenic removal 
     technologies.
       (3) The Foundation shall carry out peer-reviewed research 
     and demonstration projects to develop and demonstrate water 
     purification technologies.
       (4) In carrying out the arsenic removal program--
       (A) demonstration projects will be implemented with 
     municipal water system partners to demonstrate the 
     applicability of innovative arsenic removal technologies in 
     areas with different water chemistries representative of 
     areas across the United States with arsenic levels near or 
     exceeding EPA guidelines; and
       (B) not less than 40 percent of the funds of the Department 
     used for demonstration projects under the arsenic removal 
     program shall be expended on projects focused on needs of and 
     in partnership with rural communities or Indian tribes.
       (5) The Foundation shall develop evaluations of cost 
     effectiveness of arsenic removal technologies used in the 
     program and an education, training, and technology transfer 
     component for the program.
       (6) The Secretary shall consult with the Administrator of 
     the Environmental Protection Agency to ensure that activities 
     under the arsenic removal program are coordinated with 
     appropriate programs of the Environmental Protection Agency 
     and other federal agencies, state programs and academia.
       (7) Not later than 1 year after the date of commencement of 
     the arsenic removal program, and annually thereafter, the 
     Secretary shall submit to Congress a report on the results of 
     the arsenic removal program.
       (e) Desalination Program.--
       (1) The Secretary, in cooperation with the Commissioner of 
     Reclamation, shall carry out a desalination research program 
     in accordance with the desalination technology progress plan 
     developed in Title II of the Energy and Water Development 
     Appropriations Act, 2002 (115 Stat. 498), and described in 
     Senate Report 107-39 under the heading ``WATER AND RELATED 
     RESOURCES'' in the ``BUREAU OF RECLAMATION'' section.
       (2) The desalination program shall--
       (A) draw on the national laboratory partnership established 
     with the Bureau of Reclamation to develop the January 2003 
     national Desalination and Water Purification Technology 
     Roadmap for next-generation desalination technology;
       (B) focus on research relating to, and development and 
     demonstration of, technologies that are appropriate for use 
     in desalinating brackish groundwater, wastewater and other 
     saline water supplies; disposal of residual brine or salt; 
     and
       (C) consider the use of renewable energy sources.
       (3) Under the desalination program, funds made available 
     may be used for construction projects, including completion 
     of the National Desalination Research Center for brackish 
     groundwater and ongoing facility operational costs.
       (4) The Secretary and the Commissioner of Reclamation shall 
     jointly establish a steering committee for the desalination 
     program. The steering committee shall be jointly chaired by 1 
     representative from this Program and 1 representative from 
     the Bureau of Reclamation.
       (f) Water and Energy Sustainability Program.--
       (1) The Secretary shall carry out a research program to 
     develop understanding and technologies to assist in ensuring 
     that sufficient quantities of water are available to meet 
     present and future requirements.
       (2) Under this program and in collaboration with other 
     programs within the Department including those within the 
     Offices of Fossil Energy and Energy Efficiency and Renewable 
     Energy, the Secretary of the Interior, Army Corps of 
     Engineers, Environmental Protection Agency, Department of 
     Commerce, Department of Defense, state agencies, non-
     governmental agencies and

[[Page S10390]]

     academia, the Secretary shall assess the current state of 
     knowledge and program activities concerning--
       (A) future water resources needed to support energy 
     production within the United States including but not limited 
     to the water needs for hydropower and thermo-electric power 
     generation;
       (B) future energy resources needed to support development 
     of water purification and treatment including desalination 
     and long-distance water conveyance;
       (C) reuse and treatment of water produced as a by-product 
     of oil and gas extraction;
       (D) use of impaired and non-traditional water supplies for 
     energy production and other uses; and
       (E) technologies to reduce water use in energy production.
       (3) In addition to the assessments in (2), the Secretary 
     shall--
       (A) develop a research plan defining the scientific and 
     technology development needs and activities required to 
     support long-term water needs and planning for energy 
     sustainability, use of impaired water for energy production 
     and other uses, and reduction of water use in energy 
     production;
       (B) carry out the research plan required under (A) 
     including development of numerical models, decision analysis 
     tools, economic analysis tools, databases, planning 
     methodologies and strategies;
       (C) implement at least three planning demonstration 
     projects using the models, tools and planning approaches 
     developed under subparagraph (B) and assess the viability of 
     these tools at the scale of river basins with at least one 
     demonstration involving an international border; and
       (D) transfer these tools to other federal agencies, state 
     agencies, non-profit organizations, industry and academia for 
     use in their energy and water sustainability efforts.
       (4) Not later than 1 year after the date of enactment of 
     this Act, the Secretary shall submit to Congress a report on 
     the water and energy sustainability program that describes 
     the research elements described under paragraph (2), and 
     makes recommendations for a management structure that 
     optimizes use of Federal resources and programs.
       (g) Cost Sharing.--
       (1) Research projects under this section shall not require 
     cost-sharing.
       (2) Each demonstration project carried out under the 
     Program shall be carried out on a cost-shared basis, as 
     determined by the Secretary.
       (3) With respect to a demonstration project, the Secretary 
     may accept in-kind contributions, and waive the cost-sharing 
     requirement in appropriate circumstances.

                   Subtitle G--Energy and Environment

     SEC. 971. UNITED STATES-MEXICO ENERGY TECHNOLOGY COOPERATION.

       (a) Program.--The Secretary shall establish a research, 
     development, demonstration, and commercial application 
     program to be carried out in collaboration with entities in 
     Mexico and the United States to promote energy efficient, 
     environmentally sound economic development along the United 
     States-Mexico border which minimizes public health risks from 
     industrial activities in the border region.
       (b) Program Management.--The program under subsection (a) 
     shall be managed by the Department of Energy Carlsbad 
     Environmental Management Field Office.
       (c) Technology Transfer.--In carrying out projects and 
     activities under this section, the Secretary shall assess the 
     applicability of technology developed under the Environmental 
     Management Science Program of the Department.
       (d) Intellectual Property.--In carrying out this section, 
     the Secretary shall comply with the requirements of any 
     agreement entered into between the United States and Mexico 
     regarding intellectual property protection.
       (e) Authorization of Appropriations.--The following sums 
     are authorized to be appropriated to the Secretary to carry 
     out activities under this section:
       (1) For each of fiscal years 2004 and 2005, $5,000,000.
       (2) For each of fiscal years 2006, 2007, and 2008, 
     $6,000,000.

     SEC. 972. COAL TECHNOLOGY LOAN.

       There are authorized to be appropriated to the Secretary 
     $125,000,000 to provide a loan to the owner of the 
     experimental plant constructed under United States Department 
     of Energy cooperative agreement number DE-FC-22-91PC90544 on 
     such terms and conditions as the Secretary determines, 
     including interest rates and upfront payments.

                         Subtitle H--Management

     SEC. 981. AVAILABILITY OF FUNDS.

       Funds authorized to be appropriated to the Department under 
     this title shall remain available until expended.

     SEC. 982. COST SHARING.

       (a) Research and Development.--Except as otherwise provided 
     in this title, for research and development programs carried 
     out under this title, the Secretary shall require a 
     commitment from non-Federal sources of at least 20 percent of 
     the cost of the project. Cost sharing is not required for 
     research and development of a basic or fundamental nature.
       (b) Demonstration and Commercial Application.--Except as 
     otherwise provided in this subtitle, the Secretary shall 
     require at least 50 percent of the costs directly and 
     specifically related to any demonstration or commercial 
     application project under this subtitle to be provided from 
     non-Federal sources. The Secretary may reduce the non-Federal 
     requirement under this subsection if the Secretary determines 
     that the reduction is necessary and appropriate considering 
     the technological risks involved in the project and is 
     necessary to meet the objectives of this title.
       (c) Calculation of Amount.--In calculating the amount of 
     the non-Federal commitment under subsection (a) or (b), the 
     Secretary may include personnel, services, equipment, and 
     other resources.

     SEC. 983. MERIT REVIEW OF PROPOSALS.

       Awards of funds authorized under this title shall be made 
     only after an impartial review of the scientific and 
     technical merit of the proposals for such awards has been 
     carried out by or for the Department.

     SEC. 984. EXTERNAL TECHNICAL REVIEW OF DEPARTMENTAL PROGRAMS.

       (a) National Energy Research and Development Advisory 
     Boards.--
       (1) The Secretary shall establish one or more advisory 
     boards to review Department research, development, 
     demonstration, and commercial application programs in energy 
     efficiency, renewable energy, nuclear energy, and fossil 
     energy.
       (2) The Secretary may designate an existing advisory board 
     within the Department to fulfill the responsibilities of an 
     advisory board under this subsection, and may enter into 
     appropriate arrangements with the National Academy of 
     Sciences to establish such an advisory board.
       (b) Utilization of Existing Committees.--The Secretary 
     shall continue to use the scientific program advisory 
     committees chartered under the Federal Advisory Committee Act 
     by the Office of Science to oversee research and development 
     programs under that Office.
       (c) Membership.--Each advisory board under this section 
     shall consist of persons with appropriate expertise 
     representing a diverse range of interests.
       (d) Meetings and Purposes.--Each advisory board under this 
     section shall meet at least semi-annually to review and 
     advise on the progress made by the respective research, 
     development, demonstration, and commercial application 
     program or programs. The advisory board shall also review the 
     measurable cost and performance-based goals for such programs 
     as established under section 902, and the progress on meeting 
     such goals.
       (e) Periodic Reviews and Assessments.--The Secretary shall 
     enter into appropriate arrangements with the National Academy 
     of Sciences to conduct periodic reviews and assessments of 
     the programs authorized by this title, the measurable cost 
     and performance-based goals for such programs as established 
     under section 902, if any, and the progress on meeting such 
     goals. Such reviews and assessments shall be conducted every 
     5 years, or more often as the Secretary considers necessary, 
     and the Secretary shall transmit to the Congress reports 
     containing the results of all such reviews and assessments.

     SEC. 985. IMPROVED COORDINATION OF TECHNOLOGY TRANSFER 
                   ACTIVITIES.

       (a) Technology Transfer Coordinator.--The Secretary shall 
     designate a Technology Transfer Coordinator to perform 
     oversight of and policy development for technology transfer 
     activities at the Department. The Technology Transfer 
     Coordinator shall coordinate the activities of the Technology 
     Transfer Working Group, shall oversee the expenditure of 
     funds allocated to the Technology Transfer Working Group, and 
     shall coordinate with each technology partnership ombudsman 
     appointed under section 11 of the Technology Transfer 
     Commercialization Act of 2000 (42 U.S.C. 7261c).
       (b) Technology Transfer Working Group.--The Secretary shall 
     establish a Technology Transfer Working Group, which shall 
     consist of representatives of the National Laboratories and 
     single-purpose research facilities, to--
       (1) coordinate technology transfer activities occurring at 
     National Laboratories and single-purpose research facilities;
       (2) exchange information about technology transfer 
     practices, including alternative approaches to resolution of 
     disputes involving intellectual property rights and other 
     technology transfer matters; and
       (3) develop and disseminate to the public and prospective 
     technology partners information about opportunities and 
     procedures for technology transfer with the Department, 
     including those related to alternative approaches to 
     resolution of disputes involving intellectual property rights 
     and other technology transfer matters.
       (c) Technology Transfer Responsibility.--Nothing in this 
     section shall affect the technology transfer responsibilities 
     of Federal employees under the Stevenson-Wydler Technology 
     Innovation Act of 1980.

     SEC. 986. TECHNOLOGY INFRASTRUCTURE PROGRAM.

       (a) Establishment.--The Secretary shall establish a 
     Technology Infrastructure Program in accordance with this 
     section.
       (b) Purpose.--The purpose of the Technology Infrastructure 
     Program shall be to improve the ability of National 
     Laboratories and single-purpose research facilities to 
     support departmental missions by--
       (1) stimulating the development of technology clusters that 
     can support departmental missions at the National 
     Laboratories or single-purpose research facilities;
       (2) improving the ability of National Laboratories and 
     single-purpose research facilities to leverage and benefit 
     from commercial

[[Page S10391]]

     research, technology, products, processes, and services; and
       (3) encouraging the exchange of scientific and 
     technological expertise between National Laboratories or 
     single-purpose research facilities and entities that can 
     support departmental missions at the National Laboratories or 
     single-purpose research facilities, such as institutions of 
     higher education; technology-related business concerns; 
     nonprofit institutions; and agencies of State, tribal, or 
     local governments.
       (c) Projects.--The Secretary shall authorize the Director 
     of each National Laboratory or single-purpose research 
     facility to implement the Technology Infrastructure Program 
     at such National Laboratory or facility through projects that 
     meet the requirements of subsections (d) and (e).
       (d) Program Requirements.--Each project funded under this 
     section shall meet the following requirements:
       (1) Each project shall include at least one of each of the 
     following entities: a business; an institution of higher 
     education; a nonprofit institution; and an agency of a State, 
     local, or tribal government.
       (2) Not less than 50 percent of the costs of each project 
     funded under this section shall be provided from non-Federal 
     sources. The calculation of costs paid by the non-Federal 
     sources to a project shall include cash, personnel, services, 
     equipment, and other resources expended on the project after 
     start of the project. Independent research and development 
     expenses of Government contractors that qualify for 
     reimbursement under section 3109205 0918(e) of the Federal 
     Acquisition Regulations issued pursuant to section 25(c)(1) 
     of the Office of Federal Procurement Policy Act (41 U.S.C. 
     421(c)(1)) may be credited towards costs paid by non-Federal 
     sources to a project, if the expenses meet the other 
     requirements of this section.
       (3) All projects under this section shall be competitively 
     selected using procedures determined by the Secretary.
       (4) Any participant that receives funds under this section 
     may use generally accepted accounting principles for 
     maintaining accounts, books, and records relating to the 
     project.
       (5) No Federal funds shall be made available under this 
     section for construction or any project for more than 5 
     years.
       (e) Selection Criteria.--
       (1) The Secretary shall allocate funds under this section 
     only if the Director of the National Laboratory or single-
     purpose research facility managing the project determines 
     that the project is likely to improve the ability of the 
     National Laboratory or single-purpose research facility to 
     achieve technical success in meeting departmental missions.
       (2) The Secretary shall consider the following criteria in 
     selecting a project to receive Federal funds--
       (A) the potential of the project to promote the development 
     of a commercially sustainable technology cluster following 
     the period of Department investment, which will derive most 
     of the demand for its products or services from the private 
     sector, and which will support departmental missions at the 
     participating National Laboratory or single-purpose research 
     facility;
       (B) the potential of the project to promote the use of 
     commercial research, technology, products, processes, and 
     services by the participating National Laboratory or single-
     purpose research facility to achieve its mission or the 
     commercial development of technological innovations made at 
     the participating National Laboratory or single-purpose 
     research facility;
       (C) the extent to which the project involves a wide variety 
     and number of institutions of higher education, nonprofit 
     institutions, and technology-related business concerns that 
     can support the missions of the participating National 
     Laboratory or single-purpose research facility and that will 
     make substantive contributions to achieving the goals of the 
     project;
       (D) the extent to which the project focuses on promoting 
     the development of technology-related business concerns that 
     are small businesses or involves such small businesses 
     substantively in the project; and
       (E) such other criteria as the Secretary determines to be 
     appropriate.
       (f) Allocation.--In allocating funds for projects approved 
     under this section, the Secretary shall provide--
       (1) the Federal share of the project costs; and
       (2) additional funds to the National Laboratory or single-
     purpose research facility managing the project to permit the 
     National Laboratory or single-purpose research facility to 
     carry out activities relating to the project, and to 
     coordinate such activities with the project.
       (g) Report to Congress.--Not later than July 1, 2006, the 
     Secretary shall report to Congress on whether the Technology 
     Infrastructure Program should be continued and, if so, how 
     the program should be managed.
       (h) Definitions.--In this section:
       (1) The term ``technology cluster'' means a concentration 
     of technology-related business concerns, institutions of 
     higher education, or nonprofit institutions, that reinforce 
     each other's performance in the areas of technology 
     development through formal or informal relationships.
       (2) The term ``technology-related business concern'' means 
     a for-profit corporation, company, association, firm, 
     partnership, or small business concern that conducts 
     scientific or engineering research; develops new 
     technologies; manufactures products based on new 
     technologies; or performs technological services.
       (i) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary for activities under this 
     section $10,000,000 for each of fiscal years 2004, 2005, and 
     2006.

     SEC. 987. SMALL BUSINESS ADVOCACY AND ASSISTANCE.

       (a) Small Business Advocate.--The Secretary shall require 
     the Director of each National Laboratory, and may require the 
     Director of a single-purpose research facility, to designate 
     a small business advocate to--
       (1) increase the participation of small business concerns, 
     including socially and economically disadvantaged small 
     business concerns, in procurement, collaborative research, 
     technology licensing, and technology transfer activities 
     conducted by the National Laboratory or single-purpose 
     research facility;
       (2) report to the Director of the National Laboratory or 
     single-purpose research facility on the actual participation 
     of small business concerns in procurement and collaborative 
     research along with recommendations, if appropriate, on how 
     to improve participation;
       (3) make available to small businesses training, mentoring, 
     and information on how to participate in procurement and 
     collaborative research activities;
       (4) increase the awareness inside the National Laboratory 
     or single-purpose research facility of the capabilities and 
     opportunities presented by small business concerns; and
       (5) establish guidelines for the program under subsection 
     (b) and report on the effectiveness of such program to the 
     Director of the National Laboratory or single-purpose 
     research facility.
       (b) Establishment of Small Business Assistance Program.--
     The Secretary shall require the Director of each National 
     Laboratory, and may require the Director of a single-purpose 
     research facility, to establish a program to provide small 
     business concerns--
       (1) assistance directed at making them more effective and 
     efficient subcontractors or suppliers to the National 
     Laboratory or single-purpose research facility; or
       (2) general technical assistance, the cost of which shall 
     not exceed $10,000 per instance of assistance, to improve the 
     small business concern's products or services.
       (c) Use of Funds.--None of the funds expended under 
     subsection (b) may be used for direct grants to the small 
     business concerns.
       (d) Definitions.--In this section:
       (1) The term ``small business concern'' has the meaning 
     given such term in section 3 of the Small Business Act (15 
     U.S.C. 632).
       (2) The term ``socially and economically disadvantaged 
     small business concerns'' has the meaning given such term in 
     section 8(a)(4) of the Small Business Act (15 U.S.C. 
     637(a)(4)).
       (e) Authorization of Appropriations.--There is authorized 
     to be appropriated to the Secretary for activities under this 
     section $5,000,000 for each of fiscal years 2004 through 
     2008.

     SEC. 988. MOBILITY OF SCIENTIFIC AND TECHNICAL PERSONNEL.

       Not later than 2 years after the date of enactment of this 
     section, the Secretary shall transmit a report to the 
     Congress identifying any policies or procedures of a 
     contractor operating a National Laboratory or single-purpose 
     research facility that create disincentives to the temporary 
     transfer of scientific and technical personnel among the 
     contractor-operated National Laboratories or contractor-
     operated single-purpose research facilities and provide 
     suggestions for improving inter-laboratory exchange of 
     scientific and technical personnel.

     SEC. 989. NATIONAL ACADEMY OF SCIENCES REPORT.

       Not later than 90 days after the date of enactment of this 
     Act, the Secretary shall enter into an arrangement with the 
     National Academy of Sciences for the Academy to--
       (1) conduct a study on--
       (A) the obstacles to accelerating the research, 
     development, demonstration, and commercial application cycle 
     for energy technology; and
       (B) the adequacy of Department policies and procedures for, 
     and oversight of, technology transfer-related disputes 
     between contractors of the Department and the private sector; 
     and
       (2) report to the Congress on recommendations developed as 
     a result of the study.

     SEC. 990. OUTREACH.

       The Secretary shall ensure that each program authorized by 
     this title includes an outreach component to provide 
     information, as appropriate, to manufacturers, consumers, 
     engineers, architects, builders, energy service companies, 
     institutions of higher education, facility planners and 
     managers, State and local governments, and other entities.

     SEC. 991. COMPETITIVE AWARD OF MANAGEMENT CONTRACTS.

       None of the funds authorized to be appropriated to the 
     Secretary by this title may be used to award a management and 
     operating contract for a nonmilitary energy laboratory of the 
     Department unless such contract is competitively awarded or 
     the Secretary grants, on a case-by-case basis, a waiver to 
     allow for such a deviation. The Secretary may not delegate 
     the authority to grant such a waiver and shall submit to the 
     Congress a report notifying the Congress of the waiver and 
     setting forth the reasons for the

[[Page S10392]]

     waiver at least 60 days prior to the date of the award of 
     such a contract.

     SEC. 992. REPROGRAMMING.

       (a) Distribution Report.--Not later than 60 days after the 
     date of the enactment of an Act appropriating amounts 
     authorized under this title, the Secretary shall transmit to 
     the appropriate authorizing committees of the Congress a 
     report explaining how such amounts will be distributed among 
     the authorizations contained in this title.
       (b) Prohibition.--
       (1) No amount identified under subsection (a) shall be 
     reprogrammed if such reprogramming would result in an 
     obligation which changes an individual distribution required 
     to be reported under subsection (a) by more than 5 percent 
     unless the Secretary has transmitted to the appropriate 
     authorizing committees of the Congress a report described in 
     subsection (c) and a period of 30 days has elapsed after such 
     committees receive the report.
       (2) In the computation of the 30-day period described in 
     paragraph (1), there shall be excluded any day on which 
     either House of Congress is not in session because of an 
     adjournment of more than 3 days to a day certain.
       (c) Reprogramming Report.--A report referred to in 
     subsection (b)(1) shall contain a full and complete statement 
     of the action proposed to be taken and the facts and 
     circumstances relied on in support of the proposed action.

     SEC. 993. CONSTRUCTION WITH OTHER LAWS.

       Except as otherwise provided in this title, the Secretary 
     shall carry out the research, development, demonstration, and 
     commercial application programs, projects, and activities 
     authorized by this title in accordance with the applicable 
     provisions of the Atomic Energy Act of 1954 (42 U.S.C. et 
     seq.), the Federal Nonnuclear Research and Development Act of 
     1974 (42 U.S.C. 5901 et seq.), the Energy Policy Act of 1992 
     (42 U.S.C. 13201 et seq.), the Stevenson-Wydler Technology 
     Innovation Act of 1980 (15 U.S.C. 3701 et seq.), chapter 18 
     of title 35, United States Code (commonly referred to as the 
     Bayh-Dole Act), and any other Act under which the Secretary 
     is authorized to carry out such activities.

     SEC. 994. IMPROVED COORDINATION AND MANAGEMENT OF CIVILIAN 
                   SCIENCE AND TECHNOLOGY PROGRAMS.

       (a) Effective Top-Level Coordination of Research and 
     Development Programs.--Section 202(b) of the Department of 
     Energy Organization Act (42 U.S.C. 7132(b)) is amended to 
     read as follows:
       ``(b)(1) There shall be in the Department an Under 
     Secretary for Energy and Science, who shall be appointed by 
     the President, by and with the advice and consent of the 
     Senate. The Under Secretary shall be compensated at the rate 
     provided for at level III of the Executive Schedule under 
     section 5314 of title 5, United States Code.
       ``(2) The Under Secretary for Energy and Science shall be 
     appointed from among persons who--
       ``(A) have extensive background in scientific or 
     engineering fields; and
       ``(B) are well qualified to manage the civilian research 
     and development programs of the Department of Energy.
       ``(3) The Under Secretary for Energy and Science shall--
       ``(A) serve as the Science and Technology Advisor to the 
     Secretary;
       ``(B) monitor the Department's research and development 
     programs in order to advise the Secretary with respect to any 
     undesirable duplication or gaps in such programs;
       ``(C) advise the Secretary with respect to the well-being 
     and management of the multipurpose laboratories under the 
     jurisdiction of the Department;
       ``(D) advise the Secretary with respect to education and 
     training activities required for effective short- and long-
     term basic and applied research activities of the Department;
       ``(E) advise the Secretary with respect to grants and other 
     forms of financial assistance required for effective short- 
     and long-term basic and applied research activities of the 
     Department; and
       ``(F) exercise authority and responsibility over Assistant 
     Secretaries carrying out energy research and development and 
     energy technology functions under sections 203 and 209, as 
     well as other elements of the Department assigned by the 
     Secretary.''.
       (b) Reconfiguration of Position of Director of the Office 
     of Science.--
       (1) Section 209 of the Department of Energy Organization 
     Act (41 U.S.C. 7139) is amended to read as follows:


                          ``office of science

       ``Sec. 209. (a) There shall be within the Department an 
     Office of Science, to be headed by an Assistant Secretary for 
     Science, who shall be appointed by the President, by and with 
     the advice and consent of the Senate, and who shall be 
     compensated at the rate provided for level IV of the 
     Executive Schedule under section 5315 of title 5, United 
     States Code.
       ``(b) The Assistant Secretary for Science shall be in 
     addition to the Assistant Secretaries provided for under 
     section 203 of this Act.
       ``(c) It shall be the duty and responsibility of the 
     Assistant Secretary for Science to carry out the fundamental 
     science and engineering research functions of the Department, 
     including the responsibility for policy and management of 
     such research, as well as other functions vested in the 
     Secretary which he may assign to the Assistant Secretary.''.
       (2) Notwithstanding section 3345(b)(1) of title 5, United 
     States Code, the President may designate the Director of the 
     Office of Science immediately prior to the effective date of 
     this Act to act in the office of the Assistant Secretary of 
     Energy for Science until the office is filled as provided in 
     section 209 of the Department of Energy Organization Act, as 
     amended by paragraph (1). While so acting, such person shall 
     receive compensation at the rate provided by this Act for the 
     office of Assistant Secretary for Science.
       (c) Additional Assistant Secretary Position To Enable 
     Improved Management of Nuclear Energy Issues.--
       (1) Section 203(a) of the Department of Energy Organization 
     Act (42 U.S.C. 7133(a)) is amended by striking ``There shall 
     be in the Department six Assistant Secretaries'' and 
     inserting ``Except as provided in section 209, there shall be 
     in the Department seven Assistant Secretaries''.
       (2) It is the sense of the Congress that the leadership for 
     departmental missions in nuclear energy should be at the 
     Assistant Secretary level.
       (d) Technical and Conforming Amendments.--
       (1) Section 202 of the Department of Energy Organization 
     Act (42 U.S.C. 7132) is further amended by adding the 
     following at the end:
       ``(d) There shall be in the Department an Under Secretary, 
     who shall be appointed by the President, by and with the 
     advice and consent of the Senate, and who shall perform such 
     functions and duties as the Secretary shall prescribe, 
     consistent with this section. The Under Secretary shall be 
     compensated at the rate provided for level III of the 
     Executive Schedule under section 5314 of title 5, United 
     States Code.
       ``(e) There shall be in the Department a General Counsel, 
     who shall be appointed by the President, by and with the 
     advice and consent of the Senate, and who shall perform such 
     functions and duties as the Secretary shall prescribe. The 
     General Counsel shall be compensated at the rate provided for 
     level IV of the Executive Schedule under section 5315 of 
     title 5, United States Code.''.
       (2) Section 5314 of title 5, United States Code, is amended 
     by striking ``Under Secretaries of Energy (2)'' and inserting 
     ``Under Secretaries of Energy (3)''.
       (3) Section 5315 of title 5, United States Code, is amended 
     by--
       (A) striking ``Director, Office of Science, Department of 
     Energy.''; and
       (B) striking ``Assistant Secretaries of Energy (6)'' and 
     inserting ``Assistant Secretaries of Energy (8)''.
       (4) The table of contents for the Department of Energy 
     Organization Act (42 U.S.C. 7101 note) is amended--
       (A) by striking ``Section 209'' and inserting ``Sec. 209'';
       (B) by striking ``213.'' and inserting ``Sec. 213.'';
       (C) by striking ``214.'' and inserting ``Sec. 214.'';
       (D) by striking ``215.'' and inserting ``Sec. 215.''; and
       (E) by striking ``216.'' and inserting ``Sec. 216.''.

     SEC. 995. EDUCATIONAL PROGRAMS IN SCIENCE AND MATHEMATICS.

       (a) Section 3165a of the Department of Energy Science 
     Education Enhancement Act (42 U.S.C. 7381a) is amended by 
     adding at the end:
       ``(14) Support competitive events for students, under 
     supervision of teachers, designed to encourage student 
     interest and knowledge in science and mathematics.''.
       (b) Section 3169 of the Department of Energy Science 
     Education Enhancement Act (42 U.S.C. 7381e), as redesignated 
     by this Act, is amended by inserting before the period: ``; 
     and $40,000,000 for each of fiscal years 2004 through 
     2008.''.

     SEC. 996. OTHER TRANSACTIONS AUTHORITY.

       Section 646 of the Department of Energy Organization Act 
     (42 U.S.C. 7256) is amended by adding at the end the 
     following:
       ``(g)(1) In addition to other authorities granted to the 
     Secretary under law, the Secretary may enter into other 
     transactions on such terms as the Secretary may deem 
     appropriate in furtherance of research, development, or 
     demonstration functions vested in the Secretary. Such other 
     transactions shall not be subject to the provisions of 
     section 9 of the Federal Nonnuclear Energy Research and 
     Development Act of 1974 (42 U.S.C. 5908).
       ``(2)(A) The Secretary shall ensure that--
       ``(i) to the maximum extent the Secretary determines 
     practicable, no transaction entered into under paragraph (1) 
     provides for research, development, or demonstration that 
     duplicates research, development, or demonstration being 
     conducted under existing projects carried out by the 
     Department;
       ``(ii) to the extent the Secretary determines practicable, 
     the funds provided by the Government under a transaction 
     authorized by paragraph (1) do not exceed the total amount 
     provided by other parties to the transaction; and
       ``(iii) to the extent the Secretary determines practicable, 
     competitive, merit-based selection procedures shall be used 
     when entering into transactions under paragraph (1).
       ``(B) A transaction authorized by paragraph (1) may be used 
     for a research, development, or demonstration project only if 
     the Secretary determines the use of a standard contract, 
     grant, or cooperative agreement for the project is not 
     feasible or appropriate.

[[Page S10393]]

       ``(3)(A) The Secretary shall protect from disclosure, 
     including disclosure under section 552 of title 5, United 
     States Code, for up to 5 years after the date the information 
     is received by the Secretary--
       ``(i) a proposal, proposal abstract, and supporting 
     documents submitted to the Department in a competitive or 
     noncompetitive process having the potential for resulting in 
     an award to the party submitting the information entering 
     into a transaction under paragraph (1); and
       ``(ii) a business plan and technical information relating 
     to a transaction authorized by paragraph (1) submitted to the 
     Department as confidential business information.
       ``(B) The Secretary may protect from disclosure, for up to 
     5 years after the information was developed, any information 
     developed pursuant to a transaction under paragraph (1) which 
     developed information is of a character that it would be 
     protected from disclosure under section 552(b)(4) of title 5, 
     United States Code, if obtained from a person other than a 
     Federal agency.
       ``(4) Not later than 90 days after the date of enactment of 
     this section, the Secretary shall prescribe guidelines for 
     using other transactions authorized by the amendment under 
     subsection (a). Such guidelines shall be published in the 
     Federal Register for public comment under rulemaking 
     procedures of the Department.
       ``(5) The authority of the Secretary under this subsection 
     may be delegated only to an officer of the Department who is 
     appointed by the President by and with the advice and consent 
     of the Senate and may not be delegated to any other 
     person.''.

     SEC. 997. REPORT ON RESEARCH AND DEVELOPMENT PROGRAM 
                   EVALUATION METHODOLOGIES.

       Not later than 180 days after the date of enactment of this 
     Act, the Secretary shall enter into appropriate arrangements 
     with the National Academy of Sciences to investigate and 
     report on the scientific and technical merits of any 
     evaluation methodology currently in use or proposed for use 
     in relation to the scientific and technical programs of the 
     Department by the Secretary or other Federal official. Not 
     later than 6 months after receiving the report of the 
     National Academy, the Secretary shall submit such report to 
     Congress, along with any other views or plans of the 
     Secretary with respect to the future use of such evaluation 
     methodology.

                    TITLE X--PERSONNEL AND TRAINING

     SEC. 1001. WORKFORCE TRENDS AND TRAINEESHIP GRANTS.

       (a) Workforce Trends.--
       (1) The Secretary of Energy (in this title referred to as 
     the ``Secretary''), in consultation with the Secretary of 
     Labor and utilizing statistical data collected by the 
     Secretary of Labor, shall monitor trends in the workforce of 
     skilled technical personnel supporting energy technology 
     industries, including renewable energy industries, companies 
     developing and commercializing devices to increase energy 
     efficiency, the oil and gas industry, the nuclear power 
     industry, the coal industry, and other industrial sectors as 
     the Secretary may deem appropriate.
       (2) The Secretary shall report to the Congress whenever the 
     Secretary determines that significant national shortfalls of 
     skilled technical personnel in one or more energy industry 
     segments are forecast or have occurred.
       (b) Traineeship Grants for Skilled Technical Personnel.--
     The Secretary, in consultation with the Secretary of Labor, 
     may establish grant programs in the appropriate offices of 
     the Department of Energy to enhance training of skilled 
     technical personnel for which a shortfall is determined under 
     subsection (a).
       (c) Definition.--For purposes of this section, the term 
     ``skilled technical personnel'' means journey and apprentice 
     level workers who are enrolled in or have completed a State 
     or federally recognized apprenticeship program and other 
     skilled workers in energy technology industries.
       (d) Authorization of Appropriations.--For the purposes of 
     this section, there are authorized to be appropriated to the 
     Secretary $20,000,000 for each of fiscal years 2004 through 
     2008, to remain available until expended.

     SEC. 1002. RESEARCH FELLOWSHIPS IN ENERGY RESEARCH.

       (a) Postdoctoral Fellowships.--The Secretary shall 
     establish a program of fellowships to encourage outstanding 
     young scientists and engineers to pursue postdoctoral 
     research appointments in energy research and development at 
     institutions of higher education of their choice.
       (b) Distinguished Senior Research Fellowships.--The 
     Secretary shall establish a program of fellowships to allow 
     outstanding senior researchers in energy research and 
     development and their research groups to explore research and 
     development topics of their choosing for a fixed period of 
     time. Awards under this program shall be made on the basis of 
     past scientific or technical accomplishment and promise for 
     continued accomplishment during the period of support, which 
     shall not be less than 3 years.
       (c) Authorization of Appropriations.--For the purposes of 
     this section, there are authorized to be appropriated to the 
     Secretary $40,000,000 for each of fiscal years 2004 through 
     2008, to remain available until expended.

     SEC. 1003. TRAINING GUIDELINES FOR ELECTRIC ENERGY INDUSTRY 
                   PERSONNEL.

       The Secretary of Labor, in consultation with the Secretary 
     of Energy and jointly with the electric industry and 
     recognized employee representatives, shall develop model 
     personnel training guidelines to support electric system 
     reliability and safety. The training guidelines shall, at a 
     minimum--
       (1) include training requirements for workers engaged in 
     the construction, operation, inspection, and maintenance of 
     electric generation, transmission, and distribution, 
     including competency and certification requirements, and 
     assessment requirements that include initial and ongoing 
     evaluation of workers, recertification assessment procedures, 
     and methods for examining or testing the qualification of 
     individuals performing covered tasks; and
       (2) consolidate existing training guidelines on the 
     construction, operation, maintenance, and inspection of 
     electric generation, transmission, and distribution 
     facilities, such as those established by the National 
     Electric Safety Code and other industry consensus standards.

     SEC. 1004. NATIONAL CENTER ON ENERGY MANAGEMENT AND BUILDING 
                   TECHNOLOGIES.

       The Secretary shall support the establishment of a National 
     Center on Energy Management and Building Technologies, to 
     carry out research, education, and training activities to 
     facilitate the improvement of energy efficiency and indoor 
     air quality in industrial, commercial, and residential 
     buildings. The National Center shall be established by--
       (1) recognized representatives of employees in the heating, 
     ventilation, and air-conditioning industry;
       (2) contractors that install and maintain heating, 
     ventilation, and air-conditioning systems and equipment;
       (3) manufacturers of heating, ventilation, and air-
     conditioning systems and equipment;
       (4) representatives of the advanced building envelope 
     industry, including design, windows, lighting, and insulation 
     industries; and
       (5) other entities as the Secretary may deem appropriate.

     SEC. 1005. IMPROVED ACCESS TO ENERGY-RELATED SCIENTIFIC AND 
                   TECHNICAL CAREERS.

       (a) Department of Energy Science Education Programs.--
     Section 3164 of the Department of Energy Science Education 
     Enhancement Act (42 U.S.C. 7381a) is amended by adding at the 
     end the following:
       ``(c) Programs for Students From Under-represented 
     Groups.--In carrying out a program under subsection (a), the 
     Secretary shall give priority to activities that are designed 
     to encourage students from under-represented groups to pursue 
     scientific and technical careers.''.
       (b) Partnerships With Historically Black Colleges and 
     Universities, Hispanic-Servicing Institutions, and Tribal 
     Colleges.--The Department of Energy Science Education 
     Enhancement Act (42 U.S.C. 7381 et seq.) is amended--
       (1) by redesignating sections 3167 and 3168 as sections 
     3168 and 3169, respectively; and
       (2) by inserting after section 3166 the following:

     ``SEC. 3167. PARTNERSHIPS WITH HISTORICALLY BLACK COLLEGES 
                   AND UNIVERSITIES, HISPANIC-SERVING 
                   INSTITUTIONS, AND TRIBAL COLLEGES.

       ``(a) Definitions.--In this section:
       ``(1) Hispanic-serving institution.--The term `Hispanic-
     serving institution' has the meaning given that term in 
     section 502(a) of the Higher Education Act of 1965 (20 U.S.C. 
     1101a(a)).
       ``(2) Historically black college or university.--The term 
     `historically Black college or university' has the meaning 
     given the term `part B institution' in section 322 of the 
     Higher Education Act of 1965 (20 U.S.C. 1061).
       ``(3) National laboratory.--The term `National Laboratory' 
     has the meaning given that term in section 903(5) of the 
     Energy Policy Act of 2003.
       ``(4) Science facility.--The term `science facility' has 
     the meaning given the term `single-purpose research facility' 
     in section 903(8) of the Energy Policy Act of 2003.
       ``(5) Tribal college.--The term `tribal college' has the 
     meaning given the term `tribally controlled college or 
     university' in section 2(a) of the Tribally Controlled 
     College or University Assistance Act of 1978 (25 U.S.C. 
     1801(a)).
       ``(b) Education Partnership.--The Secretary shall direct 
     the Director of each National Laboratory, and may direct the 
     head of any science facility, to increase the participation 
     of historically Black colleges or universities, Hispanic-
     serving institutions, or tribal colleges in activities that 
     increase the capacity of the historically Black colleges or 
     universities, Hispanic-serving institutions, or tribal 
     colleges to train personnel in science or engineering.
       ``(c) Activities.--An activity under subsection (b) may 
     include--
       ``(1) collaborative research;
       ``(2) equipment transfer;
       ``(3) training activities conducted at a National 
     Laboratory or science facility; and
       ``(4) mentoring activities conducted at a National 
     Laboratory or science facility.
       ``(d) Report.--Not later than 2 years after the date of 
     enactment of this section, the Secretary shall submit to the 
     Congress a report on the activities carried out under this 
     section.''.

[[Page S10394]]

     SEC. 1006. NATIONAL POWER PLANT OPERATIONS TECHNOLOGY AND 
                   EDUCATION CENTER.

       (a) Establishment.--The Secretary shall support the 
     establishment of a National Power Plant Operations Technology 
     and Education Center (in this section referred to as the 
     ``Center''), to address the need for training and educating 
     certified operators for electric power generation plants.
       (b) Role.--The Center shall provide both training and 
     continuing education relating to electric power generation 
     plant technologies and operations. The Center shall conduct 
     training and education activities on site and through 
     Internet-based information technologies that allow for 
     learning at remote sites.
       (c) Criteria for Competitive Selection.--The Secretary 
     shall support the establishment of the Center at an 
     institution of higher education with expertise in power plant 
     technology and operation and with the ability to provide on-
     site as well as Internet-based training.

     SEC. 1007. FEDERAL MINE INSPECTORS.

       In light of projected retirements of Federal mine 
     inspectors and the need for additional personnel, the 
     Secretary of Labor shall hire, train, and deploy such 
     additional skilled Federal mine inspectors as necessary to 
     ensure the availability of skilled and experienced 
     individuals and to maintain the number of Federal mine 
     inspectors at or above the levels authorized by law or 
     established by regulation.

                         TITLE XI--ELECTRICITY

     SEC. 1101. DEFINITIONS.

       (a) Electric Utility.--Section 3(22) of the Federal Power 
     Act (16 U.S.C. 796(22)) is amended to read as follows:
       ``(22) `electric utility' means any person or Federal or 
     State agency (including any municipality) that sells electric 
     energy; such term includes the Tennessee Valley Authority and 
     each Federal power marketing agency;''.
       (b) Transmitting Utility.--Section 3(23) of the Federal 
     Power Act (16 U.S.C. 796(23)) is amended to read as follows:
       ``(23) `transmitting utility' means an entity, including 
     any entity described in section 201(f), that owns or operates 
     facilities used for the transmission of electric energy--
       ``(A) in interstate commerce; or
       ``(B) for the sale of electric energy at wholesale;''.
       (c) Additional Definitions.--At the end of section (3) of 
     the Federal Power Act, add the following:
       ``(26) `unregulated transmitting utility' means an entity 
     that--
       ``(A) owns or operates facilities used for the transmission 
     of electric energy in interstate commerce, and
       ``(B) is an entity described in section 201(f);
       ``(27) `electric cooperative' means a cooperatively owned 
     electric utility;
       ``(28) `Regional Transmission Organization' or `RTO' means 
     an entity of sufficient regional scope approved by the 
     Commission to exercise operational or functional control of 
     facilities used for the transmission of electric energy in 
     interstate commerce and to ensure non-discriminatory access 
     to such facilities; and
       ``(29) `Independent System Operator' or `ISO' means an 
     entity used for the transmission of electric energy and which 
     has been approved by the Commission to exercise operational 
     or functional control of facilities used for the transmission 
     of electric energy in interstate commerce and to ensure non-
     discriminatory access to such facilities.''.
       (d) Additional Modifications.--
       (1) Section 210(b)(2) of the Federal Power Act (16 U.S.C. 
     824(b)(2)) is amended by striking ``The'' the first time it 
     appears and inserting, ``Notwithstanding section 201(f), 
     the''.
       (2) Section 201(f) of the Federal Power Act (16 U.S.C. 
     824(f)) is amended by adding after ``political subdivision of 
     a state,'' ``an electric cooperative that has financing under 
     the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.) 
     or sells less than 4,000,000 megawatt hours of electricity 
     per year,''.
       (e) For the purposes of this title, the term ``Commission'' 
     means the Federal Energy Regulatory Commission.

                        Subtitle A--Reliability

     SEC. 1111. ELECTRIC RELIABILITY STANDARDS.

       (a) Part II of the Federal Power Act (16 U.S.C. 824 et 
     seq.) is amended by adding at the end the following:


                         ``electric reliability

       ``SEC. 215. (a) For the purposes of this section:
       ``(1) The term `bulk-power system' means
       ``(A) facilities and control systems necessary for 
     operating an interconnected electric energy transmission 
     network (or any portion thereof); and
       ``(B) electric energy from generation facilities needed to 
     maintain transmission system reliability.
       The term does not include facilities used in the local 
     distribution of electric energy.
       ``(2) The terms `Electric Reliability Organization' and 
     `ERO' mean the organization certified by the Commission under 
     subsection (c), the purpose of which is to establish and 
     enforce reliability standards for the bulk-power system, 
     subject to Commission review.
       ``(3) The term `reliability standard' means a requirement, 
     approved by the Commission under this section, to provide for 
     reliable operation of the bulk-power system. The term 
     includes requirements for the operation of existing bulk-
     power system components and the design of planned additions 
     or modifications to such components to the extent necessary 
     to provide for reliable operation of the bulk-power system, 
     but the term does not include any requirement to enlarge such 
     components or to construct new transmission capacity or 
     generation capacity.
       ``(4) The term `reliable operation' means operating the 
     components of the bulk power system within equipment and 
     electric system thermal, voltage, and stability limits so 
     that instability, uncontrolled separation, or cascading 
     failures of such system will not occur as a result of a 
     sudden disturbance or unanticipated failure of system 
     components.
       ``(5) The term `Interconnection' means a geographic area in 
     which the operation of bulkpower system components is 
     synchronized such that the failure of one or more of such 
     components may adversely affect the ability of the operators 
     of other components within the system to maintain reliable 
     operation of the portion of the system within their control.
       ``(6) The term `transmission organization' means an RTO or 
     other transmission organization finally approved by the 
     Commission for the operation of transmission facilities.
       ``(7) The term `regional entity' means an entity having 
     enforcement authority pursuant to subsection (e)(4).
       ``(b) The Commission shall have jurisdiction, within the 
     United States, over the ERO certified by the Commission under 
     subsection (c), any regional entities, and all users, owners 
     and operators of the bulk-power system, including the 
     entities described in section 201(f), for purposes of 
     approving reliability standards established under this 
     section and enforcing compliance with this section. All 
     users, owners and operators of the bulk-power system shall 
     comply with reliability standards that take effect under this 
     section. The Commission shall issue a final rule to implement 
     the requirements of this section not later than 180 days 
     after the date of enactment of this section.
       ``(c) Following the issuance of a Commission rule under 
     subsection (b), any person may submit an application to the 
     Commission for certification as the Electric Reliability 
     Organization. The Commission may certify one such ERO if the 
     Commission determines that such ERO--
       ``(1) has the ability to develop and enforce, subject to 
     subsection (d)(2), reliability standards that provide for an 
     adequate level of reliability of the bulk-power system; and
       ``(2) has established rules that--
       ``(A) assure its independence of the users and owners and 
     operators of the bulkpower system, while assuring fair 
     stakeholder representation in the selection of its directors 
     and balanced decisionmaking in any ERO committee or 
     subordinate organizational structure;
       ``(B) allocate equitably reasonable dues, fees, and other 
     charges among end users for all activities under this 
     section;
       ``(C) provide fair and impartial procedures for enforcement 
     of reliability standards through the imposition of penalties 
     in accordance with subsection (e) (including limitations on 
     activities, functions, or operations, or other appropriate 
     sanctions);
       ``(D) provide for reasonable notice and opportunity for 
     public comment, due process, openness, and balance of 
     interests in developing reliability standards and otherwise 
     exercising its duties; and
       ``(E) provide for taking, after certification, appropriate 
     steps to gain recognition in Canada and Mexico.
       ``(d)(1) The ERO shall file each reliability standard or 
     modification to a reliability standard that it proposes to be 
     made effective under this section with the Commission.
       ``(2) The Commission may approve by rule or order a 
     proposed reliability standard or modification to a 
     reliability standard if it determines that the standard is 
     just, reasonable, not unduly discriminatory or preferential, 
     and in the public interest. The Commission shall give due 
     weight to the technical expertise of the ERO with respect to 
     the content of a proposed standard or modification to a 
     reliability standard and to the technical expertise of a 
     regional entity organized on an Interconnection-wide basis 
     with respect to a reliability standard to be applicable 
     within that Interconnection, but shall not defer with respect 
     to the effect of a standard on competition. A proposed 
     standard or modification shall take effect upon approval by 
     the Commission.
       ``(3) The ERO shall rebuttably presume that a proposal from 
     a regional entity organized on an Interconnection-wide basis 
     for a reliability standard or modification to a reliability 
     standard to be applicable on an Interconnection-wide basis is 
     just, reasonable, and not unduly discriminatory or 
     preferential, and in the public interest.
       ``(4) The Commission shall remand to the ERO for further 
     consideration a proposed reliability standard or a 
     modification to a reliability standard that the Commission 
     disapproves in whole or in part.
       ``(5) The Commission, upon its own motion or upon 
     complaint, may order the ERO to submit to the Commission a 
     proposed reliability standard or a modification to a 
     reliability standard that addresses a specific matter if the 
     Commission considers such a new or modified reliability 
     standard appropriate to carry out this section.
       ``(6) The final rule adopted under subsection (b) shall 
     include fair processes for the identification and timely 
     resolution of any conflict between a reliability standard and 
     any function, rule, order, tariff, rate schedule, or 
     agreement accepted, approved,

[[Page S10395]]

     or ordered by the Commission applicable to a transmission 
     organization. Such transmission organization shall continue 
     to comply with such function, rule, order, tariff, rate 
     schedule or agreement accepted approved, or ordered by the 
     Commission until--
       ``(A) the Commission finds a conflict exists between a 
     reliability standard and any such provision;
       ``(B) the Commission orders a change to such provision 
     pursuant to section 206 of this Part; and
       ``(C) the ordered change becomes effective under this Part.
       If the Commission determines that a reliability standard 
     needs to be changed as a result of such a conflict, it shall 
     order the ERO to develop and file with the Commission a 
     modified reliability standard under paragraph (4) or (5) of 
     this subsection.
       ``(e)(1) The ERO may impose, subject to paragraph (2), a 
     penalty on a user or owner or operator of the bulk-power 
     system for a violation of a reliability standard approved by 
     the Commission under subsection (d) if the ERO, after notice 
     and an opportunity for a hearing
       ``(A) finds that the user or owner or operator has violated 
     a reliability standard approved by the Commission under 
     subsection (d); and
       ``(B) files notice and the record of the proceeding with 
     the Commission.
       ``(2) A penalty imposed under paragraph (1) may take effect 
     not earlier than the 31st day after the ERO files with the 
     Commission notice of the penalty and the record of 
     proceedings. Such penalty shall be subject to review by the 
     Commission, on its own motion or upon application by the 
     user, owner or operator that is the subject of the penalty 
     filed within 30 days after the date such notice is filed with 
     the Commission. Application to the Commission for review, or 
     the initiation of review by the Commission on its own motion, 
     shall not operate as a stay of such penalty unless the 
     Commission otherwise orders upon its own motion or upon 
     application by the user, owner or operator that is the 
     subject of such penalty. In any proceeding to review a 
     penalty imposed under paragraph (1), the Commission, after 
     notice and opportunity for hearing (which hearing may consist 
     solely of the record before the ERO and opportunity for the 
     presentation of supporting reasons to affirm, modify, or set 
     aside the penalty), shall by order affirm, set aside, 
     reinstate, or modify the penalty, and, if appropriate, remand 
     to the ERO for further proceedings. The Commission shall 
     implement expedited procedures for such hearings.
       ``(3) On its own motion or upon complaint, the Commission 
     may order compliance with a reliability standard and may 
     impose a penalty against a user or owner or operator of the 
     bulk-power system, if the Commission finds, after notice and 
     opportunity for a hearing, that the user or owner or operator 
     of the bulk-power system has engaged or is about to engage in 
     any acts or practices that constitute or will constitute a 
     violation of a reliability standard.
       ``(4) The Commission shall establish regulations 
     authorizing the ERO to enter into an agreement to delegate 
     authority to a regional entity for the purpose of proposing 
     reliability standards to the ERO and enforcing reliability 
     standards under paragraph (1) if--
       ``(A) the regional entity is governed by an independent 
     board, a balanced stakeholder board, or a combination 
     independent and balanced stakeholder board;
       ``(B) the regional entity otherwise satisfies the 
     provisions of subsection (c)(1) and (2); and
       ``(C) the agreement promotes effective and efficient 
     administration of bulk-power system reliability.
       The Commission may modify such delegation. The ERO and the 
     Commission shall rebuttably presume that a proposal for 
     delegation to a regional entity organized on an 
     Interconnection-wide basis promotes effective and efficient 
     administration of bulk-power system reliability and should be 
     approved. Such regulation may provide that the Commission may 
     assign the ERO's authority to enforce reliability standards 
     under paragraph (1) directly to a regional entity consistent 
     with the requirements of this paragraph.
       ``(5) The Commission may take such action as is necessary 
     or appropriate against the ERO or a regional entity to ensure 
     compliance with a reliability standard or any Commission 
     order affecting the ERO or a regional entity.
       ``(6) Any penalty imposed under this section shall bear a 
     reasonable relation to the seriousness of the violation and 
     shall take into consideration the efforts of such user, 
     owner, or operator to remedy the violation in a timely 
     manner.
       ``(f) The ERO shall file with the Commission for approval 
     any proposed rule or proposed rule change, accompanied by an 
     explanation of its basis and purpose. The Commission, upon 
     its own motion or complaint, may propose a change to the 
     rules of the ERO. A proposed rule or proposed rule change 
     shall take effect upon a finding by the Commission, after 
     notice and opportunity for comment, that the change is just, 
     reasonable, not unduly discriminatory or preferential, is in 
     the public interest, and satisfies the requirements of 
     subsection (c).
       ``(g) The ERO shall conduct periodic assessments of the 
     reliability and adequacy of the bulkpower system in North 
     America.
       ``(h) The President is urged to negotiate international 
     agreements with the governments of Canada and Mexico to 
     provide for effective compliance with reliability standards 
     and the effectiveness of the ERO in the United States and 
     Canada or Mexico.
       ``(i)(1) The ERO shall have authority to develop and 
     enforce compliance with reliability standards for only the 
     bulk-power system.
       ``(2) This section does not authorize the ERO or the 
     Commission to order the construction of additional generation 
     or transmission capacity or to set and enforce compliance 
     with standards for adequacy or safety of electric facilities 
     or services.
       ``(3) Nothing in this section shall be construed to preempt 
     any authority of any State to take action to ensure the 
     safety, adequacy, and reliability of electric service within 
     that State, as long as such action is not inconsistent with 
     any reliability standard.
       ``(4) Within 90 days of the application of the ERO or other 
     affected party, and after notice and opportunity for comment, 
     the Commission shall issue a final order determining whether 
     a State action is inconsistent with a reliability standard, 
     taking into consideration any recommendation of the ERO.
       ``(5) The Commission, after consultation with the ERO, may 
     stay the effectiveness of any State action, pending the 
     Commission's issuance of a final order.
       ``(j) The Commission shall establish a regional advisory 
     body on the petition of at least two-thirds of the States 
     within a region that have more than one-half of their 
     electric load served within the region. A regional advisory 
     body shall be composed of one member from each participating 
     State in the region, appointed by the Governor of each State, 
     and may include representatives of agencies, States, and 
     provinces outside the United States. A regional advisory body 
     may provide advice to the ERO, a regional entity, or the 
     Commission regarding the governance of an existing or 
     proposed regional entity within the same region; whether a 
     standard proposed to apply within the region is just, 
     reasonable, not unduly discriminatory or preferential, and in 
     the public interest; whether fees proposed to be assessed 
     within the region are just, reasonable, not unduly 
     discriminatory or preferential, and in the public interest, 
     and any other responsibilities requested by the Commission. 
     The Commission may give deference to the advice of any such 
     regional advisory body if that body is organized on an 
     Interconnection-wide basis.
       ``(k) The provisions of this section do not apply to Alaska 
     or Hawaii.''.
       (b) The electric reliability organization certified by the 
     Commission under section 215(c) of the Federal Power Act and 
     any regional entity delegated enforcement authority pursuant 
     to section 215(e) of the Federal Power Act are not 
     departments, agencies, or instrumentalities of the United 
     States Government.

                      Subtitle B--Regional Markets

     SEC. 1121. IMPLEMENTATION DATE FOR PROPOSED RULEMAKING ON 
                   STANDARD MARKET DESIGN.

       The Commission's proposed rulemaking entitled ``Remedying 
     Undue Discrimination through Open Access Transmission Service 
     and Standard Electricity Market Design'' (Docket No. RM01-12-
     [000) is remanded to the Commission for reconsideration. No 
     final rule pursuant to the proposed rulemaking, including any 
     rule or order of general applicability within the scope of 
     the proposed rulemaking, may be issued before July l, 2005. 
     Any final rule issued by the Commission pursuant to the 
     proposed rulemaking, including any rule or order of general 
     applicability within the scope of the proposed rulemaking, 
     shall be preceded by a notice of proposed rulemaking issued 
     after the date of enactment of this Act and an opportunity 
     for public comment.

     SEC. 1122. SENSE OF THE CONGRESS ON REGIONAL TRANSMISSION 
                   ORGANIZATIONS.

       It is the sense of Congress that, in order to promote fair, 
     open access to electric transmission service, benefit retail 
     consumers, facilitate wholesale competition, improve 
     efficiencies in transmission grid management, promote grid 
     reliability, remove opportunities for unduly discriminatory 
     or preferential transmission practices, and provide for the 
     efficient development of transmission infrastructure needed 
     to meet the growing demands of competitive wholesale power 
     markets, all transmitting utilities in interstate commerce 
     should voluntarily become members of independently 
     administered Regional Transmission Organizations (``RTO'') 
     that have operational or functional control of facilities 
     used for the transmission of electric energy in interstate 
     commerce and do not own or have a financial interest in 
     generation facilities used to supply electric energy for sale 
     at wholesale.

     SEC. 1123. PARTICIPATION IN REGIONAL TRANSMISSION 
                   ORGANIZATIONS. .

       Nothing in this Act authorizes the Commission to require a 
     transmitting utility to transfer control or operational 
     control of its transmitting facilities to an RTO or any other 
     Commission-approved organization designated to provide non-
     discriminatory transmission access.

     SEC. 1124. FEDERAL UTILITY PARTICIPATION IN REGIONAL 
                   TRANSMISSION ORGANIZATIONS.

