[Congressional Record Volume 149, Number 166 (Monday, November 17, 2003)]
[House]
[Pages H11207-H11356]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      CONFERENCE REPORT ON H.R. 6

  Mr. TAUZIN submitted the following conference report and statement on 
the bill (H.R. 6), to enhance energy conservation and research and 
development, to provide for security and diversity in the energy supply 
for the American people, and for other purposes:

                  Conference Report (H. Rept. 108-375)

       The committee of conference on the disagreeing votes of the 
     two Houses on the amendment of the Senate to the bill (H.R. 
     6), to enhance energy conservation and research and 
     development, to provide for security and diversity in the 
     energy supply for the American people, and for other 
     purposes, having met, after full and free conference, have 
     agreed to recommend and do recommend to their respective 
     Houses as follows:
       That the House recede from its disagreement to the 
     amendment of the Senate and agree to the same with an 
     amendment as follows:
       In lieu of the matter proposed to be inserted by the Senate 
     amendment, insert the following:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Energy 
     Policy Act of 2003''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

                       TITLE I--ENERGY EFFICIENCY

                      Subtitle A--Federal Programs

Sec. 101. Energy and water saving measures in congressional buildings.
Sec. 102. Energy management requirements.
Sec. 103. Energy use measurement and accountability.
Sec. 104. Procurement of energy efficient products.
Sec. 105. Energy savings performance contracts.
Sec. 106. Energy savings performance contracts pilot program for 
              nonbuilding applications.
Sec. 107. Voluntary commitments to reduce industrial energy intensity.
Sec. 108. Advanced Building Efficiency Testbed.
Sec. 109. Federal building performance standards.NOTICE

If the 108th Congress, 1st Session, adjourns sine die on or before 
November 21, 2003, a final issue of the Congressional Record for 
the 108th Congress, 1st Session, will be published on Monday, 
December 15, 2003, in order to permit Members to revise and extend 
their remarks.
All material for insertion must be signed by the Member and 
delivered to the respective offices of the Official Reporters of 
Debates (Room HT-60 or S-410A of the Capitol), Monday through 
Friday, between the hours of 10:00 a.m. and 3:00 p.m. through 
Friday, December 12, 2003. The final issue will be dated Monday, 
December 15, 2003, and will be delivered on Tuesday, December 16, 
2003.
None of the material printed in the final issue of the 
Congressional Record may contain subject matter, or relate to any 
event that occurred after the sine die date.
Senators' statements should also be submitted electronically, 
either on a disk to accompany the signed statement, or by e-mail to 
the Official Reporters of Debates at ``[email protected]''.
Members of the House of Representatives' statements may also be 
submitted electronically by e-mail, to accompany the signed 
statement, and formatted according to the instructions for the 
Extensions of Remarks template at http://clerkhouse.house.gov/
forms. The Official Reporters will transmit to GPO the template 
formatted electronic file only after receipt of, and authentication 
with, the hard copy, and signed manuscript. Deliver statements to 
the Official Reporters in Room 
HT-60 of the Capitol.
Members of Congress desiring to purchase reprints of material 
submitted for inclusion in the Congressional Record may do so by 
contacting the Office of Congressional Publishing Services, at the 
Government Printing Office, on 512-0224, between the hours of 8:00 
a.m. and 4:00 p.m. daily.
By order of the Joint Committee on Printing.
                                                                
ROBERT W. NEY, Chairman.

[[Page H11208]]

       Sec. 110. Increased use of recovered mineral component in 
           federally funded projects involving procurement of 
           cement or concrete.

            Subtitle B--Energy Assistance and State Programs

       Sec. 121. Low Income Home Energy Assistance Program.
       Sec. 122. Weatherization assistance.
       Sec. 123. State energy programs.
       Sec. 124. Energy efficient appliance rebate programs.
       Sec. 125. Energy efficient public buildings.
       Sec. 126. Low income community energy efficiency pilot 
           program.

                 Subtitle C--Energy Efficient Products

       Sec. 131. Energy Star program.
       Sec. 132. HVAC maintenance consumer education program.
       Sec. 133. Energy conservation standards for additional 
           products.
       Sec. 134. Energy labeling.

                       Subtitle D--Public Housing

       Sec. 141. Capacity building for energy-efficient, 
           affordable housing.
       Sec. 142. Increase of CDBG public services cap for energy 
           conservation and efficiency activities.
       Sec. 143. FHA mortgage insurance incentives for energy 
           efficient housing.
       Sec. 144. Public Housing Capital Fund.
       Sec. 145. Grants for energy-conserving improvements for 
           assisted housing.
       Sec. 146. North American Development Bank.
       Sec. 147. Energy-efficient appliances.
       Sec. 148. Energy efficiency standards.
       Sec. 149. Energy strategy for HUD.

                       TITLE II--RENEWABLE ENERGY

                     Subtitle A--General Provisions

Sec. 201. Assessment of renewable energy resources.
Sec. 202. Renewable energy production incentive.
Sec. 203. Federal purchase requirement.
Sec. 204. Insular areas energy security.
Sec. 205. Use of photovoltaic energy in public buildings.
Sec. 206. Grants to improve the commercial value of forest biomass for 
              electric energy, useful heat, transportation fuels, 
              petroleum-based product substitutes, and other commercial 
              purposes.
Sec. 207. Biobased products.

                     Subtitle B--Geothermal Energy

Sec. 211. Short title.
Sec. 212. Competitive lease sale requirements.
Sec. 213. Direct use.
Sec. 214. Royalties and near-term production incentives.
Sec. 215. Geothermal leasing and permitting on Federal lands.
Sec. 216. Review and report to Congress.
Sec. 217. Reimbursement for costs of NEPA analyses, documentation, and 
              studies.
Sec. 218. Assessment of geothermal energy potential.
Sec. 219. Cooperative or unit plans.
Sec. 220. Royalty on byproducts.
Sec. 221. Repeal of authorities of Secretary to readjust terms, 
              conditions, rentals, and royalties.
Sec. 222. Crediting of rental toward royalty.
Sec. 223. Lease duration and work commitment requirements.
Sec. 224. Advanced royalties required for suspension of production.
Sec. 225. Annual rental.
Sec. 226. Leasing and permitting on Federal lands withdrawn for 
              military purposes.
Sec. 227. Technical amendments.

                       Subtitle C--Hydroelectric

                     Part I--Alternative Conditions

Sec. 231. Alternative conditions and fishways.

                     Part II--Additional Hydropower

Sec. 241. Hydroelectric production incentives.
Sec. 242. Hydroelectric efficiency improvement.
Sec. 243. Small hydroelectric power projects.
Sec. 244. Increased hydroelectric generation at existing Federal 
              facilities.
Sec. 245. Shift of project loads to off-peak periods.
Sec. 246. Corps of Engineers hydropower operation and maintenance 
              funding.
Sec. 247. Limitation on certain charges assessed to the Flint Creek 
              Project, Montana.
Sec. 248. Reinstatement and transfer.

                         TITLE III--OIL AND GAS

           Subtitle A--Petroleum Reserve and Home Heating Oil

Sec. 301. Permanent authority to operate the Strategic Petroleum 
              Reserve and other energy programs.
Sec. 302. National Oilheat Research Alliance.

                   Subtitle B--Production Incentives

Sec. 311. Definition of Secretary.
Sec. 312. Program on oil and gas royalties in-kind.
Sec. 313. Marginal property production incentives.
Sec. 314. Incentives for natural gas production from deep wells in the 
              shallow waters of the Gulf of Mexico.
Sec. 315. Royalty relief for deep water production.
Sec. 316. Alaska offshore royalty suspension.
Sec. 317. Oil and gas leasing in the National Petroleum Reserve in 
              Alaska.
Sec. 318. Orphaned, abandoned, or idled wells on Federal land.
Sec. 319. Combined hydrocarbon leasing.
Sec. 320. Liquified natural gas.
Sec. 321. Alternate energy-related uses on the Outer Continental Shelf.
Sec. 322. Preservation of geological and geophysical data.
Sec. 323. Oil and gas lease acreage limitations.
Sec. 324. Assessment of dependence of State of Hawaii on oil.
Sec. 325. Deadline for decision on appeals of consistency determination 
              under the Coastal Zone Management Act of 1972.
Sec. 326. Reimbursement for costs of NEPA analyses, documentation, and 
              studies.
Sec. 327. Hydraulic fracturing.
Sec. 328. Oil and gas exploration and production defined.
Sec. 329. Outer Continental Shelf provisions.
Sec. 330. Appeals relating to pipeline construction or offshore mineral 
              development projects.
Sec. 331. Bilateral international oil supply agreements.
Sec. 332. Natural gas market reform.
Sec. 333. Natural gas market transparency.

                   Subtitle C--Access to Federal Land

Sec. 341. Office of Federal Energy Project Coordination.
Sec. 342. Federal onshore oil and gas leasing and permitting practices.
Sec. 343. Management of Federal oil and gas leasing programs.
Sec. 344. Consultation regarding oil and gas leasing on public land.
Sec. 345. Estimates of oil and gas resources underlying onshore Federal 
              land.
Sec. 346. Compliance with Executive Order 13211; actions concerning 
              regulations that significantly affect energy supply, 
              distribution, or use.
Sec. 347. Pilot project to improve Federal permit coordination.
Sec. 348. Deadline for consideration of applications for permits.
Sec. 349. Clarification of fair market rental value determinations for 
              public land and Forest Service rights-of-way.
Sec. 350. Energy facility rights-of-way and corridors on Federal land.
Sec. 351. Consultation regarding energy rights-of-way on public land.
Sec. 352. Renewable energy on Federal land.
Sec. 353. Electricity transmission line right-of-way, Cleveland 
              National Forest and adjacent public land, California.
Sec. 354. Sense of Congress regarding development of minerals under 
              Padre Island National Seashore.
Sec. 355. Encouraging prohibition of off-shore drilling in the Great 
              Lakes.
Sec. 356. Finger Lakes National Forest withdrawal.
Sec. 357. Study on lease exchanges in the Rocky Mountain Front.
Sec. 358. Federal coalbed methane regulation.
Sec. 359. Livingston Parish mineral rights transfer.

                Subtitle D--Alaska Natural Gas Pipeline

Sec. 371. Short title.
Sec. 372. Definitions.
Sec. 373. Issuance of certificate of public convenience and necessity.
Sec. 374. Environmental reviews.
Sec. 375. Pipeline expansion.
Sec. 376. Federal Coordinator.
Sec. 377. Judicial review.
Sec. 378. State jurisdiction over in-State delivery of natural gas.
Sec. 379. Study of alternative means of construction.
Sec. 380. Clarification of ANGTA status and authorities.
Sec. 381. Sense of Congress concerning use of steel manufactured in 
              North America negotiation of a project labor agreement.
Sec. 382. Sense of Congress and study concerning participation by small 
              business concerns.
Sec. 383. Alaska pipeline construction training program.
Sec. 384. Sense of Congress concerning natural gas demand.
Sec. 385. Sense of Congress concerning Alaskan ownership.
Sec. 386. Loan guarantees.

                             TITLE IV--COAL

                Subtitle A--Clean Coal Power Initiative

Sec. 401. Authorization of appropriations.
Sec. 402. Project criteria.
Sec. 403. Report.
Sec. 404. Clean coal Centers of Excellence.

                    Subtitle B--Clean Power Projects

Sec. 411. Coal technology loan.
Sec. 412. Coal gasification.
Sec. 413. Integrated gasification combined cycle technology.
Sec. 414. Petroleum coke gasification.
Sec. 415. Integrated coal/renewable energy system.
Sec. 416. Electron scrubbing demonstration.

                    Subtitle C--Federal Coal Leases

Sec. 421. Repeal of the 160-acre limitation for coal leases.
Sec. 422. Mining plans.
Sec. 423. Payment of advance royalties under coal leases.
Sec. 424. Elimination of deadline for submission of coal lease 
              operation and reclamation plan.
Sec. 425. Amendment relating to financial assurances with respect to 
              bonus bids.
Sec. 426. Inventory requirement.
Sec. 427. Application of amendments.

                 Subtitle D--Coal and Related Programs

Sec. 441. Clean air coal program.

                         TITLE V--INDIAN ENERGY

Sec. 501. Short title.
Sec. 502. Office of Indian Energy Policy and Programs.

[[Page H11209]]

Sec. 503. Indian energy.
Sec. 504. Four Corners transmission line project.
Sec. 505. Energy efficiency in federally assisted housing.
Sec. 506. Consultation with Indian tribes.

                       TITLE VI--NUCLEAR MATTERS

               Subtitle A--Price-Anderson Act Amendments

Sec. 601. Short title.
Sec. 602. Extension of indemnification authority.
Sec. 603. Maximum assessment.
Sec. 604. Department of Energy liability limit.
Sec. 605. Incidents outside the United States.
Sec. 606. Reports.
Sec. 607. Inflation adjustment.
Sec. 608. Treatment of modular reactors.
Sec. 609. Applicability.
Sec. 610. Prohibition on assumption by United States Government of 
              liability for certain foreign incidents.
Sec. 611. Civil penalties.

                  Subtitle B--General Nuclear Matters

Sec. 621. Licenses.
Sec. 622. NRC training program.
Sec. 623. Cost recovery from Government agencies.
Sec. 624. Elimination of pension offset.
Sec. 625. Antitrust review.
Sec. 626. Decommissioning.
Sec. 627. Limitation on legal fee reimbursement.
Sec. 628. Decommissioning pilot program.
Sec. 629. Report on feasibility of developing commercial nuclear energy 
              generation facilities at existing Department of Energy 
              sites.
Sec. 630. Uranium sales.
Sec. 631. Cooperative research and development and special 
              demonstration projects for the uranium mining industry.
Sec. 632. Whistleblower protection.
Sec. 633. Medical isotope production.
Sec. 634. Fernald byproduct material.
Sec. 635. Safe disposal of greater-than-class C radioactive waste.
Sec. 636. Prohibition on nuclear exports to countries that sponsor 
              terrorism.
Sec. 637. Uranium enrichment facilities.
Sec. 638. National uranium stockpile.

       Subtitle C--Advanced Reactor Hydrogen Cogeneration Project

Sec. 651. Project establishment.
Sec. 652. Project definition.
Sec. 653. Project management.
Sec. 654. Project requirements.
Sec. 655. Authorization of appropriations.

                      Subtitle D--Nuclear Security

Sec. 661. Nuclear facility threats.
Sec. 662. Fingerprinting for criminal history record checks.
Sec. 663. Use of firearms by security personnel of licensees and 
              certificate holders of the Commission.
Sec. 664. Unauthorized introduction of dangerous weapons.
Sec. 665. Sabotage of nuclear facilities or fuel.
Sec. 666. Secure transfer of nuclear materials.
Sec. 667. Department of Homeland Security consultation.
Sec. 668. Authorization of appropriations.

                     TITLE VII--VEHICLES AND FUELS

                     Subtitle A--Existing Programs

Sec. 701. Use of alternative fuels by dual-fueled vehicles.
Sec. 702. Neighborhood electric vehicles.
Sec. 703. Credits for medium and heavy duty dedicated vehicles.
Sec. 704. Incremental cost allocation.
Sec. 705. Alternative compliance and flexibility.
Sec. 706. Review of Energy Policy Act of 1992 programs.
Sec. 707. Report concerning compliance with alternative fueled vehicle 
              purchasing requirements.

  Subtitle B--Hybrid Vehicles, Advanced Vehicles, and Fuel Cell Buses

                        Part 1--Hybrid Vehicles

Sec. 711. Hybrid vehicles.

                       Part 2--Advanced Vehicles

Sec. 721. Definitions.
Sec. 722. Pilot program.
Sec. 723. Reports to Congress.
Sec. 724. Authorization of appropriations.

                        Part 3--Fuel Cell Buses

Sec. 731. Fuel cell transit bus demonstration.

                     Subtitle C--Clean School Buses

Sec. 741. Definitions.
Sec. 742. Program for replacement of certain school buses with clean 
              school buses.
Sec. 743. Diesel retrofit program.
Sec. 744. Fuel cell school buses.

                       Subtitle D--Miscellaneous

Sec. 751. Railroad efficiency.
Sec. 752. Mobile emission reductions trading and crediting.
Sec. 753. Aviation fuel conservation and emissions.
Sec. 754. Diesel fueled vehicles.
Sec. 755. Conserve by bicycling program.
Sec. 756. Reduction of engine idling of heavy-duty vehicles.
Sec. 757. Biodiesel engine testing program.
Sec. 758. High occupancy vehicle exception.

                   Subtitle E--Automobile Efficiency

Sec. 771. Authorization of appropriations for implementation and 
              enforcement of fuel economy standards.
Sec. 772. Revised considerations for decisions on maximum feasible 
              average fuel economy.
Sec. 773. Extension of maximum fuel economy increase for alternative 
              fueled vehicles.
Sec. 774. Study of feasibility and effects of reducing use of fuel for 
              automobiles.

                          TITLE VIII--HYDROGEN

Sec. 801. Definitions.
Sec. 802. Plan.
Sec. 803. Programs.
Sec. 804. Interagency task force.
Sec. 805. Advisory Committee.
Sec. 806. External review.
Sec. 807. Miscellaneous provisions.
Sec. 808. Savings clause.
Sec. 809. Authorization of appropriations.

                   TITLE IX--RESEARCH AND DEVELOPMENT

Sec. 901. Goals.
Sec. 902. Definitions.

                     Subtitle A--Energy Efficiency

Sec. 904. Energy efficiency.
Sec. 905. Next Generation Lighting Initiative.
Sec. 906. National Building Performance Initiative.
Sec. 907. Secondary electric vehicle battery use program.
Sec. 908. Energy Efficiency Science Initiative.
Sec. 909. Electric motor control technology.
Sec. 910. Advanced Energy Technology Transfer Centers.

       Subtitle B--Distributed Energy and Electric Energy Systems

Sec. 911. Distributed energy and electric energy systems.
Sec. 912. Hybrid distributed power systems.
Sec. 913. High power density industry program.
Sec. 914. Micro-cogeneration energy technology.
Sec. 915. Distributed energy technology demonstration program.
Sec. 916. Reciprocating power.

                      Subtitle C--Renewable Energy

Sec. 918. Renewable energy.
Sec. 919. Bioenergy programs.
Sec. 920. Concentrating solar power research and development program.
Sec. 921. Miscellaneous projects.
Sec. 922. Renewable energy in public buildings.
Sec. 923. Study of marine renewable energy options.

                       Subtitle D--Nuclear Energy

Sec. 924. Nuclear energy.
Sec. 925. Nuclear energy research and development programs.
Sec. 926. Advanced fuel cycle initiative.
Sec. 927. University nuclear science and engineering support.
Sec. 928. Security of reactor designs.
Sec. 929. Alternatives to industrial radioactive sources.
Sec. 930. Geological isolation of spent fuel.

                       Subtitle E--Fossil Energy

                       Part I--Research Programs

Sec. 931. Fossil energy.
Sec. 932. Oil and gas research programs.
Sec. 933. Technology transfer.
Sec. 934. Research and development for coal mining technologies.
Sec. 935. Coal and related technologies program.
Sec. 936. Complex well technology testing facility.
Sec. 937. Fischer-Tropsch diesel fuel loan guarantee program.

   Part II--Ultra-deepwater and Unconventional Natural Gas and Other 
                          Petroleum Resources

Sec. 941. Program authority.
Sec. 942. Ultra-deepwater program.
Sec. 943. Unconventional natural gas and other petroleum resources 
              program.
Sec. 944. Additional requirements for awards.
Sec. 945. Advisory Committees.
Sec. 946. Limits on participation.
Sec. 947. Sunset.
Sec. 948. Definitions.
Sec. 949. Funding.

                          Subtitle F--Science

Sec. 951. Science.
Sec. 952. United States participation in ITER.
Sec. 953. Plan for fusion energy sciences program.
Sec. 954. Spallation Neutron Source.
Sec. 955. Support for science and energy facilities and infrastructure.
Sec. 956. Catalysis research and development program.
Sec. 957. Nanoscale science and engineering research, development, 
              demonstration, and commercial application.
Sec. 958. Advanced scientific computing for energy missions.
Sec. 959. Genomes to Life program.
Sec. 960. Fission and fusion energy materials research program.
Sec. 961. Energy-Water Supply Program.
Sec. 962. Nitrogen fixation.

                   Subtitle G--Energy and Environment

Sec. 964. United States-Mexico energy technology cooperation.
Sec. 965. Western Hemisphere energy cooperation.
Sec. 966. Waste reduction and use of alternatives.
Sec. 967. Report on fuel cell test center.
Sec. 968. Arctic Engineering Research Center.
Sec. 969. Barrow Geophysical Research Facility.
Sec. 970. Western Michigan demonstration project.

                         Subtitle H--Management

Sec. 971. Availability of funds.
Sec. 972. Cost sharing.
Sec. 973. Merit review of proposals.
Sec. 974. External technical review of departmental programs.
Sec. 975. Improved coordination of technology transfer activities.
Sec. 976. Federal laboratory educational partners.

[[Page H11210]]

Sec. 977. Interagency cooperation.
Sec. 978. Technology infrastructure program.
Sec. 979. Reprogramming.
Sec. 980. Construction with other laws.
Sec. 981. Report on research and development program evaluation 
              methodologies.
Sec. 982. Department of Energy Science and Technology Scholarship 
              Program.
Sec. 983. Report on equal employment opportunity practices.
Sec. 984. Small business advocacy and assistance.
Sec. 985. Report on mobility of scientific and technical personnel.
Sec. 986. National Academy of Sciences report.
Sec. 987. Outreach.
Sec. 988. Competitive award of management contracts.
Sec. 989. Educational programs in science and mathematics.

                TITLE X--DEPARTMENT OF ENERGY MANAGEMENT

Sec. 1001. Additional Assistant Secretary position.
Sec. 1002. Other transactions authority.

                    TITLE XI--PERSONNEL AND TRAINING

Sec. 1101. Training guidelines for electric energy industry personnel.
Sec. 1102. Improved access to energy-related scientific and technical 
              careers.
Sec. 1103. National Power Plant Operations Technology and Education 
              Center.
Sec. 1104. International energy training.

                         TITLE XII--ELECTRICITY

Sec. 1201. Short title.

                   Subtitle A--Reliability Standards

Sec. 1211. Electric reliability standards.

         Subtitle B--Transmission Infrastructure Modernization

Sec. 1221. Siting of interstate electric transmission facilities.
Sec. 1222. Third-party finance.
Sec. 1223. Transmission system monitoring.
Sec. 1224. Advanced transmission technologies.
Sec. 1225. Electric transmission and distribution programs.
Sec. 1226. Advanced Power System Technology Incentive Program.
Sec. 1227. Office of Electric Transmission and Distribution.

            Subtitle C--Transmission Operation Improvements

Sec. 1231. Open nondiscriminatory access.
Sec. 1232. Sense of the Congress on Regional Transmission 
              Organizations.
Sec. 1233. Regional Transmission Organization applications progress 
              report.
Sec. 1234. Federal utility participation in Regional Transmission 
              Organizations.
Sec. 1235. Standard market design.
Sec. 1236. Native load service obligation.
Sec. 1237. Study on the benefits of economic dispatch.

                  Subtitle D--Transmission Rate Reform

Sec. 1241. Transmission infrastructure investment.
Sec. 1242. Voluntary transmission pricing plans.

                    Subtitle E--Amendments to PURPA

Sec. 1251. Net metering and additional standards.
Sec. 1252. Smart metering.
Sec. 1253. Cogeneration and small power production purchase and sale 
              requirements.

                      Subtitle F--Repeal of PUHCA

Sec. 1261. Short title.
Sec. 1262. Definitions.
Sec. 1263. Repeal of the Public Utility Holding Company Act of 1935.
Sec. 1264. Federal access to books and records.
Sec. 1265. State access to books and records.
Sec. 1266. Exemption authority.
Sec. 1267. Affiliate transactions.
Sec. 1268. Applicability.
Sec. 1269. Effect on other regulations.
Sec. 1270. Enforcement.
Sec. 1271. Savings provisions.
Sec. 1272. Implementation.
Sec. 1273. Transfer of resources.
Sec. 1274. Effective date.
Sec. 1275. Service allocation.
Sec. 1276. Authorization of appropriations.
Sec. 1277. Conforming amendments to the Federal Power Act.

 Subtitle G--Market Transparency, Enforcement, and Consumer Protection

Sec. 1281. Market transparency rules.
Sec. 1282. Market manipulation.
Sec. 1283. Enforcement.
Sec. 1284. Refund effective date.
Sec. 1285. Refund authority.
Sec. 1286. Sanctity of contract.
Sec. 1287. Consumer privacy and unfair trade practices.

                       Subtitle H--Merger Reform

Sec. 1291. Merger review reform and accountability.
Sec. 1292. Electric utility mergers.

                        Subtitle I--Definitions

Sec. 1295. Definitions.

            Subtitle J--Technical and Conforming Amendments

Sec. 1297. Conforming amendments.

                   TITLE XIII--ENERGY TAX INCENTIVES

Sec. 1300. Short title; amendment of 1986 code.

                        Subtitle A--Conservation

               Part I--Residential and Business Property

Sec. 1301. Credit for residential energy efficient property.
Sec. 1302. Extension and expansion of credit for electricity produced 
              from certain renewable resources.
Sec. 1303. Credit for business installation of qualified fuel cells.
Sec. 1304. Credit for energy efficiency improvements to existing homes.
Sec. 1305. Credit for construction of new energy efficient homes.
Sec. 1306. Energy credit for combined heat and power system property.
Sec. 1307. Credit for energy efficient appliances.
Sec. 1308. Energy efficient commercial buildings deduction.
Sec. 1309. Three-year applicable recovery period for depreciation of 
              qualified energy management devices.
Sec. 1310. Credit for production from advanced nuclear power 
              facilities.

             Part II--Fuels and Alternative Motor Vehicles

Sec. 1311. Repeal of 4.3-cent motor fuel excise taxes on railroads and 
              inland waterway transportation which remain in general 
              fund.
Sec. 1312. Reduced motor fuel excise tax on certain mixtures of diesel 
              fuel.
Sec. 1313. Small ethanol producer credit.
Sec. 1314. Incentives for biodiesel.
Sec. 1315. Alcohol fuel and biodiesel mixtures excise tax credit.
Sec. 1316. Nonapplication of export exemption to delivery of fuel to 
              motor vehicles removed from United States.
Sec. 1317. Repeal of phaseouts for qualified electric vehicle credit 
              and deduction for clean fuel-vehicles.
Sec. 1318. Alternative motor vehicle credit.
Sec. 1319. Modifications of deduction for certain refueling property.

                        Subtitle B--Reliability

Sec. 1321. Natural gas gathering lines treated as 7-year property.
Sec. 1322. Natural gas distribution lines treated as 15-year property.
Sec. 1323. Electric transmission property treated as 15-year property.
Sec. 1324. Expensing of capital costs incurred in complying with 
              Environmental Protection Agency sulfur regulations.
Sec. 1325. Credit for production of low sulfur diesel fuel.
Sec. 1326. Determination of small refiner exception to oil depletion 
              deduction.
Sec. 1327. Sales or dispositions to implement Federal Energy Regulatory 
              Commission or State electric restructuring policy.
Sec. 1328. Modifications to special rules for nuclear decommissioning 
              costs.
Sec. 1329. Treatment of certain income of cooperatives.
Sec. 1330. Arbitrage rules not to apply to prepayments for natural gas.

                         Subtitle C--Production

                     Part I--Oil and Gas Provisions

Sec. 1341. Oil and gas from marginal wells.
Sec. 1342. Temporary suspension of limitation based on 65 percent of 
              taxable income and extension of suspension of taxable 
              income limit with respect to marginal production.
Sec. 1343. Amortization of delay rental payments.
Sec. 1344. Amortization of geological and geophysical expenditures.
Sec. 1345. Extension and modification of credit for producing fuel from 
              a nonconventional source.

              Part II--Alternative Minimum Tax Provisions

Sec. 1346. New nonrefundable personal credits allowed against regular 
              and minimum taxes.
Sec. 1347. Business related energy credits allowed against regular and 
              minimum tax.
Sec. 1348. Temporary repeal of alternative minimum tax preference for 
              intangible drilling costs.

                    Part III--Clean Coal Incentives

Sec. 1351. Credit for clean coal technology units.
Sec. 1352. Expansion of amortization for certain pollution control 
              facilities.
Sec. 1353. 5-year recovery period for eligible integrated gasification 
              combined cycle technology unit eligible for credit.

              Part IV--High Volume Natural Gas Provisions

Sec. 1355. High volume natural gas pipe treated as 7-year property.
Sec. 1356. Extension of enhanced oil recovery credit to high volume 
              natural gas facilities.

                   Subtitle D--Additional Provisions

Sec. 1361. Extension of accelerated depreciation benefit for energy-
              related businesses on Indian reservations.
Sec. 1362. Payment of dividends on stock of cooperatives without 
              reducing patronage dividends.
Sec. 1363. Distributions from publicly traded partnerships treated as 
              qualifying income of regulated investment companies.
Sec. 1364. Ceiling fans.
Sec. 1365. Certain steam generators, and certain reactor vessel heads, 
              used in nuclear facilities.
Sec. 1366. Brownfields demonstration program for qualified green 
              building and sustainable design projects.

                        TITLE XIV--MISCELLANEOUS

         Subtitle A--Rural and Remote Electricity Construction

Sec. 1401. Denali Commission programs.

[[Page H11211]]

Sec. 1402. Rural and remote community assistance.

                      Subtitle B--Coastal Programs

Sec. 1411. Royalty payments under leases under the Outer Continental 
              Shelf Lands Act.
Sec. 1412. Domestic offshore energy reinvestment.

 Subtitle C--Reforms to the Board of Directors of the Tennessee Valley 
                               Authority

Sec. 1431. Change in composition, operation, and duties of the board of 
              directors of the Tennessee Valley Authority.
Sec. 1432. Change in manner of appointment of staff.
Sec. 1433. Conforming amendments.
Sec. 1434. Appointments; effective date; transition.

                      Subtitle D--Other Provisions

Sec. 1441. Continuation of transmission security order.
Sec. 1442. Review of agency determinations.
Sec. 1443. Attainment dates for downwind ozone nonattainment areas.
Sec. 1444. Energy production incentives
Sec. 1445. Use of granular mine tailings.

                   TITLE XV--ETHANOL AND MOTOR FUELS

                     Subtitle A--General Provisions

Sec. 1501. Renewable content of motor vehicle fuel.
Sec. 1502. Fuels safe harbor.
Sec. 1503. Findings and MTBE transition assistance.
Sec. 1504. Use of MTBE.
Sec. 1505. National Academy of Sciences review and presidential 
              determination.
Sec. 1506. Elimination of oxygen content requirement for reformulated 
              gasoline.
Sec. 1507. Analyses of motor vehicle fuel changes.
Sec. 1508. Data collection.
Sec. 1509. Reducing the proliferation of State fuel controls.
Sec. 1510. Fuel system requirements harmonization study.
Sec. 1511. Commercial byproducts from municipal solid waste and 
              cellulosic biomass loan guarantee program.
Sec. 1512. Resource center.
Sec. 1513. Cellulosic biomass and waste-derived ethanol conversion 
              assistance.
Sec. 1514. Blending of compliant reformulated gasolines.

            Subtitle B--Underground Storage Tank Compliance

Sec. 1521. Short title.
Sec. 1522. Leaking underground storage tanks.
Sec. 1523. Inspection of underground storage tanks.
Sec. 1524. Operator training.
Sec. 1525. Remediation from oxygenated fuel additives.
Sec. 1526. Release prevention, compliance, and enforcement.
Sec. 1527. Delivery prohibition.
Sec. 1528. Federal facilities.
Sec. 1529. Tanks on tribal lands.
Sec. 1530. Future release containment technology.
Sec. 1531. Authorization of appropriations.
Sec. 1532. Conforming amendments.
Sec. 1533. Technical amendments.

                           TITLE XVI--STUDIES

Sec. 1601. Study on inventory of petroleum and natural gas storage.
Sec. 1602. Natural gas supply shortage report.
Sec. 1603. Split-estate Federal oil and gas leasing and development 
              practices.
Sec. 1604. Resolution of Federal resource development conflicts in the 
              Powder River Basin.
Sec. 1605. Study of energy efficiency standards.
Sec. 1606. Telecommuting study.
Sec. 1607. LIHEAP report.
Sec. 1608. Oil bypass filtration technology.
Sec. 1609. Total integrated thermal systems.
Sec. 1610. University collaboration.
Sec. 1611. Reliability and consumer protection assessment.
                       TITLE I--ENERGY EFFICIENCY
                      Subtitle A--Federal Programs

     SEC. 101. ENERGY AND WATER SAVING MEASURES IN CONGRESSIONAL 
                   BUILDINGS.

       (a) In General.--Part 3 of title V of the National Energy 
     Conservation Policy Act (42 U.S.C. 8251 et seq.) is amended 
     by adding at the end the following:

     ``SEC. 552. ENERGY AND WATER SAVINGS MEASURES IN 
                   CONGRESSIONAL BUILDINGS.

       ``(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 
     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 of the Capitol 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 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. 552. Energy and water savings measures in congressional 
              buildings.''.
       (c) Repeal.--Section 310 of the Legislative Branch 
     Appropriations Act, 1999 (2 U.S.C. 1815), 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 of Appropriations.--There are authorized 
     to be appropriated to the Architect of the Capitol to carry 
     out subsection (d), $2,000,000 for each of fiscal years 2004 
     through 2008.

     SEC. 102. ENERGY MANAGEMENT REQUIREMENTS.

       (a) Energy Reduction Goals.--
       (1) Amendment.--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 2001, 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.''.
       (2) Reporting baseline.--The energy reduction goals and 
     baseline established in paragraph (1) of section 543(a) of 
     the National Energy Conservation Policy Act (42 U.S.C. 
     8253(a)(1)), as amended by this subsection, supersede all 
     previous goals and baselines under such paragraph, and 
     related reporting requirements.
       (b) Review and Revision of Energy Performance 
     Requirement.--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, 2012, 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 
     2023.''.
       (c) 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.''.
       (d) 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'';
       (2) by striking ``a finding of impracticability'' and 
     inserting ``the exclusion''; and

[[Page H11212]]

       (3) by striking ``energy consumption requirements'' and 
     inserting ``requirements of subsections (a) and (b)(1)''.
       (e) 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).''.
       (f) Retention of Energy and Water 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 and Water Savings.--An agency may 
     retain any funds appropriated to that agency for energy 
     expenditures, water expenditures, or wastewater treatment 
     expenditures, at buildings subject to the requirements of 
     section 543(a) and (b), that are not made because of energy 
     savings or water savings. Except as otherwise provided by 
     law, such funds may be used only for energy efficiency, water 
     conservation, or unconventional and renewable energy 
     resources projects.''.
       (g) 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''.
       (h) 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).''.

     SEC. 103. 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, energy efficiency advocacy 
     organizations, 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 1 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.--Not 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. 104. PROCUREMENT OF ENERGY EFFICIENT PRODUCTS.

       (a) Requirements.--Part 3 of title V of the National Energy 
     Conservation Policy Act (42 U.S.C. 8251 et seq.), as amended 
     by section 101, is amended by adding at the end the 
     following:

     ``SEC. 553. FEDERAL PROCUREMENT OF ENERGY EFFICIENT PRODUCTS.

       ``(a) Definitions.--In this section:
       ``(1) Energy star product.--The term `Energy Star product' 
     means a product that is rated for energy efficiency under an 
     Energy Star program.
       ``(2) Energy star program.--The term `Energy Star program' 
     means the program established by section 324A of the Energy 
     Policy and Conservation Act.
       ``(3) Executive agency.--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) FEMP designated product.--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--
       ``(A) an Energy Star product; or
       ``(B) 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) Specific Products.--(1) 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 
     not later than 120 days after the date of the enactment of 
     this section, after considering the recommendations of 
     associated electric motor manufacturers and energy efficiency 
     groups.
       ``(2) All Federal agencies are encouraged to take actions 
     to maximize the efficiency of air conditioning and 
     refrigeration equipment, including appropriate cleaning and 
     maintenance, including the use of any system treatment or 
     additive that will reduce the electricity consumed by air 
     conditioning and refrigeration equipment. Any such treatment 
     or additive must be--
       ``(A) determined by the Secretary to be effective in 
     increasing the efficiency of air conditioning and 
     refrigeration equipment without having an adverse impact on 
     air conditioning performance (including cooling capacity) or 
     equipment useful life;
       ``(B) determined by the Administrator of the Environmental 
     Protection Agency to be environmentally safe; and
       ``(C) shown to increase seasonal energy efficiency ratio 
     (SEER) or energy efficiency ratio (EER) when tested by the 
     National Institute of Standards and Technology according to 
     Department of Energy test procedures without causing any 
     adverse impact on the system, system components, the 
     refrigerant or lubricant, or other materials in the system.

     Results of testing described in subparagraph (C) shall be 
     published in the Federal Register for public review and 
     comment. For purposes of this section, a hardware device or 
     primary refrigerant shall not be considered an additive.
       ``(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 of the 
     National Energy Conservation Policy Act is further amended by 
     inserting after the item relating to section 552 the 
     following new item:

``Sec. 553. Federal procurement of energy efficient products.''.

     SEC. 105. ENERGY SAVINGS PERFORMANCE CONTRACTS.

       (a) Permanent Extension.--Effective September 30, 2003, 
     section 801(c) of the National Energy Conservation Policy Act 
     (42 U.S.C. 8287(c)) is repealed.
       (b) Payment of Costs.--Section 802 of the National Energy 
     Conservation Policy Act (42 U.S.C. 8287a) is amended by 
     inserting ``, water, or wastewater treatment'' after 
     ``payment of energy''.
       (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:

[[Page H11213]]

       ``(2) The term `energy savings' means a reduction in the 
     cost of energy, water, or wastewater treatment, 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--
       ``(A) the lease or purchase of operating equipment, 
     improvements, altered operation and maintenance, or technical 
     services;
       ``(B) the increased efficient use of existing energy 
     sources by cogeneration or heat recovery, excluding any 
     cogeneration process for other than a federally owned 
     building or buildings or other federally owned facilities; or
       ``(C) the increased efficient use of existing water sources 
     in either interior or exterior applications.''.
       (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 that provides 
     for 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 1 or more 
     locations. Such contracts shall, with respect to an agency 
     facility that is a public building (as such term is defined 
     in section 3301 of title 40, United States Code), be in 
     compliance with the prospectus requirements and procedures of 
     section 3307 of title 40, United States Code.''.
       (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; or
       ``(B) a water conservation measure that improves the 
     efficiency of water use, 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) Review.--Not later than 180 days after the date of the 
     enactment of this Act, 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 
     Congress 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.
       (g) Extension of Authority.--Any energy savings performance 
     contract entered into under section 801 of the National 
     Energy Conservation Policy Act (42 U.S.C. 8287) after October 
     1, 2003, and before the date of enactment of this Act, shall 
     be deemed to have been entered into pursuant to such section 
     801 as amended by subsection (a) of this section.

     SEC. 106. ENERGY SAVINGS PERFORMANCE CONTRACTS PILOT PROGRAM 
                   FOR NONBUILDING APPLICATIONS.

       (a) In General.--The Secretary of Defense and the heads of 
     other interested Federal agencies are authorized to enter 
     into up to 10 energy savings performance contracts using 
     procedures, established under subsection (b), based on the 
     procedures 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 
     nonbuilding applications. The payments to be made by the 
     Federal Government under such contracts shall not exceed a 
     total of $200,000,000 for all such contracts combined.
       (b) Procedures.--The Secretary of Energy, in consultation 
     with the Administrator of General Services and the Secretary 
     of Defense, shall establish procedures based on the 
     procedures under title VIII of the National Energy 
     Conservation Policy Act (42 U.S.C. 8287 et seq.), for 
     implementing this section.
       (c) Definitions.--In this section:
       (1) Nonbuilding application.--The term ``nonbuilding 
     application'' means--
       (A) any class of vehicles, devices, or equipment that are 
     transportable under their own power by land, sea, or air that 
     consume energy from any fuel source for the purpose of such 
     transportability, or to maintain a controlled environment 
     within such vehicle, device, or equipment; or
       (B) any Federally owned equipment used to generate 
     electricity or transport water.
       (2) Secondary savings.--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.
       (d) Report.--Not later than 3 years after the date of 
     enactment of this section, the Secretary of Energy shall 
     report to 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.).

     SEC. 107. VOLUNTARY COMMITMENTS TO REDUCE INDUSTRIAL ENERGY 
                   INTENSITY.

       (a) Voluntary Agreements.--The Secretary of Energy is 
     authorized to enter into voluntary agreements with 1 or more 
     persons in industrial sectors that consume significant 
     amounts of primary energy per unit of physical output to 
     reduce the energy intensity of their production activities by 
     a significant amount relative to improvements in each sector 
     in recent years.
       (b) Recognition.--The Secretary of Energy, in cooperation 
     with the Administrator of the Environmental Protection Agency 
     and other appropriate Federal agencies, shall recognize and 
     publicize the achievements of participants in voluntary 
     agreements under this section.
       (c) Definition.--In this section, the term ``energy 
     intensity'' means the primary energy consumed per unit of 
     physical output in an industrial process.

     SEC. 108. ADVANCED BUILDING EFFICIENCY TESTBED.

       (a) Establishment.--The Secretary of Energy, in 
     consultation with the Administrator of General Services, 
     shall establish an Advanced Building Efficiency Testbed 
     program for the development, testing, and demonstration of 
     advanced engineering systems, components, and materials to 
     enable innovations in building technologies. The program 
     shall evaluate efficiency concepts for government and 
     industry buildings, and demonstrate the ability of next 
     generation buildings to support individual and organizational 
     productivity and health (including by improving indoor air 
     quality) as well as flexibility and technological change to 
     improve environmental sustainability. Such program shall 
     complement and not duplicate existing national programs.
       (b) Participants.--The program established under subsection 
     (a) shall be led by a university with the ability to combine 
     the expertise from numerous academic fields including, at a 
     minimum, intelligent workplaces and advanced building systems 
     and engineering, electrical and computer engineering, 
     computer science, architecture, urban design, and 
     environmental and mechanical engineering. Such university 
     shall partner with other universities and entities who have 
     established programs and the capability of advancing 
     innovative building efficiency technologies.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary of Energy to carry out 
     this section $6,000,000 for each of the fiscal years 2004 
     through 2006, to remain available until expended. For any 
     fiscal year in which funds are expended under this section, 
     the Secretary shall provide \1/3\ of the total amount to the 
     lead university described in subsection (b), and provide the 
     remaining \2/3\ to the other participants referred to in 
     subsection (b) on an equal basis.

     SEC. 109. 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 2003 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--
       ``(i) if life-cycle 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 
     version current as of the date of enactment of this paragraph 
     of the ASHRAE Standard or 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; and
       ``(ii) where water is used to achieve energy efficiency, 
     water conservation technologies shall be applied to the 
     extent they are life-cycle cost effective.
       ``(B) Additional revisions.--Not later than 1 year after 
     the date of approval of each subsequent revision of the 
     ASHRAE Standard or the International Energy Conservation 
     Code, as appropriate, 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. 110. 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

[[Page H11214]]

     amended by adding at the end the following new section:


  ``increased use of recovered mineral component in federally funded 
          projects involving procurement of cement or concrete

       ``Sec. 6005. (a) Definitions.--In this section:
       ``(1) Agency head.--The term `agency head' means--
       ``(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 
     greater 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 
     Congress 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, not later than 1 year after the release of 
     the report in accordance with subsection (c)(3), take 
     additional actions authorized under this Act 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.''.
            Subtitle B--Energy Assistance and State Programs

     SEC. 121. LOW INCOME HOME ENERGY ASSISTANCE PROGRAM.

       Section 2602(b) of the Low-Income Home Energy Assistance 
     Act of 1981 (42 U.S.C. 8621(b)) is amended by striking ``and 
     $2,000,000,000 for each of fiscal years 2002 through 2004'' 
     and inserting ``$2,000,000,000 for fiscal years 2002 and 
     2003, and $3,400,000,000 for each of fiscal years 2004 
     through 2006''.

     SEC. 122. WEATHERIZATION ASSISTANCE.

       Section 422 of the Energy Conservation and Production Act 
     (42 U.S.C. 6872) is amended by striking ``for fiscal years 
     1999 through 2003 such sums as may be necessary'' and 
     inserting ``$325,000,000 for fiscal year 2004, $400,000,000 
     for fiscal year 2005, and $500,000,000 for fiscal year 
     2006''.

     SEC. 123. STATE ENERGY PROGRAMS.

       (a) State Energy Conservation Plans.--Section 362 of the 
     Energy Policy and Conservation Act (42 U.S.C. 6322) is 
     amended by inserting at the end the following new subsection:
       ``(g) The Secretary shall, at least once every 3 years, 
     invite the Governor of each State to review and, if 
     necessary, revise the energy conservation plan of such State 
     submitted under subsection (b) or (e). Such reviews should 
     consider the energy conservation plans of other States within 
     the region, and identify opportunities and actions carried 
     out in pursuit of common energy conservation goals.''.
       (b) State Energy Efficiency Goals.--Section 364 of the 
     Energy Policy and Conservation Act (42 U.S.C. 6324) is 
     amended to read as follows:


                    ``state energy efficiency goals

       ``Sec. 364. Each State energy conservation plan with 
     respect to which assistance is made available under this part 
     on or after the date of enactment of the Energy Policy Act of 
     2003 shall contain a goal, consisting of an improvement of 25 
     percent or more in the efficiency of use of energy in the 
     State concerned in calendar year 2010 as compared to calendar 
     year 1990, and may contain interim goals.''.
       (c) Authorization of Appropriations.--Section 365(f) of the 
     Energy Policy and Conservation Act (42 U.S.C. 6325(f)) is 
     amended by striking ``for fiscal years 1999 through 2003 such 
     sums as may be necessary'' and inserting ``$100,000,000 for 
     each of the fiscal years 2004 and 2005 and $125,000,000 for 
     fiscal year 2006''.

     SEC. 124. ENERGY EFFICIENT APPLIANCE REBATE PROGRAMS.

       (a) Definitions.--In this section:
       (1) Eligible state.--The term ``eligible State'' means a 
     State that meets the requirements of subsection (b).
       (2) Energy star program.--The term ``Energy Star program'' 
     means the program established by section 324A of the Energy 
     Policy and Conservation Act.
       (3) Residential energy star product.--The term 
     ``residential Energy Star product'' means a product for a 
     residence that is rated for energy efficiency under the 
     Energy Star program.
       (4) Secretary.--The term ``Secretary'' means the Secretary 
     of Energy.
       (5) State energy office.--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).
       (6) State program.--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) In general.--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) Minimum allocations.--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 the

[[Page H11215]]

     Secretary to carry out this section $50,000,000 for each of 
     the fiscal years 2004 through 2008.

     SEC. 125. 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 the most recent version of the 
     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 $30,000,000 for each of fiscal years 2004 
     through 2008. Not more than 10 percent of appropriated funds 
     shall be used for administration.

     SEC. 126. 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.), that 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 each of fiscal years 2004 
     through 2006.
                 Subtitle C--Energy Efficient Products

     SEC. 131. 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 2 
     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 comments from interested parties prior to 
     establishing or revising an Energy Star product category, 
     specification, or criterion (or effective dates for any of 
     the foregoing);
       ``(5) upon adoption of a new or revised product category, 
     specification, or criterion, provide reasonable notice to 
     interested parties of any changes (including effective dates) 
     in product categories, specifications, or criteria along with 
     an explanation of such changes and, where appropriate, 
     responses to comments submitted by interested parties; and
       ``(6) provide appropriate lead time (which shall be 9 
     months, unless the Agency or Department determines otherwise) 
     prior to the effective date for a new or a significant 
     revision to a product category, specification, or criterion, 
     taking into account the timing requirements of the 
     manufacturing, product marketing, and distribution process 
     for the specific product addressed.''.
       (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. 132. 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, 
     not later than 180 days after 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 businesses 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 of the Small 
     Business Administration 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.''.

     SEC. 133. 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 paragraph (30)(S), by striking the period and adding 
     at the end the following: ``but does not include any lamp 
     specifically designed to be used for special purpose 
     applications and that is unlikely to be used in general 
     purpose applications such as those described in subparagraph 
     (D), and also does not include any lamp not described in 
     subparagraph (D) that is excluded by the Secretary, by rule, 
     because the lamp is designed for special applications and is 
     unlikely to be used in general purpose applications.''; and
       (2) by adding at the end the following:
       ``(32) The term `battery charger' means a device that 
     charges batteries for consumer products and includes battery 
     chargers embedded in other consumer products.
       ``(33) The term `commercial refrigerators, freezers, and 
     refrigerator-freezers' means refrigerators, freezers, or 
     refrigerator-freezers that--
       ``(A) are not consumer products regulated under this Act; 
     and
       ``(B) incorporate 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 
     `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 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--
       ``(I) the transformer is designed for a special 
     application;
       ``(II) the transformer is unlikely to be used in general 
     purpose applications; and
       ``(III) the application of standards to the transformer 
     would not result in significant energy savings.
       ``(37) The term `low-voltage dry-type distribution 
     transformer' means a distribution transformer that--
       ``(A) has an input voltage of 600 volts or less;

[[Page H11216]]

       ``(B) is air-cooled; and
       ``(C) does not use oil as a coolant.
       ``(38) The term `standby mode' means the lowest power 
     consumption mode that--
       ``(A) cannot be switched off or influenced by the user; and
       ``(B) may persist for an indefinite time when an appliance 
     is connected to the main electricity supply and used in 
     accordance with the manufacturer's instructions,

     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 `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.
       ``(41) The term `transformer' means a device consisting of 
     2 or more coils of insulated wire that transfers alternating 
     current by electromagnetic induction from 1 coil to another 
     to change the original voltage or current value.
       ``(42) 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.''.
       (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 distribution transformers and 
     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. For purposes of section 346(a), this test 
     procedure shall be deemed to be testing requirements 
     prescribed by the Secretary under section 346(a)(1) for 
     distribution transformers for which the Secretary makes a 
     determination that energy conservation standards would be 
     technologically feasible and economically justified, and 
     would result in significant energy savings.
       ``(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, not later than 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 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) Battery Charger and External Power Supply 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 and test 
     procedures for the power use of battery chargers and external 
     power supplies. In establishing these test procedures, the 
     Secretary shall consider, among other factors, existing 
     definitions and test procedures used for measuring energy 
     consumption in standby mode and other modes 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 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 
     issued 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 energy use that--
       ``(i) meets the criteria and procedures 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) 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 that 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, standby mode 
     power consumption compared to overall product energy 
     consumption.
       ``(3) Rulemaking.--The Secretary shall not propose a 
     standard under this section unless the Secretary has issued 
     applicable test procedures for each product pursuant to 
     section 323.
       ``(4) Effective date.--Any standard issued under this 
     subsection shall be applicable to products manufactured or 
     imported 3 years after the date of issuance.
       ``(5) 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, that are designed to reduce standby mode 
     energy use.
       ``(v) Suspended Ceiling Fans, Vending Machines, and 
     Commercial Refrigerators, Freezers, and Refrigerator-
     Freezers.--The Secretary shall not later than 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 (o) and (p). 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) Low Voltage Dry-Type Distribution Transformers.--The 
     efficiency of low voltage dry-type distribution 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 subsection, 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 3 years after the date of enactment of this 
     subsection 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 Compact Fluorescent Lamps, 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 Compact 
     Fluorescent Lamps. The Secretary may, by rule, revise these 
     requirements or establish other requirements considering 
     energy savings, cost effectiveness, and consumer 
     satisfaction.
       ``(cc) Effective Date.--Section 327 shall apply--
       ``(1) to products for which standards are to be established 
     under subsections (u) and (v) 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 established under 
     subsection (u) or (v) for that product takes effect; and
       ``(2) to products for which standards are established under 
     subsections (w) through (bb) on the date of enactment of 
     those subsections, except that any State or local standards 
     prescribed or enacted prior to the date of enactment of those 
     subsections shall not be preempted until the standards 
     established under subsections (w) through (bb) take 
     effect.''.
       (d) Residential Furnace Fans.--Section 325(f)(3) of the 
     Energy Policy and Conservation Act (42 U.S.C. 6295(f)(3)) is 
     amended by adding the following new subparagraph at the end:
       ``(D) Notwithstanding any provision of this Act, the 
     Secretary may consider, and prescribe, if the requirements of 
     subsection (o) of this section are met, energy efficiency or 
     energy use

[[Page H11217]]

     standards for electricity used for purposes of circulating 
     air through duct work.''.