       (a) Definitions.--For purposes of this section:
       (1) The term ``appropriate Federal regulatory authority'' 
     means--

[[Page S10396]]

       (A) with respect to a Federal power marketing agency, the 
     Secretary of Energy, except that the Secretary may designate 
     the Administrator of a Federal power marketing agency to act 
     as the appropriate Federal regulatory authority with respect 
     to the transmission system of that Federal power marketing 
     agency; and
       (B) with respect to the Tennessee Valley Authority, the 
     Board of Directors of the Tennessee Valley Authority.
       (2) The term ``Federal utility'' means a Federal power 
     marketing agency or the Tennessee Valley Authority.
       (3) The term ``transmission system'' means electric 
     transmission facilities owned, leased, or contracted for by 
     the United States and operated by a Federal utility.
       (b) Transfer.--
       (1) The appropriate Federal regulatory authority is 
     authorized to enter into a contract, agreement, or other 
     arrangement transferring control and use of all or part of 
     the Federal utility's transmission system to a Regional 
     Transmission Organization (``RTO''), as defined in the 
     Federal Power Act. Such contract, agreement or arrangement 
     shall be voluntary and include--
       (A) performance standards for operation and use of the 
     transmission system that the head of the Federal utility 
     determines necessary or appropriate, including standards that 
     assure recovery of all the Federal utility's costs and 
     expenses related to the transmission facilities that are the 
     subject of the contract, agreement, or other arrangement; 
     consistency with existing contracts and third-party financing 
     arrangements; and consistency with said Federal utility's 
     statutory authorities, obligations, and limitations;
       (B) provisions for monitoring and oversight by the Federal 
     utility of the RTO fulfillment of the terms and conditions of 
     the contract, agreement or other arrangement, including a 
     provision that may provide for the resolution of disputes 
     through arbitration or other means with the RTO or with other 
     participants, notwithstanding the obligations and limitations 
     of any other law regarding arbitration; and
       (C) a provision that allows the Federal utility to withdraw 
     from the RTO and terminate the contract, agreement, or other 
     arrangement in accordance with its terms.
       (2) Neither this section, actions taken pursuant to it, nor 
     any other transaction of a Federal utility using an RTO shall 
     serve to confer upon the Commission jurisdiction or authority 
     over the Federal utility's electric generation assets, 
     electric capacity or energy that the Federal utility is 
     authorized by law to market, or the Federal utility's power 
     sales activities.
       (c) Existing Statutory and Other Obligations.--
       (1) Any statutory provision requiring or authorizing a 
     Federal utility to transmit, electric power, or to construct, 
     operate, or maintain its transmission system shall not be 
     construed to prohibit a transfer of control and use of its 
     transmission system pursuant to, and subject to all 
     requirements of subsection (b).
       (2) This subsection shall not be construed to--
       (A) suspend, or exempt any Federal utility from any 
     provision of existing Federal law, including but not limited 
     to any requirement or direction relating to the use of the 
     Federal utility's transmission system, environmental 
     protection, fish and wildlife protection, flood control, 
     navigation, water delivery, or recreation; or
       (B) authorize abrogation of any contract or treaty 
     obligation.

     SEC. 1125. REGIONAL CONSIDERATION OF COMPETITIVE WHOLESALE 
                   MARKETS.

       (a) State Regulatory Authorities.--Not later than 90 days 
     after the date of enactment of this Act, the Commission shall 
     convene regional discussions with State regulatory 
     authorities, as defined in section 3(21) of the Federal Power 
     Act. The regional discussions should address whether 
     wholesale electric markets in each region are working 
     effectively to provide reliable service to electric consumers 
     in the region at the lowest reasonable cost. Priority should 
     be given to discussions in regions that do not have, as of 
     the date of enactment of this Act, a Regional Transmission 
     Organization (``RTO'') or an Independent System Operator 
     (``ISO''s, as defined in the Federal Power Act. The regional 
     discussions shall consider--
       (1) the need for an RTO or other organizations in the 
     region to provide nondiscriminatory transmission access and 
     generation interconnection;
       (2) a process for regional planning of transmission 
     facilities with State regulatory authority participation and 
     for consideration of multi-state projects;
       (3) a means for ensuring that costs for all electric 
     consumers, as defined in section 3(5) of the Public Utility 
     Regulatory Policies Act of 1978 (16 U.S.C. 2602(5)), and 
     buyers of wholesale energy or capacity are reasonable and 
     economically efficient;
       (4) a means for ensuring that all electric consumers, as 
     defined in section 3(5) of the Public Utility Regulatory 
     Policies Act of 1978 (16 U.S.C. 2602(5)), within the region 
     maintain their ability to use the existing transmission 
     system without incurring unreasonable additional costs in 
     order to expand the transmission system for new customers;
       (5) whether the integrated transmission and electric power 
     supply system can and should be operated in a manner that 
     schedules and economically prioritizes all available electric 
     generation resources, so as to minimize the costs of electric 
     energy to all consumers (``economic dispatch'') and maintain 
     system reliability;
       (6) a means to provide transparent price signals to promote 
     proper location and utilization of generation and the 
     efficient expansion of transmission in a manner that does not 
     result in collection of transmission rents that do not 
     relieve congestion;
       (7) eliminating in a reasonable manner, consistent with 
     applicable State and Federal law, multiple, cumulative 
     charges for transmission service across successive locations 
     within a region (``pancaked rates'');
       (8) resolution of seams issues with neighboring regions and 
     inter-regional coordination;
       (9) a means of providing information electronically to 
     potential users of the transmission system;
       (10) implementation of a market monitor for the region with 
     State regulatory authority and Commission oversight and 
     establishment of rules and procedures that ensure that State 
     regulatory authorities are provided access to market 
     information and that provides for expedited consideration by 
     the Commission of any complaints concerning exercise of 
     market power and the operation of wholesale markets;
       (11) a process by which to phase-in any proposed RTO or 
     other organization designated to provide non-discriminatory 
     transmission access, including the formulation of 
     transmission pricing methodologies, so as to best meet the 
     needs of a region, and, if relevant, shall take into account 
     the special circumstances that may be found in the Western 
     Interconnection related to the existence of transmission 
     congestion, the existence of significant hydroelectric 
     capacity, the participation of unregulated transmitting 
     utilities, and the distances between generation and load;
       (12) the need to submit regional studies, within one year 
     of enactment of this Act, to the Commission outlining 
     possible methodologies that will ensure that the amount of 
     energy produced in any region will be equal to at least 50 
     percent of the amount of energy consumed in that region by 
     2013;
       (13) the potential value of developing a uniform system-
     wide average rate for transmission pricing as a way to 
     enhance the efficiency and reliability of the transmission 
     grid; and
       (14) a timetable to meet the objectives of this section.
       (b) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Commission shall report to 
     Congress on the progress made in addressing the issues in 
     subsection (a) of this section in discussions with the 
     States.
       (c) Savings.--Nothing in this section shall affect any 
     discussions between the Commission and State or other retail 
     regulatory authorities that are on-going prior to enactment 
     of this Act.

   Subtitle C--Improving Transmission Access and Protecting Service 
                              Obligations

     SEC. 1131. SERVICE OBLIGATION SECURITY AND PARITY.

       Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is 
     amended by adding at the end the following:


                ``service obligation security and parity

       ``Sec. 216. (a)(1) Any load-serving entity that, as of the 
     date of enactment of this section''--
       (A) owns generation facilities, markets the output of 
     federal generation facilities, or holds rights under one or 
     more wholesale contracts to purchase electric energy, for the 
     purpose of meeting a service obligation, and
       ``(B) by reason of ownership of transmission facilities, or 
     one or more contracts or service agreements for firm 
     transmission service, holds firm transmission rights for 
     delivery of the output of such generation facilities or such 
     purchased energy to meet such service obligation, is entitled 
     to use such firm transmission rights, or, at its election, 
     equivalent tradeable or financial transmission rights, in 
     order to deliver such output or purchased energy, or the 
     output of other generating facilities or purchased energy to 
     the extent deliverable using such rights, to the extent 
     required to meet its service obligation.
       ``(2) To the extent that all or a portion of the service 
     obligation covered by such firm transmission rights or 
     equivalent tradeable or financial transmission rights is 
     transferred to another load-serving entity, the successor 
     load-serving entity shall be entitled to use the firm 
     transmission rights or equivalent tradeable or financial 
     transmission rights associated with the transferred service 
     obligation. Subsequent transfers to another load-serving 
     entity, or back to the original load-serving entity, shall be 
     entitled to the same rights.
       ``(3) The Commission shall exercise its authority under 
     this Act in a manner that facilitates the planning and 
     expansion of transmission facilities to meet the reasonable 
     needs of load-serving entities to satisfy their service 
     obligations.
       ``(b) Nothing in this section shall affect any methodology, 
     approved by the Commission prior to the date of enactment of 
     this section, for the allocation of transmission rights by an 
     RTO or ISO that has been authorized by the Commission to 
     allocate transmission rights.
       ``(c) Nothing in this Act shall relieve a load-serving 
     entity from any obligation under State or local law to build 
     transmission or distribution facilities adequate to meet its 
     service obligations.
       ``(d) Nothing in this section shall provide a basis for 
     abrogating any contract or service

[[Page S10397]]

     agreement for firm transmission service or rights in effect 
     as of the date of the enactment of this subsection.
       ``(e) For purposes of this section:
       ``(1) The term `distribution utility' means an electric 
     utility that has a service obligation to end-users or to a 
     State utility or electric cooperative that, directly or 
     indirectly, through one or more additional State utilities or 
     electric cooperatives, provides electric service to end-
     users.
       ``(2) The term `load-serving entity' means a distribution 
     utility or an electric utility that has a service obligation.
       ``(3) The term `service obligation' means a requirement 
     applicable to, or the exercise of authority granted to, an 
     electric utility under Federal, State or local law or under 
     long-term contracts to provide electric service to end-users 
     or to a distribution utility.
       ``(4) The term `State utility' means a State or any 
     political subdivision of a State, or any agency, authority, 
     or instrumentality of any one or more of the foregoing, or a 
     corporation which is wholly owned, directly or indirectly, by 
     any one or more of the foregoing, competent to carry on the 
     business of developing, transmitting, utilizing or 
     distributing power.
       ``(5) A transmitting utility that is a water district or 
     water agency to which section 201 (f) applies and that has a 
     right under state law to provide water shall be treated as a 
     load-serving entity. Such water district or water agency's 
     right to provide water should be treated as a service 
     obligation.
       ``(f) Nothing in the section shall apply to an entity 
     located in an area referred to in section 212(k)(2)(A).
       ``(g) This section does not authorize the Commission to 
     take any action not otherwise within its jurisdiction under 
     other provisions of this Act.''

     SEC. 1132. OPEN NON-DISCRIMINATORY ACCESS.

       Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is 
     amended by inserting after section 211 (16 U.S.C. 824j) the 
     following:


          ``OPEN ACCESS BY UNREGULATED TRANSMITTING UTILITIES

       ``Sec. 211A. (a) Subject to section 212(h), the Commission 
     may, by rule or order, require an unregulated transmitting 
     utility to provide transmission services--
       ``(1) at rates that are comparable to those that the 
     unregulated transmitting utility charges itself; and
       ``(2) on terms and conditions (not relating to rates) that 
     are comparable to those under which such unregulated 
     transmitting utility provides transmission services to itself 
     and that are not unduly discriminatory or preferential.
       ``(b) The Commission shall exempt from any rule or order 
     under this section any unregulated transmitting utility 
     that--
       ``(1) sells no more than 4,000,000 megawatt hours of 
     electricity per year; or
       ``(2) does not own or operate any transmission facilities 
     that are necessary for operating an interconnected 
     transmission system (or any portion thereof); or
       ``(3) meets other criteria the Commission determines to be 
     in the public interest.
       ``(c) The requirements of subsection (a) shall not apply to 
     facilities used in local distribution.
       ``(d) If an unregulated transmitting utility exempted 
     pursuant to subsection (b) no longer meets any of the 
     criteria for exemption, the exemption shall expire.
       ``(e) The rate changing procedures applicable to public 
     utilities under subsections (c) and (d) of section 205 are 
     applicable to unregulated transmitting utilities for purposes 
     of this section.
       ``(f) In exercising its authority under paragraph (1) of 
     subsection (a), the Commission may remand transmission rates 
     to an unregulated transmitting utility for review and 
     revision where necessary to meet the requirements of 
     subsection (a).
       ``(g) The provision of transmission services under 
     subsection (a) does not preclude a request for transmission 
     services under section 211.
       ``(h) The Commission may not require a State or 
     municipality to take action under this section that 
     constitutes a private business use for purposes of section 
     141 of the Internal Revenue Code of 1986 (26 U.S.C. 141).
       ``(i) Nothing in this Act authorizes the Commission to 
     require an unregulated transmitting utility to transfer 
     control or operational control of its transmitting facilities 
     to an RTO or any other Commission-approved organization 
     designated to provide non-discriminatory transmission 
     access.''.

     SEC. 1133. TRANSMISSION INFRASTRUCTURE INVESTMENT.

       Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is 
     amended by adding at the end the following:


                         ``participant funding

       ``Sec. 217. (a) In General.--Not later than 180 days after 
     the date of enactment of this section, the Commission shall 
     promulgate final regulations establishing transmission 
     pricing policies applicable to all public utilities 
     associated with the construction of new interstate 
     transmission facilities and expansion, modification, or 
     upgrading of existing interstate transmission facilities 
     (``transmission expansion'').
       ``(b) Contents.--Consistent with section 205, the 
     regulation under subsection (a) shall, to the maximum extent 
     practicable--
       ``(1) promote economic capital investment in efficient 
     transmission systems;
       ``(2) encourage the construction and use of transmission 
     facilities and generation facilities that reduce risk and 
     provide just and reasonable rates to consumers;
       ``(3) encourage improved operation of generation and 
     transmission facilities and deployment of transmission 
     technologies designed to increase capacity and efficiency of 
     existing networks; and
       ``(4) ensure that the costs of any transmission expansion 
     are assigned or allocated in a fair manner, meaning that 
     those who benefit from the transmission expansion pay an 
     appropriate share of the associated costs.
       ``(c) Plan.----
       ``(1) In General.--An RTO or ISO may submit to the 
     Commission a plan containing the criteria for determining the 
     person or persons who will be required to pay for any 
     transmission expansion. Nothing herein diminishes or alters 
     the rights of individual members of an RTO or ISO under the 
     Act.
       ``(2) Requirements.--The Commission shall approve a plan 
     submitted under paragraph (1) if the Commission determines 
     that the plan--
       ``(A) meets all the requirements of this Act and is 
     consistent with the regulation promulgated under subsection 
     (a);
       ``(B) specifies the method or methods by which costs may be 
     allocated or assigned. Such methods may include, but are not 
     limited to:
       ``(i) directly assigned;
       ``(ii) participant funded; or
       ``(iii) rolled into regional or sub-regional rates; and
       ``(C) ensures that the party or parties who pay for 
     facilities necessary for the transmission expansion receive 
     appropriate compensation for those facilities, considering 
     among other factors the economic benefits associated with the 
     transmission expansion.
       ``(3) Deference.--In exercising its jurisdiction under this 
     section, the Commission shall give substantial deference to 
     the comments filed with the Commission by State regulatory 
     authorities, other appropriate State officials, and 
     stakeholders of the RTO or ISO.
       ``(4) Effect of section.--Nothing in this section shall 
     affect an RTO or ISO's allocation methodology for 
     transmission expansion approved by the Commission prior to 
     the date of enactment of this section.''.

Subtitle D--Amendments to the Public Utility Regulatory Policies Act of 
                                  1978

     SEC. 1141. NET METERING.

       (a) Adoption of Standard.--Section 111 (d) of the Public 
     Utility Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)) 
     is amended by adding at the end the following:
       ``(11) Net metering.--
       ``(A) Each electric utility shall make available upon 
     request net metering service to any electric consumer that 
     the electric utility serves.
       ``(B) For purposes of implementing this paragraph, any 
     reference contained in this section to the date of enactment 
     of the Public Utility Regulatory Policies Act of 1978 shall 
     be deemed to be a reference to the date of enactment of this 
     paragraph.
       ``(C) Notwithstanding subsections (b) and (c) of section 
     112, each State regulatory authority shall consider and make 
     a determination concerning whether it is appropriate to 
     implement the standard set out in subparagraph (A) not later 
     than 1 year after the date of enactment of this paragraph.''.
       (b) Special Rules for Net Metering.--Section 115 of the 
     Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 
     2625) is further amended by adding at the end the following:
       ``(i) Net Metering.--In undertaking the consideration and 
     making the determination under section 111 with respect to 
     the standard concerning net metering established by section 
     111(d)(11), the term net metering service shall mean a 
     service provided in accordance with the following standards:
       ``(1) An electric utility--
       ``(A) shall charge the owner or operator of an on-site 
     generating facility rates and charges that are identical to 
     those that would be charged other electric consumers of the 
     electric utility in the same rate class; and
       ``(B) shall not charge the owner or operator of an on-site 
     generating facility any additional standby, capacity, 
     interconnection, or other rate or charge.
       ``(2) An electric utility that sells electric energy to the 
     owner or operator of an on-site generating facility shall 
     measure the quantity of electric energy produced by the on-
     site facility and the quantity of electric energy consumed by 
     the owner or operator of an on-site generating facility 
     during a billing period in accordance with reasonable 
     metering practices.
       ``(3) If the quantity of electric energy sold by the 
     electric utility to an on-site generating facility exceeds 
     the quantity of electric energy supplied by the on-site 
     generating facility to the electric utility during the 
     billing period, the electric utility may bill the owner or 
     operator for the net quantity of electric energy sold, in 
     accordance with reasonable metering practices.
       ``(4) If the quantity of electric energy supplied by the 
     on-site generating facility to the electric utility exceeds 
     the quantity of electric energy sold by the electric utility 
     to the on-site generating facility during the billing 
     period--
       ``(A) the electric utility may bill the owner or operator 
     of the on-site generating facility for the appropriate 
     charges for the billing period in accordance with paragraph 
     (2); and
       ``(B) the owner or operator of the on-site generating 
     facility. shall be credited for the excess kilowatt-hours 
     generated during the

[[Page S10398]]

     billing period, with the kilowatt-hour credit appearing on 
     the bill for the following billing period.
       ``(5) An eligible on-site generating facility and net 
     metering system used by an electric consumer shall meet all 
     applicable safety, performance, reliability, and 
     interconnection standards established by the National 
     Electrical Code, the Institute of Electrical and Electronics 
     Engineers, and Underwriters Laboratories.
       ``(6) The Commission, after consultation with State 
     regulatory authorities and unregulated electric utilities and 
     after notice and opportunity for comment, may adopt, by rule, 
     additional control and testing requirements for on-site 
     generating facilities and net metering systems that the 
     Commission determines are necessary to protect public safety 
     and system reliability. ``(7) For purposes of this 
     subsection--
       ``(A) The term `eligible on-site generating facility' means 
     a facility on the site of a residential electric consumer 
     with a maximum generating capacity of 10 kilowatts or less 
     that is fueled by solar energy, wind energy, or fuel cells; 
     or a facility on the site of a commercial electric consumer 
     with a maximum generating capacity of 500 kilowatts or less 
     that is fueled solely by a renewable energy resource, 
     landfill gas, or a high efficiency system.
       ``(B) The term `renewable energy resource' means solar, 
     wind, biomass, or geothermal energy.
       ``(C) The term `high efficiency system' means fuel cells or 
     combined heat and power.
       ``(D) The term `net metering service' means service to an 
     electric consumer under which electric energy generated by 
     that electric consumer from an eligible on-site generating 
     facility and delivered to the local distribution facilities 
     may be used to offset electric energy provided by the 
     electric utility to the electric consumer during the 
     applicable billing period.''.

     SEC. 1142. SMART METERING.

       (a) In General.--Section 111 (d) of the Public Utilities 
     Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)) is 
     amended by adding at the end the following:
       ``(12) Time-based metering and communications.--
       ``(A) Each electric utility shall offer each of its 
     customer classes, and provide individual customers upon 
     customer request, a time-based rate schedule under which the 
     rate charged by the electric utility varies during different 
     time periods and reflects the variance in the costs of 
     generating and purchasing electricity at the wholesale level. 
     The time-based rate schedule shall enable the electric 
     consumer to manage energy use. and cost through advanced 
     metering and communications technology.
       ``(B) The types of time-based rate schedules that may be 
     offered under the schedule referred to in subparagraph (A) 
     include, among others--
       ``(i) time-of-use pricing whereby electricity prices are 
     set for a specific time period on an advance or forward 
     basis, typically not changing more often than twice a year. 
     Prices paid for energy consumed during these periods shall be 
     pre-established and known to consumers in advance of such 
     consumption, allowing them to vary their demand and usage in 
     response to such prices and manage their energy costs by 
     shifting usage to a lower cost period or reducing their 
     consumption overall;
       ``(ii) critical peak pricing whereby time-of-use prices are 
     in effect except for certain peak days, when prices may 
     reflect the costs of generating and purchasing electricity at 
     the wholesale level and when consumers may receive additional 
     discounts for reducing peak period energy consumption; and
       ``(iii) real-time pricing whereby electricity prices are 
     set for a specific time period on an advanced or forward 
     basis and may change as often as hourly.
       ``(C) Each electric utility subject to subparagraph (A) 
     shall provide each customer requesting a time-based rate with 
     a time-based meter capable of enabling the utility and 
     customer to offer and receive such rate, respectively.
       ``(D) For purposes of implementing this paragraph, any 
     reference contained in this section to the date of enactment 
     of the Public Utility Regulatory Policies Act of 1978 shall 
     be deemed to be a reference to the date of enactment of this 
     paragraph.
       ``(E) In a State that permits third-party marketers to sell 
     electric energy to retail electric consumers, such consumers 
     shall be entitled to receive that same time-based metering 
     and communications device and service as a retail electric 
     consumer of the electric utility.
       ``(F) Notwithstanding subsections (b) and (c) of section 
     112, each State regulatory authority shall, not later than 12 
     months after the date of enactment of this paragraph conduct 
     an investigation in accordance with section 115(I) and issue 
     a decision whether it is appropriate to implement the 
     standards set out in subparagraphs (A) and (C).''.
       (b) State Investigation of Demand Response and Time-based 
     Metering.--Section 115 of the Public Utilities Regulatory 
     Policies Act of 1978 (16 U.S.C. 2625) is amended by adding at 
     the end the following:
       ``(j) Time-based Metering and Communications.--Each State 
     regulatory authority shall conduct an investigation and issue 
     a decision whether or not it is appropriate for electric 
     utilities to provide and install time-based meters and 
     communications devices for each of their customers which 
     enable such customers to participate in time-based pricing 
     rate schedules and other demand response programs.''.
       (c) Federal Assistance on Demand Response.--Section 132(a) 
     of the Public Utility Regulatory Polices Act of 1978 (16 
     U.S.C. 2642(a)) is amended by striking ``and'' at the end of 
     paragraph (3), striking the period at the end of paragraph 
     (4) and inserting ``; and'', and by adding the following at 
     the end thereof:
       ``(5) technologies, techniques, and rate-making methods 
     related to advanced metering and communications and the use 
     of these technologies, techniques and methods in demand 
     response programs.''.
       (d) Federal Guidance.--Section 132 of the Public Utility 
     Regulatory Policies Act of 1978 (16 U.S.C. 2643) is amended 
     by adding the following at the end thereof:
       ``(d) Demand Response.--The Secretary shall be responsible 
     for--
        ``(1) educating consumers on the availability, advantages, 
     and benefits of advanced metering and communications 
     technologies, including the funding of demonstration or pilot 
     projects;
       ``(2) working with States, utilities, other energy 
     providers and advanced metering and communications experts to 
     identify and address barriers to the adoption of demand 
     response programs; and
       ``(3) not later than 180 days after the date of enactment 
     of the Energy Policy Act of 2003, providing the Congress with 
     a report that identifies and quantifies the national benefits 
     of demand response and makes a recommendation on achieving 
     specific levels of such benefits by January 1, 2005.
       ``(e) Demand Response and Regional Coordination.--
       ``(1) It is the policy of the United States to encourage 
     States to coordinate, on a regional basis, State energy 
     policies to provide reliable and affordable demand response 
     services to the public.
       ``(2) The Secretary of Energy shall provide technical 
     assistance to States and regional organizations formed by two 
     or more States to assist them in--
       ``(A) identifying the areas with the greatest demand 
     response potential;
       ``(B) identifying and resolving problems in transmission 
     and distribution networks, including through the use of 
     demand response; and
       ``(C) developing plans and programs to use demand response 
     to respond to peak demand or emergency needs.
       ``(3) Not later than 1 year after the date of enactment of 
     the Energy Policy Act of 2003, the Commission shall prepare 
     and publish an annual report, by appropriate region, that 
     assesses demand response resources, including those available 
     from all consumer classes, and which identifies and reviews--
       ``(A) saturation and penetration rate of advanced meters 
     and communications technologies, devices and systems;
       ``(B) existing demand response programs and time-based rate 
     programs;
       ``(C) the annual resource contribution of demand resources;
       ``(D) the potential for demand response as a quantifiable, 
     reliable resource for regional planning purposes; and
       ``(E) steps taken to ensure that, in regional transmission 
     planning and operations, demand resources are provided 
     equitable treatment as a quantifiable, reliable resource 
     relative to the resource obligations of any load-serving 
     entity, transmission provider, or transmitting party.
       ``(f) Federal Encouragement of Demand Response Devices.--It 
     is the policy of the United States that time-based pricing 
     and other forms of demand response, whereby electricity 
     customers are provided with electricity price signals and the 
     ability to benefit by responding to them, shall be 
     encouraged, and the deployment of such technology and devices 
     that enable electricity customers to participate in such 
     pricing and demand response systems shall be facilitated.''.

     SEC. 1143. ADOPTION OF ADDITIONAL STANDARDS.

       (a) Adoption of Standards.--Section 113(b) of the Public 
     Utility Regulatory Policies Act of 1978 (16 U.S.C. 2623(b)) 
     is amended by adding at the end the following:
       ``(6) Each electric utility shall provide distributed 
     generation, combined heat and power, and district heating and 
     cooling systems competitive access to the local distribution 
     grid and competitive pricing of service, and shall use 
     simplified standard contracts for the interconnection of 
     generating facilities that have a power production capacity 
     of 250 kilowatts or less.
       ``(7) No electric utility may refuse to interconnect a 
     generating facility with the distribution facilities of the 
     electric utility if the owner or operator of the generating 
     facility complies with technical standards adopted by the 
     State regulatory authority and agrees to pay the costs 
     established by such State regulatory authority.
       ``(8) Each electric utility shall develop a plan to 
     minimize dependence on one fuel source and to ensure that the 
     electric energy it sells to consumers is generated using a 
     diverse range of fuels and technologies, including renewable 
     technologies.
       ``(9) Each electric utility shall develop and implement a 
     10-year plan to increase the efficiency of its fossil fuel 
     generation.''.
       (b) Time for Adopting Standards.--Section 113 of the Public 
     Utility Regulatory Policies Act of 1978 (16 U.S.C. 2623) is 
     further amended by adding at the end the following:
       ``(d) Special Rule.--For purposes of implementing 
     paragraphs (6), (7), (8), and (9) of subsection (b), any 
     reference contained in this section to the date of enactment 
     of the

[[Page S10399]]

     Public Utility Regulatory Policies Act of 1978 shall be 
     deemed to be a reference to the date of enactment of this 
     subsection.''.

     SEC. 1144. TECHNICAL ASSISTANCE.

       Section 132(c) of the Public Utility Regulatory Policies 
     Act of 1978 (16 U.S.C. 2642(c)) is amended to read as 
     follows:
       ``(c) Technical Assistance for Certain Responsibilities.--
     The Secretary may provide such technical assistance as 
     determined appropriate to assist State regulatory authorities 
     and electric utilities in carrying out their responsibilities 
     under section 111(d)(11) and paragraphs (6), (7), (8), and 
     (9) of section 113(b).''.

     SEC. 1145. COGENERATION AND SMALL POWER PRODUCTION PURCHASE 
                   AND SALE REQUIREMENTS.

       (a) Termination of Mandatory Purchase and Sale 
     Requirements.--Section 210 of the Public Utility Regulatory 
     Policies Act of 1978 (16 U.S.C. 824a-3) is amended by adding 
     at the end the following:
       ``(m) Termination of Mandatory Purchase and Sale 
     Requirements.--
       ``(1) Obligation to purchase.--After the date of enactment 
     of this subsection, no electric utility shall be required to 
     enter into a new contract or obligation to purchase electric 
     energy from a qualifying cogeneration facility or a 
     qualifying small power production facility under this section 
     if the Commission finds that the qualifying cogeneration 
     facility or qualifying small power production facility has 
     nondiscriminatory access to--
       ``(A)(i) independently administered, auction-based day 
     ahead and real time wholesale markets for the sale of 
     electric energy; and (ii) wholesale markets for long-term 
     sales of capacity and electric energy; or
       ``(B)(i) transmission and interconnection services that are 
     provided by a Commission-approved regional transmission 
     entity and administered pursuant to an open access 
     transmission tariff that affords nondiscriminatory treatment 
     to all customers; and (ii) competitive wholesale markets that 
     provide a meaningful opportunity to sell capacity, including 
     long-term and short-term sales, and electric energy, 
     including long-term, short-term and real-time sales, to 
     buyers other than the utility to which the qualifying 
     facility is interconnected. In determining whether a 
     meaningful opportunity to sell exists, the Commission shall 
     consider, among other factors, evidence of transactions 
     within the relevant market; or
       ``(C) wholesale markets for the sale of capacity and 
     electric energy that are, at a minimum, of comparable 
     competitive quality as markets described in subparagraphs (A) 
     and (B).
       ``(2) Revised Purchase and Sale Obligation for New 
     Facilities.
       ``(A) After the date of enactment of this subsection, no 
     electric utility shall be required pursuant to this section 
     to enter into a new contract or obligation to purchase from 
     or sell electric energy to a facility that is not an existing 
     qualifying cogeneration facility unless the facility meets 
     the criteria for qualifying cogeneration facilities 
     established by the Commission pursuant to the rulemaking 
     required by subsection (n).
       ``(B) For the purposes of this paragraph, the term 
     `existing qualifying cogeneration facility' means a facility 
     that--
       ``(i) was a qualifying cogeneration facility on the date of 
     enactment of subsection (m); or
       ``(ii) had filed with the Commission a notice of self-
     certification, self-recertification or an application for 
     Commission certification under 18 C.F.R. 292.207 prior to the 
     date on which the Commission issues the final rule required 
     by subsection (n).
       ``(3) Commission review.--Any electric utility may file an 
     application with the Commission for relief from the mandatory 
     purchase obligation pursuant to this subsection on a service 
     territory-wide basis. Such application shall set forth the 
     factual basis upon which relief is requested and describe why 
     the conditions set forth in subparagraphs (A), (B) or (C) of 
     paragraph (1) of this subsection have been met. After notice, 
     including sufficient notice to potentially affected 
     qualifying cogeneration facilities and qualifying small power 
     production facilities, and an opportunity for comment, the 
     Commission shall make a final determination within 90 days of 
     such application regarding whether the conditions set forth 
     in subparagraphs (A), (B) or (C) of paragraph (1) have been 
     met.
       ``(4) Reinstatement of obligation to purchase.--At any time 
     after the Commission makes a finding under paragraph (3) 
     relieving an electric utility of its obligation to purchase 
     electric energy, a qualifying cogeneration facility, a 
     qualifying small power production facility, a State agency, 
     or any other affected person may apply to the Commission for 
     an order reinstating the electric utility's obligation to 
     purchase electric energy under this section. Such application 
     shall set forth the factual basis upon which the application 
     is based and describe why the conditions set forth in 
     subparagraphs (A), (B) or (C) of paragraph (1) of this 
     subsection are no longer met. After notice, including 
     sufficient notice to potentially affected utilities, and 
     opportunity for comment, the Commission shall issue an order 
     within 90 days of such application reinstating the electric 
     utility's obligation to purchase electric energy under this 
     section if the Commission finds that the conditions set forth 
     in subparagraphs (A), (B) or (C) of paragraph (1) which 
     relieved the obligation to purchase, are no longer met.
       ``(5) Obligation to sell.--After the date of enactment of 
     this subsection, no electric utility shall be required to 
     enter into a new contract or obligation to sell electric 
     energy to a qualifying cogeneration facility or a qualifying 
     small power production facility under this section if the 
     Commission finds that--
       ``(A) competing retail electric suppliers are willing and 
     able to sell and deliver electric energy to the qualifying 
     cogeneration facility or qualifying small power production 
     facility; and
       ``(B) the electric utility is not required by State law to 
     sell electric energy in its service territory.
       ``(6) No effect on existing rights and remedies.--Nothing 
     in this subsection affects the rights or remedies of any 
     party under any contract or obligation, in effect or pending 
     approval before the appropriate State regulatory authority or 
     non-regulated electric utility on the date of enactment of 
     this subsection, to purchase electric energy or capacity from 
     or to sell electric energy or capacity to a qualifying 
     cogeneration facility or qualifying small power production 
     facility under this Act (including the right to recover costs 
     of purchasing electric energy or capacity).
       ``(7) Recovery of Costs.--
       ``(A) The Commission shall promulgate and enforce such 
     regulations as are necessary to ensure that an electric 
     utility that purchases electric energy or capacity from a 
     qualifying cogeneration facility or qualifying small power 
     production facility in accordance with any legally 
     enforceable obligation entered into or imposed under this 
     section recovers all prudently incurred costs associated with 
     the purchase.
       ``(B) A regulation under subparagraph (A) shall be 
     enforceable in accordance with the provisions of law 
     applicable to enforcement of regulations under the Federal 
     Power Act (16 U.S.C. 791a et seq.).
       ``(n) Rulemaking for New Qualifying Facilities.--
       ``(1)(A) Not later than 180 days after the date of 
     enactment of this section, the Commission shall issue a rule 
     revising the criteria in 18 C.F.R. 292.205 for new qualifying 
     cogeneration facilities seeking to sell electric energy 
     pursuant to section 210 of this Act to ensure--
       ``(i) that the thermal energy output of a new qualifying 
     cogeneration facility is used in a productive and beneficial 
     manner;
       ``(ii) the electrical, thermal, and chemical output of the 
     cogeneration facility is used fundamentally for industrial, 
     commercial, or institutional purposes and is not intended 
     fundamentally for sale to an electric utility, taking into 
     account technological, efficiency, economic, and variable 
     thermal energy requirements, as well as state laws applicable 
     to sales of electric energy from a qualifying facility to its 
     host facility; and
       ``(iii) continuing progress in the development of efficient 
     electric energy generating technology.
       ``(B) The rule promulgated pursuant to section (n)(1)(A) 
     shall be applicable only to facilities that seek to sell 
     electric energy pursuant to section 210 of this Act. For all 
     other purposes, except as specifically provided in section 
     (m)(2)(A), qualifying facility status shall be determined in 
     accordance with the rules and regulations of this Act.
       ``(2) Rules for existing facilities.--Notwithstanding rule 
     revisions under paragraph (1), the Commission's criteria for 
     qualifying cogeneration facilities in effect prior to the 
     date on which the Commission issues the final rule required 
     by paragraph (1) shall continue to apply to any cogeneration 
     facility that--
       ``(A) was a qualifying cogeneration facility on the date of 
     enactment of subsection (m), or
       ``(B) had filed with the Commission a notice of self-
     certification, self-recertification or an application for 
     Commission certification under 18 C.F.R. 292.207 prior to the 
     date on which the Commission issues the final rule required 
     by paragraph (1).''.
       (b) Elimination of Ownership Limitations.--
       (1) Section 3(17)(C) of the Federal Power Act (16 U.S.C. 
     796(17)(C)) is amended to read as follows:
       ``(C) `qualifying small power production facility' means a 
     small power production facility that the Commission 
     determines, by rule, meets such requirements (including 
     requirements respecting fuel use, fuel efficiency, and 
     reliability) as the Commission may, by rule, prescribe.''.
       (2) Section 3(18)(B) of the Federal Power Act (16 U.S.C. 
     796(18)(B)) is amended to read as follows:
       ``(B) `qualifying cogeneration facility' means a 
     cogeneration facility that the Commission determines, by 
     rule, meets such requirements (including requirements 
     respecting minimum size, fuel use, and fuel efficiency) as 
     the Commission may, by rule, prescribe.''.

Subtitle E--Provisions Regarding the Public Utility Holding Company Act 
                                of 1935

       This subtitle may be cited as the ``Public Utility Holding 
     Company Act of 2003.''

     SEC. 1151. DEFINITIONS.

       For the purposes of this subtitle:
       (1) The term ``affiliate'' of a company means any company 5 
     percent or more of the outstanding voting securities of which 
     are owned, controlled, or held with power to vote, directly 
     or indirectly, by such company.

[[Page S10400]]

       (2) The term ``associate company'' of a company means any 
     company in the same holding company system with such company.
       (3) The term ``Commission'' means the Federal Energy 
     Regulatory Commission.
       (4) The term ``company'' means a corporation, partnership, 
     association, joint stock company, business trust, or any 
     organized group of persons, whether incorporated or not, or a 
     receiver, trustee, or other liquidating agent of any of the 
     foregoing.
       (5) The term ``electric utility company'' means any company 
     that owns or operates facilities used for the generation, 
     transmission, or distribution of electric energy for sale.
       (6) The terms ``exempt wholesale generator'' and ``foreign 
     utility company'' have the same meanings as in sections 32 
     and 33, respectively, of the Public Utility Holding Company 
     Act of 1935 (15 U.S.C. 79z-5, 79z-5b), as those sections 
     existed on the day before the effective date of this 
     subtitle.
       (7) The term ``gas utility company'' means any company that 
     owns or operates facilities used for distribution at retail 
     (other than the distribution only in enclosed portable 
     containers or distribution to tenants or employees of the 
     company operating such facilities for their own use and not 
     for resale) of natural or manufactured gas for heat, light, 
     or power.
       (8) The term ``holding company'' means--
       (A) any company that directly or indirectly owns, controls, 
     or holds, with power to vote, 10 percent or more of the 
     outstanding voting securities of a public-utility company or 
     of a holding company of any public-utility company, and
       (B) any person, determined by the Commission, after notice 
     and opportunity for hearing, to exercise directly or 
     indirectly (either alone or pursuant to an arrangement or 
     understanding with one or more persons) such a controlling 
     influence over the management or policies of any public-
     utility company or holding company as to make it necessary or 
     appropriate for the rate protection of utility customers with 
     respect to rates that such person be subject to the 
     obligations, duties, and liabilities imposed by this subtitle 
     upon holding companies.
       (9) The tenn ``holding company system'' means a holding 
     company, together with its subsidiary companies.
       (10) The term ``jurisdictional rates'' means rates 
     established by the Commission for the transmission of 
     electric energy in interstate commerce, the sale of electric 
     energy at wholesale in interstate commerce, the 
     transportation of natural gas in interstate commerce, and the 
     sale in interstate commerce of natural gas for resale for 
     ultimate public consumption for domestic, commercial, 
     industrial, or any other use.
       (11) The term ``natural gas company'' means a person 
     engaged in the transportation of natural gas in interstate 
     commerce or the sale of such gas in interstate commerce for 
     resale.
       (12) The term ``person'' means an individual or company.
       (13) The term ``public utility'' means any person who owns 
     or operates facilities used for transmission of electric 
     energy in interstate commerce or sales of electric energy at 
     wholesale in interstate commerce.
       (14) The term ``public-utility company'' means an electric 
     utility company or a gas utility company.
       (15) The term ``State commission'' means any commission, 
     board, agency, or officer, by whatever name designated, of a 
     State, municipality, or other political subdivision of a 
     State that, under the laws of such State, has jurisdiction to 
     regulate public-utility companies.
       (16) The term ``subsidiary company'' of a holding company 
     means--
       (A) any company, 10 percent or more of the outstanding 
     voting securities of which are directly or indirectly owned, 
     controlled, or held with power to vote, by such holding 
     company, and
       (B) any person, the management or policies of which the 
     Commission, after notice and opportunity for hearing, 
     determines to be subject to a controlling influence, directly 
     or indirectly, by such holding company (either alone or 
     pursuant to an arrangement or understanding with one or more 
     other persons) so as to make it necessary for the rate 
     protection of utility customers with respect to rates that 
     such person be subject to the obligations, duties, and 
     liabilities imposed by this subtitle upon subsidiary 
     companies of holding companies.
       (17) The term ``voting security'' means any security 
     presently entitling the owner or holder thereof to vote in 
     the direction or management of the affairs of a company.

     SEC. 1152. REPEAL OF THE PUBLIC UTILITY HOLDING COMPANY ACT 
                   OF 1935.

       The Public Utility Holding Company Act of 1935 (15 U.S.C. 
     79a et seq.) is repealed, effective 12 months after the date 
     of enactment of this Act.

     SEC. 1153. FEDERAL ACCESS TO BOOKS AND RECORDS.

       (a) In General.--Each holding company and each associate 
     company thereof shall maintain, and shall make available to 
     the Commission, such books, accounts, memoranda, and other 
     records as the Commission determines are relevant to costs 
     incurred by a public utility or natural gas company that is 
     an associate company of such holding company and necessary or 
     appropriate for the protection of utility customers with 
     respect to jurisdictional rates.
       (b) Affiliate Companies.--Each affiliate of a holding 
     company or of any subsidiary company of a holding company 
     shall maintain, and make available to the Commission, such 
     books, accounts, memoranda, and other records with respect to 
     any transaction with another affiliate, as the Commission 
     determines are relevant to costs incurred by a public utility 
     or natural gas company that is an associate company of such 
     holding company and necessary or appropriate for the 
     protection of utility customers with respect to 
     jurisdictional rates.
       (c) Holding Company Systems.--The Commission may examine 
     the books, accounts, memoranda, and other records of any 
     company in a holding company system, or any affiliate 
     thereof, as the Commission determines are relevant to costs 
     incurred by a public utility or natural gas company within 
     such holding company system and necessary or appropriate for 
     the protection of utility customers with respect to 
     jurisdictional rates.
       (d) Confidentiality.--No member, officer, or employee of 
     the Commission shall divulge any fact or information that may 
     come to his or her knowledge during the course of examination 
     of books, accounts, memoranda, or other records as provided 
     in this section, except as may be directed by the Commission 
     or by a court of competent jurisdiction.

     SEC. 1154. STATE ACCESS TO BOOKS AND RECORDS.

       (a) In General.--Upon the written request of a State 
     commission having jurisdiction to regulate a public-utility 
     company in a holding company system, and subject to such 
     terms and conditions as may be necessary and appropriate to 
     safeguard against unwarranted disclosure to the public of any 
     trade secrets or sensitive commercial information, a holding 
     company or any associate company or affiliate thereof, 
     wherever located, shall produce for inspection books, 
     accounts, memoranda, and other records that--
       (1) have been identified in reasonable detail in a 
     proceeding before the State commission;
       (2) the State commission determines are relevant to costs 
     incurred by such public-utility company, and
       (3) are necessary for the effective discharge of the 
     responsibilities of the State commission with respect to such 
     proceeding.
       (b) Effect on State Law.--Nothing in this section shall 
     preempt applicable State law concerning the provision of 
     books, accounts, memoranda, or other records, or in any way 
     limit the rights of any State to obtain books, accounts, 
     memoranda, or other records, under Federal law, contract, or 
     otherwise.
       (c) Court Jurisdiction.--Any United States district court 
     located in the State in which the State commission referred 
     to in subsection (a) is located shall have jurisdiction to 
     enforce compliance with this section.

     SEC. 1155. EXEMPTION AUTHORITY.

       (a) Rulemaking.--Not later than 90 days after the date of 
     enactment of this title, the Commission shall promulgate a 
     final rule to exempt from the requirements of section 1153 
     any person that is a holding company, solely with respect to 
     one or more--
       (1) qualifying facilities under the Public Utility 
     Regulatory Policies Act of 1978 (16 U.S.C. 2601 et seq.);
       (2) exempt wholesale generators; or
       (3) foreign utility companies.
       (b) Other Authority.--If, upon application or upon its own 
     motion, the Commission finds that the books, accounts, 
     memoranda, and other records of any person are not relevant 
     to the jurisdictional rates of a public-utility company or 
     natural gas company, or if the Commission finds that any 
     class of transactions is not relevant to the jurisdictional 
     rates of a public-utility company, the Commission shall 
     exempt such person or transaction from the requirements of 
     section 1153.

     SEC. 1156. AFFILIATE TRANSACTIONS.

       Nothing in this subtitle shall preclude the Commission or a 
     State commission from exercising its jurisdiction under 
     otherwise applicable law to determine whether a public-
     utility company, public utility, or natural gas company may 
     recover in rates any costs of an activity performed by an 
     associate company, or any costs of goods or services acquired 
     by such public-utility company, public utility, or natural 
     gas company from an associate company.

     SEC. 1157. APPLICABILITY.

       No provision of this subtitle shall apply to, or be deemed 
     to include--
       (1) the United States;
       (2) a State or any political subdivision of a State;
       (3) any foreign governmental authority not operating in the 
     United States;
       (4) any agency, authority, or instrumentality of any entity 
     referred to in paragraph (1), (2), or (3); or
       (5) any officer, agent, or employee of any entity referred 
     to in paragraph (1), (2), or (3) acting as such in the course 
     of such officer, agent, or employee's official duty.

     SEC. 1158. EFFECT ON OTHER REGULATIONS.

       Nothing in this subtitle precludes the Commission or a 
     State commission from exercising its jurisdiction under 
     otherwise applicable law to protect utility customers.

     SEC. 1159. ENFORCEMENT.

       The Commission shall have the same powers as set forth in 
     sections 306 through 317 of the Federal Power Act (16 U.S.C. 
     825e-825p) to enforce the provisions of this subtitle.

     SEC. 1160. SAVINGS PROVISIONS.

       (a) In General.--Nothing in this subtitle prohibits a 
     person from engaging in or continuing to engage in activities 
     or transactions in which it is legally engaged or authorized 
     to engage on the date of enactment

[[Page S10401]]

     of this Act, if that person continues to comply with the 
     terms of any such authorization, whether by rule or by order.
       (b) Effect on Other Commission Authority. Nothing in this 
     subtitle limits the authority of the Commission under the 
     Federal Power Act (16 U.S.C. 791a et seq.) (including section 
     301 of that Act) or the Natural Gas Act (15 U.S.C. 717 et 
     seq.) (including section 8 of that Act).

     SEC. 1161. IMPLEMENTATION.

       Not later than 12 months after the date of enactment of 
     this title, the Commission shall--
       (1) promulgate such regulations as may be necessary or 
     appropriate to implement this subtitle; and
       (2) submit to Congress detailed recommendations on 
     technical and conforming amendments to Federal law necessary 
     to carry out this subtitle and the amendments made by this 
     subtitle.

     SEC. 1162. TRANSFER OF RESOURCES.

       All books and records that relate primarily to the 
     functions transferred to the Commission under this subtitle 
     shall be transferred from the Securities and Exchange 
     Commission to the Commission.

     SEC. 1163. EFFECTIVE DATE.

       This subtitle shall take effect 12 months after the date of 
     enactment of this title.

     SEC. 1164. CONFORMING AMENDMENT TO THE FEDERAL POWER ACT.

       Section 318 of the Federal Power Act (16 U.S.C. 825q) is 
     repealed.

     SUBTITLE F--MARKET TRANSPARENCY, ANTI-MANIPULATION AND 
                   ENFORCEMENT

     SEC. 1171. MARKET TRANSPARENCY RULES.

       Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is 
     amended by adding at the end the following:


                      ``MARKET TRANSPARENCY RULES

       ``Sec. 218. (a) Not later than 180 days after the date of 
     enactment of this section, the Commission shall issue rules 
     establishing an electronic information system to provide the 
     Commission and the public with access to such information as 
     is necessary or appropriate to facilitate price transparency 
     and participation in markets subject to the Commission's 
     jurisdiction. Such systems shall provide information about 
     the availability and market price of wholesale electric 
     energy and transmission services to the Commission, State 
     commissions, buyers and sellers of wholesale electric energy, 
     users of transmission services, and the public. The 
     Commission shall have authority to obtain such information 
     from any electric and transmitting utility, including any 
     entity described in section 201(f).
       ``(b) The Commission shall exempt from disclosure 
     information it determines would, if disclosed, be detrimental 
     to the operation of an effective market or jeopardize system 
     security. This section shall not apply to an entity described 
     in section 212(k)(2)(B) with respect to transactions for the 
     purchase or sale of wholesale electric energy and 
     transmission services within the area described in section 
     212(k)(2)(A). In determining the information to be made 
     available under this section and time to make such 
     information available, the Commission shall seek to ensure 
     that consumers and competitive markets are protected from the 
     adverse effects of potential collusion or other anti-
     competitive behaviors that can be facilitated by untimely 
     public disclosure of transaction-specific information.
       ``(c) This section shall not affect the exclusive 
     jurisdiction of the Commodity Futures Trading Commission with 
     respect to accounts, agreements, contracts, or transactions 
     in commodities under the Commodity Exchange Act (7 U.S.C. 1 
     et seq.). Any request for information to a designated 
     contract market, registered derivatives transaction execution 
     facility, board of trade, exchange, or market involving 
     accounts, agreements, contracts, or transactions in 
     commodities (including natural gas, electricity and other 
     energy commodities) within the exclusive jurisdiction of the 
     Commodity Futures Trading Commission shall be directed to the 
     Commodity Futures Trading Commission.''.

     SEC. 1172. MARKET MANIPULATION.

       Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is 
     amended by adding at the end the following:


               ``PROHIBITION ON FILING FALSE INFORMATION

       ``Sec. 219. It shall be a violation of this Act for any 
     person or any other entity (including entities described in 
     section 201(f)) knowingly and willfully to report any 
     information relating to the price of electricity sold at 
     wholesale or availability of transmission capacity, which 
     information the person or any other entity knew to be false 
     at the time of the reporting, to any governmental entity with 
     the intent to manipulate the data being compiled by such 
     governmental entity.


                  ``PROHIBITION ON ROUND TRIP TRADING

       ``Sec. 220. (a) It shall be a violation of this Act for any 
     person or any other entity (including entities described in 
     section 201(f)) knowingly and willfully to enter into any 
     contract or other arrangement to execute a `round trip trade' 
     for the purchase or sale of electric energy at wholesale.
       ``(b) For the purposes of this section, the term `round 
     trip trade' means a transaction, or combination of 
     transactions, in which a person or any other entity--
       ``(1) enters into a contract or other arrangement to 
     purchase from, or sell to, any other person or other entity 
     electric energy at wholesale;
       ``(2) simultaneously with entering into the contract or 
     arrangement described in paragraph (1), arranges a 
     financially offsetting trade with such other person or entity 
     for the same such electric energy, at the same location, 
     price, quantity and terms so that, collectively, the purchase 
     and sale transactions in themselves result in no financial 
     gain or loss; and
       ``(3) enters into the contract or arrangement with the 
     intent to deceptively affect reported revenues, trading 
     volumes, or prices.''.

     SEC. 1173. MARKET TRANSPARENCY.

       (a) In General.--It shall be a violation of the Commodity 
     Exchange Act (7 U.S.C. 1 et seq.) for a person or entity to 
     knowingly report or manipulate any information relating to 
     the price, quantity, sale or purchase, and counter party of 
     any agreement, contract or transaction related to natural gas 
     or electricity in interstate commerce, which the person or 
     entity knew to be false at the time of reporting to any 
     governmental entity or any person or entity engaged in the 
     business of collecting and disseminating information.
       (b) Clarification of Existing CFTC Authority.--Section 9 of 
     the Commodity Exchange Act (7 U.S.C. 13) is amended by 
     designating subsection (f) as subsection (e), and adding:
       ``(f) Commission Administrative and Civil Authority.--The 
     Commission may bring administrative or civil action as 
     provided in this Act against any person for a violation of 
     any provision of this section including, but not limited to, 
     false reporting under subsection (a)(2). This applies to any 
     action pending on or commenced after the date of enactment of 
     the Energy Policy Act of 2003.''.
       (c) Fraud Authority.--Section 4b of the Commodity Exchange 
     Act (7 U.S.C. 6b) is amended by striking subsection (a) and 
     inserting the following:
       ``(a) Prohibition.--It shall be unlawful for any person, 
     directly or indirectly in or in connection with any account, 
     or any offer to enter into, the entry into, or the 
     confirmation of the execution of, any agreement contract, or 
     transaction subject to regulation or this Act--
       ``(1) to cheat or defraud or attempt to cheat or defraud 
     any person;
       ``(2) to willfully make or cause to be made to any person 
     any false report or statement, or to willfully enter or cause 
     to be entered for any person any false record;
       ``(3) to willfully deceive or attempt to deceive any person 
     by any means whatsoever; or
       ``(4) except as permitted in written rules of a designated 
     contract market or registered derivative transaction 
     execution facility which the agreement, contract, or 
     transaction is traded and executed--
       ``(A) to bucket an order;
       ``(B) to fill an order by offsetting against 1 or more 
     orders of another person; or
       ``(C) willfully and knowingly, for or on behalf of any 
     other person and without the prior consent of such person, to 
     become--
       ``(i) the buyer with respect to any selling order of the 
     person; or
       ``(ii) the seller with respect to any buying order of the 
     person.''
       (d) Technical Corrections.--Section 8(e) of the Commodity 
     Exchange Act (7 U.S.C. 12(e) is amended by adding at the end 
     the following:
       ``Any request by any Federal, State or foreign government 
     department, agency, or political subdivision, or foreign 
     futures authority, for information to a designated contract 
     market, registered derivatives transaction execution 
     facility, board of trade, exchange, or market involving 
     accounts, agreements, contracts, or transactions in 
     commodities (including natural gas and electricity) within 
     the exclusive jurisdiction of the Commission shall be 
     directed to the Commission.''.
       (e) Authorization.--There are authorized to be appropriated 
     to the Commission for fiscal year 2004 such sums as may be 
     necessary to carry out the additional responsibilities and 
     obligations of the Commission under this section.

     SEC. 1174. ENFORCEMENT.

       (a) Complaints.--Section 306 of the Federal Power Act (16 
     U.S.C. 825e) is amended by--
       (1) inserting ``electric utility,'' after ``Any person,''; 
     and
       (2) inserting ``, transmitting utility,'' after 
     ``licensee'' each place it appears.
       (b) Investigations.--Section 307(a) of the Federal Power 
     Act (16 U.S.C. 825f(a)) is amended by inserting ``or 
     transmitting utility'' after ``any person'' in the first 
     sentence.
       (c) Review of Commission Orders.--Section 313(a) of the 
     Federal Power Act (16 U.S.C. 8251) is amended by inserting 
     ``electric utility,'' after ``Any person,'' in the first 
     sentence.
       (d) Criminal Penalties.--Section 316 of the Federal Power 
     Act (16 U.S.C. 825o) is amended--
       (1) in subsection (a), by striking ``$5,000'' and inserting 
     ``$1,000,000'', and by striking ``two years'' and inserting 
     ``five years'';
       (2) in subsection (b), by striking ``$500'' and inserting 
     ``$25,000''; and
       (3) by striking subsection (c).
       (e) Civil Penalties.--Section 316A of the Federal Power Act 
     (16 U.S.C. 825o-1) is amended--
       (1) in subsections (a) and (b), by striking ``section 211, 
     212, 213, or 214'' each place it appears and inserting ``Part 
     II''; and
       (2) in subsection (b), by striking ``$10,000'' and 
     inserting ``$1,000,000''.

[[Page S10402]]

       (f) General Penalties.--Section 21 of the Natural Gas Act 
     (15 U.S.C. 717t) is amended--
       (1) in subsection (a), by striking ``$5,000'' and inserting 
     ``$1,000,000'', and by striking ``two years'' and inserting 
     ``five years''; and
       (2) in subsection (b), by striking ``$500'' and inserting 
     ``$50,000''.

     SEC. 1175. REFUND EFFECTIVE DATE.

       Section 206(b) of the Federal Power Act (16 U.S.C. 824e(b)) 
     is amended by--
       (1) striking ``the date 60 days after the filing of such 
     complaint nor later than 5 months after the expiration of 
     such 60-day period'' in the second sentence and inserting 
     ``the date of the filing of such complaint nor later than 5 
     months after the filing of such complaint'';
       (2) striking ``60 days after'' in the third sentence and 
     inserting ``of'';
       (3) striking ``expiration of such 60-day period'' in the 
     third sentence and inserting ``publication date''; and
       (4) striking the fifth sentence and inserting the 
     following: ``If no final decision is rendered by the 
     conclusion of the 180-day period commencing upon initiation 
     of a proceeding pursuant to this section, the Commission 
     shall state the reasons why it has failed to do so and shall 
     state its best estimate as to when it reasonably expects to 
     make such decision.''.

                    Subtitle G--Consumer Protections

     SEC. 1181. ELECTRIC UTILITY MERGERS.