     SEC. 134. ENERGY LABELING.

       (a) Rulemaking on Effectiveness of Consumer Product 
     Labeling.--Section 324(a)(2) 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 not later than 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 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 paragraph.''.
                       Subtitle D--Public Housing

     SEC. 141. 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. 142. 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. 143. 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 paragraph beginning 
     after subparagraph (B)(ii)(IV) (relating to solar energy 
     systems), 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 last 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)(IV) of the 
     National Housing Act (12 U.S.C. 1715k(d)(3)(B)(iii)(IV)) is 
     amended--
       (1) by striking ``with respect to rehabilitation projects 
     involving not more than five family units,''; and
       (2) 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.--Section 
     231(c)(2)(C) of the National Housing Act (12 U.S.C. 
     1715v(c)(2)(C)) 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. 144. 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 
     generation, advanced energy savings technologies, including 
     renewable energy generation, and other such retrofits.''.

     SEC. 145. 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 Multifamily 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.''.

     SEC. 146. 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. 147. 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 Conservation 
     Policy Act (as amended by this title), unless the purchase of 
     energy-efficient appliances is not cost-effective to the 
     agency.

     SEC. 148. 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, 
     2004'';
       (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 
     ``2003 International Energy Conservation Code'';
       (2) in subsection (b)--
       (A) by striking ``within 1 year after the date of the 
     enactment of the Energy Policy Act of 1992'' and inserting 
     ``by September 30, 2004''; and
       (B) by striking ``CABO'' and all that follows through 
     ``1989'' and inserting ``the 2003 International Energy 
     Conservation Code''; and
       (3) in subsection (c)--
       (A) in the heading, by striking ``Model Energy Code'' and 
     inserting ``The International Energy Conservation Code''; and
       (B) by striking ``CABO'' and all that follows through 
     ``1989'' and inserting ``the 2003 International Energy 
     Conservation Code''.

     SEC. 149. 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

[[Page H11218]]

     energy reduction goals and incentives for public housing 
     agencies. The Secretary shall submit a report to Congress, 
     not later than 1 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 2 years thereafter on progress in implementing 
     the strategy.
                       TITLE II--RENEWABLE ENERGY
                     Subtitle A--General Provisions

     SEC. 201. ASSESSMENT OF RENEWABLE ENERGY RESOURCES.

       (a) Resource Assessment.--Not later than 6 months after the 
     date of enactment of this Act, 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, wave, current, 
     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 Act, and each year thereafter, the 
     Secretary 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. 202. 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 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 or 
     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. 203. 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.
       (3) Not less than 7.5 percent in fiscal year 2011 and each 
     fiscal year thereafter.
       (b) Definitions.--In this section:
       (1) Biomass.--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;
       (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) Renewable energy.--The term ``renewable energy'' means 
     electric energy generated from solar, wind, biomass, landfill 
     gas, 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 Congress on the progress of the Federal Government 
     in meeting the goals established by this section.

     SEC. 204. INSULAR AREAS ENERGY SECURITY.

       Section 604 of the Act entitled ``An Act to authorize 
     appropriations for certain insular areas of the United 
     States, and for other purposes'', approved December 24, 1980 
     (48 U.S.C. 1492), is amended--
       (1) in subsection (a)(4) by striking the period and 
     inserting a semicolon;
       (2) by adding at the end of subsection (a) the following 
     new paragraphs:
       ``(5) electric power transmission and distribution lines in 
     insular areas are inadequate to withstand damage caused by 
     the hurricanes and typhoons which frequently occur in insular 
     areas and such damage often costs millions of dollars to 
     repair; and
       ``(6) the refinement of renewable energy technologies since 
     the publication of the 1982 Territorial Energy Assessment 
     prepared pursuant to subsection (c) reveals the need to 
     reassess the state of energy production, consumption, 
     infrastructure, reliance on imported energy, opportunities 
     for energy conservation and increased energy efficiency, and 
     indigenous sources in regard to the insular areas.'';
       (3) by amending subsection (e) to read as follows:
       ``(e)(1) The Secretary of the Interior, in consultation 
     with the Secretary of Energy and the head of government of 
     each insular area, shall update the plans required under 
     subsection (c) by--
       ``(A) updating the contents required by subsection (c);
       ``(B) drafting long-term energy plans for such insular 
     areas with the objective of reducing, to the extent feasible, 
     their reliance on energy imports by the year 2010, increasing 
     energy conservation and energy efficiency, and maximizing, to 
     the extent feasible, use of indigenous energy sources; and
       ``(C) drafting long-term energy transmission line plans for 
     such insular areas with the objective that the maximum 
     percentage feasible of electric power transmission and 
     distribution lines in each insular area be protected from 
     damage caused by hurricanes and typhoons.
       ``(2) Not later than December 31, 2005, the Secretary of 
     the Interior shall submit to Congress the updated plans for 
     each insular area required by this subsection.''; and
       (4) by amending subsection (g)(4) to read as follows:
       ``(4) Power line grants for insular areas.--
       ``(A) In general.--The Secretary of the Interior is 
     authorized to make grants to governments of insular areas of 
     the United States to carry out eligible projects to protect 
     electric power transmission and distribution lines in such 
     insular areas from damage caused by hurricanes and typhoons.
       ``(B) Eligible projects.--The Secretary may award grants 
     under subparagraph (A) only to governments of insular areas 
     of the United States that submit written project plans to the 
     Secretary for projects that meet the following criteria:
       ``(i) The project is designed to protect electric power 
     transmission and distribution lines located in 1 or more of 
     the insular areas of the United States from damage caused by 
     hurricanes and typhoons.
       ``(ii) The project is likely to substantially reduce the 
     risk of future damage, hardship, loss, or suffering.
       ``(iii) The project addresses 1 or more problems that have 
     been repetitive or that pose a significant risk to public 
     health and safety.
       ``(iv) The project is not likely to cost more than the 
     value of the reduction in direct damage and other negative 
     impacts that the project is designed to prevent or mitigate. 
     The cost benefit analysis required by this criterion shall be 
     computed on a net present value basis.
       ``(v) The project design has taken into consideration long-
     term changes to the areas and persons it is designed to 
     protect and has manageable future maintenance and 
     modification requirements.
       ``(vi) The project plan includes an analysis of a range of 
     options to address the problem it is

[[Page H11219]]

     designed to prevent or mitigate and a justification for the 
     selection of the project in light of that analysis.
       ``(vii) The applicant has demonstrated to the Secretary 
     that the matching funds required by subparagraph (D) are 
     available.
       ``(C) Priority.--When making grants under this paragraph, 
     the Secretary shall give priority to grants for projects 
     which are likely to--
       ``(i) have the greatest impact on reducing future disaster 
     losses; and
       ``(ii) best conform with plans that have been approved by 
     the Federal Government or the government of the insular area 
     where the project is to be carried out for development or 
     hazard mitigation for that insular area.
       ``(D) Matching requirement.--The Federal share of the cost 
     for a project for which a grant is provided under this 
     paragraph shall not exceed 75 percent of the total cost of 
     that project. The non-Federal share of the cost may be 
     provided in the form of cash or services.
       ``(E) Treatment of funds for certain purposes.--Grants 
     provided under this paragraph shall not be considered as 
     income, a resource, or a duplicative program when determining 
     eligibility or benefit levels for Federal major disaster and 
     emergency assistance.
       ``(F) Authorization of appropriations.--There are 
     authorized to be appropriated to carry out this paragraph 
     $5,000,000 for each fiscal year beginning after the date of 
     the enactment of this paragraph.''.

     SEC. 205. USE OF PHOTOVOLTAIC ENERGY IN PUBLIC BUILDINGS.

       (a) In General.--Subchapter VI of chapter 31 of title 40, 
     United States Code, is amended by adding at the end the 
     following:

     ``Sec. 3177. Use of photovoltaic energy in public buildings

       ``(a) Photovoltaic Energy Commercialization Program.--
       ``(1) In general.--The Administrator of General Services 
     may establish a photovoltaic energy commercialization program 
     for the procurement and installation of photovoltaic solar 
     electric systems for electric production in new and existing 
     public buildings.
       ``(2) Purposes.--The purposes of the program shall be to 
     accomplish the following:
       ``(A) To accelerate the growth of a commercially viable 
     photovoltaic industry to make this energy system available to 
     the general public as an option which can reduce the national 
     consumption of fossil fuel.
       ``(B) To reduce the fossil fuel consumption and costs of 
     the Federal Government.
       ``(C) To attain the goal of installing solar energy systems 
     in 20,000 Federal buildings by 2010, as contained in the 
     Federal Government's Million Solar Roof Initiative of 1997.
       ``(D) To stimulate the general use within the Federal 
     Government of life-cycle costing and innovative procurement 
     methods.
       ``(E) To develop program performance data to support policy 
     decisions on future incentive programs with respect to 
     energy.
       ``(3) Acquisition of photovoltaic solar electric systems.--
       ``(A) In general.--The program shall provide for the 
     acquisition of photovoltaic solar electric systems and 
     associated storage capability for use in public buildings.
       ``(B) Acquisition levels.--The acquisition of photovoltaic 
     electric systems shall be at a level substantial enough to 
     allow use of low-cost production techniques with at least 150 
     megawatts (peak) cumulative acquired during the 5 years of 
     the program.
       ``(4) Administration.--The Administrator shall administer 
     the program and shall--
       ``(A) issue such rules and regulations as may be 
     appropriate to monitor and assess the performance and 
     operation of photovoltaic solar electric systems installed 
     pursuant to this subsection;
       ``(B) develop innovative procurement strategies for the 
     acquisition of such systems; and
       ``(C) transmit to Congress an annual report on the results 
     of the program.
       ``(b) Photovoltaic Systems Evaluation Program.--
       ``(1) In general.--Not later than 60 days after the date of 
     enactment of this section, the Administrator, in consultation 
     with the Secretary of Energy, shall establish a photovoltaic 
     solar energy systems evaluation program to evaluate such 
     photovoltaic solar energy systems as are required in public 
     buildings.
       ``(2) Program Requirement.--In evaluating photovoltaic 
     solar energy systems under the program, the Administrator 
     shall ensure that such systems reflect the most advanced 
     technology.
       ``(c) Authorization of Appropriations.--
       ``(1) Photovoltaic energy commercialization program.--There 
     are authorized to be appropriated to carry out subsection (a) 
     $50,000,000 for each of fiscal years 2004 through 2008. Such 
     sums shall remain available until expended.
       ``(2) Photovoltaic systems evaluation program.--There are 
     authorized to be appropriated to carry out subsection (b) 
     $10,000,000 for each of fiscal years 2004 through 2008. Such 
     sums shall remain available until expended.''.
       (b) Conforming Amendment.--The section analysis for such 
     chapter is amended by inserting after the item relating to 
     section 3176 the following:

``3177. Use of photovoltaic energy in public buildings.''.

     SEC. 206. GRANTS TO IMPROVE THE COMMERCIAL VALUE OF FOREST 
                   BIOMASS FOR ELECTRIC ENERGY, USEFUL HEAT, 
                   TRANSPORTATION FUELS, PETROLEUM-BASED PRODUCT 
                   SUBSTITUTES, AND OTHER COMMERCIAL PURPOSES.

       (a) Findings.--Congress finds the following:
       (1) Thousands of communities in the United States, many 
     located near Federal lands, are at risk to wildfire. 
     Approximately 190,000,000 acres of land managed by the 
     Secretary of Agriculture and the Secretary of the Interior 
     are at risk of catastrophic fire in the near future. The 
     accumulation of heavy forest fuel loads continues to increase 
     as a result of disease, insect infestations, and drought, 
     further raising the risk of fire each year.
       (2) In addition, more than 70,000,000 acres across all land 
     ownerships are at risk to higher than normal mortality over 
     the next 15 years from insect infestation and disease. High 
     levels of tree mortality from insects and disease result in 
     increased fire risk, loss of old growth, degraded watershed 
     conditions, and changes in species diversity and 
     productivity, as well as diminished fish and wildlife habitat 
     and decreased timber values.
       (3) Preventive treatments such as removing fuel loading, 
     ladder fuels, and hazard trees, planting proper species mix 
     and restoring and protecting early successional habitat, and 
     other specific restoration treatments designed to reduce the 
     susceptibility of forest land, woodland, and rangeland to 
     insect outbreaks, disease, and catastrophic fire present the 
     greatest opportunity for long-term forest health by creating 
     a mosaic of species-mix and age distribution. Such prevention 
     treatments are widely acknowledged to be more successful and 
     cost effective than suppression treatments in the case of 
     insects, disease, and fire.
       (4) The byproducts of preventive treatment (wood, brush, 
     thinnings, chips, slash, and other hazardous fuels) removed 
     from forest lands, woodlands and rangelands represent an 
     abundant supply of biomass for biomass-to-energy facilities 
     and raw material for business. There are currently few 
     markets for the extraordinary volumes of byproducts being 
     generated as a result of the necessary large-scale preventive 
     treatment activities.
       (5) The United States should--
       (A) promote economic and entrepreneurial opportunities in 
     using byproducts removed through preventive treatment 
     activities related to hazardous fuels reduction, disease, and 
     insect infestation; and
       (B) develop and expand markets for traditionally underused 
     wood and biomass as an outlet for byproducts of preventive 
     treatment activities.
       (b) Definitions.--In this section:
       (1) Biomass.--The term ``biomass'' means trees and woody 
     plants, including limbs, tops, needles, and other woody 
     parts, and byproducts of preventive treatment, such as wood, 
     brush, thinnings, chips, and slash, that are removed--
       (A) to reduce hazardous fuels; or
       (B) to reduce the risk of or to contain disease or insect 
     infestation.
       (2) Indian tribe.--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)).
       (3) Person.--The term ``person'' includes--
       (A) an individual;
       (B) a community (as determined by the Secretary concerned);
       (C) an Indian tribe;
       (D) a small business, micro-business, or a corporation that 
     is incorporated in the United States; and
       (E) a nonprofit organization.
       (4) Preferred community.--The term ``preferred community'' 
     means--
       (A) any town, township, municipality, or other similar unit 
     of local government (as determined by the Secretary 
     concerned) that--
       (i) has a population of not more than 50,000 individuals; 
     and
       (ii) the Secretary concerned, in the sole discretion of the 
     Secretary concerned, determines contains or is located near 
     land, the condition of which is at significant risk of 
     catastrophic wildfire, disease, or insect infestation or 
     which suffers from disease or insect infestation; or
       (B) any county that--
       (i) is not contained within a metropolitan statistical 
     area; and
       (ii) the Secretary concerned, in the sole discretion of the 
     Secretary concerned, determines contains or is located near 
     land, the condition of which is at significant risk of 
     catastrophic wildfire, disease, or insect infestation or 
     which suffers from disease or insect infestation.
       (5) Secretary concerned.--The term ``Secretary concerned'' 
     means--
       (A) the Secretary of Agriculture with respect to National 
     Forest System lands; and
       (B) the Secretary of the Interior with respect to Federal 
     lands under the jurisdiction of the Secretary of the Interior 
     and Indian lands.
       (c) Biomass Commercial Use Grant Program.--
       (1) In general.--The Secretary concerned may make grants to 
     any person that owns or operates a facility that uses biomass 
     as a raw material to produce electric energy, sensible heat, 
     transportation fuels, or substitutes for petroleum-based 
     products to offset the costs incurred to purchase biomass for 
     use by such facility.
       (2) Grant amounts.--A grant under this subsection may not 
     exceed $20 per green ton of biomass delivered.
       (3) Monitoring of grant recipient activities.--As a 
     condition of a grant under this subsection, the grant 
     recipient shall keep such records as the Secretary concerned 
     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 a representative of the Secretary 
     concerned, the grant recipient shall afford the 
     representative reasonable access to the facility that 
     purchases or uses biomass and an opportunity to examine the 
     inventory and records of the facility.
       (d) Improved Biomass Use Grant Program.--
       (1) In general.--The Secretary concerned may make grants to 
     persons to offset the cost of projects to develop or research 
     opportunities to improve the use of, or add value to, 
     biomass. In making such grants, the Secretary concerned

[[Page H11220]]

     shall give preference to persons in preferred communities.
       (2) Selection.--The Secretary concerned shall select a 
     grant recipient under paragraph (1) after giving 
     consideration to the anticipated public benefits of the 
     project, including the potential to develop thermal or 
     electric energy resources or affordable energy, opportunities 
     for the creation or expansion of small businesses and micro-
     businesses, and the potential for new job creation.
       (3) Grant amount.--A grant under this subsection may not 
     exceed $500,000.
       (e) Authorization of Appropriations.--There are authorized 
     to be appropriated $50,000,000 for each of the fiscal years 
     2004 through 2014 to carry out this section.
       (f) Report.--Not later than October 1, 2010, the Secretary 
     of Agriculture, in consultation with the Secretary of the 
     Interior, shall submit to the Committee on Energy and Natural 
     Resources and the Committee on Agriculture, Nutrition, and 
     Forestry of the Senate and the Committee on Resources, the 
     Committee on Energy and Commerce, and the Committee on 
     Agriculture of the House of Representatives a report 
     describing the results of the grant programs authorized by 
     this section. The report shall include the following:
       (1) An identification of the size, type, and the use of 
     biomass by persons that receive grants under this section.
       (2) The distance between the land from which the biomass 
     was removed and the facility that used the biomass.
       (3) The economic impacts, particularly new job creation, 
     resulting from the grants to and operation of the eligible 
     operations.

     SEC. 207. BIOBASED PRODUCTS.

       Section 9002(c)(1) of the Farm Security and Rural 
     Investment Act of 2002 (7 U.S.C. 8102(c)(1)) is amended by 
     inserting ``or such items that comply with the regulations 
     issued under section 103 of Public Law 100-556 (42 U.S.C. 
     6914b-1)'' after ``practicable''.
                     Subtitle B--Geothermal Energy

     SEC. 211. SHORT TITLE.

       This subtitle may be cited as the ``John Rishel Geothermal 
     Steam Act Amendments of 2003''.

     SEC. 212. COMPETITIVE LEASE SALE REQUIREMENTS.

       Section 4 of the Geothermal Steam Act of 1970 (30 U.S.C. 
     1003) is amended to read as follows:

     ``SEC. 4. LEASING PROCEDURES.

       ``(a) Nominations.--The Secretary shall accept nominations 
     of lands to be leased at any time from qualified companies 
     and individuals 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 which has nominations pending under 
     subsection (a) if 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 a 
     competitive lease sale.
       ``(d) Leases Sold As a Block.--If information is available 
     to the Secretary indicating a geothermal resource that could 
     be produced as 1 unit can reasonably be expected to underlie 
     more than 1 parcel to be offered in a competitive lease sale, 
     the parcels for such a resource may be offered for bidding as 
     a block in the competitive lease sale.
       ``(e) Pending Lease Applications on April 1, 2003.--It 
     shall be a priority for the Secretary of the Interior, and 
     for the Secretary of Agriculture with respect to National 
     Forest Systems lands, to ensure timely completion of 
     administrative actions necessary to process applications for 
     geothermal leasing pending on April 1, 2003. Such an 
     application, and any lease issued pursuant to such an 
     application--
       ``(1) except as provided in paragraph (2), shall be subject 
     to this section as in effect on April 1, 2003; or
       ``(2) at the election of the applicant, shall be subject to 
     this section as in effect on the effective date of this 
     paragraph.''.

     SEC. 213. DIRECT USE.

       (a) Fees for Direct Use.--Section 5 of the Geothermal Steam 
     Act of 1970 (30 U.S.C. 1004) is amended--
       (1) in paragraph (c) by redesignating subparagraphs (1) and 
     (2) as subparagraphs (A) and (B);
       (2) by redesignating paragraphs (a) through (d) in order as 
     paragraphs (1) through (4);
       (3) by inserting ``(a) In General.--'' after ``Sec. 5.''; 
     and
       (4) by adding at the end the following:
       ``(b) Direct Use.--Notwithstanding subsection (a)(1), with 
     respect to the direct use of geothermal resources for 
     purposes other than the commercial generation of electricity, 
     the Secretary of the Interior shall establish a schedule of 
     fees and collect fees pursuant to such a schedule in lieu of 
     royalties based upon the total amount of the geothermal 
     resources used. The schedule of fees shall ensure that there 
     is a fair return to the public for the use of a geothermal 
     resource based upon comparable fees charged for direct use of 
     geothermal resources by States or private persons. For direct 
     use by a State or local government for public purposes there 
     shall be no royalty and the fee charged shall be nominal. 
     Leases in existence on the date of enactment of the Energy 
     Policy Act of 2003 shall be modified in order to reflect the 
     provisions of this subsection.''.
       (b) Leasing for Direct Use.--Section 4 of the Geothermal 
     Steam Act of 1970 (30 U.S.C. 1003) is further amended by 
     adding at the end the following:
       ``(f) Leasing for Direct Use of Geothermal Resources.--
     Lands leased under this Act exclusively for direct use of 
     geothermal resources shall be leased to any qualified 
     applicant who first applies for such a lease under 
     regulations issued by the Secretary, if--
       ``(1) the Secretary publishes a notice of the lands 
     proposed for leasing 60 days before the date of the issuance 
     of the lease; and
       ``(2) the Secretary does not receive in the 60-day period 
     beginning on the date of such publication any nomination to 
     include the lands concerned in the next competitive lease 
     sale.
       ``(g) Area Subject to Lease for Direct Use.--A geothermal 
     lease for the direct use of geothermal resources shall 
     embrace not more than the amount of acreage determined by the 
     Secretary to be reasonably necessary for such proposed 
     utilization.''.
       (c) Existing Leases With a Direct Use Facility.--
       (1) Application to convert.--Any lessee under a lease under 
     the Geothermal Steam Act of 1970 that was issued before the 
     date of the enactment of this Act may apply to the Secretary 
     of the Interior, by not later than 18 months after the date 
     of the enactment of this Act, to convert such lease to a 
     lease for direct utilization of geothermal resources in 
     accordance with the amendments made by this section.
       (2) Conversion.--The Secretary shall approve such an 
     application and convert such a lease to a lease in accordance 
     with the amendments by not later than 180 days after receipt 
     of such application, unless the Secretary determines that the 
     applicant is not a qualified applicant with respect to the 
     lease.
       (3) Application of new lease terms.--The amendment made by 
     subsection (a)(4) shall apply with respect to payments under 
     a lease converted under this subsection that are due and 
     owing to the United States on or after July 16, 2003.

     SEC. 214. ROYALTIES AND NEAR-TERM PRODUCTION INCENTIVES.

       (a) Royalty.--Section 5 of the Geothermal Steam Act of 1970 
     (30 U.S.C. 1004) is further amended--
       (1) in subsection (a) by striking paragraph (1) and 
     inserting the following:
       ``(1) a royalty on electricity produced using geothermal 
     steam and associated geothermal resources, other than direct 
     use of geothermal resources, that shall be--
       ``(A) not less than 1 percent and not more than 2.5 percent 
     of the gross proceeds from the sale of electricity produced 
     from such resources during the first 10 years of production 
     under the lease; and
       ``(B) not less than 2 and not more than 5 percent of the 
     gross proceeds from the sale of electricity produced from 
     such resources during each year after such 10-year period;''; 
     and
       (2) by adding at the end the following:
       ``(c) Final Regulation Establishing Royalty Rates.--In 
     issuing any final regulation establishing royalty rates under 
     this section, the Secretary shall seek--
       ``(1) to provide lessees a simplified administrative 
     system;
       ``(2) to encourage new development; and
       ``(3) to achieve the same long-term level of royalty 
     revenues to States and counties as the regulation in effect 
     on the date of enactment of this subsection.
       ``(d) Credits for In-Kind Payments of Electricity.--The 
     Secretary may provide to a lessee a credit against royalties 
     owed under this Act, in an amount equal to the value of 
     electricity provided under contract to a State or county 
     government that is entitled to a portion of such royalties 
     under section 20 of this Act, section 35 of the Mineral 
     Leasing Act (30 U.S.C. 191), or section 6 of the Mineral 
     Leasing Act for Acquired Lands (30 U.S.C. 355), if--
       ``(1) the Secretary has approved in advance the contract 
     between the lessee and the State or county government for 
     such in-kind payments;
       ``(2) the contract establishes a specific methodology to 
     determine the value of such credits; and
       ``(3) the maximum credit will be equal to the royalty value 
     owed to the State or county that is a party to the contract 
     and the electricity received will serve as the royalty 
     payment from the Federal Government to that entity.''.
       (b) Disposal of Moneys From Sales, Bonuses, Royalties, and 
     Rentals.--Section 20 of the Geothermal Steam Act of 1970 (30 
     U.S.C. 1019) is amended to read as follows:

     ``SEC. 20. DISPOSAL OF MONEYS FROM SALES, BONUSES, RENTALS, 
                   AND ROYALTIES.

       ``(a) In General.--Except with respect to lands in the 
     State of Alaska, all monies received by the United States 
     from sales, bonuses, rentals, and royalties under this Act 
     shall be paid into the Treasury of the United States. Of 
     amounts deposited under this subsection, subject to the 
     provisions of section 35 of the Mineral Leasing Act (30 
     U.S.C. 191(b)) and section 5(a)(2) of this Act--
       ``(1) 50 percent shall be paid to the State within the 
     boundaries of which the leased lands or geothermal resources 
     are or were located; and
       ``(2) 25 percent shall be paid to the County within the 
     boundaries of which the leased lands or geothermal resources 
     are or were located.
       ``(b) Use of Payments.--Amounts paid to a State or county 
     under subsection (a) shall be used consistent with the terms 
     of section 35 of the Mineral Leasing Act (30 U.S.C. 191).''.
       (c) Near-Term Production Incentive for Existing Leases.--
       (1) In general.--Notwithstanding section 5(a) of the 
     Geothermal Steam Act of 1970, the royalty required to be paid 
     shall be 50 percent of the amount of the royalty otherwise 
     required, on any lease issued before the date of enactment of 
     this Act that does not convert to new royalty terms under 
     subsection (e)--
       (A) with respect to commercial production of energy from a 
     facility that begins such production in the 6-year period 
     beginning on the date of the enactment of this Act; or
       (B) on qualified expansion geothermal energy.

[[Page H11221]]

       (2) 4-year application.--Paragraph (1) applies only to new 
     commercial production of energy from a facility in the first 
     4 years of such production.
       (d) Definition of Qualified Expansion Geothermal Energy.--
     In this section, the term ``qualified expansion geothermal 
     energy'' means geothermal energy produced from a generation 
     facility for which--
       (1) the production is increased by more than 10 percent as 
     a result of expansion of the facility carried out in the 6-
     year period beginning on the date of the enactment of this 
     Act; and
       (2) such production increase is greater than 10 percent of 
     the average production by the facility during the 5-year 
     period preceding the expansion of the facility.
       (e) Royalty Under Existing Leases.--
       (1) In general.--Any lessee under a lease issued under the 
     Geothermal Steam Act of 1970 before the date of the enactment 
     of this Act may modify the terms of the lease relating to 
     payment of royalties to comply with the amendment made by 
     subsection (a), by applying to the Secretary of the Interior 
     by not later than 18 months after the date of the enactment 
     of this Act.
       (2) Application of modification.--Such modification shall 
     apply to any use of geothermal steam and any associated 
     geothermal resources to which the amendment applies that 
     occurs after the date of that application.
       (3) Consultation.--The Secretary--
       (A) shall consult with the State and local governments 
     affected by any proposed changes in lease royalty terms under 
     this subsection; and
       (B) may establish a gross proceeds percentage within the 
     range specified in the amendment made by subsection (a)(1) 
     and with the concurrence of the lessee and the State.

     SEC. 215. 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 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 areas with geothermal potential 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 procession.
       (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. 216. REVIEW AND REPORT TO CONGRESS.

       The Secretary of the Interior shall promptly review and 
     report to Congress not later than 3 years after the date of 
     the enactment of this Act regarding the status of all 
     withdrawals from leasing under the Geothermal Steam Act of 
     1970 (30 U.S.C. 1001 et seq.) of Federal lands, specifying 
     for each such area whether the basis for such withdrawal 
     still applies.

     SEC. 217. REIMBURSEMENT FOR COSTS OF NEPA ANALYSES, 
                   DOCUMENTATION, AND STUDIES.

       (a) In General.--The Geothermal Steam Act of 1970 (30 
     U.S.C. 1001 et seq.) is amended by adding at the end the 
     following:

     ``SEC. 30. REIMBURSEMENT FOR COSTS OF CERTAIN ANALYSES, 
                   DOCUMENTATION, AND STUDIES.

       ``(a) In General.--The Secretary of the Interior may 
     reimburse a person that is a lessee, operator, operating 
     rights owner, or applicant for any lease under this Act for 
     reasonable amounts paid by the person for preparation for the 
     Secretary by a contractor or other person selected by the 
     Secretary of any project-level analysis, documentation, or 
     related study required pursuant to the National Environmental 
     Policy Act of 1969 (42 U.S.C. 4321 et seq.) with respect to 
     the lease.
       ``(b) Conditions.--The Secretary may provide reimbursement 
     under subsection (a) only if--
       ``(1) adequate funding to enable the Secretary to timely 
     prepare the analysis, documentation, or related study is not 
     appropriated;
       ``(2) the person paid the costs voluntarily;
       ``(3) the person maintains records of its costs in 
     accordance with regulations issued by the Secretary;
       ``(4) the reimbursement is in the form of a reduction in 
     the Federal share of the royalty required to be paid for the 
     lease for which the analysis, documentation, or related study 
     is conducted, and is agreed to by the Secretary and the 
     person reimbursed prior to commencing the analysis, 
     documentation, or related study; and
       ``(5) the agreement required under paragraph (4) contains 
     provisions--
       ``(A) reducing royalties owed on lease production based on 
     market prices;
       ``(B) stipulating an automatic termination of the royalty 
     reduction upon recovery of documented costs; and
       ``(C) providing a process by which the lessee may seek 
     reimbursement for circumstances in which production from the 
     specified lease is not possible.''.
       (b) Application.--The amendment made by this section shall 
     apply with respect to an analysis, documentation, or a 
     related study conducted on or after the date of enactment of 
     this Act for any lease entered into before, on, or after the 
     date of enactment of this Act.
       (c) Deadline for Regulations.--The Secretary shall issue 
     regulations implementing the amendment made by this section 
     by not later than 1 year after the date of enactment of this 
     Act.

     SEC. 218. ASSESSMENT OF GEOTHERMAL ENERGY POTENTIAL.

       The Secretary of Interior, acting through the Director of 
     the United States Geological Survey and in cooperation with 
     the States, shall update the 1978 Assessment of Geothermal 
     Resources, and submit that updated assessment to Congress--
       (1) not later than 3 years after the date of enactment of 
     this Act; and
       (2) thereafter as the availability of data and developments 
     in technology warrant.

     SEC. 219. COOPERATIVE OR UNIT PLANS.

       Section 18 of the Geothermal Steam Act of 1970 (30 U.S.C. 
     1017) is amended to read as follows:

     ``SEC. 18. UNIT AND COMMUNITIZATION AGREEMENTS.

       ``(a) Adoption of Units by Lessees.--
       ``(1) In general.--For the purpose of more properly 
     conserving the natural resources of any geothermal reservoir, 
     field, or like area, or any part thereof (whether or not any 
     part of the geothermal field, or like area, is then subject 
     to any Unit Agreement (cooperative plan of development or 
     operation)), lessees thereof and their representatives may 
     unite with each other, or jointly or separately with others, 
     in collectively adopting and operating under a Unit Agreement 
     for such field, or like area, or any part thereof including 
     direct use resources, if determined and certified by the 
     Secretary to be necessary or advisable in the public 
     interest. A majority interest of owners of any single lease 
     shall have the authority to commit that lease to a Unit 
     Agreement. The Secretary of the Interior may also initiate 
     the formation of a Unit Agreement if in the public 
     interest.
       ``(2) Modification of lease requirements by secretary.--The 
     Secretary may, in the discretion of the Secretary, and with 
     the consent of the holders of leases involved, establish, 
     alter, change, or revoke rates of operations (including 
     drilling, operations, production, and other requirements) of 
     such leases and make conditions with reference to such 
     leases, with the consent of the lessees, in connection with 
     the creation and operation of any such Unit Agreement as the 
     Secretary may deem necessary or proper to secure the proper 
     protection of the public interest. Leases with unlike lease 
     terms or royalty rates do not need to be modified to be in 
     the same unit.
       ``(b) Requirement of Plans Under New Leases.--The 
     Secretary--
       ``(1) may provide that geothermal leases issued under this 
     Act shall contain a provision requiring the lessee to operate 
     under such a reasonable Unit Agreement; and
       ``(2) may prescribe such an Agreement under which such 
     lessee shall operate, which shall adequately protect the 
     rights of all parties in interest, including the United 
     States.
       ``(c) Modification of Rate of Prospecting, Development, and 
     Production.--The Secretary may require that any Agreement 
     authorized by this section that applies to lands owned by the 
     United States contain a provision under which authority is 
     vested in the Secretary, or any person, committee, or State 
     or Federal officer or agency as may be designated in the 
     Agreement to alter or modify from time to time the rate of 
     prospecting and development and the quantity and rate of 
     production under such an Agreement.
       ``(d) Exclusion From Determination of Holding or Control.--
     Any lands that are subject to any Agreement approved or 
     prescribed by the Secretary under this section shall not be 
     considered in determining holdings or control under any 
     provision of this Act.
       ``(e) Pooling of Certain Lands.--If separate tracts of 
     lands cannot be independently developed and operated to use 
     geothermal steam and associated geothermal resources pursuant 
     to any section of this Act--
       ``(1) such lands, or a portion thereof, may be pooled with 
     other lands, whether or not owned by the United States, for 
     purposes of development and operation under a Communitization 
     Agreement providing for an apportionment of production or 
     royalties among the separate tracts of land comprising the 
     production unit, if such pooling is determined by the 
     Secretary to be in the public interest; and
       ``(2) operation or production pursuant to such an Agreement 
     shall be treated as operation or production with respect to 
     each tract of land that is subject to the agreement.
       ``(f) Unit Agreement Review.--No more than 5 years after 
     approval of any cooperative or Unit Agreement and at least 
     every 5 years thereafter, the Secretary shall review each 
     such Agreement and, after notice and opportunity for comment, 
     eliminate from inclusion in such Agreement any lands that the 
     Secretary determines are not reasonably necessary for Unit 
     operations under the Agreement. Such elimination shall be 
     based on scientific evidence, and shall occur only if it is 
     determined by the Secretary to be for the purpose of 
     conserving and properly managing the geothermal resource. Any 
     land so eliminated shall be eligible for an extension under 
     subsection (g) of section 6 if it meets the requirements for 
     such an extension.
       ``(g) Drilling or Development Contracts.-- The Secretary 
     may, on such conditions as the Secretary may prescribe, 
     approve drilling or development contracts made by 1 or more 
     lessees of geothermal leases, with 1 or more persons, 
     associations, or corporations if, in the discretion of the 
     Secretary, the conservation of natural resources or the 
     public convenience or

[[Page H11222]]

     necessity may require or the interests of the United States 
     may be best served thereby. All leases operated under such 
     approved drilling or development contracts, and interests 
     thereunder, shall be excepted in determining holdings or 
     control under section 7.
       ``(h) Coordination With State Governments.--The Secretary 
     shall coordinate unitization and pooling activities with the 
     appropriate State agencies and shall ensure that State leases 
     included in any unitization or pooling arrangement are 
     treated equally with Federal leases.''.

     SEC. 220. ROYALTY ON BYPRODUCTS.

       Section 5 of the Geothermal Steam Act of 1970 (30 U.S.C. 
     1004) is further amended in subsection (a) by striking 
     paragraph (2) and inserting the following:
       ``(2) a royalty on any byproduct that is a mineral named in 
     the first section of the Mineral Leasing Act (30 U.S.C. 181), 
     and that is derived from production under the lease, at the 
     rate of the royalty that applies under that Act to production 
     of such mineral under a lease under that Act;''.

     SEC. 221. REPEAL OF AUTHORITIES OF SECRETARY TO READJUST 
                   TERMS, CONDITIONS, RENTALS, AND ROYALTIES.

       Section 8 of the Geothermal Steam Act of 1970 (30 U.S.C. 
     1007) is amended by repealing subsection (b), and by 
     redesignating subsection (c) as subsection (b).

     SEC. 222. CREDITING OF RENTAL TOWARD ROYALTY.

       Section 5 of the Geothermal Steam Act of 1970 (30 U.S.C. 
     1004) is further amended--
       (1) in subsection (a)(2) by inserting ``and'' after the 
     semicolon at the end;
       (2) in subsection (a)(3) by striking ``; and'' and 
     inserting a period;
       (3) by striking paragraph (4) of subsection (a); and
       (4) by adding at the end the following:
       ``(e) Crediting of Rental Toward Royalty.--Any annual 
     rental under this section that is paid with respect to a 
     lease before the first day of the year for which the annual 
     rental is owed shall be credited to the amount of royalty 
     that is required to be paid under the lease for that year.''.

     SEC. 223. LEASE DURATION AND WORK COMMITMENT REQUIREMENTS.

       Section 6 of the Geothermal Steam Act of 1970 (30 U.S.C. 
     1005) is amended--
       (1) by striking so much as precedes subsection (c), and 
     striking subsections (e), (g), (h), (i), and (j);
       (2) by redesignating subsections (c), (d), and (f) in order 
     as subsections (g), (h), and (i); and
       (3) by inserting before subsection (g), as so redesignated, 
     the following:

     ``SEC. 6. LEASE TERM AND WORK COMMITMENT REQUIREMENTS.

       ``(a) In General.--
       ``(1) Primary term.--A geothermal lease shall be for a 
     primary term of 10 years.
       ``(2) Initial extension.--The Secretary shall extend the 
     primary term of a geothermal lease for 5 years if, for each 
     year after the fifth year of the lease--
       ``(A) the Secretary determined under subsection (c) that 
     the lessee satisfied the work commitment requirements that 
     applied to the lease for that year; or
       ``(B) the lessee paid in accordance with subsection (d) the 
     value of any work that was not completed in accordance with 
     those requirements.
       ``(3) Additional extension.--The Secretary shall extend the 
     primary term of a geothermal lease (after an initial 
     extension under paragraph (2)) for an additional 5 years if, 
     for each year of the initial extension under paragraph (2), 
     the Secretary determined under subsection (c) that the lessee 
     satisfied the work commitment requirements that applied to 
     the lease for that year.
       ``(b) Requirement to Satisfy Annual Work Commitment 
     Requirement.--
       ``(1) In general.--The lessee for a geothermal lease shall, 
     for each year after the fifth year of the lease, satisfy work 
     commitment requirements prescribed by the Secretary that 
     apply to the lease for that year.
       ``(2) Prescription of work commitment requirements.--The 
     Secretary shall issue regulations prescribing minimum 
     equivalent dollar value work commitment requirements for 
     geothermal leases, that--
       ``(A) require that a lessee, in each year after the fifth 
     year of the primary term of a geothermal lease, diligently 
     work to achieve commercial production or utilization of steam 
     under the lease;
       ``(B) require that in each year to which work commitment 
     requirements under the regulations apply, the lessee shall 
     significantly reduce the amount of work that remains to be 
     done to achieve such production or utilization;
       ``(C) describe specific work that must be completed by a 
     lessee by the end of each year to which the work commitment 
     requirements apply and factors, such as force majeure events, 
     that suspend or modify the work commitment obligation;
       ``(D) carry forward and apply to work commitment 
     requirements for a year, work completed in any year in the 
     preceding 3-year period that was in excess of the work 
     required to be performed in that preceding year;
       ``(E) establish transition rules for leases issued before 
     the date of the enactment of this subsection, including terms 
     under which a lease that is near the end of its term on the 
     date of enactment of this subsection may be extended for up 
     to 2 years--
       ``(i) to allow achievement of production under the lease; 
     or
       ``(ii) to allow the lease to be included in a producing 
     unit; and
       ``(F) establish an annual payment that, at the option of 
     the lessee, may be exercised in lieu of meeting any work 
     requirement for a limited number of years that the Secretary 
     determines will not impair achieving diligent development of 
     the geothermal resource.
       ``(3) Termination of application of requirements.--Work 
     commitment requirements prescribed under this subsection 
     shall not apply to a geothermal lease after the date on which 
     geothermal steam is produced or utilized under the lease in 
     commercial quantities.
       ``(c) Determination of Whether Requirements Satisfied.--The 
     Secretary shall, by not later than 90 days after the end of 
     each year for which work commitment requirements under 
     subsection (b) apply to a geothermal lease--
       ``(1) determine whether the lessee has satisfied the 
     requirements that apply for that year;
       ``(2) notify the lessee of that determination; and
       ``(3) in the case of a notification that the lessee did not 
     satisfy work commitment requirements for the year, include in 
     the notification--
       ``(A) a description of the specific work that was not 
     completed by the lessee in accordance with the requirements; 
     and
       ``(B) the amount of the dollar value of such work that was 
     not completed, reduced by the amount of expenditures made for 
     work completed in a prior year that is carried forward 
     pursuant to subsection (b)(2)(D).
       ``(d) Payment of Value of Uncompleted Work.--
       ``(1) In general.--If the Secretary notifies a lessee that 
     the lessee failed to satisfy work commitment requirements 
     under subsection (b), the lessee shall pay to the Secretary, 
     by not later than the end of the 60-day period beginning on 
     the date of the notification, the dollar value of work that 
     was not completed by the lessee, in the amount stated in the 
     notification (as reduced under subsection (c)(3)(B)).
       ``(2) Failure to pay value of uncompleted work.--If a 
     lessee fails to pay such amount to the Secretary before the 
     end of that period, the lease shall terminate upon the 
     expiration of the period.
       ``(e) Continuation After Commercial Production or 
     Utilization.--If geothermal steam is produced or utilized in 
     commercial quantities within the primary term of the lease 
     under subsection (a) (including any extension of the lease 
     under subsection (a)), such lease shall continue until the 
     date on which geothermal steam is no longer produced or 
     utilized in commercial quantities.
       ``(f) Conversion of Geothermal Lease to Mineral Lease.--The 
     lessee under a lease that has produced geothermal steam for 
     electrical generation, has been determined by the Secretary 
     to be incapable of any further commercial production or 
     utilization of geothermal steam, and that is producing any 
     valuable byproduct in payable quantities may, within 6 months 
     after such determination--
       ``(1) convert the lease to a mineral lease under the 
     Mineral Leasing Act (30 U.S.C. 181 et seq.) or under the 
     Mineral Leasing Act for Acquired Lands (30 U.S.C. 351 et 
     seq.), if the lands that are subject to the lease can be 
     leased under that Act for the production of such byproduct; 
     or
       ``(2) convert the lease to a mining claim under the general 
     mining laws, if the byproduct is a locatable mineral.''.

     SEC. 224. ADVANCED ROYALTIES REQUIRED FOR SUSPENSION OF 
                   PRODUCTION.

       Section 5 of the Geothermal Steam Act of 1970 (30 U.S.C. 
     1004) is further amended by adding at the end the following:
       ``(f) Advanced Royalties Required for Suspension of 
     Production.--
       ``(1) Continuation of lease following cessation of 
     production.--If, at any time after commercial production 
     under a lease is achieved, production ceases for any cause 
     the lease shall remain in full force and effect--
       ``(A) during the 1-year period beginning on the date 
     production ceases; and
       ``(B) after such period if, and so long as, the lessee 
     commences and continues diligently and in good faith until 
     such production is resumed the steps, operations, or 
     procedures necessary to cause a resumption of such 
     production.
       ``(2) If production of heat or energy under a geothermal 
     lease is suspended after the date of any such production for 
     which royalty is required under subsection (a) and the terms 
     of paragraph (1) are not met, the Secretary shall require the 
     lessee, until the end of such suspension, to pay royalty in 
     advance at the monthly pro-rata rate of the average annual 
     rate at which such royalty was paid each year in the 5-year-
     period preceding the date of suspension.
       ``(3) Paragraph (2) shall not apply if the suspension is 
     required or otherwise caused by the Secretary, the Secretary 
     of a military department, a State or local government, or a 
     force majeure.''.

     SEC. 225. ANNUAL RENTAL.

       (a) Annual Rental Rate.--Section 5 of the Geothermal Steam 
     Act of 1970 (30 U.S.C. 1004) is further amended in subsection 
     (a) in paragraph (3) by striking ``$1 per acre or fraction 
     thereof for each year of the lease'' and all that follows 
     through the end of the paragraph and inserting ``$1 per acre 
     or fraction thereof for each year of the lease through the 
     tenth year in the case of a lease awarded in a noncompetitive 
     lease sale; or $2 per acre or fraction thereof for the first 
     year, $3 per acre or fraction thereof for each of the second 
     through tenth years, in the case of a lease awarded in a 
     competitive lease sale; and $5 per acre or fraction thereof 
     for each year after the 10th year thereof for all 
     leases.''.
       (b) Termination of Lease for Failure to Pay Rental.--
     Section 5 of the Geothermal Steam Act of 1970 (30 U.S.C. 
     1004) is further amended by adding at the end the following:
       ``(g) Termination of Lease for Failure to Pay Rental.---
       ``(1) In general.--The Secretary shall terminate any lease 
     with respect to which rental is not paid in accordance with 
     this Act and the terms of the lease under which the rental is 
     required, upon the expiration of the 45-day period

[[Page H11223]]

     beginning on the date of the failure to pay such rental.
       ``(2) Notification.--The Secretary shall promptly notify a 
     lessee that has not paid rental required under the lease that 
     the lease will be terminated at the end of the period 
     referred to in paragraph (1).
       ``(3) Reinstatement.--A lease that would otherwise 
     terminate under paragraph (1) shall not terminate under that 
     paragraph if the lessee pays to the Secretary, before the end 
     of the period referred to in paragraph (1), the amount of 
     rental due plus a late fee equal to 10 percent of such 
     amount.''.

     SEC. 226. LEASING AND PERMITTING ON FEDERAL LANDS WITHDRAWN 
                   FOR MILITARY PURPOSES.

       Not later than 2 years after the date of enactment of this 
     Act, the Secretary of the Interior and the Secretary of 
     Defense, in consultation with each military service and with 
     interested States, counties, representatives of the 
     geothermal industry, and other persons, shall submit to 
     Congress a joint report concerning leasing and permitting 
     activities for geothermal energy on Federal lands withdrawn 
     for military purposes. Such report shall include the 
     following:
       (1) A description of the Military Geothermal Program, 
     including any differences between it and the non-Military 
     Geothermal Program, including required security procedures, 
     and operational considerations, and discussions as to the 
     differences, and why they are important. Further, the report 
     shall describe revenues or energy provided to the Department 
     of Defense and its facilities, royalty structures, where 
     applicable, and any revenue sharing with States and counties 
     or other benefits 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) If appropriate, a description of the current methods 
     and procedures used to ensure interagency coordination, where 
     needed, in developing renewable energy sources on Federal 
     lands withdrawn for military purposes, and an identification 
     of any new procedures that might be required in the future 
     for the improvement of 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.
       (3) Recommendations for any legislative or administrative 
     actions that might better achieve increased geothermal 
     production, including a common royalty structure, leasing 
     procedures, or other changes that increase production, offset 
     military operation costs, or enhance the Federal agencies' 
     ability to develop geothermal resources.

     Except as provided in this section, nothing in this subtitle 
     shall affect the legal status of the Department of the 
     Interior and the Department of the Defense with respect to 
     each other regarding geothermal leasing and development until 
     such status is changed by law.

     SEC. 227. TECHNICAL AMENDMENTS.

       The Geothermal Steam Act of 1970 (30 U.S.C. 1001 et seq.) 
     is further amended as follows:
       (1) By striking ``geothermal steam and associated 
     geothermal resources'' each place it appears and inserting 
     ``geothermal resources''.
       (2) Section 2(e) (30 U.S.C. 1001(e)) is amended to read as 
     follows:
       ``(e) `direct use' means utilization of geothermal 
     resources for commercial, residential, agricultural, public 
     facilities, or other energy needs other than the commercial 
     production of electricity; and''.
       (3) Section 21 (30 U.S.C. 1020) is amended by striking 
     ``(a) Within one hundred'' and all that follows through ``(b) 
     Geothermal'' and inserting ``Geothermal''.
       (4) The first section (30 U.S.C. 1001 note) is amended by 
     striking ``That this'' and inserting the following:

     ``SECTION 1. SHORT TITLE.

       ``This''.
       (5) Section 2 (30 U.S.C. 1001) is amended by striking 
     ``Sec. 2. As'' and inserting the following:

     ``SEC. 2. DEFINITIONS.

       ``As''.
       (6) Section 3 (30 U.S.C. 1002) is amended by striking 
     ``Sec. 3. Subject'' and inserting the following:

     ``SEC. 3 . LANDS SUBJECT TO GEOTHERMAL LEASING.

       ``Subject''.
       (7) Section 5 (30 U.S.C. 1004) is further amended by 
     striking ``Sec. 5.'', and by inserting immediately before and 
     above subsection (a) the following:

     ``SEC. 5. RENTS AND ROYALTIES.''.

       (8) Section 7 (30 U.S.C. 1006) is amended by striking 
     ``Sec. 7. A geothermal'' and inserting the following:

     ``SEC. 7. ACREAGE OF GEOTHERMAL LEASE.

       ``A geothermal''.
       (9) Section 8 (30 U.S.C. 1007) is amended by striking 
     ``Sec. 8. (a) The'' and inserting the following:

     ``SEC. 8. READJUSTMENT OF LEASE TERMS AND CONDITIONS.

       ``(a) The''.
       (10) Section 9 (30 U.S.C. 1008) is amended by striking 
     ``Sec. 9. If'' and inserting the following:

     ``SEC. 9. BYPRODUCTS.

       ``If''.
       (11) Section 10 (30 U.S.C. 1009) is amended by striking 
     ``Sec. 10. The'' and inserting the following:

     ``SEC. 10. RELINQUISHMENT OF GEOTHERMAL RIGHTS.

       ``The''.
       (12) Section 11 (30 U.S.C. 1010) is amended by striking 
     ``Sec. 11. The'' and inserting the following:

     ``SEC. 11. SUSPENSION OF OPERATIONS AND PRODUCTION.