       (a) Section 203(a) of the Federal Power Act (16 U.S.C. 
     824(b)) is amended to read as follows:
       ``(a)(1) No public utility shall, without first having 
     secured an order of the Commission authorizing it to do so--
       ``(A) sell, lease, or otherwise dispose of the whole of its 
     facilities subject to the jurisdiction of the Commission, or 
     any part thereof of a value in excess of $10,000,000,
       ``(B) merge or consolidate, directly or indirectly, such 
     facilities or any part thereof with those of any other 
     persons, by any means whatsoever, or
       ``(C) purchase, acquire, or take any security of any other 
     public utility of a value in excess of $10,000,000.
       ``(2) No holding company in a holding company system that 
     includes an electric utility company shall purchase, acquire, 
     or take any security of, or, by any means whatsoever, 
     directly or indirectly, merge or consolidate with an electric 
     utility company, a gas utility company, or a holding company 
     in a holding company system that includes a public-utility 
     company of value in excess of $10,000,000 without first 
     having secured an order of the Commission authorizing it to 
     do so.
       ``(3) Upon application for such approval the Commission 
     shall give reasonable notice in writing to the Governor and 
     State commission of each of the States in which the physical 
     property affected, or any part thereof, is situated, and to 
     such other persons as it may deem advisable.
       ``(4) After notice and opportunity for hearing, the 
     Commission shall approve the proposed disposition, 
     consolidation, acquisition, or change in control, if it finds 
     that the proposed transaction will be consistent with the 
     public interest. In evaluating whether a transaction will be 
     consistent with the public interest, the Commission shall 
     consider whether the proposed transaction--
       ``(A) will adequately protect consumer interests,
       ``(B) will be consistent with competitive wholesale 
     markets,
       ``(C) will not impair the ability of the Commission or the 
     ability of a State commission having jurisdiction following 
     the completion of the transaction over any public utility 
     that is a party to the transaction or an associate company of 
     any party to the transaction to protect the interests of 
     consumers or the public,
       ``(D) will not impair the financial integrity of any public 
     utility that is a party to the transaction or an associate 
     company of any party to the transaction, and
       ``(E) satisfies such other criteria as the Commission 
     considers consistent with the public interest.
       ``(5) The Commission shall, by rule, adopt procedures for 
     the expeditious consideration of applications for the 
     approval of dispositions, consolidations, or acquisitions 
     under this section. Such rules shall identify classes of 
     transactions, or specify criteria for transactions, that 
     normally meet the standards established in paragraph (4). The 
     Commission shall provide expedited review for such 
     transactions. The Commission shall grant or deny any other 
     application for approval of a transaction within 90 days 
     after the conclusion of the hearing or opportunity to comment 
     under paragraph (4). If the Commission does not act within 90 
     days, such application shall be deemed granted unless the 
     Commission finds, based on good cause, that further 
     consideration is required to determine whether the proposed 
     transaction meets the standards of paragraph (4) and issues 
     one or more orders tolling the time for acting on the 
     application.
       ``(6) For purposes of this subsection, the terms 
     ``associate company'', ``electric utility company'', ``gas 
     utility company'', ``holding company'', ``holding company 
     system'', and ``public-utility company'' have the meaning 
     given those terms in the Public Utility Holding Company Act 
     of 2003.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect 12 months after the date of enactment of 
     this section.

     SEC. 1182. MARKET-BASED POLICY.

       Within six months of the enactment of this section, the 
     Commission shall issue a policy statement establishing the 
     conditions under which public utilities may charge market-
     based rates for the sale of electric energy subject to the 
     jurisdiction of the Commission. Such policy statement should 
     consider consumer protections and market power, as well as 
     any other factors the Commission may deem necessary, to 
     ensure that such rates are just and reasonable.

     SEC. 1183. INTER-AGENCY REVIEW OF COMPETITION IN THE 
                   WHOLESALE AND RETAIL MARKETS FOR ELECTRIC 
                   ENERGY.

       (a) Task Force.--There is established an inter-agency task 
     force, to be known as the ``Electric Energy Market 
     Competition Task Force'' (referred to in this section as the 
     ``task force''), which shall consist of--
       (1) one member each from--
       (A) the Department of Justice, to be appointed by the 
     Attorney General of the United States;
       (B) the Federal Energy Regulatory Commission, to be 
     appointed by the chairman of that Commission;
       (C) the Federal Trade Commission, to be appointed by the 
     chairman of that Commission;
       (D) the Department of Energy, to be appointed by the 
     Secretary of Energy; and (E) the Rural Utilities Service, to 
     be appointed by the Secretary of Agriculture.
       (b) Study and Report.--
       (1) Study.--The task force shall perform a study and 
     analysis of competition within the wholesale and retail 
     market for electric energy in the United States.
       (2) Report.--
       (A) Final report.--Not later than 1 year after the 
     effective date of this subtitle, the task force shall submit 
     a final report of its findings under paragraph (1) to the 
     Congress.
       (B) Public comment.--At least 60 days before submission of 
     a final report to the Congress under subparagraph (A), the 
     task force shall publish a draft report in the Federal 
     Register to provide for public comment.
       (c) Consultation.--In performing the study required by this 
     section, the task force shall consult with and solicit 
     comments from its advisory members, the States, 
     representatives of the electric power industry, and the 
     public.

     SEC. 1184. CONSUMER PRIVACY.

       The Federal Trade Commission shall issue rules protecting 
     the privacy of electric consumers from the disclosure of 
     consumer information in connection with the sale or delivery 
     of electric energy to a retail electric consumer. If the 
     Federal Trade Commission determines that a State's 
     regulations provide equivalent or greater protection than the 
     provisions of this section, such State regulations shall 
     apply in that State in lieu of the regulations issued by the 
     Commission under this section.

     SEC. 1185. UNFAIR TRADE PRACTICES.

       (a) Slamming.--The Federal Trade Commission shall issue 
     rules prohibiting the change of selection of an electric 
     utility except with the informed consent of the electric 
     consumer or if determined by the appropriate State regulatory 
     authority to be necessary to prevent loss of service.
       (b) Cramming.--The Federal Trade Commission shall issue 
     rules prohibiting the sale of goods and services to an 
     electric consumer unless expressly authorized by law or the 
     electric consumer.
       (c) State Authority.--If the Federal Trade Commission 
     determines that a State's regulations provide equivalent or 
     greater protection than the provisions of this section, such 
     State regulations shall apply in that State in lieu of the 
     regulations issued by the Commission under this section.

     SEC. 1186. DEFINITIONS.

       For purposes of this subtitle--
       (1) the term ``State regulatory authority'' has the meaning 
     given that term in section 3(21) of the Federal Power Act (16 
     U.S.C. 796(21)).
       (2) the term ``electric consumer'' and ``electric utility'' 
     have the meanings given those terms in section 3 of the 
     Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 
     2602).

                    Subtitle H--Technical Amendments

     SEC. 1191. TECHNICAL AMENDMENTS.

       (a) Section 211(c) of the Federal Power Act (16 U.S.C. 
     824j(c)) is amended by--
       (1) striking ``(2)'';
       (2) striking ``(A)'' and inserting ``(1)''
       (3) striking ``(B)'' and inserting ``(2)''; and
       (4) striking ``termination of modification'' and inserting 
     ``termination or modification''.
       (b) Section 211(d)(1) of the Federal Power Act (16 U.S.C. 
     824j(d)) is amended by striking ``electric utility'' the 
     second time it appears and inserting ``transmitting 
     utility''.
       (c) Section 315(c) of the Federal Power Act (16 U.S.C. 
     825n(c)) is amended by striking ``subsection'' and inserting 
     ``section''.

                   DIVISION B--ENERGY TAX INCENTIVES

     SECTION 1. SHORT TITLE; ETC.

       (a) Short Title.--This division may be cited as the 
     ``Energy Tax Incentives Act of 2003''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this division an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Table of Contents.--The table of contents for this 
     division is as follows:

Sec. 1. Short title; etc.

[[Page S10403]]

          TITLE I--RENEWABLE ELECTRICITY PRODUCTION TAX CREDIT

Sec. 101. Extension and expansion of credit for electricity produced 
              from certain renewable resources.

       TITLE II--ALTERNATIVE MOTOR VEHICLES AND FUELS INCENTIVES

Sec. 201. Alternative motor vehicle credit.
Sec. 202. Modification of credit for qualified electric vehicles.
Sec. 203. Credit for installation of alternative fueling stations.
Sec. 204. Credit for retail sale of alternative fuels as motor vehicle 
              fuel.
Sec. 205. Small ethanol producer credit.
Sec. 206. Incentives for biodiesel.
Sec. 207. Alcohol fuel and biodiesel mixtures excise tax credit.
Sec. 208. Sale of gasoline and diesel fuel at duty-free sales 
              enterprises.

        TITLE III--CONSERVATION AND ENERGY EFFICIENCY PROVISIONS

Sec. 301. Credit for construction of new energy efficient home.
Sec. 302. Credit for energy efficient appliances.
Sec. 303. Credit for residential energy efficient property.
Sec. 304. Credit for business installation of qualified fuel cells and 
              stationary microturbine power plants.
Sec. 305. Energy efficient commercial buildings deduction.
Sec. 306. Three-year applicable recovery period for depreciation of 
              qualified energy management devices.
Sec. 307. Three-year applicable recovery period for depreciation of 
              qualified water submetering devices.
Sec. 308. Energy credit for combined heat and power system property.
Sec. 309. Credit for energy efficiency improvements to existing homes.

                    TITLE IV--CLEAN COAL INCENTIVES

Subtitle A--Credit for Emission Reductions and Efficiency Improvements 
        in Existing Coal-Based Electricity Generation Facilities

Sec. 401. Credit for production from a qualifying clean coal technology 
              unit.

 Subtitle B--Incentives for Early Commercial Applications of Advanced 
                        Clean Coal Technologies

Sec. 411. Credit for investment in qualifying advanced clean coal 
              technology.
Sec. 412. Credit for production from a qualifying advanced clean coal 
              technology unit.

     Subtitle C--Treatment of Persons Not Able To Use Entire Credit

Sec. 421. Treatment of persons not able to use entire credit.

                    TITLE V--OIL AND GAS PROVISIONS

Sec. 501. Oil and gas from marginal wells.
Sec. 502. Natural gas gathering lines treated as 7-year property.
Sec. 503. Expensing of capital costs incurred in complying with 
              Environmental Protection Agency sulfur regulations.
Sec. 504. Environmental tax credit.
Sec. 505. Determination of small refiner exception to oil depletion 
              deduction.
Sec. 506. Marginal production income limit extension.
Sec. 507. Amortization of delay rental payments.
Sec. 508. Amortization of geological and geophysical expenditures.
Sec. 509. Extension and modification of credit for producing fuel from 
              a nonconventional source.
Sec. 510. Natural gas distribution lines treated as 15-year property.
Sec. 511. Credit for Alaska natural gas.
Sec. 512. Certain Alaska natural gas pipeline property treated as 7-
              year property.
Sec. 513. Arbitrage rules not to apply to prepayments for natural gas.
Sec. 514. Extension of enhanced oil recovery credit to certain Alaska 
              facilities.

          TITLE VI--ELECTRIC UTILITY RESTRUCTURING PROVISIONS

Sec. 601. Modifications to special rules for nuclear decommissioning 
              costs.
Sec. 602. Treatment of certain income of cooperatives.
Sec. 603. Sales or dispositions to implement Federal Energy Regulatory 
              Commission or State electric restructuring policy.

                    TITLE VII--ADDITIONAL PROVISIONS

Sec. 701. Extension of accelerated depreciation and wage credit 
              benefits on Indian reservations.
Sec. 702. Study of effectiveness of certain provisions by GAO.
Sec. 703. Repeal of 4.3-cent motor fuel excise taxes on railroads and 
              inland waterway transportation which remain in general 
              fund.
Sec. 704. Expansion of research credit.

                     TITLE VIII--REVENUE PROVISIONS

        Subtitle A--Provisions Designed To Curtail Tax Shelters

Sec. 801. Penalty for failing to disclose reportable transaction.
Sec. 802. Accuracy-related penalty for listed transactions and other 
              reportable transactions having a significant tax 
              avoidance purpose.
Sec. 803. Tax shelter exception to confidentiality privileges relating 
              to taxpayer communications.
Sec. 804. Disclosure of reportable transactions.
Sec. 805. Modifications to penalty for failure to register tax 
              shelters.
Sec. 806. Modification of penalty for failure to maintain lists of 
              investors.
Sec. 807. Penalty on promoters of tax shelters.

      Subtitle B--Provisions to Discourage Corporate Expatriation

Sec. 821. Tax treatment of inverted corporate entities.
Sec. 822. Excise tax on stock compensation of insiders in inverted 
              corporations.
Sec. 823. Reinsurance of United States risks in foreign jurisdictions.

                  Subtitle C--Other Revenue Provisions

Sec. 831. Extension of Internal Revenue Service user fees.
Sec. 832. Addition of vaccines against hepatitis A to list of taxable 
              vaccines.
Sec. 833. Individual expatriation to avoid tax.

          TITLE I--RENEWABLE ELECTRICITY PRODUCTION TAX CREDIT

     SEC. 101. EXTENSION AND EXPANSION OF CREDIT FOR ELECTRICITY 
                   PRODUCED FROM CERTAIN RENEWABLE RESOURCES.

       (a) Expansion of Qualified Energy Resources.--Subsection 
     (c) of section 45 (relating to electricity produced from 
     certain renewable resources) is amended to read as follows:
       ``(c) Qualified Energy Resources.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified energy resources' 
     means--
       ``(A) wind,
       ``(B) closed-loop biomass,
       ``(C) biomass (other than closed-loop biomass),
       ``(D) geothermal energy,
       ``(E) solar energy,
       ``(F) small irrigation power,
       ``(G) biosolids and sludge, and
       ``(H) municipal solid waste.''.
       ``(2) Closed-loop biomass.--The term `closed-loop biomass' 
     means any organic material from a plant which is planted 
     exclusively for purposes of being used at a qualified 
     facility to produce electricity.
       ``(3) Biomass.--
       ``(A) In general.--The term `biomass' means--
       ``(i) any agricultural livestock waste nutrients, or
       ``(ii) 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 
     and harvesting residues, precommercial thinnings, slash, and 
     brush,
       ``(II) solid wood waste materials, including waste pallets, 
     crates, dunnage, manufacturing and construction wood wastes 
     (other than pressure-treated, chemically-treated, or painted 
     wood wastes), and landscape or right-of-way tree trimmings, 
     but not including municipal solid waste, gas derived from the 
     biodegradation of solid waste, or paper which is commonly 
     recycled, or
       ``(III) agriculture sources, including orchard tree crops, 
     vineyard, grain, legumes, sugar, and other crop by-products 
     or residues.

       ``(B) Agricultural livestock waste nutrients.--
       ``(i) In general.--The term `agricultural livestock waste 
     nutrients' means agricultural livestock manure and litter, 
     including wood shavings, straw, rice hulls, and other bedding 
     material for the disposition of manure.
       ``(ii) Agricultural livestock.--The term `agricultural 
     livestock' includes bovine, swine, poultry, and sheep.
       ``(4) Geothermal energy.--The term `geothermal energy' 
     means energy derived from a geothermal deposit (within the 
     meaning of section 613(e)(2)).
       ``(5) Small irrigation power.--The term `small irrigation 
     power' means power--
       ``(A) generated without any dam or impoundment of water 
     through an irrigation system canal or ditch, and
       ``(B) the installed capacity of which is less than 5 
     megawatts.
       ``(6) Biosolids and sludge.--The term `biosolids and 
     sludge' means the residue or solids removed in the treatment 
     of commercial, industrial, or municipal wastewater.
       ``(7) Municipal solid waste.--The term `municipal solid 
     waste' has the meaning given the term `solid waste' under 
     section 2(27) of the Solid Waste Disposal Act (42 U.S.C. 
     6903).''.
       (b) Extension and Expansion of Qualified Facilities.--
       (1) In general.--Section 45 is amended by redesignating 
     subsection (d) as subsection (e) and by inserting after 
     subsection (c) the following new subsection:
       ``(d) Qualified Facilities.--For purposes of this section--
       ``(1) Wind facility.--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 January 1, 
     2007.
       ``(2) Closed-loop biomass facility.--

[[Page S10404]]

       ``(A) In general.--In the case of a facility using closed-
     loop biomass to produce electricity, the term `qualified 
     facility' means any facility--
       ``(i) owned by the taxpayer which is originally placed in 
     service after December 31, 1992, and before January 1, 2007, 
     or
       ``(ii) owned by the taxpayer which before January 1, 2007, 
     is originally placed in service and modified to use closed-
     loop biomass to co-fire with coal, with other biomass, or 
     with both, but only if the modification is approved under the 
     Biomass Power for Rural Development Programs or is part of a 
     pilot project of the Commodity Credit Corporation as 
     described in 65 Fed. Reg. 63052.
       ``(B) Special rules.--In the case of a qualified facility 
     described in subparagraph (A)(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 the Energy Tax Incentives Act of 2003,
       ``(ii) the amount of the credit determined under subsection 
     (a) with respect to the facility shall be an amount equal to 
     the amount determined without regard to this clause 
     multiplied by the ratio of the thermal content of the closed-
     loop biomass used in such facility to the thermal content of 
     all fuels used in such facility, and
       ``(iii) if the owner of such facility is not the producer 
     of the electricity, the person eligible for the credit 
     allowable under subsection (a) shall be the lessee or the 
     operator of such facility.
       ``(3) Biomass facility.--
       ``(A) In general.--In the case of a facility using biomass 
     (other than closed-loop biomass) to produce electricity, the 
     term `qualified facility' means any facility owned by the 
     taxpayer which--
       ``(i) in the case of a facility using agricultural 
     livestock waste nutrients, is originally placed in service 
     after the date of the enactment of the Energy Tax Incentives 
     Act of 2003 and before January 1, 2007, and
       ``(ii) in the case of any other facility, is originally 
     placed in service before January 1, 2005.
       ``(B) Special rules for preeffective date facilities.--In 
     the case of any facility described in subparagraph (A)(ii) 
     which is placed in service before the date of the enactment 
     of such Act--
       ``(i) subsection (a)(1) shall be applied by substituting 
     `1.2 cents' for `1.5 cents', and
       ``(ii) the 5-year period beginning on January 1, 2004, 
     shall be substituted for the 10-year period in subsection 
     (a)(2)(A)(ii).
       ``(C) Credit eligibility.--In the case of any facility 
     described in subparagraph (A), if the owner of such facility 
     is not the producer of the electricity, the person eligible 
     for the credit allowable under subsection (a) shall be the 
     lessee or the operator of such facility.
       ``(4) Geothermal or solar energy facility.--
       ``(A) In general.--In the case of a facility using 
     geothermal or solar energy to produce electricity, the term 
     `qualified facility' means any facility owned by the taxpayer 
     which is originally placed in service after the date of the 
     enactment of the Energy Tax Incentives Act of 2003 and before 
     January 1, 2007.
       ``(B) Special rule.--In the case of any facility described 
     in subparagraph (A), the 5-year period beginning on the date 
     the facility was originally placed in service shall be 
     substituted for the 10-year period in subsection 
     (a)(2)(A)(ii).
       ``(5) Small irrigation power facility.--In the case of a 
     facility using small irrigation power to produce electricity, 
     the term `qualified facility' means any facility owned by the 
     taxpayer which is originally placed in service after the date 
     of the enactment of the Energy Tax Incentives Act of 2003 and 
     before January 1, 2007.
       ``(6) Biosolids and sludge facility.--In the case of a 
     facility using waste heat from the incineration of biosolids 
     and sludge to produce electricity, the term `qualified 
     facility' means any facility owned by the taxpayer which is 
     originally placed in service after the date of the enactment 
     of the Energy Tax Incentives Act of 2003 and before January 
     1, 2007. Such term shall not include any property described 
     in section 48(a)(6) the basis of which is taken into account 
     for purposes of the energy credit under section 46.
       ``(7) Municipal solid waste facility.--
       ``(A) In general.--In the case of a facility or unit 
     incinerating municipal solid waste to produce electricity, 
     the term `qualified facility' means any facility or unit 
     owned by the taxpayer which is originally placed in service 
     after the date of the enactment of the Energy Tax Incentives 
     Act of 2003 and before January 1, 2007.
       ``(B) Special rule.--In the case of any facility or unit 
     described in subparagraph (A), the 5-year period beginning on 
     the date the facility or unit was originally placed in 
     service shall be substituted for the 10-year period in 
     subsection (a)(2)(A)(ii).
       ``(C) Credit eligibility.--In the case of any qualified 
     facility described in subparagraph (A), if the owner of such 
     facility is not the producer of the electricity, the person 
     eligible for the credit allowable under subsection (a) shall 
     be the lessee or the operator of such facility.''.
       (2) No credit for certain production.--Section 45(e) 
     (relating to definitions and special rules), as redesignated 
     by paragraph (1), is amended by striking paragraph (6) and 
     inserting the following new paragraph:
       ``(6) Operations inconsistent with solid waste disposal 
     act.--In the case of a qualified facility described in 
     subsection (d)(6)(A), subsection (a) shall not apply to 
     electricity produced at such facility during any taxable year 
     if, during a portion of such year, there is a certification 
     in effect by the Administrator of the Environmental 
     Protection Agency that such facility was permitted to operate 
     in a manner inconsistent with section 4003(d) of the Solid 
     Waste Disposal Act (42 U.S.C. 6943(d)).''.
       (3) Conforming amendment.--Section 45(e), as so 
     redesignated, is amended by striking ``subsection (c)(3)(A)'' 
     in paragraph (7)(A)(i) and inserting ``subsection (d)(1)''.
       (c) Credit Rate for Electricity Produced From New 
     Facilities.--
       (1) In general.--Section 45(a) is amended by adding at the 
     end the following new flush sentence:
     ``In the case of electricity produced after 2003 at any 
     qualified facility originally placed in service after the 
     date of the enactment of the Energy Tax Incentives Act of 
     2003, paragraph (1) shall be applied by substituting `1.8 
     cents' for `1.5 cents'.''.
       (2) New rate not subject to inflation adjustment.--Section 
     45(b)(2) (relating to credit and phaseout adjustment based on 
     inflation) is amended by adding at the end the following new 
     sentence: ``This paragraph shall not apply to any amount 
     which is substituted for the 1.5 cent amount in subsection 
     (a) by reason of any provision of this section.''.
       (d) Elimination of Certain Credit Reductions.--Section 
     45(b)(3)(A) (relating to credit reduced for grants, tax-
     exempt bonds, subsidized energy financing, and other credits) 
     is amended--
       (1) by striking clause (ii),
       (2) by redesignating clauses (iii) and (iv) as clauses (ii) 
     and (iii),
       (3) by inserting ``(other than proceeds of an issue of 
     State or local government obligations the interest on which 
     is exempt from tax under section 103, or any loan, debt, or 
     other obligation incurred under subchapter I of chapter 31 of 
     title 7 of the Rural Electrification Act of 1936 (7 U.S.C. 
     901 et seq.), as in effect on the date of the enactment of 
     the Energy Tax Incentives Act of 2003)'' after ``project'' in 
     clause (ii) (as so redesignated),
       (4) by adding at the end the following new sentence: ``This 
     paragraph shall not apply with respect to any facility 
     described in subsection (d)(2)(A)(ii).'', and
       (5) by striking ``tax-exempt bonds,'' in the heading and 
     inserting ``certain''.
       (e) Treatment of Persons Not Able To Use Entire Credit.--
     Section 45(e) (relating to definitions and special rules), as 
     redesignated by subsection (b)(1), is amended by adding at 
     the end the following new paragraph:
       ``(8) Treatment of persons not able to use entire credit.--
       ``(A) Allowance of credit.--
       ``(i) In general.--Except as otherwise provided in this 
     subsection--

       ``(I) any credit allowable under subsection (a) with 
     respect to a qualified facility owned by a person described 
     in clause (ii) may be transferred or used as provided in this 
     paragraph, and
       ``(II) the determination as to whether the credit is 
     allowable shall be made without regard to the tax-exempt 
     status of the person.

       ``(ii) Persons described.--A person is described in this 
     clause if the person is--

       ``(I) an organization described in section 501(c)(12)(C) 
     and exempt from tax under section 501(a),
       ``(II) an organization described in section 1381(a)(2)(C),
       ``(III) a public utility (as defined in section 
     136(c)(2)(B)), which is exempt from income tax under this 
     subtitle,
       ``(IV) any State or political subdivision thereof, the 
     District of Columbia, any possession of the United States, or 
     any agency or instrumentality of any of the foregoing, or

       ``(V) any Indian tribal government (within the meaning of 
     section 7871) or any agency or instrumentality thereof.

       ``(B) Transfer of credit.--
       ``(i) In general.--A person described in subparagraph 
     (A)(ii) may transfer any credit to which subparagraph (A)(i) 
     applies through an assignment to any other person not 
     described in subparagraph (A)(ii). Such transfer may be 
     revoked only with the consent of the Secretary.
       ``(ii) Regulations.--The Secretary shall prescribe such 
     regulations as necessary to ensure that any credit described 
     in clause (i) is assigned once and not reassigned by such 
     other person.
       ``(iii) Transfer proceeds treated as arising from essential 
     government function.--Any proceeds derived by a person 
     described in subclause (III), (IV), or (V) of subparagraph 
     (A)(ii) from the transfer of any credit under clause (i) 
     shall be treated as arising from the exercise of an essential 
     government function.
       ``(C) Use of credit as an offset.--Notwithstanding any 
     other provision of law, in the case of a person described in 
     subclause (I), (II), or (V) of subparagraph (A)(ii), any 
     credit to which subparagraph (A)(i) applies may be applied by 
     such person, to the extent provided by the Secretary of 
     Agriculture, as a prepayment of any loan, debt, or other 
     obligation the entity has incurred under subchapter I of 
     chapter 31 of title 7 of the Rural Electrification Act of 
     1936 (7 U.S.C. 901 et seq.), as in effect on the date of the 
     enactment of the Energy Tax Incentives Act of 2003.

[[Page S10405]]

       ``(D) Credit not income.--Any transfer under subparagraph 
     (B) or use under subparagraph (C) of any credit to which 
     subparagraph (A)(i) applies shall not be treated as income 
     for purposes of section 501(c)(12).
       ``(E) Treatment of unrelated persons.--For purposes of 
     subsection (a)(2)(B), sales of electricity among and between 
     persons described in subparagraph (A)(ii) shall be treated as 
     sales between unrelated parties.''.
       (f) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to electricity produced and sold after the date of the 
     enactment of this Act, in taxable years ending after such 
     date.
       (2) Certain biomass facilities.--With respect to any 
     facility described in section 45(d)(3)(A)(ii) of the Internal 
     Revenue Code of 1986, as added by subsection (b)(1), which is 
     placed in service before the date of the enactment of this 
     Act, the amendments made by this section shall apply to 
     electricity produced and sold after December 31, 2003, in 
     taxable years ending after such date.
       (3) Credit rate for new facilities.--The amendments made by 
     subsection (c) shall apply to electricity produced and sold 
     after December 31, 2003, in taxable years ending after such 
     date.
       (4) Nonapplication of amendments to preeffective date 
     poultry waste facilities.--The amendments made by this 
     section shall not apply with respect to any poultry waste 
     facility (within the meaning of section 45(c)(3)(C), as in 
     effect on the day before the date of the enactment of this 
     Act) placed in service on or before such date of enactment.

       TITLE II--ALTERNATIVE MOTOR VEHICLES AND FUELS INCENTIVES

     SEC. 201. ALTERNATIVE MOTOR VEHICLE CREDIT.

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

     ``SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT.

       ``(a) Allowance of Credit.--There shall be allowed as a 
     credit against the tax imposed by this chapter for the 
     taxable year an amount equal to the sum of--
       ``(1) the new qualified fuel cell motor vehicle credit 
     determined under subsection (b),
       ``(2) the new qualified hybrid motor vehicle credit 
     determined under subsection (c), and
       ``(3) the new qualified alternative fuel motor vehicle 
     credit determined under subsection (d).
       ``(b) New Qualified Fuel Cell Motor Vehicle Credit.--
       ``(1) In general.--For purposes of subsection (a), the new 
     qualified fuel cell motor vehicle credit determined under 
     this subsection with respect to a new qualified fuel cell 
     motor vehicle placed in service by the taxpayer during the 
     taxable year is--
       ``(A) $4,000, if such vehicle has a gross vehicle weight 
     rating of not more than 8,500 pounds,
       ``(B) $10,000, if such vehicle has a gross vehicle weight 
     rating of more than 8,500 pounds but not more than 14,000 
     pounds,
       ``(C) $20,000, if such vehicle has a gross vehicle weight 
     rating of more than 14,000 pounds but not more than 26,000 
     pounds, and
       ``(D) $40,000, if such vehicle has a gross vehicle weight 
     rating of more than 26,000 pounds.
       ``(2) Increase for fuel efficiency.--
       ``(A) In general.--The amount determined under paragraph 
     (1)(A) with respect to a new qualified fuel cell motor 
     vehicle which is a passenger automobile or light truck shall 
     be increased by--
       ``(i) $1,000, if such vehicle achieves at least 150 percent 
     but less than 175 percent of the 2002 model year city fuel 
     economy,
       ``(ii) $1,500, if such vehicle achieves at least 175 
     percent but less than 200 percent of the 2002 model year city 
     fuel economy,
       ``(iii) $2,000, if such vehicle achieves at least 200 
     percent but less than 225 percent of the 2002 model year city 
     fuel economy,
       ``(iv) $2,500, if such vehicle achieves at least 225 
     percent but less than 250 percent of the 2002 model year city 
     fuel economy,
       ``(v) $3,000, if such vehicle achieves at least 250 percent 
     but less than 275 percent of the 2002 model year city fuel 
     economy,
       ``(vi) $3,500, if such vehicle achieves at least 275 
     percent but less than 300 percent of the 2002 model year city 
     fuel economy, and
       ``(vii) $4,000, if such vehicle achieves at least 300 
     percent of the 2002 model year city fuel economy.
       ``(B) 2002 model year city fuel economy.--For purposes of 
     subparagraph (A), the 2002 model year city fuel economy with 
     respect to a vehicle shall be determined in accordance with 
     the following tables:
       ``(i) In the case of a passenger automobile:
``If vehicle inertia weight clThe 2002 model year city fuel economy is:
1,500 or 1,750 lbs............................................45.2 mpg 
2,000 lbs.....................................................39.6 mpg 
2,250 lbs.....................................................35.2 mpg 
2,500 lbs.....................................................31.7 mpg 
2,750 lbs.....................................................28.8 mpg 
3,000 lbs.....................................................26.4 mpg 
3,500 lbs.....................................................22.6 mpg 
4,000 lbs.....................................................19.8 mpg 
4,500 lbs.....................................................17.6 mpg 
5,000 lbs.....................................................15.9 mpg 
5,500 lbs.....................................................14.4 mpg 
6,000 lbs.....................................................13.2 mpg 
6,500 lbs.....................................................12.2 mpg 
7,000 to 8,500 lbs............................................11.3 mpg.
       ``(ii) In the case of a light truck:

``If vehicle inertia weight clThe 2002 model year city fuel economy is:
1,500 or 1,750 lbs............................................39.4 mpg 
2,000 lbs.....................................................35.2 mpg 
2,250 lbs.....................................................31.8 mpg 
2,500 lbs.....................................................29.0 mpg 
2,750 lbs.....................................................26.8 mpg 
3,000 lbs.....................................................24.9 mpg 
3,500 lbs.....................................................21.8 mpg 
4,000 lbs.....................................................19.4 mpg 
4,500 lbs.....................................................17.6 mpg 
5,000 lbs.....................................................16.1 mpg 
5,500 lbs.....................................................14.8 mpg 
6,000 lbs.....................................................13.7 mpg 
6,500 lbs.....................................................12.8 mpg 
7,000 to 8,500 lbs............................................12.1 mpg.
       ``(C) Vehicle inertia weight class.--For purposes of 
     subparagraph (B), the term `vehicle inertia weight class' has 
     the same meaning as when defined in regulations prescribed by 
     the Administrator of the Environmental Protection Agency for 
     purposes of the administration of title II of the Clean Air 
     Act (42 U.S.C. 7521 et seq.).
       ``(3) New qualified fuel cell motor vehicle.--For purposes 
     of this subsection, the term `new qualified fuel cell motor 
     vehicle' means a motor vehicle--
       ``(A) which is propelled by power derived from 1 or more 
     cells which convert chemical energy directly into electricity 
     by combining oxygen with hydrogen fuel which is stored on 
     board the vehicle in any form and may or may not require 
     reformation prior to use,
       ``(B) which, in the case of a passenger automobile or light 
     truck--
       ``(i) for 2002 and later model vehicles, has received a 
     certificate of conformity under the Clean Air Act and meets 
     or exceeds the equivalent qualifying California low emission 
     vehicle standard under section 243(e)(2) of the Clean Air Act 
     for that make and model year, and
       ``(ii) for 2004 and later model vehicles, has received a 
     certificate that such vehicle meets or exceeds the Bin 5 Tier 
     II emission level established in regulations prescribed by 
     the Administrator of the Environmental Protection Agency 
     under section 202(i) of the Clean Air Act for that make and 
     model year vehicle,
       ``(C) the original use of which commences with the 
     taxpayer,
       ``(D) which is acquired for use or lease by the taxpayer 
     and not for resale, and
       ``(E) which is made by a manufacturer.
       ``(c) New Qualified Hybrid Motor Vehicle Credit.--
       ``(1) In general.--For purposes of subsection (a), the new 
     qualified hybrid motor vehicle credit determined under this 
     subsection with respect to a new qualified hybrid motor 
     vehicle placed in service by the taxpayer during the taxable 
     year is the credit amount determined under paragraph (2).
       ``(2) Credit amount.--
       ``(A) In general.--The credit amount determined under this 
     paragraph shall be determined in accordance with the 
     following tables:
       ``(i) In the case of a new qualified hybrid motor vehicle 
     which is a passenger automobile, medium duty passenger 
     vehicle, or light truck and which provides the following 
     percentage of the maximum available power:

``If percentage of the maximum
  available power is:                             The credit amount is:
  At least 4 percent but less than 10 percent.................$250 ....

  At least 10 percent but less than 20 percent................$500 ....

  At least 20 percent but less than 30 percent................$750 ....

  At least 30 percent.......................................$1,000.....

       ``(ii) In the case of a new qualified hybrid motor vehicle 
     which is a heavy duty hybrid motor vehicle and which provides 
     the following percentage of the maximum available power:

       ``(I) If such vehicle has a gross vehicle weight rating of 
     not more than 14,000 pounds:


[[Page S10406]]


``If percentage of the maximum
  available power is:                             The credit amount is:
  At least 20 percent but less than 30 percent..............$1,000 ....

  At least 30 percent but less than 40 percent..............$1,750 ....

  At least 40 percent but less than 50 percent..............$2,000 ....

  At least 50 percent but less than 60 percent..............$2,250 ....

  At least 60 percent.......................................$2,500.....

       ``(II) If such vehicle has a gross vehicle weight rating of 
     more than 14,000 but not more than 26,000 pounds:

``If percentage of the maximum
  available power is:                             The credit amount is:
  At least 20 percent but less than 30 percent..............$4,000 ....

  At least 30 percent but less than 40 percent..............$4,500 ....

  At least 40 percent but less than 50 percent..............$5,000 ....

  At least 50 percent but less than 60 percent..............$5,500 ....

  At least 60 percent.......................................$6,000.....

       ``(III) If such vehicle has a gross vehicle weight rating 
     of more than 26,000 pounds:

``If percentage of the maximum
  available power is:                             The credit amount is:
  At least 20 percent but less than 30 percent..............$6,000 ....

  At least 30 percent but less than 40 percent..............$7,000 ....

  At least 40 percent but less than 50 percent..............$8,000 ....

  At least 50 percent but less than 60 percent..............$9,000 ....

  At least 60 percent......................................$10,000.....

       ``(B) Increase for fuel efficiency.--
       ``(i) Amount.--The amount determined under subparagraph 
     (A)(i) with respect to a new qualified hybrid motor vehicle 
     which is a passenger automobile or light truck shall be 
     increased by--

       ``(I) $500, if such vehicle achieves at least 125 percent 
     but less than 150 percent of the 2002 model year city fuel 
     economy,
       ``(II) $1,000, if such vehicle achieves at least 150 
     percent but less than 175 percent of the 2002 model year city 
     fuel economy,
       ``(III) $1,500, if such vehicle achieves at least 175 
     percent but less than 200 percent of the 2002 model year city 
     fuel economy,
       ``(IV) $2,000, if such vehicle achieves at least 200 
     percent but less than 225 percent of the 2002 model year city 
     fuel economy,
       ``(V) $2,500, if such vehicle achieves at least 225 percent 
     but less than 250 percent of the 2002 model year city fuel 
     economy, and
       ``(VI) $3,000, if such vehicle achieves at least 250 
     percent of the 2002 model year city fuel economy.

       ``(ii) 2002 model year city fuel economy.--For purposes of 
     clause (i), the 2002 model year city fuel economy with 
     respect to a vehicle shall be determined on a gasoline gallon 
     equivalent basis as determined by the Administrator of the 
     Environmental Protection Agency using the tables provided in 
     subsection (b)(2)(B) with respect to such vehicle.
       ``(C) Increase for accelerated emissions performance.--The 
     amount determined under subparagraph (A)(ii) with respect to 
     an applicable heavy duty hybrid motor vehicle shall be 
     increased by the increased credit amount determined in 
     accordance with the following tables:
       ``(i) In the case of a vehicle which has a gross vehicle 
     weight rating of not more than 14,000 pounds:

The increased credit amount is:
  2003......................................................$3,000 ....

  2004......................................................$2,500 ....

  2005......................................................$2,000 ....

  2006......................................................$1,500.....

       ``(ii) In the case of a vehicle which has a gross vehicle 
     weight rating of more than 14,000 pounds but not more than 
     26,000 pounds:

The increased credit amount is:
  2003......................................................$7,750 ....

  2004......................................................$6,500 ....

  2005......................................................$5,250 ....

  2006......................................................$4,000.....

       ``(iii) In the case of a vehicle which has a gross vehicle 
     weight rating of more than 26,000 pounds:

The increased credit amount is:
  2003.....................................................$12,000 ....

  2004.....................................................$10,000 ....

  2005......................................................$8,000 ....

  2006......................................................$6,000.....

       ``(D) Definitions relating to credit amount.--
       ``(i) Applicable heavy duty hybrid motor vehicle.--For 
     purposes of subparagraph (C), the term `applicable heavy duty 
     hybrid motor vehicle' means a heavy duty hybrid motor vehicle 
     which is powered by an internal combustion or heat engine 
     which is certified as meeting the emission standards set in 
     the regulations prescribed by the Administrator of the 
     Environmental Protection Agency for 2007 and later model year 
     diesel heavy duty engines, or for 2008 and later model year 
     ottocycle heavy duty engines, as applicable.
       ``(ii) Maximum available power.--

       ``(I) Passenger automobile, medium duty passenger vehicle, 
     or light truck.--For purposes of subparagraph (A)(i), the 
     term `maximum available power' means the maximum power 
     available from the rechargeable energy storage system, during 
     a standard 10 second pulse power or equivalent test, divided 
     by such maximum power and the SAE net power of the heat 
     engine.
       ``(II) Heavy duty hybrid motor vehicle.--For purposes of 
     subparagraph (A)(ii), the term `maximum available power' 
     means the maximum power available from the rechargeable 
     energy storage system, during a standard 10 second pulse 
     power or equivalent test, divided by the vehicle's total 
     traction power. The term `total traction power' means the sum 
     of the peak power from the rechargeable energy storage system 
     and the heat engine peak power of the vehicle, except that if 
     such storage system is the sole means by which the vehicle 
     can be driven, the total traction power is the peak power of 
     such storage system.

       ``(3) New qualified hybrid motor vehicle.--For purposes of 
     this subsection--
       ``(A) In general.--The term `new qualified hybrid motor 
     vehicle' means a motor vehicle--
       ``(i) which draws propulsion energy from onboard sources of 
     stored energy which are both--

       ``(I) an internal combustion or heat engine using 
     consumable fuel, and
       ``(II) a rechargeable energy storage system,

       ``(ii) which, in the case of a passenger automobile, medium 
     duty passenger vehicle, or light truck--

       ``(I) for 2002 and later model vehicles, has received a 
     certificate of conformity under the Clean Air Act and meets 
     or exceeds the equivalent qualifying California low emission 
     vehicle standard under section 243(e)(2) of the Clean Air Act 
     for that make and model year, and
       ``(II) for 2004 and later model vehicles, has received a 
     certificate that such vehicle meets or exceeds the Bin 5 Tier 
     II emission level established in regulations prescribed by 
     the Administrator of the Environmental Protection Agency 
     under section 202(i) of the Clean Air Act for that make and 
     model year vehicle,

       ``(iii) which, in the case of a heavy duty hybrid motor 
     vehicle, has an internal combustion or heat engine which has 
     received a certificate of conformity under the Clean Air Act 
     as meeting the emission standards set in the regulations 
     prescribed by the Administrator of the Environmental 
     Protection Agency for 2004 through 2007 model year diesel 
     heavy duty engines or ottocycle heavy duty engines, as 
     applicable,
       ``(iv) the original use of which commences with the 
     taxpayer,
       ``(v) which is acquired for use or lease by the taxpayer 
     and not for resale, and
       ``(vi) which is made by a manufacturer.
       ``(B) Consumable fuel.--For purposes of subparagraph 
     (A)(i)(I), the term `consumable fuel' means any solid, 
     liquid, or gaseous matter which releases energy when consumed 
     by an auxiliary power unit.
       ``(4) Heavy duty hybrid motor vehicle.--For purposes of 
     this subsection, the term `heavy duty hybrid motor vehicle' 
     means a new qualified hybrid motor vehicle which has a gross 
     vehicle weight rating of more than 8,500 pounds. Such term 
     does not include a medium duty passenger vehicle.
       ``(d) New Qualified Alternative Fuel Motor Vehicle 
     Credit.--
       ``(1) Allowance of credit.--Except as provided in paragraph 
     (5), the new qualified alternative fuel motor vehicle credit 
     determined under this subsection is an amount equal to the 
     applicable percentage of the incremental cost of any new 
     qualified alternative fuel motor vehicle placed in service by 
     the taxpayer during the taxable year.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage with respect to any new 
     qualified alternative fuel motor vehicle is--
       ``(A) 40 percent, plus
       ``(B) 30 percent, if such vehicle--
       ``(i) has received a certificate of conformity under the 
     Clean Air Act and meets or exceeds the most stringent 
     standard available for certification under the Clean Air Act 
     for that make and model year vehicle (other than a zero 
     emission standard), or
       ``(ii) has received an order certifying the vehicle as 
     meeting the same requirements as vehicles which may be sold 
     or leased in California and meets or exceeds the most 
     stringent standard available for certification under the 
     State laws of California (enacted in accordance with a waiver 
     granted under section 209(b) of the Clean Air Act) for that 
     make and model year vehicle (other than a zero emission 
     standard).
     For purposes of the preceding sentence, in the case of any 
     new qualified alternative fuel motor vehicle which weighs 
     more than 14,000 pounds gross vehicle weight rating, the most 
     stringent standard available shall be such standard available 
     for certification on the date of the enactment of the Energy 
     Tax Incentives Act of 2003.
       ``(3) Incremental cost.--For purposes of this subsection, 
     the incremental cost of any new qualified alternative fuel 
     motor vehicle is equal to the amount of the excess of the 
     manufacturer's suggested retail price for such vehicle over 
     such price for a gasoline or diesel fuel motor vehicle of the 
     same model, to the extent such amount does not exceed--
       ``(A) $5,000, if such vehicle has a gross vehicle weight 
     rating of not more than 8,500 pounds,
       ``(B) $10,000, if such vehicle has a gross vehicle weight 
     rating of more than 8,500 pounds but not more than 14,000 
     pounds,

[[Page S10407]]

       ``(C) $25,000, if such vehicle has a gross vehicle weight 
     rating of more than 14,000 pounds but not more than 26,000 
     pounds, and
       ``(D) $40,000, if such vehicle has a gross vehicle weight 
     rating of more than 26,000 pounds.
       ``(4) New qualified alternative fuel motor vehicle.--For 
     purposes of this subsection--
       ``(A) In general.--The term `new qualified alternative fuel 
     motor vehicle' means any motor vehicle--
       ``(i) which is only capable of operating on an alternative 
     fuel,
       ``(ii) the original use of which commences with the 
     taxpayer,
       ``(iii) which is acquired by the taxpayer for use or lease, 
     but not for resale, and
       ``(iv) which is made by a manufacturer.
       ``(B) Alternative fuel.--The term `alternative fuel' means 
     compressed natural gas, liquefied natural gas, liquefied 
     petroleum gas, hydrogen, and any liquid at least 85 percent 
     of the volume of which consists of methanol.
       ``(5) Credit for mixed-fuel vehicles.--
       ``(A) In general.--In the case of a mixed-fuel vehicle 
     placed in service by the taxpayer during the taxable year, 
     the credit determined under this subsection is an amount 
     equal to--
       ``(i) in the case of a 75/25 mixed-fuel vehicle, 70 percent 
     of the credit which would have been allowed under this 
     subsection if such vehicle was a qualified alternative fuel 
     motor vehicle, and
       ``(ii) in the case of a 90/10 mixed-fuel vehicle, 90 
     percent of the credit which would have been allowed under 
     this subsection if such vehicle was a qualified alternative 
     fuel motor vehicle.
       ``(B) Mixed-fuel vehicle.--For purposes of this subsection, 
     the term `mixed-fuel vehicle' means any motor vehicle 
     described in subparagraph (C) or (D) of paragraph (3), 
     which--
       ``(i) is certified by the manufacturer as being able to 
     perform efficiently in normal operation on a combination of 
     an alternative fuel and a petroleum-based fuel,
       ``(ii) either--

       ``(I) has received a certificate of conformity under the 
     Clean Air Act, or
       ``(II) has received an order certifying the vehicle as 
     meeting the same requirements as vehicles which may be sold 
     or leased in California and meets or exceeds the low emission 
     vehicle standard under section 88.105-94 of title 40, Code of 
     Federal Regulations, for that make and model year vehicle,

       ``(iii) the original use of which commences with the 
     taxpayer,
       ``(iv) which is acquired by the taxpayer for use or lease, 
     but not for resale, and
       ``(v) which is made by a manufacturer.
       ``(C) 75/25 mixed-fuel vehicle.--For purposes of this 
     subsection, the term `75/25 mixed-fuel vehicle' means a 
     mixed-fuel vehicle which operates using at least 75 percent 
     alternative fuel and not more than 25 percent petroleum-based 
     fuel.
       ``(D) 90/10 mixed-fuel vehicle.--For purposes of this 
     subsection, the term `90/10 mixed-fuel vehicle' means a 
     mixed-fuel vehicle which operates using at least 90 percent 
     alternative fuel and not more than 10 percent petroleum-based 
     fuel.
       ``(e) Application With Other Credits.--The credit allowed 
     under subsection (a) for any taxable year shall not exceed 
     the excess (if any) of--
       ``(1) the regular tax for the taxable year reduced by the 
     sum of the credits allowable under subpart A and sections 27, 
     29, and 30, over
       ``(2) the tentative minimum tax for the taxable year.
       ``(f) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Motor vehicle.--The term `motor vehicle' has the 
     meaning given such term by section 30(c)(2).
       ``(2) City fuel economy.--The city fuel economy with 
     respect to any vehicle shall be measured in a manner which is 
     substantially similar to the manner city fuel economy is 
     measured in accordance with procedures under part 600 of 
     subchapter Q of chapter I of title 40, Code of Federal 
     Regulations, as in effect on the date of the enactment of 
     this section.
       ``(3) Other terms.--The terms `automobile', `passenger 
     automobile', `medium duty passenger vehicle', `light truck', 
     and `manufacturer' have the meanings given such terms in 
     regulations prescribed by the Administrator of the 
     Environmental Protection Agency for purposes of the 
     administration of title II of the Clean Air Act (42 U.S.C. 
     7521 et seq.).
       ``(4)  Reduction in basis.--For purposes of this subtitle, 
     the basis of any property for which a credit is allowable 
     under subsection (a) shall be reduced by the amount of such 
     credit so allowed (determined without regard to subsection 
     (e)).
       ``(5) No double benefit.--The amount of any deduction or 
     other credit allowable under this chapter--
       ``(A) for any incremental cost taken into account in 
     computing the amount of the credit determined under 
     subsection (d) shall be reduced by the amount of such credit 
     attributable to such cost, and
       ``(B) with respect to a vehicle described under subsection 
     (b) or (c), shall be reduced by the amount of credit allowed 
     under subsection (a) for such vehicle for the taxable year.
       ``(6) Property used by tax-exempt entities.--In the case of 
     a credit amount which is allowable with respect to a motor 
     vehicle which is acquired by an entity exempt from tax under 
     this chapter, the person which sells or leases such vehicle 
     to the entity shall be treated as the taxpayer with respect 
     to the vehicle for purposes of this section and the credit 
     shall be allowed to such person, but only if the person 
     clearly discloses to the entity at the time of any sale or 
     lease the specific amount of any credit otherwise allowable 
     to the entity under this section.
       ``(7) Recapture.--The Secretary shall, by regulations, 
     provide for recapturing the benefit of any credit allowable 
     under subsection (a) with respect to any property which 
     ceases to be property eligible for such credit (including 
     recapture in the case of a lease period of less than the 
     economic life of a vehicle).
       ``(8) Property used outside united states, etc., not 
     qualified.--No credit shall be allowed under subsection (a) 
     with respect to any property referred to in section 50(b) or 
     with respect to the portion of the cost of any property taken 
     into account under section 179.
       ``(9) Election to not take credit.--No credit shall be 
     allowed under subsection (a) for any vehicle if the taxpayer 
     elects to not have this section apply to such vehicle.
       ``(10) Carryback and carryforward allowed.--
       ``(A) In general.--If the credit allowable under subsection 
     (a) for a taxable year exceeds the amount of the limitation 
     under subsection (e) for such taxable year (in this paragraph 
     referred to as the `unused credit year'), such excess shall 
     be a credit carryback to each of the 3 taxable years 
     preceding the unused credit year and a credit carryforward to 
     each of the 20 taxable years following the unused credit 
     year, except that no excess may be carried to a taxable year 
     beginning before the date of the enactment of this paragraph.
       ``(B) Rules.--Rules similar to the rules of section 39 
     shall apply with respect to the credit carryback and credit 
     carryforward under subparagraph (A).
       ``(11) Interaction with air quality and motor vehicle 
     safety standards.--Unless otherwise provided in this section, 
     a motor vehicle shall not be considered eligible for a credit 
     under this section unless such vehicle is in compliance 
     with--
       ``(A) the applicable provisions of the Clean Air Act for 
     the applicable make and model year of the vehicle (or 
     applicable air quality provisions of State law in the case of 
     a State which has adopted such provision under a waiver under 
     section 209(b) of the Clean Air Act), and
       ``(B) the motor vehicle safety provisions of sections 30101 
     through 30169 of title 49, United States Code.
       ``(g) Regulations.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     Secretary shall promulgate such regulations as necessary to 
     carry out the provisions of this section.
       ``(2) Coordination in prescription of certain 
     regulations.--The Secretary of the Treasury, in coordination 
     with the Secretary of Transportation and the Administrator of 
     the Environmental Protection Agency, shall prescribe such 
     regulations as necessary to determine whether a motor vehicle 
     meets the requirements to be eligible for a credit under this 
     section.
       ``(h) Termination.--This section shall not apply to any 
     property purchased after--
       ``(1) in the case of a new qualified fuel cell motor 
     vehicle (as described in subsection (b)), December 31, 2011, 
     and
       ``(2) in the case of any other property, December 31, 
     2006.''.
       (b) Conforming Amendments.--
       (1) Section 1016(a) is amended by striking ``and'' at the 
     end of paragraph (27), by striking the period at the end of 
     paragraph (28) and inserting ``, and'', and by adding at the 
     end the following new paragraph:
       ``(29) to the extent provided in section 30B(f)(4).''.
       (2) Section 55(c)(2) is amended by inserting ``30B(e),'' 
     after ``30(b)(3),''.
       (3) Section 6501(m) is amended by inserting ``30B(f)(9),'' 
     after ``30(d)(4),''.
       (4) The table of sections for subpart B of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 30A the following new item:

``Sec. 30B. Alternative motor vehicle credit.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 202. MODIFICATION OF CREDIT FOR QUALIFIED ELECTRIC 
                   VEHICLES.

       (a) Amount of Credit.--
       (1) In general.--Section 30(a) (relating to allowance of 
     credit) is amended by striking ``10 percent of''.
       (2) Limitation of credit according to type of vehicle.--
     Section 30(b) (relating to limitations) is amended--
       (A) by striking paragraphs (1) and (2) and inserting the 
     following new paragraph:
       ``(1) Limitation according to type of vehicle.--The amount 
     of the credit allowed under subsection (a) for any vehicle 
     shall not exceed the greatest of the following amounts 
     applicable to such vehicle:
       ``(A) In the case of a vehicle with a gross vehicle weight 
     rating not exceeding 8,500 pounds--
       ``(i) except as provided in clause (ii) or (iii), $3,500,

[[Page S10408]]

       ``(ii) $6,000, if such vehicle is--

       ``(I) capable of a driving range of at least 100 miles on a 
     single charge of the vehicle's rechargeable batteries as 
     measured pursuant to the urban dynamometer schedules under 
     appendix I to part 86 of title 40, Code of Federal 
     Regulations, or
       ``(II) capable of a payload capacity of at least 1,000 
     pounds, and

       ``(iii) if such vehicle is a low-speed vehicle which 
     conforms to Standard 500 prescribed by the Secretary of 
     Transportation (49 C.F.R. 571.500), as in effect on the date 
     of the enactment of the Energy Tax Incentives Act of 2003, 
     the lesser of--

       ``(I) 10 percent of the manufacturer's suggested retail 
     price of the vehicle, or
       ``(II) $1,500.

       ``(B) In the case of a vehicle with a gross vehicle weight 
     rating exceeding 8,500 but not exceeding 14,000 pounds, 
     $10,000.
       ``(C) In the case of a vehicle with a gross vehicle weight 
     rating exceeding 14,000 but not exceeding 26,000 pounds, 
     $20,000.
       ``(D) In the case of a vehicle with a gross vehicle weight 
     rating exceeding 26,000 pounds, $40,000.'', and
       (B) by redesignating paragraph (3) as paragraph (2).
       (3) Conforming amendments.--
       (A) Section 53(d)(1)(B)(iii) is amended by striking 
     ``section 30(b)(3)(B)'' and inserting ``section 
     30(b)(2)(B)''.
       (B) Section 55(c)(2), as amended by this Act, is amended by 
     striking ``30(b)(3)'' and inserting ``30(b)(2)''.
       (b) Qualified Battery Electric Vehicle.--
       (1) In general.--Section 30(c)(1)(A) (defining qualified 
     electric vehicle) is amended to read as follows:
       ``(A) which is--
       ``(i) operated solely by use of a battery or battery pack, 
     or
       ``(ii) powered primarily through the use of an electric 
     battery or battery pack using a flywheel or capacitor which 
     stores energy produced by an electric motor through 
     regenerative braking to assist in vehicle operation,''.
       (2) Leased vehicles.--Section 30(c)(1)(C) is amended by 
     inserting ``or lease'' after ``use''.
       (3) Conforming amendments.--
       (A) Subsections (a), (b)(2), and (c) of section 30 are each 
     amended by inserting ``battery'' after ``qualified'' each 
     place it appears.
       (B) The heading of subsection (c) of section 30 is amended 
     by inserting ``Battery'' after ``Qualified''.
       (C) The heading of section 30 is amended by inserting 
     ``battery'' after ``qualified''.
       (D) The item relating to section 30 in the table of 
     sections for subpart B of part IV of subchapter A of chapter 
     1 is amended by inserting ``battery'' after ``qualified''.
       (E) Section 179A(c)(3) is amended by inserting ``battery'' 
     before ``electric''.
       (F) The heading of paragraph (3) of section 179A(c) is 
     amended by inserting ``battery'' before ``electric''.
       (c) Additional Special Rules.--Section 30(d) (relating to 
     special rules) is amended by adding at the end the following 
     new paragraphs:
       ``(5) No double benefit.--The amount of any deduction or 
     other credit allowable under this chapter for any cost taken 
     into account in computing the amount of the credit determined 
     under subsection (a) shall be reduced by the amount of such 
     credit attributable to such cost.
       ``(6) Property used by tax-exempt entities.--In the case of 
     a credit amount which is allowable with respect to a vehicle 
     which is acquired by an entity exempt from tax under this 
     chapter, the person which sells or leases such vehicle to the 
     entity shall be treated as the taxpayer with respect to the 
     vehicle for purposes of this section and the credit shall be 
     allowed to such person, but only if the person clearly 
     discloses to the entity at the time of any sale or lease the 
     specific amount of any credit otherwise allowable to the 
     entity under this section.
       ``(7) Carryback and carryforward allowed.--
       ``(A) In general.--If the credit allowable under subsection 
     (a) for a taxable year exceeds the amount of the limitation 
     under subsection (b)(2) for such taxable year (in this 
     paragraph referred to as the `unused credit year'), such 
     excess shall be a credit carryback to each of the 3 taxable 
     years preceding the unused credit year and a credit 
     carryforward to each of the 20 taxable years following the 
     unused credit year, except that no excess may be carried to a 
     taxable year beginning before the date of the enactment of 
     this paragraph.
       ``(B) Rules.--Rules similar to the rules of section 39 
     shall apply with respect to the credit carryback and credit 
     carryforward under subparagraph (A).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 203. CREDIT FOR INSTALLATION OF ALTERNATIVE FUELING 
                   STATIONS.