       ``The''.
       (13) Section 12 (30 U.S.C. 1011) is amended by striking 
     ``Sec. 12. Leases'' and inserting the following:

     ``SEC. 12. TERMINATION OF LEASES.

       ``Leases''.
       (14) Section 13 (30 U.S.C. 1012) is amended by striking 
     ``Sec. 13. The'' and inserting the following:

     ``SEC. 13. WAIVER, SUSPENSION, OR REDUCTION OF RENTAL OR 
                   ROYALTY.

       ``The''.
       (15) Section 14 (30 U.S.C. 1013) is amended by striking 
     ``Sec. 14. Subject'' and inserting the following:

     ``SEC. 14. SURFACE LAND USE.

       ``Subject''.
       (16) Section 15 (30 U.S.C. 1014) is amended by striking 
     ``Sec. 15. (a) Geothermal'' and inserting the following:

     ``SEC. 15. LANDS SUBJECT TO GEOTHERMAL LEASING.

       ``(a) Geothermal''.
       (17) Section 16 (30 U.S.C. 1015) is amended by striking 
     ``Sec. 16. Leases'' and inserting the following:

     ``SEC. 16. REQUIREMENT FOR LESSEES.

       ``Leases''.
       (18) Section 17 (30 U.S.C. 1016) is amended by striking 
     ``Sec. 17. Administration'' and inserting the following:

     ``SEC. 17. ADMINISTRATION.

       ``Administration''.
       (19) Section 19 (30 U.S.C. 1018) is amended by striking 
     ``Sec. 19. Upon'' and inserting the following:

     ``SEC. 19. DATA FROM FEDERAL AGENCIES.

       ``Upon''.
       (20) Section 21 (30 U.S.C. 1020) is further amended by 
     striking ``Sec. 21.'', and by inserting immediately before 
     and above the remainder of that section the following:

     ``SEC. 21. PUBLICATION IN FEDERAL REGISTER; RESERVATION OF 
                   MINERAL RIGHTS.''.

       (21) Section 22 (30 U.S.C. 1021) is amended by striking 
     ``Sec. 22. Nothing'' and inserting the following:

     ``SEC. 22. FEDERAL EXEMPTION FROM STATE WATER LAWS.

       ``Nothing''.
       (22) Section 23 (30 U.S.C. 1022) is amended by striking 
     ``Sec. 23. (a) All'' and inserting the following:

     ``SEC. 23. PREVENTION OF WASTE; EXCLUSIVITY.

       ``(a) All''.
       (23) Section 24 (30 U.S.C. 1023) is amended by striking 
     ``Sec. 24. The'' and inserting the following:

     ``SEC. 24. RULES AND REGULATIONS.

       ``The''.
       (24) Section 25 (30 U.S.C. 1024) is amended by striking 
     ``Sec. 25. As'' and inserting the following:

     ``SEC. 25. INCLUSION OF GEOTHERMAL LEASING UNDER CERTAIN 
                   OTHER LAWS.

       ``As''.
       (25) Section 26 is amended by striking ``Sec. 26. The'' and 
     inserting the following:

     ``SEC. 26. AMENDMENT.

       ``The''.
       (26) Section 27 (30 U.S.C. 1025) is amended by striking 
     ``Sec. 27. The'' and inserting the following:

     ``SEC. 27. FEDERAL RESERVATION OF CERTAIN MINERAL RIGHTS.

       ``The''.
       (27) Section 28 (30 U.S.C. 1026) is amended by striking 
     ``Sec. 28. (a)(1) The'' and inserting the following:

     ``SEC. 28. SIGNIFICANT THERMAL FEATURES.

       ``(a)(1) The''.
       (28) Section 29 (30 U.S.C. 1027) is amended by striking 
     ``Sec. 29. The'' and inserting the following:

     ``SEC. 29. LAND SUBJECT TO PROHIBITION ON LEASING.

       ``The''.
                       Subtitle C--Hydroelectric

                     PART I--ALTERNATIVE CONDITIONS

     SEC. 231. 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 expedited agency trial-type hearing 
     of any disputed issues of material fact, with respect to such 
     conditions. Such hearing may be conducted in accordance with 
     procedures established by agency regulation in consultation 
     with the Federal Energy Regulatory Commission.''.
       (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 
     expedited agency trial-type hearing of any disputed issues of 
     material fact, with respect to such fishways. Such hearing 
     may be conducted in accordance with procedures established by 
     agency regulation in consultation with the Federal Energy 
     Regulatory Commission.''.
       (c) Alternative Conditions and Prescriptions.--Part I of 
     the Federal Power Act (16 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

[[Page H11224]]

     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 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 provide for the 
     adequate protection and utilization of 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.
       ``(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 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 be less protective than the fishway initially prescribed 
     by the Secretary. The Secretary shall submit the advisory and 
     the Secretary's final written determination into the record 
     of the Commission's proceeding.''.

                     PART II--ADDITIONAL HYDROPOWER

     SEC. 241. HYDROELECTRIC PRODUCTION INCENTIVES.

       (a) Incentive Payments.--For electric energy generated and 
     sold by a qualified hydroelectric facility during the 
     incentive period, the Secretary of Energy (referred to in 
     this section as the ``Secretary'') shall make, subject to the 
     availability of appropriations, incentive payments to the 
     owner or operator of such facility. The amount of such 
     payment made to any such owner or operator shall be as 
     determined under subsection (e) of this section. Payments 
     under this section may only be made upon receipt by the 
     Secretary of an incentive payment application which 
     establishes that the applicant is eligible to receive such 
     payment and which satisfies such other requirements as the 
     Secretary deems necessary. Such application shall be in such 
     form, and shall be submitted at such time, as the Secretary 
     shall establish.
       (b) Definitions.--For purposes of this section:
       (1) Qualified hydroelectric facility.--The term ``qualified 
     hydroelectric facility'' means a turbine or other generating 
     device owned or solely operated by a non-Federal entity which 
     generates hydroelectric energy for sale and which is added to 
     an existing dam or conduit.
       (2) Existing dam or conduit.--The term ``existing dam or 
     conduit'' means any dam or conduit the construction of which 
     was completed before the date of the enactment of this 
     section and which does not require any construction or 
     enlargement of impoundment or diversion structures (other 
     than repair or reconstruction) in connection with the 
     installation of a turbine or other generating device.
       (3) Conduit.--The term ``conduit'' has the same meaning as 
     when used in section 30(a)(2) of the Federal Power Act (16 
     U.S.C. 823a(a)(2)).
     The terms defined in this subsection shall apply without 
     regard to the hydroelectric kilowatt capacity of the facility 
     concerned, without regard to whether the facility uses a dam 
     owned by a governmental or nongovernmental entity, and 
     without regard to whether the facility begins operation on or 
     after the date of the enactment of this section.
       (c) Eligibility Window.--Payments may be made under this 
     section only for electric energy generated from a qualified 
     hydroelectric facility which begins operation during the 
     period of 10 fiscal years beginning with the first full 
     fiscal year occurring after the date of enactment of this 
     subtitle.
       (d) Incentive Period.--A qualified hydroelectric facility 
     may receive payments under this section for a period of 10 
     fiscal years (referred to in this section as the ``incentive 
     period''). Such period shall begin with the fiscal year in 
     which electric energy generated from the facility is first 
     eligible for such payments.
       (e) Amount of Payment.--
       (1) In general.--Payments made by the Secretary under this 
     section to the owner or operator of a qualified hydroelectric 
     facility shall be based on the number of kilowatt hours of 
     hydroelectric energy generated by the facility during the 
     incentive period. For any such facility, the amount of such 
     payment shall be 1.8 cents per kilowatt hour (adjusted as 
     provided in paragraph (2)), subject to the availability of 
     appropriations under subsection (g), except that no facility 
     may receive more than $750,000 in 1 calendar year.
       (2) Adjustments.--The amount of the payment made to any 
     person under this section as provided in paragraph (1) shall 
     be adjusted for inflation for each fiscal year beginning 
     after calendar year 2003 in the same manner as provided in 
     the provisions of section 29(d)(2)(B) of the Internal Revenue 
     Code of 1986, except that in applying such provisions the 
     calendar year 2003 shall be substituted for calendar year 
     1979.
       (f) Sunset.--No payment may be made under this section to 
     any qualified hydroelectric facility after the expiration of 
     the period of 20 fiscal years beginning with the first full 
     fiscal year occurring after the date of enactment of this 
     subtitle, and no payment may be made under this section to 
     any such facility after a payment has been made with respect 
     to such facility for a period of 10 fiscal years.
       (g) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary to carry out the purposes 
     of this section $10,000,000 for each of the fiscal years 2004 
     through 2013.

     SEC. 242. HYDROELECTRIC EFFICIENCY IMPROVEMENT.

       (a) Incentive Payments.--The Secretary of Energy shall make 
     incentive payments to the owners or operators of 
     hydroelectric facilities at existing dams to be used to make 
     capital improvements in the facilities that are directly 
     related to improving the efficiency of such facilities by at 
     least 3 percent.
       (b) Limitations.--Incentive payments under this section 
     shall not exceed 10 percent of the costs of the capital 
     improvement concerned and not more than 1 payment may be made 
     with respect to improvements at a single facility. No payment 
     in excess of $750,000 may be made with respect to 
     improvements at a single facility.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section not more than 
     $10,000,000 for each of the fiscal years 2004 through 2013.

     SEC. 243. SMALL HYDROELECTRIC POWER PROJECTS.

       Section 408(a)(6) of the Public Utility Regulatory Policies 
     Act of 1978 (16 U.S.C. 2708(a)(6)) is amended by striking 
     ``April 20, 1977'' and inserting ``March 4, 2003''.

[[Page H11225]]

     SEC. 244. INCREASED HYDROELECTRIC GENERATION AT EXISTING 
                   FEDERAL FACILITIES.

       (a) In General.--The Secretary of the Interior and the 
     Secretary of Energy, in consultation with the Secretary of 
     the Army, shall jointly conduct a study of the potential for 
     increasing electric power production capability at federally 
     owned or operated water regulation, storage, and conveyance 
     facilities.
       (b) Content.--The study under this section shall include 
     identification and description in detail of each facility 
     that is capable, with or without modification, of producing 
     additional hydroelectric power, including estimation of the 
     existing potential for the facility to generate hydroelectric 
     power.
       (c) Report.--The Secretaries shall submit to the Committees 
     on Energy and Commerce, Resources, and Transportation and 
     Infrastructure of the House of Representatives and the 
     Committee on Energy and Natural Resources of the Senate a 
     report on the findings, conclusions, and recommendations of 
     the study under this section by not later than 18 months 
     after the date of the enactment of this Act. The report shall 
     include each of the following:
       (1) The identifications, descriptions, and estimations 
     referred to in subsection (b).
       (2) A description of activities currently conducted or 
     considered, or that could be considered, to produce 
     additional hydroelectric power from each identified facility.
       (3) A summary of prior actions taken by the Secretaries to 
     produce additional hydroelectric power from each identified 
     facility.
       (4) The costs to install, upgrade, or modify equipment or 
     take other actions to produce additional hydroelectric power 
     from each identified facility and the level of Federal power 
     customer involvement in the determination of such costs.
       (5) The benefits that would be achieved by such 
     installation, upgrade, modification, or other action, 
     including quantified estimates of any additional energy or 
     capacity from each facility identified under subsection (b).
       (6) A description of actions that are planned, underway, or 
     might reasonably be considered to increase hydroelectric 
     power production by replacing turbine runners, by performing 
     generator upgrades or rewinds, or construction of pumped 
     storage facilities.
       (7) The impact of increased hydroelectric power production 
     on irrigation, fish, wildlife, Indian tribes, river health, 
     water quality, navigation, recreation, fishing, and flood 
     control.
       (8) Any additional recommendations to increase 
     hydroelectric power production from, and reduce costs and 
     improve efficiency at, federally owned or operated water 
     regulation, storage, and conveyance facilities.

     SEC. 245. SHIFT OF PROJECT LOADS TO OFF-PEAK PERIODS.

       (a) In General.--The Secretary of the Interior shall--
       (1) review electric power consumption by Bureau of 
     Reclamation facilities for water pumping purposes; and
       (2) make such adjustments in such pumping as possible to 
     minimize the amount of electric power consumed for such 
     pumping during periods of peak electric power consumption, 
     including by performing as much of such pumping as possible 
     during off-peak hours at night.
       (b) Consent of Affected Irrigation Customers Required.--The 
     Secretary may not under this section make any adjustment in 
     pumping at a facility without the consent of each person that 
     has contracted with the United States for delivery of water 
     from the facility for use for irrigation and that would be 
     affected by such adjustment.
       (c) Existing Obligations Not Affected.--This section shall 
     not be construed to affect any existing obligation of the 
     Secretary to provide electric power, water, or other benefits 
     from Bureau of Reclamation facilities, including recreational 
     releases.

     SEC. 246. CORPS OF ENGINEERS HYDROPOWER OPERATION AND 
                   MAINTENANCE FUNDING.

       (a) In General.--Notwithstanding the last sentence of 
     section 5 of the Act of December 22, 1944 (commonly known as 
     the ``Flood Control Act of 1944'') (58 Stat. 890, chapter 
     665; 16 U.S.C. 825s), the 11th paragraph under the heading 
     ``office of the secretary'' in title I of the Act of October 
     12, 1949 (63 Stat. 767, chapter 680; 16 U.S.C. 825s-1), the 
     matter under the heading ``continuing fund, southeastern 
     power administration'' in title I of the Act of August 31, 
     1951 (65 Stat. 249, chapter 375; 16 U.S.C. 825s-2), section 
     3302 of title 31, United States Code, or any other law, and 
     without further appropriation or fiscal year limitation, for 
     fiscal year 2004, the Administrator of the Southeastern Power 
     Administration, the Administrator of the Southwestern Power 
     Administration, and the Administrator of the Western Area 
     Power Administration may credit to the Secretary of the Army 
     (referred to in this section as the ``Secretary''), receipts, 
     in an amount determined under subsection (c), from the sale 
     of power and related services.
       (b) Use of Funds.--
       (1) In general.--The Secretary--
       (A) shall, except as provided in paragraph (2), use the 
     amounts credited under subsection (a) to fund only the Corps 
     of Engineers annual operation and maintenance activities that 
     are allocated exclusively to the power function and assigned 
     to the respective power marketing administration and 
     respective project system as applicable for repayment; and
       (B) shall not use the amounts for any costs allocated to 
     non-power functions of Corps of Engineer operations.
       (2) Exception.--The Secretary may use amounts credited by 
     the Southwestern Power Administration under subsection (a) 
     for capital and nonrecurring costs.
       (c) Amount.--The amount of the receipts credited under 
     subsection (a) shall be equal to such amount as--
       (1) the Secretary of the Army requests; and
       (2) the appropriate Administrator, in consultation with the 
     power customers of the Administrator's power marketing 
     administration, determines to be appropriate to apply to the 
     costs referred to in subsection (b).
       (d) Applicable Law.--The amounts credited under subsection 
     (a) are exempt from sequestration under the Balanced Budget 
     and Emergency Deficit Control Act of 1985 (2 U.S.C. 901 et 
     seq.).

     SEC. 247. LIMITATION ON CERTAIN CHARGES ASSESSED TO THE FLINT 
                   CREEK PROJECT, MONTANA.

       Notwithstanding section 10(e)(1) of the Federal Power Act 
     (16 U.S.C. 803(e)(1)) or any other provision of Federal law 
     providing for the payment to the United States of charges for 
     the use of Federal land for the purposes of operating and 
     maintaining a hydroelectric development licensed by the 
     Federal Energy Regulatory Commission (referred to in this 
     section as the ``Commission''), any political subdivision of 
     the State of Montana that holds a license for Commission 
     Project No. 1473 in Granite and Deer Lodge Counties, Montana, 
     shall be required to pay to the United States for the use of 
     that land for each year during which the political 
     subdivision continues to hold the license for the project, 
     the lesser of--
       (1) $25,000; or
       (2) such annual charge as the Commission or any other 
     department or agency of the Federal Government may assess.

     SEC. 248. REINSTATEMENT AND TRANSFER.

       (a) Reinstatement and Transfer of Federal License for 
     Project Numbered 2696.--Notwithstanding section 8 of the 
     Federal Power Act (16 U.S.C. 801) or any other provision of 
     such Act, the Federal Energy Regulatory Commission shall 
     reinstate the license for Project No. 2696 and transfer the 
     license, without delay or the institution of any proceedings, 
     to the Town of Stuyvesant, New York, holder of Federal Energy 
     Regulatory Commission Preliminary Permit No. 11787, within 30 
     days after the date of enactment of this Act.
       (b) Hydroelectric Incentives.--Project No. 2696 shall be 
     entitled to the full benefit of any Federal legislation that 
     promotes hydroelectric development that is enacted within 2 
     years either before or after the date of enactment of this 
     Act.
       (c) Project Development and Financing.--The Federal Energy 
     Regulatory Commission shall permit the Town of Stuyvesant to 
     add as a colicensee any private or public entity or entities 
     to the reinstated license at any time, notwithstanding the 
     issuance of a preliminary permit to the Town of Stuyvesant 
     and any consideration of municipal preference. The town shall 
     be entitled, to the extent that funds are available or shall 
     be made available, to receive loans under sections 402 and 
     403 of the Public Utility Regulatory Policies Act of 1978 (16 
     U.S.C. 2702 and 2703), or similar programs, for the 
     reimbursement of feasibility studies or development costs, or 
     both, incurred since January 1, 2001, through and including 
     December 31, 2006. All power produced by the project shall be 
     deemed incremental hydropower for purpose of qualifying for 
     any energy credit or similar benefits.
                         TITLE III--OIL AND GAS
           Subtitle A--Petroleum Reserve and Home Heating Oil

     SEC. 301. 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 
     the following:


                   ``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. 6250e); 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 inserting before section 273 (42 U.S.C. 6283) the 
     following:

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

       (2) by striking section 273(e) (42 U.S.C. 6283(e); relating 
     to the expiration of summer fill and fuel budgeting 
     programs); and
       (3) 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 inserting after the items relating to part C of 
     title I the following:

              ``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.

[[Page H11226]]

       (d) Amendment to the Energy Policy and Conservation Act.--
     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)''.
       (e) Fill Strategic Petroleum Reserve to Capacity.--The 
     Secretary of Energy shall, as expeditiously as practicable, 
     acquire petroleum in amounts sufficient to fill the Strategic 
     Petroleum Reserve to the 1,000,000,000 barrel capacity 
     authorized under section 154(a) of the Energy Policy and 
     Conservation Act (42 U.S.C. 6234(a)), consistent with the 
     provisions of sections 159 and 160 of such Act (42 U.S.C. 
     6239, 6240).

     SEC. 302. NATIONAL OILHEAT RESEARCH ALLIANCE.

       Section 713 of the Energy Act of 2000 (42 U.S.C. 6201 note) 
     is amended by striking ``4'' and inserting ``9''.
                   Subtitle B--Production Incentives

     SEC. 311. DEFINITION OF SECRETARY.

       In this subtitle, the term ``Secretary'' means the 
     Secretary of the Interior.

     SEC. 312. PROGRAM ON OIL AND GAS ROYALTIES IN-KIND.

       (a) Applicability of Section.--Notwithstanding any other 
     provision of law, this section applies to all royalty in-kind 
     accepted by the Secretary on or after the date of enactment 
     of this Act 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 Federal law governing leasing of 
     Federal land for oil and gas development.
       (b) Terms and Conditions.--All royalty accruing to the 
     United States 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) Satisfaction of royalty obligation.--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) Marketable condition.--
       (A) In general.--Royalty production shall be placed in 
     marketable condition by the lessee at no cost to the United 
     States.
       (B) Definition of marketable condition.--In this paragraph, 
     the term ``in marketable condition'' means sufficiently free 
     from impurities and otherwise in a condition that the royalty 
     production will be accepted by a purchaser under a sales 
     contract typical of the field or area in which the royalty 
     production was produced.
       (3) Disposition by the secretary.--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) Retention by the secretary.--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 taken in-kind that otherwise would be deposited to 
     miscellaneous receipts, without regard to fiscal year 
     limitation, or may use oil or gas received as royalty taken 
     in-kind (in this paragraph referred to as ``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) Limitation.--
       (A) In general.--Except as provided in subparagraph (B), 
     the Secretary may not use revenues from the sale of oil and 
     gas taken in-kind to pay for personnel, travel, or other 
     administrative costs of the Federal Government.
       (B) Exception.--Notwithstanding subparagraph (A), the 
     Secretary may use a portion of the revenues from the sale of 
     oil 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 the 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 royalties in-kind 
     provides benefits to the United States that are greater 
     than or equal to the benefits that are likely to have been 
     received had royalties been taken in-value.
       (e) Reports.--
       (1) In general.--Not later than September 30, 2005, the 
     Secretary shall submit to Congress a report that addresses--
       (A) actions taken to develop businesses 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 businesses operation plans and 
     objectives.
       (2) Reports on oil or gas royalties taken in-kind.--For 
     each of 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 
     subsection (h), the Secretary shall submit to Congress a 
     report that describes--
       (A) the methodology or methodologies used by the Secretary 
     to determine compliance with subsection (d), including the 
     performance standard for comparing amounts received by the 
     United States derived from royalties in-kind to amounts 
     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 costs 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) In general.--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 shall deduct amounts paid 
     or deducted under subsections (b)(4) and (c) and deposit the 
     amount of the deductions in the miscellaneous receipts of the 
     United States Treasury.
       (2) Accounting for deductions.--When 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--
       (1) shall consult with a State before conducting a royalty 
     in-kind program under this subtitle within the State, and may 
     delegate management of any portion of the Federal royalty in-
     kind program to the State except as otherwise prohibited by 
     Federal law; and
       (2) shall consult 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) Small Refineries.--
       (1) Preference.--If the Secretary finds that sufficient 
     supplies of crude oil are not available in the open market to 
     refineries that do not have 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) Proration among refineries in production area.--In 
     disposing of oil under this subsection, the Secretary of 
     Energy may, at the discretion of the Secretary, prorate the 
     oil among refineries described in paragraph (1) in the area 
     in which the oil is produced.
       (i) Disposition to Federal Agencies.--
       (1) Onshore royalty.--Any royalty oil or gas taken by the 
     Secretary in-kind from onshore oil and gas leases may be sold 
     at not less than the market price to any Federal agency.
       (2) Offshore royalty.--Any royalty oil or gas taken in-kind 
     from a Federal oil or gas lease 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) Federal Low-income Energy Assistance Programs.--
       (1) Preference.--In disposing of royalty oil or gas taken 
     in-kind under this section, the Secretary may grant a 
     preference to any person, including any Federal or State 
     agency, for the purpose of providing additional resources to 
     any Federal low-income energy assistance program.
       (2) Report.--Not later than 3 years after the date of 
     enactment of this Act, the Secretary shall transmit a report 
     to Congress, assessing the effectiveness of granting 
     preferences specified in paragraph (1) and providing a 
     specific recommendation on the continuation of authority to 
     grant preferences.

     SEC. 313. MARGINAL PROPERTY PRODUCTION INCENTIVES.

       (a) Definition of Marginal Property.--Until such time as 
     the Secretary issues regulations under subsection (e) that 
     prescribe a different definition, in 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 3 most recent production 
     months, including only wells that produce on more than half 
     of the days during those 3 production months.
       (b) Conditions for Reduction of Royalty Rate.--Until such 
     time as the Secretary issues regulations 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

[[Page H11227]]

     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) In general.--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) Period of effectiveness.--The reduced royalty rate 
     under this subsection shall be effective beginning on the 
     first day of the production month following the date on which 
     the applicable condition specified in subsection (b) is met.
       (d) Termination of Reduced Royalty Rate.--A royalty rate 
     prescribed in subsection (d)(1)(A) shall terminate--
       (1) with respect to 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
       (B) the property no longer qualifies as a marginal 
     property; and
       (2) with respect to 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.
       (e) Regulations Prescribing Different Relief.--
       (1) Discretionary regulations.--The Secretary may by 
     regulation 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) Mandatory regulations.--Not later than 18 months after 
     the date of enactment of this Act, the Secretary shall by 
     regulation--
       (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) Considerations.--In promulgating regulations under this 
     subsection, the Secretary may consider--
       (A) oil and gas prices and market trends;
       (B) production costs;
       (C) abandonment costs;
       (D) Federal and State tax provisions and the effects of 
     those provisions on production economics;
       (E) other royalty relief programs;
       (F) regional differences in average wellhead prices;
       (G) national energy security issues; and
       (H) other relevant matters.
       (f) Savings Provision.--Nothing in this section prevents a 
     lessee from receiving royalty relief or a royalty reduction 
     pursuant to any other law (including a regulation) that 
     provides more relief than the amounts provided by this 
     section.

     SEC. 314. INCENTIVES FOR NATURAL GAS PRODUCTION FROM DEEP 
                   WELLS IN THE SHALLOW WATERS OF THE GULF OF 
                   MEXICO.

       (a) Royalty Incentive Regulations.--The Secretary shall 
     publish a final regulation to complete the rulemaking begun 
     by the Notice of Proposed Rulemaking entitled ``Relief or 
     Reduction in Royalty Rates--Deep Gas Provisions'', published 
     in the Federal Register on March 26, 2003 (Federal Register, 
     volume 68, number 58, 14868-14886).
       (b) Royalty Incentive Regulations for Ultra Deep Gas 
     Wells.--
       (1) In general.--Not later than 180 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 shall issue regulations, in accordance with the 
     regulations published pursuant to subsection (a), granting 
     royalty relief suspension volumes of not less than 
     35,000,000,000 cubic feet with respect to the production of 
     natural gas from ultra deep wells on leases issued before 
     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. Regulations issued under this 
     subsection shall be retroactive to the date that the Notice 
     of Proposed Rulemaking is published in the Federal Register.
       (2) Definition of ultra deep well.--In this subsection, the 
     term ``ultra deep well'' means a well 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.

     SEC. 315. 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 the 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 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) 5,000,000 barrels of oil equivalent for each lease in 
     water depths of 400 to 800 meters;
       (2) 9,000,000 barrels of oil equivalent for each lease in 
     water depths of 800 to 1,600 meters; and
       (3) 12,000,000 barrels of oil equivalent for each lease in 
     water depths greater than 1,600 meters.
       (b) Limitation.--The Secretary may place limitations on the 
     suspension of royalty relief granted based on market price.

     SEC. 316. ALASKA OFFSHORE ROYALTY SUSPENSION.

       Section 8(a)(3)(B) of the Outer Continental Shelf Lands Act 
     (43 U.S.C. 1337(a)(3)(B)) is amended by inserting ``and in 
     the Planning Areas offshore Alaska'' after ``West 
     longitude''.

     SEC. 317. OIL AND GAS LEASING IN THE NATIONAL PETROLEUM 
                   RESERVE IN ALASKA.

       (a) Transfer of Authority.--
       (1) Redesignation.--The Naval Petroleum Reserves Production 
     Act of 1976 (42 U.S.C. 6501 et seq.) is amended by 
     redesignating section 107 (42 U.S.C. 6507) as section 108.
       (2) Transfer.--The matter under the heading ``exploration 
     of national petroleum reserve in alaska'' under the heading 
     ``ENERGY AND MINERALS'' of title I of Public Law 96-514 (42 
     U.S.C. 6508) is--
       (A) transferred to the Naval Petroleum Reserves Production 
     Act of 1976 (42 U.S.C. 6501 et seq.);
       (B) redesignated as section 107 of that Act; and
       (C) moved so as to appear after section 106 of that Act (42 
     U.S.C. 6506).
       (b) Competitive Leasing.--Section 107 of the Naval 
     Petroleum Reserves Production Act of 1976 (as amended by 
     subsection (a) of this section) is amended--
       (1) by striking the heading and all that follows through 
     ``Provided, That (1) activities'' and inserting the 
     following:

     ``SEC. 107. COMPETITIVE LEASING OF OIL AND GAS.

       ``(a) In General.--Notwithstanding any other provision of 
     law and pursuant to regulations issued by the Secretary, the 
     Secretary shall conduct an expeditious program of competitive 
     leasing of oil and gas in the National Petroleum Reserve in 
     Alaska (referred to in this section as the `Reserve').
       ``(b) Mitigation of Adverse Effects.--Activities'';
       (2) by striking ``Alaska (the Reserve); (2) the'' and 
     inserting ``Alaska.
       ``(c) Land Use Planning; BLM Wilderness Study.--The'';
       (3) by striking ``Reserve; (3) the'' and inserting 
     ``Reserve.
       ``(d) First Lease Sale.--The'';
       (4) by striking ``4332); (4) the'' and inserting ``4321 et 
     seq.).
       ``(e) Withdrawals.--The'';
       (5) by striking ``herein; (5) bidding'' and inserting 
     ``under this section.
       ``(f) Bidding Systems.--Bidding'';
       (6) by striking ``629); (6) lease'' and inserting ``629).
       ``(g) Geological Structures.--Lease'';
       (7) by striking ``structures; (7) the'' and inserting 
     ``structures.
       ``(h) Size of Lease Tracts.--The'';
       (8) by striking ``Secretary; (8)'' and all that follows 
     through ``Drilling, production,'' and inserting ``Secretary.
       ``(i) Terms.--
       ``(1) In general.--Each lease shall be--
       ``(A) issued for an initial period of not more than 10 
     years; and
       ``(B) renewed for successive 10-year terms if--
       ``(i) oil or gas is produced from the lease in paying 
     quantities;
       ``(ii) oil or gas is capable of being produced in paying 
     quantities; or
       ``(iii) drilling or reworking operations, as approved by 
     the Secretary, are conducted on the leased land.
       ``(2) Renewal of nonproducing leases.--The Secretary shall 
     renew for an additional 10-year term a lease that does not 
     meet the requirements of paragraph (1)(B) if the lessee 
     submits to the Secretary an application for renewal not later 
     than 60 days before the expiration of the primary lease and--
       ``(A) the lessee certifies, and the Secretary agrees, that 
     hydrocarbon resources were discovered on 1 or more wells 
     drilled on the leased land in such quantities that a prudent 
     operator would hold the lease for potential future 
     development;
       ``(B) the lessee--
       ``(i) pays the Secretary a renewal fee of $100 per acre of 
     leased land; and
       ``(ii) provides evidence, and the Secretary agrees that, 
     the lessee has diligently pursued exploration that warrants 
     continuation with the intent of continued exploration or 
     future development of the leased land; or
       ``(C) all or part of the lease--
       ``(i) is part of a unit agreement covering a lease 
     described in subparagraph (A) or (B); and
       ``(ii) has not been previously contracted out of the unit.
       ``(3) Applicability.--This subsection applies to a lease 
     that--
       ``(A) is entered into before, on, or after the date of 
     enactment of the Energy Policy Act of 2003; and
       ``(B) is effective on or after the date of enactment of 
     that Act.
       ``(j) Unit Agreements.--
       ``(1) In general.--For the purpose of conservation of the 
     natural resources of all or part of any oil or gas pool, 
     field, reservoir, or like area, lessees (including 
     representatives) of the pool, field, reservoir, or like area 
     may unite with each other, or jointly or separately with 
     others,

[[Page H11228]]

     in collectively adopting and operating under a unit agreement 
     for all or part of the pool, field, reservoir, or like area 
     (whether or not any other part of the oil or gas pool, field, 
     reservoir, or like area is already subject to any cooperative 
     or unit plan of development or operation), if the Secretary 
     determines the action to be necessary or advisable in the 
     public interest.
       ``(2) Participation by state of alaska.--The Secretary 
     shall ensure that the State of Alaska is provided the 
     opportunity for active participation concerning creation and 
     management of units formed or expanded under this subsection 
     that include acreage in which the State of Alaska has an 
     interest in the mineral estate.
       ``(3) Participation by regional corporations.--The 
     Secretary shall ensure that any Regional Corporation (as 
     defined in section 3 of the Alaska Native Claims Settlement 
     Act (43 U.S.C. 1602)) is provided the opportunity for active 
     participation concerning creation and management of units 
     that include acreage in which the Regional Corporation has an 
     interest in the mineral estate.
       ``(4) Production allocation methodology.--The Secretary may 
     use a production allocation methodology for each 
     participating area within a unit created for land in the 
     Reserve, State of Alaska land, or Regional Corporation land 
     shall, when appropriate, be based on the characteristics of 
     each specific oil or gas pool, field, reservoir, or like area 
     to take into account reservoir heterogeneity and a real 
     variation in reservoir producibility across diverse leasehold 
     interests.
       ``(5) Benefit of operations.--Drilling, production,'';
       (9) by striking ``When separate'' and inserting the 
     following:
       ``(6) Pooling.--If separate'';
       (10) by inserting ``(in consultation with the owners of the 
     other land)'' after ``determined by the Secretary of the 
     Interior'';
       (11) by striking ``thereto; (10) to'' and all that follows 
     through ``the terms provided therein'' and inserting ``to the 
     agreement.
       ``(k) Exploration Incentives.--
       ``(1) In general.--
       ``(A) Waiver, suspension, or reduction.--To encourage the 
     greatest ultimate recovery of oil or gas or in the interest 
     of conservation, the Secretary may waive, suspend, or reduce 
     the rental fees or minimum royalty, or reduce the royalty on 
     an entire leasehold (including on any lease operated pursuant 
     to a unit agreement), if (after consultation with the State 
     of Alaska and the North Slope Borough of Alaska and the 
     concurrence of any Regional Corporation for leases that 
     include lands available for acquisition by the Regional 
     Corporation under the provisions of section 1431(o) of the 
     Alaska National Interest Lands Conservation Act (16 U.S.C. 
     3101 et seq.)) the Secretary determines that the waiver, 
     suspension, or reduction is in the public interest.
       ``(B) Applicability.--This paragraph applies to a lease 
     that--
       ``(i) is entered into before, on, or after the date of 
     enactment of the Energy Policy Act of 2003; and
       ``(ii) is effective on or after the date of enactment of 
     that Act.'';
       (12) by striking ``The Secretary is authorized to'' and 
     inserting the following:
       ``(2) Suspension of operations and production.--The 
     Secretary may'';
       (13) by striking ``In the event'' and inserting the 
     following:
       ``(3) Suspension of payments.--If'';
       (14) by striking ``thereto; and (11) all'' and inserting 
     ``to the lease.
       ``(l) Receipts.--All'';
       (15) by redesignating clauses (A), (B), and (C) as clauses 
     (1), (2), and (3), respectively;
       (16) by striking ``Any agency'' and inserting the 
     following:
       ``(m) Explorations.--Any agency'';
       (17) by striking ``Any action'' and inserting the 
     following:
       ``(n) Environmental Impact Statements.--
       ``(1) Judicial review.--Any action'';
       (18) by striking ``The detailed'' and inserting the 
     following:
       ``(2) Initial lease sales.--The detailed'';
       (19) by striking ``of the Naval Petroleum Reserves 
     Production Act of 1976 (90 Stat. 304; 42 U.S.C. 6504)''; and
       (20) by adding at the end the following:
       ``(o) Waiver of Administration for Conveyed Lands.--
     Notwithstanding section 14(g) of the Alaska Native Claims 
     Settlement Act (43 U.S.C. 1613(g)) or any other provision of 
     law--
       ``(1) the Secretary of the Interior shall waive 
     administration of any oil and gas lease insofar as such lease 
     covers any land in the National Petroleum Reserve in Alaska 
     in which the subsurface estate is conveyed to the Arctic 
     Slope Regional Corporation; and
       ``(2) if any such conveyance of such subsurface estate does 
     not cover all the land embraced within any such oil and gas 
     lease--
       ``(A) the person who owns the subsurface estate in any 
     particular portion of the land covered by such lease shall be 
     entitled to all of the revenues reserved under such lease as 
     to such portion, including, without limitation, all the 
     royalty payable with respect to oil or gas produced from or 
     allocated to such particular portion of the land covered by 
     such lease; and
       ``(B) the Secretary of the Interior shall segregate such 
     lease into 2 leases, 1 of which shall cover only the 
     subsurface estate conveyed to the Arctic Slope Regional 
     Corporation, and operations, production, or other 
     circumstances (other than payment of rentals or royalties) 
     that satisfy obligations of the lessee under, or maintain, 
     either of the segregated leases shall likewise satisfy 
     obligations of the lessee under, or maintain, the other 
     segregated lease to the same extent as if such segregated 
     leases remained a part of the original unsegregated lease.''.

     SEC. 318. ORPHANED, ABANDONED, OR IDLED WELLS ON FEDERAL 
                   LAND.

       (a) In General.--The Secretary, in cooperation with the 
     Secretary of Agriculture, shall establish a program not later 
     than 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 land administered by the land 
     management agencies within the Department of the Interior and 
     the Department of Agriculture.
       (b) Activities.--The program under subsection (a) shall--
       (1) include a means of ranking orphaned, abandoned, or 
     idled wells 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.
       (c) Cooperation and Consultations.--In carrying out the 
     program under subsection (a), the Secretary shall--
       (1) work cooperatively with the Secretary of Agriculture 
     and the States within which Federal land is located; and
       (2) consult with the Secretary of Energy and the Interstate 
     Oil and Gas Compact Commission.
       (d) Plan.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary, in cooperation with the 
     Secretary of Agriculture, shall submit to Congress a plan for 
     carrying out the program under subsection (a).
       (e) Idled Well.--For the purposes of this section, a well 
     is idled if--
       (1) the well has been nonoperational for at least 7 years; 
     and
       (2) there is no anticipated beneficial use for the well.
       (f) Technical Assistance Program for Non-Federal Land.--
       (1) In general.--The Secretary of Energy shall establish a 
     program to provide technical and financial assistance to 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 land.
       (2) Assistance.--The Secretary of Energy 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 or 
     abandoned oil or gas wells on State and private land.
       (3) Activities.--The program under paragraph (1) shall 
     include--
       (A) mechanisms to facilitate identification, if feasible, 
     of the persons 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;
       (C) information and training programs on best practices for 
     remediation of different types of sites; and
       (D) funding of State mitigation efforts on a cost-shared 
     basis.
       (g) Federal Reimbursement for Orphaned Well Reclamation 
     Pilot Program.--
       (1) Reimbursement for remediating, reclaiming, and closing 
     wells on land subject to a new lease.--The Secretary shall 
     carry out a pilot program under which, in issuing a new oil 
     and gas lease on federally owned land on which 1 or more 
     orphaned wells are located, the Secretary--
       (A) may require, but not as a condition of the lease, that 
     the lessee remediate, reclaim, and close in accordance with 
     standards established by the Secretary, all orphaned wells on 
     the land leased; and
       (B) shall develop a program to reimburse a lessee, through 
     a royalty credit against the Federal share of royalties owed 
     or other means, for the reasonable actual costs of 
     remediating, reclaiming, and closing the orphaned well 
     pursuant to that requirement.
       (2) Reimbursement for reclaiming orphaned wells on other 
     land.--In carrying out this subsection, the Secretary--
       (A) may authorize any lessee under an oil and gas lease on 
     federally owned land to reclaim in accordance with the 
     Secretary's standards--
       (i) an orphaned well on unleased federally owned land; or
       (ii) an orphaned well located on an existing lease on 
     federally owned land for the reclamation of which the lessee 
     is not legally responsible; and
       (B) shall develop a program to provide reimbursement of 115 
     percent of the reasonable actual costs of remediating, 
     reclaiming, and closing the orphaned well, through credits 
     against the Federal share of royalties or other means.
       (3) Effect of remediation, reclamation, or closure of well 
     pursuant to an approved remediation plan.--
       (A) Definition of remediating party.--In this paragraph the 
     term ``remediating party'' means a person who remediates, 
     reclaims, or closes an abandoned, orphaned, or idled well 
     pursuant to this subsection.
       (B) General rule.--A remediating party who remediates, 
     reclaims, or closes an abandoned, orphaned, or idled well in 
     accordance with a detailed written remediation plan approved 
     by the Secretary under this subsection, shall be immune from 
     civil liability under Federal environmental laws, for--

[[Page H11229]]

       (i) pre-existing environmental conditions at or associated 
     with the well, unless the remediating party owns or operates, 
     in the past owned or operated, or is related to a person that 
     owns or operates or in the past owned or operated, the well 
     or the land on which the well is located; or
       (ii) any remaining releases of pollutants from the well 
     during or after completion of the remediation, reclamation, 
     or closure of the well, unless the remediating party causes 
     increased pollution as a result of activities that are not in 
     accordance with the approved remediation plan.
       (C) Limitations.--Nothing in this section shall limit in 
     any way the liability of a remediating party for injury, 
     damage, or pollution resulting from the remediating party's 
     acts or omissions that are not in accordance with the 
     approved remediation plan, are reckless or willful, 
     constitute gross negligence or wanton misconduct, or are 
     unlawful.
       (4) Regulations.--The Secretary may issue such regulations 
     as are appropriate to carry out this subsection.
       (h) Authorization of Appropriations.--
       (1) In general.--There are authorized to be appropriated to 
     carry out this section $25,000,000 for each of fiscal years 
     2005 through 2009.
       (2) Use.--Of the amounts authorized under paragraph (1), 
     $5,000,000 are authorized for each fiscal year for activities 
     under subsection (f).

     SEC. 319. COMBINED HYDROCARBON LEASING.

       (a) Special Provisions Regarding Leasing.--Section 17(b)(2) 
     of the Mineral Leasing Act (30 U.S.C. 226(b)(2)) is amended--
       (1) by inserting ``(A)'' after ``(2)''; and
       (2) by adding at the end the following:
       ``(B) For any area that contains any combination of tar 
     sand and oil or gas (or both), the Secretary may issue under 
     this Act, separately--
       ``(i) a lease for exploration for and extraction of tar 
     sand; and
       ``(ii) a lease for exploration for and development of oil 
     and gas.
       ``(C) A lease issued for tar sand shall be issued using the 
     same bidding process, annual rental, and posting period as a 
     lease issued for oil and gas, except that the minimum 
     acceptable bid required for a lease issued for tar sand shall 
     be $2 per acre.
       ``(D) The Secretary may waive, suspend, or alter any 
     requirement under section 26 that a permittee under a permit 
     authorizing prospecting for tar sand must exercise due 
     diligence, to promote any resource covered by a combined 
     hydrocarbon lease.''.
       (b) Conforming Amendment.--Section 17(b)(1)(B) of the 
     Mineral Leasing Act (30 U.S.C. 226(b)(1)(B)) is amended in 
     the second sentence by inserting ``, subject to paragraph 
     (2)(B),'' after ``Secretary''.
       (c) Regulations.--Not later than 45 days after the date of 
     enactment of this Act, the Secretary shall issue final 
     regulations to implement this section.

     SEC. 320. LIQUIFIED NATURAL GAS.

       Section 3 of the Natural Gas Act (15 U.S.C. 717b) is 
     amended by adding at the end the following:
       ``(d) Limitation on Commission Authority.--If an applicant 
     under this section proposes to construct or expand a 
     liquified natural gas terminal either onshore or in State 
     waters for the purpose of importing liquified natural gas 
     into the United States, the Commission shall not deny or 
     condition the application solely on the basis that the 
     applicant proposes to utilize the terminal exclusively or 
     partially for gas that the applicant or any affiliate thereof 
     will supply thereto. In all other respects, subsection (a) 
     shall remain applicable to any such proposal.''.

     SEC. 321. 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:
       ``(p) Leases, Easements, or Rights-Of-Way for Energy and 
     Related Purposes.--
       ``(1) In General.--The Secretary, in consultation with the 
     Secretary of the Department in which the Coast Guard is 
     operating and other relevant departments and agencies of the 
     Federal Government, may grant a lease, 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, if those activities--
       ``(A) support exploration, development, production, 
     transportation, or storage of oil, natural gas, or other 
     minerals;
       ``(B) produce or support production, transportation, or 
     transmission of energy from sources other than oil and gas; 
     or
       ``(C) use, for energy-related or marine-related purposes, 
     facilities currently or previously used for activities 
     authorized under this Act.
       ``(2) Payments.--The Secretary shall establish reasonable 
     forms of payments for any easement or right-of-way granted 
     under this subsection. Such payments shall not be assessed on 
     the basis of throughput or production. The Secretary may 
     establish fees, rentals, bonus, or other payments by rule or 
     by agreement with the party to which the lease, easement, or 
     right-of-way is granted.
       ``(3) Consultation.--Before exercising authority under this 
     subsection, the Secretary shall consult with the Secretary of 
     Defense and other appropriate agencies concerning issues 
     related to national security and navigational obstruction.
       ``(4) Competitive or noncompetitive basis.--
       ``(A) In general.--The Secretary may issue a lease, 
     easement, or right-of-way for energy and related purposes as 
     described in paragraph (1) on a competitive or noncompetitive 
     basis.
       ``(B) Considerations.--In determining whether a lease, 
     easement, or right-of-way shall be granted competitively or 
     noncompetitively, the Secretary shall consider such factors 
     as--
       ``(i) prevention of waste and conservation of natural 
     resources;
       ``(ii) the economic viability of an energy project;
       ``(iii) protection of the environment;
       ``(iv) the national interest and national security;
       ``(v) human safety;
       ``(vi) protection of correlative rights; and
       ``(vii) potential return for the lease, easement, or right-
     of-way.
       ``(5) Regulations.--Not later than 270 days after the date 
     of enactment of the Energy Policy Act of 2003, the Secretary, 
     in consultation with the Secretary of the Department in which 
     the Coast Guard is operating and other relevant agencies of 
     the Federal Government and affected States, shall issue any 
     necessary regulations to ensure safety, protection of the 
     environment, prevention of waste, and conservation of the 
     natural resources of the outer Continental Shelf, protection 
     of national security interests, and protection of correlative 
     rights in the outer Continental Shelf.
       ``(6) Security.--The Secretary shall require the holder of 
     a lease, 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 considers necessary 
     to protect the interests of the United States.
       ``(7) Effect of subsection.--Nothing in this subsection 
     displaces, supersedes, limits, or modifies the jurisdiction, 
     responsibility, or authority of any Federal or State agency 
     under any other Federal law.
       ``(8) Applicability.--This subsection does not apply to any 
     area on the outer Continental Shelf designated as a National 
     Marine Sanctuary.''.
       (b) Conforming Amendment.--Section 8 of the Outer 
     Continental Shelf Lands Act (43 U.S.C. 1337) is amended by 
     striking the section heading and inserting the following: 
     ``Leases, Easements, and Rights-of-Way on the Outer 
     Continental Shelf.--''.
       (c) Savings Provision.--Nothing in the amendment made by 
     subsection (a) requires, with respect to any project--
       (1) for which offshore test facilities have been 
     constructed before the date of enactment of this Act; or
       (2) for which a request for proposals has been issued by a 
     public authority,
     any resubmittal of documents previously submitted or any 
     reauthorization of actions previously authorized.

     SEC. 322. PRESERVATION OF GEOLOGICAL AND GEOPHYSICAL DATA.

       (a) Short Title.--This section may be cited as the 
     ``National Geological and Geophysical Data Preservation 
     Program Act of 2003''.
       (b) Program.--The Secretary shall carry out a National 
     Geological and Geophysical Data Preservation Program in 
     accordance with this section--
       (1) to archive geologic, geophysical, and engineering data, 
     maps, well logs, and samples;
       (2) to provide a national catalog of such archival 
     material; and
       (3) to provide technical and financial assistance related 
     to the archival material.
       (c) Plan.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary shall submit to Congress 
     a plan for the implementation of the Program.
       (d) Data Archive System.--
       (1) Establishment.--The Secretary shall establish, as a 
     component of the Program, a data archive system to provide 
     for the storage, preservation, and archiving of subsurface, 
     surface, geological, geophysical, and engineering data and 
     samples. The Secretary, in consultation with the Advisory 
     Committee, shall develop guidelines relating to the data 
     archive system, including the types of data and samples to be 
     preserved.
       (2) System components.--The system shall be comprised of 
     State agencies that elect to be part of the system and 
     agencies within the Department of the Interior that maintain 
     geological and geophysical data and samples 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) Limitation of designation.--The Secretary may not 
     designate a State agency as a component of the data archive 
     system unless that agency is the agency that acts as the 
     geological survey in the State.
       (4) Data from federal land.--The data archive system shall 
     provide for the archiving of relevant subsurface data and 
     samples obtained from Federal land--
       (A) in the most appropriate repository designated under 
     paragraph (2), with preference being given to archiving data 
     in the State in which the data were collected; and
       (B) consistent with all applicable law and requirements 
     relating to confidentiality and proprietary data.
       (e) National Catalog.--
       (1) In general.--As soon as practicable after the date of 
     enactment of this Act, the Secretary shall develop and 
     maintain, as a component of the Program, a national catalog 
     that identifies--
       (A) data and samples available in the data archive system 
     established under subsection (d);
       (B) the repository for particular material in the system; 
     and
       (C) the means of accessing the material.
       (2) Availability.--The Secretary shall make the national 
     catalog accessible to the public on the site of the Survey on 
     the Internet, consistent with all applicable requirements 
     related to confidentiality and proprietary data.
       (f) Advisory Committee.--

[[Page H11230]]

       (1) In general.--The Advisory Committee shall advise the 
     Secretary on planning and implementation of the Program.
       (2) New duties.--In addition to its duties under the 
     National Geologic Mapping Act of 1992 (43 U.S.C. 31a et 
     seq.), the Advisory Committee shall perform the following 
     duties:
       (A) Advise the Secretary on developing guidelines and 
     procedures for providing assistance for facilities under 
     subsection (g)(1).
       (B) Review and critique the draft implementation plan 
     prepared by the Secretary under subsection (c).
       (C) Identify useful studies of data archived under the 
     Program that will advance understanding of the Nation's 
     energy and mineral resources, geologic hazards, and 
     engineering geology.
       (D) Review the progress of the Program in archiving 
     significant data and preventing the loss of such data, and 
     the scientific progress of the studies funded under the 
     Program.
       (E) Include in the annual report to the Secretary required 
     under section 5(b)(3) of the National Geologic Mapping Act of 
     1992 (43 U.S.C. 31d(b)(3)) an evaluation of the progress of 
     the Program toward fulfilling the purposes of the Program 
     under subsection (b).
       (g) Financial Assistance.--
       (1) Archive facilities.--Subject to the availability of 
     appropriations, the Secretary shall provide financial 
     assistance to a State agency that is designated under 
     subsection (d)(2) for providing facilities to archive energy 
     material.
       (2) Studies.--Subject to the availability of 
     appropriations, the Secretary shall provide financial 
     assistance to any State agency designated under subsection 
     (d)(2) for studies and technical assistance activities that 
     enhance understanding, interpretation, and use of materials 
     archived in the data archive system established under 
     subsection (d).
       (3) Federal share.--The Federal share of the cost of an 
     activity carried out with assistance under this subsection 
     shall be not more than 50 percent of the total cost of the 
     activity.
       (4) Private contributions.--The Secretary shall apply to 
     the non-Federal share of the cost of an activity carried out 
     with assistance under this subsection the value of private 
     contributions of property and services used for that 
     activity.
       (h) Report.--The Secretary shall include in each report 
     under section 8 of the National Geologic Mapping Act of 1992 
     (43 U.S.C. 31g)--
       (1) a description of the status of the Program;
       (2) an evaluation of the progress achieved in developing 
     the Program during the period covered by the report; and
       (3) any recommendations for legislative or other action the 
     Secretary considers necessary and appropriate to fulfill the 
     purposes of the Program under subsection (b).
       (i) Maintenance of State Effort.--It is the intent of 
     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) Definitions.--In this section:
       (1) Advisory committee.--The term ``Advisory Committee'' 
     means the advisory committee established under section 5 of 
     the National Geologic Mapping Act of 1992 (43 U.S.C. 31d).
       (2) Program.--The term ``Program'' means the National 
     Geological and Geophysical Data Preservation Program carried 
     out under this section.
       (3) Secretary.--The term ``Secretary'' means the Secretary 
     of the Interior, acting through the Director of the United 
     States Geological Survey.
       (4) Survey.--The term ``Survey'' means the United States 
     Geological Survey.
       (k) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section $30,000,000 for 
     each of fiscal years 2004 through 2008.

     SEC. 323. OIL AND GAS LEASE ACREAGE LIMITATIONS.

       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 sand areas'' the following: ``, and acreage under 
     any lease any portion of which has been committed to a 
     federally approved unit or cooperative plan or 
     communitization agreement or for which royalty (including 
     compensatory royalty or royalty in-kind) was paid in the 
     preceding calendar year,''.

     SEC. 324. 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 affecting 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 
     liquified natural gas to displace residual fuel oil for 
     electric generation, including neighbor island opportunities, 
     and the effect of the displacement on the economic 
     relationship described in paragraph (2), including--
       (A) the availability of supply;
       (B) siting and facility configuration for onshore and 
     offshore liquified 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 the 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 1 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, a 
     report detailing the findings, conclusions, and 
     recommendations resulting from the assessment.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as are necessary to carry out 
     this section.

     SEC. 325. DEADLINE FOR DECISION ON APPEALS OF CONSISTENCY 
                   DETERMINATION UNDER THE COASTAL ZONE MANAGEMENT 
                   ACT OF 1972.

       (a) In General.--Section 319 of the Coastal Zone Management 
     Act of 1972 (16 U.S.C. 1465) is amended to read as follows:


                       ``appeals to the secretary

       ``Sec. 319. (a) Notice.--The Secretary shall publish an 
     initial notice in the Federal Register not later than 30 days 
     after the date of the filing of any appeal to the Secretary 
     of a consistency determination under section 307.
       ``(b) Closure of Record.--
       ``(1) In general.--Not later than the end of the 120-day 
     period beginning on the date of publication of an initial 
     notice under subsection (a), the Secretary shall receive no 
     more filings on the appeal and the administrative record 
     regarding the appeal shall be closed.
       ``(2) Notice.--Upon the closure of the administrative 
     record, the Secretary shall immediately publish a notice that 
     the administrative record has been closed.
       ``(c) Deadline for Decision.--The Secretary shall issue a 
     decision in any appeal filed under section 307 not later than 
     120 days after the closure of the administrative record.
       ``(d) Application.--This section applies to appeals 
     initiated by the Secretary and appeals filed by an 
     applicant.''.
       (b) Application.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendment made by subsection (a) shall apply with respect to 
     any appeal initiated or filed before, on, or after the date 
     of enactment of this Act.
       (2) Limitation.--Subsection (a) of section 319 of the 
     Coastal Zone Management Act of 1972 (as amended by subsection 
     (a)) shall not apply with respect to an appeal initiated or 
     filed before the date of enactment of this Act.
       (c) Closure of Record for Appeal Filed Before Date of 
     Enactment.--Notwithstanding section 319(b)(1) of the Coastal 
     Zone Management Act of 1972 (as amended by this section), in 
     the case of an appeal of a consistency determination under 
     section 307 of that Act initiated or filed before the date of 
     enactment of this Act, the Secretary of Commerce shall 
     receive no more filings on the appeal and the administrative 
     record regarding the appeal shall be closed not later than 
     120 days after the date of enactment of this Act.

     SEC. 326. REIMBURSEMENT FOR COSTS OF NEPA ANALYSES, 
                   DOCUMENTATION, AND STUDIES.

       (a) In General.--The Mineral Leasing Act is amended by 
     inserting after section 37 (30 U.S.C. 193) the following:


   ``reimbursement for costs of certain analyses, documentation, and 
                                studies

       ``Sec. 38. (a) In General.--The Secretary of the Interior 
     may reimburse a person that is a lessee, operator, operating 
     rights owner, or applicant for any lease under this Act for 
     reasonable amounts paid by the person for preparation for the 
     Secretary by a contractor or other person selected by the 
     Secretary of any project-level analysis, documentation, or 
     related study required pursuant to the National Environmental 
     Policy Act of 1969 (42 U.S.C. 4321 et seq.) with respect to 
     the lease.
       ``(b) Conditions.--The Secretary may provide reimbursement 
     under subsection (a) only if--
       ``(1) adequate funding to enable the Secretary to timely 
     prepare the analysis, documentation, or related study is not 
     appropriated;
       ``(2) the person paid the costs voluntarily;
       ``(3) the person maintains records of its costs in 
     accordance with regulations issued by the Secretary;
       ``(4) the reimbursement is in the form of a reduction in 
     the Federal share of the royalty required to be paid for the 
     lease for which the analysis, documentation, or related study 
     is conducted, and is agreed to by the Secretary and the 
     person reimbursed prior to commencing the analysis, 
     documentation, or related study; and
       ``(5) the agreement required under paragraph (4) contains 
     provisions--
       ``(A) reducing royalties owed on lease production based on 
     market prices;
       ``(B) stipulating an automatic termination of the royalty 
     reduction upon recovery of documented costs; and

[[Page H11231]]

       ``(C) providing a process by which the lessee may seek 
     reimbursement for circumstances in which production from the 
     specified lease is not possible.''.
       (b) Application.--The amendment made by this section shall 
     apply with respect to an analysis, documentation, or a 
     related study conducted on or after the date of enactment of 
     this Act for any lease entered into before, on, or after the 
     date of enactment of this Act.
       (c) Deadline for Regulations.--The Secretary shall issue 
     regulations implementing the amendment made by this section 
     by not later than 1 year after the date of enactment of this 
     Act.

     SEC. 327. HYDRAULIC FRACTURING.

       Paragraph (1) of section 1421(d) of the Safe Drinking Water 
     Act (42 U.S.C. 300h(d)) is amended to read as follows:
       ``(1) Underground injection.--The term `underground 
     injection'--
       ``(A) means the subsurface emplacement of fluids by well 
     injection; and
       ``(B) excludes--
       ``(i) the underground injection of natural gas for purposes 
     of storage; and
       ``(ii) the underground injection of fluids or propping 
     agents pursuant to hydraulic fracturing operations related to 
     oil or gas production activities.''.

     SEC. 328. OIL AND GAS EXPLORATION AND PRODUCTION DEFINED.

       Section 502 of the Federal Water Pollution Control Act (33 
     U.S.C. 1362) is amended by adding at the end the following:
       ``(24) Oil and gas exploration and production.--The term 
     `oil and gas exploration, production, processing, or 
     treatment operations or transmission facilities' means all 
     field activities or operations associated with exploration, 
     production, processing, or treatment operations, or 
     transmission facilities, including activities necessary to 
     prepare a site for drilling and for the movement and 
     placement of drilling equipment, whether or not such field 
     activities or operations may be considered to be construction 
     activities.''.

     SEC. 329. OUTER CONTINENTAL SHELF PROVISIONS.

       (a) Storage on the Outer Continental Shelf.--Section 
     5(a)(5) of the Outer Continental Shelf Lands Act (43 U.S.C. 
     1334(a)(5)) is amended by inserting ``from any source'' after 
     ``oil and gas''.
       (b) Deepwater Projects.--Section 6 of the Deepwater Port 
     Act of 1974 (33 U.S.C. 1505) is amended by adding at the end 
     the following:
       ``(d) Reliance on Activities of Other Agencies.--In 
     fulfilling the requirements of section 5(f)--
       ``(1) to the extent that other Federal agencies have 
     prepared environmental impact statements, are conducting 
     studies, or are monitoring the affected human, marine, or 
     coastal environment, the Secretary may use the information 
     derived from those activities in lieu of directly conducting 
     such activities; and
       ``(2) the Secretary may use information obtained from any 
     State or local government or from any person.''.
       (c) Natural Gas Defined.--Section 3(13) of the Deepwater 
     Port Act of 1974 (33 U.S.C. 1502(13)) is amended to read as 
     follows:
       ``(13) natural gas means--
       ``(A) natural gas unmixed; or
       ``(B) any mixture of natural or artificial gas, including 
     compressed or liquefied natural gas, natural gas liquids, 
     liquefied petroleum gas, and condensate recovered from 
     natural gas;''.

     SEC. 330. APPEALS RELATING TO PIPELINE CONSTRUCTION OR 
                   OFFSHORE MINERAL DEVELOPMENT PROJECTS.

       (a) Agency of Record, Pipeline Construction Projects.--Any 
     Federal administrative agency proceeding that is an appeal or 
     review under section 319 of the Coastal Zone Management Act 
     of 1972 (16 U.S.C. 1465), as amended by this Act, related to 
     Federal authority for an interstate natural gas pipeline 
     construction project, including construction of natural gas 
     storage and liquefied natural gas facilities, shall use as 
     its exclusive record for all purposes the record compiled by 
     the Federal Energy Regulatory Commission pursuant to the 
     Commission's proceeding under sections 3 and 7 of the Natural 
     Gas Act (15 U.S.C. 717b, 717f).
       (b) Sense of Congress.--It is the sense of Congress that 
     all Federal and State agencies with jurisdiction over 
     interstate natural gas pipeline construction activities 
     should coordinate their proceedings within the timeframes 
     established by the Federal Energy Regulatory Commission when 
     the Commission is acting under sections 3 and 7 of the 
     Natural Gas Act (15 U.S.C. 717b, 717f) to determine whether a 
     certificate of public convenience and necessity should be 
     issued for a proposed interstate natural gas pipeline.
       (c) Agency of Record, Offshore Mineral Development 
     Projects.--Any Federal administrative agency proceeding that 
     is an appeal or review under section 319 of the Coastal Zone 
     Management Act of 1972 (16 U.S.C. 1465), as amended by this 
     Act, related to Federal authority for the permitting, 
     approval, or other authorization of energy projects, 
     including projects to explore, develop, or produce mineral 
     resources in or underlying the outer Continental Shelf shall 
     use as its exclusive record for all purposes (except for the 
     filing of pleadings) the record compiled by the relevant 
     Federal permitting agency.

     SEC. 331. BILATERAL INTERNATIONAL OIL SUPPLY AGREEMENTS.

       (a) In General.--Notwithstanding any other provision of 
     law, the President may export oil to, or secure oil for, any 
     country pursuant to a bilateral international oil supply 
     agreement entered into by the United States with the country 
     before June 25, 1979, or to any country pursuant to the 
     International Emergency Oil Sharing Plan of the International 
     Energy Agency.
       (b) Memorandum of Agreement.--The following agreements are 
     deemed to have entered into force by operation of law and are 
     deemed to have no termination date:
       (1) The agreement entitled ``Agreement amending and 
     extending the memorandum of agreement of June 22, 1979'', 
     entered into force November 13, 1994 (TIAS 12580).
       (2) The agreement entitled ``Agreement amending the 
     contingency implementing arrangements of October 17, 1980'', 
     entered into force June 27, 1995 (TIAS 12670).

     SEC. 332. NATURAL GAS MARKET REFORM.

       (a) Clarification of Existing CFTC Authority.--
       (1) False reporting.--Section 9(a)(2) of the Commodity 
     Exchange Act (7 U.S.C. 13(a)(2)) is amended by striking 
     ``false or misleading or knowingly inaccurate reports'' and 
     inserting ``knowingly false or knowingly misleading or 
     knowingly inaccurate reports''.
       (2) Commission Administrative and Civil Authority.--Section 
     9 of the Commodity Exchange Act (7 U.S.C. 13) is amended by 
     redesignating subsection (f) as subsection (e), and adding:
       ``(f) Commission Administrative and Civil Authority.--The 
     Commission may bring administrative or civil actions 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).''.
       (3) Effect of amendments.--The amendments made by 
     paragraphs (1) and (2) restate, without substantive change, 
     existing burden of proof provisions and existing Commission 
     civil enforcement authority, respectively. These clarifying 
     changes do not alter any existing burden of proof or grant 
     any new statutory authority. The provisions of this section, 
     as restated herein, continue to apply to any action pending 
     on or commenced after the date of enactment of this Act for 
     any act, omission, or violation occurring before, on, or 
     after, such date of enactment.
       (b) Fraud Authority.--Section 4b of the Commodity Exchange 
     Act (7 U.S.C. 6b) is amended--
       (1) by redesignating subsections (b) and (c) as subsections 
     (c) and (d), respectively; and
       (2) by striking subsection (a) and inserting the following:
       ``(a) It shall be unlawful--
       ``(1) for any person, in or in connection with any order to 
     make, or the making of, any contract of sale of any commodity 
     for future delivery or in interstate commerce, that is made, 
     or to be made, on or subject to the rules of a designated 
     contract market, for or on behalf of any other person; or
       ``(2) for any person, in or in connection with any order to 
     make, or the making of, any contract of sale of any commodity 
     for future delivery, or other agreement, contract, or 
     transaction subject to section 5a(g) (1) and (2) of this Act, 
     that is made, or to be made, for or on behalf of, or with, 
     any other person, other than on or subject to the rules of a 
     designated contract market--
       ``(A) to cheat or defraud or attempt to cheat or defraud 
     such other person;
       ``(B) willfully to make or cause to be made to such other 
     person any false report or statement or willfully to enter or 
     cause to be entered for such other person any false record;
       ``(C) willfully to deceive or attempt to deceive such other 
     person by any means whatsoever in regard to any order or 
     contract or the disposition or execution of any order or 
     contract, or in regard to any act of agency performed, with 
     respect to any order or contract for or, in the case of 
     subsection (a)(2), with such other person; or
       ``(D)(i) to bucket an order if such order is either 
     represented by such person as an order to be executed, or 
     required to be executed, on or subject to the rules of a 
     designated contract market; or
       ``(ii) to fill an order by offset against the order or 
     orders of any other person, or willfully and knowingly and 
     without the prior consent of such other person to become the 
     buyer in respect to any selling order of such other person, 
     or become the seller in respect to any buying order of such 
     other person, if such order is either represented by such 
     person as an order to be executed, or required to be 
     executed, on or subject to the rules of a designated contract 
     market.
       ``(b) Subsection (a)(2) shall not obligate any person, in 
     connection with a transaction in a contract of sale of a 
     commodity for future delivery, or other agreement, contract 
     or transaction subject to section 5a(g) (1) and (2) of this 
     Act, with another person, to disclose to such other person 
     nonpublic information that may be material to the market 
     price of such commodity or transaction, except as necessary 
     to make any statement made to such other person in connection 
     with such transaction, not misleading in any material 
     respect.''.
       (c) Jurisdiction of the CFTC.--The Natural Gas Act (15 
     U.S.C. 717 et seq.) is amended by adding at the end:

     ``SEC. 26. JURISDICTION.

       ``This Act 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 by the Commission 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, which shall cooperate in responding to any 
     information request by the Commission.''.

[[Page H11232]]

       (d) Increased Penalties.--Section 21 of the Natural Gas Act 
     (15 U.S.C. 717t) is amended--
       (1) in subsection (a)--
       (A) by striking ``$5,000'' and inserting ``$1,000,000''; 
     and
       (B) by striking ``two years'' and inserting ``5 years''; 
     and
       (2) in subsection (b), by striking ``$500'' and inserting 
     ``$50,000''.

     SEC. 333. NATURAL GAS MARKET TRANSPARENCY.

       The Natural Gas Act (15 U.S.C 717 et seq.) is amended--
       (1) by redesignating section 24 as section 25; and
       (2) by inserting after section 23 the following:

     ``SEC. 24. NATURAL GAS MARKET TRANSPARENCY.

       ``(a) Authorization.--(1) Not later than 180 days after the 
     date of enactment of the Energy Policy Act of 2003, the 
     Federal Energy Regulatory Commission shall issue rules 
     directing all entities subject to the Commission's 
     jurisdiction as provided under this Act to timely report 
     information about the availability and prices of natural gas 
     sold at wholesale in interstate commerce to the Commission 
     and price publishers.
       ``(2) The Commission shall evaluate the data for adequate 
     price transparency and accuracy.
       ``(3) Rules issued under this subsection requiring the 
     reporting of information to the Commission that may become 
     publicly available shall be limited to aggregate data and 
     transaction-specific data that are otherwise required by the 
     Commission to be made public.
       ``(4) In exercising its authority under this section, the 
     Commission shall not--
       ``(A) compete with, or displace from the market place, any 
     price publisher; or
       ``(B) regulate price publishers or impose any requirements 
     on the publication of information.
       ``(b) Timely Enforcement.--No person shall be subject to 
     any penalty under this section with respect to a violation 
     occurring more than 3 years before the date on which the 
     Federal Energy Regulatory Commission seeks to assess a 
     penalty.
       ``(c) Limitation on Commission Authority.--(1) The 
     Commission shall not condition access to interstate pipeline 
     transportation upon the reporting requirements authorized 
     under this section.
       ``(2) Natural gas sales by a producer that are attributable 
     to volumes of natural gas produced by such producer shall not 
     be subject to the rules issued pursuant to this section.
       ``(3) The Commission shall not require natural gas 
     producers, processors, or users who have a de minimis market 
     presence to participate in the reporting requirements 
     provided in this section.''.
                   Subtitle C--Access to Federal Land

     SEC. 341. OFFICE OF FEDERAL ENERGY PROJECT COORDINATION.

       (a) Establishment.--The President shall establish the 
     Office of Federal Energy Project Coordination (referred to in 
     this section as the ``Office'') within the Executive Office 
     of the President in the same manner and with the same mission 
     as the White House Energy Projects Task Force established by 
     Executive Order No. 13212 (42 U.S.C. 13201 note).
       (b) Staffing.--The Office shall be staffed by functional 
     experts from relevant Federal agencies on a nonreimbursable 
     basis to carry out the mission of the Office.
       (c) Report.--The Office shall transmit an annual report to 
     Congress that describes the activities put in place to 
     coordinate and expedite Federal decisions on energy projects. 
     The report shall list accomplishments in improving the 
     Federal decisionmaking process and shall include any 
     additional recommendations or systemic changes needed to 
     establish a more effective and efficient Federal permitting 
     process.

     SEC. 342. FEDERAL ONSHORE OIL AND GAS LEASING AND PERMITTING 
                   PRACTICES.

       (a) Review of Onshore Oil and Gas Leasing Practices.--
       (1) In general.--The Secretary of the Interior, in 
     consultation with the Secretary of Agriculture with respect 
     to National Forest System lands under the jurisdiction of the 
     Department of Agriculture, shall perform an internal review 
     of current Federal onshore oil and gas leasing and permitting 
     practices.
       (2) Inclusions.--The review shall include the process for--
       (A) accepting or rejecting offers to lease;
       (B) administrative appeals of decisions or orders of 
     officers or employees of the Bureau of Land Management with 
     respect to a Federal oil or gas lease;
       (C) considering surface use plans of operation, including 
     the timeframes in which the plans are considered, and any 
     recommendations for improving and expediting the process; and
       (D) identifying stipulations to address site-specific 
     concerns and conditions, including those stipulations 
     relating to the environment and resource use conflicts.
       (b) Report.--Not later than 180 days after the date of 
     enactment of this Act, the Secretary of the Interior and the 
     Secretary of Agriculture shall transmit a report to Congress 
     that describes--
       (1) actions taken under section 3 of Executive Order No. 
     13212 (42 U.S.C. 13201 note); and
       (2) actions taken or any plans to improve the Federal 
     onshore oil and gas leasing program.

     SEC. 343. MANAGEMENT OF FEDERAL OIL AND GAS LEASING PROGRAMS.

       (a) Timely Action on Leases and Permits.--To ensure timely 
     action on oil and gas leases and applications for permits to 
     drill on land otherwise available for leasing, the Secretary 
     of the Interior (in this section referred to as the 
     ``Secretary'') shall--
       (1) ensure expeditious compliance with 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 the public; and
       (3) improve the collection, storage, and retrieval of 
     information relating to the leasing activities.
       (b) Best Management Practices.--
       (1) In general.--Not later than 18 months after the date of 
     enactment of this Act, the Secretary shall develop and 
     implement best management practices to--
       (A) improve the administration of the onshore oil and gas 
     leasing program under the Mineral Leasing Act (30 U.S.C. 181 
     et seq.); and
       (B) ensure timely action on oil and gas leases and 
     applications for permits to drill on lands otherwise 
     available for leasing.
       (2) Considerations.--In developing the best management 
     practices under paragraph (1), the Secretary shall consider 
     any recommendations from the review under section 342.
       (3) Regulations.--Not later than 180 days after the 
     development of best management practices under paragraph (1), 
     the Secretary shall publish, for public comment, proposed 
     regulations that set forth specific timeframes for processing 
     leases and applications in accordance with the practices, 
     including deadlines for--
       (A) approving or disapproving resource management plans and 
     related documents, lease applications, and surface use plans; 
     and
       (B) related administrative appeals.
       (c) Improved Enforcement.--The Secretary shall improve 
     inspection and enforcement of oil and gas activities, 
     including enforcement of terms and conditions in permits to 
     drill.
       (d) Authorization of Appropriations.--In addition to 
     amounts authorized to be appropriated to carry out section 17 
     of the Mineral Leasing Act (30 U.S.C. 226), there are 
     authorized to be appropriated to the Secretary for each of 
     fiscal years 2004 through 2007--
       (1) $40,000,000 to carry out subsections (a) and (b); and
       (2) $20,000,000 to carry out subsection (c).

     SEC. 344. CONSULTATION REGARDING OIL AND GAS LEASING ON 
                   PUBLIC LAND.

       (a) In General.--Not later than 180 days after the date of 
     enactment of this Act, the Secretary of the Interior and the 
     Secretary of Agriculture shall enter into a memorandum of 
     understanding regarding oil and gas leasing on--
       (1) public lands under the jurisdiction of the Secretary of 
     the Interior; and
       (2) National Forest System lands under the jurisdiction of 
     the Secretary of Agriculture.
       (b) Contents.--The memorandum of understanding shall 
     include provisions that--
       (1) establish administrative procedures and lines of 
     authority that ensure timely processing of oil and gas lease 
     applications, surface use plans of operation, and 
     applications for permits to drill, including steps for 
     processing surface use plans and applications for permits to 
     drill consistent with the timelines established by the 
     amendment made by section 348;
       (2) eliminate duplication of effort by providing for 
     coordination of planning and environmental compliance 
     efforts; and
       (3) ensure that lease stipulations are--
       (A) applied consistently;
       (B) coordinated between agencies; and
       (C) only as restrictive as necessary to protect the 
     resource for which the stipulations are applied.
       (c) Data Retrieval System.--
       (1) In general.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary of the Interior and the 
     Secretary of Agriculture shall establish a joint data 
     retrieval system that is capable of--
       (A) tracking applications and formal requests made in 
     accordance with procedures of the Federal onshore oil and gas 
     leasing program; and
       (B) providing information regarding the status of the 
     applications and requests within the Department of the 
     Interior and the Department of Agriculture.
       (2) Resource mapping.--Not later than 2 years after the 
     date of enactment of this Act, the Secretary of the Interior 
     and the Secretary of Agriculture shall establish a joint 
     Geographic Information System mapping system for use in--
       (A) tracking surface resource values to aid in resource 
     management; and
       (B) processing surface use plans of operation and 
     applications for permits to drill.

     SEC. 345. ESTIMATES OF OIL AND GAS RESOURCES UNDERLYING 
                   ONSHORE FEDERAL LAND.

       (a) Assessment.--Section 604 of the Energy Act of 2000 (42 
     U.S.C. 6217) is amended--
       (1) in subsection (a)--
       (A) in paragraph (1)--
       (i) by striking ``reserve''; and
       (ii) by striking ``and'' after the semicolon; and
       (B) by striking paragraph (2) and inserting the following:
       ``(2) the extent and nature of any restrictions or 
     impediments to the development of the resources, including--
       ``(A) impediments to the timely granting of leases;
       ``(B) post-lease restrictions, impediments, or delays on 
     development for conditions of approval, applications for 
     permits to drill, or processing of environmental permits; and
       ``(C) permits or restrictions associated with transporting 
     the resources for entry into commerce; and
       ``(3) the quantity of resources not produced or introduced 
     into commerce because of the restrictions.'';
       (2) in subsection (b)--
       (A) by striking ``reserve'' and inserting ``resource''; and
       (B) by striking ``publically'' and inserting ``publicly''; 
     and
       (3) by striking subsection (d) and inserting the following:
       ``(d) Assessments.--Using the inventory, the Secretary of 
     Energy shall make periodic assessments of economically 
     recoverable resources accounting for a range of parameters 
     such as current costs, commodity prices, technology, and 
     regulations.''.
       (b) Methodology.--The Secretary of the Interior shall use 
     the same assessment methodology across all geological 
     provinces, areas, and

[[Page H11233]]

     regions in preparing and issuing national geological 
     assessments to ensure accurate comparisons of geological 
     resources.

     SEC. 346. COMPLIANCE WITH EXECUTIVE ORDER 13211; ACTIONS 
                   CONCERNING REGULATIONS THAT SIGNIFICANTLY 
                   AFFECT ENERGY SUPPLY, DISTRIBUTION, OR USE.

       (a) Requirement.--The head of each Federal agency shall 
     require that before the Federal agency takes any action that 
     could have a significant adverse effect on the supply of 
     domestic energy resources from Federal public land, the 
     Federal agency taking the action shall comply with Executive 
     Order No. 13211 (42 U.S.C. 13201 note).
       (b) Guidance.--Not later than 180 days after the date of 
     enactment of this Act, the Secretary of Energy shall publish 
     guidance for purposes of this section describing what 
     constitutes a significant adverse effect on the supply of 
     domestic energy resources under Executive Order No. 13211 (42 
     U.S.C. 13201 note).
       (c) Memorandum of Understanding.--The Secretary of the 
     Interior and the Secretary of Agriculture shall include in 
     the memorandum of understanding under section 344 provisions 
     for implementing subsection (a) of this section.

     SEC. 347. PILOT PROJECT TO IMPROVE FEDERAL PERMIT 
                   COORDINATION.

       (a) Establishment.--The Secretary of the Interior (in this 
     section referred to as the ``Secretary'') shall establish a 
     Federal Permit Streamlining Pilot Project (in this section 
     referred to as the ``Pilot Project'').
       (b) Memorandum of Understanding.--
       (1) In general.--Not later than 90 days after the date of 
     enactment of this Act, the Secretary shall enter into a 
     memorandum of understanding with the Secretary of 
     Agriculture, the Administrator of the Environmental 
     Protection Agency, and the Chief of Engineers of the Army 
     Corps of Engineers for purposes of this section.
       (2) State participation.--The Secretary may request that 
     the Governors of Wyoming, Montana, Colorado, Utah, and New 
     Mexico be signatories to the memorandum of understanding.
       (c) Designation of Qualified Staff.--
       (1) In general.--Not later than 30 days after the date of 
     the signing of the memorandum of understanding under 
     subsection (b), all Federal signatory parties shall assign to 
     each of the field offices identified in subsection (d), on a 
     nonreimbursable basis, an employee who has expertise in the 
     regulatory issues relating to the office in which the 
     employee is employed, including, as applicable, particular 
     expertise in--
       (A) the consultations and the preparation of biological 
     opinions under section 7 of the Endangered Species Act of 
     1973 (16 U.S.C. 1536);
       (B) permits under section 404 of Federal Water Pollution 
     Control Act (33 U.S.C. 1344);
       (C) regulatory matters under the Clean Air Act (42 U.S.C. 
     7401 et seq.);
       (D) planning under the National Forest Management Act of 
     1976 (16 U.S.C. 472a et seq.); and
       (E) the preparation of analyses under the National 
     Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
       (2) Duties.--Each employee assigned under paragraph (1) 
     shall--
       (A) not later than 90 days after the date of assignment, 
     report to the Bureau of Land Management Field Managers in the 
     office to which the employee is assigned;
       (B) be responsible for all issues relating to the 
     jurisdiction of the home office or agency of the employee; 
     and
       (C) participate as part of the team of personnel working on 
     proposed energy projects, planning, and environmental 
     analyses.
       (d) Field Offices.--The following Bureau of Land Management 
     Field Offices shall serve as the Pilot Project offices:
       (1) Rawlins, Wyoming.
       (2) Buffalo, Wyoming.
       (3) Miles City, Montana
       (4) Farmington, New Mexico.
       (5) Carlsbad, New Mexico.
       (6) Glenwood Springs, Colorado.
       (7) Vernal, Utah.
       (e) Reports.--Not later than 3 years after the date of 
     enactment of this Act, the Secretary shall transmit to 
     Congress a report that--
       (1) outlines the results of the Pilot Project to date; and
       (2) makes a recommendation to the President regarding 
     whether the Pilot Project should be implemented throughout 
     the United States.
       (f) Additional Personnel.--The Secretary shall assign to 
     each field office identified in subsection (d) any additional 
     personnel that are necessary to ensure the effective 
     implementation of--
       (1) the Pilot Project; and
       (2) other programs administered by the field offices, 
     including inspection and enforcement relating to energy 
     development on Federal land, in accordance with the multiple 
     use mandate of the Federal Land Policy and Management Act of 
     1976 (43 U.S.C. 1701 et seq).
       (g) Savings Provision.--Nothing in this section affects--
       (1) the operation of any Federal or State law; or
       (2) any delegation of authority made by the head of a 
     Federal agency whose employees are participating in the Pilot 
     Project.

     SEC. 348. DEADLINE FOR CONSIDERATION OF APPLICATIONS FOR 
                   PERMITS.

       Section 17 of the Mineral Leasing Act (30 U.S.C. 226) is 
     amended by adding at the end the following:
       ``(p) Deadlines for Consideration of Applications for 
     Permits.--
       ``(1) In general.--Not later than 10 days after the date on 
     which the Secretary receives an application for any permit to 
     drill, the Secretary shall--
       ``(A) notify the applicant that the application is 
     complete; or
       ``(B) notify the applicant that information is missing and 
     specify any information that is required to be submitted for 
     the application to be complete.
       ``(2) Issuance or deferral.--Not later than 30 days after 
     the applicant for a permit has submitted a complete 
     application, the Secretary shall--
       ``(A) issue the permit; or
       ``(B)(i) defer decision on the permit; and
       ``(ii) provide to the applicant a notice that specifies any 
     steps that the applicant could take for the permit to be 
     issued.
       ``(3) Requirements for deferred applications.--
       ``(A) In general.--If the Secretary provides notice under 
     paragraph (2)(B)(ii), the applicant shall have a period of 2 
     years from the date of receipt of the notice in which to 
     complete all requirements specified by the Secretary, 
     including providing information needed for compliance with 
     the National Environmental Policy Act of 1969 (42 U.S.C. 4321 
     et seq.).
       ``(B) Issuance of decision on permit.--If the applicant 
     completes the requirements within the period specified in 
     subparagraph (A), the Secretary shall issue a decision on the 
     permit not later than 10 days after the date of completion of 
     the requirements described in subparagraph (A).
       ``(C) Denial of permit.--If the applicant does not complete 
     the requirements within the period specified in subparagraph 
     (A), the Secretary shall deny the permit.
       ``(q) Report.--On a quarterly basis, each field office of 
     the Bureau of Land Management and the Forest Service shall 
     transmit to the Secretary of the Interior or the Secretary of 
     Agriculture, respectively, a report that--
       ``(1) specifies the number of applications for permits to 
     drill received by the field office in the period covered by 
     the report; and
       ``(2) describes how each of the applications was disposed 
     of by the field office.''.

     SEC. 349. CLARIFICATION OF FAIR MARKET RENTAL VALUE 
                   DETERMINATIONS FOR PUBLIC LAND AND FOREST 
                   SERVICE RIGHTS-OF-WAY.

       (a) Linear Rights-Of-Way Under Federal Land Policy and 
     Management Act of 1976.--Section 504 of the Federal Land 
     Policy and Management Act of 1976 (43 U.S.C. 1764) is amended 
     by adding at the end the following:
       ``(k) Determination of Fair Market Value of Linear Rights-
     Of-Way.--
       ``(1) In general.--Effective beginning on the date of the 
     issuance of the rules required by paragraph (2), for purposes 
     of subsection (g), the Secretary concerned shall determine 
     the fair market value for the use of land encumbered by a 
     linear right-of-way granted, issued, or renewed under this 
     title using the valuation method described in paragraphs (2), 
     (3), and (4).
       ``(2) Revisions.--Not later than 1 year after the date of 
     enactment of this subsection--
       ``(A) the Secretary of the Interior shall amend section 
     2803.1-2 of title 43, Code of Federal Regulations, as in 
     effect on the date of enactment of this subsection, to revise 
     the per acre rental fee zone value schedule by State, county, 
     and type of linear right-of-way use to reflect current values 
     of land in each zone; and
       ``(B) the Secretary of Agriculture shall make the same 
     revision for linear rights-of-way granted, issued, or renewed 
     under this title on National Forest System land.
       ``(3) Updates.--The Secretary concerned shall annually 
     update the schedule revised under paragraph (2) by 
     multiplying the current year's rental per acre by the annual 
     change, second quarter to second quarter (June 30 to June 30) 
     in the Gross National Product Implicit Price Deflator Index 
     published in the Survey of Current Business of the Department 
     of Commerce, Bureau of Economic Analysis.
       ``(4) Review.--If the cumulative change in the index 
     referred to in paragraph (3) exceeds 30 percent, or the 
     change in the 3-year average of the 1-year Treasury interest 
     rate used to determine per acre rental fee zone values 
     exceeds plus or minus 50 percent, the Secretary concerned 
     shall conduct a review of the zones and rental per acre 
     figures to determine whether the value of Federal land has 
     differed sufficiently from the index referred to in paragraph 
     (3) to warrant a revision in the base zones and rental per 
     acre figures. If, as a result of the review, the Secretary 
     concerned determines that such a revision is warranted, the 
     Secretary concerned shall revise the base zones and rental 
     per acre figures accordingly. Any revision of base zones and 
     rental per acre figure shall only affect lease rental rates 
     at inception or renewal.''.
       (b) Rights-Of-Way Under Mineral Leasing Act.--Section 28(l) 
     of the Mineral Leasing Act (30 U.S.C. 185(l)) is amended by 
     inserting before the period at the end the following: ``using 
     the valuation method described in section 2803.1-2 of title 
     43, Code of Federal Regulations, as revised in accordance 
     with section 504(k) of the Federal Land Policy and Management 
     Act of 1976 (43 U.S.C. 1764(k))''.

     SEC. 350. ENERGY FACILITY RIGHTS-OF-WAY AND CORRIDORS ON 
                   FEDERAL LAND.

       (a) Report to Congress.--
       (1) In general.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary of Agriculture and the 
     Secretary of the Interior, in consultation with the Secretary 
     of Commerce, the Secretary of Defense, the Secretary of 
     Energy, and the Federal Energy Regulatory Commission, shall 
     submit to Congress a joint report--
       (A) that addresses--
       (i) the location of existing rights-of-way and designated 
     and de facto corridors for oil and gas pipelines and electric 
     transmission and distribution facilities on Federal land; and
       (ii) opportunities for additional oil and gas pipeline and 
     electric transmission capacity within those rights-of-way and 
     corridors; and
       (B) that includes a plan for making available, on request, 
     to the appropriate Federal, State,

[[Page H11234]]

     and local agencies, tribal governments, and other persons 
     involved in the siting of oil and gas pipelines and 
     electricity transmission facilities Geographic Information 
     System-based information regarding the location of the 
     existing rights-of-way and corridors and any planned rights-
     of-way and corridors.
       (2) Consultations and considerations.--In preparing the 
     report, the Secretary of the Interior and the Secretary of 
     Agriculture shall consult with--
       (A) other agencies of Federal, State, tribal, or local 
     units of government, as appropriate;
       (B) persons involved in the siting of oil and gas pipelines 
     and electric transmission facilities; and
       (C) other interested members of the public.
       (3) Limitation.--The Secretary of the Interior and the 
     Secretary of Agriculture shall limit the distribution of the 
     report and Geographic Information System-based information 
     referred to in paragraph (1) as necessary for national and 
     infrastructure security reasons, if either Secretary 
     determines that the information may be withheld from public 
     disclosure under a national security or other exception under 
     section 552(b) of title 5, United States Code.
       (b) Corridor Designations.--
       (1) 11 contiguous western states.--Not later than 2 years 
     after the date of enactment of this Act, the Secretary of 
     Agriculture, the Secretary of Commerce, the Secretary of 
     Defense, the Secretary of Energy, and the Secretary of the 
     Interior, in consultation with the Federal Energy Regulatory 
     Commission and the affected utility industries, shall 
     jointly--
       (A) designate, under title V of the Federal Land Policy and 
     Management Act of 1976 (43 U.S.C. 1761 et seq.) and other 
     applicable Federal laws, corridors for oil and gas pipelines 
     and electricity transmission and facilities on Federal land 
     in the eleven contiguous Western States (as defined in 
     section 103 of the Federal Land Policy and Management Act of 
     1976 (43 U.S.C. 1702));
       (B) perform any environmental reviews that may be required 
     to complete the designations of corridors for the facilities 
     on Federal land in the eleven contiguous Western States; and
       (C) incorporate the designated corridors into--
       (i) the relevant departmental and agency land use and 
     resource management plans; or
       (ii) equivalent plans.
       (2) Other states.--Not later than 4 years after the date of 
     enactment of this Act, the Secretary of Agriculture, the 
     Secretary of Commerce, the Secretary of Defense, the 
     Secretary of Energy, and the Secretary of the Interior, in 
     consultation with the Federal Energy Regulatory Commission 
     and the affected utility industries, shall jointly--
       (A) identify corridors for oil and gas pipelines and 
     electricity transmission and distribution facilities on 
     Federal land in the States other than those described in 
     paragraph (1); and
       (B) schedule prompt action to identify, designate, and 
     incorporate the corridors into the land use plan.
       (3) Ongoing responsibilities.--After completing the 
     requirements under paragraphs (1) and (2), the Secretary of 
     Agriculture, the Secretary of Commerce, the Secretary of 
     Defense, the Secretary of Energy, and the Secretary of the 
     Interior, with respect to lands under their respective 
     jurisdictions, in consultation with the Federal Energy 
     Regulatory Commission and the affected utility industries, 
     shall establish procedures that--
       (A) ensure that additional corridors for oil and gas 
     pipelines and electricity transmission and distribution 
     facilities on Federal land are promptly identified and 
     designated; and
       (B) expedite applications to construct or modify oil and 
     gas pipelines and electricity transmission and distribution 
     facilities within the corridors, taking into account prior 
     analyses and environmental reviews undertaken during the 
     designation of corridors.
       (c) Considerations.--In carrying out this section, the 
     Secretaries shall take into account the need for upgraded and 
     new electricity transmission and distribution facilities to--
       (1) improve reliability;
       (2) relieve congestion; and
       (3) enhance the capability of the national grid to deliver 
     electricity.
       (d) Definition of Corridor.--
       (1) In general.--In this section and title V of the Federal 
     Land Policy and Management Act of 1976 (43 U.S.C. 1761 et 
     seq.), the term ``corridor'' means--
       (A) a linear strip of land--
       (i) with a width determined with consideration given to 
     technological, environmental, and topographical factors; and
       (ii) that contains, or may in the future contain, 1 or more 
     utility, communication, or transportation facilities;
       (B) a land use designation that is established--
       (i) by law;
       (ii) by Secretarial Order;
       (iii) through the land use planning process; or
       (iv) by other management decision; and
       (C) a designation made for the purpose of establishing the 
     preferred location of compatible linear facilities and land 
     uses.
       (2) Specifications of corridor.--On designation of a 
     corridor under this section, the centerline, width, and 
     compatible uses of a corridor shall be specified.

     SEC. 351. CONSULTATION REGARDING ENERGY RIGHTS-OF-WAY ON 
                   PUBLIC LAND.

       (a) Memorandum of Understanding.--
       (1) In general.--Not later than 6 months after the date of 
     enactment of this Act, the Secretary of Energy, in 
     consultation with the Secretary of the Interior, the 
     Secretary of Agriculture, and the Secretary of Defense with 
     respect to lands under their respective jurisdictions, shall 
     enter into a memorandum of understanding to coordinate all 
     applicable Federal authorizations and environmental reviews 
     relating to a proposed or existing utility facility. To the 
     maximum extent practicable under applicable law, the 
     Secretary of Energy shall, to ensure timely review and permit 
     decisions, coordinate such authorizations and reviews 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.
       (2) Contents.--The memorandum of understanding shall 
     include provisions that--
       (A) establish--
       (i) a unified right-of-way application form; and
       (ii) an administrative procedure for processing right-of-
     way applications, including lines of authority, steps in 
     application processing, and timeframes for application 
     processing;
       (B) provide for coordination of planning relating to the 
     granting of the rights-of-way;
       (C) provide for 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
       (D) provide for coordination of use of right-of-way 
     stipulations to achieve consistency.
       (b) Natural Gas Pipelines.--
       (1) In general.--With respect to permitting activities for 
     interstate natural gas pipelines, the May 2002 document 
     entitled ``Interagency Agreement On Early Coordination Of 
     Required Environmental And Historic Preservation Reviews 
     Conducted In Conjunction With The Issuance Of Authorizations 
     To Construct And Operate Interstate Natural Gas Pipelines 
     Certificated By The Federal Energy Regulatory Commission'' 
     shall constitute compliance with subsection (a).
       (2) Report.--
       (A) In general.--Not later than 1 year after the date of 
     enactment of this Act, and every 2 years thereafter, agencies 
     that are signatories to the document referred to in paragraph 
     (1) shall transmit to Congress a report on how the agencies 
     under the jurisdiction of the Secretaries are incorporating 
     and implementing the provisions of the document referred to 
     in paragraph (1).
       (B) Contents.--The report shall address--
       (i) efforts to implement the provisions of the document 
     referred to in paragraph (1);
       (ii) whether the efforts have had a streamlining effect;
       (iii) further improvements to the permitting process of the 
     agency; and
       (iv) recommendations for inclusion of State and tribal 
     governments in a coordinated permitting process.
       (c) Definition of Utility Facility.--In this section, the 
     term ``utility facility'' means any privately, publicly, or 
     cooperatively owned line, facility, or system--
       (1) for the transportation of--
       (A) oil, natural gas, synthetic liquid fuel, or gaseous 
     fuel;
       (B) any refined product produced from oil, natural gas, 
     synthetic liquid fuel, or gaseous fuel; or
       (C) products in support of the production of material 
     referred to in subparagraph (A) or (B);
       (2) for storage and terminal facilities in connection with 
     the production of material referred to in paragraph (1); or
       (3) for the generation, transmission, and distribution of 
     electric energy.

     SEC. 352. RENEWABLE ENERGY ON FEDERAL LAND.

       (a) Report.--
       (1) In general.--Not later than 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 transmit to Congress a report that includes 
     recommendations on opportunities to develop renewable energy 
     on--
       (A) public lands under the jurisdiction of the Secretary of 
     the Interior; and
       (B) National Forest System lands under the jurisdiction of 
     the Secretary of Agriculture.
       (2) Contents.--The report shall include--
       (A) 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;
       (B) an analysis of--
       (i) the use of rights-of-way, leases, or other methods to 
     develop renewable energy on such lands;
       (ii) the anticipated benefits of grants, loans, tax 
     credits, or other provisions to promote renewable energy 
     development on such lands; and
       (iii) any issues that the Secretary of the Interior or the 
     Secretary of Agriculture have encountered in managing 
     renewable energy projects on such lands, believe are likely 
     to arise in relation to the development of renewable energy 
     on such lands;
       (C) 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 the Department of 
     Defense that would be suitable for development for renewable 
     energy, and any recommended statutory and regulatory 
     mechanisms for such development; and
       (D) any recommendations relating to the issues addressed in 
     the report.
       (b) National Academy of Sciences Study.--
       (1) In general.--Not later than 90 days after the date of 
     enactment of this Act, 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 energy (including tidal, wave, 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.

[[Page H11235]]

       (2) Transmittal.--The results of the study shall be 
     transmitted to Congress not later than 2 years after the date 
     of enactment of this Act.
       (c) Generation Capacity of Electricity From Renewable 
     Energy Resources on Public Land.--The Secretary of the 
     Interior shall, not later than 10 years after the date of 
     enactment of this Act, seek to approve renewable energy 
     projects located (or to be located) on public lands with a 
     generation capacity of at least 10,000 megawatts of 
     electricity.

     SEC. 353. ELECTRICITY TRANSMISSION LINE RIGHT-OF-WAY, 
                   CLEVELAND NATIONAL FOREST AND ADJACENT PUBLIC 
                   LAND, CALIFORNIA.

       (a) Issuance.--
       (1) In general.--Not later than 60 days after the 
     completion of the environmental reviews under subsection (c), 
     the Secretary of the Interior and the Secretary of 
     Agriculture shall issue all necessary grants, easements, 
     permits, plan amendments, and other approvals to allow for 
     the siting and construction of a high-voltage electricity 
     transmission line right-of-way running approximately north to 
     south through the Trabuco Ranger District of the Cleveland 
     National Forest in the State of California and adjacent lands 
     under the jurisdiction of the Bureau of Land Management and 
     the Forest Service.
       (2) Inclusions.--The right-of-way approvals under paragraph 
     (1) shall provide all necessary Federal authorization from 
     the Secretary of the Interior and the Secretary of 
     Agriculture for the routing, construction, operation, and 
     maintenance of a 500-kilovolt transmission line capable of 
     meeting the long-term electricity transmission needs of the 
     region between the existing Valley-Serrano transmission line 
     to the north and the Telega-Escondido transmission line to 
     the south, and for connecting to future generating capacity 
     that may be developed in the region.
       (b) Protection of Wilderness Areas.--The Secretary of the 
     Interior and the Secretary of Agriculture shall not allow any 
     portion of a transmission line right-of-way corridor 
     identified in subsection (a) to enter any identified 
     wilderness area in existence as of the date of enactment of 
     this Act.
       (c) Environmental and Administrative Reviews.--
       (1) Department of interior or local agency.--The Secretary 
     of the Interior, acting through the Director of the Bureau of 
     Land Management, shall be the lead Federal agency with 
     overall responsibility to ensure completion of required 
     environmental and other reviews of the approvals to be issued 
     under subsection (a).
       (2) National forest system land.--For the portions of the 
     corridor on National Forest System lands, the Secretary of 
     Agriculture shall complete all required environmental reviews 
     and administrative actions in coordination with the Secretary 
     of the Interior.
       (3) Expeditious completion.--The reviews required for 
     issuance of the approvals under subsection (a) shall be 
     completed not later than 1 year after the date of the 
     enactment of this Act.
       (d) Other Terms and Conditions.--The transmission line 
     right-of-way shall be subject to such terms and conditions as 
     the Secretary of the Interior and the Secretary of 
     Agriculture consider necessary, based on the environmental 
     reviews under subsection (c), to protect the value of 
     historic, cultural, and natural resources under the 
     jurisdiction of the Secretary of the Interior or the 
     Secretary of Agriculture.
       (e) Preference Among Proposals.--The Secretary of the 
     Interior and the Secretary of Agriculture shall give a 
     preference to any application or preapplication proposal for 
     a transmission line right-of-way referred to in subsection 
     (a) that was submitted before December 31, 2002, over all 
     other applications and proposals for the same or a similar 
     right-of-way submitted on or after that date.

     SEC. 354. SENSE OF CONGRESS REGARDING DEVELOPMENT OF MINERALS 
                   UNDER PADRE ISLAND NATIONAL SEASHORE.

       (a) Findings.--Congress finds the following:
       (1) Pursuant to Public Law 87-712 (16 U.S.C. 459d et seq.; 
     popularly known as the ``Federal Enabling Act'') and various 
     deeds and actions under that Act, the United States is the 
     owner of only the surface estate of certain lands 
     constituting the Padre Island National Seashore.
       (2) Ownership of the oil, gas, and other minerals in the 
     subsurface estate of the lands constituting the Padre Island 
     National Seashore was never acquired by the United States, 
     and ownership of those interests is held by the State of 
     Texas and private parties.
       (3) Public Law 87-712 (16 U.S.C. 459d et seq.)--
       (A) expressly contemplated that the United States would 
     recognize the ownership and future development of the oil, 
     gas, and other minerals in the subsurface estate of the lands 
     constituting the Padre Island National Seashore by the owners 
     and their mineral lessees; and
       (B) recognized that approval of the State of Texas was 
     required to create Padre Island National Seashore.
       (4) Approval was given for the creation of Padre Island 
     National Seashore by the State of Texas through Tex. Rev. 
     Civ. Stat. Ann. Art. 6077(t) (Vernon 1970), which expressly 
     recognized that development of the oil, gas, and other 
     minerals in the subsurface of the lands constituting Padre 
     Island National Seashore would be conducted with full rights 
     of ingress and egress under the laws of the State of Texas.
       (b) Sense of Congress.--It is the sense of Congress that 
     with regard to Federal law, any regulation of the development 
     of oil, gas, or other minerals in the subsurface of the lands 
     constituting Padre Island National Seashore should be made as 
     if those lands retained the status that the lands had on 
     September 27, 1962.

     SEC. 355. ENCOURAGING PROHIBITION OF OFF-SHORE DRILLING IN 
                   THE GREAT LAKES.

       Congress encourages--
       (1) the States of Illinois, Michigan, New York, 
     Pennsylvania, and Wisconsin to continue to prohibit offshore 
     drilling in the Great Lakes for oil and gas; and
       (2) the States of Indiana, Minnesota, and Ohio to enact a 
     prohibition of such drilling.

     SEC. 356. FINGER LAKES NATIONAL FOREST WITHDRAWAL.

       All Federal land within the boundary of Finger Lakes 
     National Forest in the State of New York is withdrawn from--
       (1) all forms of entry, appropriation, or disposal under 
     the public land laws; and
       (2) disposition under all laws relating to oil and gas 
     leasing.

     SEC. 357. STUDY ON LEASE EXCHANGES IN THE ROCKY MOUNTAIN 
                   FRONT.