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

     ``SEC. 30C. CLEAN-FUEL VEHICLE REFUELING PROPERTY CREDIT.

       ``(a) Credit Allowed.--There shall be allowed as a credit 
     against the tax imposed by this chapter for the taxable year 
     an amount equal to 50 percent of the amount paid or incurred 
     by the taxpayer during the taxable year for the installation 
     of qualified clean-fuel vehicle refueling property.
       ``(b) Limitation.--The credit allowed under subsection 
     (a)--
       ``(1) with respect to any retail clean-fuel vehicle 
     refueling property, shall not exceed $30,000, and
       ``(2) with respect to any residential clean-fuel vehicle 
     refueling property, shall not exceed $1,000.
       ``(c) Year Credit Allowed.--Notwithstanding subsection (a), 
     no credit shall be allowed under subsection (a) with respect 
     to any qualified clean-fuel vehicle refueling property before 
     the taxable year in which the property is placed in service 
     by the taxpayer.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified clean-fuel vehicle refueling property.--The 
     term `qualified clean-fuel vehicle refueling property' has 
     the same meaning given such term by section 179A(d).
       ``(2) Residential clean-fuel vehicle refueling property.--
     The term `residential clean-fuel vehicle refueling property' 
     means qualified clean-fuel vehicle refueling property which 
     is installed on property which is used as the principal 
     residence (within the meaning of section 121) of the 
     taxpayer.
       ``(3) Retail clean-fuel vehicle refueling property.--The 
     term `retail clean-fuel vehicle refueling property' means 
     qualified clean-fuel vehicle refueling property which is 
     installed on property (other than property described in 
     paragraph (2)) used in a trade or business of the taxpayer.
       ``(e) Application With Other Credits.--The credit allowed 
     under subsection (a) for any taxable year shall not exceed 
     the excess (if any) of--
       ``(1) the regular tax for the taxable year reduced by the 
     sum of the credits allowable under subpart A and sections 27, 
     29, 30, and 30B, over
       ``(2) the tentative minimum tax for the taxable year.
       ``(f) Basis Reduction.--For purposes of this title, the 
     basis of any property shall be reduced by the portion of the 
     cost of such property taken into account under subsection 
     (a).
       ``(g) No Double Benefit.--
       ``(1) Coordination with other deductions and credits.--
     Except as provided in paragraph (2), the amount of any 
     deduction or other credit allowable under this chapter for 
     any cost taken into account in computing the amount of the 
     credit determined under subsection (a) shall be reduced by 
     the amount of such credit attributable to such cost.
       ``(2) No deduction allowed under section 179a.--No 
     deduction shall be allowed under section 179A with respect to 
     any property with respect to which a credit is allowed under 
     subsection (a).
       ``(h) Refueling Property Installed for Tax-Exempt 
     Entities.--In the case of qualified clean-fuel vehicle 
     refueling property installed on property owned or used by an 
     entity exempt from tax under this chapter, the person which 
     installs such refueling property for the entity shall be 
     treated as the taxpayer with respect to the refueling 
     property for purposes of this section (and such refueling 
     property shall be treated as retail clean-fuel vehicle 
     refueling property) and the credit shall be allowed to such 
     person, but only if the person clearly discloses to the 
     entity in any installation contract the specific amount of 
     the credit allowable under this section.
       ``(i) Carryforward Allowed.--
       ``(1) In general.--If the credit allowable under subsection 
     (a) for a taxable year exceeds the amount of the limitation 
     under subsection (e) for such taxable year, such excess shall 
     be a credit carryforward to each of the 20 taxable years 
     following such taxable year.
       ``(2) Rules.--Rules similar to the rules of section 39 
     shall apply with respect to the credit carryforward under 
     paragraph (1).
       ``(j) Special Rules.--Rules similar to the rules of 
     paragraphs (4) and (5) of section 179A(e) shall apply.
       ``(k) Regulations.--The Secretary shall prescribe such 
     regulations as necessary to carry out the provisions of this 
     section.
       ``(l) Termination.--This section shall not apply to any 
     property placed in service--
       ``(1) in the case of property relating to hydrogen, after 
     December 31, 2011, and
       ``(2) in the case of any other property, after December 31, 
     2007.''.
       (b) Modifications to Extension of Deduction for Certain 
     Refueling Property.--
       (1) In general.--Subsection (f) of section 179A is amended 
     to read as follows:
       ``(f) Termination.--This section shall not apply to any 
     property placed in service--
       ``(1) in the case of property relating to hydrogen, after 
     December 31, 2011, and
       ``(2) in the case of any other property, after December 31, 
     2007.''.
       (2) Extension of phaseout.--Section 179A(b)(1)(B) is 
     amended--
       (A) by striking ``calendar year 2004'' in clause (i) and 
     inserting ``calendar years 2004 and 2005 (calendar years 2004 
     through 2009 in the case of property relating to hydrogen) 
     '',
       (B) by striking ``2005'' in clause (ii) and inserting 
     ``2006 (calendar year 2010 in the case of property relating 
     to hydrogen)'', and
       (C) by striking ``2006'' in clause (iii) and inserting 
     ``2007 (calendar year 2011 in the case of property relating 
     to hydrogen)''.
       (c) Incentive for Production of Hydrogen at Qualified 
     Clean-Fuel Vehicle Refueling Property.--Section 179A(d) 
     (defining qualified clean-fuel vehicle refueling

[[Page S10409]]

     property) is amended by adding at the end the following new 
     flush sentence:
     ``In the case of clean-burning fuel which is hydrogen 
     produced from another clean-burning fuel, paragraph (3)(A) 
     shall be applied by substituting `production, storage, or 
     dispensing' for `storage or dispensing' both places it 
     appears.''.
       (d) Conforming Amendments.--
       (1) Section 1016(a), as amended by this Act, is amended by 
     striking ``and'' at the end of paragraph (28), by striking 
     the period at the end of paragraph (29) and inserting ``, 
     and'', and by adding at the end the following new paragraph:
       ``(30) to the extent provided in section 30C(f).''.
       (2) Section 55(c)(2), as amended by this Act, is amended by 
     inserting ``30C(e),'' after ``30B(e),''.
       (3) The table of sections for subpart B of part IV of 
     subchapter A of chapter 1, as amended by this Act, is amended 
     by inserting after the item relating to section 30B the 
     following new item:

``Sec. 30C. Clean-fuel vehicle refueling property credit.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 204. CREDIT FOR RETAIL SALE OF ALTERNATIVE FUELS AS 
                   MOTOR VEHICLE FUEL.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits) is amended 
     by inserting after section 40 the following new section:

     ``SEC. 40A. CREDIT FOR RETAIL SALE OF ALTERNATIVE FUELS AS 
                   MOTOR VEHICLE FUEL.

       ``(a) General Rule.--For purposes of section 38, the 
     alternative fuel retail sales credit for any taxable year is 
     the applicable amount for each gasoline gallon equivalent of 
     alternative fuel sold at retail by the taxpayer during such 
     year as a fuel to propel any qualified motor vehicle.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Applicable amount.--The term `applicable amount' 
     means the amount determined in accordance with the following 
     table:

``In the case of any taxable year ending in--The applicable amount is--
  2003........................................................30 cents 
  2004........................................................40 cents 
  2005 and 2006...............................................50 cents.
       ``(2) Alternative fuel.--The term `alternative fuel' means 
     compressed natural gas, liquefied natural gas, liquefied 
     petroleum gas, hydrogen, or any liquid at least 85 percent of 
     the volume of which consists of methanol or ethanol.
       ``(3) Gasoline gallon equivalent.--The term `gasoline 
     gallon equivalent' means, with respect to any alternative 
     fuel, the amount (determined by the Secretary) of such fuel 
     having a Btu content of 114,000.
       ``(4) Qualified motor vehicle.--The term `qualified motor 
     vehicle' means any motor vehicle (as defined in section 
     30(c)(2)) which meets any applicable Federal or State 
     emissions standards with respect to each fuel by which such 
     vehicle is designed to be propelled.
       ``(5) Sold at retail.--
       ``(A) In general.--The term `sold at retail' means the 
     sale, for a purpose other than resale, after manufacture, 
     production, or importation.
       ``(B) Use treated as sale.--If any person uses alternative 
     fuel (including any use after importation) as a fuel to 
     propel any new qualified alternative fuel motor vehicle (as 
     defined in section 30B(d)(4)) before such fuel is sold at 
     retail, then such use shall be treated in the same manner as 
     if such fuel were sold at retail as a fuel to propel such a 
     vehicle by such person.
       ``(c) No Double Benefit.--The amount of any deduction or 
     other credit allowable under this chapter for any fuel taken 
     into account in computing the amount of the credit determined 
     under subsection (a) shall be reduced by the amount of such 
     credit attributable to such fuel.
       ``(d) Pass-Thru in the Case of Estates and Trusts.--Under 
     regulations prescribed by the Secretary, rules similar to the 
     rules of subsection (d) of section 52 shall apply.
       ``(e) Termination.--This section shall not apply to any 
     fuel sold at retail after December 31, 2006.''.
       (b) Credit Treated as Business Credit.--Section 38(b) 
     (relating to current year business credit) is amended by 
     striking ``plus'' at the end of paragraph (14), by striking 
     the period at the end of paragraph (15) and inserting ``, 
     plus'', and by adding at the end the following new paragraph:
       ``(16) the alternative fuel retail sales credit determined 
     under section 40A(a).''.
       (c) Transitional Rule.--Section 39(d) (relating to 
     transitional rules) is amended by adding at the end the 
     following new paragraph:
       ``(11) No carryback of section 40a credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the alternative fuel 
     retail sales credit determined under section 40A(a) may be 
     carried back to a taxable year ending on or before the date 
     of the enactment of such section.''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 is amended by 
     inserting after the item relating to section 40 the following 
     new item:

``Sec. 40A. Credit for retail sale of alternative fuels as motor 
              vehicle fuel.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to fuel sold at retail after the date of the 
     enactment of this Act, in taxable years ending after such 
     date.

     SEC. 205. SMALL ETHANOL PRODUCER CREDIT.

       (a) Allocation of Alcohol Fuels Credit to Patrons of a 
     Cooperative.--Section 40(g) (relating to definitions and 
     special rules for eligible small ethanol producer credit) is 
     amended by adding at the end the following new paragraph:
       ``(6) Allocation of small ethanol producer credit to 
     patrons of cooperative.--
       ``(A) Election to allocate.--
       ``(i) In general.--In the case of a cooperative 
     organization described in section 1381(a), any portion of the 
     credit determined under subsection (a)(3) for the taxable 
     year may, at the election of the organization, be apportioned 
     pro rata among patrons of the organization on the basis of 
     the quantity or value of business done with or for such 
     patrons for the taxable year.
       ``(ii) Form and effect of election.--An election under 
     clause (i) for any taxable year shall be made on a timely 
     filed return for such year. Such election, once made, shall 
     be irrevocable for such taxable year.
       ``(B) Treatment of organizations and patrons.--The amount 
     of the credit apportioned to patrons under subparagraph (A)--
       ``(i) shall not be included in the amount determined under 
     subsection (a) with respect to the organization for the 
     taxable year, and
       ``(ii) shall be included in the amount determined under 
     subsection (a) for the taxable year of each patron for which 
     the patronage dividends for the taxable year described in 
     subparagraph (A) are included in gross income.
       ``(C) Special rules for decrease in credits for taxable 
     year.--If the amount of the credit of a cooperative 
     organization determined under subsection (a)(3) for a taxable 
     year is less than the amount of such credit shown on the 
     return of the cooperative organization for such year, an 
     amount equal to the excess of--
       ``(i) such reduction, over
       ``(ii) the amount not apportioned to such patrons under 
     subparagraph (A) for the taxable year,
     shall be treated as an increase in tax imposed by this 
     chapter on the organization. Such increase shall not be 
     treated as tax imposed by this chapter for purposes of 
     determining the amount of any credit under this chapter or 
     for purposes of section 55.''.
       (b) Improvements to Small Ethanol Producer Credit.--
       (1) Definition of small ethanol producer.--Section 40(g) 
     (relating to definitions and special rules for eligible small 
     ethanol producer credit) is amended by striking 
     ``30,000,000'' each place it appears and inserting 
     ``60,000,000''.
       (2) Small ethanol producer credit not a passive activity 
     credit.--Clause (i) of section 469(d)(2)(A) is amended by 
     striking ``subpart D'' and inserting ``subpart D, other than 
     section 40(a)(3),''.
       (3) Allowing credit against entire regular tax and minimum 
     tax.--
       (A) In general.--Subsection (c) of section 38 (relating to 
     limitation based on amount of tax) is amended by 
     redesignating paragraph (4) as paragraph (5) and by inserting 
     after paragraph (3) the following new paragraph:
       ``(4) Special rules for small ethanol producer credit.--
       ``(A) In general.--In the case of the small ethanol 
     producer credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to the credit, and
       ``(ii) in applying paragraph (1) to the credit--

       ``(I) the amounts in subparagraphs (A) and (B) thereof 
     shall be treated as being zero, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the small 
     ethanol producer credit).

       ``(B) Small ethanol producer credit.--For purposes of this 
     subsection, the term `small ethanol producer credit' means 
     the credit allowable under subsection (a) by reason of 
     section 40(a)(3).''.
       (B) Conforming amendments.--Subclause (II) of section 
     38(c)(2)(A)(ii) and subclause (II) of section 38(c)(3)(A)(ii) 
     are each amended by inserting ``or the small ethanol producer 
     credit'' after ``employee credit''.
       (4) Small ethanol producer credit not added back to income 
     under section 87.--Section 87 (relating to income inclusion 
     of alcohol fuel credit) is amended to read as follows:

     ``SEC. 87. ALCOHOL FUEL CREDIT.

       ``Gross income includes an amount equal to the sum of--
       ``(1) the amount of the alcohol mixture credit determined 
     with respect to the taxpayer for the taxable year under 
     section 40(a)(1), and
       ``(2) the alcohol credit determined with respect to the 
     taxpayer for the taxable year under section 40(a)(2).''.
       (c) Conforming Amendment.--Section 1388 (relating to 
     definitions and special rules for cooperative organizations) 
     is amended by adding at the end the following new subsection:
       ``(k) Cross Reference.--For provisions relating to the 
     apportionment of the alcohol

[[Page S10410]]

     fuels credit between cooperative organizations and their 
     patrons, see section 40(g)(6).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 206. INCENTIVES FOR BIODIESEL.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by this Act, is amended by inserting after section 40A the 
     following new section:

     ``SEC. 40B. BIODIESEL USED AS FUEL.

       ``(a) General Rule.--For purposes of section 38, the 
     biodiesel fuels credit determined under this section for the 
     taxable year is an amount equal to the sum of--
       ``(1) the biodiesel mixture credit, plus
       ``(2) the biodiesel credit.
       ``(b) Definition of Biodiesel Mixture Credit and Biodiesel 
     Credit.--For purposes of this section--
       ``(1) Biodiesel mixture credit.--
       ``(A) In general.--The biodiesel mixture credit of any 
     taxpayer for any taxable year is 50 cents for each gallon of 
     biodiesel used by the taxpayer in the production of a 
     qualified biodiesel mixture.
       ``(B) Qualified biodiesel mixture.--The term `qualified 
     biodiesel mixture' means a mixture of biodiesel and diesel 
     fuel which--
       ``(i) is sold by the taxpayer producing such mixture to any 
     person for use as a fuel, or
       ``(ii) is used as a fuel by the taxpayer producing such 
     mixture.
       ``(C) Sale or use must be in trade or business, etc.--
     Biodiesel used in the production of a qualified biodiesel 
     mixture shall be taken into account--
       ``(i) only if the sale or use described in subparagraph (B) 
     is in a trade or business of the taxpayer, and
       ``(ii) for the taxable year in which such sale or use 
     occurs.
       ``(D) Casual off-farm production not eligible.--No credit 
     shall be allowed under this section with respect to any 
     casual off-farm production of a qualified biodiesel mixture.
       ``(2) Biodiesel credit.--
       ``(A) In general.--The biodiesel credit of any taxpayer for 
     any taxable year is 50 cents for each gallon of biodiesel 
     which is not in a mixture with diesel fuel and which during 
     the taxable year--
       ``(i) is used by the taxpayer as a fuel in a trade or 
     business, or
       ``(ii) is sold by the taxpayer at retail to a person and 
     placed in the fuel tank of such person's vehicle.
       ``(B) User credit not to apply to biodiesel sold at 
     retail.--No credit shall be allowed under subparagraph (A)(i) 
     with respect to any biodiesel which was sold in a retail sale 
     described in subparagraph (A)(ii).
       ``(3) Credit for agri-biodiesel.--
       ``(A) In general.--Subject to subparagraph (B), in the case 
     of any biodiesel which is agri-biodiesel, paragraphs (1)(A) 
     and (2)(A) shall be applied by substituting `$1.00' for `50 
     cents'.
       ``(B) Certification for agri-biodiesel.--Subparagraph (A) 
     shall apply only if the taxpayer described in paragraph 
     (1)(A) or (2)(A) obtains a certification (in such form and 
     manner as prescribed by the Secretary) from the producer of 
     the agri-biodiesel which identifies the product produced.
       ``(c) Coordination With Credit Against Excise Tax.--The 
     amount of the credit determined under this section with 
     respect to any agri-biodiesel shall, under regulations 
     prescribed by the Secretary, be properly reduced to take into 
     account any benefit provided with respect to such agri-
     biodiesel solely by reason of the application of section 6426 
     or 6427(e).
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Biodiesel.--The term `biodiesel' means the monoalkyl 
     esters of long chain fatty acids derived from plant or animal 
     matter for use in diesel-powered engines which meet--
       ``(A) the registration requirements for fuels and fuel 
     additives established by the Environmental Protection Agency 
     under section 211 of the Clean Air Act (42 U.S.C. 7545), and
       ``(B) the requirements of the American Society of Testing 
     and Materials D6751.
       ``(2) Agri-biodiesel.--The term `agri-biodiesel' means 
     biodiesel derived solely from virgin oils. Such term shall 
     include esters derived from vegetable oils from corn, 
     soybeans, sunflower seeds, cottonseeds, canola, crambe, 
     rapeseeds, safflowers, flaxseeds, rice bran, and mustard 
     seeds, and from animal fats.
       ``(3) Biodiesel mixture not used as a fuel, etc.--
       ``(A) Imposition of tax.--If--
       ``(i) any credit was determined under this section with 
     respect to biodiesel used in the production of any qualified 
     biodiesel mixture, and
       ``(ii) any person--

       ``(I) separates such biodiesel from the mixture, or

       ``(II) without separation, uses the mixture other than as a 
     fuel,

     then there is hereby imposed on such person a tax equal to 
     the product of the rate applicable under subsection (b)(1)(A) 
     and the number of gallons of the mixture.
       ``(B) Applicable laws.--All provisions of law, including 
     penalties, shall, insofar as applicable and not inconsistent 
     with this section, apply in respect of any tax imposed under 
     subparagraph (A) as if such tax were imposed by section 4081 
     and not by this chapter.
       ``(4) Pass-thru in the case of estates and trusts.--Under 
     regulations prescribed by the Secretary, rules similar to the 
     rules of subsection (d) of section 52 shall apply.
       ``(e) Termination.--This section shall not apply to any 
     fuel sold after December 31, 2005.''.
       (b) Credit Treated as Part of General Business Credit.--
     Section 38(b) (relating to current year business credit), as 
     amended by this Act, is amended by striking ``plus'' at the 
     end of paragraph (15), by striking the period at the end of 
     paragraph (16) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(17) the biodiesel fuels credit determined under section 
     40B(a).''.
       (c) Conforming Amendments.--
       (1) Section 39(d), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(12) No carryback of biodiesel fuels credit before 
     effective date.--No portion of the unused business credit for 
     any taxable year which is attributable to the biodiesel fuels 
     credit determined under section 40B may be carried back to a 
     taxable year ending on or before the date of the enactment of 
     section 40B.''.
       (2)(A) Section 87, as amended by this Act, is amended--
       (i) by striking ``and'' at the end of paragraph (1),
       (ii) by striking the period at the end of paragraph (2) and 
     inserting ``, and'',
       (iii) by adding at the end the following new paragraph:
       ``(3) the biodiesel fuels credit determined with respect to 
     the taxpayer for the taxable year under section 40B(a).'', 
     and
       (iv) by striking ``FUEL CREDIT'' in the heading and 
     inserting ``AND BIODIESEL FUELS CREDITS''.
       (B) The item relating to section 87 in the table of 
     sections for part II of subchapter B of chapter 1 is amended 
     by striking ``fuel credit'' and inserting ``and biodiesel 
     fuels credits''.
       (3) Section 196(c) is amended by striking ``and'' at the 
     end of paragraph (9), by striking the period at the end of 
     paragraph (10) and inserting ``, and'', and by adding at the 
     end the following new paragraph:
       ``(11) the biodiesel fuels credit determined under section 
     40B(a).''.
       (4) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by this Act, is amended 
     by adding after the item relating to section 40A the 
     following new item:

``Sec. 40B. Biodiesel used as fuel.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to fuel sold after the date of the enactment of 
     this Act, in taxable years ending after such date.

     SEC. 207. ALCOHOL FUEL AND BIODIESEL MIXTURES EXCISE TAX 
                   CREDIT.

       (a) In General.--Subchapter B of chapter 65 (relating to 
     rules of special application) is amended by inserting after 
     section 6425 the following new section:

     ``SEC. 6426. CREDIT FOR ALCOHOL FUEL AND BIODIESEL MIXTURES.

       ``(a) Allowance of Credits.--There shall be allowed as a 
     credit against the tax imposed by section 4081 an amount 
     equal to the sum of--
       ``(1) the alcohol fuel mixture credit, plus
       ``(2) the biodiesel mixture credit.
       ``(b) Alcohol Fuel Mixture Credit.--
       ``(1) In general.--For purposes of this section, the 
     alcohol fuel mixture credit is the applicable amount for each 
     gallon of alcohol used by the taxpayer in producing an 
     alcohol fuel mixture.
       ``(2) Applicable amount.--For purposes of this subsection--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the applicable amount is 52 cents (51 cents in the case of 
     any sale or use after 2004).
       ``(B) Mixtures not containing ethanol.--In the case of an 
     alcohol fuel mixture in which none of the alcohol consists of 
     ethanol, the applicable amount is 60 cents.
       ``(3) Alcohol fuel mixture.--For purposes of this 
     subsection, the term `alcohol fuel mixture' is a mixture 
     which--
       ``(A) consists of alcohol and a taxable fuel, and
       ``(B) is sold for use or used as a fuel by the taxpayer 
     producing the mixture.
       ``(4) Other definitions.--For purposes of this subsection--
       ``(A) Alcohol.--The term `alcohol' includes methanol and 
     ethanol but does not include--
       ``(i) alcohol produced from petroleum, natural gas, or coal 
     (including peat), or
       ``(ii) alcohol with a proof of less than 190 (determined 
     without regard to any added denaturants).
     Such term also includes an alcohol gallon equivalent of ethyl 
     tertiary butyl ether or other ethers produced from such 
     alcohol.
       ``(B) Taxable fuel.--The term `taxable fuel' has the 
     meaning given such term by section 4083(a)(1).
       ``(5) Termination.--This subsection shall not apply to any 
     sale or use for any period after December 31, 2010.
       ``(c) Biodiesel Mixture Credit.--
       ``(1) In general.--For purposes of this section, the 
     biodiesel mixture credit is the product of the applicable 
     amount and the number of gallons of biodiesel used by the 
     taxpayer in producing any qualified biodiesel mixture.
       ``(2) Applicable amount.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the applicable amount is 50 cents.
       ``(B) Amount for agri-biodiesel.--

[[Page S10411]]

       ``(i) In general.--Subject to clause (ii), in the case of 
     any biodiesel which is agri-biodiesel, the applicable amount 
     is $1.00.
       ``(ii) Certification for agri-biodiesel.--Clause (i) shall 
     apply only if the taxpayer described in paragraph (1) obtains 
     a certification (in such form and manner as prescribed by the 
     Secretary) from the producer of the agri-biodiesel which 
     identifies the product produced.
       ``(3) Definitions.--Any term used in this subsection which 
     is also used in section 40B shall have the meaning given such 
     term by section 40B.
       ``(4) Termination.--This subsection shall not apply to any 
     sale or use for any period after December 31, 2005.
       ``(d) Mixture not used as a fuel, etc.--
       ``(1) Imposition of tax.--If--
       ``(A) any credit was determined under this section with 
     respect to alcohol or biodiesel used in the production of any 
     alcohol fuel mixture or qualified biodiesel mixture, 
     respectively, and
       ``(B) any person--
       ``(i) separates such alcohol or biodiesel from the mixture, 
     or
       ``(ii) without separation, uses the mixture other than as a 
     fuel,
     then there is hereby imposed on such person a tax equal to 
     the product of the applicable amount and the number of 
     gallons of such alcohol or biodiesel.
       ``(2) Applicable laws.--All provisions of law, including 
     penalties, shall, insofar as applicable and not inconsistent 
     with this section, apply in respect of any tax imposed under 
     paragraph (1) as if such tax were imposed by section 4081 and 
     not by this section.''.
       (b) Registration Requirement.--Section 4101(a) (relating to 
     registration) is amended by inserting ``and every person 
     producing biodiesel (as defined in section 40B(d)(1)) or 
     alcohol (as defined in section 6426(b)(4)(A))'' after 
     ``4091''.
       (c) Conforming Amendments.--
       (1) Section 40(c) is amended by striking ``section 4081(c), 
     or section 4091(c)'' and inserting ``section 4091(c), section 
     6426, section 6427(e), or section 6427(f)''.
       (2) Section 40(d)(4)(B) is amended by striking ``or 
     4081(c)''.
       (3) Section 40(e)(1) is amended--
       (A) by striking ``2007'' in subparagraph (A) and inserting 
     ``2010'', and
       (B) by striking ``2008'' in subparagraph (B) and inserting 
     ``2011''.
       (4) Section 40(h) is amended--
       (A) by striking ``2007'' in paragraph (1) and inserting 
     ``2010'', and
       (B) by striking ``, 2006, or 2007'' in the table contained 
     in paragraph (2) and inserting ``through 2010''.
       (5) Section 4041(b)(2)(B) is amended by striking ``a 
     substance other than petroleum or natural gas'' and inserting 
     ``coal (including peat)''.
       (6) Paragraph (1) of section 4041(k) is amended to read as 
     follows:
       ``(1) In general.--Under regulations prescribed by the 
     Secretary, in the case of the sale or use of any liquid at 
     least 10 percent of which consists of alcohol (as defined in 
     section 6426(b)(4)(A)), the rate of the tax imposed by 
     subsection (c)(1) shall be the comparable rate under section 
     4091(c).''.
       (7) Section 4081 is amended by striking subsection (c).
       (8) Paragraph (2) of section 4083(a) is amended to read as 
     follows:
       ``(2) Gasoline.--The term `gasoline'--
       ``(A) includes any gasoline blend, other than qualified 
     methanol or ethanol fuel (as defined in section 
     4041(b)(2)(B)) or a denaturant of alcohol (as defined in 
     section 6426(b)(4)(A)), and
       ``(B) includes, to the extent prescribed in regulations--
       ``(i) any gasoline blend stock, and
       ``(ii) any product commonly used as an additive in 
     gasoline.
     For purposes of subparagraph (B)(i), the term `gasoline blend 
     stock' means any petroleum product component of gasoline.''.
       (9) Section 6427 is amended by inserting after subsection 
     (d) the following new subsection:
       ``(e) Alcohol or Biodiesel Used To Produce Alcohol Fuel and 
     Biodiesel Mixtures or Used as Fuels.--Except as provided in 
     subsection (k)--
       ``(1) Used to produce a mixture.--If any person produces a 
     mixture described in section 6426 in such person's trade or 
     business, the Secretary shall pay (without interest) to such 
     person an amount equal to the alcohol fuel mixture credit or 
     the biodiesel mixture credit with respect to such mixture.
       ``(2) Used as fuel.--If alcohol (as defined in section 
     40(d)(1)) or biodiesel (as defined in section 40B(d)(1)) or 
     agri-biodiesel (as defined in section 40B(d)(2)) which is not 
     in a mixture with a taxable fuel (as defined in section 
     4083(a)(1))--
       ``(A) is used by any person as a fuel in a trade or 
     business, or
       ``(B) is sold by any person at retail to another person and 
     placed in the fuel tank of such person's vehicle,
     the Secretary shall pay (without interest) to such person an 
     amount equal to the alcohol credit (as determined under 
     section 40(b)(2)) or the biodiesel credit (as determined 
     under section 40B(b)(2)) with respect to such fuel.
       ``(3) Coordination with other repayment provisions.--No 
     amount shall be payable under paragraph (1) with respect to 
     any mixture with respect to which an amount is allowed as a 
     credit under section 6426.
       ``(4) Termination.--This subsection shall not apply with 
     respect to--
       ``(A) any alcohol fuel mixture (as defined in section 
     6426(b)(3)) or alcohol (as so defined) sold or used after 
     December 31, 2010, and
       ``(B) any qualified biodiesel mixture (within the meaning 
     of section 6426(c)(1)) or biodiesel (as so defined) or agri-
     biodiesel (as so defined) sold or used after December 31, 
     2005.''.
       (10) Subsection (f) of section 6427 is amended to read as 
     follows:
       ``(f) Aviation Fuel Used to Produce Certain Alcohol 
     Fuels.--
       ``(1) In general.--Except as provided in subsection (k), if 
     any aviation fuel on which tax was imposed by section 4091 at 
     the regular tax rate is used by any person in producing a 
     mixture described in section 4091(c)(1)(A) which is sold or 
     used in such person's trade or business, the Secretary shall 
     pay (without interest) to such person an amount equal to the 
     excess of the regular tax rate over the incentive tax rate 
     with respect to such fuel.
       ``(2) Definitions.--For purposes of paragraph (1)--
       ``(A) Regular tax rate.--The term `regular tax rate' means 
     the aggregate rate of tax imposed by section 4091 determined 
     without regard to subsection (c) thereof.
       ``(B) Incentive tax rate.--The term `incentive tax rate' 
     means the aggregate rate of tax imposed by section 4091 with 
     respect to fuel described in subsection (c)(2) thereof.
       ``(3) Coordination with other repayment provisions.--No 
     amount shall be payable under paragraph (1) with respect to 
     any aviation fuel with respect to which an amount is payable 
     under subsection (d) or (l).
       ``(4) Termination.--This subsection shall not apply with 
     respect to any mixture sold or used after September 30, 
     2007.''.
       (11) Paragraphs (1) and (2) of section 6427(i) are amended 
     by inserting ``(f),'' after ``(d),''.
       (12) Section 6427(i)(3) is amended--
       (A) by striking ``subsection (f)'' both places it appears 
     in subparagraph (A) and inserting ``subsection (e)(1)'',
       (B) by striking ``gasoline, diesel fuel, or kerosene used 
     to produce a qualified alcohol mixture (as defined in section 
     4081(c)(3))'' in subparagraph (A) and inserting ``a mixture 
     described in section 6426'',
       (C) by striking ``subsection (f)(1)'' in subparagraph (B) 
     and inserting ``subsection (e)(1)'',
       (D) by striking ``20 days of the date of the filing of such 
     claim'' in subparagraph (B) and inserting ``45 days of the 
     date of the filing of such claim (20 days in the case of an 
     electronic claim)'', and
       (E) by striking ``alcohol mixture'' in the heading and 
     inserting ``alcohol fuel and biodiesel mixture''.
       (13) Section 6427(o) is amended--
       (A) by striking paragraph (1) and inserting the following 
     new paragraph:
       ``(1) any tax is imposed by section 4081, and'',
       (B) by striking ``such gasohol'' in paragraph (2) and 
     inserting ``the alcohol fuel mixture (as defined in section 
     6426(b)(3))'',
       (C) by striking ``gasohol'' both places it appears in the 
     matter following paragraph (2) and inserting ``alcohol fuel 
     mixture'', and
       (D) by striking ``Gasohol'' in the heading and inserting 
     ``Alcohol Fuel Mixture''.
       (14) Section 9503(b)(1) is amended by adding at the end the 
     following new flush sentence:
     ``For purposes of this paragraph, taxes received under 
     sections 4041 and 4081 shall be determined without reduction 
     for credits under section 6426.''.
       (15) Section 9503(b)(4) is amended--
       (A) by adding ``or'' at the end of subparagraph (C),
       (B) by striking the comma at the end of subparagraph 
     (D)(iii) and inserting a period, and
       (C) by striking subparagraphs (E) and (F).
       (16) Section 9503(c)(2)(A)(i)(III) is amended by inserting 
     ``(other than subsection (e) thereof)'' after ``section 
     6427''.
       (17) Section 9503(e)(2) is amended by striking subparagraph 
     (B) and by redesignating subparagraphs (C), (D), and (E) as 
     subparagraphs (B), (C), and (D), respectively.
       (18) The table of sections for subchapter B of chapter 65 
     is amended by inserting after the item relating to section 
     6425 the following new item:

``Sec. 6426. Credit for alcohol fuel and biodiesel mixtures.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to fuel sold or used after September 30, 2003.
       (e) Format for Filing.--The Secretary of the Treasury shall 
     describe the electronic format for filing claims described in 
     section 6427(i)(3)(B) of the Internal Revenue Code of 1986 
     (as amended by subsection (b)(12)(D)) not later than 
     September 30, 2003.

     SEC. 208. SALE OF GASOLINE AND DIESEL FUEL AT DUTY-FREE SALES 
                   ENTERPRISES.

       (a) Prohibition.--Section 555(b) of the Tariff Act of 1930 
     (19 U.S.C. 1555(b)) is amended--
       (1) by redesignating paragraphs (6) through (8) as 
     paragraphs (7) through (9), respectively; and
       (2) by inserting after paragraph (5) the following:
       ``(6) Any gasoline or diesel fuel sold at a duty-free sales 
     enterprise shall be considered to be entered for consumption 
     into the customs territory of the United States.''.

[[Page S10412]]

       (b) Construction.--The amendments made by this section 
     shall not be construed to create any inference with respect 
     to the interpretation of any provision of law as such 
     provision was in effect on the day before the date of 
     enactment of this Act.
       (c) Effective date.--The amendments made by this section 
     shall take effect on the date of enactment of this Act.

        TITLE III--CONSERVATION AND ENERGY EFFICIENCY PROVISIONS

     SEC. 301. CREDIT FOR CONSTRUCTION OF NEW ENERGY EFFICIENT 
                   HOME.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

     ``SEC. 45G. NEW ENERGY EFFICIENT HOME CREDIT.

       ``(a) In General.--For purposes of section 38, in the case 
     of an eligible contractor, the credit determined under this 
     section for the taxable year is an amount equal to the 
     aggregate adjusted bases of all energy efficient property 
     installed in a qualifying new home during construction of 
     such home.
       ``(b) Limitations.--
       ``(1) Maximum credit.--
       ``(A) In general.--The credit allowed by this section with 
     respect to a qualifying new home shall not exceed--
       ``(i) in the case of a 30-percent home, $1,000, and
       ``(ii) in the case of a 50-percent home, $2,000.
       ``(B) 30- or 50-percent home.--For purposes of subparagraph 
     (A)--
       ``(i) 30-percent home.--The term `30-percent home' means--

       ``(I) a qualifying new home which is certified to have a 
     projected level of annual heating and cooling energy 
     consumption, measured in terms of average annual energy cost 
     to the homeowner, which is at least 30 percent less than the 
     annual level of heating and cooling energy consumption of a 
     qualifying new home constructed in accordance with the latest 
     standards of chapter 4 of the International Energy 
     Conservation Code approved by the Department of Energy before 
     the construction of such qualifying new home and any 
     applicable Federal minimum efficiency standards for 
     equipment, or
       ``(II) in the case of a qualifying new home which is a 
     manufactured home, a home which meets the applicable 
     standards required by the Administrator of the Environmental 
     Protection Agency under the Energy Star Labeled Homes 
     program.

       ``(ii) 50-percent home.--The term `50-percent home' means a 
     qualifying new home which would be described in clause (i)(I) 
     if 50 percent were substituted for 30 percent.
       ``(C) Prior credit amounts on same home taken into 
     account.--The amount of the credit otherwise allowable for 
     the taxable year with respect to a qualifying new home under 
     clause (i) or (ii) of subparagraph (A) shall be reduced by 
     the sum of the credits allowed under subsection (a) to any 
     taxpayer with respect to the home for all preceding taxable 
     years.
       ``(2) Coordination with certain credits.--For purposes of 
     this section--
       ``(A) the basis of any property referred to in subsection 
     (a) shall be reduced by that portion of the basis of any 
     property which is attributable to the rehabilitation credit 
     (as determined under section 47(a)) or to the energy credit 
     (as determined under section 48(a)), and
       ``(B) expenditures taken into account under section 25D, 
     47, or 48(a) shall not be taken into account under this 
     section.
       ``(3) Provider limitation.--Any eligible contractor who 
     directly or indirectly provides the guarantee of energy 
     savings under a guarantee-based method of certification 
     described in subsection (d)(1)(D) shall not be eligible to 
     receive the credit allowed by this section.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Eligible contractor.--The term `eligible contractor' 
     means--
       ``(A) the person who constructed the qualifying new home, 
     or
       ``(B) in the case of a qualifying new home which is a 
     manufactured home, the manufactured home producer of such 
     home.
     If more than 1 person is described in subparagraph (A) or (B) 
     with respect to any qualifying new home, such term means the 
     person designated as such by the owner of such home.
       ``(2) Energy efficient property.--The term `energy 
     efficient property' means any energy efficient building 
     envelope component, and any energy efficient heating or 
     cooling equipment or system which can, individually or in 
     combination with other components, meet the requirements of 
     this section.
       ``(3) Qualifying new home.--
       ``(A) In general.--The term `qualifying new home' means a 
     dwelling--
       ``(i) located in the United States,
       ``(ii) the construction of which is substantially completed 
     after the date of the enactment of this section, and
       ``(iii) the first use of which after construction is as a 
     principal residence (within the meaning of section 121).
       ``(B) Manufactured home included.--The term `qualifying new 
     home' includes a manufactured home conforming to Federal 
     Manufactured Home Construction and Safety Standards (24 
     C.F.R. 3280).
       ``(4) Construction.--The term `construction' includes 
     reconstruction and rehabilitation.
       ``(5) Building envelope component.--The term `building 
     envelope component' means--
       ``(A) any insulation material or system which is 
     specifically and primarily designed to reduce the heat loss 
     or gain of a qualifying new home when installed in or on such 
     home,
       ``(B) exterior windows (including skylights), and
       ``(C) exterior doors.
       ``(d) Certification.--
       ``(1) Method of certification.--
       ``(A) In general.--A certification described in subsection 
     (b)(1)(B) shall be determined either by a component-based 
     method, a performance-based method, or a guarantee-based 
     method, or, in the case of a qualifying new home which is a 
     manufactured home, by a method prescribed by the 
     Administrator of the Environmental Protection Agency under 
     the Energy Star Labeled Homes program.
       ``(B) Component-based method.--A component-based method is 
     a method which uses the applicable technical energy 
     efficiency specifications or ratings (including product 
     labeling requirements) for the energy efficient building 
     envelope component or energy efficient heating or cooling 
     equipment. The Secretary shall, in consultation with the 
     Administrator of the Environmental Protection Agency, develop 
     prescriptive component-based packages which are equivalent in 
     energy performance to properties which qualify under 
     subparagraph (C).
       ``(C) Performance-based method.--
       ``(i) In general.--A performance-based method is a method 
     which calculates projected energy usage and cost reductions 
     in the qualifying new home in relation to a new home--

       ``(I) heated by the same fuel type, and
       ``(II) constructed in accordance with the latest standards 
     of chapter 4 of the International Energy Conservation Code 
     approved by the Department of Energy before the construction 
     of such qualifying new home and any applicable Federal 
     minimum efficiency standards for equipment.

       ``(ii) Computer software.--Computer software shall be used 
     in support of a performance-based method certification under 
     clause (i). Such software shall meet procedures and methods 
     for calculating energy and cost savings in regulations 
     promulgated by the Secretary of Energy.
       ``(D) Guarantee-based method.--
       ``(i) In general.--A guarantee-based method is a method 
     which guarantees in writing to the homeowner energy savings 
     of either 30 percent or 50 percent over the 2000 
     International Energy Conservation Code for heating and 
     cooling costs. The guarantee shall be provided for a minimum 
     of 2 years and shall fully reimburse the homeowner any 
     heating and cooling costs in excess of the guaranteed amount.
       ``(ii) Computer software.--Computer software shall be 
     selected by the provider to support the guarantee-based 
     method certification under clause (i). Such software shall 
     meet procedures and methods for calculating energy and cost 
     savings in regulations promulgated by the Secretary of 
     Energy.
       ``(2) Provider.--A certification described in subsection 
     (b)(1)(B) shall be provided by--
       ``(A) in the case of a component-based method, a local 
     building regulatory authority, a utility, or a home energy 
     rating organization,
       ``(B) in the case of a performance-based method or a 
     guarantee-based method, an individual recognized by an 
     organization designated by the Secretary for such purposes, 
     or
       ``(C) in the case of a qualifying new home which is a 
     manufactured home, a manufactured home primary inspection 
     agency.
       ``(3) Form.--
       ``(A) In general.--A certification described in subsection 
     (b)(1)(B) shall be made in writing in a manner which 
     specifies in readily verifiable fashion the energy efficient 
     building envelope components and energy efficient heating or 
     cooling equipment installed and their respective rated energy 
     efficiency performance, and
       ``(i) in the case of a performance-based method, 
     accompanied by a written analysis documenting the proper 
     application of a permissible energy performance calculation 
     method to the specific circumstances of such qualifying new 
     home, and
       ``(ii) in the case of a qualifying new home which is a 
     manufactured home, accompanied by such documentation as 
     required by the Administrator of the Environmental Protection 
     Agency under the Energy Star Labeled Homes program.
       ``(B) Form provided to buyer.--A form documenting the 
     energy efficient building envelope components and energy 
     efficient heating or cooling equipment installed and their 
     rated energy efficiency performance shall be provided to the 
     buyer of the qualifying new home. The form shall include 
     labeled R-value for insulation products, NFRC-labeled U-
     factor and solar heat gain coefficient for windows, 
     skylights, and doors, labeled annual fuel utilization 
     efficiency (AFUE) ratings for furnaces and boilers, labeled 
     heating seasonal performance factor (HSPF) ratings for 
     electric heat pumps, and labeled seasonal energy efficiency 
     ratio (SEER) ratings for air conditioners.
       ``(C) Ratings label affixed in dwelling.--A permanent label 
     documenting the ratings in subparagraph (B) shall be affixed 
     to the front of the electrical distribution panel of the 
     qualifying new home, or shall be otherwise permanently 
     displayed in a readily inspectable location in such home.

[[Page S10413]]

       ``(4) Regulations.--
       ``(A) In general.--In prescribing regulations under this 
     subsection for performance-based and guarantee-based 
     certification methods, the Secretary shall prescribe 
     procedures for calculating annual energy usage and cost 
     reductions for heating and cooling and for the reporting of 
     the results. Such regulations shall--
       ``(i) provide that any calculation procedures be fuel 
     neutral such that the same energy efficiency measures allow a 
     qualifying new home to be eligible for the credit under this 
     section regardless of whether such home uses a gas or oil 
     furnace or boiler or an electric heat pump, and
       ``(ii) require that any computer software allow for the 
     printing of the Federal tax forms necessary for the credit 
     under this section and for the printing of forms for 
     disclosure to the homebuyer.
       ``(B) Providers.--For purposes of paragraph (2)(B), the 
     Secretary shall establish requirements for the designation of 
     individuals based on the requirements for energy consultants 
     and home energy raters specified by the Mortgage Industry 
     National Home Energy Rating Standards.
       ``(e) Application.--Subsection (a) shall apply to 
     qualifying new homes the construction of which is 
     substantially completed after the date of the enactment of 
     this section and purchased during the period beginning on 
     such date and ending on--
       ``(1) in the case of any 30-percent home, December 31, 
     2005, and
       ``(2) in the case of any 50-percent home, December 31, 
     2007.''.
       (b) Credit Made Part of General Business Credit.--Section 
     38(b) (relating to current year business credit), as amended 
     by this Act, is amended by striking ``plus'' at the end of 
     paragraph (16), by striking the period at the end of 
     paragraph (17) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(18) the new energy efficient home credit determined 
     under section 45G(a).''.
       (c) Denial of Double Benefit.--Section 280C (relating to 
     certain expenses for which credits are allowable) is amended 
     by adding at the end the following new subsection:
       ``(d) New Energy Efficient Home Expenses.--No deduction 
     shall be allowed for that portion of expenses for a 
     qualifying new home otherwise allowable as a deduction for 
     the taxable year which is equal to the amount of the credit 
     determined for such taxable year under section 45G(a).''.
       (d) Limitation on Carryback.--Section 39(d) (relating to 
     transition rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(13) No carryback of new energy efficient home credit 
     before effective date.--No portion of the unused business 
     credit for any taxable year which is attributable to the 
     credit determined under section 45G may be carried back to 
     any taxable year ending on or before the date of the 
     enactment of such section.''.
       (e) Deduction for Certain Unused Business Credits.--Section 
     196(c) (defining qualified business credits), as amended by 
     this Act, is amended by striking ``and'' at the end of 
     paragraph (10), by striking the period at the end of 
     paragraph (11) and inserting ``, and'', and by adding after 
     paragraph (11) the following new paragraph:
       ``(12) the new energy efficient home credit determined 
     under section 45G(a).''.
       (f) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45G. New energy efficient home credit.''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to homes the construction of which is 
     substantially completed after the date of the enactment of 
     this Act.

     SEC. 302. CREDIT FOR ENERGY EFFICIENT APPLIANCES.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business-related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

     ``SEC. 45H. ENERGY EFFICIENT APPLIANCE CREDIT.

       ``(a) Allowance of Credit.--
       ``(1) In general.--For purposes of section 38, the energy 
     efficient appliance credit determined under this section for 
     the taxable year is an amount equal to the sum of the amounts 
     determined under paragraph (2) for qualified energy efficient 
     appliances produced by the taxpayer during the calendar year 
     ending with or within the taxable year.
       ``(2) Amount.--The amount determined under this paragraph 
     for any category described in subsection (b)(2)(B) shall be 
     the product of the applicable amount for appliances in the 
     category and the eligible production for the category.
       ``(b) Applicable Amount; Eligible Production.--For purposes 
     of subsection (a)--
       ``(1) Applicable amount.--The applicable amount is--
       ``(A) $50, in the case of--
       ``(i) a clothes washer which is manufactured with at least 
     a 1.42 MEF, or
       ``(ii) a refrigerator which consumes at least 10 percent 
     less kilowatt hours per year than the energy conservation 
     standards for refrigerators promulgated by the Department of 
     Energy and effective on July 1, 2001,
       ``(B) $100, in the case of--
       ``(i) a clothes washer which is manufactured with at least 
     a 1.50 MEF, or
       ``(ii) a refrigerator which consumes at least 15 percent 
     (20 percent in the case of a refrigerator manufactured after 
     2006) less kilowatt hours per year than such energy 
     conservation standards, and
       ``(C) $150, in the case of a refrigerator manufactured 
     before 2007 which consumes at least 20 percent less kilowatt 
     hours per year than such energy conservation standards.
       ``(2) Eligible production.--
       ``(A) In general.--The eligible production of each category 
     of qualified energy efficient appliances is the excess of--
       ``(i) the number of appliances in such category which are 
     produced by the taxpayer during such calendar year, over
       ``(ii) the average number of appliances in such category 
     which were produced by the taxpayer during calendar years 
     2000, 2001, and 2002.
       ``(B) Categories.--For purposes of subparagraph (A), the 
     categories are--
       ``(i) clothes washers described in paragraph (1)(A)(i),
       ``(ii) clothes washers described in paragraph (1)(B)(i),
       ``(iii) refrigerators described in paragraph (1)(A)(ii),
       ``(iv) refrigerators described in paragraph (1)(B)(ii), and
       ``(v) refrigerators described in paragraph (1)(C).
       ``(c) Limitation on Maximum Credit.--
       ``(1) In general.--The amount of credit allowed under 
     subsection (a) with respect to a taxpayer for all taxable 
     years shall not exceed $60,000,000, of which not more than 
     $30,000,000 may be allowed with respect to the credit 
     determined by using the applicable amount under subsection 
     (b)(1)(A).
       ``(2) Limitation based on gross receipts.--The credit 
     allowed under subsection (a) with respect to a taxpayer for 
     the taxable year shall not exceed an amount equal to 2 
     percent of the average annual gross receipts of the taxpayer 
     for the 3 taxable years preceding the taxable year in which 
     the credit is determined.
       ``(3) Gross receipts.--For purposes of this subsection, the 
     rules of paragraphs (2) and (3) of section 448(c) shall 
     apply.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified energy efficient appliance.--The term 
     `qualified energy efficient appliance' means--
       ``(A) a clothes washer described in subparagraph (A)(i) or 
     (B)(i) of subsection (b)(1), or
       ``(B) a refrigerator described in subparagraph (A)(ii), 
     (B)(ii), or (C) of subsection (b)(1).
       ``(2) Clothes washer.--The term `clothes washer' means a 
     residential clothes washer, including a residential style 
     coin operated washer.
       ``(3) Refrigerator.--The term `refrigerator' means an 
     automatic defrost refrigerator-freezer which has an internal 
     volume of at least 16.5 cubic feet.
       ``(4) MEF.--The term `MEF' means Modified Energy Factor (as 
     determined by the Secretary of Energy).
       ``(e) Special Rules.--
       ``(1) In general.--Rules similar to the rules of 
     subsections (c), (d), and (e) of section 52 shall apply for 
     purposes of this section.
       ``(2) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52 or 
     subsection (m) or (o) of section 414 shall be treated as 1 
     person for purposes of subsection (a).
       ``(f) Verification.--The taxpayer shall submit such 
     information or certification as the Secretary, in 
     consultation with the Secretary of Energy, determines 
     necessary to claim the credit amount under subsection (a).
       ``(g) Termination.--This section shall not apply--
       ``(1) with respect to refrigerators described in subsection 
     (b)(1)(A)(ii) produced after December 31, 2004, and
       ``(2) with respect to all other qualified energy efficient 
     appliances produced after December 31, 2007.''.
       (b) Credit Made Part of General Business Credit.--Section 
     38(b) (relating to current year business credit), as amended 
     by this Act, is amended by striking ``plus'' at the end of 
     paragraph (17), by striking the period at the end of 
     paragraph (18) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(19) the energy efficient appliance credit determined 
     under section 45H(a).''.
       (c) Limitation on Carryback.--Section 39(d) (relating to 
     transition rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(14) No carryback of energy efficient appliance credit 
     before effective date.--No portion of the unused business 
     credit for any taxable year which is attributable to the 
     energy efficient appliance credit determined under section 
     45H may be carried to a taxable year ending on or before the 
     date of the enactment of such section.''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45H. Energy efficient appliance credit.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to appliances produced after the date of the 
     enactment of this Act, in taxable years ending after such 
     date.

[[Page S10414]]

     SEC. 303. CREDIT FOR RESIDENTIAL ENERGY EFFICIENT PROPERTY.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits) is 
     amended by inserting after section 25B the following new 
     section:

     ``SEC. 25C. RESIDENTIAL ENERGY EFFICIENT PROPERTY.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to the sum 
     of--
       ``(1) 15 percent of the qualified photovoltaic property 
     expenditures made by the taxpayer during such year,
       ``(2) 15 percent of the qualified solar water heating 
     property expenditures made by the taxpayer during such year,
       ``(3) 30 percent of the qualified fuel cell property 
     expenditures made by the taxpayer during such year,
       ``(4) 30 percent of the qualified wind energy property 
     expenditures made by the taxpayer during such year, and
       ``(5) the sum of the qualified Tier 2 energy efficient 
     building property expenditures made by the taxpayer during 
     such year.
       ``(b) Limitations.--
       ``(1) Maximum credit.--The credit allowed under subsection 
     (a) shall not exceed--
       ``(A) $2,000 for property described in paragraph (1), (2), 
     or (5) of subsection (d),
       ``(B) $500 for each 0.5 kilowatt of capacity of property 
     described in subsection (d)(4), and
       ``(C) for property described in subsection (d)(6)--
       ``(i) $150 for each electric heat pump water heater,
       ``(ii) $125 for each advanced natural gas, oil, propane 
     furnace, or hot water boiler,
       ``(iii) $150 for each advanced natural gas, oil, or propane 
     water heater,
       ``(iv) $50 for each natural gas, oil, or propane water 
     heater,
       ``(v) $50 for an advanced main air circulating fan,
       ``(vi) $150 for each advanced combination space and water 
     heating system,
       ``(vii) $50 for each combination space and water heating 
     system, and
       ``(viii) $250 for each geothermal heat pump.
       ``(2) Safety certifications.--No credit shall be allowed 
     under this section for an item of property unless--
       ``(A) in the case of solar water heating property, such 
     property is certified for performance and safety by the non-
     profit Solar Rating Certification Corporation or a comparable 
     entity endorsed by the government of the State in which such 
     property is installed,
       ``(B) in the case of a photovoltaic property, a fuel cell 
     property, or a wind energy property, such property meets 
     appropriate fire and electric code requirements, and
       ``(C) in the case of property described in subsection 
     (d)(6), such property meets the performance and quality 
     standards, and the certification requirements (if any), 
     which--
       ``(i) have been prescribed by the Secretary by regulations 
     (after consultation with the Secretary of Energy or the 
     Administrator of the Environmental Protection Agency, as 
     appropriate),
       ``(ii) in the case of the energy efficiency ratio (EER) for 
     property described in subsection (d)(6)(B)(viii)--

       ``(I) require measurements to be based on published data 
     which is tested by manufacturers at 95 degrees Fahrenheit, 
     and
       ``(II) do not require ratings to be based on certified data 
     of the Air Conditioning and Refrigeration Institute, and

       ``(iii) are in effect at the time of the acquisition of the 
     property.
       ``(c) Carryforward of Unused Credit.--If the credit 
     allowable under subsection (a) exceeds the limitation imposed 
     by section 26(a) for such taxable year reduced by the sum of 
     the credits allowable under this subpart (other than this 
     section and section 25D), such excess shall be carried to the 
     succeeding taxable year and added to the credit allowable 
     under subsection (a) for such succeeding taxable year.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified solar water heating property expenditure.--
     The term `qualified solar water heating property expenditure' 
     means an expenditure for property to heat water for use in a 
     dwelling unit located in the United States and used as a 
     residence by the taxpayer if at least half of the energy used 
     by such property for such purpose is derived from the sun.
       ``(2) Qualified photovoltaic property expenditure.--The 
     term `qualified photovoltaic property expenditure' means an 
     expenditure for property which uses solar energy to generate 
     electricity for use in a dwelling unit located in the United 
     States and used as a residence by the taxpayer.
       ``(3) Solar panels.--No expenditure relating to a solar 
     panel or other property installed as a roof (or portion 
     thereof) shall fail to be treated as property described in 
     paragraph (1) or (2) solely because it constitutes a 
     structural component of the structure on which it is 
     installed.
       ``(4) Qualified fuel cell property expenditure.--The term 
     `qualified fuel cell property expenditure' means an 
     expenditure for qualified fuel cell property (as defined in 
     section 48(a)(4)) installed on or in connection with a 
     dwelling unit located in the United States and used as a 
     principal residence (within the meaning of section 121) by 
     the taxpayer.
       ``(5) Qualified wind energy property expenditure.--The term 
     `qualified wind energy property expenditure' means an 
     expenditure for property which uses wind energy to generate 
     electricity for use in a dwelling unit located in the United 
     States and used as a residence by the taxpayer.
       ``(6) Qualified tier 2 energy efficient building property 
     expenditure.--
       ``(A) In general.--The term `qualified Tier 2 energy 
     efficient building property expenditure' means an expenditure 
     for any Tier 2 energy efficient building property.
       ``(B) Tier 2 energy efficient building property.--The term 
     `Tier 2 energy efficient building property' means--
       ``(i) an electric heat pump water heater which yields an 
     energy factor of at least 1.7 in the standard Department of 
     Energy test procedure,
       ``(ii) an advanced natural gas, oil, propane furnace, or 
     hot water boiler which achieves at least 95 percent annual 
     fuel utilization efficiency (AFUE),
       ``(iii) an advanced natural gas, oil, or propane water 
     heater which has an energy factor of at least 0.80 in the 
     standard Department of Energy test procedure,
       ``(iv) a natural gas, oil, or propane water heater which 
     has an energy factor of at least 0.65 but less than 0.80 in 
     the standard Department of Energy test procedure,
       ``(v) an advanced main air circulating fan used in a new 
     natural gas, propane, or oil-fired furnace, including main 
     air circulating fans that use a brushless permanent magnet 
     motor or another type of motor which achieves similar or 
     higher efficiency at half and full speed, as determined by 
     the Secretary,
       ``(vi) an advanced combination space and water heating 
     system which has a combined energy factor of at least 0.80 
     and a combined annual fuel utilization efficiency (AFUE) of 
     at least 78 percent in the standard Department of Energy test 
     procedure,
       ``(vii) a combination space and water heating system which 
     has a combined energy factor of at least 0.65 but less than 
     0.80 and a combined annual fuel utilization efficiency (AFUE) 
     of at least 78 percent in the standard Department of Energy 
     test procedure, and
       ``(viii) a geothermal heat pump which has an energy 
     efficiency ratio (EER) of at least 21.
       ``(7) Labor costs.--Expenditures for labor costs properly 
     allocable to the onsite preparation, assembly, or original 
     installation of the property described in paragraph (1), (2), 
     (4), (5), or (6) and for piping or wiring to interconnect 
     such property to the dwelling unit shall be taken into 
     account for purposes of this section.
       ``(8) Swimming pools, etc., used as storage medium.--
     Expenditures which are properly allocable to a swimming pool, 
     hot tub, or any other energy storage medium which has a 
     function other than the function of such storage shall not be 
     taken into account for purposes of this section.
       ``(e) Special Rules.--For purposes of this section--
       ``(1) Dollar amounts in case of joint occupancy.--In the 
     case of any dwelling unit which is jointly occupied and used 
     during any calendar year as a residence by 2 or more 
     individuals the following rules shall apply:
       ``(A) The amount of the credit allowable, under subsection 
     (a) by reason of expenditures (as the case may be) made 
     during such calendar year by any of such individuals with 
     respect to such dwelling unit shall be determined by treating 
     all of such individuals as 1 taxpayer whose taxable year is 
     such calendar year.
       ``(B) There shall be allowable, with respect to such 
     expenditures to each of such individuals, a credit under 
     subsection (a) for the taxable year in which such calendar 
     year ends in an amount which bears the same ratio to the 
     amount determined under subparagraph (A) as the amount of 
     such expenditures made by such individual during such 
     calendar year bears to the aggregate of such expenditures 
     made by all of such individuals during such calendar year.
       ``(2) Tenant-stockholder in cooperative housing 
     corporation.--In the case of an individual who is a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     individual shall be treated as having made his tenant-
     stockholder's proportionate share (as defined in section 
     216(b)(3)) of any expenditures of such corporation.
       ``(3) Condominiums.--
       ``(A) In general.--In the case of an individual who is a 
     member of a condominium management association with respect 
     to a condominium which the individual owns, such individual 
     shall be treated as having made the individual's 
     proportionate share of any expenditures of such association.
       ``(B) Condominium management association.--For purposes of 
     this paragraph, the term `condominium management association' 
     means an organization which meets the requirements of 
     paragraph (1) of section 528(c) (other than subparagraph (E) 
     thereof) with respect to a condominium project substantially 
     all of the units of which are used as residences.
       ``(4) Allocation in certain cases.--Except in the case of 
     qualified wind energy property expenditures, if less than 80 
     percent of the use of an item is for nonbusiness purposes, 
     only that portion of the expenditures for such item which is 
     properly allocable to use for nonbusiness purposes shall be 
     taken into account.

[[Page S10415]]

       ``(5) When expenditure made; amount of expenditure.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     an expenditure with respect to an item shall be treated as 
     made when the original installation of the item is completed.
       ``(B) Expenditures part of building construction.--In the 
     case of an expenditure in connection with the construction or 
     reconstruction of a structure, such expenditure shall be 
     treated as made when the original use of the constructed or 
     reconstructed structure by the taxpayer begins.
       ``(C) Amount.--The amount of any expenditure shall be the 
     cost thereof.
       ``(6) Property financed by subsidized energy financing.--
     For purposes of determining the amount of expenditures made 
     by any individual with respect to any dwelling unit, there 
     shall not be taken into account expenditures which are made 
     from subsidized energy financing (as defined in section 
     48(a)(5)(C)).
       ``(f) Basis Adjustments.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(g) Termination.--The credit allowed under this section 
     shall not apply to expenditures after December 31, 2007.''.
       (b) Credit Allowed Against Regular Tax and Alternative 
     Minimum Tax.--
       (1) In general.--Section 25C(b), as added by subsection 
     (a), is amended by adding at the end the following new 
     paragraph:
       ``(3) Limitation based on amount of tax.--The credit 
     allowed under subsection (a) for the taxable year shall not 
     exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under this subpart 
     (other than this section and section 25D) and section 27 for 
     the taxable year.''.
       (2) Conforming amendments.--
       (A) Section 25C(c), as added by subsection (a), is amended 
     by striking ``section 26(a) for such taxable year reduced by 
     the sum of the credits allowable under this subpart (other 
     than this section and section 25D)'' and inserting 
     ``subsection (b)(3)''.
       (B) Section 23(b)(4)(B) is amended by inserting ``and 
     section 25C'' after ``this section''.
       (C) Section 24(b)(3)(B) is amended by striking ``23 and 
     25B'' and inserting ``23, 25B, and 25C''.
       (D) Section 25(e)(1)(C) is amended by inserting ``25C,'' 
     after ``25B,''.
       (E) Section 25B(g)(2) is amended by striking ``section 23'' 
     and inserting ``sections 23 and 25C''.
       (F) Section 26(a)(1) is amended by striking ``and 25B'' and 
     inserting ``25B, and 25C''.
       (G) Section 904(h) is amended by striking ``and 25B'' and 
     inserting ``25B, and 25C''.
       (H) Section 1400C(d) is amended by striking ``and 25B'' and 
     inserting ``25B, and 25C''.
       (c) Additional Conforming Amendments.--
       (1) Section 23(c), as in effect for taxable years beginning 
     before January 1, 2004, is amended by striking ``section 
     1400C'' and inserting ``sections 25C and 1400C''.
       (2) Section 25(e)(1)(C), as in effect for taxable years 
     beginning before January 1, 2004, is amended by inserting ``, 
     25C,'' after ``sections 23''.
       (3) Section 1016(a), as amended by this Act, is amended by 
     striking ``and'' at the end of paragraph (29), by striking 
     the period at the end of paragraph (30) and inserting ``, 
     and'', and by adding at the end the following new paragraph:
       ``(31) to the extent provided in section 25C(f), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25C.''.
       (4) Section 1400C(d), as in effect for taxable years 
     beginning before January 1, 2004, is amended by inserting 
     ``and section 25C'' after ``this section''.
       (5) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 25B the following new item:

``Sec. 25C. Residential energy efficient property.''.
       (d) Effective Dates.--
       (1) In general.--Except as provided by paragraph (2), the 
     amendments made by this section shall apply to expenditures 
     after the date of the enactment of this Act, in taxable years 
     ending after such date.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 304. CREDIT FOR BUSINESS INSTALLATION OF QUALIFIED FUEL 
                   CELLS AND STATIONARY MICROTURBINE POWER PLANTS.

       (a) In General.--Section 48(a)(3)(A) (defining energy 
     property) is amended by striking ``or'' at the end of clause 
     (i), by adding ``or'' at the end of clause (ii), and by 
     inserting after clause (ii) the following new clause:
       ``(iii) qualified fuel cell property or qualified 
     microturbine property,''.
       (b) Qualified Fuel Cell Property; Qualified Microturbine 
     Property.--Section 48(a) (relating to energy credit) is 
     amended by redesignating paragraphs (4) and (5) as paragraphs 
     (5) and (6), respectively, and by inserting after paragraph 
     (3) the following new paragraph:
       ``(4) Qualified fuel cell property; qualified microturbine 
     property.--For purposes of this subsection--
       ``(A) Qualified fuel cell property.--
       ``(i) In general.--The term `qualified fuel cell property' 
     means a fuel cell power plant which--

       ``(I) generates at least 0.5 kilowatt of electricity using 
     an electrochemical process, and
       ``(II) has an electricity-only generation efficiency 
     greater than 30 percent.

       ``(ii) Limitation.--In the case of qualified fuel cell 
     property placed in service during the taxable year, the 
     credit otherwise determined under paragraph (1) for such year 
     with respect to such property shall not exceed an amount 
     equal to $500 for each 0.5 kilowatt of capacity of such 
     property.
       ``(iii) Fuel cell power plant.--The term `fuel cell power 
     plant' means an integrated system comprised of a fuel cell 
     stack assembly and associated balance of plant components 
     which converts a fuel into electricity using electrochemical 
     means.
       ``(iv) Termination.--The term `qualified fuel cell 
     property' shall not include any property placed in service 
     after December 31, 2007.
       ``(B) Qualified microturbine property.--
       ``(i) In general.--The term `qualified microturbine 
     property' means a stationary microturbine power plant which--

       ``(I) has a capacity of less than 2,000 kilowatts, and
       ``(II) has an electricity-only generation efficiency of not 
     less than 26 percent at International Standard Organization 
     conditions.

       ``(ii) Limitation.--In the case of qualified microturbine 
     property placed in service during the taxable year, the 
     credit otherwise determined under paragraph (1) for such year 
     with respect to such property shall not exceed an amount 
     equal $200 for each kilowatt of capacity of such property.
       ``(iii) Stationary microturbine power plant.--The term 
     `stationary microturbine power plant' means an integrated 
     system comprised of a gas turbine engine, a combustor, a 
     recuperator or regenerator, a generator or alternator, and 
     associated balance of plant components which converts a fuel 
     into electricity and thermal energy. Such term also includes 
     all secondary components located between the existing 
     infrastructure for fuel delivery and the existing 
     infrastructure for power distribution, including equipment 
     and controls for meeting relevant power standards, such as 
     voltage, frequency, and power factors.
       ``(iv) Termination.--The term `qualified microturbine 
     property' shall not include any property placed in service 
     after December 31, 2006.''.
       (c) Energy Percentage.--Section 48(a)(2)(A) (relating to 
     energy percentage) is amended to read as follows:
       ``(A) In general.--The energy percentage is--
       ``(i) in the case of qualified fuel cell property, 30 
     percent, and
       ``(ii) in the case of any other energy property, 10 
     percent.''.
       (d) Conforming Amendments.--
       (A) Section 29(b)(3)(A)(i)(III) is amended by striking 
     ``section 48(a)(4)(C)'' and inserting ``section 
     48(a)(5)(C)''.
       (B) Section 48(a)(1) is amended by inserting ``except as 
     provided in subparagraph (A)(ii) or (B)(ii) of paragraph 
     (4),'' before ``the energy''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date, under rules similar to the rules of section 48(m) of 
     the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of the Revenue 
     Reconciliation Act of 1990).

     SEC. 305. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

       (a) In General.--Part VI of subchapter B of chapter 1 
     (relating to itemized deductions for individuals and 
     corporations) is amended by inserting after section 179A the 
     following new section:

     ``SEC. 179B. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

       ``(a) In General.--There shall be allowed as a deduction 
     for the taxable year in which a building is placed in service 
     by a taxpayer, an amount equal to the energy efficient 
     commercial building property expenditures made by such 
     taxpayer with respect to the construction or reconstruction 
     of such building for the taxable year or any preceding 
     taxable year.
       ``(b) Maximum Amount of Deduction.--The amount of energy 
     efficient commercial building property expenditures taken 
     into account under subsection (a) shall not exceed an amount 
     equal to the product of--
       ``(1) $2.25, and
       ``(2) the square footage of the building with respect to 
     which the expenditures are made.
       ``(c) Energy Efficient Commercial Building Property 
     Expenditures.--For purposes of this section--
       ``(1) In general.--The term `energy efficient commercial 
     building property expenditures' means amounts paid or 
     incurred for energy efficient property installed on or in 
     connection with the construction or reconstruction of a 
     building--
       ``(A) for which depreciation is allowable under section 
     167,
       ``(B) which is located in the United States, and
       ``(C) which is the type of structure to which the Standard 
     90.1-2001 of the American Society of Heating, Refrigerating, 
     and Air

[[Page S10416]]

     Conditioning Engineers and the Illuminating Engineering 
     Society of North America is applicable.
     Such term includes expenditures for labor costs properly 
     allocable to the onsite preparation, assembly, or original 
     installation of the property.
       ``(2) Energy efficient property.--For purposes of paragraph 
     (1)--
       ``(A) In general.--The term `energy efficient property' 
     means any property which reduces total annual energy and 
     power costs with respect to the lighting, heating, cooling, 
     ventilation, and hot water supply systems of the building by 
     50 percent or more in comparison to a building which meets 
     the minimum requirements of Standard 90.1-2001 of the 
     American Society of Heating, Refrigerating, and Air 
     Conditioning Engineers and the Illuminating Engineering 
     Society of North America, using methods of calculation 
     described in subparagraph (B) and certified by qualified 
     individuals as provided under paragraph (5).
       ``(B) Methods of calculation.--The Secretary, in 
     consultation with the Secretary of Energy, shall promulgate 
     regulations which describe in detail methods for calculating 
     and verifying energy and power costs.
       ``(C) Computer software.--
       ``(i) In general.--Any calculation described in 
     subparagraph (B) shall be prepared by qualified computer 
     software.
       ``(ii) Qualified computer software.--For purposes of this 
     subparagraph, the term `qualified computer software' means 
     software--

       ``(I) for which the software designer has certified that 
     the software meets all procedures and detailed methods for 
     calculating energy and power costs as required by the 
     Secretary,
       ``(II) which provides such forms as required to be filed by 
     the Secretary in connection with energy efficiency of 
     property and the deduction allowed under this section, and
       ``(III) which provides a notice form which summarizes the 
     energy efficiency features of the building and its projected 
     annual energy costs.

       ``(3) Allocation of deduction for public property.--In the 
     case of energy efficient commercial building property 
     expenditures made by a public entity with respect to the 
     construction or reconstruction of a public building, the 
     Secretary shall promulgate regulations under which the value 
     of the deduction with respect to such expenditures which 
     would be allowable to the public entity under this section 
     (determined without regard to the tax-exempt status of such 
     entity) may be allocated to the person primarily responsible 
     for designing the energy efficient property. Such person 
     shall be treated as the taxpayer for purposes of this 
     section.
       ``(4) Notice to owner.--Any qualified individual providing 
     a certification under paragraph (5) shall provide an 
     explanation to the owner of the building regarding the energy 
     efficiency features of the building and its projected annual 
     energy costs as provided in the notice under paragraph 
     (2)(C)(ii)(III).
       ``(5) Certification.--
       ``(A) In general.--The Secretary shall prescribe procedures 
     for the inspection and testing for compliance of buildings by 
     qualified individuals described in subparagraph (B). Such 
     procedures shall be--
       ``(i) comparable, given the difference between commercial 
     and residential buildings, to the requirements in the 
     Mortgage Industry National Home Energy Rating Standards, and
       ``(ii) fuel neutral such that the same energy efficiency 
     measures allow a building to be eligible for the credit under 
     this section regardless of whether such building uses a gas 
     or oil furnace or boiler or an electric heat pump.
       ``(B) Qualified individuals.--Individuals qualified to 
     determine compliance shall be only those individuals who are 
     recognized by an organization certified by the Secretary for 
     such purposes. The Secretary may qualify a home energy 
     ratings organization, a local building regulatory authority, 
     a State or local energy office, a utility, or any other 
     organization which meets the requirements prescribed under 
     this paragraph.
       ``(C) Proficiency of qualified individuals.--The Secretary 
     shall consult with nonprofit organizations and State agencies 
     with expertise in energy efficiency calculations and 
     inspections to develop proficiency tests and training 
     programs to qualify individuals to determine compliance.
       ``(d) Basis Reduction.--For purposes of this subtitle, if a 
     deduction is allowed under this section with respect to any 
     energy efficient property, the basis of such property shall 
     be reduced by the amount of the deduction so allowed.
       ``(e) Regulations.--The Secretary shall promulgate such 
     regulations as necessary to take into account new 
     technologies regarding energy efficiency and renewable energy 
     for purposes of determining energy efficiency and savings 
     under this section.
       ``(f) Termination.--This section shall not apply with 
     respect to any energy efficient commercial building property 
     expenditures in connection with a building the construction 
     of which is not completed on or before December 31, 2009.''.
       (b) Conforming Amendments.--
       (1) Section 1016(a), as amended by this Act, is amended by 
     striking ``and'' at the end of paragraph (30), by striking 
     the period at the end of paragraph (31) and inserting ``, 
     and'', and by adding at the end the following new paragraph:
       ``(32) to the extent provided in section 179B(d).''.
       (2) Section 1245(a) is amended by inserting ``179B,'' after 
     ``179A,'' both places it appears in paragraphs (2)(C) and 
     (3)(C).
       (3) Section 1250(b)(3) is amended by inserting before the 
     period at the end of the first sentence ``or by section 
     179B''.
       (4) Section 263(a)(1) is amended by striking ``or'' at the 
     end of subparagraph (G), by striking the period at the end of 
     subparagraph (H) and inserting ``, or'', and by inserting 
     after subparagraph (H) the following new subparagraph:
       ``(I) expenditures for which a deduction is allowed under 
     section 179B.''.
       (5) Section 312(k)(3)(B) is amended by striking ``or 179A'' 
     each place it appears in the heading and text and inserting 
     ``, 179A, or 179B''.
       (c) Clerical Amendment.--The table of sections for part VI 
     of subchapter B of chapter 1 is amended by inserting after 
     section 179A the following new item:

``Sec. 179B. Energy efficient commercial buildings deduction.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 306. THREE-YEAR APPLICABLE RECOVERY PERIOD FOR 
                   DEPRECIATION OF QUALIFIED ENERGY MANAGEMENT 
                   DEVICES.

       (a) In General.--Section 168(e)(3)(A) (defining 3-year 
     property) is amended by striking ``and'' at the end of clause 
     (ii), by striking the period at the end of clause (iii) and 
     inserting ``, and'', and by adding at the end the following 
     new clause:
       ``(iv) any qualified energy management device.''.
       (b) Definition of Qualified Energy Management Device.--
     Section 168(i) (relating to definitions and special rules) is 
     amended by inserting at the end the following new paragraph:
       ``(15) Qualified energy management device.--
       ``(A) In general.--The term `qualified energy management 
     device' means any energy management device which is placed in 
     service before January 1, 2008, by a taxpayer who is a 
     supplier of electric energy or a provider of electric energy 
     services.
       ``(B) Energy management device.--For purposes of 
     subparagraph (A), the term `energy management device' means 
     any meter or metering device which is used by the taxpayer--
       ``(i) to measure and record electricity usage data on a 
     time-differentiated basis in at least 4 separate time 
     segments per day, and
       ``(ii) to provide such data on at least a monthly basis to 
     both consumers and the taxpayer.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 307. THREE-YEAR APPLICABLE RECOVERY PERIOD FOR 
                   DEPRECIATION OF QUALIFIED WATER SUBMETERING 
                   DEVICES.

       (a) In General.--Section 168(e)(3)(A) (defining 3-year 
     property), as amended by this Act, is amended by striking 
     ``and'' at the end of clause (iii), by striking the period at 
     the end of clause (iv) and inserting ``, and'', and by adding 
     at the end the following new clause:
       ``(v) any qualified water submetering device.''.
       (b) Definition of Qualified Water Submetering Device.--
     Section 168(i) (relating to definitions and special rules), 
     as amended by this Act, is amended by inserting at the end 
     the following new paragraph:
       ``(16) Qualified water submetering device.--
       ``(A) In general.--The term `qualified water submetering 
     device' means any water submetering device which is placed in 
     service before January 1, 2008, by a taxpayer who is an 
     eligible resupplier with respect to the unit for which the 
     device is placed in service.
       ``(B) Water submetering device.--For purposes of this 
     paragraph, the term `water submetering device' means any 
     submetering device which is used by the taxpayer--
       ``(i) to measure and record water usage data, and
       ``(ii) to provide such data on at least a monthly basis to 
     both consumers and the taxpayer.
       ``(C) Eligible resupplier.--For purposes of subparagraph 
     (A), the term `eligible resupplier' means any taxpayer who 
     purchases and installs qualified water submetering devices in 
     every unit in any multi-unit property.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 308. ENERGY CREDIT FOR COMBINED HEAT AND POWER SYSTEM 
                   PROPERTY.

       (a) In General.--Section 48(a)(3)(A) (defining energy 
     property), as amended by this Act, is amended by striking 
     ``or'' at the end of clause (ii), by adding ``or'' at the end 
     of clause (iii), and by inserting after clause (iii) the 
     following new clause:
       ``(iv) combined heat and power system property,''.
       (b) Combined Heat and Power System Property.--Section 48(a) 
     (relating to energy credit), as amended by this Act, is 
     amended by redesignating paragraphs (5) and (6) as paragraphs 
     (6) and (7), respectively, and by

[[Page S10417]]

     inserting after paragraph (4) the following new paragraph:
       ``(5) Combined heat and power system property.--For 
     purposes of this subsection--
       ``(A) Combined heat and power system property.--The term 
     `combined heat and power system property' means property 
     comprising a system--
       ``(i) which uses the same energy source for the 
     simultaneous or sequential generation of electrical power, 
     mechanical shaft power, or both, in combination with the 
     generation of steam or other forms of useful thermal energy 
     (including heating and cooling applications),
       ``(ii) which has an electrical capacity of more than 50 
     kilowatts or a mechanical energy capacity of more than 67 
     horsepower or an equivalent combination of electrical and 
     mechanical energy capacities,
       ``(iii) which produces--

       ``(I) at least 20 percent of its total useful energy in the 
     form of thermal energy which is not used to produce 
     electrical or mechanical power (or combination thereof), and
       ``(II) at least 20 percent of its total useful energy in 
     the form of electrical or mechanical power (or combination 
     thereof),

       ``(iv) the energy efficiency percentage of which exceeds 60 
     percent (70 percent in the case of a system with an 
     electrical capacity in excess of 50 megawatts or a mechanical 
     energy capacity in excess of 67,000 horsepower, or an 
     equivalent combination of electrical and mechanical energy 
     capacities), and
       ``(v) which is placed in service before January 1, 2007.
       ``(B) Special rules.--
       ``(i) Energy efficiency percentage.--For purposes of 
     subparagraph (A)(iv), the energy efficiency percentage of a 
     system is the fraction--

       ``(I) the numerator of which is the total useful 
     electrical, thermal, and mechanical power produced by the 
     system at normal operating rates, and expected to be consumed 
     in its normal application, and
       ``(II) the denominator of which is the lower heating value 
     of the primary fuel source for the system.

       ``(ii) Determinations made on btu basis.--The energy 
     efficiency percentage and the percentages under subparagraph 
     (A)(iii) shall be determined on a Btu basis.
       ``(iii) Input and output property not included.--The term 
     `combined heat and power system property' does not include 
     property used to transport the energy source to the facility 
     or to distribute energy produced by the facility.
       ``(iv) Public utility property.--

       ``(I) Accounting rule for public utility property.--If the 
     combined heat and power system property is public utility 
     property (as defined in section 168(i)(10)), the taxpayer may 
     only claim the credit under this subsection if, with respect 
     to such property, the taxpayer uses a normalization method of 
     accounting.
       ``(II) Certain exception not to apply.--The matter 
     following paragraph (3)(D) shall not apply to combined heat 
     and power system property.

        ``(v) Nonapplication of certain rules.--For purposes of 
     determining if the term `combined heat and power system 
     property' includes technologies which generate electricity or 
     mechanical power using back-pressure steam turbines in place 
     of existing pressure-reducing valves or which make use of 
     waste heat from industrial processes such as by using organic 
     rankin, stirling, or kalina heat engine systems, subparagraph 
     (A) shall be applied without regard to clauses (i), (iii), 
     and (iv) thereof.
       ``(C) Extension of depreciation recovery period.--If a 
     taxpayer is allowed a credit under this section for a 
     combined heat and power system property which has a class 
     life of 15 years or less under section 168, such property 
     shall be treated as having a 22-year class life for purposes 
     of section 168.''.
       (c) Limitation on Carryback.--Section 39(d) (relating to 
     transition rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(15) No carryback of energy credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the energy credit with 
     respect to property described in section 48(a)(5) may be 
     carried back to a taxable year ending on or before the date 
     of the enactment of such section.''.
       (d) Conforming Amendments.--
       (A) Section 25C(e)(6), as added by this Act, is amended by 
     striking ``section 48(a)(5)(C)'' and inserting ``section 
     48(a)(6)(C)''.
       (B) Section 29(b)(3)(A)(i)(III), as amended by this Act, is 
     amended by striking ``section 48(a)(5)(C)'' and inserting 
     ``section 48(a)(6)(C)''.
       (e) Effective Date.--The amendments made by this subsection 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date, under rules similar to the rules of section 48(m) of 
     the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of the Revenue 
     Reconciliation Act of 1990).

     SEC. 309. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS TO 
                   EXISTING HOMES.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by this Act, is amended by inserting after section 
     25C the following new section:

     ``SEC. 25D. ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to 10 
     percent of the amount paid or incurred by the taxpayer for 
     qualified energy efficiency improvements installed during 
     such taxable year.
       ``(b) Limitation.--The credit allowed by this section with 
     respect to a dwelling for any taxable year shall not exceed 
     $300, reduced (but not below zero) by the sum of the credits 
     allowed under subsection (a) to the taxpayer with respect to 
     the dwelling for all preceding taxable years.
       ``(c) Carryforward of Unused Credit.--If the credit 
     allowable under subsection (a) exceeds the limitation imposed 
     by section 26(a) for such taxable year reduced by the sum of 
     the credits allowable under this subpart (other than this 
     section) for such taxable year, such excess shall be carried 
     to the succeeding taxable year and added to the credit 
     allowable under subsection (a) for such succeeding taxable 
     year.
       ``(d) Qualified Energy Efficiency Improvements.--For 
     purposes of this section, the term `qualified energy 
     efficiency improvements' means any energy efficient building 
     envelope component which is certified to meet or exceed the 
     latest prescriptive criteria for such component in the 
     International Energy Conservation Code approved by the 
     Department of Energy before the installation of such 
     component, or any combination of energy efficiency measures 
     which are certified as achieving at least a 30 percent 
     reduction in heating and cooling energy usage for the 
     dwelling (as measured in terms of energy cost to the 
     taxpayer), if--
       ``(1) such component or combination of measures is 
     installed in or on a dwelling which--
       ``(A) is located in the United States,
       ``(B) has not been treated as a qualifying new home for 
     purposes of any credit allowed under section 45G, and
       ``(C) is owned and used by the taxpayer as the taxpayer's 
     principal residence (within the meaning of section 121),
       ``(2) the original use of such component or combination of 
     measures commences with the taxpayer, and
       ``(3) such component or combination of measures reasonably 
     can be expected to remain in use for at least 5 years.
       ``(e) Certification.--
       ``(1) Methods of certification.--
       ``(A) Component-based method.--The certification described 
     in subsection (d) for any component described in such 
     subsection shall be determined on the basis of applicable 
     energy efficiency ratings (including product labeling 
     requirements) for affected building envelope components.
       ``(B) Performance-based method.--
       ``(i) In general.--The certification described in 
     subsection (d) for any combination of measures described in 
     such subsection shall be--

       ``(I) determined by comparing the projected heating and 
     cooling energy usage for the dwelling to such usage for such 
     dwelling in its original condition, and
       ``(II) accompanied by a written analysis documenting the 
     proper application of a permissible energy performance 
     calculation method to the specific circumstances of such 
     dwelling.

       ``(ii) Computer software.--Computer software shall be used 
     in support of a performance-based method certification under 
     clause (i). Such software shall meet procedures and methods 
     for calculating energy and cost savings in regulations 
     promulgated by the Secretary of Energy.
       ``(2) Provider.--A certification described in subsection 
     (d) shall be provided by--
       ``(A) in the case of the method described in paragraph 
     (1)(A), a third party, such as a local building regulatory 
     authority, a utility, a manufactured home primary inspection 
     agency, or a home energy rating organization, or
       ``(B) in the case of the method described in paragraph 
     (1)(B), an individual recognized by an organization 
     designated by the Secretary for such purposes.
       ``(3) Form.--A certification described in subsection (d) 
     shall be made in writing on forms which specify in readily 
     inspectable fashion the energy efficient components and other 
     measures and their respective efficiency ratings, and which 
     include a permanent label affixed to the electrical 
     distribution panel of the dwelling.
       ``(4) Regulations.--
       ``(A) In general.--In prescribing regulations under this 
     subsection for certification methods described in paragraph 
     (1)(B), the Secretary, after examining the requirements for 
     energy consultants and home energy ratings providers 
     specified by the Mortgage Industry National Home Energy 
     Rating Standards, shall prescribe procedures for calculating 
     annual energy usage and cost reductions for heating and 
     cooling and for the reporting of the results. Such 
     regulations shall--
       ``(i) provide that any calculation procedures be fuel 
     neutral such that the same energy efficiency measures allow a 
     dwelling to be eligible for the credit under this section 
     regardless of whether such dwelling uses a gas or oil furnace 
     or boiler or an electric heat pump, and
       ``(ii) require that any computer software allow for the 
     printing of the Federal tax forms necessary for the credit 
     under this section and for the printing of forms for 
     disclosure to the owner of the dwelling.

[[Page S10418]]

       ``(B) Providers.--For purposes of paragraph (2)(B), the 
     Secretary shall establish requirements for the designation of 
     individuals based on the requirements for energy consultants 
     and home energy raters specified by the Mortgage Industry 
     National Home Energy Rating Standards.
       ``(f) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Dollar amounts in case of joint occupancy.--In the 
     case of any dwelling unit which is jointly occupied and used 
     during any calendar year as a residence by 2 or more 
     individuals the following rules shall apply:
       ``(A) The amount of the credit allowable under subsection 
     (a) by reason of expenditures for the qualified energy 
     efficiency improvements made during such calendar year by any 
     of such individuals with respect to such dwelling unit shall 
     be determined by treating all of such individuals as 1 
     taxpayer whose taxable year is such calendar year.
       ``(B) There shall be allowable, with respect to such 
     expenditures to each of such individuals, a credit under 
     subsection (a) for the taxable year in which such calendar 
     year ends in an amount which bears the same ratio to the 
     amount determined under subparagraph (A) as the amount of 
     such expenditures made by such individual during such 
     calendar year bears to the aggregate of such expenditures 
     made by all of such individuals during such calendar year.
       ``(2) Tenant-stockholder in cooperative housing 
     corporation.--In the case of an individual who is a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     individual shall be treated as having paid his tenant-
     stockholder's proportionate share (as defined in section 
     216(b)(3)) of the cost of qualified energy efficiency 
     improvements made by such corporation.
       ``(3) Condominiums.--
       ``(A) In general.--In the case of an individual who is a 
     member of a condominium management association with respect 
     to a condominium which the individual owns, such individual 
     shall be treated as having paid the individual's 
     proportionate share of the cost of qualified energy 
     efficiency improvements made by such association.
       ``(B) Condominium management association.--For purposes of 
     this paragraph, the term `condominium management association' 
     means an organization which meets the requirements of 
     paragraph (1) of section 528(c) (other than subparagraph (E) 
     thereof) with respect to a condominium project substantially 
     all of the units of which are used as residences.
       ``(4) Building envelope component.--The term `building 
     envelope component' means--
       ``(A) any insulation material or system which is 
     specifically and primarily designed to reduce the heat loss 
     or gain or a dwelling when installed in or on such dwelling,
       ``(B) exterior windows (including skylights), and
       ``(C) exterior doors.
       ``(5) Manufactured homes included.--For purposes of this 
     section, the term `dwelling' includes a manufactured home 
     which conforms to Federal Manufactured Home Construction and 
     Safety Standards (24 C.F.R. 3280).
       ``(g) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(h) Termination.--Subsection (a) shall not apply to 
     qualified energy efficiency improvements installed after 
     December 31, 2006.''.
       (b) Credit Allowed Against Regular Tax and Alternative 
     Minimum Tax.--
       (1) In general.--Section 25D(b), as added by subsection 
     (a), is amended--
       (A) by striking ``The credit'' and inserting the following:
       ``(1) Dollar amount.--The credit'', and
       (B) by adding at the end the following new paragraph:
       ``(2) Limitation based on amount of tax.--The credit 
     allowed under subsection (a) for the taxable year shall not 
     exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under this subpart 
     (other than this section) and section 27 for the taxable 
     year.''.
       (2) Conforming amendments.--
       (A) Section 25D(c), as added by subsection (a), is amended 
     by striking ``section 26(a) for such taxable year reduced by 
     the sum of the credits allowable under this subpart (other 
     than this section)'' and inserting ``subsection (b)(2)''.
       (B) Section 23(b)(4)(B), as amended by this Act, is amended 
     by striking ``section 25C'' and inserting ``sections 25C and 
     25D''.
       (C) Section 24(b)(3)(B), as amended by this Act, is amended 
     by striking ``and 25C'' and inserting ``25C, and 25D''.
       (D) Section 25(e)(1)(C), as amended by this Act, is amended 
     by inserting ``25D,'' after ``25C,''.
       (E) Section 25B(g)(2), as amended by this Act, is amended 
     by striking ``23 and 25C'' and inserting ``23, 25C, and 
     25D''.
       (F) Section 26(a)(1), as amended by this Act, is amended by 
     striking ``and 25C'' and inserting ``25C, and 25D''.
       (G) Section 904(h), as amended by this Act, is amended by 
     striking ``and 25C'' and inserting ``25C, and 25D''.
       (H) Section 1400C(d), as amended by this Act, is amended by 
     striking ``and 25C'' and inserting ``25C, and 25D''.
       (c) Additional Conforming Amendments.--
       (1) Section 23(c), as in effect for taxable years beginning 
     before January 1, 2004, and as amended by this Act, is 
     amended by inserting ``, 25D,'' after ``sections 25C''.
       (2) Section 25(e)(1)(C), as in effect for taxable years 
     beginning before January 1, 2004, and as amended by this Act, 
     is amended by inserting ``25D,'' after ``25C,''.
       (3) Section 1016(a), as amended by this Act, is amended by 
     striking ``and'' at the end of paragraph (31), by striking 
     the period at the end of paragraph (32) and inserting ``; 
     and'', and by adding at the end the following new paragraph:
       ``(33) to the extent provided in section 25D(g), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25D.''.
       (4) Section 1400C(d), as in effect for taxable years 
     beginning before January 1, 2004, and as amended by this Act, 
     is amended by striking ``section 25C'' and inserting 
     ``sections 25C and 25D''.
       (5) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1, as amended by this Act, is amended 
     by inserting after the item relating to section 25C the 
     following new item:

``Sec. 25D. Energy efficiency improvements to existing homes.''.
       (d) Effective Dates.--
       (1) In general.--Except as provided by paragraph (2), the 
     amendments made by this section shall apply to property 
     installed after the date of the enactment of this Act, in 
     taxable years ending after such date.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to taxable years beginning after December 31, 
     2003.

                    TITLE IV--CLEAN COAL INCENTIVES

Subtitle A--Credit for Emission Reductions and Efficiency Improvements 
        in Existing Coal-Based Electricity Generation Facilities

     SEC. 401. CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN COAL 
                   TECHNOLOGY UNIT.

       (a) Credit for Production From a Qualifying Clean Coal 
     Technology Unit.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

     ``SEC. 45I. CREDIT FOR PRODUCTION FROM A QUALIFYING CLEAN 
                   COAL TECHNOLOGY UNIT.

       ``(a) General Rule.--For purposes of section 38, the 
     qualifying clean coal technology production credit of any 
     taxpayer for any taxable year is equal to--
       ``(1) the applicable amount of clean coal technology 
     production credit, multiplied by
       ``(2) the applicable percentage of the sum of--
       ``(A) the kilowatt hours of electricity, plus
       ``(B) each 3,413 Btu of fuels or chemicals,
     produced by the taxpayer during such taxable year at a 
     qualifying clean coal technology unit, but only if such 
     production occurs during the 10-year period beginning on the 
     date the unit was returned to service after becoming a 
     qualifying clean coal technology unit.
       ``(b) Applicable Amount.--
       ``(1) In general.--For purposes of this section, the 
     applicable amount of clean coal technology production credit 
     is equal to $0.0034.
       ``(2) Inflation adjustment.--For calendar years after 2004, 
     the applicable amount of clean coal technology production 
     credit shall be adjusted by multiplying such amount by the 
     inflation adjustment factor for the calendar year in which 
     the amount is applied. If any amount as increased under the 
     preceding sentence is not a multiple of 0.01 cent, such 
     amount shall be rounded to the nearest multiple of 0.01 cent.
       ``(c) Applicable Percentage.--For purposes of this section, 
     with respect to any qualifying clean coal technology unit, 
     the applicable percentage is the percentage equal to the 
     ratio which the portion of the national megawatt capacity 
     limitation allocated to the taxpayer with respect to such 
     unit under subsection (e) bears to the total megawatt 
     capacity of such unit.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Qualifying clean coal technology unit.--The term 
     `qualifying clean coal technology unit' means a clean coal 
     technology unit of the taxpayer which--
       ``(A) on the date of the enactment of this section--
       ``(i) was a coal-based electricity generating steam 
     generator-turbine unit which was not a clean coal technology 
     unit, and
       ``(ii) had a nameplate capacity rating of not more than 300 
     megawatts,
       ``(B) becomes a clean coal technology unit as the result of 
     the retrofitting, repowering, or replacement of the unit with 
     clean coal technology during the 10-year period beginning on 
     the date of the enactment of this section,
       ``(C) is not receiving nor is scheduled to receive funding 
     under the Clean Coal Technology Program, the Power Plant 
     Improvement Initiative, or the Clean Coal Power Initiative 
     administered by the Secretary of Energy, and

[[Page S10419]]

       ``(D) receives an allocation of a portion of the national 
     megawatt capacity limitation under subsection (e).
       ``(2) Clean coal technology unit.--The term `clean coal 
     technology unit' means a unit which--
       ``(A) uses clean coal technology, including advanced 
     pulverized coal or atmospheric fluidized bed combustion, 
     pressurized fluidized bed combustion, integrated gasification 
     combined cycle, or any other technology, for the production 
     of electricity,
       ``(B) uses an input of at least 75 percent coal to produce 
     at least 50 percent of its thermal output as electricity,
       ``(C) has a design net heat rate of at least 500 less than 
     that of such unit as described in paragraph (1)(A),
       ``(D) has a maximum design net heat rate of not more than 
     9,500, and
       ``(E) meets the pollution control requirements of paragraph 
     (3).
       ``(3) Pollution control requirements.--
       ``(A) In general.--A unit meets the requirements of this 
     paragraph if--
       ``(i) its emissions of sulfur dioxide, nitrogen oxide, or 
     particulates meet the lower of the emission levels for each 
     such emission specified in--

       ``(I) subparagraph (B), or
       ``(II) the new source performance standards of the Clean 
     Air Act (42 U.S.C. 7411) which are in effect for the category 
     of source at the time of the retrofitting, repowering, or 
     replacement of the unit, and

       ``(ii) its emissions do not exceed any relevant emission 
     level specified by regulation pursuant to the hazardous air 
     pollutant requirements of the Clean Air Act (42 U.S.C. 7412) 
     in effect at the time of the retrofitting, repowering, or 
     replacement.
       ``(B) Specific levels.--The levels specified in this 
     subparagraph are--
       ``(i) in the case of sulfur dioxide emissions, 50 percent 
     of the sulfur dioxide emission levels specified in the new 
     source performance standards of the Clean Air Act (42 U.S.C. 
     7411) in effect on the date of the enactment of this section 
     for the category of source,
       ``(ii) in the case of nitrogen oxide emissions--

       ``(I) 0.1 pound per million Btu of heat input if the unit 
     is not a cyclone-fired boiler, and
       ``(II) if the unit is a cyclone-fired boiler, 15 percent of 
     the uncontrolled nitrogen oxide emissions from such boilers, 
     and

       ``(iii) in the case of particulate emissions, 0.02 pound 
     per million Btu of heat input.
       ``(4) Design net heat rate.--The design net heat rate with 
     respect to any unit, measured in Btu per kilowatt hour 
     (HHV)--
       ``(A) shall be based on the design annual heat input to and 
     the design annual net electrical power, fuels, and chemicals 
     output from such unit (determined without regard to such 
     unit's co-generation of steam),
       ``(B) shall be adjusted for the heat content of the design 
     coal to be used by the unit if it is less than 12,000 Btu per 
     pound according to the following formula:
     Design net heat rate = Unit net heat rate [l- {((12,000-
     design coal heat content, Btu per pound)/1,000) 0.013 ],
       ``(C) shall be corrected for the site reference conditions 
     of--
       ``(i) elevation above sea level of 500 feet,
       ``(ii) air pressure of 14.4 pounds per square inch absolute 
     (psia),
       ``(iii) temperature, dry bulb of 63 deg.F,
       ``(iv) temperature, wet bulb of 54 deg.F, and
       ``(v) relative humidity of 55 percent, and
       ``(D) if carbon capture controls have been installed with 
     respect to any qualifying unit and such controls remove at 
     least 50 percent of the unit's carbon dioxide emissions, 
     shall be adjusted up to the design heat rate level which 
     would have resulted without the installation of such 
     controls.
       ``(5) HHV.--The term `HHV' means higher heating value.
       ``(6) Application of certain rules.--The rules of 
     paragraphs (3), (4), and (5) of section 45(e) shall apply.
       ``(7) Inflation adjustment factor.--
       ``(A) In general.--The term `inflation adjustment factor' 
     means, with respect to a calendar year, a fraction the 
     numerator of which is the GDP implicit price deflator for the 
     preceding calendar year and the denominator of which is the 
     GDP implicit price deflator for the calendar year 2003.
       ``(B) GDP implicit price deflator.--The term `GDP implicit 
     price deflator' means, for any calendar year, the most recent 
     revision of the implicit price deflator for the gross 
     domestic product as of June 30 of such calendar year as 
     computed by the Department of Commerce before October 1 of 
     such calendar year.
       ``(8) Noncompliance with pollution laws.--For purposes of 
     this section, a unit which is not in compliance with the 
     applicable State and Federal pollution prevention, control, 
     and permit requirements for any period of time shall not be 
     considered to be a qualifying clean coal technology unit 
     during such period.
       ``(e) National Limitation on the Aggregate Capacity of 
     Qualifying Clean Coal Technology Units.--
       ``(1) In general.--For purposes of this section, the 
     national megawatt capacity limitation for qualifying clean 
     coal technology units is 4,000 megawatts.
       ``(2) Allocation of limitation.--The Secretary shall 
     allocate the national megawatt capacity limitation for 
     qualifying clean coal technology units in such manner as the 
     Secretary may prescribe under the regulations under paragraph 
     (3).
       ``(3) Regulations.--Not later than 6 months after the date 
     of the enactment of this section, the Secretary shall 
     prescribe such regulations as may be necessary or 
     appropriate--
       ``(A) to carry out the purposes of this subsection,
       ``(B) to limit the capacity of any qualifying clean coal 
     technology unit to which this section applies so that the 
     megawatt capacity allocated to any unit under this subsection 
     does not exceed 300 megawatts and the combined megawatt 
     capacity allocated to all such units when all such units are 
     placed in service during the 10-year period described in 
     subsection (d)(1)(B), does not exceed 4,000 megawatts,
       ``(C) to provide a certification process under which the 
     Secretary, in consultation with the Secretary of Energy, 
     shall approve and allocate the national megawatt capacity 
     limitation--
       ``(i) to encourage that units with the highest thermal 
     efficiencies, when adjusted for the heat content of the 
     design coal and site reference conditions described in 
     subsection (d)(4)(C), and environmental performance, be 
     placed in service as soon as possible, and
       ``(ii) to allocate capacity to taxpayers which have a 
     definite and credible plan for placing into commercial 
     operation a qualifying clean coal technology unit, 
     including--

       ``(I) a site,
       ``(II) contractual commitments for procurement and 
     construction or, in the case of regulated utilities, the 
     agreement of the State utility commission,
       ``(III) filings for all necessary preconstruction 
     approvals,
       ``(IV) a demonstrated record of having successfully 
     completed comparable projects on a timely basis, and

       ``(V) such other factors that the Secretary determines are 
     appropriate,

       ``(D) to allocate the national megawatt capacity limitation 
     to a portion of the capacity of a qualifying clean coal 
     technology unit if the Secretary determines that such an 
     allocation would maximize the amount of efficient production 
     encouraged with the available tax credits,
       ``(E) to set progress requirements and conditional 
     approvals so that capacity allocations for clean coal 
     technology units which become unlikely to meet the necessary 
     conditions for qualifying can be reallocated by the Secretary 
     to other clean coal technology units, and
       ``(F) to provide taxpayers with opportunities to correct 
     administrative errors and omissions with respect to 
     allocations and record keeping within a reasonable period 
     after discovery, taking into account the availability of 
     regulations and other administrative guidance from the 
     Secretary.''.
       (b) Credit Treated as Business Credit.--Section 38(b) 
     (relating to current year business credit), as amended by 
     this Act, is amended by striking ``plus'' at the end of 
     paragraph (18), by striking the period at the end of 
     paragraph (19) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(20) the qualifying clean coal technology production 
     credit determined under section 45I(a).''.
       (c) Transitional Rule.--Section 39(d) (relating to 
     transitional rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(16) No carryback of section 45i credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying clean 
     coal technology production credit determined under section 
     45I may be carried back to a taxable year ending on or before 
     the date of the enactment of such section.''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45I. Credit for production from a qualifying clean coal 
              technology unit.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to production after the date of the enactment of 
     this Act, in taxable years ending after such date.

 Subtitle B--Incentives for Early Commercial Applications of Advanced 
                        Clean Coal Technologies

     SEC. 411. CREDIT FOR INVESTMENT IN QUALIFYING ADVANCED CLEAN 
                   COAL TECHNOLOGY.

       (a) Allowance of Qualifying Advanced Clean Coal Technology 
     Unit Credit.--Section 46 (relating to amount of credit) is 
     amended by striking ``and'' at the end of paragraph (2), by 
     striking the period at the end of paragraph (3) and inserting 
     ``, and'', and by adding at the end the following new 
     paragraph:
       ``(4) the qualifying advanced clean coal technology unit 
     credit.''.
       (b) Amount of Qualifying Advanced Clean Coal Technology 
     Unit Credit.--Subpart E of part IV of subchapter A of chapter 
     1 (relating to rules for computing investment credit) is 
     amended by inserting after section 48 the following new 
     section:

     ``SEC. 48A. QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY UNIT 
                   CREDIT.

       ``(a) In General.--For purposes of section 46, the 
     qualifying advanced clean coal technology unit credit for any 
     taxable year is an amount equal to 10 percent of the 
     applicable percentage of the qualified investment in a 
     qualifying advanced clean coal technology unit for such 
     taxable year.
       ``(b) Qualifying Advanced Clean Coal Technology Unit.--

[[Page S10420]]

       ``(1) In general.--For purposes of subsection (a), the term 
     `qualifying advanced clean coal technology unit' means an 
     advanced clean coal technology unit of the taxpayer--
       ``(A)(i) in the case of a unit first placed in service 
     after the date of the enactment of this section, the original 
     use of which commences with the taxpayer, or
       ``(ii) in the case of the retrofitting or repowering of a 
     unit first placed in service before such date of enactment, 
     the retrofitting or repowering of which is completed by the 
     taxpayer after such date, or
       ``(B) which is depreciable under section 167,
       ``(C) which has a useful life of not less than 4 years,
       ``(D) which is located in the United States,
       ``(E) which is not receiving nor is scheduled to receive 
     funding under the Clean Coal Technology Program, the Power 
     Plant Improvement Initiative, or the Clean Coal Power 
     Initiative administered by the Secretary of Energy,
       ``(F) which is not a qualifying clean coal technology unit, 
     and
       ``(G) which receives an allocation of a portion of the 
     national megawatt capacity limitation under subsection (f).
       ``(2) Special rule for sale-leasebacks.--For purposes of 
     subparagraph (A) of paragraph (1), in the case of a unit 
     which--
       ``(A) is originally placed in service by a person, and
       ``(B) is sold and leased back by such person, or is leased 
     to such person, within 3 months after the date such unit was 
     originally placed in service, for a period of not less than 
     12 years,
     such unit shall be treated as originally placed in service 
     not earlier than the date on which such unit is used under 
     the leaseback (or lease) referred to in subparagraph (B). The 
     preceding sentence shall not apply to any property if the 
     lessee and lessor of such property make an election under 
     this sentence. Such an election, once made, may be revoked 
     only with the consent of the Secretary.
       ``(3) Noncompliance with pollution laws.--For purposes of 
     this subsection, a unit which is not in compliance with the 
     applicable State and Federal pollution prevention, control, 
     and permit requirements for any period of time shall not be 
     considered to be a qualifying advanced clean coal technology 
     unit during such period.
       ``(c) Applicable Percentage.--For purposes of this section, 
     with respect to any qualifying advanced clean coal technology 
     unit, the applicable percentage is the percentage equal to 
     the ratio which the portion of the national megawatt capacity 
     limitation allocated to the taxpayer with respect to such 
     unit under subsection (f) bears to the total megawatt 
     capacity of such unit.
       ``(d) Advanced Clean Coal Technology Unit.--For purposes of 
     this section--
       ``(1) In general.--The term `advanced clean coal technology 
     unit' means a new, retrofit, or repowering unit of the 
     taxpayer which--
       ``(A) is--
       ``(i) an eligible advanced pulverized coal or atmospheric 
     fluidized bed combustion technology unit,
       ``(ii) an eligible pressurized fluidized bed combustion 
     technology unit,
       ``(iii) an eligible integrated gasification combined cycle 
     technology unit, or
       ``(iv) an eligible other technology unit, and
       ``(B) meets the carbon emission rate requirements of 
     paragraph (6).
       ``(2) Eligible advanced pulverized coal or atmospheric 
     fluidized bed combustion technology unit.--The term `eligible 
     advanced pulverized coal or atmospheric fluidized bed 
     combustion technology unit' means a clean coal technology 
     unit using advanced pulverized coal or atmospheric fluidized 
     bed combustion technology which--
       ``(A) is placed in service after the date of the enactment 
     of this section and before January 1, 2013, and
       ``(B) has a design net heat rate of not more than 8,500 
     (8,900 in the case of units placed in service before 2009).
       ``(3) Eligible pressurized fluidized bed combustion 
     technology unit.--The term `eligible pressurized fluidized 
     bed combustion technology unit' means a clean coal technology 
     unit using pressurized fluidized bed combustion technology 
     which--
       ``(A) is placed in service after the date of the enactment 
     of this section and before January 1, 2017, and
       ``(B) has a design net heat rate of not more than 7,720 
     (8,900 in the case of units placed in service before 2009, 
     and 8,500 in the case of units placed in service after 2008 
     and before 2013).
       ``(4) Eligible integrated gasification combined cycle 
     technology unit.--The term `eligible integrated gasification 
     combined cycle technology unit' means a clean coal technology 
     unit using integrated gasification combined cycle technology, 
     with or without fuel or chemical co-production, which--
       ``(A) is placed in service after the date of the enactment 
     of this section and before January 1, 2017,
       ``(B) has a design net heat rate of not more than 7,720 
     (8,900 in the case of units placed in service before 2009, 
     and 8,500 in the case of units placed in service after 2008 
     and before 2013), and
       ``(C) has a net thermal efficiency (HHV) using coal with 
     fuel or chemical co-production of not less than 44.2 percent 
     (38.4 percent in the case of units placed in service before 
     2009, and 40.2 percent in the case of units placed in service 
     after 2008 and before 2013).
       ``(5) Eligible other technology unit.--The term `eligible 
     other technology unit' means a clean coal technology unit 
     using any other technology for the production of electricity 
     which is placed in service after the date of the enactment of 
     this section and before January 1, 2017.
       ``(6) Carbon emission rate requirements.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     a unit meets the requirements of this paragraph if--
       ``(i) in the case of a unit using design coal with a heat 
     content of not more than 9,000 Btu per pound, the carbon 
     emission rate is less than 0.60 pound of carbon per kilowatt 
     hour, and
       ``(ii) in the case of a unit using design coal with a heat 
     content of more than 9,000 Btu per pound, the carbon emission 
     rate is less than 0.54 pound of carbon per kilowatt hour.
       ``(B) Eligible other technology unit.--In the case of an 
     eligible other technology unit, subparagraph (A) shall be 
     applied by substituting `0.51' and `0.459' for `0.60' and 
     `0.54', respectively.
       ``(e) General Definitions.--Any term used in this section 
     which is also used in section 45I shall have the meaning 
     given such term in section 45I.
       ``(f) National Limitation on the Aggregate Capacity of 
     Advanced Clean Coal Technology Units.--
       ``(1) In general.--For purposes of subsection (b)(1)(G), 
     the national megawatt capacity limitation is--
       ``(A) for qualifying advanced clean coal technology units 
     using advanced pulverized coal or atmospheric fluidized bed 
     combustion technology, not more than 1,000 megawatts (not 
     more than 500 megawatts in the case of units placed in 
     service before 2009),
       ``(B) for such units using pressurized fluidized bed 
     combustion technology, not more than 500 megawatts (not more 
     than 250 megawatts in the case of units placed in service 
     before 2009),
       ``(C) for such units using integrated gasification combined 
     cycle technology, with or without fuel or chemical co-
     production, not more than 2,000 megawatts (not more than 750 
     megawatts in the case of units placed in service before 
     2009), and
       ``(D) for such units using other technology for the 
     production of electricity, not more than 500 megawatts (not 
     more than 250 megawatts in the case of units placed in 
     service before 2009).
       ``(2) Allocation of limitation.--The Secretary shall 
     allocate the national megawatt capacity limitation for 
     qualifying advanced clean coal technology units in such 
     manner as the Secretary may prescribe under the regulations 
     under paragraph (3).
       ``(3) Regulations.--Not later than 6 months after the date 
     of the enactment of this section, the Secretary shall 
     prescribe such regulations as may be necessary or 
     appropriate--
       ``(A) to carry out the purposes of this subsection and 
     section 45J,
       ``(B) to limit the capacity of any qualifying advanced 
     clean coal technology unit to which this section applies so 
     that the combined megawatt capacity of all such units to 
     which this section applies does not exceed 4,000 megawatts,
       ``(C) to provide a certification process described in 
     section 45I(e)(3)(C),
       ``(D) to carry out the purposes described in subparagraphs 
     (D), (E), and (F) of section 45I(e)(3), and
       ``(E) to reallocate capacity which is not allocated to any 
     technology described in subparagraphs (A) through (D) of 
     paragraph (1) because an insufficient number of qualifying 
     units request an allocation for such technology, to another 
     technology described in such subparagraphs in order to 
     maximize the amount of energy efficient production encouraged 
     with the available tax credits.
       ``(4) Selection criteria.--For purposes of this subsection, 
     the selection criteria for allocating the national megawatt 
     capacity limitation to qualifying advanced clean coal 
     technology units--
       ``(A) shall be established by the Secretary of Energy as 
     part of a competitive solicitation,
       ``(B) shall include primary criteria of minimum design net 
     heat rate, maximum design thermal efficiency, environmental 
     performance, and lowest cost to the Government, and
       ``(C) shall include supplemental criteria as determined 
     appropriate by the Secretary of Energy.
       ``(g) Qualified Investment.--For purposes of subsection 
     (a), the term `qualified investment' means, with respect to 
     any taxable year, the basis of a qualifying advanced clean 
     coal technology unit placed in service by the taxpayer during 
     such taxable year (in the case of a unit described in 
     subsection (b)(1)(A)(ii), only that portion of the basis of 
     such unit which is properly attributable to the retrofitting 
     or repowering of such unit).
       ``(h) Qualified Progress Expenditures.--
       ``(1) Increase in qualified investment.--In the case of a 
     taxpayer who has made an election under paragraph (5), the 
     amount of the qualified investment of such taxpayer for the 
     taxable year (determined under subsection (g) without regard 
     to this subsection) shall be increased by an amount equal to 
     the aggregate of each qualified progress expenditure for the 
     taxable year with respect to progress expenditure property.
       ``(2) Progress expenditure property defined.--For purposes 
     of this subsection, the

[[Page S10421]]

     term `progress expenditure property' means any property being 
     constructed by or for the taxpayer and which it is reasonable 
     to believe will qualify as a qualifying advanced clean coal 
     technology unit which is being constructed by or for the 
     taxpayer when it is placed in service.
       ``(3) Qualified progress expenditures defined.--For 
     purposes of this subsection--
       ``(A) Self-constructed property.--In the case of any self-
     constructed property, the term `qualified progress 
     expenditures' means the amount which, for purposes of this 
     subpart, is properly chargeable (during such taxable year) to 
     capital account with respect to such property.
       ``(B) Nonself-constructed property.--In the case of 
     nonself-constructed property, the term `qualified progress 
     expenditures' means the amount paid during the taxable year 
     to another person for the construction of such property.
       ``(4) Other definitions.--For purposes of this subsection--
       ``(A) Self-constructed property.--The term `self-
     constructed property' means property for which it is 
     reasonable to believe that more than half of the construction 
     expenditures will be made directly by the taxpayer.
       ``(B) Nonself-constructed property.--The term `nonself-
     constructed property' means property which is not self-
     constructed property.
       ``(C) Construction, etc.--The term `construction' includes 
     reconstruction and erection, and the term `constructed' 
     includes reconstructed and erected.
       ``(D) Only construction of qualifying advanced clean coal 
     technology unit to be taken into account.--Construction shall 
     be taken into account only if, for purposes of this subpart, 
     expenditures therefor are properly chargeable to capital 
     account with respect to the property.
       ``(5) Election.--An election under this subsection may be 
     made at such time and in such manner as the Secretary may by 
     regulations prescribe. Such an election shall apply to the 
     taxable year for which made and to all subsequent taxable 
     years. Such an election, once made, may not be revoked except 
     with the consent of the Secretary.
       ``(i) Coordination With Other Credits.--This section shall 
     not apply to any property with respect to which the 
     rehabilitation credit under section 47 or the energy credit 
     under section 48 is allowed unless the taxpayer elects to 
     waive the application of such credit to such property.''.
       (c) Recapture.--Section 50(a) (relating to other special 
     rules) is amended by adding at the end the following new 
     paragraph:
       ``(6) Special rules relating to qualifying advanced clean 
     coal technology unit.--For purposes of applying this 
     subsection in the case of any credit allowable by reason of 
     section 48A, the following rules shall apply:
       ``(A) General rule.--In lieu of the amount of the increase 
     in tax under paragraph (1), the increase in tax shall be an 
     amount equal to the investment tax credit allowed under 
     section 38 for all prior taxable years with respect to a 
     qualifying advanced clean coal technology unit (as defined by 
     section 48A(b)(1)) multiplied by a fraction the numerator of 
     which is the number of years remaining to fully depreciate 
     under this title the qualifying advanced clean coal 
     technology unit disposed of, and the denominator of which is 
     the total number of years over which such unit would 
     otherwise have been subject to depreciation. For purposes of 
     the preceding sentence, the year of disposition of the 
     qualifying advanced clean coal technology unit shall be 
     treated as a year of remaining depreciation.
       ``(B) Property ceases to qualify for progress 
     expenditures.--Rules similar to the rules of paragraph (2) 
     shall apply in the case of qualified progress expenditures 
     for a qualifying advanced clean coal technology unit under 
     section 48A, except that the amount of the increase in tax 
     under subparagraph (A) of this paragraph shall be substituted 
     for the amount described in such paragraph (2).
       ``(C) Application of paragraph.--This paragraph shall be 
     applied separately with respect to the credit allowed under 
     section 38 regarding a qualifying advanced clean coal 
     technology unit.''.
       (d) Transitional Rule.--Section 39(d) (relating to 
     transitional rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(17) No carryback of section 48a credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying advanced 
     clean coal technology unit credit determined under section 
     48A may be carried back to a taxable year ending on or before 
     the date of the enactment of such section.''.
       (e) Technical Amendments.--
       (1) Section 49(a)(1)(C) is amended by striking ``and'' at 
     the end of clause (ii), by striking the period at the end of 
     clause (iii) and inserting ``, and'', and by adding at the 
     end the following new clause:
       ``(iv) the portion of the basis of any qualifying advanced 
     clean coal technology unit attributable to any qualified 
     investment (as defined by section 48A(g)).''.
       (2) Section 50(a)(4) is amended by striking ``and (2)'' and 
     inserting ``, (2), and (6)''.
       (3) Section 50(c) is amended by adding at the end the 
     following new paragraph:
       ``(6) Nonapplication.--Paragraphs (1) and (2) shall not 
     apply to any qualifying advanced clean coal technology unit 
     credit under section 48A.''.
       (4) The table of sections for subpart E of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 48 the following new item:

``Sec. 48A. Qualifying advanced clean coal technology unit credit.''.