       (a) Definitions.--For the purposes of this section:
       (1) Badger-two medicine area.--The term ``Badger-Two 
     Medicine Area'' means the Forest Service land located in--
       (A) T. 31 N., R. 12-13 W.;
       (B) T. 30 N., R. 11-13 W.;
       (C) T. 29 N., R. 10-16 W.; and
       (D) T. 28 N., R. 10-14 W.
       (2) Blackleaf area.--The term ``Blackleaf Area'' means the 
     Federal land owned by the Forest Service and Bureau of Land 
     Management that is located in--
       (A) T. 27 N., R. 9 W.;
       (B) T. 26 N., R. 9-10 W.;
       (C) T. 25 N., R. 8-10 W.; and
       (D) T. 24 N., R. 8-9 W.
       (3) Eligible lessee.--The term ``eligible lessee'' means a 
     lessee under a nonproducing lease.
       (4) Nonproducing lease.--The term ``nonproducing lease'' 
     means a Federal oil or gas lease--
       (A) that is in existence and in good standing on the date 
     of enactment of this Act; and
       (B) that is located in the Badger-Two Medicine Area or the 
     Blackleaf Area.
       (5) Secretary.--The term ``Secretary'' means the Secretary 
     of the Interior.
       (6) State.--The term ``State'' means the State of Montana.
       (b) Evaluation.--
       (1) In general.--The Secretary, in consultation with the 
     Governor of the State, and the eligible lessees, shall 
     evaluate opportunities for domestic oil and gas production 
     through the exchange of the nonproducing leases.
       (2) Requirements.--In carrying out the evaluation under 
     subsection (a), the Secretary shall--
       (A) consider opportunities for domestic production of oil 
     and gas through--
       (i) the exchange of the nonproducing leases for oil and gas 
     lease tracts of comparable value in the State; and
       (ii) the issuance of bidding, royalty, or rental credits 
     for Federal oil and gas leases in the State in exchange for 
     the cancellation of the nonproducing leases;
       (B) consider any other appropriate means to exchange, or 
     provide compensation for the cancellation of, nonproducing 
     leases, subject to the consent of the eligible lessees;
       (C) consider the views of any interested persons, including 
     the State;
       (D) determine the level of interest of the eligible lessees 
     in exchanging the nonproducing leases;
       (E) assess the economic impact on the lessees and the State 
     of lease exchange, lease cancellation, and final judicial or 
     administrative decisions related to the nonproducing leases; 
     and
       (F) provide recommendations on--
       (i) whether to pursue an exchange of the nonproducing 
     leases;
       (ii) any changes in laws (including regulations) that are 
     necessary for the Secretary to carry out the exchange; and
       (iii) any other appropriate means to exchange or provide 
     compensation for the cancellation of a nonproducing lease, 
     subject to the consent of the eligible lessee.
       (c) Valuation of Nonproducing Leases.--For the purpose of 
     the evaluation under subsection (a), the value of a 
     nonproducing lease shall be an amount equal to the difference 
     between--
       (1) the sum of--
       (A) the amount paid by the eligible lessee for the 
     nonproducing lease;
       (B) any direct expenditures made by the eligible lessee 
     before the transmittal of the report in subsection (c) 
     associated with the exploration and development of the 
     nonproducing lease; and
       (C) interest on any amounts under subparagraphs (A) and (B) 
     during the period beginning on the date on which the amount 
     was paid and ending on the date on which credits are issued 
     under subsection (b)(2)(A)(ii); and
       (2) the sum of the revenues from the nonproducing lease.
       (d) Report to Congress.--Not later than 2 years after the 
     date of the enactment of this Act, the Secretary shall 
     initiate the evaluation in subsection (b) and transmit to 
     Congress a report on the evaluation.

     SEC. 358. FEDERAL COALBED METHANE REGULATION.

       Any State currently on the list of Affected States 
     established under section 1339(b) of the Energy Policy Act of 
     1992 (42 U.S.C. 13368(b)) shall be removed from the list if, 
     not later than 3 years after the date of enactment of this 
     Act, the State takes, or prior to the date of enactment has 
     taken, any of the actions required for removal from the list 
     under such section 1339(b).

     SEC. 359. LIVINGSTON PARISH MINERAL RIGHTS TRANSFER.

       (a) Amendments.--Section 102 of Public Law 102-562 (106 
     Stat. 4234) is amended--
       (1) by striking ``(a) In General.--
       (2) by striking ``and subject to the reservation in 
     subsection (b),''; and

[[Page H11236]]

       (3) by striking subsection (b).
       (b) Implementation of Amendment.--The Secretary of the 
     Interior shall execute the legal instruments necessary to 
     effectuate the amendment made by subsection (a)(3).
                Subtitle D--Alaska Natural Gas Pipeline

     SEC. 371. SHORT TITLE.

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

     SEC. 372. DEFINITIONS.

       In this subtitle:
       (1) Alaska natural gas.--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) Alaska natural gas transportation project.--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--
       (A) the Alaska Natural Gas Transportation Act of 1976 (15 
     U.S.C. 719 et seq.); or
       (B) section 373.
       (3) Alaska natural gas transportation system.--The term 
     ``Alaska natural gas transportation system'' means the Alaska 
     natural gas transportation project authorized under the 
     Alaska Natural Gas Transportation Act of 1976 (15 U.S.C. 719 
     et seq.) and designated and described in section 2 of the 
     President's decision.
       (4) Commission.--The term ``Commission'' means the Federal 
     Energy Regulatory Commission.
       (5) Federal coordinator.--The term ``Federal Coordinator'' 
     means the head of the Office of the Federal Coordinator for 
     Alaska Natural Gas Transportation Projects established by 
     section 376(a).
       (6) President's decision.--The term ``President's 
     decision'' means the decision and report to Congress on the 
     Alaska natural gas transportation system--
       (A) issued by the President on September 22, 1977, in 
     accordance with section 7 of the Alaska Natural Gas 
     Transportation Act of 1976 (15 U.S.C. 719e); and
       (B) approved by Public Law 95-158 (15 U.S.C. 719f note; 91 
     Stat. 1268).
       (7) Secretary.--The term ``Secretary'' means the Secretary 
     of Energy.
       (8) State.--The term ``State'' means the State of Alaska.

     SEC. 373. ISSUANCE OF CERTIFICATE OF PUBLIC CONVENIENCE AND 
                   NECESSITY.

       (a) Authority of the Commission.--Notwithstanding the 
     Alaska Natural Gas Transportation Act of 1976 (15 U.S.C. 719 
     et seq.), the Commission may, in accordance with 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) In general.--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) Considerations.--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 the project to markets 
     in the contiguous United States.
       (c) Expedited Approval Process.--Not later than 60 days 
     after the date of issuance of the final environmental impact 
     statement under section 374 for an Alaska natural gas 
     transportation project, the Commission shall issue a final 
     order granting or denying any application for a certificate 
     of public convenience and necessity for the project under 
     section 7(c) of the Natural Gas Act (15 U.S.C. 717f(c)) and 
     this section.
       (d) Prohibition of 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 land within the 
     Prudhoe Bay oil and gas lease area may be granted for any 
     pipeline that follows a route that--
       (1) traverses land beneath navigable waters (as defined in 
     section 2 of the Submerged Lands Act (43 U.S.C. 1301)) 
     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.--
       (1) In general.--Not later than 120 days after the date of 
     enactment of this Act, the Commission shall issue regulations 
     governing the conduct of open seasons for Alaska natural gas 
     transportation projects (including procedures for the 
     allocation of capacity).
       (2) Regulations.--The regulations referred to in paragraph 
     (1) shall--
       (A) include the criteria for and timing of any open 
     seasons;
       (B) promote competition in the exploration, development, 
     and production of Alaska natural gas; and
       (C) for any open season for capacity exceeding the initial 
     capacity, provide the opportunity for the transportation of 
     natural gas other than from the Prudhoe Bay and Point Thomson 
     units.
       (3) Applicability.--Except in a case in which an expansion 
     is ordered in accordance with section 375, 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 issued under 
     paragraph (1).
       (f) Projects in the Contiguous United States.--
       (1) In general.--An application 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 in accordance with the Natural Gas Act (15 
     U.S.C. 717a et seq.).
       (2) Expansion.--To the extent that a pipeline facility 
     described in paragraph (1) includes the expansion of any 
     facility constructed in accordance with the Alaska Natural 
     Gas Transportation Act of 1976 (15 U.S.C. 719 et seq.), 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 the holder 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.--
       (1) In general.--Except as provided in paragraph (2), the 
     Commission, on a request by the State and after a hearing, 
     may provide for reasonable access to the Alaska natural gas 
     transportation project by the State (or State designee) for 
     the transportation of royalty gas of the State for the 
     purpose of meeting local consumption needs within the State.
       (2) Exception.--The rates of shippers of subscribed 
     capacity on an Alaska natural gas transportation project 
     described in paragraph (1), as in effect as of the date on 
     which access under that paragraph is granted, shall not be 
     increased as a result of such access.
       (i) Regulations.--The Commission may issue such regulations 
     as are necessary to carry out this section.

     SEC. 374. 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 373 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.--
       (1) In general.--The Commission--
       (A) shall be the lead agency for purposes of complying with 
     the National Environmental Policy Act of 1969 (42 U.S.C. 4321 
     et seq.); and
       (B) shall be responsible for preparing the environmental 
     impact 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 373.
       (2) Consolidation of statements.--In carrying out paragraph 
     (1), the Commission shall prepare a single environmental 
     impact statement, which shall consolidate the environmental 
     reviews of all Federal agencies considering any aspect of the 
     Alaska natural gas transportation project covered by the 
     environmental impact statement.
       (c) Other Agencies.--
       (1) In general.--Each Federal agency considering an aspect 
     of the construction and operation of an Alaska natural gas 
     transportation project under section 373 shall--
       (A) cooperate with the Commission; and
       (B) comply with deadlines established by the Commission in 
     the preparation of the environmental impact statement under 
     this section.
       (2) Satisfaction of nepa requirements.--The environmental 
     impact statement prepared under this section shall be adopted 
     by each Federal agency described in paragraph (1) in 
     satisfaction of the responsibilities of the Federal agency 
     under section 102(2)(C) of the National Environmental Policy 
     Act of 1969 (42 U.S.C. 4332(2)(C)) with respect to the Alaska 
     natural gas transportation project covered by the 
     environmental impact statement.
       (d) Expedited Process.--The Commission shall--
       (1) not later than 1 year after the Commission determines 
     that the application under section 373 with respect to an 
     Alaska natural gas transportation project is complete, issue 
     a draft environmental impact statement under this section; 
     and
       (2) not later than 180 days after the date of issuance of 
     the draft environmental impact statement, issue a final 
     environmental impact statement, unless the Commission for 
     good cause determines that additional time is needed.

     SEC. 375. PIPELINE EXPANSION.

       (a) Authority.--With respect to any Alaska natural gas 
     transportation project, on a request by 1 or more persons and 
     after giving notice and an opportunity for a hearing, the 
     Commission may order the expansion of the Alaska natural gas 
     project if the Commission determines that such an expansion 
     is required by the present and future public convenience and 
     necessity.
       (b) Responsibilities of Commission.--Before ordering an 
     expansion under subsection (a), 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 do not require existing shippers 
     on the Alaska natural gas transportation project to subsidize 
     expansion shippers;
       (3) find that a 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 tariff of the Alaska natural gas

[[Page H11237]]

     transportation project in effect as of the date of the 
     expansion;
       (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 in accordance with this 
     section shall be void unless the person requesting the order 
     executes a firm transportation agreement with the Alaska 
     natural gas transportation project within such reasonable 
     period of time as the order may specify.
       (d) Limitation.--Nothing in this section expands or 
     otherwise affects any authority of the Commission with 
     respect to any natural gas pipeline located outside the 
     State.
       (e) Regulations.--The Commission may issue such regulations 
     as are necessary to carry out this section.

     SEC. 376. 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.--
       (1) Appointment.--The Office shall be headed by a Federal 
     Coordinator for Alaska Natural Gas Transportation Projects, 
     who shall be appointed by the President, by and with the 
     advice and consent of the Senate, to serve a term to last 
     until 1 year following the completion of the project referred 
     to in section 373.
       (2) Compensation.--The Federal Coordinator shall 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) Expedited reviews and actions.--All reviews conducted 
     and actions taken by any Federal 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 under this subtitle.
       (2) Prohibition of certain terms and conditions.--No 
     Federal agency may include in any certificate, right-of-way, 
     permit, lease, or other authorization issued to an Alaska 
     natural gas transportation project any term or condition that 
     may be permitted, but is not required, by any applicable law 
     if the Federal Coordinator determines that the term or 
     condition would prevent or impair in any significant respect 
     the expeditious construction and operation, or an expansion, 
     of the Alaska natural gas transportation project.
       (3) Prohibition of certain actions.--Unless required by 
     law, no Federal 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 the action 
     would prevent or impair in any significant respect the 
     expeditious construction and operation, or an expansion, of 
     the Alaska natural gas transportation project.
       (4) Limitation.--The Federal Coordinator shall not have 
     authority to--
       (A) override--
       (i) the implementation or enforcement of regulations issued 
     by the Commission under section 373; or
       (ii) an order by the Commission to expand the project under 
     section 375; or
       (B) impose any terms, conditions, or requirements in 
     addition to those imposed by the Commission or any agency 
     with respect to construction and operation, or an expansion 
     of, the project.
       (e) State Coordination.--
       (1) In general.--The Federal Coordinator and the State 
     shall enter into a joint surveillance and monitoring 
     agreement similar to the agreement in effect during 
     construction of the Trans-Alaska Pipeline, to be approved by 
     the President and the Governor of the State, for the purpose 
     of monitoring the construction of the Alaska natural gas 
     transportation project.
       (2) Primary responsibility.--With respect to an Alaska 
     natural gas transportation project--
       (A) the Federal Government shall have primary surveillance 
     and monitoring responsibility in areas where the Alaska 
     natural gas transportation project crosses Federal land or 
     private land; and
       (B) the State government shall have primary surveillance 
     and monitoring responsibility in areas where the Alaska 
     natural gas transportation project crosses State land.
       (f) Transfer of Federal Inspector Functions and 
     Authority.--On 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 under 
     section 3012(b) of the Energy Policy Act of 1992 (15 U.S.C. 
     719e note; Public Law 102-486), including all functions and 
     authority described and enumerated in the Reorganization Plan 
     No. 1 of 1979 (44 Fed. Reg. 33663), Executive Order No. 12142 
     of June 21, 1979 (44 Fed. Reg. 36927), and section 5 of the 
     President's decision, shall be transferred to the Federal 
     Coordinator.
       (g) Temporary Authority.--The functions, authorities, 
     duties, and responsibilities of the Federal Coordinator shall 
     be vested in the Secretary until the later of the appointment 
     of the Federal Coordinator by the President, or 18 months 
     after the date of enactment of this Act.

     SEC. 377. JUDICIAL REVIEW.

       (a) Exclusive Jurisdiction.--Except for review by the 
     Supreme Court 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 
     (42 U.S.C. 4321 et seq.) with respect to any action under 
     this subtitle.
       (b) Deadline for Filing Claim.--A claim 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 of the Alaska Natural Gas Transportation Act 
     of 1976.--Section 10(c) of the Alaska Natural Gas 
     Transportation Act of 1976 (15 U.S.C. 719h) is amended--
       (1) by striking ``(c)(1) A claim'' and inserting the 
     following:
       ``(c) Jurisdiction.--
       ``(1) Special courts.--
       ``(A) In general.--A claim'';
       (2) by striking ``Such court shall have'' and inserting the 
     following:
       ``(B) Exclusive jurisdiction.--The Special Court shall 
     have'';
       (3) by inserting after paragraph (1) the following:
       ``(2) Expedited consideration.--The Special Court shall set 
     any action brought under this section for expedited 
     consideration, taking into account the national interest 
     described in section 2.''; and
       (4) in paragraph (3), by striking ``(3) The enactment'' and 
     inserting the following:
       ``(3) Environmental impact statements.--The enactment''.

     SEC. 378. STATE JURISDICTION OVER IN-STATE DELIVERY OF 
                   NATURAL GAS.

       (a) Local Distribution.--Any facility receiving natural gas 
     from an Alaska natural gas transportation project for 
     delivery to consumers within the State--
       (1) shall be deemed to be a local distribution facility 
     within the meaning of section 1(b) of the Natural Gas Act (15 
     U.S.C. 717(b)); and
       (2) shall not be subject to the jurisdiction of the 
     Commission.
       (b) Additional Pipelines.--Except as provided in section 
     373(d), nothing in this subtitle shall preclude or otherwise 
     affect a future natural 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 for consumption within or distribution 
     outside the State.
       (c) Rate Coordination.--
       (1) In general.--In accordance with the Natural Gas Act (15 
     U.S.C. 717a et seq.), the Commission shall establish rates 
     for the transportation of natural gas on any Alaska natural 
     gas transportation project.
       (2) Consultation.--In carrying out paragraph (1), the 
     Commission, in accordance with section 17(b) of the Natural 
     Gas Act (15 U.S.C. 717p(b)), shall consult with the State 
     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.

     SEC. 379. 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 by the date that is 18 months 
     after the date of enactment of this Act, the Secretary shall 
     conduct a study of alternative approaches to the construction 
     and operation of such an Alaska natural gas transportation 
     project.
       (b) Scope of Study.--The study under subsection (a) shall 
     take into consideration the feasibility of--
       (1) establishing a Federal Government corporation to 
     construct an Alaska natural gas transportation project; and
       (2) securing alternative means of providing Federal 
     financing and ownership (including alternative combinations 
     of Government and private corporate ownership) of the Alaska 
     natural gas transportation project.
       (c) Consultation.--In conducting the study under subsection 
     (a), the Secretary shall consult with the Secretary of the 
     Treasury and the Secretary of the Army (acting through the 
     Chief of Engineers).
       (d) Report.--On completion of any study under subsection 
     (a), the Secretary shall submit to Congress a report that 
     describes--

[[Page H11238]]

       (1) the results of the study; and
       (2) any recommendations of the Secretary (including 
     proposals for legislation to implement the recommendations).

     SEC. 380. CLARIFICATION OF ANGTA STATUS AND AUTHORITIES.

       (a) Savings Clause.--Nothing in this subtitle affects--
       (1) 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. 719g); or
       (2) any Presidential finding or waiver issued in accordance 
     with that Act.
       (b) Clarification of Authority to Amend Terms and 
     Conditions to Meet Current Project Requirements.--Any Federal 
     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. 719g) may add to, amend, or rescind any term 
     or condition included in the certificate, permit, right-of-
     way, lease, or other authorization to meet current project 
     requirements (including the physical design, facilities, and 
     tariff specifications), if the addition, amendment, or 
     rescission--
       (1) would not compel any 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
       (2) would not otherwise prevent or impair in any 
     significant respect the expeditious construction and initial 
     operation of the Alaska natural gas transportation system.
       (c) Updated Environmental Reviews.--The Secretary 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. 381. SENSE OF CONGRESS CONCERNING USE OF STEEL 
                   MANUFACTURED IN NORTH AMERICA NEGOTIATION OF A 
                   PROJECT LABOR AGREEMENT.

       It is the sense of Congress that--
       (1) an Alaska natural gas transportation project would 
     provide significant economic benefits to the United States 
     and Canada; and
       (2) to maximize those benefits, the sponsors of the Alaska 
     natural gas transportation project should make every effort 
     to--
       (A) use steel that is manufactured in North America; and
       (B) negotiate a project labor agreement to expedite 
     construction of the pipeline.

     SEC. 382. SENSE OF CONGRESS AND STUDY CONCERNING 
                   PARTICIPATION BY SMALL BUSINESS CONCERNS.

       (a) Definition of Small Business Concern.--In this section, 
     the term ``small business concern'' has the meaning given the 
     term in section 3(a) of the Small Business Act (15 U.S.C. 
     632(a)).
       (b) Sense of Congress.--It is the sense of Congress that--
       (1) an Alaska natural gas transportation project would 
     provide significant economic benefits to the United States 
     and Canada; and
       (2) to maximize those benefits, the sponsors of the Alaska 
     natural gas transportation project should maximize the 
     participation of small business concerns in contracts and 
     subcontracts awarded in carrying out the project.
       (c) Study.--
       (1) In general.--The Comptroller General of the United 
     States shall conduct a study to determine the extent to which 
     small business concerns participate in the construction of 
     oil and gas pipelines in the United States.
       (2) Report.--Not later that 1 year after the date of 
     enactment of this Act, the Comptroller General shall submit 
     to Congress a report that describes results of the study 
     under paragraph (1).
       (3) Updates.--The Comptroller General shall--
       (A) update the study at least once every 5 years until 
     construction of an Alaska natural gas transportation project 
     is completed; and
       (B) on completion of each update, submit to Congress a 
     report containing the results of the update.

     SEC. 383. ALASKA PIPELINE CONSTRUCTION TRAINING PROGRAM.

       (a) Program.--
       (1) Establishment.--The Secretary of Labor (in this section 
     referred to as the ``Secretary'') shall make grants to the 
     Alaska Workforce Investment Board--
       (A) to recruit and train adult and dislocated workers in 
     Alaska, including Alaska Natives, in the skills required to 
     construct and operate an Alaska gas pipeline system; and
       (B) for the design and construction of a training facility 
     to be located in Fairbanks, Alaska, to support an Alaska gas 
     pipeline training program.
       (2) Coordination with existing programs.--The training 
     program established with the grants authorized under 
     paragraph (1) shall be consistent with the vision and goals 
     set forth in the State of Alaska Unified Plan, as developed 
     pursuant to the Workforce Investment Act of 1998 (29 U.S.C. 
     2801 et seq.).
       (b) Requirements for Grants.--The Secretary shall make a 
     grant under subsection (a) only if--
       (1) the Governor of the State of Alaska requests the grant 
     funds and certifies in writing to the Secretary that there is 
     a reasonable expectation that the construction of the Alaska 
     natural gas pipeline system will commence by the date that is 
     2 years after the date of the certification; and
       (2) the Secretary of Energy concurs in writing to the 
     Secretary with the certification made under paragraph (1) 
     after considering--
       (A) the status of necessary Federal and State permits;
       (B) the availability of financing for the Alaska natural 
     gas pipeline project; and
       (C) other relevant factors.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary to carry out this section 
     $20,000,000. Not more than 15 percent of the funds may be 
     used for the facility described in subsection (a)(1)(B).

     SEC. 384. SENSE OF CONGRESS CONCERNING 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 Mackenzie 
     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 Mackenzie Delta project means it will most likely be 
     completed before the Alaska Natural Gas Pipeline;
       (5) natural gas production in the 48 contiguous States and 
     Canada will not be able to meet all domestic demand in the 
     coming decades; and
       (6) as a result, natural gas delivered from Alaskan North 
     Slope will not displace or reduce the commercial viability of 
     Canadian natural gas produced from the Mackenzie Delta or 
     production from the 48 contiguous States.

     SEC. 385. SENSE OF CONGRESS CONCERNING ALASKAN OWNERSHIP.

       It is the sense of Congress that--
       (1) Alaska Native Regional Corporations, companies owned 
     and operated by Alaskans, and individual Alaskans should have 
     the opportunity to own shares of the Alaska natural gas 
     pipeline in a way that promotes economic development for the 
     State; and
       (2) to facilitate economic development in the State, all 
     project sponsors should negotiate in good faith with any 
     willing Alaskan person that desires to be involved in the 
     project.

     SEC. 386. LOAN GUARANTEES.

       (a) Authority.--(1) The Secretary may enter into agreements 
     with 1 or more holders of a certificate of public convenience 
     and necessity issued under section 373(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 373(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 
     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.

[[Page H11239]]

       (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 under this section, 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.
                             TITLE IV--COAL
                Subtitle A--Clean Coal Power Initiative

     SEC. 401. AUTHORIZATION OF APPROPRIATIONS.

       (a) Clean Coal Power Initiative.--There are authorized to 
     be appropriated to the Secretary of Energy (referred to in 
     this title as the ``Secretary'') to carry out the activities 
     authorized by this subtitle $200,000,000 for each of fiscal 
     years 2004 through 2012, to remain available until expended.
       (b) Report.--The Secretary shall submit to Congress the 
     report required by this subsection not later than March 31, 
     2005. The report shall include, with respect to subsection 
     (a), a 10-year plan containing--
       (1) a detailed assessment of whether the aggregate funding 
     levels provided under subsection (a) are the 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
       (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.

     SEC. 402. 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 commercial service or have been demonstrated on a 
     scale that the Secretary determines is sufficient to 
     demonstrate that commercial service is viable as of the date 
     of enactment of this Act.
       (b) Technical Criteria for Clean Coal Power Initiative.--
       (1) Gasification projects.--
       (A) In general.--In allocating the funds made available 
     under section 401(a), the Secretary shall ensure that at 
     least 60 percent of the funds are used only for projects on 
     coal-based gasification technologies, including gasification 
     combined cycle, gasification fuel cells, gasification 
     coproduction, and hybrid gasification/combustion.
       (B) Technical milestones.--The Secretary shall periodically 
     set technical milestones specifying the emission and thermal 
     efficiency levels that coal gasification projects under this 
     subtitle shall be designed, and reasonably expected, to 
     achieve. The technical milestones shall become more 
     restrictive during the life of the program. The Secretary 
     shall set the periodic milestones so as to achieve by 2020 
     coal gasification projects able--
       (i) to remove 99 percent of sulfur dioxide;
       (ii) to emit not more than .05 lbs of NOx per 
     million Btu;
       (iii) to achieve substantial reductions in mercury 
     emissions; and
       (iv) to achieve a thermal efficiency of--

       (I) 60 percent for coal of more than 9,000 Btu;
       (II) 59 percent for coal of 7,000 to 9,000 Btu; and
       (III) 50 percent for coal of less than 7,000 Btu.

       (2) Other projects.--The Secretary shall periodically set 
     technical milestones and ensure that up to 40 percent of the 
     funds appropriated pursuant to section 401(a) are used for 
     projects not described in paragraph (1). The milestones shall 
     specify the emission and thermal efficiency levels that 
     projects funded under this paragraph shall be designed to and 
     reasonably expected to achieve. The technical milestones 
     shall become more restrictive during the life of the program. 
     The Secretary shall set the periodic milestones so as to 
     achieve by 2010 projects able--
       (A) to remove 97 percent of sulfur dioxide;
       (B) to emit no more than .08 lbs of NOx per 
     million Btu;
       (C) to achieve substantial reductions in mercury emissions; 
     and
       (D) to achieve a thermal efficiency of--
       (i) 45 percent for coal of more than 9,000 Btu;
       (ii) 44 percent for coal of 7,000 to 9,000 Btu; and
       (iii) 40 percent for coal of less than 7,000 Btu.
       (3) Consultation.--Before setting the technical milestones 
     under paragraphs (1)(B) and (2), 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.
       (4) Existing units.--In the case of projects at units in 
     existence on the date of enactment of this Act, in lieu of 
     the thermal efficiency requirements set forth in paragraph 
     (1)(B)(iv) and (2)(D), the milestones 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.
       (5) Permitted uses.--In carrying out this subtitle, the 
     Secretary may fund projects that include, as part of the 
     project, the separation and capture of carbon dioxide.
       (c) Financial Criteria.--The Secretary shall not provide a 
     funding award under this subtitle unless the recipient 
     documents 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 to enable 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.
       (d) Financial Assistance.--The Secretary shall provide 
     financial assistance to projects that meet the requirements 
     of subsections (a), (b), and (c) 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 in order to maintain a diversity of fuel choices in 
     the United States to meet electricity generation 
     requirements; and
       (3) demonstrate methods and equipment that are applicable 
     to 25 percent of the electricity generating facilities, using 
     various types of coal, that use coal as the primary feedstock 
     as of the date of enactment of this Act.
       (e) Federal Share.--The Federal share of the cost of a coal 
     or related technology project funded by the Secretary under 
     this subtitle shall not exceed 50 percent.
       (f) Applicability.--No technology, or level of emission 
     reduction, shall be treated as adequately demonstrated for 
     purposes of section 111 of the Clean Air Act (42 U.S.C. 
     7411), achievable for purposes of section 169 of that Act (42 
     U.S.C. 7479), or achievable in practice for purposes of 
     section 171 of that Act (42 U.S.C. 7501) solely by reason of 
     the use of such technology, or the achievement of such 
     emission reduction, by 1 or more facilities receiving 
     assistance under this subtitle.

     SEC. 403. REPORT.

       Not later than 1 year after the date of enactment of this 
     Act, and once every 2 years thereafter through 2012, the 
     Secretary, in consultation with other appropriate Federal 
     agencies, shall submit to Congress a report describing--
       (1) the technical milestones set forth in section 402 and 
     how those milestones ensure progress toward meeting the 
     requirements of subsections (b)(1)(B) and (b)(2) of section 
     402; and
       (2) the status of projects funded under this subtitle.

     SEC. 404. CLEAN COAL CENTERS OF EXCELLENCE.

       As part of the program authorized in section 401, 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 show the greatest potential for 
     advancing new clean coal technologies.
                    Subtitle B--Clean Power Projects

     SEC. 411. 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.

     SEC. 412. COAL GASIFICATION.

       The Secretary is authorized to provide loan guarantees for 
     a project to produce energy from a plant using integrated 
     gasification combined cycle technology of at least 400 
     megawatts in capacity that produces power at competitive 
     rates in deregulated energy generation markets and that does 
     not receive any subsidy (direct or indirect) from ratepayers.

     SEC. 413. INTEGRATED GASIFICATION COMBINED CYCLE TECHNOLOGY.

       The Secretary is authorized to provide loan guarantees for 
     a project to produce energy from a plant using integrated 
     gasification combined cycle technology located in a taconite-
     producing region of the United States that is entitled under 
     the law of the State in which the plant is located to enter 
     into a long-term contract approved by a State Public Utility 
     Commission to sell at least 450 megawatts of output to a 
     utility.

[[Page H11240]]

     SEC. 414. PETROLEUM COKE GASIFICATION.

       The Secretary is authorized to provide loan guarantees for 
     at least 1 petroleum coke gasification polygeneration 
     project.

     SEC. 415. INTEGRATED COAL/RENEWABLE ENERGY SYSTEM.

       The Secretary is authorized, subject to the availability of 
     appropriations, to provide loan guarantees for a project to 
     produce energy from coal of less than 7000 btu/lb using 
     appropriate advanced integrated gasification combined cycle 
     technology, including repowering of existing facilities, that 
     is combined with wind and other renewable sources, minimizes 
     and offers the potential to sequester carbon dioxide 
     emissions, and provides a ready source of hydrogen for near-
     site fuel cell demonstrations. The facility may be built in 
     stages, combined output shall be at least 200 megawatts at 
     successively more competitive rates, and the facility shall 
     be located in the Upper Great Plains. Section 402(b) 
     technical criteria apply, and the Federal cost share shall 
     not exceed 50 percent. The loan guarantees provided under 
     this section do not preclude the facility from receiving an 
     allocation for investment tax credits under section 48A of 
     the Internal Revenue Code of 1986. Utilizing this investment 
     tax credit does not prohibit the use of other Clean Coal 
     Program funding.

     SEC. 416. ELECTRON SCRUBBING DEMONSTRATION.

       The Secretary shall use $5,000,000 from amounts 
     appropriated to initiate, through the Chicago Operations 
     Office, a project to demonstrate the viability of high-energy 
     electron scrubbing technology on commercial-scale electrical 
     generation using high-sulfur coal.
                    Subtitle C--Federal Coal Leases

     SEC. 421. REPEAL OF THE 160-ACRE LIMITATION FOR COAL LEASES.

       Section 3 of the Mineral Leasing Act (30 U.S.C. 203) is 
     amended--
       (1) in the first sentence--
       (A) by striking ``Any person'' and inserting ``(a) Any 
     person'';
       (B) by inserting a comma after ``may''; and
       (C) by striking ``upon'' and all that follows through the 
     period and inserting the following: ``upon a finding by the 
     Secretary that the lease--
       ``(1) would be in the interest of the United States;
       ``(2) would not displace a competitive interest in the 
     land; and
       ``(3) would not include land 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 land or coal deposits contiguous or cornering 
     to those embraced in the lease, but in no event shall the 
     total area added by any modifications to an existing coal 
     lease exceed 1280 acres, or add acreage larger than the 
     acreage in the original lease.'';
       (2) in the second sentence, by striking ``The Secretary'' 
     and inserting the following:
       ``(b) The Secretary''; and
       (3) in the third sentence, by striking ``The minimum'' and 
     inserting the following:
       ``(c) The minimum''.

     SEC. 422. 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 40 
     years if the Secretary determines that the longer period--
       ``(i) will ensure the maximum economic recovery of a coal 
     deposit; or
       ``(ii) the longer period is in the interest of the orderly, 
     efficient, or economic development of a coal resource.''.

     SEC. 423. PAYMENT OF ADVANCE ROYALTIES UNDER COAL LEASES.

       Section 7(b) of the Mineral Leasing Act (30 U.S.C. 207(b)) 
     is amended to read as follows:
       ``(b)(1) Each lease shall be subjected to the condition of 
     diligent development and continued operation of the mine or 
     mines, except in a case in which operations under the lease 
     are interrupted by strikes, the elements, or casualties not 
     attributable to the lessee.
       ``(2)(A) The Secretary of the Interior may suspend the 
     condition of continued operation upon the payment of advance 
     royalties, if the Secretary determines that the public 
     interest will be served by the suspension.
       ``(B) Advance royalties required under subparagraph (A) 
     shall be computed based on--
       ``(i) the average price for coal sold in the spot market 
     from the same region during the last month of each applicable 
     continued operation year; or
       ``(ii) by using other methods established by the Secretary 
     of the Interior to capture the commercial value of coal,

     and based on commercial quantities, as defined by regulation 
     by the Secretary of the Interior.
       ``(C) The aggregate number of years during the initial and 
     any extended term of any lease for which advance royalties 
     may be accepted in lieu of the condition of continued 
     operation shall not exceed 20.
       ``(3) 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 the lease, to the extent that 
     the advance royalties have not been used to reduce production 
     royalties for a prior year.
       ``(4) The Secretary may, upon 6 months' notice to a lessee, 
     cease to accept advance royalties in lieu of the requirement 
     of continued operation.
       ``(5) Nothing in this subsection affects the requirement 
     contained in the second sentence of subsection (a) relating 
     to commencement of production at the end of 10 years.''.

     SEC. 424. 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 in the first sentence by striking ``and not later 
     than three years after a lease is issued,''.

     SEC. 425. AMENDMENT RELATING TO FINANCIAL ASSURANCES WITH 
                   RESPECT TO BONUS BIDS.

       Section 2(a) of the Mineral Leasing Act (30 U.S.C. 201(a)) 
     is amended by adding at the end the following:
       ``(4)(A) The Secretary shall not require a surety bond or 
     any other financial assurance to guarantee payment of 
     deferred bonus bid installments with respect to any coal 
     lease issued on a cash bonus bid to a lessee or successor in 
     interest having a history of a timely payment of noncontested 
     coal royalties and advanced coal royalties in lieu of 
     production (where applicable) and bonus bid installment 
     payments.
       ``(B) The Secretary may waive any requirement that a lessee 
     provide a surety bond or other financial assurance for a coal 
     lease issued before the date of the enactment of the Energy 
     Policy Act of 2003 only if the Secretary determines that the 
     lessee has a history of making timely payments referred to in 
     subparagraph (A).
       ``(5) Notwithstanding any other provision of law, if the 
     lessee under a coal lease fails to pay any installment of a 
     deferred cash bonus bid within 10 days after the Secretary 
     provides written notice that payment of the installment is 
     past due--
       ``(A) the lease shall automatically terminate; and
       ``(B) any bonus payments already made to the United States 
     with respect to the lease shall not be returned to the lessee 
     or credited in any future lease sale.''.

     SEC. 426. INVENTORY REQUIREMENT.

       (a) Review of Assessments.--
       (1) In general.--The Secretary of the Interior, in 
     consultation with the Secretary of Agriculture and the 
     Secretary, shall review coal assessments and other available 
     data to identify--
       (A) public lands, other than National Park lands, with coal 
     resources;
       (B) the extent and nature of any restrictions or 
     impediments to the development of coal resources on public 
     lands identified under subparagraph (A); and
       (C) with respect to areas of such lands for which 
     sufficient data exists, resources of compliant coal and 
     supercompliant coal.
       (2) Definitions.--In this subsection:
       (A) Compliant coal.--The term ``compliant coal'' means coal 
     that contains not less than 1.0 and not more than 1.2 pounds 
     of sulfur dioxide per million Btu.
       (B) Supercompliant coal.--The term ``supercompliant coal'' 
     means coal that contains less than 1.0 pounds of sulfur 
     dioxide per million Btu.
       (b) Completion and Updating of the Inventory.--The 
     Secretary of the Interior--
       (1) shall complete the inventory under subsection (a)(1) by 
     not later than 2 years after the date of the enactment of 
     this Act; and
       (2) shall update the inventory as the availability of data 
     and developments in technology warrant.
       (c) Report.--The Secretary of the Interior shall submit to 
     Congress, and make publicly available--
       (1) a report containing the inventory under this section by 
     not later than 2 years after the effective date of this 
     section; and
       (2) each update of that inventory.

     SEC. 427. APPLICATION OF AMENDMENTS.

       The amendments made by this subtitle apply--
       (1) with respect to any coal lease issued on or after the 
     date of enactment of this Act; and
       (2) with respect to any coal lease issued before the date 
     of enactment of this Act, upon the earlier of--
       (A) the date of readjustment of the lease as provided for 
     by section 7(a) of the Mineral Leasing Act (30 U.S.C. 
     207(a)); or
       (B) the date the lessee requests such application.
                 Subtitle D--Coal and Related Programs

     SEC. 441. CLEAN AIR COAL PROGRAM.

       (a) Amendment.--The Energy Policy Act of 1992 is amended by 
     adding the following new title at the end thereof:
                  ``TITLE XXXI--CLEAN AIR COAL PROGRAM

     ``SEC. 3101. FINDINGS; PURPOSES; DEFINITIONS.

       ``(a) Findings.--The Congress finds that--
       ``(1) new environmental regulations present additional 
     challenges for coal-fired electrical generation in the 
     private marketplace; and
       ``(2) the Department of Energy, in cooperation with 
     industry, has already fully developed and commercialized 
     several new clean-coal technologies that will allow the clean 
     use of coal.
       ``(b) Purposes.--The purposes of this title are to--
       ``(1) promote national energy policy and energy security, 
     diversity, and economic competitiveness benefits that result 
     from the increased use of coal;
       ``(2) mitigate financial risks, reduce the cost, and 
     increase the marketplace acceptance of the new clean coal 
     technologies; and
       ``(3) advance the deployment of pollution control equipment 
     to meet the current and future obligations of coal-fired 
     generation units regulated under the Clean Air Act (42 U.S.C. 
     7402 and following).

     ``SEC. 3102. AUTHORIZATION OF PROGRAM.

       ``The Secretary shall carry out a program to facilitate 
     production and generation of coal-based power and the 
     installation of pollution control equipment.

     ``SEC. 3103. AUTHORIZATION OF APPROPRIATIONS.

       ``(a) Pollution Control Projects.--There are authorized to 
     be appropriated to the Secretary $300,000,000 for fiscal year 
     2005,

[[Page H11241]]

     $100,000,000 for fiscal year 2006, $40,000,000 for fiscal 
     year 2007, $30,000,000 for fiscal year 2008, and $30,000,000 
     for fiscal year 2009, to remain available until expended, for 
     carrying out the program for pollution control projects, 
     which may include--
       ``(1) pollution control equipment and processes for the 
     control of mercury air emissions;
       ``(2) pollution control equipment and processes for the 
     control of nitrogen dioxide air emissions or sulfur dioxide 
     emissions;
       ``(3) pollution control equipment and processes for the 
     mitigation or collection of more than one pollutant;
       ``(4) advanced combustion technology for the control of at 
     least two pollutants, including mercury, particulate matter, 
     nitrogen oxides, and sulfur dioxide, which may also be 
     designed to improve the energy efficiency of the unit; and
       ``(5) advanced pollution control equipment and processes 
     designed to allow use of the waste byproducts or other 
     byproducts of the equipment or an electrical generation unit 
     designed to allow the use of byproducts.
     Funds appropriated under this subsection which are not 
     awarded before fiscal year 2011 may be applied to projects 
     under subsection (b), in addition to amounts authorized under 
     subsection (b).
       ``(b) Generation Projects.--There are authorized to be 
     appropriated to the Secretary $150,000,000 for fiscal year 
     2006, $250,000,000 for each of the fiscal years 2007 through 
     2011, and $100,000,000 for fiscal year 2012, to remain 
     available until expended, for generation projects and air 
     pollution control projects. Such projects may include--
       ``(1) coal-based electrical generation equipment and 
     processes, including gasification combined cycle or other 
     coal-based generation equipment and processes;
       ``(2) associated environmental control equipment, that will 
     be cost-effective and that is designed to meet anticipated 
     regulatory requirements;
       ``(3) coal-based electrical generation equipment and 
     processes, including gasification fuel cells, gasification 
     coproduction, and hybrid gasification/combustion projects; 
     and
       ``(4) advanced coal-based electrical generation equipment 
     and processes, including oxidation combustion techniques, 
     ultra-supercritical boilers, and chemical looping, which the 
     Secretary determines will be cost-effective and could 
     substantially contribute to meeting anticipated environmental 
     or energy needs.
       ``(c) Limitation.--Funds placed at risk during any fiscal 
     year for Federal loans or loan guarantees pursuant to this 
     title may not exceed 30 percent of the total funds obligated 
     under this title.

     ``SEC. 3104. AIR POLLUTION CONTROL PROJECT CRITERIA.

       ``The Secretary shall pursuant to authorizations contained 
     in section 3103 provide funding for air pollution control 
     projects designed to facilitate compliance with Federal and 
     State environmental regulations, including any regulation 
     that may be established with respect to mercury.

     ``SEC. 3105. CRITERIA FOR GENERATION PROJECTS.

       ``(a) Criteria.--The Secretary shall establish criteria on 
     which selection of individual projects described in section 
     3103(b) should be based. The Secretary may modify the 
     criteria as appropriate to reflect improvements in equipment, 
     except that the criteria shall not be modified to be less 
     stringent. These selection criteria shall include--
       ``(1) prioritization of projects whose installation is 
     likely to result in significant air quality improvements in 
     nonattainment air quality areas;
       ``(2) prioritization of projects that result in the 
     repowering or replacement of older, less efficient units;
       ``(3) documented broad interest in the procurement of the 
     equipment and utilization of the processes used in the 
     projects by electrical generator owners or operators;
       ``(4) equipment and processes beginning in 2005 through 
     2010 that are projected to achieve an thermal efficiency of--
       ``(A) 40 percent for coal of more than 9,000 Btu per pound 
     based on higher heating values;
       ``(B) 38 percent for coal of 7,000 to 9,000 Btu per pound 
     based on higher heating values; and
       ``(C) 36 percent for coal of less than 7,000 Btu per pound 
     based on higher heating values,

     except that energy used for coproduction or cogeneration 
     shall not be counted in calculating the thermal efficiency 
     under this paragraph; and
       ``(5) equipment and processes beginning in 2011 and 2012 
     that are projected to achieve an thermal efficiency of--
       ``(A) 45 percent for coal of more than 9,000 Btu per pound 
     based on higher heating values;
       ``(B) 44 percent for coal of 7,000 to 9,000 Btu per pound 
     based on higher heating values; and
       ``(C) 40 percent for coal of less than 7,000 Btu per pound 
     based on higher heating values,

     except that energy used for coproduction or cogeneration 
     shall not be counted in calculating the thermal efficiency 
     under this paragraph.
       ``(b) Selection.--(1) In selecting the projects, up to 25 
     percent of the projects selected may be either coproduction 
     or cogeneration or other gasification projects, but at least 
     25 percent of the projects shall be for the sole purpose of 
     electrical generation, and priority should be given to 
     equipment and projects less than 600 MW to foster and promote 
     standard designs.
       ``(2) The Secretary shall give priority to projects that 
     have been developed and demonstrated that are not yet cost 
     competitive, and for coal energy generation projects that 
     advance efficiency, environmental performance, or cost 
     competitiveness significantly beyond the level of pollution 
     control equipment that is in operation on a full scale.

     ``SEC. 3106. FINANCIAL CRITERIA.

       ``(a) In General.--The Secretary shall only provide 
     financial assistance to projects that meet the requirements 
     of sections 3103 and 3104 and are likely to--
       ``(1) achieve overall cost reductions in the utilization of 
     coal to generate useful forms of energy; and
       ``(2) improve the competitiveness of coal in order to 
     maintain a diversity of domestic fuel choices in the United 
     States to meet electricity generation requirements.
       ``(b) Conditions.--The Secretary shall not provide a 
     funding award under this title unless--
       ``(1) the award recipient is financially viable without the 
     receipt of additional Federal funding; and
       ``(2) the recipient provides sufficient information to the 
     Secretary for the Secretary to ensure that the award funds 
     are spent efficiently and effectively.
       ``(c) Equal Access.--The Secretary shall, to the extent 
     practical, utilize cooperative agreement, loan guarantee, and 
     direct Federal loan mechanisms designed to ensure that all 
     electrical generation owners have equal access to these 
     technology deployment incentives. The Secretary shall develop 
     and direct a competitive solicitation process for the 
     selection of technologies and projects under this title.

     ``SEC. 3107. FEDERAL SHARE.

       ``The Federal share of the cost of a coal or related 
     technology project funded by the Secretary under this title 
     shall not exceed 50 percent. For purposes of this title, 
     Federal funding includes only appropriated funds.

     ``SEC. 3108. APPLICABILITY.

       ``No technology, or level of emission reduction, shall be 
     treated as adequately demonstrated for purposes of section 
     111 of the Clean Air Act (42 U.S.C. 7411), achievable for 
     purposes of section 169 of the Clean Air Act (42 U.S.C. 
     7479), or achievable in practice for purposes of section 171 
     of the Clean Air Act (42 U.S.C. 7501) 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.''.
       (b) Table of Contents Amendment.--The table of contents of 
     the Energy Policy Act of 1992 is amended by adding at the end 
     the following:

                  ``TITLE XXXI--CLEAN AIR COAL PROGRAM

``Sec. 3101. Findings; purposes; definitions.
``Sec. 3102. Authorization of program.
``Sec. 3103. Authorization of appropriations.
``Sec. 3104. Air pollution control project criteria.
``Sec. 3105. Criteria for generation projects.
``Sec. 3106. Financial criteria.
``Sec. 3107. Federal share.
``Sec. 3108. Applicability.''.
                         TITLE V--INDIAN ENERGY

     SEC. 501. SHORT TITLE.

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

     SEC. 502. 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, in accordance with 
     Federal policies promoting Indian self-determination and the 
     purposes of this Act, shall 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) bring electrical power and service to Indian land and 
     the homes of tribal members located on Indian lands or 
     acquired, constructed, or improved (in whole or in part) with 
     Federal funds.''.
       (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.''.

       (2) Section 5315 of title 5, United States Code, is amended 
     by inserting ``Director, Office of Indian Energy Policy and 
     Programs, Department of Energy.'' after ``Inspector General, 
     Department of Energy.''.

     SEC. 503. INDIAN ENERGY.

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

[[Page H11242]]

                      ``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, Department of Energy.
       ``(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 or an individual Indian;
       ``(ii) by an Indian tribe or an individual Indian, subject 
     to restriction against alienation under laws of the United 
     States; or
       ``(iii) by a dependent Indian community; and
       ``(C) land that is owned by an Indian tribe and was 
     conveyed by the United States to a Native Corporation 
     pursuant to the Alaska Native Claims Settlement Act (43 
     U.S.C. 1601 et seq.), or that was conveyed by the United 
     States to a Native Corporation in exchange for such land.
       ``(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; and
       ``(C) 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), except that the 
     term `Indian tribe', for the purpose of paragraph (11) and 
     sections 2603(b)(3) and 2604, shall not include any Native 
     Corporation.
       ``(5) The term `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 
     or distribution facility) on or near Indian land to process, 
     refine, generate electricity from, or otherwise develop 
     energy resources on, Indian land.
       ``(6) 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).
       ``(7) 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.
       ``(8) The term `Program' means the Indian energy resource 
     development program established under section 2602(a).
       ``(9) The term `Secretary' means the Secretary of the 
     Interior.
       ``(10) The term `tribal energy resource development 
     organization' means an organization of 2 or more entities, at 
     least 1 of which is an Indian tribe, that has the written 
     consent of the governing bodies of all Indian tribes 
     participating in the organization to apply for a grant, loan, 
     or other assistance authorized by section 2602.
       ``(11) The term `tribal land' means any land or interests 
     in land owned by any Indian tribe, title to which is held in 
     trust by the United States or which is subject to a 
     restriction against alienation under laws of the United 
     States.

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

       ``(a) Department of the Interior Program.--
       ``(1) 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 consenting Indian 
     tribes and tribal energy resource development organizations 
     in achieving the purposes of this title.
       ``(2) In carrying out the Program, the Secretary shall--
       ``(A) provide development grants to Indian tribes and 
     tribal energy resource development organizations for use in 
     developing or obtaining the managerial and technical capacity 
     needed to develop energy resources on Indian land, and to 
     properly account for resulting energy production and 
     revenues;
       ``(B) provide grants to Indian tribes and tribal energy 
     resource development organizations for use in carrying out 
     projects to promote the integration of energy resources, and 
     to process, use, or develop those energy resources, on Indian 
     land; and
       ``(C) provide low-interest loans to Indian tribes and 
     tribal energy resource development organizations for use in 
     the promotion of energy resource development on Indian land 
     and integration of energy resources.
       ``(3) There are authorized to be appropriated to carry out 
     this subsection such sums as are necessary for each of fiscal 
     years 2004 through 2014.
       ``(b) Department of Energy Indian Energy Education Planning 
     and Management Assistance Program.--
       ``(1) The Director shall establish programs to assist 
     consenting Indian tribes in meeting energy education, 
     research and development, planning, and management needs.
       ``(2) In carrying out this subsection, the Director may 
     provide grants, on a competitive basis, to an Indian tribe or 
     tribal energy resource development organization for use in 
     carrying out--
       ``(A) energy, energy efficiency, and energy conservation 
     programs;
       ``(B) studies and other activities supporting tribal 
     acquisitions 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 
     subsection.
       ``(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 of Energy may issue such regulations as 
     necessary to carry out this subsection.
       ``(5) There are authorized to be appropriated to carry out 
     this subsection $20,000,000 for each of fiscal years 2004 
     through 2014.
       ``(c) Department of Energy Loan Guarantee Program.--
       ``(1) Subject to paragraph (3), the Secretary of Energy 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 guarantee under this subsection shall be made 
     by--
       ``(A) a financial institution subject to examination by the 
     Secretary of Energy; or
       ``(B) an Indian tribe, from funds of the Indian tribe.
       ``(3) The aggregate outstanding amount guaranteed by the 
     Secretary of Energy at any time under this subsection shall 
     not exceed $2,000,000,000.
       ``(4) The Secretary of Energy may issue such regulations as 
     the Secretary of Energy 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 of Energy shall report to 
     Congress on the financing requirements of Indian tribes for 
     energy development on Indian land.
       ``(d) Federal Agencies-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; or
       ``(B) obtain less than prevailing market terms and 
     conditions.

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

       ``(a) Grants.--The Secretary may provide to Indian tribes, 
     on an annual basis, grants for use in accordance with 
     subsection (b).
       ``(b) Use of Funds.--Funds from a grant provided under this 
     section may be used--
       ``(1) by an Indian tribe for the development of a tribal 
     energy resource inventory or tribal energy resource on Indian 
     land;
       ``(2) by an Indian tribe for the development of a 
     feasibility study or other report necessary to the 
     development of energy resources on Indian land;
       ``(3) by an Indian tribe (other than an Indian Tribe in 
     Alaska except the Metlakatla Indian Community) for the 
     development and enforcement of tribal laws (including 
     regulations) relating to tribal energy resource development 
     and the development of technical infrastructure to protect 
     the environment under applicable law; or
       ``(4) by a Native Corporation for the development and 
     implementation of corporate policies and the development of 
     technical infrastructure to protect the environment under 
     applicable law; and
       ``(5) by an Indian tribe for 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.--In carrying out the obligations of 
     the United States under this title, the Secretary shall 
     ensure, to the maximum extent practicable and to the extent 
     of available resources, that upon the request of an Indian 
     tribe, the Indian tribe shall have available scientific and 
     technical information and expertise, for use in the Indian 
     tribe's regulation, development, and management of energy 
     resources on Indian land. The Secretary may fulfill this 
     responsibility either directly, through the use of Federal 
     officials, or indirectly, by providing financial assistance 
     to the Indian tribe to secure independent assistance.