       (f) Effective Date.--The amendments made by this section 
     shall apply to periods after the date of the enactment of 
     this Act, under rules similar to the rules of section 48(m) 
     of the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of the Revenue 
     Reconciliation Act of 1990).

     SEC. 412. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED 
                   CLEAN COAL TECHNOLOGY UNIT.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

     ``SEC. 45J. CREDIT FOR PRODUCTION FROM A QUALIFYING ADVANCED 
                   CLEAN COAL TECHNOLOGY UNIT.

       ``(a) General Rule.--For purposes of section 38, the 
     qualifying advanced clean coal technology production credit 
     of any taxpayer for any taxable year is equal to--
       ``(1) the applicable amount of advanced clean coal 
     technology production credit, multiplied by
       ``(2) the applicable percentage (as determined under 
     section 48A(c)) of the sum of--
       ``(A) the kilowatt hours of electricity, plus
       ``(B) each 3,413 Btu of fuels or chemicals,
     produced by the taxpayer during such taxable year at a 
     qualifying advanced clean coal technology unit, but only if 
     such production occurs during the 10-year period beginning on 
     the date the unit was originally placed in service (or 
     returned to service after becoming a qualifying advanced 
     clean coal technology unit).
       ``(b) Applicable Amount.--For purposes of this section--
       ``(1) In general.--Except as provided in paragraph (2), the 
     applicable amount of advanced clean coal technology 
     production credit with respect to production from a 
     qualifying advanced clean coal technology unit shall be 
     determined as follows:
       ``(A) If the qualifying advanced clean coal technology unit 
     is producing electricity only:
       ``(i) In the case of a unit originally placed in service 
     before 2009, if--
       

------------------------------------------------------------------------
                                            The applicable amount is:
                                       ---------------------------------
    ``The design net heat rate is:      For 1st 5 years   For 2d 5 years
                                        of such service  of such service
------------------------------------------------------------------------
Not more than 8,500...................          $.0060           $.0038
More than 8,500 but not more than               $.0025           $.0010
 8,750................................
More than 8,750 but less than 8,900...          $.0010          $.0010.
------------------------------------------------------------------------

       ``(ii) In the case of a unit originally placed in service 
     after 2008 and before 2013, if--
       

------------------------------------------------------------------------
                                            The applicable amount is:
                                       ---------------------------------
    ``The design net heat rate is:      For 1st 5 years   For 2d 5 years
                                        of such service  of such service
------------------------------------------------------------------------
Not more than 7,770...................          $.0105           $.0090
More than 7,770 but not more than               $.0085           $.0068
 8,125................................
More than 8,125 but less than 8,500...          $.0075          $.0055.
------------------------------------------------------------------------

       ``(iii) In the case of a unit originally placed in service 
     after 2012 and before 2017, if--
       

------------------------------------------------------------------------
                                            The applicable amount is:
                                       ---------------------------------
    ``The design net heat rate is:      For 1st 5 years   For 2d 5 years
                                        of such service  of such service
------------------------------------------------------------------------
Not more than 7,380...................          $.0140           $.0115
More than 7,380 but not more than               $.0120          $.0090.
 7,720................................
------------------------------------------------------------------------

       ``(B) If the qualifying advanced clean coal technology unit 
     is producing fuel or chemicals:
       ``(i) In the case of a unit originally placed in service 
     before 2009, if--
       

------------------------------------------------------------------------
                                            The applicable amount is:
     ``The unit design net thermal     ---------------------------------
         efficiency (HHV) is:           For 1st 5 years   For 2d 5 years
                                        of such service  of such service
------------------------------------------------------------------------
Not less than 40.2 percent............          $.0060           $.0038
Less than 40.2 but not less than 39             $.0025           $.0010
 percent..............................
Less than 39 but not less than 38.4             $.0010          $.0010.
 percent..............................
------------------------------------------------------------------------

       ``(ii) In the case of a unit originally placed in service 
     after 2008 and before 2013, if--
       

------------------------------------------------------------------------
                                            The applicable amount is:
     ``The unit design net thermal     ---------------------------------
         efficiency (HHV) is:           For 1st 5 years   For 2d 5 years
                                        of such service  of such service
------------------------------------------------------------------------
Not less than 43.9 percent............          $.0105           $.0090
Less than 43.9 but not less than 42             $.0085           $.0068
 percent..............................
Less than 42 but not less than 40.2             $.0075          $.0055.
 percent..............................
------------------------------------------------------------------------


[[Page S10422]]

       ``(iii) In the case of a unit originally placed in service 
     after 2012 and before 2017, if--
       

------------------------------------------------------------------------
                                            The applicable amount is:
     ``The unit design net thermal     ---------------------------------
         efficiency (HHV) is:           For 1st 5 years   For 2d 5 years
                                        of such service  of such service
------------------------------------------------------------------------
 
Not less than 46.3 percent............          $.0140           $.0115
Less than 46.3 but not less than 44.2           $.0120          $.0090.
 percent..............................
------------------------------------------------------------------------

       ``(2) Special rule for units qualifying for greater 
     applicable amount when placed in service.--If, at the time a 
     qualifying advanced clean coal technology unit is placed in 
     service, production from the unit would be entitled to a 
     greater applicable amount if such unit had been placed in 
     service at a later date, the applicable amount for such unit 
     shall be such greater amount.
       ``(c) Inflation Adjustment.--For calendar years after 2004, 
     each dollar amount in subsection (b)(1) shall be adjusted by 
     multiplying such amount by the inflation adjustment factor 
     for the calendar year in which the amount is applied. If any 
     amount as increased under the preceding sentence is not a 
     multiple of 0.01 cent, such amount shall be rounded to the 
     nearest multiple of 0.01 cent.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) In general.--Any term used in this section which is 
     also used in section 45I or 48A shall have the meaning given 
     such term in such section.
       ``(2) Applicable rules.--The rules of paragraphs (3), (4), 
     and (5) of section 45(e) shall apply.''.
       (b) Credit Treated as Business Credit.--Section 38(b) 
     (relating to current year business credit), as amended by 
     this Act, is amended by striking ``plus'' at the end of 
     paragraph (19), by striking the period at the end of 
     paragraph (20) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(21) the qualifying advanced clean coal technology 
     production credit determined under section 45J(a).''.
       (c) Transitional Rule.--Section 39(d) (relating to 
     transitional rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(18) No carryback of section 45j credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying advanced 
     clean coal technology production credit determined under 
     section 45J may be carried back to a taxable year ending on 
     or before the date of the enactment of such section.''.
       (d) Denial of Double Benefit.--Section 29(d) (relating to 
     other definitions and special rules) is amended by adding at 
     the end the following new paragraph:
       ``(9) Denial of double benefit.--This section shall not 
     apply with respect to any qualified fuel the production of 
     which may be taken into account for purposes of determining 
     the credit under section 45J.''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45J. Credit for production from a qualifying advanced clean coal 
              technology unit.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to production after the date of the enactment of 
     this Act, in taxable years ending after such date.

     Subtitle C--Treatment of Persons Not Able To Use Entire Credit

     SEC. 421. TREATMENT OF PERSONS NOT ABLE TO USE ENTIRE CREDIT.

       (a) In General.--Section 45I, as added by this Act, is 
     amended by adding at the end the following new subsection:
       ``(f) Treatment of Person Not Able To Use Entire Credit.--
       ``(1) Allowance of credits.--
       ``(A) In general.--Any credit allowable under this section, 
     section 45J, or section 48A with respect to a facility owned 
     by a person described in subparagraph (B) may be transferred 
     or used as provided in this subsection, and the determination 
     as to whether the credit is allowable shall be made without 
     regard to the tax-exempt status of the person.
       ``(B) Persons described.--A person is described in this 
     subparagraph if the person is--
       ``(i) an organization described in section 501(c)(12)(C) 
     and exempt from tax under section 501(a),
       ``(ii) an organization described in section 1381(a)(2)(C),
       ``(iii) a public utility (as defined in section 
     136(c)(2)(B)),
       ``(iv) any State or political subdivision thereof, the 
     District of Columbia, or any agency or instrumentality of any 
     of the foregoing,
       ``(v) any Indian tribal government (within the meaning of 
     section 7871) or any agency or instrumentality thereof, or
       ``(vi) the Tennessee Valley Authority.
       ``(2) Transfer of credit.--
       ``(A) In general.--A person described in clause (i), (ii), 
     (iii), (iv), or (v) of paragraph (1)(B) may transfer any 
     credit to which paragraph (1)(A) applies through an 
     assignment to any other person not described in paragraph 
     (1)(B). Such transfer may be revoked only with the consent of 
     the Secretary.
       ``(B) Regulations.--The Secretary shall prescribe such 
     regulations as necessary to ensure that any credit described 
     in subparagraph (A) is claimed once and not reassigned by 
     such other person.
       ``(C) Transfer proceeds treated as arising from essential 
     government function.--Any proceeds derived by a person 
     described in clause (iii), (iv), or (v) of paragraph (1)(B) 
     from the transfer of any credit under subparagraph (A) shall 
     be treated as arising from the exercise of an essential 
     government function.
       ``(3) Use of credit as an offset.--Notwithstanding any 
     other provision of law, in the case of a person described in 
     clause (i), (ii), or (v) of paragraph (1)(B), any credit to 
     which paragraph (1)(A) applies may be applied by such person, 
     to the extent provided by the Secretary of Agriculture, as a 
     prepayment of any loan, debt, or other obligation the entity 
     has incurred under subchapter I of chapter 31 of title 7 of 
     the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.), 
     as in effect on the date of the enactment of this section.
       ``(4) Use by tva.--
       ``(A) In general.--Notwithstanding any other provision of 
     law, in the case of a person described in paragraph 
     (1)(B)(vi), any credit to which paragraph (1)(A) applies may 
     be applied as a credit against the payments required to be 
     made in any fiscal year under section 15d(e) of the Tennessee 
     Valley Authority Act of 1933 (16 U.S.C. 831n-4(e)) as an 
     annual return on the appropriations investment and an annual 
     repayment sum.
       ``(B) Treatment of credits.--The aggregate amount of 
     credits described in paragraph (1)(A) with respect to such 
     person shall be treated in the same manner and to the same 
     extent as if such credits were a payment in cash and shall be 
     applied first against the annual return on the appropriations 
     investment.
       ``(C) Credit carryover.--With respect to any fiscal year, 
     if the aggregate amount of credits described paragraph (1)(A) 
     with respect to such person exceeds the aggregate amount of 
     payment obligations described in subparagraph (A), the excess 
     amount shall remain available for application as credits 
     against the amounts of such payment obligations in succeeding 
     fiscal years in the same manner as described in this 
     paragraph.
       ``(5) Credit not income.--Any transfer under paragraph (2) 
     or use under paragraph (3) of any credit to which paragraph 
     (1)(A) applies shall not be treated as income for purposes of 
     section 501(c)(12).
       ``(6) Treatment of unrelated persons.--For purposes of this 
     subsection, transfers among and between persons described in 
     clauses (i), (ii), (iii), (iv), and (v) of paragraph (1)(B) 
     shall be treated as transfers between unrelated parties.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to production after the date of the enactment of 
     this Act, in taxable years ending after such date.

                    TITLE V--OIL AND GAS PROVISIONS

     SEC. 501. OIL AND GAS FROM MARGINAL WELLS.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business credits), as amended by this 
     Act, is amended by adding at the end the following new 
     section:

     ``SEC. 45K. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL 
                   WELLS.

       ``(a) General Rule.--For purposes of section 38, the 
     marginal well production credit for any taxable year is an 
     amount equal to the product of--
       ``(1) the credit amount, and
       ``(2) the qualified crude oil production and the qualified 
     natural gas production which is attributable to the taxpayer.
       ``(b) Credit Amount.--For purposes of this section--
       ``(1) In general.--The credit amount is--
       ``(A) $3 per barrel of qualified crude oil production, and
       ``(B) 50 cents per 1,000 cubic feet of qualified natural 
     gas production.
       ``(2) Reduction as oil and gas prices increase.--
       ``(A) In general.--The $3 and 50 cents amounts under 
     paragraph (1) shall each be reduced (but not below zero) by 
     an amount which bears the same ratio to such amount 
     (determined without regard to this paragraph) as--
       ``(i) the excess (if any) of the applicable reference price 
     over $15 ($1.67 for qualified natural gas production), bears 
     to
       ``(ii) $3 ($0.33 for qualified natural gas production).
     The applicable reference price for a taxable year is the 
     reference price of the calendar year preceding the calendar 
     year in which the taxable year begins.
       ``(B) Inflation adjustment.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 2003, each of the dollar 
     amounts contained in subparagraph (A) shall be increased to 
     an amount equal to such dollar amount multiplied by the 
     inflation adjustment factor for such calendar year.
       ``(ii) Inflation adjustment factor.--For purposes of clause 
     (i)--

       ``(I) In general.--The term `inflation adjustment factor' 
     means, with respect to a calendar year, a fraction the 
     numerator of which is the GDP implicit price deflator for the 
     preceding calendar year and the denominator of which is the 
     GDP implicit price deflator for the calendar year 2002.
       ``(II) GDP implicit price deflator.--The term `GDP implicit 
     price deflator' means, for

[[Page S10423]]

     any calendar year, the most recent revision of the implicit 
     price deflator for the gross domestic product as of June 30 
     of such calendar year as computed by the Department of 
     Commerce before October 1 of such calendar year.

       ``(C) Reference price.--For purposes of this paragraph, the 
     term `reference price' means, with respect to any calendar 
     year--
       ``(i) in the case of qualified crude oil production, the 
     reference price determined under section 29(d)(2)(C), and
       ``(ii) in the case of qualified natural gas production, the 
     Secretary's estimate of the annual average wellhead price per 
     1,000 cubic feet for all domestic natural gas.
       ``(c) Qualified Crude Oil and Natural Gas Production.--For 
     purposes of this section--
       ``(1) In general.--The terms `qualified crude oil 
     production' and `qualified natural gas production' mean 
     domestic crude oil or domestic natural gas which is produced 
     from a qualified marginal well.
       ``(2) Limitation on amount of production which may 
     qualify.--
       ``(A) In general.--Crude oil or natural gas produced during 
     any taxable year from any well shall not be treated as 
     qualified crude oil production or qualified natural gas 
     production to the extent production from the well during the 
     taxable year exceeds 1,095 barrels or barrel equivalents.
       ``(B) Proportionate reductions.--
       ``(i) Short taxable years.--In the case of a short taxable 
     year, the limitations under this paragraph shall be 
     proportionately reduced to reflect the ratio which the number 
     of days in such taxable year bears to 365.
       ``(ii) Wells not in production entire year.--In the case of 
     a well which is not capable of production during each day of 
     a taxable year, the limitations under this paragraph 
     applicable to the well shall be proportionately reduced to 
     reflect the ratio which the number of days of production 
     bears to the total number of days in the taxable year.
       ``(3) Noncompliance with pollution laws.--Production from 
     any well during any period in which such well is not in 
     compliance with applicable Federal pollution prevention, 
     control, and permit requirements shall not be treated as 
     qualified crude oil production or qualified natural gas 
     production.
       ``(4) Definitions.--
       ``(A) Qualified marginal well.--The term `qualified 
     marginal well' means a domestic well--
       ``(i) the production from which during the taxable year is 
     treated as marginal production under section 613A(c)(6), or
       ``(ii) which, during the taxable year--

       ``(I) has average daily production of not more than 25 
     barrel equivalents, and
       ``(II) produces water at a rate not less than 95 percent of 
     total well effluent.

       ``(B) Crude oil, etc.--The terms `crude oil', `natural 
     gas', `domestic', and `barrel' have the meanings given such 
     terms by section 613A(e).
       ``(C) Barrel equivalent.--The term `barrel equivalent' 
     means, with respect to natural gas, a conversation ratio of 
     6,000 cubic feet of natural gas to 1 barrel of crude oil.
       ``(D) Domestic natural gas.--The term `domestic natural 
     gas' does not include Alaska natural gas (as defined in 
     section 45M(c)(1)).
       ``(d) Other Rules.--
       ``(1) Production attributable to the taxpayer.--In the case 
     of a qualified marginal well in which there is more than 1 
     owner of operating interests in the well and the crude oil or 
     natural gas production exceeds the limitation under 
     subsection (c)(2), qualifying crude oil production or 
     qualifying natural gas production attributable to the 
     taxpayer shall be determined on the basis of the ratio which 
     taxpayer's revenue interest in the production bears to the 
     aggregate of the revenue interests of all operating interest 
     owners in the production.
       ``(2) Operating interest required.--Any credit under this 
     section may be claimed only on production which is 
     attributable to the holder of an operating interest.
       ``(3) Production from nonconventional sources excluded.--In 
     the case of production from a qualified marginal well which 
     is eligible for the credit allowed under section 29 for the 
     taxable year, no credit shall be allowable under this section 
     unless the taxpayer elects not to claim the credit under 
     section 29 with respect to the well.''.
       (b) Credit Treated as Business Credit.--Section 38(b) 
     (relating to current year business credit), as amended by 
     this Act, is amended by striking ``plus'' at the end of 
     paragraph (20), by striking the period at the end of 
     paragraph (21) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(22) the marginal oil and gas well production credit 
     determined under section 45K(a).''.
       (c) No Carryback of Marginal Oil and Gas Well Production 
     Credit Before Effective Date.--Section 39(d) (relating to 
     transition rules), as amended by this Act, is amended by 
     adding at the end the following new paragraph:
       ``(19) No carryback of marginal oil and gas well production 
     credit before effective date.--No portion of the unused 
     business credit for any taxable year which is attributable to 
     the marginal oil and gas well production credit determined 
     under section 45K may be carried back to a taxable year 
     ending on or before the date of the enactment of such 
     section.''.
       (d) Coordination With Section 29.--Section 29(a) (relating 
     to allowance of credit) is amended by striking ``There'' and 
     inserting ``At the election of the taxpayer, there''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45K. Credit for producing oil and gas from marginal wells.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to production in taxable years beginning after 
     the date of the enactment of this Act.

     SEC. 502. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR 
                   PROPERTY.

       (a) In General.--Section 168(e)(3)(C) (defining 7-year 
     property) is amended by striking ``and'' at the end of clause 
     (i), by redesignating clause (ii) as clause (iii), and by 
     inserting after clause (i) the following new clause:
       ``(ii) any natural gas gathering line, and''.
       (b) Natural Gas Gathering Line.--Section 168(i) (relating 
     to definitions and special rules), as amended by this Act, is 
     amended by adding at the end the following new paragraph:
       ``(17) Natural gas gathering line.--The term `natural gas 
     gathering line' means--
       ``(A) the pipe, equipment, and appurtenances used to 
     deliver natural gas from the wellhead or a commonpoint to the 
     point at which such gas first reaches--
       ``(i) a gas processing plant,
       ``(ii) an interconnection with a transmission pipeline 
     certificated by the Federal Energy Regulatory Commission as 
     an interstate transmission pipeline,
       ``(iii) an interconnection with an intrastate transmission 
     pipeline, or
       ``(iv) a direct interconnection with a local distribution 
     company, a gas storage facility, or an industrial consumer, 
     or
       ``(B) any other pipe, equipment, or appurtenances 
     determined to be a gathering line by the Federal Energy 
     Regulatory Commission.
       (c) Alternative System.--The table contained in section 
     168(g)(3)(B) (relating to special rule for certain property 
     assigned to classes) is amended by inserting after the item 
     relating to subparagraph (C)(i) the following new item:

``(C)(ii).........................................................10''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 503. EXPENSING OF CAPITAL COSTS INCURRED IN COMPLYING 
                   WITH ENVIRONMENTAL PROTECTION AGENCY SULFUR 
                   REGULATIONS.

       (a) In General.--Part VI of subchapter B of chapter 1 
     (relating to itemized deductions for individuals and 
     corporations), as amended by this Act, is amended by 
     inserting after section 179B the following new section:

     ``SEC. 179C. DEDUCTION FOR CAPITAL COSTS INCURRED IN 
                   COMPLYING WITH ENVIRONMENTAL PROTECTION AGENCY 
                   SULFUR REGULATIONS.

       ``(a) Treatment as Expense.--
       ``(1) In general.--A small business refiner may elect to 
     treat any qualified capital costs as an expense which is not 
     chargeable to capital account. Any qualified cost which is so 
     treated shall be allowed as a deduction for the taxable year 
     in which the cost is paid or incurred.
       ``(2) Limitation.--
       ``(A) In general.--The aggregate costs which may be taken 
     into account under this subsection for any taxable year with 
     respect to any facility may not exceed the applicable 
     percentage of the qualified capital costs paid or incurred 
     for the taxable year with respect to such facility.
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A)--
       ``(i) In general.--Except as provided in clause (ii), the 
     applicable percentage is 75 percent.
       ``(ii) Reduced percentage.--In the case of any facility 
     with average daily refinery runs or average retained 
     production for the period described in subsection (b)(2) in 
     excess of 155,000 barrels, the percentage described in clause 
     (i) shall be reduced (but not below zero) by the product of--

       ``(I) such percentage (before the application of this 
     clause), and
       ``(II) the ratio of such excess to 50,000 barrels.

       ``(b) Definitions.--For purposes of this section--
       ``(1) Qualified capital costs.--The term `qualified capital 
     costs' means any costs which--
       ``(A) are otherwise chargeable to capital account, and
       ``(B) are paid or incurred for the purpose of complying 
     with the Highway Diesel Fuel Sulfur Control Requirement of 
     the Environmental Protection Agency, as in effect on the date 
     of the enactment of this section, with respect to a facility 
     placed in service by the taxpayer before such date.
       ``(2) Small business refiner.--The term `small business 
     refiner' means, with respect to any taxable year, a refiner 
     of crude oil--
       ``(A) which, within the refinery operations of the 
     business, employs not more than 1,500 employees on any day 
     during such taxable year, and
       ``(B) the average daily refinery run or average retained 
     production of which for all facilities of the taxpayer for 
     the 1-year period ending on the date of the enactment of this 
     section did not exceed 410,000 barrels.
       ``(c) Coordination With Other Provisions.--Section 280B 
     shall not apply to

[[Page S10424]]

     amounts which are treated as expenses under this section.
       ``(d) Basis Reduction.--For purposes of this title, the 
     basis of any property shall be reduced by the portion of the 
     cost of such property taken into account under subsection 
     (a).
       ``(e) Controlled Groups.--For purposes of this section, all 
     persons treated as a single employer under subsection (b), 
     (c), (m), or (o) of section 414 shall be treated as a single 
     employer.''.
       (b) Conforming Amendments.--
       (1) Section 263(a)(1), as amended by this Act, is amended 
     by striking ``or'' at the end of subparagraph (H), by 
     striking the period at the end of subparagraph (I) and 
     inserting ``, or'', and by inserting after subparagraph (I) 
     the following new subparagraph:
       ``(J) expenditures for which a deduction is allowed under 
     section 179C.''.
       (2) Section 263A(c)(3) is amended by inserting ``179C,'' 
     after ``section''.
       (3) Section 312(k)(3)(B), as amended by this Act, is 
     amended by striking ``or 179B'' each place it appears in the 
     heading and text and inserting ``179B, or 179C''.
       (4) Section 1016(a), as amended by this Act, is amended by 
     striking ``and'' at the end of paragraph (32), by striking 
     the period at the end of paragraph (33) and inserting ``, 
     and'', and by adding at the end the following new paragraph:
       ``(34) to the extent provided in section 179C(d).''.
       (5) Section 1245(a), as amended by this Act, is amended by 
     inserting ``179C,'' after ``179B,'' both places it appears in 
     paragraphs (2)(C) and (3)(C).
       (6) The table of sections for part VI of subchapter B of 
     chapter 1, as amended by this Act, is amended by inserting 
     after the item relating to section 179B the following new 
     item:

``Sec. 179C. Deduction for capital costs incurred in complying with 
              Environmental Protection Agency sulfur regulations.''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to expenses paid or incurred after December 31, 
     2002, in taxable years ending after such date.

     SEC. 504. ENVIRONMENTAL TAX CREDIT.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business-related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

     ``SEC. 45L. ENVIRONMENTAL TAX CREDIT.

       ``(a) In General.--For purposes of section 38, the amount 
     of the environmental tax credit determined under this section 
     with respect to any small business refiner for any taxable 
     year is an amount equal to 5 cents for every gallon of low-
     sulfur diesel fuel produced at a facility by such small 
     business refiner during such taxable year.
       ``(b) Maximum Credit.--
       ``(1) In general.--For any small business refiner, the 
     aggregate amount determined under subsection (a) for any 
     taxable year with respect to any facility shall not exceed 
     the applicable percentage of the qualified capital costs paid 
     or incurred by such small business refiner with respect to 
     such facility during the applicable period, reduced by the 
     credit allowed under subsection (a) with respect to such 
     facility for any preceding year.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1)--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the applicable percentage is 25 percent.
       ``(B) Reduced percentage.--The percentage described in 
     subparagraph (A) shall be reduced in the same manner as under 
     section 179C(a)(2)(B)(ii).
       ``(c) Definitions.--For purposes of this section--
       ``(1) In general.--The terms `small business refiner' and 
     `qualified capital costs' have the same meaning as given in 
     section 179C.
       ``(2) Low-sulfur diesel fuel.--The term `low-sulfur diesel 
     fuel' means diesel fuel containing not more than 15 parts per 
     million of sulfur.
       ``(3) Applicable period.--The term `applicable period' 
     means, with respect to any facility, the period beginning on 
     the day after the date of the enactment of this section and 
     ending with the date which is 1 year after the date on which 
     the taxpayer must comply with the applicable EPA regulations 
     with respect to such facility.
       ``(4) Applicable epa regulations.--The term `applicable EPA 
     regulations' means the Highway Diesel Fuel Sulfur Control 
     Requirements of the Environmental Protection Agency, as in 
     effect on the date of the enactment of this section.
       ``(d) Certification.--
       ``(1) Required.--Not later than the date which is 30 months 
     after the first day of the first taxable year in which a 
     credit is allowed under this section with respect to a 
     facility, the small business refiner shall obtain a 
     certification from the Secretary, in consultation with the 
     Administrator of the Environmental Protection Agency, that 
     the taxpayer's qualified capital costs with respect to such 
     facility will result in compliance with the applicable EPA 
     regulations.
       ``(2) Contents of application.--An application for 
     certification shall include relevant information regarding 
     unit capacities and operating characteristics sufficient for 
     the Secretary, in consultation with the Administrator of the 
     Environmental Protection Agency, to determine that such 
     qualified capital costs are necessary for compliance with the 
     applicable EPA regulations.
       ``(3) Review period.--Any application shall be reviewed and 
     notice of certification, if applicable, shall be made within 
     60 days of receipt of such application. In the event the 
     Secretary does not notify the taxpayer of the results of such 
     certification within such period, the taxpayer may presume 
     the certification to be issued until so notified.
       ``(4) Statute of limitations.--With respect to the credit 
     allowed under this section--
       ``(A) the statutory period for the assessment of any 
     deficiency attributable to such credit shall not expire 
     before the end of the 3-year period ending on the date that 
     the period described in paragraph (3) ends with respect to 
     the taxpayer, and
       ``(B) such deficiency may be assessed before the expiration 
     of such 3-year period notwithstanding the provisions of any 
     other law or rule of law which would otherwise prevent such 
     assessment.
       ``(e) Controlled Groups.--For purposes of this section, all 
     persons treated as a single employer under subsection (b), 
     (c), (m), or (o) of section 414 shall be treated as a single 
     employer.
       ``(f) Cooperative Organizations.--
       ``(1) Apportionment of credit.--
       ``(A) In general.--In the case of a cooperative 
     organization described in section 1381(a), any portion of the 
     credit determined under subsection (a) for the taxable year 
     may, at the election of the organization, be apportioned 
     among patrons eligible to share in patronage dividends on the 
     basis of the quantity or value of business done with or for 
     such patrons for the taxable year.
       ``(B) Form and effect of election.--An election under 
     subparagraph (A) for any taxable year shall be made on a 
     timely filed return for such year. Such election, once made, 
     shall be irrevocable for such taxable year.
       ``(2) Treatment of organizations and patrons.--
       ``(A) Organizations.--The amount of the credit not 
     apportioned to patrons pursuant to paragraph (1) shall be 
     included in the amount determined under subsection (a) for 
     the taxable year of the organization.
       ``(B) Patrons.--The amount of the credit apportioned to 
     patrons pursuant to paragraph (1) shall be included in the 
     amount determined under subsection (a) for the first taxable 
     year of each patron ending on or after the last day of the 
     payment period (as defined in section 1382(d)) for the 
     taxable year of the organization or, if earlier, for the 
     taxable year of each patron ending on or after the date on 
     which the patron receives notice from the cooperative of the 
     apportionment.
       ``(3) Special rules for decrease in credits for taxable 
     year.--If the amount of the credit of a cooperative 
     organization determined under subsection (a) for a taxable 
     year is less than the amount of such credit shown on the 
     return of the cooperative organization for such year, an 
     amount equal to the excess of--
       ``(A) such reduction, over
       ``(B) the amount not apportioned to such patrons under 
     paragraph (1) for the taxable year,
     shall be treated as an increase in tax imposed by this 
     chapter on the organization. Such increase shall not be 
     treated as tax imposed by this chapter for purposes of 
     determining the amount of any credit under this chapter or 
     for purposes of section 55.''.
       (b) Credit Made Part of General Business Credit.--Section 
     38(b) (relating to current year business credit), as amended 
     by this Act, is amended by striking ``plus'' at the end of 
     paragraph (21), by striking the period at the end of 
     paragraph (22) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(23) in the case of a small business refiner, the 
     environmental tax credit determined under section 45L(a).''.
       (c) Denial of Double Benefit.--Section 280C (relating to 
     certain expenses for which credits are allowable), as amended 
     by this Act, is amended by adding at the end the following 
     new subsection:
       ``(e) Environmental Tax Credit.--No deduction shall be 
     allowed for that portion of the expenses otherwise allowable 
     as a deduction for the taxable year which is equal to the 
     amount of the credit determined for the taxable year under 
     section 45L(a).''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45L. Environmental tax credit.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to expenses paid or incurred after December 31, 
     2002, in taxable years ending after such date.

     SEC. 505. DETERMINATION OF SMALL REFINER EXCEPTION TO OIL 
                   DEPLETION DEDUCTION.

       (a) In General.--Paragraph (4) of section 613A(d) (relating 
     to limitations on application of subsection (c)) is amended 
     to read as follows:
       ``(4) Certain refiners excluded.--If the taxpayer or 1 or 
     more related persons engages in the refining of crude oil, 
     subsection (c) shall not apply to the taxpayer for a taxable 
     year if the average daily refinery runs of the taxpayer and 
     such persons for the taxable year exceed 60,000 barrels. For 
     purposes of this paragraph, the average daily refinery runs 
     for any taxable year shall be determined by dividing the 
     aggregate refinery runs for the taxable year by the number of 
     days in the taxable year.''.

[[Page S10425]]

       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 506. MARGINAL PRODUCTION INCOME LIMIT EXTENSION.

       Section 613A(c)(6)(H) (relating to temporary suspension of 
     taxable income limit with respect to marginal production) is 
     amended by striking ``2004'' and inserting ``2007''.

     SEC. 507. AMORTIZATION OF DELAY RENTAL PAYMENTS.

       (a) In General.--Section 167 (relating to depreciation) is 
     amended by redesignating subsection (h) as subsection (i) and 
     by inserting after subsection (g) the following new 
     subsection:
       ``(h) Amortization of Delay Rental Payments for Domestic 
     Oil and Gas Wells.--
       ``(1) In general.--Any delay rental payment paid or 
     incurred in connection with the development of oil or gas 
     wells within the United States (as defined in section 638) 
     shall be allowed as a deduction ratably over the 24-month 
     period beginning on the date that such payment was paid or 
     incurred.
       ``(2) Half-year convention.--For purposes of paragraph (1), 
     any payment paid or incurred during the taxable year shall be 
     treated as paid or incurred on the mid-point of such taxable 
     year.
       ``(3) Exclusive method.--Except as provided in this 
     subsection, no depreciation or amortization deduction shall 
     be allowed with respect to such payments.
       ``(4) Treatment upon abandonment.--If any property to which 
     a delay rental payment relates is retired or abandoned during 
     the 24-month period described in paragraph (1), no deduction 
     shall be allowed on account of such retirement or abandonment 
     and the amortization deduction under this subsection shall 
     continue with respect to such payment.
       ``(5) Delay rental payments.--For purposes of this 
     subsection, the term `delay rental payment' means an amount 
     paid for the privilege of deferring development of an oil or 
     gas well under an oil or gas lease.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred in taxable years 
     beginning after the date of the enactment of this Act.

     SEC. 508. AMORTIZATION OF GEOLOGICAL AND GEOPHYSICAL 
                   EXPENDITURES.

       (a) In General.--Section 167 (relating to depreciation), as 
     amended by this Act, is amended by redesignating subsection 
     (i) as subsection (j) and by inserting after subsection (h) 
     the following new subsection:
       ``(i) Amortization of Geological and Geophysical 
     Expenditures.--
       ``(1) In general.--Any geological and geophysical expenses 
     paid or incurred in connection with the exploration for, or 
     development of, oil or gas within the United States (as 
     defined in section 638) shall be allowed as a deduction 
     ratably over the 24-month period beginning on the date that 
     such expense was paid or incurred.
       ``(2) Special rules.--For purposes of this subsection, 
     rules similar to the rules of paragraphs (2), (3), and (4) of 
     subsection (h) shall apply.''.
       (b) Conforming Amendment.--Section 263A(c)(3) is amended by 
     inserting ``167(h), 167(i),'' after ``under section''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to costs paid or incurred in taxable years 
     beginning after the date of the enactment of this Act.

     SEC. 509. EXTENSION AND MODIFICATION OF CREDIT FOR PRODUCING 
                   FUEL FROM A NONCONVENTIONAL SOURCE.

       (a) In General.--Section 29 (relating to credit for 
     producing fuel from a nonconventional source) is amended by 
     adding at the end the following new subsection:
       ``(h) Extension for Other Facilities.--
       ``(1) Oil and gas.--In the case of a well or facility for 
     producing qualified fuels described in subparagraph (A) or 
     (B) of subsection (c)(1) which was drilled or placed in 
     service after the date of the enactment of this subsection 
     and before January 1, 2007, notwithstanding subsection (f), 
     this section shall apply with respect to such fuels produced 
     at such well or facility before the close of the 3-year 
     period beginning on the date that such well is drilled or 
     such facility is placed in service.
       ``(2) Facilities producing fuels from agricultural and 
     animal waste.--
       ``(A) In general.--In the case of facility for producing 
     liquid, gaseous, or solid fuels from qualified agricultural 
     and animal wastes, including such fuels when used as 
     feedstocks, which was placed in service after the date of the 
     enactment of this subsection and before January 1, 2007, this 
     section shall apply with respect to fuel produced at such 
     facility before the close of the 3-year period beginning on 
     the date such facility is placed in service.
       ``(B) Qualified agricultural and animal waste.--For 
     purposes of this paragraph, the term `qualified agricultural 
     and animal waste' means agriculture and animal waste, 
     including by-products, packaging, and any materials 
     associated with the processing, feeding, selling, 
     transporting, or disposal of agricultural or animal products 
     or wastes.
       ``(3) Wells producing viscous oil.--
       ``(A) In general.--In the case of a well for producing 
     viscous oil which was placed in service after the date of the 
     enactment of this subsection and before January 1, 2007, this 
     section shall apply with respect to fuel produced at such 
     well before the close of the 3-year period beginning on the 
     date such well is placed in service.
       ``(B) Viscous oil.--The term `viscous oil' means heavy oil, 
     as defined in section 613A(c)(6), except that--
       ``(i) `22 degrees' shall be substituted for `20 degrees' in 
     applying subparagraph (F) thereof, and
       ``(ii) in all cases, the oil gravity shall be measured from 
     the initial well-head samples, drill cuttings, or down hole 
     samples.
       ``(C) Waiver of unrelated person requirement.--In the case 
     of viscous oil, the requirement under subsection (a)(2)(A) of 
     a sale to an unrelated person shall not apply to any sale to 
     the extent that the viscous oil is not consumed in the 
     immediate vicinity of the wellhead.
       ``(4) Facilities producing refined coal.--
       ``(A) In general.--In the case of a facility described in 
     subparagraph (C) for producing refined coal which was placed 
     in service after the date of the enactment of this subsection 
     and before January 1, 2007, this section shall apply with 
     respect to fuel produced at such facility before the close of 
     the 5-year period beginning on the date such facility is 
     placed in service.
       ``(B) Refined coal.--For purposes of this paragraph, the 
     term `refined coal' means a fuel which is a liquid, gaseous, 
     or solid synthetic fuel produced from coal (including 
     lignite) or high carbon fly ash, including such fuel used as 
     a feedstock.
       ``(C) Covered facilities.--
       ``(i) In general.--A facility is described in this 
     subparagraph if such facility produces refined coal using a 
     technology which results in--

       ``(I) a qualified emission reduction, and
       ``(II) a qualified enhanced value.

       ``(ii) Qualified emission reduction.--For purposes of this 
     subparagraph, the term `qualified emission reduction' means a 
     reduction of at least 20 percent of the emissions of nitrogen 
     oxide and either sulfur dioxide or mercury released when 
     burning the refined coal (excluding any dilution caused by 
     materials combined or added during the production process), 
     as compared to the emissions released when burning the 
     feedstock coal or comparable coal predominantly available in 
     the marketplace as of January 1, 2003.
       ``(iii) Qualified enhanced value.--For purposes of this 
     subparagraph, the term `qualified enhanced value' means an 
     increase of at least 50 percent in the market value of the 
     refined coal (excluding any increase caused by materials 
     combined or added during the production process), as compared 
     to the value of the feedstock coal.
       ``(iv) Qualifying advanced clean coal technology units 
     excluded.--A facility described in this subparagraph shall 
     not include a qualifying advanced clean coal technology unit 
     (as defined in section 48A(b)).
       ``(5) Coalmine gas.--
       ``(A) In general.--This section shall apply to coalmine 
     gas--
       ``(i) captured or extracted by the taxpayer during the 
     period beginning after the date of the enactment of this 
     subsection and ending before January 1, 2007, and
       ``(ii) utilized as a fuel source or sold by or on behalf of 
     the taxpayer to an unrelated person during such period.
       ``(B) Coalmine gas.--For purposes of this paragraph, the 
     term `coalmine gas' means any methane gas which is--
       ``(i) liberated during or as a result of coal mining 
     operations, or
       ``(ii) extracted up to 10 years in advance of coal mining 
     operations as part of a specific plan to mine a coal deposit.
       ``(C) Special rule for advanced extraction.--In the case of 
     coalmine gas which is captured in advance of coal mining 
     operations, the credit under subsection (a) shall be allowed 
     only after the date the coal extraction occurs in the 
     immediate area where the coalmine gas was removed.
       ``(D) Noncompliance with pollution laws.--This paragraph 
     shall not apply to the capture or extraction of coalmine gas 
     from coal mining operations with respect to any period in 
     which such coal mining operations are not in compliance with 
     applicable State and Federal pollution prevention, control, 
     and permit requirements.
       ``(6) Special rules.--In determining the amount of credit 
     allowable under this section solely by reason of this 
     subsection--
       ``(A) Fuels treated as qualified fuels.--Any fuel described 
     in paragraph (2), (3), (4), or (5) shall be treated as a 
     qualified fuel for purposes of this section.
       ``(B) Daily limit.--The amount of qualified fuels sold 
     during any taxable year which may be taken into account by 
     reason of this subsection with respect to any project shall 
     not exceed an average barrel-of-oil equivalent of 200,000 
     cubic feet of natural gas per day. Days before the date the 
     project is placed in service shall not be taken into account 
     in determining such average.
       ``(C) Credit amount.--The dollar amount applicable under 
     subsection (a)(1) shall be $3 (and the inflation adjustment 
     under subsection (b)(2) shall not apply to such amount).''.
       (b) Clarification of Placed in Service Date for Certain 
     Landfill Gas Facilities.--Section 29(d) (relating to other 
     definitions and special rules), as amended by this Act, is 
     amended by adding at the end the following new paragraph:
       ``(10) Clarification of placed in service date for certain 
     landfill gas facilities.--
       ``(A) In general.--In the case of a landfill placed in 
     service on or before the date of the enactment of this 
     paragraph--
       ``(i) a facility for producing qualified fuel from such 
     landfill shall include all wells,

[[Page S10426]]

     pipes, and related components used to collect landfill gas, 
     and
       ``(ii) production of landfill gas from such landfill 
     attributable to wells, pipes, and related components placed 
     in service after such date of enactment shall be treated as 
     produced from a facility placed in service on the date such 
     wells, pipes, and related components were placed in service.
       ``(B) Landfill gas.--The term `landfill gas' means gas 
     described in subsection (c)(1)(B)(ii) and derived from the 
     biodegradation of municipal solid waste.''.
       (c) Extension for certain fuel produced at existing 
     facilities.--Section 29(f)(2) (relating to application of 
     section) is amended by inserting ``(January 1, 2006, in the 
     case of any coke, coke gas, or natural gas and byproducts 
     produced by coal gasification from lignite in a facility 
     described in paragraph (1)(B))'' after ``January 1, 2003''.
       (d) Study of Coalbed Methane.--
       (1) In general.--The Secretary of the Treasury shall 
     conduct a study regarding the effect of section 29 of the 
     Internal Revenue Code of 1986 on the production of coalbed 
     methane.
       (2) Contents of study.--The study under paragraph (1) shall 
     estimate the total amount of credits under section 29 of the 
     Internal Revenue Code of 1986 claimed annually and in the 
     aggregate which are related to the production of coalbed 
     methane since the date of the enactment of such section 29. 
     Such study shall report the annual value of such credits 
     allowable for coalbed methane compared to the average annual 
     wellhead price of natural gas (per thousand cubic feet of 
     natural gas). Such study shall also estimate the incremental 
     increase in production of coalbed methane which has resulted 
     from the enactment of such section 29, and the cost to the 
     Federal Government, in terms of the net tax benefits claimed, 
     per thousand cubic feet of incremental coalbed methane 
     produced annually and in the aggregate since such enactment.
       (e) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to fuel sold 
     after the date of the enactment of this Act, in taxable years 
     ending after such date.
       (2) Existing facilities.--The amendments made by subsection 
     (c) shall apply to fuel sold after December 31, 2002, in 
     taxable years ending after such date.

     SEC. 510. NATURAL GAS DISTRIBUTION LINES TREATED AS 15-YEAR 
                   PROPERTY.

       (a) In General.--Section 168(e)(3)(E) (defining 15-year 
     property) is amended by striking ``and'' at the end of clause 
     (ii), by striking the period at the end of clause (iii) and 
     by inserting ``, and'', and by adding at the end the 
     following new clause:
       ``(iv) any natural gas distribution line.''.
       (b) Alternative System.--The table contained in section 
     168(g)(3)(B) (relating to special rule for certain property 
     assigned to classes), as amended by this Act, is amended by 
     adding after the item relating to subparagraph (E)(iii) the 
     following new item:

``(E)(iv).........................................................20''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 511. CREDIT FOR ALASKA NATURAL GAS.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

     ``SEC. 45M. ALASKA NATURAL GAS.

       ``(a) In General.--For purposes of section 38, the Alaska 
     natural gas credit for any taxable year is an amount equal to 
     the product of--
       ``(1) the credit amount, and
       ``(2) Alaska natural gas the production of which is 
     attributable to the taxpayer.
       ``(b) Credit Amount.--For purposes of this section--
       ``(1) In general.--The credit amount is $0.52 per 1,000,000 
     Btu of Alaska natural gas.
       ``(2) Reduction as gas prices increase.--
       ``(A) In general.--The dollar amount under paragraph (1) 
     shall be reduced (but not below zero) by an amount which 
     bears the same ratio to such amount (determined without 
     regard to this paragraph) as--
       ``(i) the excess (if any) of the applicable reference price 
     over $0.83, bears to
       ``(ii) $0.52.
       ``(B) Applicable reference price.--For purposes of this 
     paragraph--
       ``(i) In general.--The applicable reference price for any 
     calendar month in a taxable year is the reference price for 
     the calendar month in which production occurs.
       ``(ii) Reference price.--The term `reference price' means, 
     with respect to any calendar month, a published market price 
     for natural gas in United States dollars per 1,000,000 Btu 
     (reduced by any gas transportation costs and gas processing 
     costs as determined by the appropriate national regulatory 
     body for natural gas transportation) as determined under 
     regulations by the Secretary.
       ``(C) Inflation adjustment.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 2003, each of the dollar 
     amounts contained in paragraph (1) and subparagraph (A) of 
     this paragraph shall be increased to an amount equal to such 
     dollar amount multiplied by the inflation adjustment factor 
     for such calendar year.
       ``(ii) Inflation adjustment factor.--For purposes of clause 
     (i)--

       ``(I) In general.--The term `inflation adjustment factor' 
     means, with respect to a calendar year, a fraction the 
     numerator of which is the GDP implicit price deflator for the 
     preceding calendar year and the denominator of which is the 
     GDP implicit price deflator for the calendar year 2002.
       ``(II) GDP implicit price deflator.--The term `GDP implicit 
     price deflator' means, for any calendar year, the most recent 
     revision of the implicit price deflator for the gross 
     domestic product as of June 30 of such calendar year as 
     computed by the Department of Commerce before October 1 of 
     such calendar year.

       ``(c) Alaska Natural Gas.--For purposes of this section--
       ``(1) In general.--The term `Alaska natural gas' means 
     natural gas entering the Alaska natural gas pipeline (as 
     defined in section 168(i)(18) (determined without regard to 
     subparagraph (B) thereof)) which is produced from a well--
       ``(A) located in the area of the State of Alaska lying 
     north of 64 degrees North latitude, determined by excluding 
     the area of the Alaska National Wildlife Refuge (including 
     the continental shelf thereof within the meaning of section 
     638(1)), and
       ``(B) pursuant to the applicable State and Federal 
     pollution prevention, control, and permit requirements from 
     such area (including the continental shelf thereof within the 
     meaning of section 638(1)).
       ``(2) Natural gas.--The term `natural gas' has the meaning 
     given such term by section 613A(e)(2).
       ``(d) Special Rules.--For purposes of this section--
       ``(1) Production attributable to the taxpayer.--
       ``(A) In general.--In the case of a well in which there is 
     more than 1 person or entity--
       ``(i) entitled to production of Alaska natural gas, or
       ``(ii) at the election of such person or entity, entitled 
     to the value of production as either an operating interest 
     owner or a royalty interest owner,
     the portion of such production attributable to such person or 
     entity shall be determined on the basis of the ratio which 
     the person's or entity's interest in the production or the 
     value of production bears to the aggregate of the interests 
     of all such persons or entities. Production otherwise 
     attributable to a United States tax-exempt person or entity 
     by reason of a royalty interest shall be attributable to such 
     person or entity with respect to whom royalty-in-value 
     production remains or to whom royalty-in-kind production is 
     sold.
       ``(B) Partnership properties.--In the case of a 
     partnership, for purposes of applying subparagraph (A), 
     production shall be attributable to its partners based on 
     each partner's distributive share of Alaska natural gas which 
     is produced from partnership properties and attributable to 
     the partnership or its partners under subparagraph (A).
       ``(2) Pass-Thru in the Case of Estates and Trusts.--Under 
     regulations prescribed by the Secretary, rules similar to the 
     rules of subsection (d) of section 52 shall apply.
       ``(e) Application of Section.--This section shall apply to 
     Alaska natural gas during the period--
       ``(1) beginning with the later of--
       ``(A) January 1, 2010, or
       ``(B) the initial date for the interstate transportation of 
     such Alaska natural gas, and
       ``(2) ending with the date which is 25 years after the date 
     described in paragraph (1).''.
       (b) Credit Treated as Business Credit.--Section 38(b) 
     (relating to current year business credit), as amended by 
     this Act, is amended by striking ``plus'' at the end of 
     paragraph (22), by striking the period at the end of 
     paragraph (23) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(24) The Alaska natural gas credit determined under 
     section 45M(a).''.
       (c) Allowing Credit Against Entire Regular Tax and Minimum 
     Tax.--
       (1) In general.--Section 38(c) (relating to limitation 
     based on amount of tax), as amended by this Act, is amended 
     by redesignating paragraph (5) as paragraph (6) and by 
     inserting after paragraph (4) the following new paragraph:
       ``(5) Special rules for alaska natural gas credit.--
       ``(A) In general.--In the case of the Alaska natural gas 
     credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to the credit, and
       ``(ii) in applying paragraph (1) to the credit--

       ``(I) the amounts in subparagraphs (A) and (B) thereof 
     shall be treated as being zero, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the Alaska 
     natural gas credit).

       ``(B) Alaska Natural Gas Credit.--For purposes of this 
     subsection, the term `Alaska natural gas credit' means the 
     credit allowable under subsection (a) by reason of section 
     45M(a).''.
       (2) Conforming amendments.--Subclause (II) of section 
     38(c)(2)(A)(ii), as amended by this Act, subclause (II) of 
     section 38(c)(3)(A)(ii), as amended by this Act, and 
     subclause (II) of section 38(c)(4)(A)(ii), as added by this 
     Act, are each amended by inserting ``or the Alaska natural 
     gas credit'' after ``producer credit''.

[[Page S10427]]

       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45M. Alaska natural gas.''.

     SEC. 512. CERTAIN ALASKA NATURAL GAS PIPELINE PROPERTY 
                   TREATED AS 7-YEAR PROPERTY.

       (a) In General.--Section 168(e)(3)(C) (defining 7-year 
     property), as amended by this Act, is amended by striking 
     ``and'' at the end of clause (ii), by redesignating clause 
     (iii) as clause (iv), and by inserting after clause (ii) the 
     following new clause:
       ``(iii) any Alaska natural gas pipeline, and''.
       (b) Alaska Natural Gas Pipeline.--Section 168(i) (relating 
     to definitions and special rules), as amended by this Act, is 
     amended by adding at the end the following new paragraph:
       ``(18) Alaska natural gas pipeline.--The term `Alaska 
     natural gas pipeline' means the natural gas pipeline system 
     located in the State of Alaska which--
       ``(A) has a capacity of more than 500,000,000,000 Btu of 
     natural gas per day, and
       ``(B) is--
       ``(i) placed in service after December 31, 2012, or
       ``(ii) treated as placed in service on January 1, 2013, if 
     the taxpayer who places such system in service before January 
     1, 2013, elects such treatment.
     Such term includes the pipe, trunk lines, related equipment, 
     and appurtenances used to carry natural gas, but does not 
     include any gas processing plant.''.
       (c) Alternative System.--The table contained in section 
     168(g)(3)(B) (relating to special rule for certain property 
     assigned to classes), as amended by this Act, is amended by 
     inserting after the item relating to subparagraph (C)(ii) the 
     following new item:

``(C)(iii)........................................................10''.

       ``(d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service on or after the 
     date of the enactment of this Act.

     SEC. 513. ARBITRAGE RULES NOT TO APPLY TO PREPAYMENTS FOR 
                   NATURAL GAS.

       (a) In General.--Section 148(b) (relating to higher 
     yielding investments) is amended by adding at the end the 
     following new paragraph:
       ``(4) Safe harbor for prepaid natural gas.--
       ``(A) In general.--The term `investment-type property' does 
     not include a prepayment under a qualified natural gas supply 
     contract.
       ``(B) Qualified natural gas supply contract.--For purposes 
     of this paragraph, the term `qualified natural gas supply 
     contract' means any contract to acquire natural gas for 
     resale by or for a utility owned by a governmental unit if 
     the amount of gas permitted to be acquired under the contract 
     for the utility during any year does not exceed the sum of--
       ``(i) the annual average amount during the testing period 
     of natural gas purchased (other than for resale) by customers 
     of such utility who are located within the service area of 
     such utility, and
       ``(ii) the amount of natural gas to be used to transport 
     the prepaid natural gas to the utility during such year.
       ``(C) Natural gas used to generate electricity.--Natural 
     gas used to generate electricity shall be taken into account 
     in determining the average under subparagraph (B)(i)--
       ``(i) only if the electricity is generated by a utility 
     owned by a governmental unit, and
       ``(ii) only to the extent that the electricity is sold 
     (other than for resale) to customers of such utility who are 
     located within the service area of such utility.
       ``(D) Adjustments for changes in customer base.--
       ``(i) New business customers.--If--

       ``(I) after the close of the testing period and before the 
     date of issuance of the issue, the utility owned by a 
     governmental unit enters into a contract to supply natural 
     gas (other than for resale) for use by a business at a 
     property within the service area of such utility, and
       ``(II) the utility did not supply natural gas to such 
     property during the testing period or the ratable amount of 
     natural gas to be supplied under the contract is 
     significantly greater than the ratable amount of gas supplied 
     to such property during the testing period,

     then a contract shall not fail to be treated as a qualified 
     natural gas supply contract by reason of supplying the 
     additional natural gas under the contract referred to in 
     subclause (I).
       ``(ii) Overall limitation.--The average under subparagraph 
     (B)(i) shall not exceed the annual amount of natural gas 
     reasonably expected to be purchased (other than for resale) 
     by persons who are located within the service area of such 
     utility and who, as of the date of issuance of the issue, are 
     customers of such utility.
       ``(E) Ruling requests.--The Secretary may increase the 
     average under subparagraph (B)(i) for any period if the 
     utility owned by the governmental unit establishes to the 
     satisfaction of the Secretary that, based on objective 
     evidence of growth in natural gas consumption or population, 
     such average would otherwise be insufficient for such period.
       ``(F) Adjustment for natural gas otherwise on hand.--
       ``(i) In general.--The amount otherwise permitted to be 
     acquired under the contract for any period shall be reduced 
     by--

       ``(I) the applicable share of natural gas held by the 
     utility on the date of issuance of the issue, and
       ``(II) the natural gas (not taken into account under 
     subclause (I)) which the utility has a right to acquire 
     during such period (determined as of the date of issuance of 
     the issue).

       ``(ii) Applicable share.--For purposes of clause (i), the 
     term `applicable share' means, with respect to any period, 
     the natural gas allocable to such period if the gas were 
     allocated ratably over the period to which the prepayment 
     relates.
       ``(G) Intentional acts.--Subparagraph (A) shall cease to 
     apply to any issue if the utility owned by the governmental 
     unit engages in any intentional act to render the volume of 
     natural gas acquired by such prepayment to be in excess of 
     the sum of--
       ``(i) the amount of natural gas needed (other than for 
     resale) by customers of such utility who are located within 
     the service area of such utility, and
       ``(ii) the amount of natural gas used to transport such 
     natural gas to the utility.
       ``(H) Testing period.--For purposes of this paragraph, the 
     term `testing period' means, with respect to an issue, the 
     most recent 5 calendar years ending before the date of 
     issuance of the issue.
       ``(I) Service area.--For purposes of this paragraph, the 
     service area of a utility owned by a governmental unit shall 
     be comprised of--
       ``(i) any area throughout which such utility provided at 
     all times during the testing period--

       ``(I) in the case of a natural gas utility, natural gas 
     transmission or distribution services, and
       ``(II) in the case of an electric utility, electricity 
     distribution services,

       ``(ii) any area within a county contiguous to the area 
     described in clause (i) in which retail customers of such 
     utility are located if such area is not also served by 
     another utility providing natural gas or electricity 
     services, as the case may be, and
       ``(iii) any area recognized as the service area of such 
     utility under State or Federal law.''.
       (b) Private Loan Financing Test Not To Apply to Prepayments 
     for Natural Gas.--Section 141(c)(2) (providing exceptions to 
     the private loan financing test) is amended by striking 
     ``or'' at the end of subparagraph (A), by striking the period 
     at the end of subparagraph (B) and inserting ``, or'', and by 
     adding at the end the following new subparagraph:
       ``(C) is a qualified natural gas supply contract (as 
     defined in section 148(b)(4)).''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to obligations issued after the date of the 
     enactment of this Act.

     SEC. 514. EXTENSION OF ENHANCED OIL RECOVERY CREDIT TO 
                   CERTAIN ALASKA FACILITIES.

       (a) In General.--Section 43(c)(1) (defining qualified 
     enhanced oil recovery costs) is amended by adding at the end 
     the following new subparagraph:
       ``(D) Any amount which is paid or incurred during the 
     taxable year to construct a gas treatment plant which--
       ``(i) is located in the area of the United States (within 
     the meaning of section 638(1)) lying north of 64 degrees 
     North latitude,
       ``(ii) prepares Alaska natural gas (as defined in section 
     45M(c)(1)) for transportation through a pipeline with a 
     capacity of at least 2,000,000,000,000 Btu of natural gas per 
     day, and
       ``(iii) produces carbon dioxide which is injected into 
     hydrocarbon-bearing geological formations.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to costs paid or incurred in taxable years 
     beginning after December 31, 2003.

          TITLE VI--ELECTRIC UTILITY RESTRUCTURING PROVISIONS

     SEC. 601. MODIFICATIONS TO SPECIAL RULES FOR NUCLEAR 
                   DECOMMISSIONING COSTS.

       (a) Repeal of Limitation on Deposits Into Fund Based on 
     Cost of Service; Contributions After Funding Period.--
     Subsection (b) of section 468A (relating to special rules for 
     nuclear decommissioning costs) is amended to read as follows:
       ``(b) Limitation on Amounts Paid Into Fund.--The amount 
     which a taxpayer may pay into the Fund for any taxable year 
     shall not exceed the ruling amount applicable to such taxable 
     year.''.
       (b) Clarification of Treatment of Fund Transfers.--Section 
     468A(e) (relating to Nuclear Decommissioning Reserve Fund) is 
     amended by adding at the end the following new paragraph:
       ``(8) Treatment of fund transfers.--If, in connection with 
     the transfer of the taxpayer's interest in a nuclear power 
     plant, the taxpayer transfers the Fund with respect to such 
     power plant to the transferee of such interest and the 
     transferee elects to continue the application of this section 
     to such Fund--
       ``(A) the transfer of such Fund shall not cause such Fund 
     to be disqualified from the application of this section, and
       ``(B) no amount shall be treated as distributed from such 
     Fund, or be includable in gross income, by reason of such 
     transfer.''.
       (c) Treatment of Certain Decommissioning Costs.--

[[Page S10428]]

       (1) In general.--Section 468A is amended by redesignating 
     subsections (f) and (g) as subsections (g) and (h), 
     respectively, and by inserting after subsection (e) the 
     following new subsection:
       ``(f) Transfers Into Qualified Funds.--
       ``(1) In general.--Notwithstanding subsection (b), any 
     taxpayer maintaining a Fund to which this section applies 
     with respect to a nuclear power plant may transfer into such 
     Fund not more than an amount equal to the present value of 
     the excess of the total nuclear decommissioning costs with 
     respect to such nuclear power plant over the portion of such 
     costs taken into account in determining the ruling amount in 
     effect immediately before the transfer.
       ``(2) Deduction for amounts transferred.--
       ``(A) In general.--Except as provided in subparagraph (C), 
     the deduction allowed by subsection (a) for any transfer 
     permitted by this subsection shall be allowed ratably over 
     the remaining estimated useful life (within the meaning of 
     subsection (d)(2)(A)) of the nuclear power plant beginning 
     with the taxable year during which the transfer is made.
       ``(B) Denial of deduction for previously deducted 
     amounts.--No deduction shall be allowed for any transfer 
     under this subsection of an amount for which a deduction was 
     previously allowed or a corresponding amount was not included 
     in gross income. For purposes of the preceding sentence, a 
     ratable portion of each transfer shall be treated as being 
     from previously deducted or excluded amounts to the extent 
     thereof.
       ``(C) Transfers of qualified funds.--If--
       ``(i) any transfer permitted by this subsection is made to 
     any Fund to which this section applies, and
       ``(ii) such Fund is transferred thereafter,
     any deduction under this subsection for taxable years ending 
     after the date that such Fund is transferred shall be allowed 
     to the transferee and not the transferor. The preceding 
     sentence shall not apply if the transferor is an entity 
     exempt from tax under this chapter.
       ``(D) Special rules.--
       ``(i) Gain or loss not recognized.--No gain or loss shall 
     be recognized on any transfer permitted by this subsection.
       ``(ii) Transfers of appreciated property.--If appreciated 
     property is transferred in a transfer permitted by this 
     subsection, the amount of the deduction shall not exceed the 
     adjusted basis of such property.
       ``(3) New ruling amount required.--Paragraph (1) shall not 
     apply to any transfer unless the taxpayer requests from the 
     Secretary a new schedule of ruling amounts in connection with 
     such transfer.
       ``(4) No basis in qualified funds.--Notwithstanding any 
     other provision of law, the taxpayer's basis in any Fund to 
     which this section applies shall not be increased by reason 
     of any transfer permitted by this subsection.''.
       (2) New ruling amount to take into account total costs.--
     Subparagraph (A) of section 468A(d)(2) (defining ruling 
     amount) is amended to read as follows:
       ``(A) fund the total nuclear decommissioning costs with 
     respect to such power plant over the estimated useful life of 
     such power plant, and''.
       (d) Technical Amendment.--Section 468A(e)(2) (relating to 
     taxation of Fund) is amended--
       (1) by striking ``rate set forth in subparagraph (B)'' in 
     subparagraph (A) and inserting ``rate of 20 percent'',
       (2) by striking subparagraph (B), and
       (3) by redesignating subparagraphs (C) and (D) as 
     subparagraphs (B) and (C), respectively.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 602. TREATMENT OF CERTAIN INCOME OF COOPERATIVES.

       (a) Income From Open Access and Nuclear Decommissioning 
     Transactions.--
       (1) In general.--Section 501(c)(12)(C) (relating to list of 
     exempt organizations) is amended by striking ``or'' at the 
     end of clause (i), by striking clause (ii), and by adding at 
     the end the following new clauses:
       ``(ii) from any open access transaction (other than income 
     received or accrued directly or indirectly from a member),
       ``(iii) from any nuclear decommissioning transaction,
       ``(iv) from any asset exchange or conversion transaction, 
     or
       ``(v) from the prepayment of any loan, debt, or obligation 
     made, insured, or guaranteed under the Rural Electrification 
     Act of 1936.''.
       (2) Definitions and special rules.--Section 501(c)(12) is 
     amended by adding at the end the following new subparagraphs:
       ``(E) For purposes of subparagraph (C)(ii)--
       ``(i) The term `open access transaction' means any 
     transaction meeting the open access requirements of any of 
     the following subclauses with respect to a mutual or 
     cooperative electric company:

       ``(I) The provision or sale of electric transmission 
     service or ancillary services meets the open access 
     requirements of this subclause only if such services are 
     provided on a nondiscriminatory open access basis pursuant to 
     an open access transmission tariff filed with and approved by 
     FERC, including an acceptable reciprocity tariff, or under a 
     regional transmission organization agreement approved by 
     FERC.
       ``(II) The provision or sale of electric energy 
     distribution services or ancillary services meets the open 
     access requirements of this subclause only if such services 
     are provided on a nondiscriminatory open access basis to end-
     users served by distribution facilities owned by the mutual 
     or cooperative electric company (or its members).
       ``(III) The delivery or sale of electric energy generated 
     by a generation facility meets the open access requirements 
     of this subclause only if such facility is directly connected 
     to distribution facilities owned by the mutual or cooperative 
     electric company (or its members) which owns the generation 
     facility, and such distribution facilities meet the open 
     access requirements of subclause (II).

       ``(ii) Clause (i)(I) shall apply in the case of a 
     voluntarily filed tariff only if the mutual or cooperative 
     electric company files a report with FERC within 90 days 
     after the date of the enactment of this subparagraph relating 
     to whether or not such company will join a regional 
     transmission organization.
       ``(iii) A mutual or cooperative electric company shall be 
     treated as meeting the open access requirements of clause 
     (i)(I) if a regional transmission organization controls the 
     transmission facilities.
       ``(iv) References to FERC in this subparagraph shall be 
     treated as including references to the Public Utility 
     Commission of Texas with respect to any ERCOT utility (as 
     defined in section 212(k)(2)(B) of the Federal Power Act (16 
     U.S.C. 824k(k)(2)(B))) or references to the Rural Utilities 
     Service with respect to any other facility not subject to 
     FERC jurisdiction.
       ``(v) For purposes of this subparagraph--

       ``(I) The term `transmission facility' means an electric 
     output facility (other than a generation facility) which 
     operates at an electric voltage of 69 kilovolts or greater. 
     To the extent provided in regulations, such term includes any 
     output facility which FERC determines is a transmission 
     facility under standards applied by FERC under the Federal 
     Power Act (as in effect on the date of the enactment of the 
     Energy Tax Incentives Act of 2003).
       ``(II) The term `regional transmission organization' 
     includes an independent system operator.
       ``(III) The term `FERC' means the Federal Energy Regulatory 
     Commission.

       ``(F) The term `nuclear decommissioning transaction' 
     means--
       ``(i) any transfer into a trust, fund, or instrument 
     established to pay any nuclear decommissioning costs if the 
     transfer is in connection with the transfer of the mutual or 
     cooperative electric company's interest in a nuclear power 
     plant or nuclear power plant unit,
       ``(ii) any distribution from any trust, fund, or instrument 
     established to pay any nuclear decommissioning costs, or
       ``(iii) any earnings from any trust, fund, or instrument 
     established to pay any nuclear decommissioning costs.
       ``(G) The term `asset exchange or conversion transaction' 
     means any voluntary exchange or involuntary conversion of any 
     property related to generating, transmitting, distributing, 
     or selling electric energy by a mutual or cooperative 
     electric company, the gain from which qualifies for deferred 
     recognition under section 1031 or 1033, but only if the 
     replacement property acquired by such company pursuant to 
     such section constitutes property which is used, or to be 
     used, for--
       ``(i) generating, transmitting, distributing, or selling 
     electric energy, or
       ``(ii) producing, transmitting, distributing, or selling 
     natural gas.''.
       (b) Treatment of Income From Load Loss Transactions.--
     Section 501(c)(12), as amended by subsection (a)(2), is 
     amended by adding after subparagraph (G) the following new 
     subparagraph:
       ``(H)(i) In the case of a mutual or cooperative electric 
     company described in this paragraph or an organization 
     described in section 1381(a)(2)(C), income received or 
     accrued from a load loss transaction shall be treated as an 
     amount collected from members for the sole purpose of meeting 
     losses and expenses.
       ``(ii) For purposes of clause (i), the term `load loss 
     transaction' means any wholesale or retail sale of electric 
     energy (other than to members) to the extent that the 
     aggregate sales during the recovery period do not exceed the 
     load loss mitigation sales limit for such period.
       ``(iii) For purposes of clause (ii), the load loss 
     mitigation sales limit for the recovery period is the sum of 
     the annual load losses for each year of such period.
       ``(iv) For purposes of clause (iii), a mutual or 
     cooperative electric company's annual load loss for each year 
     of the recovery period is the amount (if any) by which--
       ``(I) the megawatt hours of electric energy sold during 
     such year to members of such electric company are less than
       ``(II) the megawatt hours of electric energy sold during 
     the base year to such members.
       ``(v) For purposes of clause (iv)(II), the term `base year' 
     means--
       ``(I) the calendar year preceding the start-up year, or
       ``(II) at the election of the electric company, the second 
     or third calendar years preceding the start-up year.
       ``(vi) For purposes of this subparagraph, the recovery 
     period is the 7-year period beginning with the start-up year.
       ``(vii) For purposes of this subparagraph, the start-up 
     year is the calendar year which includes the date of the 
     enactment of this

[[Page S10429]]

     subparagraph or, if later, at the election of the mutual or 
     cooperative electric company--
       ``(I) the first year that such electric company offers 
     nondiscriminatory open access, or
       ``(II) the first year in which at least 10 percent of such 
     electric company's sales are not to members of such electric 
     company.
       ``(viii) A company shall not fail to be treated as a mutual 
     or cooperative company for purposes of this paragraph or as a 
     corporation operating on a cooperative basis for purposes of 
     section 1381(a)(2)(C) by reason of the treatment under clause 
     (i).
       ``(ix) In the case of a mutual or cooperative electric 
     company, income from any open access transaction received, or 
     accrued, indirectly from a member shall be treated as an 
     amount collected from members for the sole purpose of meeting 
     losses and expenses.''.
       (c) Exception From Unrelated Business Taxable Income.--
     Section 512(b) (relating to modifications) is amended by 
     adding at the end the following new paragraph:
       ``(18) Treatment of mutual or cooperative electric 
     companies.--In the case of a mutual or cooperative electric 
     company described in section 501(c)(12), there shall be 
     excluded income which is treated as member income under 
     subparagraph (H) thereof.''.
       (d) Cross Reference.--Section 1381 is amended by adding at 
     the end the following new subsection:

       ``(c) Cross Reference.--

  ``For treatment of income from load loss transactions of 
organizations described in subsection (a)(2)(C), see section 
501(c)(12)(H).''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 603. SALES OR DISPOSITIONS TO IMPLEMENT FEDERAL ENERGY 
                   REGULATORY COMMISSION OR STATE ELECTRIC 
                   RESTRUCTURING POLICY.

       (a) In General.--Section 451 (relating to general rule for 
     taxable year of inclusion) is amended by adding at the end 
     the following new subsection:
       ``(i) Special Rule for Sales or Dispositions To Implement 
     Federal Energy Regulatory Commission or State Electric 
     Restructuring Policy.--
       ``(1) In general.--For purposes of this subtitle, if a 
     taxpayer elects the application of this subsection to a 
     qualifying electric transmission transaction in any taxable 
     year--
       ``(A) any ordinary income derived from such transaction 
     which would be required to be recognized under section 1245 
     or 1250 for such taxable year (determined without regard to 
     this subsection), and
       ``(B) any income derived from such transaction in excess of 
     such ordinary income which is required to be included in 
     gross income for such taxable year (determined without regard 
     to this subsection),
     shall be so recognized and included ratably over the 8-
     taxable year period beginning with such taxable year.
       ``(2) Qualifying electric transmission transaction.--For 
     purposes of this subsection, the term `qualifying electric 
     transmission transaction' means any sale or other disposition 
     before January 1, 2008, of--
       ``(A) property used by the taxpayer in the trade or 
     business of providing electric transmission services, or
       ``(B) any stock or partnership interest in a corporation or 
     partnership, as the case may be, whose principal trade or 
     business consists of providing electric transmission 
     services,
     but only if such sale or disposition is to an independent 
     transmission company.
       ``(3) Independent transmission company.--For purposes of 
     this subsection, the term `independent transmission company' 
     means--
       ``(A) a regional transmission organization approved by the 
     Federal Energy Regulatory Commission,
       ``(B) a person--
       ``(i) who the Federal Energy Regulatory Commission 
     determines in its authorization of the transaction under 
     section 203 of the Federal Power Act (16 U.S.C. 824b) is not 
     a market participant within the meaning of such Commission's 
     rules applicable to regional transmission organizations, and
       ``(ii) whose transmission facilities to which the election 
     under this subsection applies are under the operational 
     control of a Federal Energy Regulatory Commission-approved 
     regional transmission organization before the close of the 
     period specified in such authorization, but not later than 
     January 1, 2008, or
       ``(C) in the case of facilities subject to the exclusive 
     jurisdiction of the Public Utility Commission of Texas, a 
     person which is approved by that Commission as consistent 
     with Texas State law regarding an independent transmission 
     organization.
       ``(4) Election.--An election under paragraph (1), once 
     made, shall be irrevocable.
       ``(5) Nonapplication of installment sales treatment.--
     Section 453 shall not apply to any qualifying electric 
     transmission transaction with respect to which an election to 
     apply this subsection is made.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to transactions occurring after the date of the 
     enactment of this Act.

                    TITLE VII--ADDITIONAL PROVISIONS

     SEC. 701. EXTENSION OF ACCELERATED DEPRECIATION AND WAGE 
                   CREDIT BENEFITS ON INDIAN RESERVATIONS.

       (a) Special Recovery Period for Property on Indian 
     Reservations.--Section 168(j)(8) (relating to termination) is 
     amended by striking ``2004'' and inserting ``2005''.
       (b) Indian Employment Credit.--Section 45A(f) (relating to 
     termination) is amended by striking ``2004'' and inserting 
     ``2005''.

     SEC. 702. STUDY OF EFFECTIVENESS OF CERTAIN PROVISIONS BY 
                   GAO.

       (a) Study.--The Comptroller General of the United States 
     shall undertake an ongoing analysis of--
       (1) the effectiveness of the alternative motor vehicles and 
     fuel incentives provisions under title II and the 
     conservation and energy efficiency provisions under title 
     III, and
       (2) the recipients of the tax benefits contained in such 
     provisions, including an identification of such recipients by 
     income and other appropriate measurements.
     Such analysis shall quantify the effectiveness of such 
     provisions by examining and comparing the Federal 
     Government's forgone revenue to the aggregate amount of 
     energy actually conserved and tangible environmental benefits 
     gained as a result of such provisions.
       (b) Reports.--The Comptroller General of the United States 
     shall report the analysis required under subsection (a) to 
     Congress not later than December 31, 2004, and annually 
     thereafter.

     SEC. 703. REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES ON 
                   RAILROADS AND INLAND WATERWAY TRANSPORTATION 
                   WHICH REMAIN IN GENERAL FUND.

       (a) Taxes on Trains.--
       (1) In general.--Subparagraph (A) of section 4041(a)(1) is 
     amended by striking ``or a diesel-powered train'' each place 
     it appears and by striking ``or train''.
       (2) Conforming amendments.--
       (A) Subparagraph (C) of section 4041(a)(1) is amended by 
     striking clause (ii) and by redesignating clause (iii) as 
     clause (ii).
       (B) Subparagraph (C) of section 4041(b)(1) is amended by 
     striking all that follows ``section 6421(e)(2)'' and 
     inserting a period.
       (C) Subsection (d) of section 4041 is amended by 
     redesignating paragraph (3) as paragraph (4) and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) Diesel fuel used in trains.--There is hereby imposed 
     a tax of 0.1 cent per gallon on any liquid other than 
     gasoline (as defined in section 4083)--
       ``(A) sold by any person to an owner, lessee, or other 
     operator of a diesel-powered train for use as a fuel in such 
     train, or
       ``(B) used by any person as a fuel in a diesel-powered 
     train unless there was a taxable sale of such fuel under 
     subparagraph (A).
     No tax shall be imposed by this paragraph on the sale or use 
     of any liquid if tax was imposed on such liquid under section 
     4081.''
       (D) Subsection (f) of section 4082 is amended by striking 
     ``section 4041(a)(1)'' and inserting ``subsections (d)(3) and 
     (a)(1) of section 4041, respectively''.
       (E) Paragraph (3) of section 4083(a) is amended by striking 
     ``or a diesel-powered train''.
       (F) Paragraph (3) of section 6421(f) is amended to read as 
     follows:
       ``(3) Gasoline used in trains.--In the case of gasoline 
     used as a fuel in a train, this section shall not apply with 
     respect to the Leaking Underground Storage Tank Trust Fund 
     financing rate under section 4081.''
       (G) Paragraph (3) of section 6427(l) is amended to read as 
     follows:
       ``(3) Refund of certain taxes on fuel used in diesel-
     powered trains.--For purposes of this subsection, the term 
     `nontaxable use' includes fuel used in a diesel-powered 
     train. The preceding sentence shall not apply to the tax 
     imposed by section 4041(d) and the Leaking Underground 
     Storage Tank Trust Fund financing rate under section 4081 
     except with respect to fuel sold for exclusive use by a State 
     or any political subdivision thereof.''
       (b) Fuel Used on Inland Waterways.--
       (1) In general.--Paragraph (1) of section 4042(b) is 
     amended by adding ``and'' at the end of subparagraph (A), by 
     striking ``, and'' at the end of subparagraph (B) and 
     inserting a period, and by striking subparagraph (C).
       (2) Conforming amendment.--Paragraph (2) of section 4042(b) 
     is amended by striking subparagraph (C).
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2004.

     SEC. 704. EXPANSION OF RESEARCH CREDIT.

       (a) Credit for Expenses Attributable to Certain 
     Collaborative Energy Research Consortia.--
       (1) In general.--Section 41(a) (relating to credit for 
     increasing research activities) is amended by striking 
     ``and'' at the end of paragraph (1), by striking the period 
     at the end of paragraph (2) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(3) 20 percent of the amounts paid or incurred by the 
     taxpayer in carrying on any trade or business of the taxpayer 
     during the taxable year (including as contributions) to an 
     energy research consortium.''.
       (2) Energy research consortium defined.--Section 41(f) 
     (relating to special rules) is amended by adding at the end 
     the following new paragraph:
       ``(6) Energy research consortium.--
       ``(A) In general.--The term `energy research consortium' 
     means any organization--
       ``(i) which is--

       ``(I) described in section 501(c)(3) and is exempt from tax 
     under section 501(a) and is organized and operated primarily 
     to conduct energy research, or
       ``(II) organized and operated primarily to conduct energy 
     research in the public interest (within the meaning of 
     section 501(c)(3)),

[[Page S10430]]

       ``(ii) which is not a private foundation,
       ``(iii) to which at least 5 unrelated persons paid or 
     incurred during the calendar year in which the taxable year 
     of the organization begins amounts (including as 
     contributions) to such organization for energy research, and
       ``(iv) to which no single person paid or incurred 
     (including as contributions) during such calendar year an 
     amount equal to more than 50 percent of the total amounts 
     received by such organization during such calendar year for 
     energy research.
       ``(B) Treatment of persons.--All persons treated as a 
     single employer under subsection (a) or (b) of section 52 
     shall be treated as related persons for purposes of 
     subparagraph (A)(iii) and as a single person for purposes of 
     subparagraph (A)(iv).''.
       (3) Conforming amendment.--Section 41(b)(3)(C) is amended 
     by inserting ``(other than an energy research consortium)'' 
     after ``organization''.
       (b) Repeal of Limitation on Contract Research Expenses Paid 
     to Small Businesses, Universities, and Federal 
     Laboratories.--Section 41(b)(3) (relating to contract 
     research expenses) is amended by adding at the end the 
     following new subparagraph:
       ``(D) Amounts paid to eligible small businesses, 
     universities, and federal laboratories.--
       ``(i) In general.--In the case of amounts paid by the 
     taxpayer to--

       ``(I) an eligible small business,
       ``(II) an institution of higher education (as defined in 
     section 3304(f)), or
       ``(III) an organization which is a Federal laboratory,

     for qualified research which is energy research, subparagraph 
     (A) shall be applied by substituting `100 percent' for `65 
     percent'.
       ``(ii) Eligible small business.--For purposes of this 
     subparagraph, the term `eligible small business' means a 
     small business with respect to which the taxpayer does not 
     own (within the meaning of section 318) 50 percent or more 
     of--

       ``(I) in the case of a corporation, the outstanding stock 
     of the corporation (either by vote or value), and
       ``(II) in the case of a small business which is not a 
     corporation, the capital and profits interests of the small 
     business.

       ``(iii) Small business.--For purposes of this 
     subparagraph--

       ``(I) In general.--The term `small business' means, with 
     respect to any calendar year, any person if the annual 
     average number of employees employed by such person during 
     either of the 2 preceding calendar years was 500 or fewer. 
     For purposes of the preceding sentence, a preceding calendar 
     year may be taken into account only if the person was in 
     existence throughout the year.
       ``(II) Startups, controlled groups, and predecessors.--
     Rules similar to the rules of subparagraphs (B) and (D) of 
     section 220(c)(4) shall apply for purposes of this clause.

       ``(iv) Federal laboratory.--For purposes of this 
     subparagraph, the term `Federal laboratory' has the meaning 
     given such term by section 4(6) of the Stevenson-Wydler 
     Technology Innovation Act of 1980 (15 U.S.C. 3703(6)), as in 
     effect on the date of the enactment of the Energy Tax 
     Incentives Act of 2003.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act.

                     TITLE VIII--REVENUE PROVISIONS

        Subtitle A--Provisions Designed To Curtail Tax Shelters

     SEC. 801. PENALTY FOR FAILING TO DISCLOSE REPORTABLE 
                   TRANSACTION.

       (a) In General.--Part I of subchapter B of chapter 68 
     (relating to assessable penalties) is amended by inserting 
     after section 6707 the following new section:

     ``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE 
                   TRANSACTION INFORMATION WITH RETURN OR 
                   STATEMENT.

       ``(a) Imposition of Penalty.--Any person who fails to 
     include on any return or statement any information with 
     respect to a reportable transaction which is required under 
     section 6011 to be included with such return or statement 
     shall pay a penalty in the amount determined under subsection 
     (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), the amount of the penalty under subsection (a) shall be 
     $50,000.
       ``(2) Listed transaction.--The amount of the penalty under 
     subsection (a) with respect to a listed transaction shall be 
     $100,000.
       ``(3) Increase in penalty for large entities and high net 
     worth individuals.--
       ``(A) In general.--In the case of a failure under 
     subsection (a) by--
       ``(i) a large entity, or
       ``(ii) a high net worth individual,
     the penalty under paragraph (1) or (2) shall be twice the 
     amount determined without regard to this paragraph.
       ``(B) Large entity.--For purposes of subparagraph (A), the 
     term `large entity' means, with respect to any taxable year, 
     a person (other than a natural person) with gross receipts in 
     excess of $10,000,000 for the taxable year in which the 
     reportable transaction occurs or the preceding taxable year. 
     Rules similar to the rules of paragraph (2) and subparagraphs 
     (B), (C), and (D) of paragraph (3) of section 448(c) shall 
     apply for purposes of this subparagraph.
       ``(C) High net worth individual.--For purposes of 
     subparagraph (A), the term `high net worth individual' means, 
     with respect to a reportable transaction, a natural person 
     whose net worth exceeds $2,000,000 immediately before the 
     transaction.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Reportable transaction.--The term `reportable 
     transaction' means any transaction with respect to which 
     information is required to be included with a return or 
     statement because, as determined under regulations prescribed 
     under section 6011, such transaction is of a type which the 
     Secretary determines as having a potential for tax avoidance 
     or evasion.
       ``(2) Listed transaction.--Except as provided in 
     regulations, the term `listed transaction' means a reportable 
     transaction which is the same as, or substantially similar 
     to, a transaction specifically identified by the Secretary as 
     a tax avoidance transaction for purposes of section 6011.
       ``(d) Authority To Rescind Penalty.--
       ``(1) In general.--The Commissioner of Internal Revenue may 
     rescind all or any portion of any penalty imposed by this 
     section with respect to any violation if--
       ``(A) the violation is with respect to a reportable 
     transaction other than a listed transaction,
       ``(B) the person on whom the penalty is imposed has a 
     history of complying with the requirements of this title,
       ``(C) it is shown that the violation is due to an 
     unintentional mistake of fact;
       ``(D) imposing the penalty would be against equity and good 
     conscience, and
       ``(E) rescinding the penalty would promote compliance with 
     the requirements of this title and effective tax 
     administration.
       ``(2) Discretion.--The exercise of authority under 
     paragraph (1) shall be at the sole discretion of the 
     Commissioner and may be delegated only to the head of the 
     Office of Tax Shelter Analysis. The Commissioner, in the 
     Commissioner's sole discretion, may establish a procedure to 
     determine if a penalty should be referred to the Commissioner 
     or the head of such Office for a determination under 
     paragraph (1).
       ``(3) No appeal.--Notwithstanding any other provision of 
     law, any determination under this subsection may not be 
     reviewed in any administrative or judicial proceeding.
       ``(4) Records.--If a penalty is rescinded under paragraph 
     (1), the Commissioner shall place in the file in the Office 
     of the Commissioner the opinion of the Commissioner or the 
     head of the Office of Tax Shelter Analysis with respect to 
     the determination, including--
       ``(A) the facts and circumstances of the transaction,
       ``(B) the reasons for the rescission, and
       ``(C) the amount of the penalty rescinded.
       ``(5) Report.--The Commissioner shall each year report to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate--
       ``(A) a summary of the total number and aggregate amount of 
     penalties imposed, and rescinded, under this section, and
       ``(B) a description of each penalty rescinded under this 
     subsection and the reasons therefor.
       ``(e) Penalty Reported to SEC.--In the case of a person--
       ``(1) which is required to file periodic reports under 
     section 13 or 15(d) of the Securities Exchange Act of 1934 or 
     is required to be consolidated with another person for 
     purposes of such reports, and
       ``(2) which--
       ``(A) is required to pay a penalty under this section with 
     respect to a listed transaction, or
       ``(B) is required to pay a penalty under section 6662A with 
     respect to any reportable transaction at a rate prescribed 
     under section 6662A(c),

     the requirement to pay such penalty shall be disclosed in 
     such reports filed by such person for such periods as the 
     Secretary shall specify. Failure to make a disclosure in 
     accordance with the preceding sentence shall be treated as a 
     failure to which the penalty under subsection (b)(2) applies.
       ``(f) Coordination With Other Penalties.--The penalty 
     imposed by this section is in addition to any penalty imposed 
     under this title.''.
       (b) Conforming Amendment.--The table of sections for part I 
     of subchapter B of chapter 68 is amended by inserting after 
     the item relating to section 6707 the following:

``Sec. 6707A. Penalty for failure to include reportable transaction 
              information with return or statement.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns and statements the due date for which 
     is after the date of the enactment of this Act.

     SEC. 802. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS 
                   AND OTHER REPORTABLE TRANSACTIONS HAVING A 
                   SIGNIFICANT TAX AVOIDANCE PURPOSE.

       (a) In General.--Subchapter A of chapter 68 is amended by 
     inserting after section 6662 the following new section:

     ``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON 
                   UNDERSTATEMENTS WITH RESPECT TO REPORTABLE 
                   TRANSACTIONS.

       ``(a) Imposition of Penalty.--If a taxpayer has a 
     reportable transaction understatement for any taxable year, 
     there shall be added to the tax an amount equal to 20 percent 
     of the amount of such understatement.
       ``(b) Reportable Transaction Understatement.--For purposes 
     of this section--

[[Page S10431]]

       ``(1) In general.--The term `reportable transaction 
     understatement' means the sum of--
       ``(A) the product of--
       ``(i) the amount of the increase (if any) in taxable income 
     which results from a difference between the proper tax 
     treatment of an item to which this section applies and the 
     taxpayer's treatment of such item (as shown on the taxpayer's 
     return of tax), and
       ``(ii) the highest rate of tax imposed by section 1 
     (section 11 in the case of a taxpayer which is a 
     corporation), and
       ``(B) the amount of the decrease (if any) in the aggregate 
     amount of credits determined under subtitle A which results 
     from a difference between the taxpayer's treatment of an item 
     to which this section applies (as shown on the taxpayer's 
     return of tax) and the proper tax treatment of such item.

     For purposes of subparagraph (A), any reduction of the excess 
     of deductions allowed for the taxable year over gross income 
     for such year, and any reduction in the amount of capital 
     losses which would (without regard to section 1211) be 
     allowed for such year, shall be treated as an increase in 
     taxable income.
       ``(2) Items to which section applies.--This section shall 
     apply to any item which is attributable to--
       ``(A) any listed transaction, and
       ``(B) any reportable transaction (other than a listed 
     transaction) if a significant purpose of such transaction is 
     the avoidance or evasion of Federal income tax.
       ``(c) Higher Penalty for Nondisclosed Listed and Other 
     Avoidance Transactions.--
       ``(1) In general.--Subsection (a) shall be applied by 
     substituting `30 percent' for `20 percent' with respect to 
     the portion of any reportable transaction understatement with 
     respect to which the requirement of section 6664(d)(2)(A) is 
     not met.
       ``(2) Rules applicable to compromise of penalty.--
       ``(A) In general.--If the 1st letter of proposed deficiency 
     which allows the taxpayer an opportunity for administrative 
     review in the Internal Revenue Service Office of Appeals has 
     been sent with respect to a penalty to which paragraph (1) 
     applies, only the Commissioner of Internal Revenue may 
     compromise all or any portion of such penalty.
       ``(B) Applicable rules.--The rules of paragraphs (2), (3), 
     (4), and (5) of section 6707A(d) shall apply for purposes of 
     subparagraph (A).
       ``(d) Definitions of Reportable and Listed Transactions.--
     For purposes of this section, the terms `reportable 
     transaction' and `listed transaction' have the respective 
     meanings given to such terms by section 6707A(c).
       ``(e) Special Rules.--
       ``(1) Coordination with penalties, etc., on other 
     understatements.--In the case of an understatement (as 
     defined in section 6662(d)(2))--
       ``(A) the amount of such understatement (determined without 
     regard to this paragraph) shall be increased by the aggregate 
     amount of reportable transaction understatements for purposes 
     of determining whether such understatement is a substantial 
     understatement under section 6662(d)(1), and
       ``(B) the addition to tax under section 6662(a) shall apply 
     only to the excess of the amount of the substantial 
     understatement (if any) after the application of subparagraph 
     (A) over the aggregate amount of reportable transaction 
     understatements.
       ``(2) Coordination with other penalties.--
       ``(A) Application of fraud penalty.--References to an 
     underpayment in section 6663 shall be treated as including 
     references to a reportable transaction understatement.
       ``(B) No double penalty.--This section shall not apply to 
     any portion of an understatement on which a penalty is 
     imposed under section 6663.
       ``(3) Special rule for amended returns.--Except as provided 
     in regulations, in no event shall any tax treatment included 
     with an amendment or supplement to a return of tax be taken 
     into account in determining the amount of any reportable 
     transaction understatement if the amendment or supplement is 
     filed after the earlier of the date the taxpayer is first 
     contacted by the Secretary regarding the examination of the 
     return or such other date as is specified by the Secretary.
       ``(4) Cross reference.--

  ``For reporting of section 6662A(c) penalty to the Securities and 
Exchange Commission, see section 6707A(e).''.
       (b) Determination of Other Understatements.--Subparagraph 
     (A) of section 6662(d)(2) is amended by adding at the end the 
     following flush sentence:

     ``The excess under the preceding sentence shall be determined 
     without regard to items to which section 6662A applies.''.
       (c) Reasonable Cause Exception.--
       (1) In general.--Section 6664 is amended by adding at the 
     end the following new subsection:
       ``(d) Reasonable Cause Exception for Reportable Transaction 
     Understatements.--
       ``(1) In general.--No penalty shall be imposed under 
     section 6662A with respect to any portion of a reportable 
     transaction understatement if it is shown that there was a 
     reasonable cause for such portion and that the taxpayer acted 
     in good faith with respect to such portion.
       ``(2) Special rules.--Paragraph (1) shall not apply to any 
     reportable transaction understatement unless--
       ``(A) the relevant facts affecting the tax treatment of the 
     item are adequately disclosed in accordance with the 
     regulations prescribed under section 6011,
       ``(B) there is or was substantial authority for such 
     treatment, and
       ``(C) the taxpayer reasonably believed that such treatment 
     was more likely than not the proper treatment.

     A taxpayer failing to adequately disclose in accordance with 
     section 6011 shall be treated as meeting the requirements of 
     subparagraph (A) if the penalty for such failure was 
     rescinded under section 6707A(d).
       ``(3) Rules relating to reasonable belief.--For purposes of 
     paragraph (2)(C)--
       ``(A) In general.--A taxpayer shall be treated as having a 
     reasonable belief with respect to the tax treatment of an 
     item only if such belief--
       ``(i) is based on the facts and law that exist at the time 
     the return of tax which includes such tax treatment is filed, 
     and
       ``(ii) relates solely to the taxpayer's chances of success 
     on the merits of such treatment and does not take into 
     account the possibility that a return will not be audited, 
     such treatment will not be raised on audit, or such treatment 
     will be resolved through settlement if it is raised.
       ``(B) Certain opinions may not be relied upon.--
       ``(i) In general.--An opinion of a tax advisor may not be 
     relied upon to establish the reasonable belief of a taxpayer 
     if--

       ``(I) the tax advisor is described in clause (ii), or
       ``(II) the opinion is described in clause (iii).

       ``(ii) Disqualified tax advisors.--A tax advisor is 
     described in this clause if the tax advisor--

       ``(I) is a material advisor (within the meaning of section 
     6111(b)(1)) who participates in the organization, management, 
     promotion, or sale of the transaction or who is related 
     (within the meaning of section 267(b) or 707(b)(1)) to any 
     person who so participates,
       ``(II) is compensated directly or indirectly by a material 
     advisor with respect to the transaction,
       ``(III) has a fee arrangement with respect to the 
     transaction which is contingent on all or part of the 
     intended tax benefits from the transaction being sustained, 
     or
       ``(IV) as determined under regulations prescribed by the 
     Secretary, has a continuing financial interest with respect 
     to the transaction.

       ``(iii) Disqualified opinions.--For purposes of clause (i), 
     an opinion is disqualified if the opinion--

       ``(I) is based on unreasonable factual or legal assumptions 
     (including assumptions as to future events),
       ``(II) unreasonably relies on representations, statements, 
     findings, or agreements of the taxpayer or any other person,
       ``(III) does not identify and consider all relevant facts, 
     or
       ``(IV) fails to meet any other requirement as the Secretary 
     may prescribe.''.

       (2) Conforming amendment.--The heading for subsection (c) 
     of section 6664 is amended by inserting ``for Underpayments'' 
     after ``Exception''.
       (d) Conforming Amendments.--
       (1) Subparagraph (C) of section 461(i)(3) is amended by 
     striking ``section 6662(d)(2)(C)(iii)'' and inserting 
     ``section 1274(b)(3)(C)''.
       (2) Paragraph (3) of section 1274(b) is amended--
       (A) by striking ``(as defined in section 
     6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
       (B) by adding at the end the following new subparagraph:
       ``(C) Tax shelter.--For purposes of subparagraph (B), the 
     term `tax shelter' means--
       ``(i) a partnership or other entity,
       ``(ii) any investment plan or arrangement, or
       ``(iii) any other plan or arrangement,
     if a significant purpose of such partnership, entity, plan, 
     or arrangement is the avoidance or evasion of Federal income 
     tax.''.
       (3) Section 6662(d) is amended--
       (A) by striking subparagraphs (C) and (D) of paragraph (2), 
     and
       (B) by adding at the end the following:
       ``(3) Secretarial list.--For purposes of this subsection, 
     section 6664(d)(2), and section 6694(a)(1), the Secretary may 
     prescribe a list of positions for which the Secretary 
     believes there is not substantial authority or there is no 
     reasonable belief that the tax treatment is more likely than 
     not the proper tax treatment. Such list (and any revisions 
     thereof) shall be published in the Federal Register or the 
     Internal Revenue Bulletin.''.
       (4) Section 6664(c)(1) is amended by striking ``this part'' 
     and inserting ``section 6662 or 6663''.
       (5) Subsection (b) of section 7525 is amended by striking 
     ``section 6662(d)(2)(C)(iii)'' and inserting ``section 
     1274(b)(3)(C)''.
       (6)(A) The heading for section 6662 is amended to read as 
     follows:

     ``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON 
                   UNDERPAYMENTS.''.

       (B) The table of sections for part II of subchapter A of 
     chapter 68 is amended by striking the item relating to 
     section 6662 and inserting the following new items:

``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements 
              with respect to reportable transactions.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable

[[Page S10432]]

     years ending after the date of the enactment of this Act.

     SEC. 803. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES 
                   RELATING TO TAXPAYER COMMUNICATIONS.

       (a) In General.--Section 7525(b) (relating to section not 
     to apply to communications regarding corporate tax shelters) 
     is amended to read as follows:
       ``(b) Section Not To Apply to Communications Regarding Tax 
     Shelters.--The privilege under subsection (a) shall not apply 
     to any written communication which is--
       ``(1) between a federally authorized tax practitioner and--
       ``(A) any person,
       ``(B) any director, officer, employee, agent, or 
     representative of the person, or
       ``(C) any other person holding a capital or profits 
     interest in the person, and
       ``(2) in connection with the promotion of the direct or 
     indirect participation of the person in any tax shelter (as 
     defined in section 1274(b)(3)(C)).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to communications made on or after the date of 
     the enactment of this Act.

     SEC. 804. DISCLOSURE OF REPORTABLE TRANSACTIONS.

       (a) In General.--Section 6111 (relating to registration of 
     tax shelters) is amended to read as follows:

     ``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.

       ``(a) In General.--Each material advisor with respect to 
     any reportable transaction shall make a return (in such form 
     as the Secretary may prescribe) setting forth--
       ``(1) information identifying and describing the 
     transaction,
       ``(2) information describing any potential tax benefits 
     expected to result from the transaction, and
       ``(3) such other information as the Secretary may 
     prescribe.

     Such return shall be filed not later than the date specified 
     by the Secretary.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Material advisor.--
       ``(A) In general.--The term `material advisor' means any 
     person--
       ``(i) who provides any material aid, assistance, or advice 
     with respect to organizing, promoting, selling, implementing, 
     or carrying out any reportable transaction, and
       ``(ii) who directly or indirectly derives gross income in 
     excess of the threshold amount for such aid, assistance, or 
     advice.
       ``(B) Threshold amount.--For purposes of subparagraph (A), 
     the threshold amount is--
       ``(i) $50,000 in the case of a reportable transaction 
     substantially all of the tax benefits from which are provided 
     to natural persons, and
       ``(ii) $250,000 in any other case.
       ``(2) Reportable transaction.--The term `reportable 
     transaction' has the meaning given to such term by section 
     6707A(c).
       ``(c) Regulations.--The Secretary may prescribe regulations 
     which provide--
       ``(1) that only 1 person shall be required to meet the 
     requirements of subsection (a) in cases in which 2 or more 
     persons would otherwise be required to meet such 
     requirements,
       ``(2) exemptions from the requirements of this section, and
       ``(3) such rules as may be necessary or appropriate to 
     carry out the purposes of this section.''.
       (b) Conforming Amendments.--
       (1) The item relating to section 6111 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6111. Disclosure of reportable transactions.''.
       (2)(A) So much of section 6112 as precedes subsection (c) 
     thereof is amended to read as follows:

     ``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS 
                   MUST KEEP LISTS OF ADVISEES.

       ``(a) In General.--Each material advisor (as defined in 
     section 6111) with respect to any reportable transaction (as 
     defined in section 6707A(c)) shall maintain, in such manner 
     as the Secretary may by regulations prescribe, a list--
       ``(1) identifying each person with respect to whom such 
     advisor acted as such a material advisor with respect to such 
     transaction, and
       ``(2) containing such other information as the Secretary 
     may by regulations require.

     This section shall apply without regard to whether a material 
     advisor is required to file a return under section 6111 with 
     respect to such transaction.''.
       (B) Section 6112 is amended by redesignating subsection (c) 
     as subsection (b).
       (C) Section 6112(b), as redesignated by subparagraph (B), 
     is amended--
       (i) by inserting ``written'' before ``request'' in 
     paragraph (1)(A), and
       (ii) by striking ``shall prescribe'' in paragraph (2) and 
     inserting ``may prescribe''.
       (D) The item relating to section 6112 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6112. Material advisors of reportable transactions must keep 
              lists of advisees.''.
       (3)(A) The heading for section 6708 is amended to read as 
     follows:

     ``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH 
                   RESPECT TO REPORTABLE TRANSACTIONS.''.

       (B) The item relating to section 6708 in the table of 
     sections for part I of subchapter B of chapter 68 is amended 
     to read as follows:

``Sec. 6708. Failure to maintain lists of advisees with respect to 
              reportable transactions.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions with respect to which material 
     aid, assistance, or advice referred to in section 
     6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as 
     added by this section) is provided after the date of the 
     enactment of this Act.

     SEC. 805. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER 
                   TAX SHELTERS.

       (a) In General.--Section 6707 (relating to failure to 
     furnish information regarding tax shelters) is amended to 
     read as follows:

     ``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING 
                   REPORTABLE TRANSACTIONS.

       ``(a) In General.--If a person who is required to file a 
     return under section 6111(a) with respect to any reportable 
     transaction--
       ``(1) fails to file such return on or before the date 
     prescribed therefor, or
       ``(2) files false or incomplete information with the 
     Secretary with respect to such transaction,

     such person shall pay a penalty with respect to such return 
     in the amount determined under subsection (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     penalty imposed under subsection (a) with respect to any 
     failure shall be $50,000.
       ``(2) Listed transactions.--The penalty imposed under 
     subsection (a) with respect to any listed transaction shall 
     be an amount equal to the greater of--
       ``(A) $200,000, or
       ``(B) 50 percent of the gross income derived by such person 
     with respect to aid, assistance, or advice which is provided 
     with respect to the listed transaction before the date the 
     return including the transaction is filed under section 6111.

     Subparagraph (B) shall be applied by substituting `75 
     percent' for `50 percent' in the case of an intentional 
     failure or act described in subsection (a).
       ``(c) Rescission Authority.--The provisions of section 
     6707A(d) (relating to authority of Commissioner to rescind 
     penalty) shall apply to any penalty imposed under this 
     section.
       ``(d) Reportable and Listed Transactions.--The terms 
     `reportable transaction' and `listed transaction' have the 
     respective meanings given to such terms by section 
     6707A(c).''.
       (b) Clerical Amendment.--The item relating to section 6707 
     in the table of sections for part I of subchapter B of 
     chapter 68 is amended by striking ``tax shelters'' and 
     inserting ``reportable transactions''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns the due date for which is after the 
     date of the enactment of this Act.

     SEC. 806. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN 
                   LISTS OF INVESTORS.

       (a) In General.--Subsection (a) of section 6708 is amended 
     to read as follows:
       ``(a) Imposition of Penalty.--
       ``(1) In general.--If any person who is required to 
     maintain a list under section 6112(a) fails to make such list 
     available upon written request to the Secretary in accordance 
     with section 6112(b)(1)(A) within 20 business days after the 
     date of the Secretary's request, such person shall pay a 
     penalty of $10,000 for each day of such failure after such 
     20th day.
       ``(2) Reasonable cause exception.--No penalty shall be 
     imposed by paragraph (1) with respect to the failure on any 
     day if such failure is due to reasonable cause.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to requests made after the date of the enactment 
     of this Act.

     SEC. 807. PENALTY ON PROMOTERS OF TAX SHELTERS.

       (a) Penalty on Promoting Abusive Tax Shelters.--Section 
     6700(a) is amended by adding at the end the following new 
     sentence: ``Notwithstanding the first sentence, if an 
     activity with respect to which a penalty imposed under this 
     subsection involves a statement described in paragraph 
     (2)(A), the amount of the penalty shall be equal to 50 
     percent of the gross income derived (or to be derived) from 
     such activity by the person on which the penalty is 
     imposed.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to activities after the date of the enactment of 
     this Act.

      Subtitle B--Provisions to Discourage Corporate Expatriation

     SEC. 821. TAX TREATMENT OF INVERTED CORPORATE ENTITIES.

       (a) In General.--Subchapter C of chapter 80 (relating to 
     provisions affecting more than one subtitle) is amended by 
     adding at the end the following new section:

     ``SEC. 7874. RULES RELATING TO INVERTED CORPORATE ENTITIES.

       ``(a) Inverted Corporations Treated as Domestic 
     Corporations.--
       ``(1) In general.--If a foreign incorporated entity is 
     treated as an inverted domestic corporation, then, 
     notwithstanding section 7701(a)(4), such entity shall be 
     treated for purposes of this title as a domestic corporation.
       ``(2) Inverted domestic corporation.--For purposes of this 
     section, a foreign incorporated entity shall be treated as an 
     inverted domestic corporation if, pursuant to a plan (or a 
     series of related transactions)--

[[Page S10433]]

       ``(A) the entity completes after March 20, 2002, the direct 
     or indirect acquisition of substantially all of the 
     properties held directly or indirectly by a domestic 
     corporation or substantially all of the properties 
     constituting a trade or business of a domestic partnership,
       ``(B) after the acquisition at least 80 percent of the 
     stock (by vote or value) of the entity is held--
       ``(i) in the case of an acquisition with respect to a 
     domestic corporation, by former shareholders of the domestic 
     corporation by reason of holding stock in the domestic 
     corporation, or
       ``(ii) in the case of an acquisition with respect to a 
     domestic partnership, by former partners of the domestic 
     partnership by reason of holding a capital or profits 
     interest in the domestic partnership, and
       ``(C) the expanded affiliated group which after the 
     acquisition includes the entity does not have substantial 
     business activities in the foreign country in which or under 
     the law of which the entity is created or organized when 
     compared to the total business activities of such expanded 
     affiliated group.

     Except as provided in regulations, an acquisition of 
     properties of a domestic corporation shall not be treated as 
     described in subparagraph (A) if none of the corporation's 
     stock was readily tradeable on an established securities 
     market at any time during the 4-year period ending on the 
     date of the acquisition.
       ``(b) Preservation of Domestic Tax Base in Certain 
     Inversion Transactions To Which Subsection (a) Does Not 
     Apply.--
       ``(1) In general.--If a foreign incorporated entity would 
     be treated as an inverted domestic corporation with respect 
     to an acquired entity if either--
       ``(A) subsection (a)(2)(A) were applied by substituting 
     `after December 31, 1996, and on or before March 20, 2002' 
     for `after March 20, 2002' and subsection (a)(2)(B) were 
     applied by substituting `more than 50 percent' for `at least 
     80 percent', or
       ``(B) subsection (a)(2)(B) were applied by substituting 
     `more than 50 percent' for `at least 80 percent',

     then the rules of subsection (c) shall apply to any inversion 
     gain of the acquired entity during the applicable period and 
     the rules of subsection (d) shall apply to any related party 
     transaction of the acquired entity during the applicable 
     period. This subsection shall not apply for any taxable year 
     if subsection (a) applies to such foreign incorporated entity 
     for such taxable year.
       ``(2) Acquired entity.--For purposes of this section--
       ``(A) In general.--The term `acquired entity' means the 
     domestic corporation or partnership substantially all of the 
     properties of which are directly or indirectly acquired in an 
     acquisition described in subsection (a)(2)(A) to which this 
     subsection applies.
       ``(B) Aggregation rules.--Any domestic person bearing a 
     relationship described in section 267(b) or 707(b) to an 
     acquired entity shall be treated as an acquired entity with 
     respect to the acquisition described in subparagraph (A).
       ``(3) Applicable period.--For purposes of this section--
       ``(A) In general.--The term `applicable period' means the 
     period--
       ``(i) beginning on the first date properties are acquired 
     as part of the acquisition described in subsection (a)(2)(A) 
     to which this subsection applies, and
       ``(ii) ending on the date which is 10 years after the last 
     date properties are acquired as part of such acquisition.
       ``(B) Special rule for inversions occurring before march 
     21, 2002.--In the case of any acquired entity to which 
     paragraph (1)(A) applies, the applicable period shall be the 
     10-year period beginning on January 1, 2003.
       ``(c) Tax on Inversion Gains May Not Be Offset.--If 
     subsection (b) applies--
       ``(1) In general.--The taxable income of an acquired entity 
     (or any expanded affiliated group which includes such entity) 
     for any taxable year which includes any portion of the 
     applicable period shall in no event be less than the 
     inversion gain of the entity for the taxable year.
       ``(2) Credits not allowed against tax on inversion gain.--
     Credits shall be allowed against the tax imposed by this 
     chapter on an acquired entity for any taxable year described 
     in paragraph (1) only to the extent such tax exceeds the 
     product of--
       ``(A) the amount of the inversion gain for the taxable 
     year, and
       ``(B) the highest rate of tax specified in section 
     11(b)(1).

     For purposes of determining the credit allowed by section 901 
     inversion gain shall be treated as from sources within the 
     United States.
       ``(3) Special rules for partnerships.--In the case of an 
     acquired entity which is a partnership--
       ``(A) the limitations of this subsection shall apply at the 
     partner rather than the partnership level,
       ``(B) the inversion gain of any partner for any taxable 
     year shall be equal to the sum of--
       ``(i) the partner's distributive share of inversion gain of 
     the partnership for such taxable year, plus
       ``(ii) income or gain required to be recognized for the 
     taxable year by the partner under section 367(a), 741, or 
     1001, or under any other provision of chapter 1, by reason of 
     the transfer during the applicable period of any partnership 
     interest of the partner in such partnership to the foreign 
     incorporated entity, and
       ``(C) the highest rate of tax specified in the rate 
     schedule applicable to the partner under chapter 1 shall be 
     substituted for the rate of tax under paragraph (2)(B).
       ``(4) Inversion gain.--For purposes of this section, the 
     term `inversion gain' means any income or gain required to be 
     recognized under section 304, 311(b), 367, 1001, or 1248, or 
     under any other provision of chapter 1, by reason of the 
     transfer during the applicable period of stock or other 
     properties by an acquired entity--
       ``(A) as part of the acquisition described in subsection 
     (a)(2)(A) to which subsection (b) applies, or
       ``(B) after such acquisition to a foreign related person.

     The Secretary may provide that income or gain from the sale 
     of inventories or other transactions in the ordinary course 
     of a trade or business shall not be treated as inversion gain 
     under subparagraph (B) to the extent the Secretary determines 
     such treatment would not be inconsistent with the purposes of 
     this section.
       ``(5) Coordination with section 172 and minimum tax.--Rules 
     similar to the rules of paragraphs (3) and (4) of section 
     860E(a) shall apply for purposes of this section.
       ``(6) Statute of limitations.--
       ``(A) In general.--The statutory period for the assessment 
     of any deficiency attributable to the inversion gain of any 
     taxpayer for any pre-inversion year shall not expire before 
     the expiration of 3 years from the date the Secretary is 
     notified by the taxpayer (in such manner as the Secretary may 
     prescribe) of the acquisition described in subsection 
     (a)(2)(A) to which such gain relates and such deficiency may 
     be assessed before the expiration of such 3-year period 
     notwithstanding the provisions of any other law or rule of 
     law which would otherwise prevent such assessment.
       ``(B) Pre-inversion year.--For purposes of subparagraph 
     (A), the term `pre-inversion year' means any taxable year 
     if--
       ``(i) any portion of the applicable period is included in 
     such taxable year, and
       ``(ii) such year ends before the taxable year in which the 
     acquisition described in subsection (a)(2)(A) is completed.
       ``(d) Special Rules Applicable to Related Party 
     Transactions.--
       ``(1) Annual application for agreements on return 
     positions.--
       ``(A) In general.--Each acquired entity to which subsection 
     (b) applies shall file with the Secretary an application for 
     an approval agreement under subparagraph (D) for each taxable 
     year which includes a portion of the applicable period. Such 
     application shall be filed at such time and manner, and shall 
     contain such information, as the Secretary may prescribe.
       ``(B) Secretarial action.--Within 90 days of receipt of an 
     application under subparagraph (A) (or such longer period as 
     the Secretary and entity may agree upon), the Secretary 
     shall--
       ``(i) enter into an agreement described in subparagraph (D) 
     for the taxable year covered by the application,
       ``(ii) notify the entity that the Secretary has determined 
     that the application was filed in good faith and 
     substantially complies with the requirements for the 
     application under subparagraph (A), or
       ``(iii) notify the entity that the Secretary has determined 
     that the application was not filed in good faith or does not 
     substantially comply with such requirements.

     If the Secretary fails to act within the time prescribed 
     under the preceding sentence, the entity shall be treated for 
     purposes of this paragraph as having received notice under 
     clause (ii).
       ``(C) Failures to comply.--If an acquired entity fails to 
     file an application under subparagraph (A), or the acquired 
     entity receives a notice under subparagraph (B)(iii), for any 
     taxable year, then for such taxable year--
       ``(i) there shall not be allowed any deduction, or addition 
     to basis or cost of goods sold, for amounts paid or incurred, 
     or losses incurred, by reason of a transaction between the 
     acquired entity and a foreign related person,
       ``(ii) any transfer or license of intangible property (as 
     defined in section 936(h)(3)(B)) between the acquired entity 
     and a foreign related person shall be disregarded, and
       ``(iii) any cost-sharing arrangement between the acquired 
     entity and a foreign related person shall be disregarded.
       ``(D) Approval agreement.--For purposes of subparagraph 
     (A), the term `approval agreement' means a prefiling, advance 
     pricing, or other agreement specified by the Secretary which 
     contains such provisions as the Secretary determines 
     necessary to ensure that the requirements of sections 163(j), 
     267(a)(3), 482, and 845, and any other provision of this 
     title applicable to transactions between related persons and 
     specified by the Secretary, are met.
       ``(E) Tax court review.--
       ``(i) In general.--The Tax Court shall have jurisdiction 
     over any action brought by an acquired entity receiving a 
     notice under subparagraph (B)(iii) to determine whether the 
     issuance of the notice was an abuse of discretion, but only 
     if the action is brought within 30 days after the date of the 
     mailing (determined under rules similar to section 6213) of 
     the notice.