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

       ``(a) Leases and Business 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 
     resource development on tribal land, including a lease or 
     business agreement for--
       ``(A) exploration for, extraction of, processing of, or 
     other development of the Indian tribe's energy mineral 
     resources located 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

[[Page H11243]]

     refine energy resources developed on tribal land; and
       ``(2) such 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 pursuant 
     to 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 
     resources, gas resources, or both, 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 the periodic review and 
     evaluation of the activities of the Indian tribe under the 
     agreement, to be conducted pursuant to the provisions 
     required by subsection (e)(2)(D)(i)).
       ``(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 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 the periodic review and 
     evaluation of the Indian tribe's activities under such 
     agreement described in subparagraphs (D) and (E) of 
     subsection (e)(2)).
       ``(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 relating to the development of tribal energy resources 
     pursuant to the provisions of this section shall be valid 
     unless the lease, business agreement, or right-of-way is 
     authorized by the provisions of a tribal energy resource 
     agreement approved by the Secretary under subsection (e)(2).
       ``(e) Tribal Energy Resource Agreements.--
       ``(1) On issuance of regulations under paragraph (8), 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 not 
     later than 60 days after the Secretary receives a revised 
     tribal energy resource agreement submitted by an Indian tribe 
     under paragraph (4)(C), (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;
       ``(ii) the tribal energy resource agreement includes 
     provisions required under subparagraph (D); and
       ``(iii) the tribal energy resource agreement includes 
     provisions that, with respect to a 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 the economic return to the Indian tribe 
     under leases, business agreements, and rights-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 off-reservation impacts, if any, 
     identified pursuant to the provisions required under 
     subparagraph (C)(i);
       ``(XI) describe the remedies for breach of the lease, 
     business agreement, or right-of-way;
       ``(XII) require each lease, business agreement, and right-
     of-way to include a statement that, in the event that any of 
     its provisions violates an express term or requirement set 
     forth in the tribal energy resource agreement pursuant to 
     which it was executed--

       ``(aa) such provision shall be null and void; and
       ``(bb) if the Secretary determines such provision to be 
     material, the Secretary shall have the authority to suspend 
     or rescind the lease, business agreement, or right-of-way or 
     take other appropriate action that the Secretary determines 
     to be in the best interest of the Indian tribe;

       ``(XIII) require each lease, business agreement, and right-
     of-way to provide that it will become effective on the date 
     on which a copy of the executed lease, business agreement, or 
     right-of-way is delivered to the Secretary in accordance with 
     regulations adopted pursuant to this subsection; and
       ``(XIV) include citations to tribal laws, regulations, or 
     procedures, if any, that set out tribal remedies that must be 
     exhausted before a petition may be submitted to the Secretary 
     pursuant to paragraph (7)(B).
       ``(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 the environmental 
     impacts of the proposed action before tribal approval 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 a 
     periodic review and evaluation to monitor the performance of 
     the Indian tribe's activities associated with the development 
     of energy resources under the tribal energy resource 
     agreement; and
       ``(ii) when such review and evaluation result in a finding 
     by the Secretary of imminent jeopardy to a physical trust 
     asset arising from a violation of the tribal energy resource 
     agreement or applicable Federal laws, provisions authorizing 
     the Secretary to take appropriate actions determined by the 
     Secretary to be necessary to protect such asset, which 
     actions may include reassumption of responsibility for 
     activities associated with the development of energy 
     resources on tribal land until the violation and conditions 
     that gave rise to such jeopardy have been corrected.
       ``(E) The periodic review and evaluation described in 
     subparagraph (D) shall be conducted on an annual basis, 
     except that, after the third such annual review and 
     evaluation, the Secretary and the Indian tribe may mutually 
     agree to amend the tribal energy resource agreement to 
     authorize the review and evaluation required by subparagraph 
     (D) to be conducted once every 2 years.
       ``(3) The Secretary shall provide notice and opportunity 
     for public comment on tribal energy resource agreements 
     submitted for approval under paragraph (1). The Secretary's 
     review of a tribal energy resource agreement under the 
     National Environmental Policy Act of 1969 (42 U.S.C. 4321 et 
     seq.) shall be limited to the direct effects of that 
     approval.
       ``(4) If the Secretary disapproves a tribal energy resource 
     agreement submitted by an Indian tribe under paragraph (1), 
     the Secretary shall, not later than 10 days after the date of 
     disapproval--
       ``(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 paragraph (8), 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 
     payments to be made directly to the Indian tribe, information 
     and documentation of those payments sufficient to enable the 
     Secretary to discharge the trust responsibility of the United 
     States to enforce the terms of, and protect the Indian 
     tribe's rights under, the lease, business agreement, or 
     right-of-way.
       ``(6)(A) For purposes of the activities to be undertaken by 
     the Secretary pursuant to this section, the Secretary shall--
       ``(i) carry out such activities in a manner consistent with 
     the trust responsibility of the United States relating to 
     mineral and other trust resources; and
       ``(ii) act in good faith and in the best interests of the 
     Indian tribes.
       ``(B) Subject to the provisions of subsections (a)(2), (b), 
     and (c) waiving the requirement of Secretarial approval of 
     leases, business agreements, and rights-of-way executed 
     pursuant to tribal energy resource agreements approved under 
     this section, and the provisions of subparagraph (D), nothing 
     in this section shall absolve the United States from any 
     responsibility to Indians or Indian tribes, including, but 
     not limited to, those which derive from the trust 
     relationship or from any treaties, statutes, and other laws 
     of the United States, Executive Orders, or agreements between 
     the United States and any Indian tribe.

[[Page H11244]]

       ``(C) The Secretary shall continue to have a trust 
     obligation to ensure that the rights and interests of an 
     Indian tribe are protected in the event that--
       ``(i) any other party to any such lease, business 
     agreement, or right-of-way violates any applicable provision 
     of Federal law or the terms of any lease, business agreement, 
     or right-of-way under this section; or
       ``(ii) any provision in such lease, business agreement, or 
     right-of-way violates any express provision or requirement 
     set forth in the tribal energy resource agreement pursuant to 
     which the lease, business agreement, or right-of-way was 
     executed.
       ``(D) Notwithstanding subparagraph (B), the United States 
     shall not be liable to any party (including any Indian tribe) 
     for any of the negotiated terms of, or any losses resulting 
     from the negotiated terms of, a lease, business agreement, or 
     right-of-way executed pursuant to and in accordance with a 
     tribal energy resource agreement approved by the Secretary 
     under paragraph (2). For the purpose of this subparagraph, 
     the term `negotiated terms' means any terms or provisions 
     that are negotiated by an Indian tribe and any other party or 
     parties to a lease, business agreement, or right-of-way 
     entered into pursuant to an approved tribal energy resource 
     agreement.
       ``(7)(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 environmental 
     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 paragraph 
     (8), 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 
     by the Secretary under paragraph (2).
       ``(C)(i) Not later than 120 days after the date on which 
     the Secretary receives a petition under subparagraph (B), the 
     Secretary shall determine whether the Indian tribe is not in 
     compliance with the tribal energy resource agreement, as 
     alleged in the petition.
       ``(ii) The Secretary may adopt procedures under paragraph 
     (8) authorizing an extension of time, not to exceed 120 days, 
     for making the determination under clause (i) in any case in 
     which the Secretary determines that additional time is 
     necessary to evaluate the allegations of the petition.
       ``(iii) Subject to subparagraph (D), if the Secretary 
     determines that the Indian tribe is not in compliance with 
     the tribal energy resource agreement as alleged in the 
     petition, the Secretary shall take such action as is 
     necessary to ensure compliance with the provisions of the 
     tribal energy resource agreement, which action may include--
       ``(I) temporarily suspending some or all activities under a 
     lease, business agreement, or right-of-way under this section 
     until the Indian tribe or such activities are in compliance 
     with the provisions of the approved tribal energy resource 
     agreement; or
       ``(II) rescinding approval of all or part of the tribal 
     energy resource agreement, and if all of such agreement is 
     rescinded, reassuming the responsibility for approval of any 
     future leases, business agreements, or rights-of-way 
     described in subsections (a) and (b).
       ``(D) Prior to seeking to ensure compliance with the 
     provisions of the tribal energy resource agreement of an 
     Indian tribe under subparagraph (C)(iii), 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 violations together with the written determination; and
       ``(iii) before taking any action described in subparagraph 
     (C)(iii) 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) An Indian tribe described in subparagraph (D) shall 
     retain all rights to appeal as provided in regulations issued 
     by the Secretary.
       ``(8) 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 issue 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;
       ``(B) a process and requirements in accordance with which 
     an Indian tribe may--
       ``(i) voluntarily rescind a 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;
       ``(C) provisions setting forth the scope of, and procedures 
     for, the periodic review and evaluation described in 
     subparagraphs (D) and (E) of paragraph (2), including 
     provisions for review of transactions, reports, site 
     inspections, and any other review activities the Secretary 
     determines to be appropriate; and
       ``(D) provisions defining final agency actions after 
     exhaustion of administrative appeals from determinations of 
     the Secretary under paragraph (7).
       ``(f) No Effect on Other Law.--Nothing in this section 
     affects the application of--
       ``(1) any Federal environment 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.) and the National Environmental Policy Act of 1969 (42 
     U.S.C. 4321 et seq.).
       ``(g) Authorization of Appropriations.--There are 
     authorized to be appropriated to the Secretary such sums as 
     are necessary for each of fiscal years 2004 through 2014 to 
     implement the provisions of this section and to make grants 
     or provide other appropriate assistance to Indian tribes to 
     assist the Indian tribes in developing and implementing 
     tribal energy resource agreements in accordance with the 
     provisions of this section.

     ``SEC. 2605. 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 
     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. 2606. 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 non-federally generated 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 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 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, or used for the 
     benefit of, 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 deliver Federal power.
       ``(f) Authorization of Appropriations.--There are 
     authorized to be appropriated to carry out this section 
     $750,000, which shall remain available until expended and 
     shall not be reimbursable.

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

       ``(a) Study.--The Secretary of Energy, in coordination with 
     the Secretary of the Army and the Secretary, 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

[[Page H11245]]

     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 and projected requirements for 
     firming power and the patterns of availability and use of 
     firming power;
       ``(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 the Energy Policy Act of 2003, 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 use of combined 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 
     energy resource development organization 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) Authorization of appropriations.--There are 
     authorized to be appropriated to carry out this section 
     $500,000, to remain available until expended.
       ``(2) Nonreimbursability.--Costs incurred by the Secretary 
     in carrying out this section shall be nonreimbursable.''.
       (b) Conforming Amendments.--The table of contents for the 
     Energy Policy Act of 1992 is amended by striking the items 
     relating to title XXVI and inserting the following:

  ``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. Indian mineral development review.
  ``Sec. 2606. Federal Power Marketing Administrations.
  ``Sec. 2607. Wind and hydropower feasibility study.''.

     SEC. 504. 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 217 of the Department of 
     Energy Organization Act, as added by section 502 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. 505. 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. 506. CONSULTATION WITH INDIAN TRIBES.

       In carrying out this title and the amendments made by this 
     title, 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 VI--NUCLEAR MATTERS
               Subtitle A--Price-Anderson Act Amendments

     SEC. 601. SHORT TITLE.

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

     SEC. 602. EXTENSION OF INDEMNIFICATION AUTHORITY.

       (a) Indemnification of Nuclear Regulatory Commission 
     Licensees.--Section 170 c. 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''; and
       (2) by striking ``December 31, 2003'' each place it appears 
     and inserting ``December 31, 2023''.
       (b) Indemnification of Department of Energy Contractors.--
     Section 170 d.(1)(A) of the Atomic Energy Act of 1954 (42 
     U.S.C. 2210(d)(1)(A)) is amended by striking ``December 31, 
     2004'' and inserting ``December 31, 2023''.
       (c) Indemnification of Nonprofit Educational 
     Institutions.--Section 170 k. of the Atomic Energy Act of 
     1954 (42 U.S.C. 2210(k)) is amended by striking ``August 1, 
     2002'' each place it appears and inserting ``December 31, 
     2023''.

     SEC. 603. 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 
     ``$95,800,000''; 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 ``August 20, 
     2003''; and
       (C) in subparagraph (A), by striking ``such date of 
     enactment'' and inserting ``August 20, 2003''.

     SEC. 604. DEPARTMENT OF ENERGY LIABILITY LIMIT.

       (a) Indemnification of Department of Energy Contractors.--
     Section 170 d. 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 of the contractor as are approved by the Secretary.''.
       (b) Contract Amendments.--Section 170 d. 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 170 e.(1)(B) of the Atomic 
     Energy Act of 1954 (42 U.S.C. 2210(e)(1)(B)) is amended--
       (1) by striking ``the maximum amount of financial 
     protection required under subsection b. or''; and
       (2) by striking ``paragraph (3) of subsection d., whichever 
     amount is more'' and inserting ``paragraph (2) of subsection 
     d.''.

     SEC. 605. INCIDENTS OUTSIDE THE UNITED STATES.

       (a) Amount of Indemnification.--Section 170 d.(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 170 e.(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. 606. REPORTS.

       Section 170 p. of the Atomic Energy Act of 1954 (42 U.S.C. 
     2210(p)) is amended by striking ``August 1, 1998'' and 
     inserting ``December 31, 2019''.

     SEC. 607. INFLATION ADJUSTMENT.

       Section 170 t. 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 inserting 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. 608. TREATMENT OF MODULAR REACTORS.

       Section 170 b. 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.''.

[[Page H11246]]

     SEC. 609. APPLICABILITY.

       The amendments made by sections 603, 604, and 605 do not 
     apply to a nuclear incident that occurs before the date of 
     the enactment of this Act.

     SEC. 610. PROHIBITION ON ASSUMPTION BY UNITED STATES 
                   GOVERNMENT OF LIABILITY FOR CERTAIN FOREIGN 
                   INCIDENTS.

       Section 170 of the Atomic Energy Act of 1954 (42 U.S.C. 
     2210) is amended by adding at the end the following new 
     subsection:
       ``u. Prohibition on Assumption of Liability for Certain 
     Foreign Incidents.--Notwithstanding this section or any other 
     provision of law, no officer of the United States or of any 
     department, agency, or instrumentality of the United States 
     Government may enter into any contract or other arrangement, 
     or into any amendment or modification of a contract or other 
     arrangement, the purpose or effect of which would be to 
     directly or indirectly impose liability on the United States 
     Government, or any department, agency, or instrumentality of 
     the United States Government, or to otherwise directly or 
     indirectly require an indemnity by the United States 
     Government, for nuclear incidents occurring in connection 
     with the design, construction, or operation of a production 
     facility or utilization facility in any country whose 
     government has been identified by the Secretary of State as 
     engaged in state sponsorship of terrorist activities 
     (specifically including any country the government of which, 
     as of September 11, 2001, had been determined by the 
     Secretary of State under section 620A(a) of the Foreign 
     Assistance Act of 1961 (22 U.S.C. 2371(a)), section 6(j)(1) 
     of the Export Administration Act of 1979 (50 U.S.C. App. 
     2405(j)(1)), or section 40(d) of the Arms Export Control Act 
     (22 U.S.C. 2780(d)) to have repeatedly provided support for 
     acts of international terrorism). This subsection shall not 
     apply to nuclear incidents occurring as a result of missions, 
     carried out under the direction of the Secretary of Energy, 
     the Secretary of Defense, or the Secretary of State, that are 
     necessary to safely secure, store, transport, or remove 
     nuclear materials for nuclear safety or nonproliferation 
     purposes.''.

     SEC. 611. CIVIL PENALTIES.

       (a) Repeal of Automatic Remission.--Section 234A b.(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 1-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 (42 U.S.C. 2011 et seq.) occurring under a contract 
     entered into before the date of enactment of this section.
                  Subtitle B--General Nuclear Matters

     SEC. 621. LICENSES.

       Section 103 c. of the Atomic Energy Act of 1954 (42 U.S.C. 
     2133(c)) is amended by inserting ``from the authorization to 
     commence operations'' after ``forty years''.

     SEC. 622. 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 Nuclear 
     Regulatory 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 nuclear safety regulatory skills.
       (b) Authorization of Appropriations.--
       (1) In general.--There are authorized to be appropriated to 
     the Nuclear Regulatory Commission to carry out this section 
     $1,000,000 for each of fiscal years 2004 through 2008.
       (2) Availability.--Funds made available under paragraph (1) 
     shall remain available until expended.

     SEC. 623. COST RECOVERY FROM GOVERNMENT AGENCIES.

       Section 161 w. of the Atomic Energy Act of 1954 (42 U.S.C. 
     2201(w)) is amended--
       (1) by striking ``for or is issued'' and all that follows 
     through ``1702'' and inserting ``to the Commission for, or is 
     issued by the Commission, a license or certificate'';
       (2) by striking ``483a'' and inserting ``9701''; and
       (3) by striking ``, of applicants for, or holders of, such 
     licenses or certificates''.

     SEC. 624. 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. 625. ANTITRUST REVIEW.

       Section 105 c. 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 or production facility under section 103 
     or 104 b. that is filed on or after the date of enactment of 
     this paragraph.''.

     SEC. 626. DECOMMISSIONING.

       Section 161 i. 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 104 b., 
     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''.

     SEC. 627. LIMITATION ON LEGAL FEE REIMBURSEMENT.

       The Department of Energy shall not, except as required 
     under a contract entered into before the date of enactment of 
     this Act, reimburse any contractor or subcontractor of the 
     Department for any legal fees or expenses incurred with 
     respect to a complaint subsequent to--
       (1) an adverse determination on the merits with respect to 
     such complaint against the contractor or subcontractor by the 
     Director of the Department of Energy's Office of Hearings and 
     Appeals pursuant to part 708 of title 10, Code of Federal 
     Regulations, or by a Department of Labor Administrative Law 
     Judge pursuant to section 211 of the Energy Reorganization 
     Act of 1974 (42 U.S.C. 5851); or
       (2) an adverse final judgment by any State or Federal court 
     with respect to such complaint against the contractor or 
     subcontractor for wrongful termination or retaliation due to 
     the making of disclosures protected under chapter 12 of title 
     5, United States Code, section 211 of the Energy 
     Reorganization Act of 1974 (42 U.S.C. 5851), or any 
     comparable State law,
     unless the adverse determination or final judgment is 
     reversed upon further administrative or judicial review.

     SEC. 628. DECOMMISSIONING PILOT PROGRAM.

       (a) Pilot Program.--The Secretary of Energy 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 are authorized 
     to be appropriated to the Secretary of Energy to carry out 
     this section $16,000,000.

     SEC. 629. REPORT ON FEASIBILITY OF DEVELOPING COMMERCIAL 
                   NUCLEAR ENERGY GENERATION FACILITIES AT 
                   EXISTING DEPARTMENT OF ENERGY SITES.

       Not later than 1 year after the date of the enactment of 
     this Act, the Secretary of Energy shall submit to Congress a 
     report on the feasibility of developing commercial nuclear 
     energy generation facilities at Department of Energy sites in 
     existence on the date of enactment of this Act.

     SEC. 630. URANIUM SALES.

       (a) Sales, Transfers, and Services.--Section 3112 of the 
     USEC Privatization Act (42 U.S.C. 2297h-10) is amended by 
     striking subsections (d), (e), and (f) and inserting the 
     following:
       ``(3) The Secretary may transfer to the Corporation, 
     notwithstanding subsections (b)(2) and (d), natural uranium 
     in amounts sufficient to fulfill the Department of Energy's 
     commitments under Article 4(B) of the Agreement between the 
     Department and the Corporation dated June 17, 2002.
       ``(d) Inventory Sales.--(1) In addition to the transfers 
     and sales authorized under subsections (b) and (c) and under 
     paragraph (5) of this subsection, the United States 
     Government may transfer or sell uranium in any form subject 
     to paragraphs (2), (3), and (4).
       ``(2) Except as provided in subsections (b) and (c) and 
     paragraph (5) of this subsection, no sale or transfer of 
     uranium shall be made under this subsection by the United 
     States Government unless--
       ``(A) the President determines that the material is not 
     necessary for national security needs and the sale or 
     transfer has no adverse impact on implementation of existing 
     government-to-government agreements;
       ``(B) the price paid to the appropriate Federal agency, if 
     the transaction is a sale, will not be less than the fair 
     market value of the material; and
       ``(C) the sale or transfer to commercial nuclear power end 
     users is made pursuant to a contract of at least 3 years' 
     duration.
       ``(3) Except as provided in paragraph (5), the United 
     States Government shall not make any transfer or sale of 
     uranium in any form under this subsection that would cause 
     the total amount of uranium transferred or sold pursuant to 
     this subsection that is delivered for consumption by 
     commercial nuclear power end users to exceed--
       ``(A) 3,000,000 pounds of U3O8 
     equivalent in fiscal year 2004, 2005, 2006, 2007, 2008, or 
     2009;
       ``(B) 5,000,000 pounds of U3O8 
     equivalent in fiscal year 2010 or 2011;
       ``(C) 7,000,000 pounds of U3O8 
     equivalent in fiscal year 2012; and
       ``(D) 10,000,000 pounds of U3O8 
     equivalent in fiscal year 2013 or any fiscal year thereafter.
       ``(4) Except for sales or transfers under paragraph (5), 
     for the purposes of this subsection, the recovery of uranium 
     from uranium bearing materials transferred or sold by the 
     United States Government to the domestic uranium industry 
     shall be the preferred method of making uranium available. 
     The recovered uranium shall be counted against the annual 
     maximum deliveries set forth in this section, when such 
     uranium is sold to end users.

[[Page H11247]]

       ``(5) The United States Government may make the following 
     sales and transfers:
       ``(A) Sales or transfers to a Federal agency if the 
     material is transferred for the use of the receiving agency 
     without any resale or transfer to another entity and the 
     material does not meet commercial specifications.
       ``(B) Sales or transfers to any person for national 
     security purposes, as determined by the Secretary.
       ``(C) Sales or transfers to any State or local agency or 
     nonprofit, charitable, or educational institution for use 
     other than the generation of electricity for commercial use.
       ``(D) Sales or transfers to the Department of Energy 
     research reactor sales program.
       ``(E) Sales or transfers, at fair market value, for 
     emergency purposes in the event of a disruption in supply to 
     commercial nuclear power end users in the United States.
       ``(F) Sales or transfers, at fair market value, for use in 
     a commercial reactor in the United States with nonstandard 
     fuel requirements.
       ``(G) Sales or transfers provided for under law for use by 
     the Tennessee Valley Authority in relation to the Department 
     of Energy's highly enriched uranium or tritium programs.
       ``(6) For purposes of this subsection, the term ``United 
     States Government'' does not include the Tennessee Valley 
     Authority.
       ``(e) Savings Provision.--Nothing in this subchapter 
     modifies the terms of the Russian HEU Agreement.----
       ``(f) Services.--Notwithstanding any other provision of 
     this section, if the Secretary determines that the 
     Corporation has failed, or may fail, to perform any 
     obligation under the Agreement between the Department of 
     Energy and the Corporation dated June 17, 2002, and as 
     amended thereafter, which failure could result in termination 
     of the Agreement, the Secretary shall notify Congress, in 
     such a manner that affords Congress an opportunity to 
     comment, prior to a determination by the Secretary whether 
     termination, waiver, or modification of the Agreement is 
     required. The Secretary is authorized to take such action as 
     he determines necessary under the Agreement to terminate, 
     waive, or modify provisions of the Agreement to achieve its 
     purposes.''.
       (b) Report.--Not later than 3 years after the date of 
     enactment of this Act, the Secretary of Energy shall report 
     to Congress on the implementation of this section. The report 
     shall include a discussion of available excess uranium 
     inventories; 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.

     SEC. 631. COOPERATIVE RESEARCH AND DEVELOPMENT AND SPECIAL 
                   DEMONSTRATION PROJECTS FOR THE URANIUM MINING 
                   INDUSTRY.

       (a) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary of Energy $10,000,000 for 
     each of fiscal years 2004, 2005, and 2006 for--
       (1) cooperative, cost-shared agreements between the 
     Department of Energy and domestic uranium producers to 
     identify, test, and develop improved in situ leaching mining 
     technologies, including low-cost environmental restoration 
     technologies that may be applied to sites after completion of 
     in situ leaching operations; and
       (2) funding for competitively selected demonstration 
     projects with domestic uranium producers relating to--
       (A) enhanced production with minimal environmental impacts;
       (B) restoration of well fields; and
       (C) decommissioning and decontamination activities.
       (b) Domestic Uranium Producer.--For purposes of this 
     section, the term ``domestic uranium producer'' has the 
     meaning given that term in section 1018(4) of the Energy 
     Policy Act of 1992 (42 U.S.C. 2296b-7(4)), except that the 
     term shall not include any producer that has not produced 
     uranium from domestic reserves on or after July 30, 1998.
       (c) Limitation.--No activities funded under this section 
     may be carried out in the State of New Mexico.

     SEC. 632. WHISTLEBLOWER PROTECTION.

       (a) Definition of Employer.--Section 211(a)(2) of the 
     Energy Reorganization Act of 1974 (42 U.S.C. 5851(a)(2)) 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.''.-
       (b) De Novo Review.--Subsection (b) of such section 211 is 
     amended by adding at the end the following new paragraph:
       ``(4) If the Secretary has not issued a final decision 
     within 540 days after the filing of a complaint under 
     paragraph (1), and there is no showing that such delay is due 
     to the bad faith of the person seeking relief under this 
     paragraph, such person may bring an action at law or equity 
     for de novo review in the appropriate district court of the 
     United States, which shall have jurisdiction over such an 
     action without regard to the amount in controversy.''.

     SEC. 633. MEDICAL ISOTOPE PRODUCTION.

       Section 134 of the Atomic Energy Act of 1954 (42 U.S.C. 
     2160d) is amended--
       (1) in subsection a., by striking ``a. The Commission'' and 
     inserting ``a. In General.--Except as provided in subsection 
     b., the Commission'';
       (2) by redesignating subsection b. as subsection c.; and
       (3) by inserting after subsection a. the following:
       ``b. Medical Isotope Production.--
       ``(1) Definitions.--In this subsection:
       ``(A) Highly enriched uranium.--The term `highly enriched 
     uranium' means uranium enriched to include concentration of 
     U-235 above 20 percent.
       ``(B) Medical isotope.--The term `medical isotope' includes 
     Molybdenum 99, Iodine 131, Xenon 133, and other radioactive 
     materials used to produce a radiopharmaceutical for 
     diagnostic, therapeutic procedures or for research and 
     development.
       ``(C) Radiopharmaceutical.--The term `radiopharmaceutical' 
     means a radioactive isotope that--
       ``(i) contains byproduct material combined with chemical or 
     biological material; and
       ``(ii) is designed to accumulate temporarily in a part of 
     the body for therapeutic purposes or for enabling the 
     production of a useful image for use in a diagnosis of a 
     medical condition.
       ``(D) Recipient country.--The term `recipient country' 
     means Canada, Belgium, France, Germany, and the Netherlands.
       ``(2) Licenses.--The Commission may issue a license 
     authorizing the export (including shipment to and use at 
     intermediate and ultimate consignees specified in the 
     license) to a recipient country of highly enriched uranium 
     for medical isotope production if, in addition to any other 
     requirements of this Act (except subsection a.), the 
     Commission determines that--
       ``(A) a recipient country that supplies an assurance letter 
     to the United States Government in connection with the 
     consideration by the Commission of the export license 
     application has informed the United States Government that 
     any intermediate consignees and the ultimate consignee 
     specified in the application are required to use the highly 
     enriched uranium solely to produce medical isotopes; and
       ``(B) the highly enriched uranium for medical isotope 
     production will be irradiated only in a reactor in a 
     recipient country that--
       ``(i) uses an alternative nuclear reactor fuel; or
       ``(ii) is the subject of an agreement with the United 
     States Government to convert to an alternative nuclear 
     reactor fuel when alternative nuclear reactor fuel can be 
     used in the reactor.
       ``(3) Review of physical protection requirements.--
       ``(A) In general.--The Commission shall review the adequacy 
     of physical protection requirements that, as of the date of 
     an application under paragraph (2), are applicable to the 
     transportation and storage of highly enriched uranium for 
     medical isotope production or control of residual material 
     after irradiation and extraction of medical isotopes.
       ``(B) Imposition of additional requirements.--If the 
     Commission determines that additional physical protection 
     requirements are necessary (including a limit on the quantity 
     of highly enriched uranium that may be contained in a single 
     shipment), the Commission shall impose such requirements as 
     license conditions or through other appropriate means.
       ``(4) First report to congress.--
       ``(A) NAS study.--The Secretary shall enter into an 
     arrangement with the National Academy of Sciences to conduct 
     a study to determine--
       ``(i) the feasibility of procuring supplies of medical 
     isotopes from commercial sources that do not use highly 
     enriched uranium;
       ``(ii) the current and projected demand and availability of 
     medical isotopes in regular current domestic use;
       ``(iii) the progress that is being made by the Department 
     of Energy and others to eliminate all use of highly enriched 
     uranium in reactor fuel, reactor targets, and medical isotope 
     production facilities; and
       ``(iv) the potential cost differential in medical isotope 
     production in the reactors and target processing facilities 
     if the products were derived from production systems that do 
     not involve fuels and targets with highly enriched uranium.
       ``(B) Feasibility.--For the purpose of this subsection, the 
     use of low enriched uranium to produce medical isotopes shall 
     be determined to be feasible if--
       ``(i) low enriched uranium targets have been developed and 
     demonstrated for use in the reactors and target processing 
     facilities that produce significant quantities of medical 
     isotopes to serve United States needs for such isotopes;
       ``(ii) sufficient quantities of medical isotopes are 
     available from low enriched uranium targets and fuel to meet 
     United States domestic needs; and
       ``(iii) the average anticipated total cost increase from 
     production of medical isotopes in such facilities without use 
     of highly enriched uranium is less than 10 percent.
       ``(C) Report by the secretary.--Not later than 5 years 
     after the date of enactment of the Energy Policy Act of 2003, 
     the Secretary shall submit to Congress a report that--
       ``(i) contains the findings of the National Academy of 
     Sciences made in the study under subparagraph (A); and
       ``(ii) discloses the existence of any commitments from 
     commercial producers to provide domestic requirements for 
     medical isotopes without use of highly enriched uranium 
     consistent with the feasibility criteria described in 
     subparagraph (B) not later than the date that is 4 years 
     after the date of submission of the report.
       ``(5) Second report to congress.--If the study of the 
     National Academy of Sciences determines under paragraph 
     (4)(A)(i) that the procurement of supplies of medical 
     isotopes from commercial sources that do not use highly 
     enriched uranium is feasible, but the Secretary is unable to 
     report the existence of commitments under paragraph 
     (4)(C)(ii), not later than the date that is 6 years after the 
     date of enactment of the Energy Policy Act of 2003, the 
     Secretary shall submit to Congress a report that describes 
     options for developing domestic supplies of medical isotopes 
     in quantities that are adequate to meet domestic demand 
     without the use of highly

[[Page H11248]]

     enriched uranium consistent with the cost increase described 
     in paragraph (4)(B)(iii).
       ``(6) Certification.--At such time as commercial facilities 
     that do not use highly enriched uranium are capable of 
     meeting domestic requirements for medical isotopes, within 
     the cost increase described in paragraph (4)(B)(iii) and 
     without impairing the reliable supply of medical isotopes for 
     domestic utilization, the Secretary shall submit to Congress 
     a certification to that effect.
       ``(7) Sunset provision.--After the Secretary submits a 
     certification under paragraph (6), the Commission shall, by 
     rule, terminate its review of export license applications 
     under this subsection.''.

     SEC. 634. FERNALD BYPRODUCT MATERIAL.

       Notwithstanding any other law, the material in the concrete 
     silos at the Fernald uranium processing facility managed on 
     the date of enactment of this Act by the Department of Energy 
     shall be considered byproduct material (as defined by section 
     11 e.(2) of the Atomic Energy Act of 1954 (42 U.S.C. 
     2014(e)(2))). The Department of Energy may dispose of the 
     material in a facility regulated by the Nuclear Regulatory 
     Commission or by an Agreement State. If the Department of 
     Energy disposes of the material in such a facility, the 
     Nuclear Regulatory Commission or the Agreement State shall 
     regulate the material as byproduct material under that Act. 
     This material shall remain subject to the jurisdiction of the 
     Department of Energy until it is received at a commercial, 
     Nuclear Regulatory Commission-licensed, or Agreement State-
     licensed facility, at which time the material shall be 
     subject to the health and safety requirements of the Nuclear 
     Regulatory Commission or the Agreement State with 
     jurisdiction over the disposal site.

     SEC. 635. SAFE DISPOSAL OF GREATER-THAN-CLASS C RADIOACTIVE 
                   WASTE.

       (a) Designation of Responsibility.--The Secretary of Energy 
     shall designate an Office within the Department of Energy to 
     have the responsibility for activities needed to develop a 
     new, or use an existing, facility for safely disposing of all 
     low-level radioactive waste with concentrations of 
     radionuclides that exceed the limits established by the 
     Nuclear Regulatory Commission for Class C radioactive waste 
     (referred to in this section as ``GTCC waste'').
       (b) Comprehensive Plan.--The Secretary of Energy shall 
     develop a comprehensive plan for permanent disposal of GTCC 
     waste which includes plans for a disposal facility. This plan 
     shall be transmitted to Congress in a series of reports, 
     including the following:
       (1) Report on short-term plan.--Not later than 180 days 
     after the date of enactment of this Act, the Secretary of 
     Energy shall submit to Congress a plan describing the 
     Secretary's operational strategy for continued recovery and 
     storage of GTCC waste until a permanent disposal facility is 
     available.
       (2) Update of 1987 report.--
       (A) In general.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary of Energy shall submit 
     to Congress an update of the Secretary's February 1987 report 
     submitted to Congress that made comprehensive recommendations 
     for the disposal of GTCC waste.
       (B) Contents.--The update under this paragraph shall 
     contain--
       (i) a detailed description and identification of the GTCC 
     waste that is to be disposed;
       (ii) a description of current domestic and international 
     programs, both Federal and commercial, for management and 
     disposition of GTCC waste;
       (iii) an identification of the Federal and private options 
     and costs for the safe disposal of GTCC waste;
       (iv) an identification of the options for ensuring that, 
     wherever possible, generators and users of GTCC waste bear 
     all reasonable costs of waste disposal;
       (v) an identification of any new statutory authority 
     required for disposal of GTCC waste; and
       (vi) in coordination with the Environmental Protection 
     Agency and the Nuclear Regulatory Commission, an 
     identification of any new regulatory guidance needed for the 
     disposal of GTCC waste.
       (3) Report on cost and schedule for completion of 
     environmental impact statement and record of decision.--Not 
     later than 180 days after the date of submission of the 
     update required under paragraph (2), the Secretary of Energy 
     shall submit to Congress a report containing an estimate of 
     the cost and schedule to complete a draft and final 
     environmental impact statement and to issue a record of 
     decision for a permanent disposal facility, utilizing either 
     a new or existing facility, for GTCC waste.

     SEC. 636. PROHIBITION ON NUCLEAR EXPORTS TO COUNTRIES THAT 
                   SPONSOR TERRORISM.

       (a) In General.--Section 129 of the Atomic Energy Act of 
     1954 (42 U.S.C. 2158) is amended--
       (1) by inserting ``a.'' before ``No nuclear materials and 
     equipment''; and
       (2) by adding at the end the following new subsection:
       ``b.(1) Notwithstanding any other provision of law, 
     including specifically section 121 of this Act, and except as 
     provided in paragraphs (2) and (3), no nuclear materials and 
     equipment or sensitive nuclear technology, including items 
     and assistance authorized by section 57 b. of this Act and 
     regulated under part 810 of title 10, Code of Federal 
     Regulations, and nuclear-related items on the Commerce 
     Control List maintained under part 774 of title 15 of the 
     Code of Federal Regulations, shall be exported or reexported, 
     or transferred or retransferred whether directly or 
     indirectly, and no Federal agency shall issue any license, 
     approval, or authorization for the export or reexport, or 
     transfer, or retransfer, whether directly or indirectly, of 
     these items or assistance (as defined in this paragraph) to 
     any country whose government has been identified by the 
     Secretary of State as engaged in state sponsorship of 
     terrorist activities (specifically including any country the 
     government of which has been determined by the Secretary of 
     State under section 620A(a) of the Foreign Assistance Act of 
     1961 (22 U.S.C. 2371(a)), section 6(j)(1) of the Export 
     Administration Act of 1979 (50 U.S.C. App. 2405(j)(1)), or 
     section 40(d) of the Arms Export Control Act (22 U.S.C. 
     2780(d)) to have repeatedly provided support for acts of 
     international terrorism).
       ``(2) This subsection shall not apply to exports, 
     reexports, transfers, or retransfers of radiation monitoring 
     technologies, surveillance equipment, seals, cameras, tamper-
     indication devices, nuclear detectors, monitoring systems, or 
     equipment necessary to safely store, transport, or remove 
     hazardous materials, whether such items, services, or 
     information are regulated by the Department of Energy, the 
     Department of Commerce, or the Nuclear Regulatory Commission, 
     except to the extent that such technologies, equipment, 
     seals, cameras, devices, detectors, or systems are available 
     for use in the design or construction of nuclear reactors or 
     nuclear weapons.
       ``(3) The President may waive the application of paragraph 
     (1) to a country if the President determines and certifies to 
     Congress that the waiver will not result in any increased 
     risk that the country receiving the waiver will acquire 
     nuclear weapons, nuclear reactors, or any materials or 
     components of nuclear weapons and--
       ``(A) the government of such country has not within the 
     preceding 12-month period willfully aided or abetted the 
     international proliferation of nuclear explosive devices to 
     individuals or groups or willfully aided and abetted an 
     individual or groups in acquiring unsafeguarded nuclear 
     materials;
       ``(B) in the judgment of the President, the government of 
     such country has provided adequate, verifiable assurances 
     that it will cease its support for acts of international 
     terrorism;
       ``(C) the waiver of that paragraph is in the vital national 
     security interest of the United States; or
       ``(D) such a waiver is essential to prevent or respond to a 
     serious radiological hazard in the country receiving the 
     waiver that may or does threaten public health and safety.''.
       (b) Applicability To Exports Approved for Transfer but Not 
     Transferred.--Subsection b. of section 129 of Atomic Energy 
     Act of 1954, as added by subsection (a) of this section, 
     shall apply with respect to exports that have been approved 
     for transfer as of the date of the enactment of this Act but 
     have not yet been transferred as of that date.

     SEC. 637. URANIUM ENRICHMENT FACILITIES.

       (a) Nuclear Regulatory Commission Review of Applications.--
       (1) In general.--In order to facilitate a timely review and 
     approval of an application in a proceeding for a license for 
     the construction and operation of a uranium enrichment 
     facility under sections 53 and 63 of the Atomic Energy Act of 
     1954 (42 U.S.C. 2073, 2093) (referred to in this subsection 
     as a ``covered proceeding''), the Nuclear Regulatory 
     Commission shall, not later than 30 days after the receipt of 
     the application, establish, by order, the schedule for the 
     conduct of any hearing that may be requested by any person 
     whose interest may be affected by the covered proceeding.
       (2) Final agency decision.--The schedule shall provide that 
     a final decision by the Commission on the application shall 
     be made not later than the date that is 2 years after the 
     date of submission of the application by the applicant.
       (3) Compliance with schedule.--
       (A) In general.--The Commission shall establish a process 
     to assess compliance with the schedule established under 
     paragraph (1) on an ongoing basis during the course of the 
     review of the application, including ensuring compliance with 
     schedules and milestones that are established for the conduct 
     of any covered proceeding by the Atomic Safety and Licensing 
     Board.
       (B) Report.--The Commission shall submit to Congress on a 
     bimonthly basis a report describing the status of compliance 
     with the schedule established under paragraph (1), including 
     a description of the status of actions required to be 
     completed pursuant to the schedule by officers and employees 
     of--
       (i) the Commission in undertaking the safety and 
     environmental review of applications; and
       (ii) the Atomic Safety and Licensing Board in the conduct 
     of any covered proceeding.
       (4) Environmental review.--
       (A) In general.--In evaluating an application under the 
     National Environmental Policy Act of 1969 (42 U.S.C. 4321 et 
     seq.) for licensing of a facility in a covered proceeding, 
     the Commission shall limit the consideration of need to 
     whether the licensing of the facility would advance the 
     national interest of encouraging in the United States--
       (i) additional secure, reliable uranium enrichment 
     capacity;
       (ii) diverse supplies and suppliers of uranium enrichment 
     capacity; and
       (iii) the deployment of advanced centrifuge enrichment 
     technology.
       (B) Comment.--In carrying out subparagraph (A), the 
     Commission shall consider and solicit the views of other 
     affected Federal agencies.
       (C) Atomic safety and licensing board.--
       (i) In general.--Except as provided in clause (ii), in any 
     covered proceeding, the Commission shall allow the litigation 
     and resolution by the Atomic Safety and Licensing Board of 
     issues arising under the National Environmental Policy Act of 
     1969 (42 U.S.C. 4321 et seq.), on the basis of information 
     submitted by the applicant in its environmental report, prior 
     to publication of any required environmental impact 
     statement.

[[Page H11249]]

       (ii) Exceptions.--On the publication of any required 
     environmental impact statement, issues may be proffered for 
     resolution by the Atomic Safety and Licensing Board only if 
     information or conclusions in the environmental impact 
     statement differ significantly from the information or 
     conclusions in the environmental report submitted by the 
     applicant.
       (D) Environmental justice.--In a covered proceeding, the 
     Commission shall apply the criteria in Appendix C of the 
     final report entitled ``Environmental Review Guidance for 
     Licensing Actions Associated with NMSS Programs'' (NUREG-
     1748), published in August 2003, in any required review of 
     environmental justice.
       (5) Low-level waste.--In any covered proceeding, the 
     Commission shall--
       (A) deem the obligation of the Secretary of Energy pursuant 
     to section 3113 of the USEC Privitization Act (42 U.S.C. 2297 
     h-11) to constitute a plausible strategy with regard to the 
     disposition of depleted uranium generated by such facility; 
     and
       (B) treat any residual material that remains following the 
     extraction of any usable resource value from depleted uranium 
     as low-level radioactive waste under part 61 of title 10, 
     Code of Federal Regulations.
       (6) Adjudicatory hearing on licensing of uranium enrichment 
     facilities.--Section 193(b) of the Atomic Energy Act of 1954 
     (42 U.S.C. 2243(b)) is amended by striking paragraph (2) and 
     inserting the following:
       ``(2) Timing.--On the issuance of a final decision on the 
     application by the Atomic Safety and Licensing Board, the 
     Commission shall issue and make immediately effective any 
     license for the construction and operation of a uranium 
     enrichment facility under sections 53 and 63, on a 
     determination by the Commission that the issuance of the 
     license would not cause irreparable injury to the public 
     health and safety or the common defense and security, 
     notwithstanding the pendency before the Commission of any 
     appeal or petition for review of any decision of the Atomic 
     Safety and Licensing Board.''.
       (b) Department of Energy Responsibilities.--
       (1) In general.--Not later than 180 days after a request is 
     made to the Secretary of Energy by an applicant for or 
     recipient of a license for a uranium enrichment facility 
     under section 53, 63, or 193 of the Atomic Energy Act of 1954 
     ((42 U.S.C. 2073, 2093, 2243), the Secretary shall enter into 
     a memorandum of agreement with the applicant or licensee that 
     provides a schedule for the transfer to the Secretary, not 
     later than 5 years after the generation of any depleted 
     uranium hexafluoride, of title and possession of the depleted 
     uranium hexafluoride to be generated by the applicant or 
     licensee.
       (2) Cost.--
       (A) In general.--Subject to subparagraphs (B) and (C), the 
     memorandum of agreement shall specify the cost to be assessed 
     by the Secretary for the transfer to the Secretary of the 
     depleted uranium hexafluoride.
       (B) Nondiscriminatory basis.--The cost shall be determined 
     by the Secretary on a nondiscriminatory basis.
       (C) Cost.--Taking into account the physical and chemical 
     characteristics of such depleted uranium hexafluoride, the 
     cost shall not exceed the cost assessed by the Secretary for 
     the acceptance of depleted uranium hexafluoride under--
       (i) the memorandum of agreement between the United States 
     Department of Energy and the United States Enrichment 
     Corporation Relating to Depleted Uranium, dated June 30, 
     1998; and
       (ii) the Agreement Between the U.S. Department of Energy 
     and USEC Inc., dated June 17, 2002.

     SEC. 638. NATIONAL URANIUM STOCKPILE.

       (a) Stockpile Creation.--The Secretary of Energy may create 
     a national low-enriched uranium stockpile with the goals to--
       (1) enhance national energy security; and
       (2) reduce global proliferation threats.
       (b) Source of Material.--The Secretary shall obtain 
     material for the stockpile from--
       (1) material derived from blend-down of Russian highly 
     enriched uranium derived from weapons materials; and
       (2) domestically mined and enriched uranium.
       (c) Limitation on Sales or Transfers.--Sales or transfer of 
     materials in the stockpile shall occur pursuant to section 
     3112 of the USEC Privitization Act (42 U.S.C. 2297h-10), as 
     amended by section 630 of this Act.
       Subtitle C--Advanced Reactor Hydrogen Cogeneration Project

     SEC. 651. PROJECT ESTABLISHMENT.

       The Secretary of Energy (in this subtitle referred to as 
     the ``Secretary'') is directed to establish an Advanced 
     Reactor Hydrogen Cogeneration Project.

     SEC. 652. PROJECT DEFINITION.

       The project shall consist of the research, development, 
     design, construction, and operation of a hydrogen production 
     cogeneration research facility 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 
     facility 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. 653. 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 project, 
     providing the site for the reactor construction, shall be the 
     Idaho National Engineering and Environmental Laboratory (in 
     this subtitle referred to as ``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. 654. PROJECT REQUIREMENTS.

       (a) Research and Development.--
       (1) In general.--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.
       (2) Reactor test capabilities at ineel.--The project shall 
     utilize, where appropriate, extensive reactor test 
     capabilities resident at INEEL.
       (3) Alternatives.--The project shall be designed to explore 
     technical, environmental, and economic feasibility of 
     alternative approaches for reactor-based hydrogen production.
       (4) Industrial lead.--The industrial lead for the project 
     shall be a company incorporated in the United States.
       (b) International Collaboration.--
       (1) In general.--The Secretary shall seek international 
     cooperation, participation, and financial contribution in 
     this project.
       (2) Assistance from international partners.--The Secretary 
     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.
       (3) Generation iv international forum.--International 
     activities shall be coordinated with the Generation IV 
     International Forum.
       (4) Generation iv nuclear energy systems program.--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 research 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 explaining why this date is not 
     feasible.
       (f) Waiver of Construction Timelines.--The Secretary is 
     authorized to conduct the Advanced Reactor Hydrogen 
     Cogeneration Project without the constraints of DOE Order 
     413.3, relating to program and project management for the 
     acquisition of capital assets, as necessary to meet the 
     specified operational date.
       (g) Competition.--The Secretary may fund up to 2 teams for 
     up to 1 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 research 
     facility. Utilization of domestic university-based facilities 
     shall be encouraged to provide educational opportunities for 
     student development.
       (i) Role of Nuclear Regulatory Commission.--
       (1) In general.--The Nuclear Regulatory Commission shall 
     have licensing and regulatory authority for any reactor 
     authorized under this subtitle, pursuant to section 202 of 
     the Energy Reorganization Act of 1974 (42 U.S.C. 5842).
       (2) Risk-based criteria.--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--The Secretary shall develop and transmit to 
     Congress a comprehensive project plan not later than April 
     30, 2004. The project plan shall be updated annually with 
     each annual budget submission.

     SEC. 655. 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 
     construction activities described in subsection (b):
       (1) For fiscal year 2004, $35,000,000.
       (2) For each of fiscal years 2005 through 2008, 
     $150,000,000.
       (3) For fiscal years beyond 2008, such sums as are 
     necessary.
       (b) Construction.--There are authorized to be appropriated 
     to the Secretary for all project-related construction 
     activities, to be available until expended, $500,000,000.

[[Page H11250]]

                      Subtitle D--Nuclear Security

     SEC. 661. NUCLEAR FACILITY THREATS.

       (a) Study.--The President, in consultation with the Nuclear 
     Regulatory Commission (referred to in this subtitle as the 
     ``Commission'') and other appropriate Federal, State, and 
     local agencies and private entities, shall conduct a study to 
     identify the types of threats that pose an appreciable risk 
     to the security of the various classes of facilities licensed 
     by the Commission under the Atomic Energy Act of 1954 (42 
     U.S.C. 2011 et seq.). Such study shall take into account, but 
     not be limited to--
       (1) the events of September 11, 2001;
       (2) an assessment of physical, cyber, biochemical, and 
     other terrorist threats;
       (3) the potential for attack on facilities by multiple 
     coordinated teams of a large number of individuals;
       (4) the potential for assistance in an attack from several 
     persons employed at the facility;
       (5) the potential for suicide attacks;
       (6) the potential for water-based and air-based threats;
       (7) the potential use of explosive devices of considerable 
     size and other modern weaponry;
       (8) the potential for attacks by persons with a 
     sophisticated knowledge of facility operations;
       (9) the potential for fires, especially fires of long 
     duration;
       (10) the potential for attacks on spent fuel shipments by 
     multiple coordinated teams of a large number of individuals;
       (11) 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; and
       (12) the potential for theft and diversion of nuclear 
     materials from such facilities.
       (b) Summary and Classification Report.--Not later than 180 
     days after the date of the enactment of this Act, the 
     President shall transmit to Congress and the Commission a 
     report--
       (1) summarizing the types of threats identified under 
     subsection (a); and
       (2) classifying each type of threat identified under 
     subsection (a), in accordance with existing laws and 
     regulations, as either--
       (A) involving attacks and destructive acts, including 
     sabotage, directed against the facility by an enemy of the 
     United States, whether a foreign government or other person, 
     or otherwise falling under the responsibilities of the 
     Federal Government; or
       (B) involving the type of risks that Commission licensees 
     should be responsible for guarding against.
       (c) Federal Action Report.--Not later than 90 days after 
     the date on which a report is transmitted under subsection 
     (b), the President shall transmit to Congress a report on 
     actions taken, or to be taken, to address the types of 
     threats identified under subsection (b)(2)(A), including 
     identification of the Federal, State, and local agencies 
     responsible for carrying out the obligations and authorities 
     of the United States. Such report may include a classified 
     annex, as appropriate.
       (d) Regulations.--Not later than 180 days after the date on 
     which a report is transmitted under subsection (b), the 
     Commission may revise, by rule, the design basis threats 
     issued before the date of enactment of this section as the 
     Commission considers appropriate based on the summary and 
     classification report.
       (e) Physical Security Program.--The Commission shall 
     establish an operational safeguards response evaluation 
     program that ensures that the physical protection capability 
     and operational safeguards response for sensitive nuclear 
     facilities, as determined by the Commission consistent with 
     the protection of public health and the common defense and 
     security, shall be tested periodically through Commission 
     approved or designed, observed, and evaluated force-on-force 
     exercises to determine whether the ability to defeat the 
     design basis threat is being maintained. For purposes of this 
     subsection, the term ``sensitive nuclear facilities'' 
     includes at a minimum commercial nuclear power plants and 
     category I fuel cycle facilities.
       (f) Control of Information.--Notwithstanding any other 
     provision of law, the Commission may undertake any rulemaking 
     under this subtitle in a manner that will fully protect 
     safeguards and classified national security information.
       (g) Federal Security Coordinators.--
       (1) Regional offices.--Not later than 18 months after the 
     date of enactment of this Act, 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 such classes of facilities as the Commission 
     determines to be appropriate;
       (B) ensuring that such classes of facilities as the 
     Commission determines to be appropriate maintain security 
     consistent with the security plan in accordance with the 
     appropriate threat level; and
       (C) assisting in the coordination of security measures 
     among the private security forces at such classes of 
     facilities as the Commission determines to be appropriate and 
     Federal, State, and local authorities, as appropriate.
       (h) Training Program.--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.