[[Page S10434]]

       ``(ii) Court action.--The Tax Court shall issue its 
     decision within 30 days after the filing of the action under 
     clause (i) and may order the Secretary to issue a notice 
     described in subparagraph (B)(ii).
       ``(iii) Review.--An order of the Tax Court under this 
     subparagraph shall be reviewable in the same manner as any 
     other decision of the Tax Court.
       ``(2) Modifications of limitation on interest deduction.--
     In the case of an acquired entity to which subsection (b) 
     applies, section 163(j) shall be applied--
       ``(A) without regard to paragraph (2)(A)(ii) thereof, and
       ``(B) by substituting `25 percent' for `50 percent' each 
     place it appears in paragraph (2)(B) thereof.
       ``(e) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Rules for application of subsection (a)(2).--In 
     applying subsection (a)(2) for purposes of subsections (a) 
     and (b), the following rules shall apply:
       ``(A) Certain stock disregarded.--There shall not be taken 
     into account in determining ownership for purposes of 
     subsection (a)(2)(B)--
       ``(i) stock held by members of the expanded affiliated 
     group which includes the foreign incorporated entity, or
       ``(ii) stock of such entity which is sold in a public 
     offering or private placement related to the acquisition 
     described in subsection (a)(2)(A).
       ``(B) Plan deemed in certain cases.--If a foreign 
     incorporated entity acquires directly or indirectly 
     substantially all of the properties of a domestic corporation 
     or partnership during the 4-year period beginning on the date 
     which is 2 years before the ownership requirements of 
     subsection (a)(2)(B) are met with respect to such domestic 
     corporation or partnership, such actions shall be treated as 
     pursuant to a plan.
       ``(C) Certain transfers disregarded.--The transfer of 
     properties or liabilities (including by contribution or 
     distribution) shall be disregarded if such transfers are part 
     of a plan a principal purpose of which is to avoid the 
     purposes of this section.
       ``(D) Special rule for related partnerships.--For purposes 
     of applying subsection (a)(2) to the acquisition of a 
     domestic partnership, except as provided in regulations, all 
     partnerships which are under common control (within the 
     meaning of section 482) shall be treated as 1 partnership.
       ``(E) Treatment of certain rights.--The Secretary shall 
     prescribe such regulations as may be necessary--
       ``(i) to treat warrants, options, contracts to acquire 
     stock, convertible debt instruments, and other similar 
     interests as stock, and
       ``(ii) to treat stock as not stock.
       ``(2) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group as defined in 
     section 1504(a) but without regard to section 1504(b)(3), 
     except that section 1504(a) shall be applied by substituting 
     `more than 50 percent' for `at least 80 percent' each place 
     it appears.
       ``(3) Foreign incorporated entity.--The term `foreign 
     incorporated entity' means any entity which is, or but for 
     subsection (a)(1) would be, treated as a foreign corporation 
     for purposes of this title.
       ``(4) Foreign related person.--The term `foreign related 
     person' means, with respect to any acquired entity, a foreign 
     person which--
       ``(A) bears a relationship to such entity described in 
     section 267(b) or 707(b), or
       ``(B) is under the same common control (within the meaning 
     of section 482) as such entity.
       ``(5) Subsequent acquisitions by unrelated domestic 
     corporations.--
       ``(A) In general.--Subject to such conditions, limitations, 
     and exceptions as the Secretary may prescribe, if, after an 
     acquisition described in subsection (a)(2)(A) to which 
     subsection (b) applies, a domestic corporation stock of which 
     is traded on an established securities market acquires 
     directly or indirectly any properties of one or more acquired 
     entities in a transaction with respect to which the 
     requirements of subparagraph (B) are met, this section shall 
     cease to apply to any such acquired entity with respect to 
     which such requirements are met.
       ``(B) Requirements.--The requirements of the subparagraph 
     are met with respect to a transaction involving any 
     acquisition described in subparagraph (A) if--
       ``(i) before such transaction the domestic corporation did 
     not have a relationship described in section 267(b) or 
     707(b), and was not under common control (within the meaning 
     of section 482), with the acquired entity, or any member of 
     an expanded affiliated group including such entity, and
       ``(ii) after such transaction, such acquired entity--

       ``(I) is a member of the same expanded affiliated group 
     which includes the domestic corporation or has such a 
     relationship or is under such common control with any member 
     of such group, and
       ``(II) is not a member of, and does not have such a 
     relationship and is not under such common control with any 
     member of, the expanded affiliated group which before such 
     acquisition included such entity.

       ``(f) Regulations.--The Secretary shall provide such 
     regulations as are necessary to carry out this section, 
     including regulations providing for such adjustments to the 
     application of this section as are necessary to prevent the 
     avoidance of the purposes of this section, including the 
     avoidance of such purposes through--
       ``(1) the use of related persons, pass-through or other 
     noncorporate entities, or other intermediaries, or
       ``(2) transactions designed to have persons cease to be (or 
     not become) members of expanded affiliated groups or related 
     persons.''.
       (b) Treatment of Agreements.--
       (1) Confidentiality.--
       (A) Treatment as return information.--Section 6103(b)(2) 
     (relating to return information) is amended by striking 
     ``and'' at the end of subparagraph (C), by inserting ``and'' 
     at the end of subparagraph (D), and by inserting after 
     subparagraph (D) the following new subparagraph:
       ``(E) any approval agreement under section 7874(d)(1) to 
     which any preceding subparagraph does not apply and any 
     background information related to the agreement or any 
     application for the agreement,''.
       (B) Exception from public inspection as written 
     determination.--Section 6110(b)(1)(B) is amended by striking 
     ``or (D)'' and inserting ``, (D), or (E)''.
       (2) Reporting.--The Secretary of the Treasury shall include 
     with any report on advance pricing agreements required to be 
     submitted after the date of the enactment of this Act under 
     section 521(b) of the Ticket to Work and Work Incentives 
     Improvement Act of 1999 (Public Law 106-170) a report 
     regarding approval agreements under section 7874(d)(1) of the 
     Internal Revenue Code of 1986. Such report shall include 
     information similar to the information required with respect 
     to advance pricing agreements and shall be treated for 
     confidentiality purposes in the same manner as the reports on 
     advance pricing agreements are treated under section 
     521(b)(3) of such Act.
       (c) Information Reporting.--The Secretary of the Treasury 
     shall exercise the Secretary's authority under the Internal 
     Revenue Code of 1986 to require entities involved in 
     transactions to which section 7874 of such Code (as added by 
     subsection (a)) applies to report to the Secretary, 
     shareholders, partners, and such other persons as the 
     Secretary may prescribe such information as is necessary to 
     ensure the proper tax treatment of such transactions.
       (d) Conforming Amendment.--The table of sections for 
     subchapter C of chapter 80 is amended by adding at the end 
     the following new item:

``Sec. 7874. Rules relating to inverted corporate entities.''.
       (e) Transition Rule for Certain Regulated Investment 
     Companies and Unit Investment Trusts.--Notwithstanding 
     section 7874 of the Internal Revenue Code of 1986 (as added 
     by subsection (a)), a regulated investment company, or other 
     pooled fund or trust specified by the Secretary of the 
     Treasury, may elect to recognize gain by reason of section 
     367(a) of such Code with respect to a transaction under which 
     a foreign incorporated entity is treated as an inverted 
     domestic corporation under section 7874(a) of such Code by 
     reason of an acquisition completed after March 20, 2002, and 
     before January 1, 2004.

     SEC. 822. EXCISE TAX ON STOCK COMPENSATION OF INSIDERS IN 
                   INVERTED CORPORATIONS.

       (a) In General.--Subtitle D is amended by adding at the end 
     the following new chapter:

 ``CHAPTER 48--STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS

``Sec. 5000A. Stock compensation of insiders in inverted corporations 
              entities.

     ``SEC. 5000A. STOCK COMPENSATION OF INSIDERS IN INVERTED 
                   CORPORATIONS.

       ``(a) Imposition of Tax.--In the case of an individual who 
     is a disqualified individual with respect to any inverted 
     corporation, there is hereby imposed on such person a tax 
     equal to 20 percent of the value (determined under subsection 
     (b)) of the specified stock compensation held (directly or 
     indirectly) by or for the benefit of such individual or a 
     member of such individual's family (as defined in section 
     267) at any time during the 12-month period beginning on the 
     date which is 6 months before the inversion date.
       ``(b) Value.--For purposes of subsection (a)--
       ``(1) In general.--The value of specified stock 
     compensation shall be--
       ``(A) in the case of a stock option (or other similar 
     right) or any stock appreciation right, the fair value of 
     such option or right, and
       ``(B) in any other case, the fair market value of such 
     compensation.
       ``(2) Date for determining value.--The determination of 
     value shall be made--
       ``(A) in the case of specified stock compensation held on 
     the inversion date, on such date,
       ``(B) in the case of such compensation which is canceled 
     during the 6 months before the inversion date, on the day 
     before such cancellation, and
       ``(C) in the case of such compensation which is granted 
     after the inversion date, on the date such compensation is 
     granted.
       ``(c) Tax To Apply Only If Shareholder Gain Recognized.--
     Subsection (a) shall apply to any disqualified individual 
     with respect to an inverted corporation only if gain (if any) 
     on any stock in such corporation is recognized in whole or 
     part by any shareholder by reason of the acquisition referred 
     to in section 7874(a)(2)(A) (determined by substituting `July 
     10, 2002' for `March 20, 2002') with respect to such 
     corporation.

[[Page S10435]]

       ``(d) Exception Where Gain Recognized on Compensation.--
     Subsection (a) shall not apply to--
       ``(1) any stock option which is exercised on the inversion 
     date or during the 6-month period before such date and to the 
     stock acquired in such exercise, and
       ``(2) any specified stock compensation which is sold, 
     exchanged, or distributed during such period in a transaction 
     in which gain or loss is recognized in full.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Disqualified individual.--The term `disqualified 
     individual' means, with respect to a corporation, any 
     individual who, at any time during the 12-month period 
     beginning on the date which is 6 months before the inversion 
     date--
       ``(A) is subject to the requirements of section 16(a) of 
     the Securities Exchange Act of 1934 with respect to such 
     corporation or any member of the expanded affiliated group 
     which includes such corporation, or
       ``(B) would be subject to such requirements if such 
     corporation or member were an issuer of equity securities 
     referred to in such section.
       ``(2) Inverted corporation; inversion date.--
       ``(A) Inverted corporation.--The term `inverted 
     corporation' means any corporation to which subsection (a) or 
     (b) of section 7874 applies determined--
       ``(i) by substituting `July 10, 2002' for `March 20, 2002' 
     in section 7874(a)(2)(A), and
       ``(ii) without regard to subsection (b)(1)(A).

     Such term includes any predecessor or successor of such a 
     corporation.
       ``(B) Inversion date.--The term `inversion date' means, 
     with respect to a corporation, the date on which the 
     corporation first becomes an inverted corporation.
       ``(3) Specified stock compensation.--
       ``(A) In general.--The term `specified stock compensation' 
     means payment (or right to payment) granted by the inverted 
     corporation (or by any member of the expanded affiliated 
     group which includes such corporation) to any person in 
     connection with the performance of services by a disqualified 
     individual for such corporation or member if the value of 
     such payment or right is based on (or determined by reference 
     to) the value (or change in value) of stock in such 
     corporation (or any such member).
       ``(B) Exceptions.--Such term shall not include--
       ``(i) any option to which part II of subchapter D of 
     chapter 1 applies, or
       ``(ii) any payment or right to payment from a plan referred 
     to in section 280G(b)(6).
       ``(4) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group (as defined in 
     section 1504(a) without regard to section 1504(b)(3)); except 
     that section 1504(a) shall be applied by substituting `more 
     than 50 percent' for `at least 80 percent' each place it 
     appears.
       ``(f) Special Rules.--For purposes of this section--
       ``(1) Cancellation of restriction.--The cancellation of a 
     restriction which by its terms will never lapse shall be 
     treated as a grant.
       ``(2) Payment or reimbursement of tax by corporation 
     treated as specified stock compensation.--Any payment of the 
     tax imposed by this section directly or indirectly by the 
     inverted corporation or by any member of the expanded 
     affiliated group which includes such corporation--
       ``(A) shall be treated as specified stock compensation, and
       ``(B) shall not be allowed as a deduction under any 
     provision of chapter 1.
       ``(3) Certain restrictions ignored.--Whether there is 
     specified stock compensation, and the value thereof, shall be 
     determined without regard to any restriction other than a 
     restriction which by its terms will never lapse.
       ``(4) Property transfers.--Any transfer of property shall 
     be treated as a payment and any right to a transfer of 
     property shall be treated as a right to a payment.
       ``(5) Other administrative provisions.--For purposes of 
     subtitle F, any tax imposed by this section shall be treated 
     as a tax imposed by subtitle A.
       ``(g) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       (b) Denial of Deduction.--
       (1) In general.--Paragraph (6) of section 275(a) is amended 
     by inserting ``48,'' after ``46,''.
       (2) $1,000,000 limit on deductible compensation reduced by 
     payment of excise tax on specified stock compensation.--
     Paragraph (4) of section 162(m) is amended by adding at the 
     end the following new subparagraph:
       ``(G) Coordination with excise tax on specified stock 
     compensation.--The dollar limitation contained in paragraph 
     (1) with respect to any covered employee shall be reduced 
     (but not below zero) by the amount of any payment (with 
     respect to such employee) of the tax imposed by section 5000A 
     directly or indirectly by the inverted corporation (as 
     defined in such section) or by any member of the expanded 
     affiliated group (as defined in such section) which includes 
     such corporation.''.
       (c) Conforming Amendments.--
       (1) The last sentence of section 3121(v)(2)(A) is amended 
     by inserting before the period ``or to any specified stock 
     compensation (as defined in section 5000A) on which tax is 
     imposed by section 5000A''.
       (2) The table of chapters for subtitle D is amended by 
     adding at the end the following new item:

``Chapter 48. Stock compensation of insiders in inverted 
              corporations.''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on July 11, 2002; except that periods 
     before such date shall not be taken into account in applying 
     the periods in subsections (a) and (e)(1) of section 5000A of 
     the Internal Revenue Code of 1986, as added by this section.

     SEC. 823. REINSURANCE OF UNITED STATES RISKS IN FOREIGN 
                   JURISDICTIONS.

       (a) In General.--Section 845(a) (relating to allocation in 
     case of reinsurance agreement involving tax avoidance or 
     evasion) is amended by striking ``source and character'' and 
     inserting ``amount, source, or character''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to any risk reinsured after April 11, 2002.

                  Subtitle C--Other Revenue Provisions

     SEC. 831. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

       (a) In General.--Chapter 77 (relating to miscellaneous 
     provisions) is amended by adding at the end the following new 
     section:

     ``SEC. 7528. INTERNAL REVENUE SERVICE USER FEES.

       ``(a) General Rule.--The Secretary shall establish a 
     program requiring the payment of user fees for--
       ``(1) requests to the Internal Revenue Service for ruling 
     letters, opinion letters, and determination letters, and
       ``(2) other similar requests.
       ``(b) Program Criteria.--
       ``(1) In general.--The fees charged under the program 
     required by subsection (a)--
       ``(A) shall vary according to categories (or subcategories) 
     established by the Secretary,
       ``(B) shall be determined after taking into account the 
     average time for (and difficulty of) complying with requests 
     in each category (and subcategory), and
       ``(C) shall be payable in advance.
       ``(2) Exemptions, etc.--
       ``(A) In general.--The Secretary shall provide for such 
     exemptions (and reduced fees) under such program as the 
     Secretary determines to be appropriate.
       ``(B) Exemption for certain requests regarding pension 
     plans.--The Secretary shall not require payment of user fees 
     under such program for requests for determination letters 
     with respect to the qualified status of a pension benefit 
     plan maintained solely by 1 or more eligible employers or any 
     trust which is part of the plan. The preceding sentence shall 
     not apply to any request--
       ``(i) made after the later of--

       ``(I) the fifth plan year the pension benefit plan is in 
     existence, or
       ``(II) the end of any remedial amendment period with 
     respect to the plan beginning within the first 5 plan years, 
     or

       ``(ii) made by the sponsor of any prototype or similar plan 
     which the sponsor intends to market to participating 
     employers.
       ``(C) Definitions and special rules.--For purposes of 
     subparagraph (B)--
       ``(i) Pension benefit plan.--The term `pension benefit 
     plan' means a pension, profit-sharing, stock bonus, annuity, 
     or employee stock ownership plan.
       ``(ii) Eligible employer.--The term `eligible employer' 
     means an eligible employer (as defined in section 
     408(p)(2)(C)(i)(I)) which has at least 1 employee who is not 
     a highly compensated employee (as defined in section 414(q)) 
     and is participating in the plan. The determination of 
     whether an employer is an eligible employer under 
     subparagraph (B) shall be made as of the date of the request 
     described in such subparagraph.
       ``(iii) Determination of average fees charged.--For 
     purposes of any determination of average fees charged, any 
     request to which subparagraph (B) applies shall not be taken 
     into account.
       ``(3) Average fee requirement.--The average fee charged 
     under the program required by subsection (a) shall not be 
     less than the amount determined under the following table:

``Category                                                  Average fee
  Employee plan ruling and opinion............................$250 ....

  Exempt organization ruling..................................$350 ....

  Employee plan determination.................................$300 ....

  Exempt organization determination...........................$275 ....

  Chief counsel ruling........................................$200.....

       ``(c) Termination.--No fee shall be imposed under this 
     section with respect to requests made after September 30, 
     2013.''.
       (b) Conforming Amendments.--
       (1) The table of sections for chapter 77 is amended by 
     adding at the end the following new item:

``Sec. 7528. Internal Revenue Service user fees.''.
       (2) Section 10511 of the Revenue Act of 1987 is repealed.
       (3) Section 620 of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001 is repealed.
       (c) Limitations.--Notwithstanding any other provision of 
     law, any fees collected pursuant to section 7528 of the 
     Internal Revenue Code of 1986, as added by subsection (a), 
     shall not be expended by the Internal Revenue Service unless 
     provided by an appropriations Act.
       (d) Effective Date.--The amendments made by this section 
     shall apply to requests made after the date of the enactment 
     of this Act.

[[Page S10436]]

     SEC. 832. ADDITION OF VACCINES AGAINST HEPATITIS A TO LIST OF 
                   TAXABLE VACCINES.

       (a) In General.--Section 4132(a)(1) (defining taxable 
     vaccine) is amended by redesignating subparagraphs (I), (J), 
     (K), and (L) as subparagraphs (J), (K), (L), and (M), 
     respectively, and by inserting after subparagraph (H) the 
     following new subparagraph:
       ``(I) Any vaccine against hepatitis A.''.
       (b) Conforming Amendment.--Section 9510(c)(1)(A) is amended 
     by striking ``October 18, 2000'' and inserting ``April 2, 
     2003''.
       (c) Effective Date.--
       (1) Sales, etc.--The amendments made by this section shall 
     apply to sales and uses on or after the first day of the 
     first month which begins more than 4 weeks after the date of 
     the enactment of this Act.
       (2) Deliveries.--For purposes of paragraph (1) and section 
     4131 of the Internal Revenue Code of 1986, in the case of 
     sales on or before the effective date described in such 
     paragraph for which delivery is made after such date, the 
     delivery date shall be considered the sale date.

     SEC. 843. INDIVIDUAL EXPATRIATION TO AVOID TAX.

       (a) Expatriation To Avoid Tax.--
       (1) In general.--Subsection (a) of section 877 (relating to 
     treatment of expatriates) is amended to read as follows:
       ``(a) Treatment of Expatriates.--
       ``(1) In general.--Every nonresident alien individual to 
     whom this section applies and who, within the 10-year period 
     immediately preceding the close of the taxable year, lost 
     United States citizenship shall be taxable for such taxable 
     year in the manner provided in subsection (b) if the tax 
     imposed pursuant to such subsection (after any reduction in 
     such tax under the last sentence of such subsection) exceeds 
     the tax which, without regard to this section, is imposed 
     pursuant to section 871.
       ``(2) Individuals subject to this section.--This section 
     shall apply to any individual if--
       ``(A) the average annual net income tax (as defined in 
     section 38(c)(1)) of such individual for the period of 5 
     taxable years ending before the date of the loss of United 
     States citizenship is greater than $122,000,
       ``(B) the net worth of the individual as of such date is 
     $2,000,000 or more, or
       ``(C) such individual fails to certify under penalty of 
     perjury that he has met the requirements of this title for 
     the 5 preceding taxable years or fails to submit such 
     evidence of such compliance as the Secretary may require.

     In the case of the loss of United States citizenship in any 
     calendar year after 2003, such $122,000 amount shall be 
     increased by an amount equal to such dollar amount multiplied 
     by the cost-of-living adjustment determined under section 
     1(f)(3) for such calendar year by substituting `2002' for 
     `1992' in subparagraph (B) thereof. Any increase under the 
     preceding sentence shall be rounded to the nearest multiple 
     of $1,000.''.
       (2) Revision of exceptions from alternative tax.--
     Subsection (c) of section 877 (relating to tax avoidance not 
     presumed in certain cases) is amended to read as follows:
       ``(c) Exceptions.--
       ``(1) In general.--Subparagraphs (A) and (B) of subsection 
     (a)(2) shall not apply to an individual described in 
     paragraph (2) or (3).
       ``(2) Dual citizens.--
       ``(A) In general.--An individual is described in this 
     paragraph if--
       ``(i) the individual became at birth a citizen of the 
     United States and a citizen of another country and continues 
     to be a citizen of such other country, and
       ``(ii) the individual has had no substantial contacts with 
     the United States.
       ``(B) Substantial contacts.--An individual shall be treated 
     as having no substantial contacts with the United States only 
     if the individual--
       ``(i) was never a resident of the United States (as defined 
     in section 7701(b)),
       ``(ii) has never held a United States passport, and
       ``(iii) was not present in the United States for more than 
     30 days during any calendar year which is 1 of the 10 
     calendar years preceding the individual's loss of United 
     States citizenship.
       ``(3) Certain minors.--An individual is described in this 
     paragraph if--
       ``(A) the individual became at birth a citizen of the 
     United States,
       ``(B) neither parent of such individual was a citizen of 
     the United States at the time of such birth,
       ``(C) the individual's loss of United States citizenship 
     occurs before such individual attains age 18\1/2\, and
       ``(D) the individual was not present in the United States 
     for more than 30 days during any calendar year which is 1 of 
     the 10 calendar years preceding the individual's loss of 
     United States citizenship.''.
       (3) Conforming amendment.--Section 2107(a) is amended to 
     read as follows:
       ``(a) Treatment of Expatriates.--A tax computed in 
     accordance with the table contained in section 2001 is hereby 
     imposed on the transfer of the taxable estate, determined as 
     provided in section 2106, of every decedent nonresident not a 
     citizen of the United States if the date of death occurs 
     during a taxable year with respect to which the decedent is 
     subject to tax under section 877(b).''.
       (b) Special Rules for Determining When an Individual is no 
     Longer a United States Citizen or Long-Term Resident.--
     Section 7701 (relating to definitions) is amended by 
     redesignating subsection (n) as subsection (o) and by 
     inserting after subsection (m) the following new subsection:
       ``(n) Special Rules for Determining When an Individual is 
     no Longer a United States Citizen or Long-Term Resident.--An 
     individual who would not (but for this subsection) be treated 
     as a citizen or resident of the United States shall continue 
     to be treated as a citizen or resident of the United States 
     until such individual--
       ``(1) gives notice of an expatriating act or termination of 
     residency (with the requisite intent to relinquish 
     citizenship or terminate residency) to the Secretary of State 
     or the Secretary of Homeland Security, and
       ``(2) provides a statement in accordance with section 
     6039G.''.
       (c) Physical Presence in the United States for More Than 30 
     Days.--Section 877 (relating to expatriation to avoid tax) is 
     amended by adding at the end the following new subsection:
       ``(g) Physical Presence.--This section shall not apply to 
     any individual for any taxable year during the 10-year period 
     referred to in subsection (a) in which such individual is 
     present (within the meaning of section 7701(b)(7) without 
     regard to subparagraphs (B), (C), and (D) thereof) in the 
     United States for more than 30 days in the calendar year 
     ending in such taxable year, and such individual shall be 
     treated for purposes of this title as a citizen or resident 
     of the United States for such taxable year.''.
       (d) Transfers Subject to Gift Tax.--Subsection (a) of 
     section 2501 (relating to taxable transfers) is amended by 
     adding at the end the following:
       ``(6) Transfers of certain stock.--
       ``(A) In general.--Paragraph (3) shall not apply to the 
     transfer of stock described in subparagraph (B) by any 
     individual to whom section 877(b) applies, and section 
     2511(a) shall be applied without regard to whether such stock 
     is property which is situated within the United States.
       ``(B) Valuation.--For purposes of subparagraph (A), the 
     value of stock shall be determined as provided in section 
     2103, except that--
       ``(i) if the donor owned (within the meaning of section 
     958(a)) at the time of such transfer 10 percent or more of 
     the total combined voting power of all classes of stock 
     entitled to vote of a foreign corporation, and
       ``(ii) if such donor owned (within the meaning of section 
     958(a)), or is considered to have owned (by applying the 
     ownership rules of section 958(b)), at the time of such 
     transfer, more than 50 percent of--

       ``(I) the total combined voting power of all classes of 
     stock entitled to vote of such corporation, or
       ``(II) the total value of the stock of such corporation,

     then the portion of the fair market value of the stock of 
     such foreign corporation transferred by such donor which is 
     included for purposes of subparagraph (A) shall be the amount 
     which bears the same ratio to such value as the fair market 
     value of any assets owned by such foreign corporation and 
     situated in the United States at the time of such transfer 
     bears to the total fair market value of all assets owned by 
     such foreign corporation at such time. For purposes of the 
     preceding sentence, a donor shall be treated as owning stock 
     of a foreign corporation at the time of such transfer if, at 
     such time, by trust or otherwise, within the meaning of 
     sections 2035 to 2038, inclusive, he owned such stock.''.
       (e) Enhanced Information Reporting From Individuals Losing 
     United States Citizenship.--
       (1) In general.--Subsection (a) of section 6039G is amended 
     to read as follows:
       ``(a) In General.--Notwithstanding any other provision of 
     law, any individual to whom section 877(b) applies for any 
     taxable year shall provide a statement for such taxable year 
     which includes the information described in subsection 
     (b).''.
       (2) Information to be provided.--Subsection (b) of section 
     6039G is amended to read as follows:
       ``(b) Information To Be Provided.--Information required 
     under subsection (a) shall include--
       ``(1) the taxpayer's TIN,
       ``(2) the mailing address of such individual's principal 
     foreign residence,
       ``(3) the foreign country, in which such individual is 
     residing,
       ``(4) the foreign country of which such individual is a 
     citizen,
       ``(5) information detailing the income, assets, and 
     liabilities of such individual,
       ``(6) the number of days that the individual was present in 
     the United States during the taxable year, and
       ``(7) such other information as the Secretary may 
     prescribe.''.
       (3) Increase in penalty.--Subsection (d) of section 6039G 
     is amended to read as follows:
       ``(d) Penalty.--If--
       ``(1) an individual is required to file a statement under 
     subsection (a) for any taxable year, and
       ``(2) fails to file such a statement with the Secretary on 
     or before the date such statement is required to be filed or 
     fails to include all the information required to be shown on 
     the statement or includes incorrect information,

     such individual shall pay a penalty of $5,000 unless it is 
     shown that such failure is due to reasonable cause and not to 
     willful neglect.''.
       (4) Conforming amendment.--Section 6039G is amended by 
     striking subsections (c),

[[Page S10437]]

     (f), and (g) and by redesignating subsections (d) and (e) as 
     subsection (c) and (d), respectively.
       (f) Effective Date.--The amendments made by this section 
     shall apply to individuals who expatriate after February 27, 
     2003.
                                 ______
                                 
  SA 1433. Mr. FRIST proposed an amendment to the bill S. 14, to 
enhance the energy security of the United States, and for other 
purposes; as follows:

       At the end of the amendment add the following:
       All provisions of Division A and Division B shall take 
     effect one day after enactment of this Act.
                                 ______
                                 
  SA 1434. Mr. FRIST proposed an amendment to amendment SA 1433 
proposed by Mr. Frist to the bill S. 14, to enhance the energy security 
of the United States, and for other purposes; as follows:

       On line 3 of the amendment strike ``one day'' and insert 
     ``two days''.
                                 ______
                                 
  SA 1435. Mr. FRIST (for Mr. Campbell) proposed an amendment to the 
bill S. 523, to make technical corrections to law relating to Native 
Americans, and for other purposes; as follows:

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Native 
     American Technical Corrections Act of 2003''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Definition of Secretary.

 TITLE I--TECHNICAL AMENDMENTS AND OTHER PROVISIONS RELATING TO NATIVE 
                               AMERICANS

                    Subtitle A--Technical Amendments

Sec. 101. Bosque Redondo Memorial Act.
Sec. 102. Navajo-Hopi Land Settlement Act.
Sec. 103. Tribal sovereignty.
Sec. 104. Cow Creek Band of Umpqua Indians.
Sec. 105. Pueblo de Cochiti; modification of settlement.
Sec. 106. Four Corners Interpretive Center.
Sec. 107. Mississippi Band of Choctaw Indians.
Sec. 108. Rehabilitation of Celilo Indian Village.

       Subtitle B--Other Provisions Relating to Native Americans

Sec. 121. Barona Band of Mission Indians; facilitation of construction 
              of pipeline to provide water for emergency fire 
              suppression and other purposes.
Sec. 122. Conveyance of Native Alaskan objects.
Sec. 123. Pueblo of Acoma; land and mineral consolidation.
Sec. 124. Quinault Indian Nation; water feasibility study.
Sec. 125. Santee Sioux Tribe; study and report.
Sec. 126. Shakopee Mdewakanton Sioux Community.
Sec. 127. Agua Caliente Band of Cahuilla Indians.
Sec. 128. Saginaw Chippewa Tribal College.
Sec. 129. Ute Indian Tribe; oil shale reserve.

      TITLE II--PUEBLO OF SANTA CLARA AND PUEBLO OF SAN ILDEFONSO

Sec. 201. Definitions.
Sec. 202. Trust for the Pueblo of Santa Clara, New Mexico.
Sec. 203. Trust for the Pueblo of San Ildefonso, New Mexico.
Sec. 204. Survey and legal descriptions.
Sec. 205. Administration of trust land.
Sec. 206. Effect.
Sec. 207. Gaming.

     TITLE III--DISTRIBUTION OF QUINAULT PERMANENT FISHERIES FUNDS

Sec. 301. Distribution of judgment funds.
Sec. 302. Conditions for distribution.

     SEC. 2. DEFINITION OF SECRETARY.

       In this Act, except as otherwise provided in this Act, the 
     term ``Secretary'' means the Secretary of the Interior.

 TITLE I--TECHNICAL AMENDMENTS AND OTHER PROVISIONS RELATING TO NATIVE 
                               AMERICANS

                    Subtitle A--Technical Amendments

     SEC. 101. BOSQUE REDONDO MEMORIAL ACT.

       Section 206 of the Bosque Redondo Memorial Act (16 U.S.C. 
     431 note; Public Law 106-511) is amended--
       (1) in subsection (a)--
       (A) in paragraph (1), by striking ``2000'' and inserting 
     ``2004''; and
       (B) in paragraph (2), by striking ``2001 and 2002'' and 
     inserting ``2005 and 2006''; and
       (2) in subsection (b), by striking ``2002'' and inserting 
     ``2007,''.

     SEC. 102. NAVAJO-HOPI LAND SETTLEMENT ACT.

       Section 25(a)(8) of Public Law 93-531 (commonly known as 
     the ``Navajo-Hopi Land Settlement Act of 1974'') (25 U.S.C. 
     640d-24(a)(8)) is amended by striking ``annually for fiscal 
     years 1995, 1996, 1997, 1998, 1999, and 2000'' and inserting 
     ``for each of fiscal years 2003 through 2008''.

     SEC. 103. TRIBAL SOVEREIGNTY.

       Section 16 of the Act of June 18, 1934 (25 U.S.C. 476), is 
     amended by adding at the end the following:
       ``(h) Tribal Sovereignty.--Notwithstanding any other 
     provision of this Act--
       ``(1) each Indian tribe shall retain inherent sovereign 
     power to adopt governing documents under procedures other 
     than those specified in this section; and
       ``(2) nothing in this Act invalidates any constitution or 
     other governing document adopted by an Indian tribe after 
     June 18, 1934, in accordance with the authority described in 
     paragraph (1).''.

     SEC. 104. COW CREEK BAND OF UMPQUA INDIANS.

       Section 7 of the Cow Creek Band of Umpqua Tribe of Indians 
     Recognition Act (25 U.S.C. 712e) is amended in the third 
     sentence by inserting before the period at the end the 
     following: ``, and shall be treated as on-reservation land 
     for the purpose of processing acquisitions of real property 
     into trust''.

     SEC. 105. PUEBLO DE COCHITI; MODIFICATION OF SETTLEMENT.

       Section 1 of Public Law 102-358 (106 Stat. 960) is 
     amended--
       (1) by striking ``implement the settlement'' and inserting 
     the following: ``implement--
       ``(1) the settlement;'';
       (2) by striking the period at the end and inserting ``; 
     and''; and
       (3) by adding at the end the following:
       ``(2) the modifications regarding the use of the settlement 
     funds as described in the agreement known as the `First 
     Amendment to Operation and Maintenance Agreement for 
     Implementation of Cochiti Wetlands Solution', executed--
       ``(A) on October 22, 2001, by the Army Corps of Engineers;
       ``(B) on October 25, 2001, by the Pueblo de Cochiti of New 
     Mexico; and
       ``(C) on November 8, 2001, by the Secretary of the 
     Interior.''.

     SEC. 106. FOUR CORNERS INTERPRETIVE CENTER.

       Section 7 of the Four Corners Interpretive Center Act (113 
     Stat. 1706) is amended--
       (1) in subsection (a)(2), by striking ``2005'' and 
     inserting ``2008'';
       (2) in subsection (b), by striking ``2002'' and inserting 
     ``2005''; and
       (3) in subsection (c), by striking ``2001'' and inserting 
     ``2004''.

     SEC. 107. MISSISSIPPI BAND OF CHOCTAW INDIANS.

       Section 1(a)(2) of Public Law 106-228 (114 Stat. 462) is 
     amended by striking ``report entitled'' and all that follows 
     through ``is hereby declared'' and inserting the following: 
     ``report entitled `Report of May 17, 2002, Clarifying and 
     Correcting Legal Descriptions or Recording Information for 
     Certain Lands placed into Trust and Reservation Status for 
     the Mississippi Band of Choctaw Indians by Section 1(a)(2) of 
     Pub. L. 106-228, as amended by Title VIII, Section 811 of 
     Pub. L. 106-568', on file in the Office of the 
     Superintendent, Choctaw Agency, Bureau of Indian Affairs, 
     Department of the Interior, is declared''.

     SEC. 108. REHABILITATION OF CELILO INDIAN VILLAGE.

       Section 401(b)(3) of Public Law 100-581 (102 Stat. 2944) is 
     amended by inserting ``and Celilo Village'' after ``existing 
     sites''.

       Subtitle B--Other Provisions Relating to Native Americans

     SEC. 121. BARONA BAND OF MISSION INDIANS; FACILITATION OF 
                   CONSTRUCTION OF PIPELINE TO PROVIDE WATER FOR 
                   EMERGENCY FIRE SUPPRESSION AND OTHER PURPOSES.

       (a) In General.--Notwithstanding any other provision of 
     law, subject to valid existing rights under Federal and State 
     law, and to any easements or similar restrictions which may 
     be granted to the city of San Diego, California, for the 
     construction, operation and maintenance of a pipeline and 
     related appurtenances and facilities for conveying water from 
     the San Vicente Reservoir to the Barona Indian Reservation, 
     or for conservation, wildlife or habitat protection, or 
     related purposes, the land described in subsection (b), fee 
     title to which is held by the Barona Band of Mission Indians 
     of California (referred to in this section as the ``Band'')--
       (1) is declared to be held in trust by the United States 
     for the benefit of the Band; and
       (2) shall be considered to be a portion of the reservation 
     of the Band.
       (b) Land.--The land referred to in subsection (a) is land 
     comprising approximately 85 acres in San Diego County, 
     California, and described more particularly as follows: San 
     Bernardino Base and Meridian; T. 14 S., R. 1 E.; sec. 21: 
     W\1/2\ SE\1/4\, 68 acres; NW\1/4\ NW\1/4\, 17 acres.
       (c) Gaming.--The land taken into trust by subsection (a) 
     shall neither be considered to have been taken into trust for 
     gaming, nor be used for gaming (as that term is used in the 
     Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq.)).

     SEC. 122. CONVEYANCE OF NATIVE ALASKAN OBJECTS.

       Notwithstanding any provision of law affecting the disposal 
     of Federal property, on the request of the Chugach Alaska 
     Corporation or Sealaska Corporation, the Secretary of 
     Agriculture shall convey to whichever of those corporations 
     that has received title to a cemetery site or historical 
     place on National Forest System land conveyed under section 
     14(h)(1) of the Alaska Native Claims Settlement Act (43 
     U.S.C. 1613(h)(1)) all artifacts, physical remains, and 
     copies of any available field records that--
       (1)(A) are in the possession of the Secretary of 
     Agriculture; and

[[Page S10438]]

       (B) have been collected from the cemetery site or 
     historical place; but
       (2) are not required to be conveyed in accordance with the 
     Native American Graves Protection and Repatriation Act (25 
     U.S.C. 3001 et seq.) or any other applicable law.

     SEC. 123. PUEBLO OF ACOMA; LAND AND MINERAL CONSOLIDATION.

       (a) Definition of Bidding or Royalty Credit.--The term 
     ``bidding or royalty credit'' means a legal instrument or 
     other written documentation, or an entry in an account 
     managed by the Secretary, that may be used in lieu of any 
     other monetary payment for--
       (1) a bonus bid for a lease sale on the outer Continental 
     Shelf; or
       (2) a royalty due on oil or gas production;
     for any lease located on the outer Continental Shelf outside 
     the zone defined and governed by section 8(g)(2) of the Outer 
     Continental Shelf Lands Act (43 U.S.C. 1337(g)(2)).
       (b) Authority.--Notwithstanding any other provision of law, 
     the Secretary may acquire any nontribal interest in or to 
     land (including an interest in mineral or other surface or 
     subsurface rights) within the boundaries of the Acoma Indian 
     Reservation for the purpose of carrying out Public Law 107-
     138 (116 Stat. 6) by issuing bidding or royalty credits under 
     this section in an amount equal to the value of the interest 
     acquired by the Secretary, as determined under section 1(a) 
     of Public Law 107-138 (116 Stat. 6).
       (c) Use of Bidding and Royalty Credits.--On issuance by the 
     Secretary of a bidding or royalty credit under subsection 
     (b), the bidding or royalty credit--
       (1) may be freely transferred to any other person (except 
     that, before any such transfer, the transferor shall notify 
     the Secretary of the transfer by such method as the Secretary 
     may specify); and
       (2) shall remain available for use by any person during the 
     5-year period beginning on the date of issuance by the 
     Secretary of the bidding or royalty credit.

     SEC. 124. QUINAULT INDIAN NATION; WATER FEASIBILITY STUDY.

       (a) In General.--The Secretary is authorized to carry out, 
     in accordance with Federal reclamation law (the Act of June 
     17, 1902 (32 Stat. 388, chapter 1093), and Acts supplemental 
     to and amendatory of that Act (43 U.S.C. 371 et seq.)), a 
     water source, quantity, and quality feasibility study for 
     land of the Quinault Indian Nation to identify ways to meet 
     the current and future domestic and commercial water supply 
     and distribution needs of the Quinault Indian Nation on the 
     Olympic Peninsula, Washington.
       (b) Public Availability of Results.--As soon as practicable 
     after completion of a feasibility study under subsection (a), 
     the Secretary shall--
       (1) publish in the Federal Register a notice of the 
     availability of the results of the feasibility study; and
       (2) make available to the public, on request, the results 
     of the feasibility study.

     SEC. 125. SANTEE SIOUX TRIBE; STUDY AND REPORT.

       (a) Study.--Pursuant to reclamation laws, the Secretary, 
     acting through the Bureau of Reclamation and in consultation 
     with the Santee Sioux Tribe of Nebraska (referred to in this 
     subtitle as the ``Tribe''), shall conduct a feasibility study 
     to determine the most feasible method of developing a safe 
     and adequate municipal, rural, and industrial water treatment 
     and distribution system for the Santee Sioux Tribe of 
     Nebraska that could serve the tribal community and adjacent 
     communities and incorporate population growth and economic 
     development activities for a period of 40 years.
       (b) Cooperative Agreement.--At the request of the Tribe, 
     the Secretary shall enter into a cooperative agreement with 
     the Tribe for activities necessary to conduct the study 
     required by subsection (a) regarding which the Tribe has 
     unique expertise or knowledge.
       (c) Report.--Not later than 1 year after funds are made 
     available to carry out this subtitle, the Secretary shall 
     submit to Congress a report containing the results of the 
     study required by subsection (a).
       (d) Authorization of Appropriations.--There is authorized 
     to be appropriated to the Secretary to carry out this section 
     $500,000, to remain available until expended.

     SEC. 126. SHAKOPEE MDEWAKANTON SIOUX COMMUNITY.

       (a) In General.--Notwithstanding any other provision of 
     law, without further authorization by the United States, the 
     Shakopee Mdewakanton Sioux Community in the State of 
     Minnesota (referred to in this section as the ``Community'') 
     may lease, sell, convey, warrant, or otherwise transfer all 
     or any part of the interest of the Community in or to any 
     real property that is not held in trust by the United States 
     for the benefit of the Community.
       (b) No Effect on Trust Land.--Nothing in this section--
       (1) authorizes the Community to lease, sell, convey, 
     warrant, or otherwise transfer all or part of an interest in 
     any real property that is held in trust by the United States 
     for the benefit of the Community; or
       (2) affects the operation of any law governing leasing, 
     selling, conveying, warranting, or otherwise transferring any 
     interest in that trust land.

     SEC. 127. AGUA CALIENTE BAND OF CAHUILLA INDIANS.

       (a) In General.--Notwithstanding any other provision of law 
     (including any restrictive covenant in effect under, or 
     required by operation of, a State law), title to land that 
     the Secretary of the Interior agrees is to be acquired by the 
     United States in accordance with the Act of June 18, 1934 (25 
     U.S.C. 465), for the Agua Caliente Band of Cahuilla Indians 
     shall be taken in the name of the United States.
       (b) Covenants.--A restrictive covenant referred to in 
     subsection (a) shall be unenforceable against the United 
     States if the land to which the restrictive covenant is 
     attached was held in trust by the United States for, or owned 
     by, the Agua Caliente Band of Cahuilla Indians, or an 
     individual member of the Band, before the date on which the 
     restrictive covenant attached to the land.

     SEC. 128. SAGINAW CHIPPEWA TRIBAL COLLEGE.

       Section 532 of the Equity in Educational Land Grant Status 
     Act of 1994 (7 U.S.C. 301 note; Public Law 103-382) is 
     amended--
       (1) by redesignating paragraphs (22) through (31) as 
     paragraphs (23) through (32), respectively; and
       (2) by inserting after paragraph (21) the following:
       ``(22) Saginaw Chippewa Tribal College.''.

     SEC. 129. UTE INDIAN TRIBE; OIL SHALE RESERVE.

       Section 3405(c) of the Strom Thurmond National Defense 
     Authorization Act for Fiscal Year 1999 (10 U.S.C. 7420 note; 
     Public Law 105-261) is amended by striking paragraph (3) and 
     inserting the following:
       ``(3) With respect to the land conveyed to the Tribe under 
     subsection (b)--
       ``(A) the land shall not be subject to any Federal 
     restriction on alienation; and
       ``(B) notwithstanding any provision to the contrary in the 
     constitution, bylaws, or charter of the Tribe, the Act of May 
     11, 1938 (commonly known as the `Indian Mineral Leasing Act 
     of 1938') (25 U.S.C. 396a et seq.), the Indian Mineral 
     Development Act of 1982 (25 U.S.C. 2101 et seq.), section 
     2103 of the Revised Statutes (25 U.S.C. 81), or section 2116 
     of the Revised Statutes (25 U.S.C. 177), or any other law, no 
     purchase, grant, lease, or other conveyance of the land (or 
     any interest in the land), and no exploration, development, 
     or other agreement relating to the land that is authorized by 
     resolution by the governing body of the Tribe, shall require 
     approval by the Secretary of the Interior or any other 
     Federal official.''.

      TITLE II--PUEBLO OF SANTA CLARA AND PUEBLO OF SAN ILDEFONSO

     SEC. 201. DEFINITIONS.

       In this title:
       (1) Agreement.--The term ``Agreement'' means the agreement 
     entitled ``Agreement to Affirm Boundary Between Pueblo of 
     Santa Clara and Pueblo of San Ildefonso Aboriginal Lands 
     Within Garcia Canyon Tract'', entered into by the Governors 
     on December 20, 2000.
       (2) Boundary line.--The term ``boundary line'' means the 
     boundary line established under section 204(a).
       (3) Governors.--The term ``Governors'' means--
       (A) the Governor of the Pueblo of Santa Clara, New Mexico; 
     and
       (B) the Governor of the Pueblo of San Ildefonso, New 
     Mexico.
       (4) Indian tribe.--The term ``Indian tribe'' has the 
     meaning given the term in section 4 of the Indian Self-
     Determination and Education Assistance Act (25 U.S.C. 450b).
       (5) Pueblos.--The term ``Pueblos'' means--
       (A) the Pueblo of Santa Clara, New Mexico; and
       (B) the Pueblo of San Ildefonso, New Mexico.
       (6) Trust land.--The term ``trust land'' means the land 
     held by the United States in trust under section 202(a) or 
     203(a).

     SEC. 202. TRUST FOR THE PUEBLO OF SANTA CLARA, NEW MEXICO.

       (a) In General.--All right, title, and interest of the 
     United States in and to the land described in subsection (b), 
     including improvements on, appurtenances to, and mineral 
     rights (including rights to oil and gas) to the land, shall 
     be held by the United States in trust for the Pueblo of Santa 
     Clara, New Mexico.
       (b) Description of Land.--The land referred to in 
     subsection (a) consists of approximately 2,484 acres of 
     Bureau of Land Management land located in Rio Arriba County, 
     New Mexico, and more particularly described as--
       (1) the portion of T. 20 N., R. 7 E., sec. 22, New Mexico 
     Principal Meridian, that is located north of the boundary 
     line;
       (2) the southern half of T. 20 N., R. 7 E., sec. 23, New 
     Mexico Principal Meridian;
       (3) the southern half of T. 20 N., R. 7 E., sec. 24, New 
     Mexico Principal Meridian;
       (4) T. 20 N., R. 7 E., sec. 25, excluding the 5-acre tract 
     in the southeast quarter owned by the Pueblo of San 
     Ildefonso;
       (5) the portion of T. 20 N., R. 7 E., sec. 26, New Mexico 
     Principal Meridian, that is located north and east of the 
     boundary line;
       (6) the portion of T. 20 N., R. 7 E., sec. 27, New Mexico 
     Principal Meridian, that is located north of the boundary 
     line;
       (7) the portion of T. 20 N., R. 8 E., sec. 19, New Mexico 
     Principal Meridian, that is not included in the Santa Clara 
     Pueblo Grant or the Santa Clara Indian Reservation; and
       (8) the portion of T. 20 N., R. 8 E., sec. 30, that is not 
     included in the Santa Clara Pueblo Grant or the San Ildefonso 
     Grant.

     SEC. 203. TRUST FOR THE PUEBLO OF SAN ILDEFONSO, NEW MEXICO.

       (a) In General.--All right, title, and interest of the 
     United States in and to the land described in subsection (b), 
     including improvements on, appurtenances to, and mineral 
     rights (including rights to oil and gas)

[[Page S10439]]

     to the land, shall be held by the United States in trust for 
     the Pueblo of San Ildefonso, New Mexico.
       (b) Description of Land.--The land referred to in 
     subsection (a) consists of approximately 2,000 acres of 
     Bureau of Land Management land located in Rio Arriba County 
     and Santa Fe County in the State of New Mexico, and more 
     particularly described as--
       (1) the portion of T. 20 N., R. 7 E., sec. 22, New Mexico 
     Principal Meridian, that is located south of the boundary 
     line;
       (2) the portion of T. 20 N., R. 7 E., sec. 26, New Mexico 
     Principal Meridian, that is located south and west of the 
     boundary line;
       (3) the portion of T. 20 N., R. 7 E., sec. 27, New Mexico 
     Principal Meridian, that is located south of the boundary 
     line;
       (4) T. 20 N., R. 7 E., sec. 34, New Mexico Principal 
     Meridian; and
       (5) the portion of T. 20 N., R. 7 E., sec. 35, New Mexico 
     Principal Meridian, that is not included in the San Ildefonso 
     Pueblo Grant.

     SEC. 204. SURVEY AND LEGAL DESCRIPTIONS.

       (a) Survey.--Not later than 180 days after the date of 
     enactment of this Act, the Office of Cadastral Survey of the 
     Bureau of Land Management shall, in accordance with the 
     Agreement, complete a survey of the boundary line established 
     under the Agreement for the purpose of establishing, in 
     accordance with sections 3102(b) and 3103(b), the boundaries 
     of the trust land.
       (b) Legal Descriptions.--
       (1) Publication.--On approval by the Governors of the 
     survey completed under subsection (a), the Secretary shall 
     publish in the Federal Register--
       (A) a legal description of the boundary line; and
       (B) legal descriptions of the trust land.
       (2) Technical corrections.--Before the date on which the 
     legal descriptions are published under paragraph (1)(B), the 
     Secretary may correct any technical errors in the 
     descriptions of the trust land provided in sections 3102(b) 
     and 3103(b) to ensure that the descriptions are consistent 
     with the terms of the Agreement.
       (3) Effect.--Beginning on the date on which the legal 
     descriptions are published under paragraph (1)(B), the legal 
     descriptions shall be the official legal descriptions of the 
     trust land.

     SEC. 205. ADMINISTRATION OF TRUST LAND.

       (a) In General.--Effective beginning on the date of 
     enactment of this Act--
       (1) the land held in trust under section 202(a) shall be 
     declared to be a part of the Santa Clara Indian Reservation; 
     and
       (2) the land held in trust under section 203(a) shall be 
     declared to be a part of the San Ildefonso Indian 
     Reservation.
       (b) Applicable Law.--
       (1) In general.--The trust land shall be administered in 
     accordance with any law (including regulations) or court 
     order generally applicable to property held in trust by the 
     United States for Indian tribes.
       (2) Pueblo lands act.--The following shall be subject to 
     section 17 of the Act of June 7, 1924 (commonly known as the 
     ``Pueblo Lands Act'') (25 U.S.C. 331 note):
       (A) The trust land.
       (B) Any land owned as of the date of enactment of this Act 
     or acquired after the date of enactment of this Act by the 
     Pueblo of Santa Clara in the Santa Clara Pueblo Grant.
       (C) Any land owned as of the date of enactment of this Act 
     or acquired after the date of enactment of this Act by the 
     Pueblo of San Ildefonso in the San Ildefonso Pueblo Grant.
       (c) Use of Trust Land.--
       (1) In general.--Subject to the criteria developed under 
     paragraph (2), the trust land may be used only for--
       (A) traditional and customary uses; or
       (B) stewardship conservation for the benefit of the Pueblo 
     for which the trust land is held in trust.
       (2) Criteria.--The Secretary shall work with the Pueblos to 
     develop appropriate criteria for using the trust land in a 
     manner that preserves the trust land for traditional and 
     customary uses or stewardship conservation.
       (3) Limitation.--Beginning on the date of enactment of this 
     Act, the trust land shall not be used for any new commercial 
     developments.

     SEC. 206. EFFECT.

       Nothing in this title--
       (1) affects any valid right-of-way, lease, permit, mining 
     claim, grazing permit, water right, or other right or 
     interest of a person or entity (other than the United States) 
     that is--
       (A) in or to the trust land; and
       (B) in existence before the date of enactment of this Act;
       (2) enlarges, impairs, or otherwise affects a right or 
     claim of the Pueblos to any land or interest in land that 
     is--
       (A) based on Aboriginal or Indian title; and
       (B) in existence before the date of enactment of this Act;
       (3) constitutes an express or implied reservation of water 
     or water right with respect to the trust land; or
       (4) affects any water right of the Pueblos in existence 
     before the date of enactment of this Act.

     SEC. 207. GAMING.

       Land taken into trust under this title shall neither be 
     considered to have been taken into trust for, nor be used 
     for, gaming (as that term is used in the Indian Gaming 
     Regulatory Act (25 U.S.C. 2701 et seq.)).

     TITLE III--DISTRIBUTION OF QUINAULT PERMANENT FISHERIES FUNDS

     SEC. 301. DISTRIBUTION OF JUDGMENT FUNDS.

       (a) Funds To Be Deposited Into Separate Accounts.--
       (1) In general.--Subject to section 302, not later than 30 
     days after the date of enactment of this Act, the funds 
     appropriated on September 19, 1989, in satisfaction of an 
     award granted to the Quinault Indian Nation under Dockets 
     772-71, 773-71, 774-71, and 775-71 before the United States 
     Claims Court, less attorney fees and litigation expenses, and 
     including all interest accrued to the date of disbursement, 
     shall be distributed by the Secretary and deposited into 3 
     separate accounts to be established and maintained by the 
     Quinault Indian Nation (referred to in this title as the 
     ``Tribe'') in accordance with this subsection.
       (2) Account for principal amount.--
       (A) In general.--The Tribe shall--
       (i) establish an account for the principal amount of the 
     judgment funds; and
       (ii) use those funds to establish a Permanent Fisheries 
     Fund.
       (B) Use and investment.--The principal amount described in 
     subparagraph (A)(i)--
       (i) except as provided in subparagraph (A)(ii), shall not 
     be expended by the Tribe; and
       (ii) shall be invested by the Tribe in accordance with the 
     investment policy of the Tribe.
       (3) Account for investment income.--
       (A) In general.--The Tribe shall establish an account for, 
     and deposit in the account, all investment income earned on 
     amounts in the Permanent Fisheries Fund established under 
     paragraph (2)(A)(ii) after the date of distribution of the 
     funds to the Tribe under paragraph (1).
       (B) Use of funds.--Funds deposited in the account 
     established under subparagraph (A) shall be available to the 
     Tribe--
       (i) subject to subparagraph (C), to carry out fisheries 
     enhancement projects; and
       (ii) pay expenses incurred in administering the Permanent 
     Fisheries Fund established under paragraph (2)(A)(ii).
       (C) Specification of projects.--Each fisheries enhancement 
     project carried out under subparagraph (B)(i) shall be 
     specified in the approved annual budget of the Tribe.
       (4) Account for income on judgment funds.--
       (A) In general.--The Tribe shall establish an account for, 
     and deposit in the account, all investment income earned on 
     the judgment funds described in subsection (a) during the 
     period beginning on September 19, 1989, and ending on the 
     date of distribution of the funds to the Tribe under 
     paragraph (1).
       (B) Use of funds.--
       (i) In general.--Subject to clause (ii), funds deposited in 
     the account established under subparagraph (A) shall be 
     available to the Tribe for use in carrying out tribal 
     government activities.
       (ii) Specification of activities.--Each tribal government 
     activity carried out under clause (i) shall be specified in 
     the approved annual budget of the Tribe.
       (b) Determination of Amount of Funds Available.--Subject to 
     compliance by the Tribe with paragraphs (3)(C) and (4)(B)(ii) 
     of subsection (a), the Quinault Business Committee, as the 
     governing body of the Tribe, may determine the amount of 
     funds available for expenditure under paragraphs (3) and (4) 
     of subsection (a).
       (c) Annual Audit.--The records and investment activities of 
     the 3 accounts established under subsection (a) shall--
       (1) be maintained separately by the Tribe; and
       (2) be subject to an annual audit.
       (d) Reporting of Investment Activities and Expenditures.--
     Not later than 120 days after the date on which each fiscal 
     year of the Tribe ends, the Tribe shall make available to 
     members of the Tribe a full accounting of the investment 
     activities and expenditures of the Tribe with respect to each 
     fund established under this section (which may be in the form 
     of the annual audit described in subsection (c)) for the 
     fiscal year.

     SEC. 302. CONDITIONS FOR DISTRIBUTION.

       (a) United States Liability.--On disbursement to the Tribe 
     of the funds under section 301(a), the United States shall 
     bear no trust responsibility or liability for the investment, 
     supervision, administration, or expenditure of the funds.
       (b) Application of Other Law.--All funds distributed under 
     this title shall be subject to section 7 of the Indian Tribal 
     Judgment Funds Use or Distribution Act (25 U.S.C. 1407).

                          ____________________