     SEC. 662. FINGERPRINTING FOR CRIMINAL HISTORY RECORD CHECKS.

       (a) In General.--Subsection a. of section 149 of the Atomic 
     Energy Act of 1954 (42 U.S.C. 2169(a)) is amended--
       (1) 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 each 
     individual or entity--
       ``(i) that is licensed or certified to engage in an 
     activity subject to regulation by the Commission;
       ``(ii) that has filed an application for a license or 
     certificate to engage in an activity subject to regulation by 
     the Commission; or
       ``(iii) that has notified the Commission, in writing, of an 
     intent to file an application for licensing, certification, 
     permitting, or approval of a product or activity subject to 
     regulation by the Commission,
     to fingerprint each individual described in subparagraph (B) 
     before the individual is permitted unescorted access or 
     access, whichever is applicable, as 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 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; or

       ``(ii) is permitted access to safeguards information under 
     section 147.'';
       (2) by striking ``All fingerprints obtained by a licensee 
     or applicant as required in the preceding sentence'' and 
     inserting the following:
       ``(2) Submission to the attorney general.--All fingerprints 
     obtained by an individual or entity as required in paragraph 
     (1)'';
       (3) by striking ``The costs of any identification and 
     records check conducted pursuant to the preceding sentence 
     shall be paid by the licensee or applicant.'' and inserting 
     the following:
       ``(3) Costs.--The costs of any identification and records 
     check conducted pursuant to paragraph (1) shall be paid by 
     the individual or entity required to conduct the 
     fingerprinting under paragraph (1)(A).''; and
       (4) by striking ``Notwithstanding any other provision of 
     law, the Attorney General may provide all the results of the 
     search to the Commission, and, in accordance with regulations 
     prescribed under this section, the Commission may provide 
     such results to licensee or applicant submitting such 
     fingerprints.'' and inserting the following:
       ``(4) Provision to individual or entity required to conduct 
     fingerprinting.--Notwithstanding any other provision of law, 
     the Attorney General may provide all the results of the 
     search to the Commission, and, in accordance with regulations 
     prescribed under this section, the Commission may provide 
     such results to the individual or entity required to conduct 
     the fingerprinting under paragraph (1)(A).''.
       (b) Administration--Subsection c. of section 149 of the 
     Atomic Energy Act of 1954 (42 U.S.C. 2169(c)) is amended--
       (1) by striking ``, subject to public notice and comment, 
     regulations--'' and inserting ``requirements--''; and
       (2) by striking, in paragraph (2)(B), ``unescorted access 
     to the facility of a licensee or applicant'' and inserting 
     ``unescorted access to a utilization facility, radioactive 
     material, or other property described in subsection 
     a.(1)(B)''.
       (c) Biometric Methods.--Subsection d. of section 149 of the 
     Atomic Energy Act of 1954 (42 U.S.C. 2169(d)) is redesignated 
     as subsection e., and the following is inserted after 
     subsection c.:
       ``d. Use of Other Biometric Methods.--The Commission may 
     satisfy any requirement for a person to conduct 
     fingerprinting under this section using any other biometric 
     method for identification approved for use by the Attorney 
     General, after the Commission has approved the alternative 
     method by rule.''.

     SEC. 663. USE OF FIREARMS BY SECURITY PERSONNEL OF LICENSEES 
                   AND CERTIFICATE HOLDERS OF THE COMMISSION.

       Section 161 of the Atomic Energy Act of 1954 (42 U.S.C. 
     2201) is amended by adding at the end the following 
     subsection:
       ``(z)(1) notwithstanding section 922(o), (v), and (w) of 
     title 18, United States Code, or any similar provision of any 
     State law or any similar rule or regulation of a State or any 
     political subdivision of a State prohibiting the transfer or 
     possession of a handgun, a rifle or shotgun, a short-barreled 
     shotgun, a short-barreled rifle, a machinegun, a 
     semiautomatic assault weapon, ammunition for the foregoing, 
     or a large capacity ammunition feeding device, authorize 
     security personnel of licensees and certificate holders of 
     the Commission (including employees of contractors of 
     licensees and certificate holders) to receive, possess, 
     transport, import, and use 1 or more of those weapons, 
     ammunition, or devices, if the Commission determines that--
       ``(A) such authorization is necessary to the discharge of 
     the security personnel's official duties; and
       ``(B) the security personnel--
       ``(i) are not otherwise prohibited from possessing or 
     receiving a firearm under Federal or State laws pertaining to 
     possession of firearms by certain categories of persons;
       ``(ii) have successfully completed requirements established 
     through guidelines implementing this subsection for training 
     in use of firearms and tactical maneuvers;
       ``(iii) are engaged in the protection of--

       ``(I) facilities owned or operated by a Commission licensee 
     or certificate holder that are designated by the Commission; 
     or
       ``(II) radioactive material or other property owned or 
     possessed by a person that is a licensee or certificate 
     holder of the Commission,

[[Page H11251]]

     or that is being transported to or from a facility owned or 
     operated by such a licensee or certificate holder, and that 
     has been determined by the Commission to be of significance 
     to the common defense and security or public health and 
     safety; and

       ``(iv) are discharging their official duties.
       ``(2) Such receipt, possession, transportation, 
     importation, or use shall be subject to--
       ``(A) chapter 44 of title 18, United States Code, except 
     for section 922(a)(4), (o), (v), and (w);
       ``(B) chapter 53 of title 26, United States Code, except 
     for section 5844; and
       ``(C) a background check by the Attorney General, based on 
     fingerprints and including a check of the system established 
     under section 103(b) of the Brady Handgun Violence Prevention 
     Act (18 U.S.C. 922 note) to determine whether the person 
     applying for the authority is prohibited from possessing or 
     receiving a firearm under Federal or State law.
       ``(3) This subsection shall become effective upon the 
     issuance of guidelines by the Commission, with the approval 
     of the Attorney General, to govern the implementation of this 
     subsection.
       ``(4) In this subsection, the terms ``handgun'', ``rifle'', 
     ``shotgun'', ``firearm'', ``ammunition'', ``machinegun'', 
     ``semiautomatic assault weapon'', ``large capacity ammunition 
     feeding device'', ``short-barreled shotgun'', and ``short-
     barreled rifle'' shall have the meanings given those terms in 
     section 921(a) of title 18, United States Code.''.

     SEC. 664. UNAUTHORIZED INTRODUCTION OF DANGEROUS WEAPONS.

       Section 229 a. 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. 665. SABOTAGE OF NUCLEAR FACILITIES OR FUEL.

       (a) In General.--Section 236 a. of the Atomic Energy Act of 
     1954 (42 U.S.C. 2284(a)) is amended--
       (1) in paragraph (2), by striking ``storage facility'' and 
     inserting ``storage, treatment, or disposal facility'';
       (2) 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;
       (3) 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 comma at the end and inserting a 
     semicolon; and
       (4) by inserting after paragraph (4) the following:
       ``(5) any production, utilization, waste storage, waste 
     treatment, waste disposal, uranium enrichment, uranium 
     conversion, 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,''.
       (b) Penalties.--Section 236 of the Atomic Energy Act of 
     1954 (42 U.S.C. 2284) is amended by striking ``$10,000 or 
     imprisoned for not more than 20 years, or both, and, if death 
     results to any person, shall be imprisoned for any term of 
     years or for life'' both places it appears and inserting 
     ``$1,000,000 or imprisoned for up to life without parole''.

     SEC. 666. SECURE TRANSFER OF NUCLEAR MATERIALS.

       (a) Amendment.--Chapter 14 of the Atomic Energy Act of 1954 
     (42 U.S.C. 2201-2210b) is amended by adding at the end the 
     following new section:

     ``SEC. 170C. SECURE TRANSFER OF NUCLEAR MATERIALS.

       ``a. The Nuclear Regulatory Commission shall establish a 
     system to ensure that materials described in subsection b., 
     when transferred or received in the United States by any 
     party pursuant to an import or export license issued pursuant 
     to this Act, are accompanied by a manifest describing the 
     type and amount of materials being transferred or received. 
     Each individual receiving or accompanying the transfer of 
     such materials shall be subject to a security background 
     check conducted by appropriate Federal entities.
       ``b. Except as otherwise provided by the Commission by 
     regulation, the materials referred to in subsection a. are 
     byproduct materials, source materials, special nuclear 
     materials, high-level radioactive waste, spent nuclear fuel, 
     transuranic waste, and low-level radioactive waste (as 
     defined in section 2(16) of the Nuclear Waste Policy Act of 
     1982 (42 U.S.C. 10101(16))).''.
       (b) Regulations.--Not later than 1 year after the date of 
     the enactment of this Act, and from time to time thereafter 
     as it considers necessary, the Nuclear Regulatory Commission 
     shall issue regulations identifying radioactive materials or 
     classes of individuals that, consistent with the protection 
     of public health and safety and the common defense and 
     security, are appropriate exceptions to the requirements of 
     section 170C of the Atomic Energy Act of 1954, as added by 
     subsection (a) of this section.
       (c) Effective Date.--The amendment made by subsection (a) 
     shall take effect upon the issuance of regulations under 
     subsection (b), except that the background check requirement 
     shall become effective on a date established by the 
     Commission.
       (d) Effect on Other Law.--Nothing in this section or the 
     amendment made by this section shall waive, modify, or affect 
     the application of chapter 51 of title 49, United States 
     Code, part A of subtitle V of title 49, United States Code, 
     part B of subtitle VI of title 49, United States Code, and 
     title 23, United States Code.
       (e) Table of Sections Amendment.--The table of sections for 
     chapter 14 of the Atomic Energy Act of 1954 is amended by 
     adding at the end the following new item:

``Sec. 170C. Secure transfer of nuclear materials.''.

     SEC. 667. DEPARTMENT OF HOMELAND SECURITY CONSULTATION.

       Before issuing a license for a utilization facility, the 
     Nuclear Regulatory Commission shall consult with the 
     Department of Homeland Security concerning the potential 
     vulnerabilities of the location of the proposed facility to 
     terrorist attack.

     SEC. 668. AUTHORIZATION OF APPROPRIATIONS.

       (a) In General.--There are authorized to be appropriated 
     such sums as are necessary to carry out this subtitle and the 
     amendments made by this subtitle.
       (b) Aggregate Amount of Charges.--Section 6101(c)(2)(A) 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.''.
                     TITLE VII--VEHICLES AND FUELS
                     Subtitle A--Existing 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 in which--
       ``(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 
     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. NEIGHBORHOOD ELECTRIC VEHICLES.

       (a) Amendments.--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) in paragraph (13), by striking ``and'' at the end;
       (3) in paragraph (14), by striking the period at the end 
     and inserting ``; and''; and
       (4) by adding at the end the following:
       ``(15) the term `neighborhood electric vehicle' means a 
     motor vehicle that--
       ``(A) meets the definition of a low-speed vehicle (as 
     defined in part 571 of title 49, Code of Federal 
     Regulations);
       ``(B) meets the definition of a zero-emission vehicle (as 
     defined in section 86.1702-99 of title 40, Code of Federal 
     Regulations);
       ``(C) meets the requirements of Federal Motor Vehicle 
     Safety Standard No. 500; and
       ``(D) has a maximum speed of not greater than 25 miles per 
     hour.''.
       (b) Credits.--Notwithstanding section 508 of the Energy 
     Policy Act of 1992 (42 U.S.C. 13258) or any other provision 
     of law, a neighborhood electric vehicle shall not be 
     allocated credit as more than 1 vehicle for purposes of 
     determining compliance with any requirement under title III 
     or title V of such Act.

     SEC. 703. 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) Heavy duty dedicated vehicle.--The term `heavy duty 
     dedicated vehicle' means a dedicated vehicle that has a gross 
     vehicle weight rating of more than 14,000 pounds.
       ``(B) Medium duty dedicated vehicle.--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.
       ``(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

[[Page H11252]]

     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. 704. 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. 705. ALTERNATIVE COMPLIANCE AND FLEXIBILITY.

       (a) Alternative Compliance.--
       (1) In general.--Title V of the Energy Policy Act of 1992 
     (42 U.S.C. 13251 et seq.) is amended--
       (A) by redesignating section 514 as section 515; and
       (B) by inserting after section 513 the following:

     ``SEC. 514. ALTERNATIVE COMPLIANCE.

       ``(a) Application for Waiver.--Any covered person subject 
     to section 501 and any State subject to 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 100 percent compliance 
     with fuel use requirements in section 501, or, for 
     entities covered under section 507(o), a reduction equal 
     to the covered State entity's consumption of alternative 
     fuels if all its alternative fuel vehicles given credit 
     under section 508 were to use alternative fuel 100 percent 
     of the time; and
       ``(2) is in compliance with all applicable vehicle emission 
     standards established by the Administrator under the Clean 
     Air Act (42 U.S.C. 7401 et seq.).
       ``(c) Revocation of Waiver.--The Secretary shall revoke any 
     waiver granted under this section if the State or covered 
     person fails to comply with subsection (b).''.
       (2) Table of contents amendment.--The table of contents of 
     the Energy Policy Act of 1992 (42 U.S.C. prec. 13201) is 
     amended by striking the item relating to section 514 and 
     inserting the following:

``Sec. 514. Alternative compliance.
``Sec. 515. Authorization of appropriations.''.

       (b) Credits.--Section 508 of the Energy Policy Act of 1992 
     (42 U.S.C. 13258) (as amended by section 703) is amended--
       (1) by redesignating subsections (b) through (e) as 
     subsections (c) through (f), respectively;
       (2) by striking subsection (a) and inserting the following:
       ``(a) In General.--The Secretary shall allocate a credit to 
     a fleet or covered person that is required to acquire an 
     alternative fueled vehicle under this title, if that fleet or 
     person acquires an alternative fueled vehicle--
       ``(1) in excess of the number that fleet or person is 
     required to acquire under this title;
       ``(2) before the date on which that fleet or person is 
     required to acquire an alternative fueled vehicle under this 
     title; or
       ``(3) that is eligible to receive credit under subsection 
     (b).
       ``(b) Maximum Available Power.--The Secretary shall 
     allocate credit to a fleet under subsection (a)(3) for the 
     acquisition by the fleet of a hybrid vehicle as follows:
       ``(1) For a hybrid vehicle with at least 4 percent but less 
     than 10 percent maximum available power, the Secretary shall 
     allocate 25 percent of 1 credit.
       ``(2) For a hybrid vehicle with at least 10 percent but 
     less than 20 percent maximum available power, the Secretary 
     shall allocate 50 percent of 1 credit.
       ``(3) For a hybrid vehicle with at least 20 percent but 
     less than 30 percent maximum available power, the Secretary 
     shall allocate 75 percent of 1 credit.
       ``(4) For a hybrid vehicle with 30 percent or more maximum 
     available power, the Secretary shall allocate 1 credit.''; 
     and
       (3) by adding at the end the following:
       ``(g) Credit for Investment in Alternative Fuel 
     Infrastructure.--
       ``(1) Definition of qualifying infrastructure.--In this 
     subsection, 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; and
       ``(C) such other activities as 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 purpose 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.
       ``(h) Definition of Maximum Available Power.--In this 
     section, the term `maximum available power' means the 
     quotient obtained by dividing--
       ``(1) the maximum power available from the energy storage 
     device of a hybrid vehicle, during a standard 10-second pulse 
     power or equivalent test; by
       ``(2) the sum of--
       ``(A) the maximum power described in subparagraph (A); and
       ``(B) the net power of the internal combustion or heat 
     engine, as determined in accordance with standards 
     established by the Society of Automobile Engineers.''.
       (c) Lease Condensate Fuels.--Section 301 of the Energy 
     Policy Act of 1992 (42 U.S.C. 13211) (as amended by section 
     702) 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 ``liquefied 
     petroleum gas;'';
       (2) in paragraph (14)--
       (A) by inserting ``mixtures containing 50 percent or more 
     by volume of lease condensate or fuels extracted from lease 
     condensate,'' after ``liquefied petroleum gas,''; and
       (B) by striking ``and'' at the end;
       (3) in paragraph (15), by striking the period at the end 
     and inserting ``; and''; and
       (4) by adding at the end the following:
       ``(16) the term `lease condensate' means a mixture, 
     primarily of pentanes and heavier hydrocarbons, that is 
     recovered as a liquid from natural gas in lease separation 
     facilities.''.
       (d) Lease Condensate Use Credits.--
       (1) In general.--Title III of the Energy Policy Act of 1992 
     (42 U.S.C. 13211 et seq.) is amended by adding at the end the 
     following:

     ``SEC. 313. LEASE CONDENSATE USE CREDITS.

       ``(a) In General.--Subject to subsection (d), the Secretary 
     shall allocate 1 credit under this section to a fleet or 
     covered person for each qualifying volume of the lease 
     condensate component of fuel containing at least 50 percent 
     lease condensate, or fuels extracted from lease condensate, 
     after the date of enactment of this section for use by the 
     fleet or covered person in vehicles owned or operated by the 
     fleet or covered person that weigh more than 8,500 pounds 
     gross vehicle weight rating.
       ``(b) Requirements.--A credit allocated under this 
     section--
       ``(1) shall be subject to the same exceptions, authority, 
     documentation, and use of credits that are specified for 
     qualifying volumes of biodiesel in section 312; and
       ``(2) shall not be considered a credit under section 508.
       ``(c) Regulation.--
       ``(1) In general.--Subject to subsection (d), not later 
     than January 1, 2004, after the collection of appropriate 
     information and data that consider usage options, uses in 
     other industries, products, or processes, potential volume 
     capacities, costs, air emissions, and fuel efficiencies, 
     the Secretary shall issue a regulation establishing 
     requirements and procedures for the implementation of this 
     section.
       ``(2) Qualifying volume.--The regulation shall include a 
     determination of an appropriate qualifying volume for lease 
     condensate, except that in no case shall the Secretary 
     determine that the qualifying volume for lease condensate is 
     less than 1,125 gallons.
       ``(d) Applicability.--This section applies unless the 
     Secretary finds that the use of lease condensate as an 
     alternative fuel would adversely affect public health or 
     safety or ambient air quality or the environment.''.
       (2) Table of contents amendment.--The table of contents of 
     the Energy Policy Act of 1992 (42 U.S.C. prec. 13201) is 
     amended by adding at the end of the items relating to title 
     III the following:

``Sec. 313. Lease condensate use credits.''.

       (e) Emergency Exemption.--Section 301 of the Energy Policy 
     Act of 1992 (42 U.S.C. 13211) (as amended by section 702 and 
     this section) is amended in paragraph (9)(E) by inserting 
     before the semicolon at the end ``, including vehicles 
     directly used in the emergency repair of transmission lines 
     and in the restoration of electricity service following power 
     outages, as determined by the Secretary''.

     SEC. 706. REVIEW OF ENERGY POLICY ACT OF 1992 PROGRAMS.

       (a) In General.--Not later than 180 days after the date of 
     enactment of this section, the Secretary of Energy 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--
       (1) the development of alternative fueled vehicle 
     technology;
       (2) the availability of that technology in the market; and
       (3) the cost of alternative fueled vehicles.
       (b) Topics.--As part of the study under subsection (a), 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 quantity, by type, of alternative fuel actually 
     used in alternative fueled vehicles acquired by fleets or 
     covered persons;
       (3) the quantity of petroleum displaced by the use of 
     alternative fuels in alternative fueled vehicles acquired by 
     fleets or covered persons;
       (4) the direct and indirect costs of compliance with 
     requirements under titles III, IV, and V of the Energy Policy 
     Act of 1992 (42 U.S.C. 13211 et seq.), including--
       (A) vehicle acquisition requirements imposed on fleets or 
     covered persons;
       (B) administrative and recordkeeping expenses;
       (C) fuel and fuel infrastructure costs;

[[Page H11253]]

       (D) associated training and employee expenses; and
       (E) any other factors or expenses the Secretary determines 
     to be necessary to compile reliable estimates of the overall 
     costs and benefits of complying with programs under those 
     titles for fleets, covered persons, and the national economy;
       (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; and
       (6) the projected impact of amendments to the Energy Policy 
     Act of 1992 made by this title.
       (c) Report.--Upon completion of the study under this 
     section, the Secretary shall submit to Congress a report that 
     describes the results of the study 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.).

     SEC. 707. REPORT CONCERNING COMPLIANCE WITH ALTERNATIVE 
                   FUELED VEHICLE PURCHASING REQUIREMENTS.

       Section 310(b)(1) of the Energy Policy Act of 1992 (42 
     U.S.C. 13218(b)(1)) is amended by striking ``1 year after the 
     date of enactment of this subsection'' and inserting 
     ``February 15, 2004''.
  Subtitle B--Hybrid Vehicles, Advanced Vehicles, and Fuel Cell Buses

                        PART 1--HYBRID VEHICLES

     SEC. 711. HYBRID VEHICLES.

       The Secretary of Energy shall accelerate efforts 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.

                       PART 2--ADVANCED VEHICLES

     SEC. 721. DEFINITIONS.

       In this part:
       (1) Alternative fueled vehicle.--
       (A) In general.--The term ``alternative fueled vehicle'' 
     means a vehicle propelled solely on an alternative fuel (as 
     defined in section 301 of the Energy Policy Act of 1992 (42 
     U.S.C. 13211)).
       (B) Exclusion.--The term ``alternative fueled vehicle'' 
     does not include a vehicle that the Secretary determines, by 
     regulation, does not yield substantial environmental benefits 
     over a vehicle operating solely on gasoline or diesel derived 
     from fossil fuels.
       (2) Fuel cell vehicle.--The term ``fuel cell vehicle'' 
     means a vehicle propelled by an electric motor powered by a 
     fuel cell system that converts chemical energy into 
     electricity by combining oxygen (from air) with hydrogen fuel 
     that is stored on the vehicle or is produced onboard by 
     reformation of a hydrocarbon fuel. Such fuel cell system may 
     or may not include the use of auxiliary energy storage 
     systems to enhance vehicle performance.
       (3) Hybrid vehicle.--The term ``hybrid vehicle'' means a 
     medium or heavy duty vehicle propelled by an internal 
     combustion engine or heat engine using any combustible fuel 
     and an onboard rechargeable energy storage device.
       (4) Neighborhood electric vehicle.--The term ``neighborhood 
     electric vehicle'' means a motor vehicle that--
       (A) meets the definition of a low-speed vehicle (as defined 
     in part 571 of title 49, Code of Federal Regulations);
       (B) meets the definition of a zero-emission vehicle (as 
     defined in section 86.1702-99 of title 40, Code of Federal 
     Regulations);
       (C) meets the requirements of Federal Motor Vehicle Safety 
     Standard No. 500; and
       (D) has a maximum speed of not greater than 25 miles per 
     hour.
       (5) Pilot program.--The term ``pilot program'' means the 
     competitive grant program established under section 722.
       (6) Secretary.--The term ``Secretary'' means the Secretary 
     of Energy.
       (7) Ultra-low sulfur diesel vehicle.--The term ``ultra-low 
     sulfur diesel vehicle'' means a vehicle manufactured in any 
     of model years 2003 through 2006 powered by a heavy-duty 
     diesel engine that--
       (A) is fueled by diesel fuel that contains sulfur at not 
     more than 15 parts per million; and
       (B) emits not more than the lesser of--
       (i) for vehicles manufactured in--

       (I) model year 2003, 3.0 grams per brake horsepower-hour of 
     oxides of nitrogen and .01 grams per brake horsepower-hour of 
     particulate matter; and
       (II) model years 2004 through 2006, 2.5 grams per brake 
     horsepower-hour of nonmethane hydrocarbons and oxides of 
     nitrogen and .01 grams per brake horsepower-hour of 
     particulate matter; or

       (ii) the quantity of emissions of nonmethane hydrocarbons, 
     oxides of nitrogen, and particulate matter of the best-
     performing technology of ultra-low sulfur diesel vehicles of 
     the same class and application that are commercially 
     available.

     SEC. 722. PILOT PROGRAM.

       (a) Establishment.--The Secretary, in consultation with the 
     Secretary of Transportation, shall establish a competitive 
     grant pilot program, to be administered through the Clean 
     Cities Program of the Department of Energy, to provide not 
     more than 15 geographically dispersed project grants to State 
     governments, local governments, or metropolitan 
     transportation authorities to carry out a project or projects 
     for the purposes described in subsection (b).
       (b) Grant Purposes.--A grant under this section may be used 
     for the following purposes:
       (1) The acquisition of alternative fueled vehicles or fuel 
     cell vehicles, including--
       (A) passenger vehicles (including neighborhood electric 
     vehicles); and
       (B) motorized 2-wheel bicycles, scooters, or other vehicles 
     for use by law enforcement personnel or other State or local 
     government or metropolitan transportation authority 
     employees.
       (2) The acquisition of alternative fueled vehicles, hybrid 
     vehicles, or fuel cell vehicles, including--
       (A) buses used for public transportation or transportation 
     to and from schools;
       (B) delivery vehicles for goods or services; and
       (C) ground support vehicles at public airports (including 
     vehicles to carry baggage or push or pull airplanes toward or 
     away from terminal gates).
       (3) The acquisition of ultra-low sulfur diesel vehicles.
       (4) Installation or acquisition of infrastructure necessary 
     to directly support an alternative fueled vehicle, fuel cell 
     vehicle, or hybrid vehicle project funded by the grant, 
     including fueling and other support equipment.
       (5) Operation and maintenance of vehicles, infrastructure, 
     and equipment acquired as part of a project funded by the 
     grant.
       (c) Applications.--
       (1) Requirements.--
       (A) In general.--The Secretary shall issue requirements for 
     applying for grants under the pilot program.
       (B) Minimum requirements.--At a minimum, the Secretary 
     shall require that an application for a grant--
       (i) be submitted by the head of a State or local government 
     or a metropolitan transportation authority, or any 
     combination thereof, and a registered participant in the 
     Clean Cities Program of the Department of Energy; and
       (ii) include--

       (I) a description of the project proposed in the 
     application, including how the project meets the requirements 
     of this part;
       (II) an estimate of the ridership or degree of use of the 
     project;
       (III) an estimate of the air pollution emissions reduced 
     and fossil fuel displaced as a result of the project, and a 
     plan to collect and disseminate environmental data, related 
     to the project to be funded under the grant, over the life of 
     the project;
       (IV) a description of how the project will be sustainable 
     without Federal assistance after the completion of the term 
     of the grant;
       (V) a complete description of the costs of the project, 
     including acquisition, construction, operation, and 
     maintenance costs over the expected life of the project;
       (VI) a description of which costs of the project will be 
     supported by Federal assistance under this part; and
       (VII) documentation to the satisfaction of the Secretary 
     that diesel fuel containing sulfur at not more than 15 parts 
     per million is available for carrying out the project, and a 
     commitment by the applicant to use such fuel in carrying out 
     the project.

       (2) Partners.--An applicant under paragraph (1) may carry 
     out a project under the pilot program in partnership with 
     public and private entities.
       (d) Selection Criteria.--In evaluating applications under 
     the pilot program, the Secretary shall--
       (1) consider each applicant's previous experience with 
     similar projects; and
       (2) give priority consideration to applications that--
       (A) are most likely to maximize protection of the 
     environment;
       (B) demonstrate the greatest commitment on the part of the 
     applicant to ensure funding for the proposed project and the 
     greatest likelihood that the project will be maintained or 
     expanded after Federal assistance under this part is 
     completed; and
       (C) exceed the minimum requirements of subsection 
     (c)(1)(B)(ii).
       (e) Pilot Project Requirements.--
       (1) Maximum amount.--The Secretary shall not provide more 
     than $20,000,000 in Federal assistance under the pilot 
     program to any applicant.
       (2) Cost sharing.--The Secretary shall not provide more 
     than 50 percent of the cost, incurred during the period of 
     the grant, of any project under the pilot program.
       (3) Maximum period of grants.--The Secretary shall not fund 
     any applicant under the pilot program for more than 5 years.
       (4) Deployment and distribution.--The Secretary shall seek 
     to the maximum extent practicable to ensure a broad 
     geographic distribution of project sites.
       (5) Transfer of information and knowledge.--The Secretary 
     shall establish mechanisms to ensure that the information and 
     knowledge gained by participants in the pilot program are 
     transferred among the pilot program participants and to other 
     interested parties, including other applicants that submitted 
     applications.
       (f) Schedule.--
       (1) Publication.--Not later than 90 days after the date of 
     enactment of this Act, the Secretary shall publish in the 
     Federal Register, Commerce Business Daily, and elsewhere as 
     appropriate, a request for applications to undertake projects 
     under the pilot program. Applications shall be due not later 
     than 180 days after the date of publication of the notice.
       (2) Selection.--Not later than 180 days after the date by 
     which applications for grants are due, the Secretary shall 
     select by competitive, peer reviewed proposal, all 
     applications for projects to be awarded a grant under the 
     pilot program.
       (g) Limit on Funding.--The Secretary shall provide not less 
     than 20 nor more than 25 percent of the grant funding made 
     available under this section for the acquisition of ultra-low 
     sulfur diesel vehicles.

     SEC. 723. REPORTS TO CONGRESS.

       (a) Initial Report.--Not later than 60 days after the date 
     on which grants are awarded

[[Page H11254]]

     under this part, the Secretary shall submit to Congress a 
     report containing--
       (1) an identification of the grant recipients and a 
     description of the projects to be funded;
       (2) an identification of other applicants that submitted 
     applications for the pilot program; and
       (3) a description of the mechanisms used by the Secretary 
     to ensure that the information and knowledge gained by 
     participants in the pilot program are transferred among the 
     pilot program participants and to other interested parties, 
     including other applicants that submitted applications.
       (b) Evaluation.--Not later than 3 years after the date of 
     enactment of this Act, and annually thereafter until the 
     pilot program ends, the Secretary shall submit to Congress a 
     report containing an evaluation of the effectiveness of the 
     pilot program, including--
       (1) an assessment of the benefits to the environment 
     derived from the projects included in the pilot program; and
       (2) an estimate of the potential benefits to the 
     environment to be derived from widespread application of 
     alternative fueled vehicles and ultra-low sulfur diesel 
     vehicles.

     SEC. 724. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated to the Secretary to 
     carry out this part $200,000,000, to remain available until 
     expended.

                        PART 3--FUEL CELL BUSES

     SEC. 731. FUEL CELL TRANSIT BUS DEMONSTRATION.

       (a) In General.--The Secretary of Energy, in consultation 
     with the Secretary of Transportation, shall establish a 
     transit bus demonstration program to make competitive, merit-
     based awards for 5-year projects to demonstrate not more than 
     25 fuel cell transit buses (and necessary infrastructure) in 
     5 geographically dispersed localities.
       (b) Preference.--In selecting projects under this section, 
     the Secretary of Energy shall give preference to projects 
     that are most likely to mitigate congestion and improve air 
     quality.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary of Energy to carry out 
     this section $10,000,000 for each of fiscal years 2004 
     through 2008.
                     Subtitle C--Clean School Buses

     SEC. 741. DEFINITIONS.

       In this subtitle:
       (1) Administrator.--The term ``Administrator'' means the 
     Administrator of the Environmental Protection Agency.
       (2) Alternative fuel.--The term ``alternative fuel'' means 
     liquefied natural gas, compressed natural gas, liquefied 
     petroleum gas, hydrogen, propane, or methanol or ethanol at 
     no less than 85 percent by volume.
       (3) Alternative fuel school bus.--The term ``alternative 
     fuel school bus'' means a school bus that meets all of the 
     requirements of this subtitle and is operated solely on an 
     alternative fuel.
       (4) Emissions control retrofit technology.--The term 
     ``emissions control retrofit technology'' means a particulate 
     filter or other emissions control equipment that is verified 
     or certified by the Administrator or the California Air 
     Resources Board as an effective emission reduction technology 
     when installed on an existing school bus.
       (5) Idling.--The term ``idling'' means operating an engine 
     while remaining stationary for more than approximately 15 
     minutes, except that the term does not apply to routine 
     stoppages associated with traffic movement or congestion.
       (6) Secretary.--The term ``Secretary'' means the Secretary 
     of Energy.
       (7) Ultra-low sulfur diesel fuel.--The term ``ultra-low 
     sulfur diesel fuel'' means diesel fuel that contains sulfur 
     at not more than 15 parts per million.
       (8) Ultra-low sulfur diesel fuel school bus.--The term 
     ``ultra-low sulfur diesel fuel school bus'' means a school 
     bus that meets all of the requirements of this subtitle and 
     is operated solely on ultra-low sulfur diesel fuel.

     SEC. 742. PROGRAM FOR REPLACEMENT OF CERTAIN SCHOOL BUSES 
                   WITH CLEAN SCHOOL BUSES.

       (a) Establishment.--The Administrator, in consultation with 
     the Secretary and other appropriate Federal departments and 
     agencies, shall establish a program for awarding grants on a 
     competitive basis to eligible entities for the replacement of 
     existing school buses manufactured before model year 1991 
     with alternative fuel school buses and ultra-low sulfur 
     diesel fuel school buses.
       (b) Requirements.--
       (1) In general.--Not later than 90 days after the date of 
     enactment of this Act, the Administrator shall establish and 
     publish in the Federal Register grant requirements on 
     eligibility for assistance, and on implementation of the 
     program established under subsection (a), including 
     instructions for the submission of grant applications and 
     certification requirements to ensure compliance with this 
     subtitle.
       (2) Application deadlines.--The requirements established 
     under paragraph (1) shall require submission of grant 
     applications not later than--
       (A) in the case of the first year of program 
     implementation, the date that is 180 days after the 
     publication of the requirements in the Federal Register; and
       (B) in the case of each subsequent year, June 1 of the 
     year.
       (c) Eligible Recipients.--A grant shall be awarded under 
     this section only--
       (1) to 1 or more local or State governmental entities 
     responsible for providing school bus service to 1 or more 
     public school systems or responsible for the purchase of 
     school buses;
       (2) to 1 or more contracting entities that provide school 
     bus service to 1 or more public school systems, if the grant 
     application is submitted jointly with the 1 or more school 
     systems to be served by the buses, except that the 
     application may provide that buses purchased using funds 
     awarded shall be owned, operated, and maintained exclusively 
     by the 1 or more contracting entities; or
       (3) to a nonprofit school transportation association 
     representing private contracting entities, if the association 
     has notified and received approval from the 1 or more school 
     systems to be served by the buses.
       (d) Award Deadlines.--
       (1) In general.--Subject to paragraph (2), the 
     Administrator shall award a grant made to a qualified 
     applicant for a fiscal year--
       (A) in the case of the first fiscal year of program 
     implementation, not later than the date that is 90 days after 
     the application deadline established under subsection (b)(2); 
     and
       (B) in the case of each subsequent fiscal year, not later 
     than August 1 of the fiscal year.
       (2) Insufficient number of qualified grant applications.--
     If the Administrator does not receive a sufficient number of 
     qualified grant applications to meet the requirements of 
     subsection (i)(1) for a fiscal year, the Administrator shall 
     award a grant made to a qualified applicant under subsection 
     (i)(2) not later than September 30 of the fiscal year.
       (e) Types of Grants.--
       (1) In general.--A grant under this section shall be used 
     for the replacement of school buses manufactured before model 
     year 1991 with alternative fuel school buses and ultra-low 
     sulfur diesel fuel school buses.
       (2) No economic benefit.--Other than the receipt of the 
     grant, a recipient of a grant under this section may not 
     receive any economic benefit in connection with the receipt 
     of the grant.
       (3) Priority of grant applications.--The Administrator 
     shall give priority to applicants that propose to replace 
     school buses manufactured before model year 1977.
       (f) Conditions of Grant.--A grant provided under this 
     section shall include the following conditions:
       (1) School bus fleet.--All buses acquired with funds 
     provided under the grant shall be operated as part of the 
     school bus fleet for which the grant was made for a minimum 
     of 5 years.
       (2) Use of funds.--Funds provided under the grant may only 
     be used--
       (A) to pay the cost, except as provided in paragraph (3), 
     of new alternative fuel school buses or ultra-low sulfur 
     diesel fuel school buses, including State taxes and contract 
     fees associated with the acquisition of such buses; and
       (B) to provide--
       (i) up to 20 percent of the price of the alternative fuel 
     school buses acquired, for necessary alternative fuel 
     infrastructure if the infrastructure will only be available 
     to the grant recipient; and
       (ii) up to 25 percent of the price of the alternative fuel 
     school buses acquired, for necessary alternative fuel 
     infrastructure if the infrastructure will be available to the 
     grant recipient and to other bus fleets.
       (3) Grant recipient funds.--The grant recipient shall be 
     required to provide at least--
       (A) in the case of a grant recipient described in paragraph 
     (1) or (3) of subsection (c), the lesser of--
       (i) an amount equal to 15 percent of the total cost of each 
     bus received; or
       (ii) $15,000 per bus; and
       (B) in the case of a grant recipient described in 
     subsection (c)(2), the lesser of--
       (i) an amount equal to 20 percent of the total cost of each 
     bus received; or
       (ii) $20,000 per bus.
       (4) Ultra-low sulfur diesel fuel.--In the case of a grant 
     recipient receiving a grant for ultra-low sulfur diesel fuel 
     school buses, the grant recipient shall be required to 
     provide documentation to the satisfaction of the 
     Administrator that diesel fuel containing sulfur at not more 
     than 15 parts per million is available for carrying out the 
     purposes of the grant, and a commitment by the applicant to 
     use such fuel in carrying out the purposes of the grant.
       (5) Timing.--All alternative fuel school buses, ultra-low 
     sulfur diesel fuel school buses, or alternative fuel 
     infrastructure acquired under a grant awarded under this 
     section shall be purchased and placed in service as soon as 
     practicable.
       (g) Buses.--
       (1) In general.--Except as provided in paragraph (2), 
     funding under a grant made under this section for the 
     acquisition of new alternative fuel school buses or ultra-low 
     sulfur diesel fuel school buses shall only be used to acquire 
     school buses--
       (A) with a gross vehicle weight of greater than 14,000 
     pounds;
       (B) that are powered by a heavy duty engine;
       (C) in the case of alternative fuel school buses 
     manufactured in model years 2004 through 2006, that emit not 
     more than 1.8 grams per brake horsepower-hour of nonmethane 
     hydrocarbons and oxides of nitrogen and .01 grams per brake 
     horsepower-hour of particulate matter; and
       (D) in the case of ultra-low sulfur diesel fuel school 
     buses manufactured in model years 2004 through 2006, that 
     emit not more than 2.5 grams per brake horsepower-hour of 
     nonmethane hydrocarbons and oxides of nitrogen and .01 grams 
     per brake horsepower-hour of particulate matter.
       (2) Limitations.--A bus shall not be acquired under this 
     section that emits nonmethane hydrocarbons, oxides of 
     nitrogen, or particulate matter at a rate greater than the 
     best performing technology of the same class of ultra-low 
     sulfur diesel fuel school buses commercially available at the 
     time the grant is made.
       (h) Deployment and Distribution.--The Administrator shall--

[[Page H11255]]

       (1) seek, to the maximum extent practicable, to achieve 
     nationwide deployment of alternative fuel school buses and 
     ultra-low sulfur diesel fuel school buses through the program 
     under this section; and
       (2) ensure a broad geographic distribution of grant awards, 
     with a goal of no State receiving more than 10 percent of the 
     grant funding made available under this section for a fiscal 
     year.
       (i) Allocation of Funds.--
       (1) In general.--Subject to paragraph (2), of the amount of 
     grant funding made available to carry out this section for 
     any fiscal year, the Administrator shall use--
       (A) 70 percent for the acquisition of alternative fuel 
     school buses or supporting infrastructure; and
       (B) 30 percent for the acquisition of ultra-low sulfur 
     diesel fuel school buses.
       (2) Insufficient number of qualified grant applications.--
     After the first fiscal year in which this program is in 
     effect, if the Administrator does not receive a sufficient 
     number of qualified grant applications to meet the 
     requirements of subparagraph (A) or (B) of paragraph (1) for 
     a fiscal year, effective beginning on August 1 of the fiscal 
     year, the Administrator shall make the remaining funds 
     available to other qualified grant applicants under this 
     section.
       (j) Reduction of School Bus Idling.--Each local educational 
     agency (as defined in section 9101 of the Elementary and 
     Secondary Education Act of 1965 (20 U.S.C. 7801)) that 
     receives Federal funds under the Elementary and Secondary 
     Education Act of 1965 (20 U.S.C. 6301 et seq.) is encouraged 
     to develop a policy, consistent with the health, safety, and 
     welfare of students and the proper operation and maintenance 
     of school buses, to reduce the incidence of unnecessary 
     school bus idling at schools when picking up and unloading 
     students.
       (k) Annual Report.--
       (1) In general.--Not later than January 31 of each year, 
     the Administrator shall transmit to Congress a report 
     evaluating implementation of the programs under this section 
     and section 743.
       (2) Components.--The reports shall include a description 
     of--
       (A) the total number of grant applications received;
       (B) the number and types of alternative fuel school buses, 
     ultra-low sulfur diesel fuel school buses, and retrofitted 
     buses requested in grant applications;
       (C) grants awarded and the criteria used to select the 
     grant recipients;
       (D) certified engine emission levels of all buses purchased 
     or retrofitted under the programs under this section and 
     section 743;
       (E) an evaluation of the in-use emission level of buses 
     purchased or retrofitted under the programs under this 
     section and section 743; and
       (F) any other information the Administrator considers 
     appropriate.
       (l) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Administrator to carry out this 
     section, to remain available until expended--
       (1) $45,000,000 for fiscal year 2005;
       (2) $65,000,000 for fiscal year 2006;
       (3) $90,000,000 for fiscal year 2007; and
       (4) such sums as are necessary for each of fiscal years 
     2008 and 2009.

     SEC. 743. DIESEL RETROFIT PROGRAM.

       (a) Establishment.--The Administrator, in consultation with 
     the Secretary, shall establish a program for awarding grants 
     on a competitive basis to entities for the installation of 
     retrofit technologies for diesel school buses.
       (b) Eligible Recipients.--A grant shall be awarded under 
     this section only--
       (1) to a local or State governmental entity responsible for 
     providing school bus service to 1 or more public school 
     systems;
       (2) to 1 or more contracting entities that provide school 
     bus service to 1 or more public school systems, if the grant 
     application is submitted jointly with the 1 or more school 
     systems that the buses will serve, except that the 
     application may provide that buses purchased using funds 
     awarded shall be owned, operated, and maintained exclusively 
     by the 1 or more contracting entities; or
       (3) to a nonprofit school transportation association 
     representing private contracting entities, if the association 
     has notified and received approval from the 1 or more school 
     systems to be served by the buses.
       (c) Awards.--
       (1) In general.--The Administrator shall seek, to the 
     maximum extent practicable, to ensure a broad geographic 
     distribution of grants under this section.
       (2) Preferences.--In making awards of grants under this 
     section, the Administrator shall give preference to proposals 
     that--
       (A) will achieve the greatest reductions in emissions of 
     nonmethane hydrocarbons, oxides of nitrogen, or particulate 
     matter per proposal or per bus; or
       (B) involve the use of emissions control retrofit 
     technology on diesel school buses that operate solely on 
     ultra-low sulfur diesel fuel.
       (d) Conditions of Grant.--A grant shall be provided under 
     this section on the conditions that--
       (1) buses on which retrofit emissions-control technology 
     are to be demonstrated--
       (A) will operate on ultra-low sulfur diesel fuel where such 
     fuel is reasonably available or required for sale by State or 
     local law or regulation;
       (B) were manufactured in model year 1991 or later; and
       (C) will be used for the transportation of school children 
     to and from school for a minimum of 5 years;
       (2) grant funds will be used for the purchase of emission 
     control retrofit technology, including State taxes and 
     contract fees; and
       (3) grant recipients will provide at least 15 percent of 
     the total cost of the retrofit, including the purchase of 
     emission control retrofit technology and all necessary labor 
     for installation of the retrofit.
       (e) Verification.--Not later than 90 days after the date of 
     enactment of this Act, the Administrator shall publish in the 
     Federal Register procedures to verify--
       (1) the retrofit emissions-control technology to be 
     demonstrated;
       (2) that buses powered by ultra-low sulfur diesel fuel on 
     which retrofit emissions-control technology are to be 
     demonstrated will operate on diesel fuel containing not more 
     than 15 parts per million of sulfur; and
       (3) that grants are administered in accordance with this 
     section.
       (f) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Administrator to carry out this 
     section, to remain available until expended--
       (1) $20,000,000 for fiscal year 2005;
       (2) $35,000,000 for fiscal year 2006;
       (3) $45,000,000 for fiscal year 2007; and
       (4) such sums as are necessary for each of fiscal years 
     2008 and 2009.

     SEC. 744. FUEL CELL SCHOOL BUSES.

       (a) Establishment.--The Secretary shall establish a program 
     for entering into cooperative agreements--
       (1) with private sector fuel cell bus developers for the 
     development of fuel cell-powered school buses; and
       (2) subsequently, with not less than 2 units of local 
     government using natural gas-powered school buses and such 
     private sector fuel cell bus developers to demonstrate the 
     use of fuel cell-powered school buses.
       (b) Cost Sharing.--The non-Federal contribution for 
     activities funded under this section shall be not less than--
       (1) 20 percent for fuel infrastructure development 
     activities; and
       (2) 50 percent for demonstration activities and for 
     development activities not described in paragraph (1).
       (c) Reports to Congress.--Not later than 3 years after the 
     date of enactment of this Act, the Secretary shall transmit 
     to Congress a report that--
       (1) evaluates the process of converting natural gas 
     infrastructure to accommodate fuel cell-powered school buses; 
     and
       (2) assesses the results of the development and 
     demonstration program under this section.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary to carry out this section 
     $25,000,000 for the period of fiscal years 2004 through 2006.
                       Subtitle D--Miscellaneous

     SEC. 751. RAILROAD EFFICIENCY.

       (a) Establishment.--The Secretary of Energy shall, in 
     cooperation with the Secretary of Transportation and the 
     Administrator of the Environmental Protection Agency, 
     establish a cost-shared, public-private research partnership 
     involving the Federal Government, railroad carriers, 
     locomotive manufacturers and equipment suppliers, and the 
     Association of American Railroads, to develop and demonstrate 
     railroad locomotive technologies that increase fuel economy, 
     reduce emissions, and lower costs of operation.
       (b) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary of Energy to carry out 
     this section--
       (1) $25,000,000 for fiscal year 2005;
       (2) $35,000,000 for fiscal year 2006; and
       (3) $50,000,000 for fiscal year 2007.

     SEC. 752. MOBILE EMISSION REDUCTIONS TRADING AND CREDITING.

       (a) In General.--Not later than 180 days after the date of 
     enactment of this Act, the Administrator of the Environmental 
     Protection Agency shall submit to Congress a report on the 
     experience of the Administrator with the trading of mobile 
     source emission reduction credits for use by owners and 
     operators of stationary source emission sources to meet 
     emission offset requirements within a nonattainment area.
       (b) Contents.--The report shall describe--
       (1) projects approved by the Administrator that include the 
     trading of mobile source emission reduction credits for use 
     by stationary sources in complying with offset requirements, 
     including a description of--
       (A) project and stationary sources location;
       (B) volumes of emissions offset and traded;
       (C) the sources of mobile emission reduction credits; and
       (D) if available, the cost of the credits;
       (2) the significant issues identified by the Administrator 
     in consideration and approval of trading in the projects;
       (3) the requirements for monitoring and assessing the air 
     quality benefits of any approved project;
       (4) the statutory authority on which the Administrator has 
     based approval of the projects;
       (5) an evaluation of how the resolution of issues in 
     approved projects could be used in other projects; and
       (6) any other issues that the Administrator considers 
     relevant to the trading and generation of mobile source 
     emission reduction credits for use by stationary sources or 
     for other purposes.

     SEC. 753. AVIATION FUEL CONSERVATION AND EMISSIONS.

       (a) In General.--Not later than 60 days after the date of 
     enactment of this Act, the Administrator of the Federal 
     Aviation Administration and the Administrator of the 
     Environmental Protection Agency shall jointly initiate a 
     study to identify--
       (1) the impact of aircraft emissions on air quality in 
     nonattainment areas; and
       (2) ways to promote fuel conservation measures for aviation 
     to--
       (A) enhance fuel efficiency; and
       (B) reduce emissions.
       (b) Focus.--The study under subsection (a) shall focus on 
     how air traffic management inefficiencies, such as aircraft 
     idling at airports, result in unnecessary fuel burn and air 
     emissions.

[[Page H11256]]

       (c) Report.--Not later than 1 year after the date of the 
     initiation of the study under subsection (a), the 
     Administrator of the Federal Aviation Administration and the 
     Administrator of the Environmental Protection Agency shall 
     jointly submit to the Committee on Energy and Commerce and 
     the Committee on Transportation and Infrastructure of the 
     House of Representatives and the Committee on Environment and 
     Public Works and the Committee on Commerce, Science, and 
     Transportation of the Senate a report that--
       (1) describes the results of the study; and
       (2) includes any recommendations on ways in which 
     unnecessary fuel use and emissions affecting air quality may 
     be reduced--
       (A) without adversely affecting safety and security and 
     increasing individual aircraft noise; and
       (B) while taking into account all aircraft emissions and 
     the impact of the emissions on human health.

     SEC. 754. DIESEL FUELED VEHICLES.

       (a) Definition of Tier 2 Emission Standards.--In this 
     section, the term ``tier 2 emission standards'' means the 
     motor vehicle emission standards that apply to passenger 
     cars, light trucks, and larger passenger vehicles 
     manufactured after the 2003 model year, as issued on February 
     10, 2000, by the Administrator of the Environmental 
     Protection Agency under sections 202 and 211 of the Clean Air 
     Act (42 U.S.C. 7521, 7545).
       (b) Diesel Combustion and After-Treatment Technologies.--
     The Secretary of Energy shall accelerate efforts to improve 
     diesel combustion and after-treatment technologies for use in 
     diesel fueled motor vehicles.
       (c) Goals.--The Secretary shall carry out subsection (b) 
     with a view toward achieving the following goals:
       (1) Developing and demonstrating diesel technologies that, 
     not later than 2010, meet the following standards:
       (A) Tier 2 emission standards.
       (B) The heavy-duty emissions standards of 2007 that are 
     applicable to heavy-duty vehicles under regulations issued by 
     the Administrator of the Environmental Protection Agency as 
     of the date of enactment of this Act.
       (2) Developing the next generation of low-emission, high 
     efficiency diesel engine technologies, including homogeneous 
     charge compression ignition technology.

     SEC. 755. CONSERVE BY BICYCLING PROGRAM.

       (a) Definitions.--In this section:
       (1) Program.--The term ``program'' means the Conserve by 
     Bicycling Program established by subsection (b).
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of Transportation.
       (b) Establishment.--There is established within the 
     Department of Transportation a program to be known as the 
     ``Conserve by Bicycling Program''.
       (c) Projects.--
       (1) In general.--In carrying out the program, the Secretary 
     shall establish not more than 10 pilot projects that are--
       (A) dispersed geographically throughout the United States; 
     and
       (B) designed to conserve energy resources by encouraging 
     the use of bicycles in place of motor vehicles.
       (2) Requirements.--A pilot project described in paragraph 
     (1) shall--
       (A) use education and marketing to convert motor vehicle 
     trips to bicycle trips;
       (B) document project results and energy savings (in 
     estimated units of energy conserved);
       (C) facilitate partnerships among interested parties in at 
     least 2 of the fields of--
       (i) transportation;
       (ii) law enforcement;
       (iii) education;
       (iv) public health;
       (v) environment; and
       (vi) energy;
       (D) maximize bicycle facility investments;
       (E) demonstrate methods that may be used in other regions 
     of the United States; and
       (F) facilitate the continuation of ongoing programs that 
     are sustained by local resources.
       (3) Cost sharing.--At least 20 percent of the cost of each 
     pilot project described in paragraph (1) shall be provided 
     from State or local sources.
       (d) Energy and Bicycling Research Study.--
       (1) In general.--Not later than 2 years after the date of 
     enactment of this Act, the Secretary shall enter into a 
     contract with the National Academy of Sciences for, and the 
     National Academy of Sciences shall conduct and submit to 
     Congress a report on, a study on the feasibility of 
     converting motor vehicle trips to bicycle trips.
       (2) Components.--The study shall--
       (A) document the results or progress of the pilot projects 
     under subsection (c);
       (B) determine the type and duration of motor vehicle trips 
     that people in the United States may feasibly make by 
     bicycle, taking into consideration factors such as--
       (i) weather;
       (ii) land use and traffic patterns;
       (iii) the carrying capacity of bicycles; and
       (iv) bicycle infrastructure;
       (C) determine any energy savings that would result from the 
     conversion of motor vehicle trips to bicycle trips;
       (D) include a cost-benefit analysis of bicycle 
     infrastructure investments; and
       (E) include a description of any factors that would 
     encourage more motor vehicle trips to be replaced with 
     bicycle trips.
       (e) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary to carry out this section 
     $6,200,000, to remain available until expended, of which--
       (1) $5,150,000 shall be used to carry out pilot projects 
     described in subsection (c);
       (2) $300,000 shall be used by the Secretary to coordinate, 
     publicize, and disseminate the results of the program; and
       (3) $750,000 shall be used to carry out subsection (d).

     SEC. 756. REDUCTION OF ENGINE IDLING OF HEAVY-DUTY VEHICLES.

       (a) Definitions.--In this section:
       (1) Administrator.--The term ``Administrator'' means the 
     Administrator of the Environmental Protection Agency.
       (2) Advanced truck stop electrification system.--The term 
     ``advanced truck stop electrification system'' means a 
     stationary system that delivers heat, air conditioning, 
     electricity, and communications, and is capable of providing 
     verifiable and auditable evidence of use of those services, 
     to a heavy-duty vehicle and any occupants of the heavy-duty 
     vehicle without relying on components mounted onboard the 
     heavy-duty vehicle for delivery of those services.
       (3) Auxiliary power unit.--The term ``auxiliary power 
     unit'' means an integrated system that--
       (A) provides heat, air conditioning, engine warming, and 
     electricity to the factory-installed components on a heavy-
     duty vehicle as if the main drive engine of the heavy-duty 
     vehicle were running; and
       (B) is certified by the Administrator under part 89 of 
     title 40, Code of Federal Regulations (or any successor 
     regulation), as meeting applicable emission standards.
       (4) Heavy-duty vehicle.--The term ``heavy-duty vehicle'' 
     means a vehicle that--
       (A) has a gross vehicle weight rating greater than 12,500 
     pounds; and
       (B) is powered by a diesel engine.
       (5) Idle reduction technology.--The term ``idle reduction 
     technology'' means an advanced truck stop electrification 
     system, auxiliary power unit, or other device or system of 
     devices that--
       (A) is used to reduce long-duration idling of a heavy-duty 
     vehicle; and
       (B) allows for the main drive engine or auxiliary 
     refrigeration engine of a heavy-duty vehicle to be shut down.
       (6) Long-duration idling.--
       (A) In general.--The term ``long-duration idling'' means 
     the operation of a main drive engine or auxiliary 
     refrigeration engine of a heavy-duty vehicle, for a period 
     greater than 15 consecutive minutes, at a time at which the 
     main drive engine is not engaged in gear.
       (B) Exclusions.--The term ``long-duration idling'' does not 
     include the operation of a main drive engine or auxiliary 
     refrigeration engine of a heavy-duty vehicle during a routine 
     stoppage associated with traffic movement or congestion.
       (b) Idle Reduction Technology Benefits, Programs, and 
     Studies.--
       (1) In general.--Not later than 90 days after the date of 
     enactment of this Act, the Administrator shall--
       (A)(i) commence a review of the mobile source air emission 
     models of the Environmental Protection Agency used under the 
     Clean Air Act (42 U.S.C. 7401 et seq.) to determine whether 
     the models accurately reflect the emissions resulting from 
     long-duration idling of heavy-duty vehicles and other 
     vehicles and engines; and
       (ii) update those models as the Administrator determines to 
     be appropriate; and
       (B)(i) commence a review of the emission reductions 
     achieved by the use of idle reduction technology; and
       (ii) complete such revisions of the regulations and 
     guidance of the Environmental Protection Agency as the 
     Administrator determines to be appropriate.
       (2) Deadline for completion.--Not later than 180 days after 
     the date of enactment of this Act, the Administrator shall--
       (A) complete the reviews under subparagraphs (A)(i) and 
     (B)(i) of paragraph (1); and
       (B) prepare and make publicly available 1 or more reports 
     on the results of the reviews.
       (3) Discretionary inclusions.--The reviews under 
     subparagraphs (A)(i) and (B)(i) of paragraph (1) and the 
     reports under paragraph (2)(B) may address the potential fuel 
     savings resulting from use of idle reduction technology.
       (4) Idle reduction deployment program.--
       (A) Establishment.--
       (i) In general.--Not later than 90 days after the date of 
     enactment of this Act, the Administrator, in consultation 
     with the Secretary of Transportation, shall establish a 
     program to support deployment of idle reduction technology.
       (ii) Priority.--The Administrator shall give priority to 
     the deployment of idle reduction technology based on 
     beneficial effects on air quality and ability to lessen the 
     emission of criteria air pollutants.
       (B) Funding.--
       (i) Authorization of appropriations.--There are authorized 
     to be appropriated to the Administrator to carry out 
     subparagraph (A) $19,500,000 for fiscal year 2004, 
     $30,000,000 for fiscal year 2005, and $45,000,000 for fiscal 
     year 2006.
       (ii) Cost sharing.--Subject to clause (iii), the 
     Administrator shall require at least 50 percent of the costs 
     directly and specifically related to any project under this 
     section to be provided from non-Federal sources.
       (iii) Necessary and appropriate reductions.--The 
     Administrator may reduce the non-Federal requirement under 
     clause (ii) if the Administrator determines that the 
     reduction is necessary and appropriate to meet the objectives 
     of this section.
       (5) Idling location study.--
       (A) In general.--Not later than 90 days after the date of 
     enactment of this Act, the Administrator, in consultation 
     with the Secretary of Transportation, shall commence a study 
     to analyze all locations at which heavy-duty vehicles stop 
     for long-duration idling, including--
       (i) truck stops;
       (ii) rest areas;

[[Page H11257]]

       (iii) border crossings;
       (iv) ports;
       (v) transfer facilities; and
       (vi) private terminals.
       (B) Deadline for completion.--Not later than 180 days after 
     the date of enactment of this Act, the Administrator shall--
       (i) complete the study under subparagraph (A); and
       (ii) prepare and make publicly available 1 or more reports 
     of the results of the study.
       (c) Vehicle Weight Exemption.--Section 127(a) of title 23, 
     United States Code, is amended--
       (1) by designating the first through eleventh sentences as 
     paragraphs (1) through (11), respectively; and
       (2) by adding at the end the following:
       ``(12) Heavy duty vehicles.--
       ``(A) In general.--Subject to subparagraphs (B) and (C), in 
     order to promote reduction of fuel use and emissions because 
     of engine idling, the maximum gross vehicle weight limit and 
     the axle weight limit for any heavy-duty vehicle equipped 
     with an idle reduction technology shall be increased by a 
     quantity necessary to compensate for the additional weight of 
     the idle reduction system.
       ``(B) Maximum weight increase.--The weight increase under 
     subparagraph (A) shall be not greater than 250 pounds.
       ``(C) Proof.--On request by a regulatory agency or law 
     enforcement agency, the vehicle operator shall provide proof 
     (through demonstration or certification) that--
       ``(i) the idle reduction technology is fully functional at 
     all times; and
       ``(ii) the 250-pound gross weight increase is not used for 
     any purpose other than the use of idle reduction technology 
     described in subparagraph (A).''.

     SEC. 757. BIODIESEL ENGINE TESTING PROGRAM.

       (a) In General.--Not later that 180 days after the date of 
     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 program shall provide for testing to 
     determine the impact of biodiesel from different sources on 
     current and future emission control technologies, with 
     emphasis on--
       (1) the impact of biodiesel on emissions warranty, in-use 
     liability, and antitampering 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 of this Act, the Secretary shall provide an interim 
     report to Congress on the findings of the program, 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) Authorization of Appropriations.--There are authorized 
     to be appropriated $5,000,000 for each of fiscal years 2004 
     through 2008 to carry out this section.
       (e) Definition.--For purposes of this section, the term 
     ``biodiesel'' means a diesel fuel substitute produced from 
     nonpetroleum 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. 758. HIGH OCCUPANCY VEHICLE EXCEPTION.

       Notwithstanding section 102(a) 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 the 
     vehicle--
       (1) is a dedicated vehicle (as defined in section 301 of 
     the Energy Policy Act of 1992 (42 U.S. 13211)); or
       (2) is a hybrid vehicle (as defined by the State for the 
     purpose of this section).
                   Subtitle E--Automobile Efficiency

     SEC. 771. AUTHORIZATION OF APPROPRIATIONS FOR IMPLEMENTATION 
                   AND ENFORCEMENT OF FUEL ECONOMY STANDARDS.

       In addition to any other funds authorized by law, there are 
     authorized to be appropriated to the National Highway Traffic 
     Safety Administration to carry out its obligations with 
     respect to average fuel economy standards $2,000,000 for each 
     of fiscal years 2004 through 2008.

     SEC. 772. 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 effects of fuel economy standards on passenger 
     automobiles, nonpassenger automobiles, and occupant safety.
       ``(6) The effects of compliance with average fuel economy 
     standards on levels of automobile industry employment in the 
     United States.''.

     SEC. 773. EXTENSION OF MAXIMUM FUEL ECONOMY INCREASE FOR 
                   ALTERNATIVE FUELED VEHICLES.

       (a) Manufacturing Incentives.--Section 32905 of title 49, 
     United States Code, is amended--
       (1) in each of subsections (b) and (d), by striking ``1993-
     2004'' and inserting ``1993-2008'';
       (2) in subsection (f), by striking ``2001'' and inserting 
     ``2005''; and
       (3) in subsection (f)(1), by striking ``2004'' and 
     inserting ``2008''.
       (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. 774. STUDY OF FEASIBILITY AND EFFECTS OF REDUCING USE OF 
                   FUEL FOR AUTOMOBILES.

       (a) In General.--Not later than 30 days after the date of 
     the enactment of this Act, the Administrator of the National 
     Highway Traffic Safety Administration shall initiate a study 
     of the feasibility and effects of reducing by model year 
     2012, by a significant percentage, the amount of fuel 
     consumed by automobiles.
       (b) Subjects of Study.--The study under this section shall 
     include--
       (1) examination of, and recommendation of alternatives to, 
     the policy under current Federal law of establishing average 
     fuel economy standards for automobiles and requiring each 
     automobile manufacturer to comply with average fuel economy 
     standards that apply to the automobiles it manufactures;
       (2) examination of how automobile manufacturers could 
     contribute toward achieving the reduction referred to in 
     subsection (a);
       (3) examination of the potential of fuel cell technology in 
     motor vehicles in order to determine the extent to which such 
     technology may contribute to achieving the reduction referred 
     to in subsection (a); and
       (4) examination of the effects of the reduction referred to 
     in subsection (a) on--
       (A) gasoline supplies;
       (B) the automobile industry, including sales of automobiles 
     manufactured in the United States;
       (C) motor vehicle safety; and
       (D) air quality.
       (c) Report.--The Administrator shall submit to Congress a 
     report on the findings, conclusion, and recommendations of 
     the study under this section by not later than 1 year after 
     the date of the enactment of this Act.
                          TITLE VIII--HYDROGEN

     SEC. 801. DEFINITIONS.

       In this title:
       (1) Advisory committee.--The term ``Advisory Committee'' 
     means the Hydrogen Technical and Fuel Cell Advisory Committee 
     established under section 805.
       (2) Department.--The term ``Department'' means the 
     Department of Energy.
       (3) Fuel cell.--The term ``fuel cell'' means a device that 
     directly converts the chemical energy of a fuel and an 
     oxidant into electricity by an electrochemical process taking 
     place at separate electrodes in the device.
       (4) Infrastructure.--The term ``infrastructure'' means the 
     equipment, systems, or facilities used to produce, 
     distribute, deliver, or store hydrogen.
       (5) Light duty vehicle.--The term ``light duty vehicle'' 
     means a car or truck classified by the Department of 
     Transportation as a Class I or IIA vehicle.
       (6) Secretary.--The term ``Secretary'' means the Secretary 
     of Energy.

     SEC. 802. PLAN.

       Not later than 6 months after the date of enactment of this 
     Act, the Secretary shall transmit to Congress a coordinated 
     plan for the programs described in this title and any other 
     programs of the Department that are directly related to fuel 
     cells or hydrogen. The plan shall describe, at a minimum--
       (1) the agenda for the next 5 years for the programs 
     authorized under this title, including the agenda for each 
     activity enumerated in section 803(a);
       (2) the types of entities that will carry out the 
     activities under this title and what role each entity is 
     expected to play;
       (3) the milestones that will be used to evaluate the 
     programs for the next 5 years;-
       (4) the most significant technical and nontechnical hurdles 
     that stand in the way of achieving the goals described in 
     section 803(b), and how the programs will address those 
     hurdles; and-
       (5) the policy assumptions that are implicit in the plan, 
     including any assumptions that would affect the sources of 
     hydrogen or the marketability of hydrogen-related products.

     SEC. 803. PROGRAMS.

       (a) Activities.--The Secretary, in partnership with the 
     private sector, shall conduct programs to address--
       (1) production of hydrogen from diverse energy sources, 
     including--
       (A) fossil fuels, which may include carbon capture and 
     sequestration;
       (B) hydrogen-carrier fuels (including ethanol and 
     methanol);
       (C) renewable energy resources, including biomass; and
       (D) nuclear energy;
       (2) use of hydrogen for commercial, industrial, and 
     residential electric power generation;
       (3) safe delivery of hydrogen or hydrogen-carrier fuels, 
     including--

[[Page H11258]]

       (A) transmission by pipeline and other distribution 
     methods; and
       (B) convenient and economic refueling of vehicles either at 
     central refueling stations or through distributed on-site 
     generation;
       (4) advanced vehicle technologies, including--
       (A) engine and emission control systems;
       (B) energy storage, electric propulsion, and hybrid 
     systems;
       (C) automotive materials; and
       (D) other advanced vehicle technologies;
       (5) storage of hydrogen or hydrogen-carrier fuels, 
     including development of materials for safe and economic 
     storage in gaseous, liquid, or solid form at refueling 
     facilities and onboard vehicles;
       (6) development of safe, durable, affordable, and efficient 
     fuel cells, including fuel-flexible fuel cell power systems, 
     improved manufacturing processes, high-temperature membranes, 
     cost-effective fuel processing for natural gas, fuel cell 
     stack and system reliability, low temperature operation, and 
     cold start capability;
       (7) development, after consultation with the private 
     sector, of necessary codes and standards (including 
     international codes and standards and voluntary consensus 
     standards adopted in accordance with OMB Circular A-119) and 
     safety practices for the production, distribution, storage, 
     and use of hydrogen, hydrogen-carrier fuels, and related 
     products; and
       (8) a public education program to develop improved 
     knowledge and acceptability of hydrogen-based systems.
       (b) Program Goals.--
       (1) Vehicles.--For vehicles, the goals of the program are--
       (A) to enable a commitment by automakers no later than year 
     2015 to offer safe, affordable, and technically viable 
     hydrogen fuel cell vehicles in the mass consumer market; and
       (B) to enable production, delivery, and acceptance by 
     consumers of model year 2020 hydrogen fuel cell and other 
     hydrogen-powered vehicles that will have--
       (i) a range of at least 300 miles;
       (ii) improved performance and ease of driving;
       (iii) safety and performance comparable to vehicle 
     technologies in the market; and
       (iv) when compared to light duty vehicles in model year 
     2003--

       (I) fuel economy that is substantially higher;
       (II) substantially lower emissions of air pollutants; and
       (III) equivalent or improved vehicle fuel system crash 
     integrity and occupant protection.

       (2) Hydrogen energy and energy infrastructure.--For 
     hydrogen energy and energy infrastructure, the goals of the 
     program are to enable a commitment not later than 2015 that 
     will lead to infrastructure by 2020 that will provide--
       (A) safe and convenient refueling;
       (B) improved overall efficiency;
       (C) widespread availability of hydrogen from domestic 
     energy sources through--
       (i) production, with consideration of emissions levels;
       (ii) delivery, including transmission by pipeline and other 
     distribution methods for hydrogen; and
       (iii) storage, including storage in surface transportation 
     vehicles;
       (D) hydrogen for fuel cells, internal combustion engines, 
     and other energy conversion devices for portable, stationary, 
     and transportation applications; and
       (E) other technologies consistent with the Department's 
     plan.
       (3) Fuel cells.--The goals for fuel cells and their 
     portable, stationary, and transportation applications are to 
     enable--
       (A) safe, economical, and environmentally sound hydrogen 
     fuel cells;
       (B) fuel cells for light duty and other vehicles; and
       (C) other technologies consistent with the Department's 
     plan.
       (c) Demonstration.--In carrying out the programs under this 
     section, the Secretary shall fund a limited number of 
     demonstration projects, consistent with a determination of 
     the maturity, cost-effectiveness, and environmental impacts 
     of technologies supporting each project. In selecting 
     projects under this subsection, the Secretary shall, to 
     the extent practicable and in the public interest, select 
     projects that--
       (1) involve using hydrogen and related products at existing 
     facilities or installations, such as existing office 
     buildings, military bases, vehicle fleet centers, transit bus 
     authorities, or units of the National Park System;
       (2) depend on reliable power from hydrogen to carry out 
     essential activities;-
       (3) lead to the replication of hydrogen technologies and 
     draw such technologies into the marketplace;
       (4) include vehicle, portable, and stationary 
     demonstrations of fuel cell and hydrogen-based energy 
     technologies;
       (5) address the interdependency of demand for hydrogen fuel 
     cell applications and hydrogen fuel infrastructure;
       (6) raise awareness of hydrogen technology among the 
     public;
       (7) facilitate identification of an optimum technology 
     among competing alternatives;
       (8) address distributed generation using renewable sources; 
     and
       (9) address applications specific to rural or remote 
     locations, including isolated villages and islands, the 
     National Park System, and tribal entities.

     The Secretary shall give preference to projects which address 
     multiple elements contained in paragraphs (1) through (9).
       (d) Deployment.--In carrying out the programs under this 
     section, the Secretary shall, in partnership with the private 
     sector, conduct activities to facilitate the deployment of 
     hydrogen energy and energy infrastructure, fuel cells, and 
     advanced vehicle technologies.
       (e) Funding.--
       (1) In general.--The Secretary shall carry out the programs 
     under this section using a competitive, merit-based review 
     process and consistent with the generally applicable Federal 
     laws and regulations governing awards of financial 
     assistance, contracts, or other agreements.
       (2) Research centers.--Activities under this section may be 
     carried out by funding nationally recognized university-based 
     or Federal laboratory research centers.
       (f) Cost Sharing.--
       (1) 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. The Secretary may reduce or eliminate the 
     non-Federal requirement under this paragraph if the Secretary 
     determines that the research and development is of a basic or 
     fundamental nature or involves technical analyses or 
     educational activities.
       (2) Demonstration and commercial application.--Except as 
     otherwise provided in this title, the Secretary shall require 
     at least 50 percent of the costs directly and specifically 
     related to any demonstration or commercial application 
     project under this title to be provided from non-Federal 
     sources. The Secretary may reduce the non-Federal requirement 
     under this paragraph 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.
       (3) Calculation of amount.--In calculating the amount of 
     the non-Federal commitment under paragraph (1) or (2), the 
     Secretary may include personnel, services, equipment, and 
     other resources.
       (4) Size of non-federal share.--The Secretary may consider 
     the size of the non-Federal share in selecting projects.
       (g) Disclosure.--Section 623 of the Energy Policy Act of 
     1992 (42 U.S.C. 13293) relating to the protection of 
     information shall apply to projects carried out through 
     grants, cooperative agreements, or contracts under this 
     title.

     SEC. 804. INTERAGENCY TASK FORCE.

       (a) Establishment.--Not later than 120 days after the date 
     of enactment of this Act, the President shall establish an 
     interagency task force chaired by the Secretary with 
     representatives from each of the following:
       (1) The Office of Science and Technology Policy within the 
     Executive Office of the President.
       (2) The Department of Transportation.
       (3) The Department of Defense.
       (4) The Department of Commerce (including the National 
     Institute of Standards and Technology).
       (5) The Department of State.
       (6) The Environmental Protection Agency.
       (7) The National Aeronautics and Space Administration.
       (8) Other Federal agencies as the Secretary determines 
     appropriate.
       (b) Duties.--
       (1) Planning.--The interagency task force shall work 
     toward--
       (A) a safe, economical, and environmentally sound fuel 
     infrastructure for hydrogen and hydrogen-carrier fuels, 
     including an infrastructure that supports buses and other 
     fleet transportation;
       (B) fuel cells in government and other applications, 
     including portable, stationary, and transportation 
     applications;
       (C) distributed power generation, including the generation 
     of combined heat, power, and clean fuels including hydrogen;
       (D) uniform hydrogen codes, standards, and safety 
     protocols; and
       (E) vehicle hydrogen fuel system integrity safety 
     performance.
       (2) Activities.--The interagency task force may organize 
     workshops and conferences, may issue publications, and may 
     create databases to carry out its duties. The interagency 
     task force shall--
       (A) foster the exchange of generic, nonproprietary 
     information and technology among industry, academia, and 
     government;
       (B) develop and maintain an inventory and assessment of 
     hydrogen, fuel cells, and other advanced technologies, 
     including the commercial capability of each technology for 
     the economic and environmentally safe production, 
     distribution, delivery, storage, and use of hydrogen;
       (C) integrate technical and other information made 
     available as a result of the programs and activities under 
     this title;
       (D) promote the marketplace introduction of infrastructure 
     for hydrogen fuel vehicles; and
       (E) conduct an education program to provide hydrogen and 
     fuel cell information to potential end-users.
       (c) Agency Cooperation.--The heads of all agencies, 
     including those whose agencies are not represented on the 
     interagency task force, shall cooperate with and furnish 
     information to the interagency task force, the Advisory 
     Committee, and the Department.

     SEC. 805. ADVISORY COMMITTEE.

       (a) Establishment.--The Hydrogen Technical and Fuel Cell 
     Advisory Committee is established to advise the Secretary on 
     the programs and activities under this title.
       (b) Membership.--
       (1) Members.--The Advisory Committee shall be comprised of 
     not fewer than 12 nor more than 25 members. The members shall 
     be appointed by the Secretary to represent domestic industry, 
     academia, professional societies, government agencies, 
     Federal laboratories, previous advisory panels, and 
     financial, environmental, and other appropriate organizations 
     based on the Department's assessment of the technical and 
     other qualifications of committee members and the needs of 
     the Advisory Committee.

[[Page H11259]]

       (2) Terms.--The term of a member of the Advisory Committee 
     shall not be more than 3 years. The Secretary may appoint 
     members of the Advisory Committee in a manner that allows the 
     terms of the members serving at any time to expire at spaced 
     intervals so as to ensure continuity in the functioning of 
     the Advisory Committee. A member of the Advisory Committee 
     whose term is expiring may be reappointed.
       (3) Chairperson.--The Advisory Committee shall have a 
     chairperson, who is elected by the members from among their 
     number.
       (c) Review.--The Advisory Committee shall review and make 
     recommendations to the Secretary on--
       (1) the implementation of programs and activities under 
     this title;
       (2) the safety, economical, and environmental consequences 
     of technologies for the production, distribution, delivery, 
     storage, or use of hydrogen energy and fuel cells; and
       (3) the plan under section 802.
       (d) Response.--
       (1) Consideration of recommendations.--The Secretary shall 
     consider, but need not adopt, any recommendations of the 
     Advisory Committee under subsection (c).
       (2) Biennial report.--The Secretary shall transmit a 
     biennial report to Congress describing any recommendations 
     made by the Advisory Committee since the previous report. The 
     report shall include a description of how the Secretary has 
     implemented or plans to implement the recommendations, or an 
     explanation of the reasons that a recommendation will not be 
     implemented. The report shall be transmitted along with the 
     President's budget proposal.
       (e) Support.--The Secretary shall provide resources 
     necessary in the judgment of the Secretary for the Advisory 
     Committee to carry out its responsibilities under this title.

     SEC. 806. EXTERNAL REVIEW.

       (a) Plan.--The Secretary shall enter into an arrangement 
     with the National Academy of Sciences to review the plan 
     prepared under section 802, which shall be completed not 
     later than 6 months after the Academy receives the plan. Not 
     later than 45 days after receiving the review, the Secretary 
     shall transmit the review to Congress along with a plan to 
     implement the review's recommendations or an explanation of 
     the reasons that a recommendation will not be implemented.
       (b) Additional review.--The Secretary shall enter into an 
     arrangement with the National Academy of Sciences under which 
     the Academy will review the programs under section 803 during 
     the fourth year following the date of enactment of this Act. 
     The Academy's review shall include the research priorities 
     and technical milestones, and evaluate the progress toward 
     achieving them. The review shall be completed not later than 
     5 years after the date of enactment of this Act. Not later 
     than 45 days after receiving the review, the Secretary shall 
     transmit the review to Congress along with a plan to 
     implement the review's recommendations or an explanation for 
     the reasons that a recommendation will not be implemented.

     SEC. 807. MISCELLANEOUS PROVISIONS.

       (a) Representation.--The Secretary may represent the United 
     States interests with respect to activities and programs 
     under this title, in coordination with the Department of 
     Transportation, the National Institute of Standards and 
     Technology, and other relevant Federal agencies, before 
     governments and nongovernmental organizations including--
       (1) other Federal, State, regional, and local governments 
     and their representatives;
       (2) industry and its representatives, including members of 
     the energy and transportation industries; and
       (3) in consultation with the Department of State, foreign 
     governments and their representatives including international 
     organizations.
       (b) Regulatory Authority.--Nothing in this title shall be 
     construed to alter the regulatory authority of the 
     Department.

     SEC. 808. SAVINGS CLAUSE.

       Nothing in this title shall be construed to affect the 
     authority of the Secretary of Transportation that may exist 
     prior to the date of enactment of this Act with respect to--
       (1) research into, and regulation of, hydrogen-powered 
     vehicles fuel systems integrity, standards, and safety under 
     subtitle VI of title 49, United States Code;
       (2) regulation of hazardous materials transportation under 
     chapter 51 of title 49, United States Code;
       (3) regulation of pipeline safety under chapter 601 of 
     title 49, United States Code;
       (4) encouragement and promotion of research, development, 
     and deployment activities relating to advanced vehicle 
     technologies under section 5506 of title 49, United States 
     Code;
       (5) regulation of motor vehicle safety under chapter 301 of 
     title 49, United States Code;
       (6) automobile fuel economy under chapter 329 of title 49, 
     United States Code; or
       (7) representation of the interests of the United States 
     with respect to the activities and programs under the 
     authority of title 49, United States Code.

     SEC. 809. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated to the Secretary to 
     carry out this title, in addition to any amounts made 
     available for these purposes under other Acts--
       (1) $273,500,000 for fiscal year 2004;
       (2) $375,000,000 for fiscal year 2005;
       (3) $450,000,000 for fiscal year 2006;
       (4) $500,000,000 for fiscal year 2007; and
       (5) $550,000,000 for fiscal year 2008.
                   TITLE IX--RESEARCH AND DEVELOPMENT

     SEC. 901. GOALS.

       (a) In General.--The Secretary shall conduct a balanced set 
     of programs of energy research, development, demonstration, 
     and commercial application to support Federal energy policy 
     and programs by the Department. Such programs shall be 
     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 5-year 
     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.
       (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.--
       (1) No new authority or requirement.--Nothing in subsection 
     (a) or the annually published goals shall--
       (A) create any new--
       (i) authority for any Federal agency; or
       (ii) requirement for any other person;
       (B) be used by a Federal agency to support the 
     establishment of regulatory standards or regulatory 
     requirements; or
       (C) alter the authority of the Secretary to make grants or 
     other awards.
       (2) No limitation.--Nothing in this subsection shall be 
     construed to limit the authority of the Secretary to impose 
     conditions on grants or other awards based on the goals in 
     subsection (a) or any subsequent modification thereto.

     SEC. 902. DEFINITIONS.

       For purposes of this title:
       (1) Department.--The term ``Department'' means the 
     Department of Energy.
       (2) Departmental mission.--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) Institution of higher education.--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) National laboratory.--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) Nonmilitary energy laboratory.--The term ``nonmilitary 
     energy laboratory'' means the laboratories listed in 
     paragraph (4), except for those listed in subparagraphs (G), 
     (H), and (N).
       (6) Secretary.--The term ``Secretary'' means the Secretary 
     of Energy.
       (7) Single-purpose research facility.--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. 904. 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.
       (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 905--
       (A) for fiscal year 2004, $20,000,000;
       (B) for fiscal year 2005, $30,000,000;
       (C) for fiscal year 2006, $50,000,000;
       (D) for fiscal year 2007, $50,000,000; and
       (E) for fiscal year 2008, $50,000,000.
       (2) For activities under section 907--
       (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 908--
       (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.

[[Page H11260]]

       (4) For activities under section 909, $2,000,000 for each 
     of fiscal years 2005 through 2008.
       (c) Extended Authorization.--There are authorized to be 
     appropriated to the Secretary for activities under section 
     905, $50,000,000 for each of fiscal years 2009 through 2013.
       (d) Limitation on Use of Funds.--None of the funds 
     authorized to be appropriated under this section may be used 
     for--
       (1) the issuance and implementation of energy efficiency 
     regulations;
       (2) the Weatherization Assistance Program under part A of 
     title IV of the Energy Conservation and Production Act (42 
     U.S.C. 6861 et seq.);
       (3) the State Energy Program under part D of title III of 
     the Energy Policy and Conservation Act (42 U.S.C. 6321 et 
     seq.); or
       (4) the Federal Energy Management Program under part 3 of 
     title V of the National Energy Conservation Policy Act (42 
     U.S.C. 8251 et seq.).

     SEC. 905. NEXT GENERATION LIGHTING INITIATIVE.

       (a) In General.--The Secretary shall carry out a Next 
     Generation Lighting Initiative in 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; and 
     cost-competitive, and have less environmental impact.
       (c) Industry Alliance.--The Secretary shall, not later than 
     3 months after the date of enactment of this section, 
     competitively select an Industry Alliance to represent 
     participants that 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) In general.--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) Assistance from the industry alliance.--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) Availability of information and roadmaps.--The 
     information and roadmaps under paragraph (2) shall be 
     available to the public and public response shall be 
     solicited by the Secretary.
       (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) Intellectual Property.--The Secretary may require, in 
     accordance with the authorities provided in section 
     202(a)(ii) of title 35, United States Code, section 152 of 
     the Atomic Energy Act of 1954 (42 U.S.C. 2182), and section 9 
     of the Federal Nonnuclear Energy Research and Development Act 
     of 1974 (42 U.S.C. 5908), that--
       (1) for any new invention resulting from activities under 
     subsection (d)--
       (A) the Industry Alliance members that are active 
     participants in research, development, and demonstration 
     activities related to the advanced solid-state lighting 
     technologies that are the subject of this section shall be 
     granted first option to negotiate with the invention owner 
     nonexclusive licenses and royalties for uses of the invention 
     related to solid-state lighting on terms that are reasonable 
     under the circumstances; and
       (B)(i) for 1 year after a United States patent is issued 
     for the invention, the patent holder shall not negotiate any 
     license or royalty with any entity that is not a participant 
     in the Industry Alliance described in subparagraph (A); and
       (ii) during the year described in clause (i), the invention 
     owner shall negotiate nonexclusive licenses and royalties in 
     good faith with any interested participant in the Industry 
     Alliance described in subparagraph (A); and
       (2) such other terms as the Secretary determines are 
     required to promote accelerated commercialization of 
     inventions made under the Initiative.
       (g) 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. The Academy shall review the research priorities, 
     technical milestones, and plans for technology transfer and 
     progress towards achieving them. The Secretary shall consider 
     the results of such reviews in evaluating the information 
     obtained under subsection (d)(2).
       (h) Definitions.--As used in this section:
       (1) Advanced solid-state lighting.--The term ``advanced 
     solid-state lighting'' means a semiconducting device package 
     and delivery system that produces white light using 
     externally applied voltage.
       (2) Research.--The term ``research'' includes research on 
     the technologies, materials, and manufacturing processes 
     required for white light emitting diodes. -
       (3) Industry alliance.--The term ``Industry Alliance'' 
     means an entity selected by the Secretary under subsection 
     (c).
       (4) White light emitting diode.--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. 906. 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, working with 
     the National Institute of Building Sciences, 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.--
       (1) Establishment.--The Secretary, in consultation with the 
     Secretary of Commerce and the Director of the Office of 
     Science and Technology Policy, shall establish an advisory 
     committee to--
       (A) analyze and provide recommendations on potential 
     private sector roles and participation in the Initiative; and
       (B) review and provide recommendations on the plan 
     described in subsection (c).
       (2) Membership.--Membership of the advisory committee shall 
     include representatives with a broad range of appropriate 
     expertise, including expertise in--
       (A) building research and technology;
       (B) architecture, engineering, and building materials and 
     systems; and
       (C) the residential, commercial, and industrial sectors of 
     the construction industry.
       (f) Construction.--Nothing in this section provides any 
     Federal agency with new authority to regulate building 
     performance.

     SEC. 907. SECONDARY ELECTRIC VEHICLE BATTERY USE PROGRAM.

       (a) Definitions.--For purposes of this section:
       (1) Associated equipment.--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.
       (2) Battery.--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.
       (b) Program.--The Secretary shall establish and conduct a 
     research, development, demonstration, and commercial 
     application program for the secondary use of batteries if the 
     Secretary finds that there are sufficient numbers of such 
     batteries to support the program. The 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 enactment of this Act, if the Secretary finds under 
     subsection (b) that there are sufficient numbers of batteries 
     to support the program, 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) In general.--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, subject to the availability of appropriations.
       (2) Diversity; environmental effect.--In selecting 
     proposals, the Secretary shall consider diversity of battery 
     type, geographic and climatic diversity, and life-cycle 
     environmental effects of the approaches.
       (3) Limitation.--No 1 project selected under this section 
     shall receive more than 25 percent of the funds authorized 
     for the program under this section.
       (4) Optimization of federal resources.--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.

[[Page H11261]]

       (5) Other criteria.--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;
       (2) the proposer provide at least 50 percent of the costs 
     associated with the proposal; and
       (3) the proposer provide to the Secretary such information 
     regarding the disposal of the batteries as the Secretary may 
     require to ensure that the proposer disposes of the batteries 
     in accordance with applicable law.

     SEC. 908. 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 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.

     SEC. 909. ELECTRIC MOTOR CONTROL TECHNOLOGY.

       The Secretary shall conduct a research, development, 
     demonstration, and commercial application program on advanced 
     control devices to improve the energy efficiency of electric 
     motors used in heating, ventilation, air conditioning, and 
     comparable systems.

     SEC. 910. ADVANCED ENERGY TECHNOLOGY TRANSFER CENTERS.

       (a) Grants.--Not later than 18 months after the date of 
     enactment of this Act, the Secretary shall make grants to 
     nonprofit institutions, State and local governments, or 
     universities (or consortia thereof), to establish a 
     geographically dispersed network of Advanced Energy 
     Technology Transfer Centers, to be located in areas the 
     Secretary determines have the greatest need of the services 
     of such Centers.
       (b) Activities.--
       (1) In general.--Each Center shall operate a program to 
     encourage demonstration and commercial application of 
     advanced energy methods and technologies through education 
     and outreach to building and industrial professionals, and to 
     other individuals and organizations with an interest in 
     efficient energy use.
       (2) Advisory panel.--Each Center shall establish an 
     advisory panel to advise the Center on how best to accomplish 
     the activities under paragraph (1).
       (c) Application.--A person seeking a grant under this 
     section shall submit to the Secretary an application in such 
     form and containing such information as the Secretary may 
     require. The Secretary may award a grant under this section 
     to an entity already in existence if the entity is otherwise 
     eligible under this section.
       (d) Selection Criteria.--The Secretary shall award grants 
     under this section on the basis of the following criteria, at 
     a minimum:
       (1) The ability of the applicant to carry out the 
     activities in subsection (b).
       (2) The extent to which the applicant will coordinate the 
     activities of the Center with other entities, such as State 
     and local governments, utilities, and educational and 
     research institutions.
       (e) Matching Funds.--The Secretary shall require a non-
     Federal matching requirement of at least 50 percent of the 
     costs of establishing and operating each Center.
       (f) Advisory Committee.--The Secretary shall establish an 
     advisory committee to advise the Secretary on the 
     establishment of Centers under this section. The advisory 
     committee shall be composed of individuals with expertise in 
     the area of advanced energy methods and technologies, 
     including at least 1 representative from--
       (1) State or local energy offices;
       (2) energy professionals;
       (3) trade or professional associations;
       (4) architects, engineers, or construction professionals;
       (5) manufacturers;
       (6) the research community; and
       (7) nonprofit energy or environmental organizations.
       (g) Definitions.--For purposes of this section:
       (1) Advanced energy methods and technologies.--The term 
     ``advanced energy methods and technologies'' means all 
     methods and technologies that promote energy efficiency and 
     conservation, including distributed generation technologies, 
     and life-cycle analysis of energy use.
       (2) Center.--The term ``Center'' means an Advanced Energy 
     Technology Transfer Center established pursuant to this 
     section.
       (3) Distributed generation.--The term ``distributed 
     generation'' means an electric power generation facility that 
     is designed to serve retail electric consumers at or near the 
     facility site.
       Subtitle B--Distributed Energy and Electric Energy Systems

     SEC. 911. DISTRIBUTED ENERGY AND ELECTRIC ENERGY SYSTEMS.

       (a) In General.--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:
       (1) For fiscal year 2004, $190,000,000.
       (2) For fiscal year 2005, $200,000,000.
       (3) For fiscal year 2006, $220,000,000.
       (4) For fiscal year 2007, $240,000,000.
       (5) For fiscal year 2008, $260,000,000.
       (b) Micro-Cogeneration Energy Technology.--From amounts 
     authorized under subsection (a), $20,000,000 for each of 
     fiscal years 2004 and 2005 is authorized for activities under 
     section 914.

     SEC. 912. HYBRID DISTRIBUTED POWER SYSTEMS.

       (a) Requirement.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary shall develop and 
     transmit to Congress a strategy for a comprehensive research, 
     development, demonstration, and commercial application 
     program to develop hybrid distributed power systems that 
     combine--
       (1) 1 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.
       (b) Contents.--The strategy shall--
       (1) identify the needs best met with such hybrid 
     distributed power systems and the technological barriers to 
     the use of such systems;
       (2) provide for the development of methods to design, test, 
     integrate into systems, and operate such hybrid distributed 
     power systems;
       (3) include, as appropriate, research, development, 
     demonstration, and commercial application on related 
     technologies needed for the adoption of such hybrid 
     distributed power systems, including energy storage devices 
     and environmental control technologies;
       (4) include research, development, demonstration, and 
     commercial application of interconnection technologies for 
     communications and controls of distributed generation 
     architectures, particularly technologies promoting real-time 
     response to power market information and physical conditions 
     on the electrical grid; and
       (5) describe how activities under the strategy will be 
     integrated with other research, development, demonstration, 
     and commercial application activities supported by the 
     Department related to electric power technologies.

     SEC. 913. 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. 914. 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--
       (1) the use of small-scale combined heat and power in 
     residential heating appliances; and
       (2) the use of excess power to operate other appliances 
     within the residence and supply excess generated power to the 
     power grid.

     SEC. 915. DISTRIBUTED ENERGY TECHNOLOGY DEMONSTRATION 
                   PROGRAM.

       The Secretary, within the sums authorized under section 
     911(a), 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. 916. RECIPROCATING POWER.

       The Secretary shall conduct a research, development, and 
     demonstration program regarding fuel system optimization and 
     emissions reduction after-treatment technologies for 
     industrial reciprocating engines. Such after-treatment 
     technologies shall use processes that reduce emissions by 
     recirculating exhaust gases and shall be designed to be 
     retrofitted to any new or existing diesel or natural gas 
     engine used for power generation, peaking power generation, 
     combined heat and power, or compression.
                      Subtitle C--Renewable Energy

     SEC. 918. 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:
       (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.
       (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 919:
       (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.
       (5) For fiscal year 2008, $192,000,000.
       (c) Concentrating Solar Power.--From amounts authorized 
     under subsection (a), the following sums are authorized to be 
     appropriated to carry out section 920:
       (1) For fiscal year 2004, $20,000,000.
       (2) For fiscal year 2005, $40,000,000.
       (3) For each of fiscal years 2006, 2007 and 2008, 
     $50,000,000.
       (d) Public Buildings.--From the amounts authorized under 
     subsection (a), $30,000,000 for each of the fiscal years 2004 
     through 2008 are authorized to be appropriated to carry out 
     section 922.
       (e) Limits on Use of Funds.--

[[Page H11262]]

       (1) No funds for renewable support and implementation.--
     None of the funds authorized to be appropriated under this 
     section may be used for Renewable Support and Implementation.
       (2) Grants.--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.
       (3) Regional field verification program.--Of the funds 
     authorized under subsection (a), not less than $4,000,000 for 
     each fiscal year shall be made available for the Regional 
     Field Verification Program of the Department.
       (4) Off-stream pumped storage hydropower.--Of the funds 
     authorized under subsection (a), such sums as may be 
     necessary shall be made available for demonstration projects 
     of off-stream pumped storage hydropower.
       (f) Consultation.--In carrying out this subtitle, 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. 919. BIOENERGY PROGRAMS.

       (a) Definitions.--For the purposes of this section:
       (1) The term ``agricultural byproducts'' includes waste 
     products, including poultry fat and poultry waste.
       (2) The term ``cellulosic biomass'' means any portion of a 
     crop containing lignocellulose or hemicellulose, including 
     barley grain, grapeseed, forest thinnings, rice bran, rice 
     hulls, rice straw, soybean matter, and sugarcane bagasse, or 
     any crop grown specifically for the purpose of producing 
     cellulosic feedstocks.
       (b) Program.--The Secretary shall conduct a program of 
     research, development, demonstration, and commercial 
     application for bioenergy, including--
       (1) biopower energy systems;
       (2) biofuels;
       (3) bio-based products;
       (4) integrated biorefineries that may produce biopower, 
     biofuels, and bio-based products;
       (5) cross-cutting research and development in feedstocks 
     and enzymes; and
       (6) economic analysis.
       (c) Biofuels and Bio-Based Products.--The goals of the 
     biofuels and bio-based products programs shall be to develop, 
     in partnership with industry--
       (1) advanced biochemical and thermochemical conversion 
     technologies capable of making biofuels that are price-
     competitive with gasoline or diesel in either internal 
     combustion engines or fuel cell-powered vehicles, and bio-
     based products from a variety of feedstocks, including 
     grains, cellulosic biomass, and other agricultural 
     byproducts; and
       (2) advanced biotechnology processes capable of making 
     biofuels and bio-based products with emphasis on development 
     of biorefinery technologies using enzyme-based processing 
     systems.

     SEC. 920. CONCENTRATING SOLAR POWER RESEARCH AND DEVELOPMENT 
                   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 
     cogeneration 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 thermochemical cycles for hydrogen 
     production at the temperatures attainable with concentrating 
     solar power;
       (3) evaluation of materials issues for the thermochemical 
     cycles described in paragraph (2);
       (4) system architectures and economics studies; and
       (5) coordination with activities in the Advanced Reactor 
     Hydrogen Cogeneration Project on high temperature materials, 
     thermochemical cycles, and economic issues.
       (b) Assessment.--In carrying out the program under this 
     section, the Secretary shall--
       (1) 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 Department-funded reviews of that report; and
       (2) provide an assessment of the potential impact of the 
     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 Act, the Secretary shall provide a report 
     to Congress on the economic and technical potential for 
     electricity or hydrogen production, with or without 
     cogeneration, with concentrating solar power, including the 
     economic and technical feasibility of potential construction 
     of a pilot demonstration facility suitable for commercial 
     production of electricity or hydrogen from concentrating 
     solar power.

     SEC. 921. MISCELLANEOUS PROJECTS.

       The Secretary may conduct research, development, 
     demonstration, and commercial application programs for--
       (1) ocean energy, including wave energy; and
       (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.

     SEC. 922. RENEWABLE ENERGY IN PUBLIC BUILDINGS.

       (a) Demonstration and Technology Transfer Program.--The 
     Secretary shall establish a program for the demonstration of 
     innovative technologies for solar and other renewable energy 
     sources in buildings owned or operated by a State or local 
     government, and for the dissemination of information 
     resulting from such demonstration to interested parties.
       (b) Limit on Federal Funding.--The Secretary shall provide 
     under this section no more than 40 percent of the incremental 
     costs of the solar or other renewable energy source project 
     funded.
       (c) Requirement.--As part of the application for awards 
     under this section, the Secretary shall require all 
     applicants--
       (1) to demonstrate a continuing commitment to the use of 
     solar and other renewable energy sources in buildings they 
     own or operate; and
       (2) to state how they expect any award to further their 
     transition to the significant use of renewable energy.

     SEC. 923. STUDY OF MARINE RENEWABLE ENERGY OPTIONS.

       (a) In General.--The Secretary shall enter into an 
     arrangement with the National Academy of Sciences to conduct 
     a study on--
       (1) the feasibility of various methods of renewable 
     generation of energy from the ocean, including energy from 
     waves, tides, currents, and thermal gradients; and
       (2) the research, development, demonstration, and 
     commercial application activities required to make marine 
     renewable energy generation competitive with other forms of 
     electricity generation.
       (b) Transmittal.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary shall transmit the study 
     to Congress along with the Secretary's recommendations for 
     implementing the results of the study.
                       Subtitle D--Nuclear Energy

     SEC. 924. 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, $355,000,000.
       (3) For fiscal year 2006, $430,000,000.
       (4) For fiscal year 2007, $455,000,000.
       (5) For fiscal year 2008, $545,000,000.
       (b) Nuclear Infrastructure Support.--The following sums are 
     authorized to be appropriated to the Secretary for activities 
     under section 925(e):
       (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.
       (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 926--
       (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 927--
       (A) for fiscal year 2004, $35,200,000;
       (B) for fiscal year 2005, $44,350,000;
       (C) for fiscal year 2006, $49,200,000;
       (D) for fiscal year 2007, $54,950,000; and
       (E) for fiscal year 2008, $60,000,000.
       (3) For activities under section 929, for each of fiscal 
     years 2004 through 2008, $6,000,000.
       (d) Limitation on Use of Funds.--None of the funds 
     authorized under this section may be used for decommissioning 
     the Fast Flux Test Facility.

     SEC. 925. NUCLEAR ENERGY RESEARCH AND DEVELOPMENT 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. Whatever type of 
     reactor is chosen for the hydrogen cogeneration project under 
     subtitle C of title VI, that type shall not be addressed in 
     the Program under this section. The Program shall include--
       (1) support for first-of-a-kind engineering design and 
     certification expenses of advanced nuclear power plant 
     designs, which offer improved safety and economics over 
     current conventional plants and the promise of near-term to 
     medium-term commercial deployment;
       (2) action by the Secretary to encourage domestic power 
     companies to install new nuclear plant capacity as soon as 
     possible;
       (3) utilization of the expertise and capabilities of 
     industry, universities, and National Laboratories in 
     evaluation of advanced nuclear fuel cycles and fuels testing;
       (4) consideration of proliferation-resistant passively-
     safe, small reactors suitable for long-term electricity 
     production without refueling and suitable for use in remote 
     installations;
       (5) participation of international collaborators in 
     research, development, design, and deployment efforts as 
     appropriate and consistent with

[[Page H11263]]

     United States interests in nonproliferation of nuclear 
     weapons;
       (6) encouragement for university and industry 
     participation; and
       (7) selection of projects such as to strengthen the 
     competitive position of the domestic nuclear power industrial 
     infrastructure.
       (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) 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 Congress for fiscal year 2006.

     SEC. 926. 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 that 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 the 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. 927. 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 Office of Nuclear 
     Energy, Science, and Technology and the Office of Civilian 
     Radioactive Waste Management. The Secretary shall support 
     communication and outreach related to nuclear science, 
     engineering, and nuclear waste management, consistent with 
     interests of the United States in nonproliferation of nuclear 
     weapons capabilities.
       (c) Strengthening University Research and Training Reactors 
     and Associated Infrastructure.--Activities under this section 
     may include--
       (1) converting research and training 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 research and training reactors as part of a student 
     training program; and
       (3) providing funding, through the Innovations in Nuclear 
     Infrastructure and Education Program, 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 and training reactor at an institution of higher 
     education used in the research project.

     SEC. 928. SECURITY OF REACTOR DESIGNS.

       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 reactor designs 
     from natural phenomena and the security of reactor designs 
     from deliberate attacks.

     SEC. 929. ALTERNATIVES TO INDUSTRIAL RADIOACTIVE SOURCES.

       (a) Study.--The Secretary shall conduct a study and provide 
     a report to Congress not later than August 1, 2004. The study 
     shall--
       (1) survey industrial applications of large radioactive 
     sources, including well-logging sources;
       (2) review current domestic and international Department, 
     Department of Defense, Department of State, and commercial 
     programs to manage and dispose of radioactive sources;
       (3) discuss disposal options and practices for currently 
     deployed or future sources and, if deficiencies are noted in 
     existing disposal options or practices for either deployed or 
     future sources, recommend options to remedy deficiencies; and
       (4) develop a program plan for research and development to 
     develop alternatives to large industrial sources that reduce 
     safety, environmental, or proliferation risks to either 
     workers using the sources or the public.
       (b) Program.--The Secretary shall establish a research and 
     development program to implement the program plan developed 
     under subsection (a)(4). The program shall include 
     miniaturized particle accelerators for well-logging or other 
     industrial applications and portable accelerators for 
     production of short-lived radioactive materials at an 
     industrial site.

     SEC. 930. GEOLOGICAL ISOLATION OF SPENT FUEL.

       The Secretary shall conduct a study to determine the 
     feasibility of deep borehole disposal of spent nuclear fuel 
     and high-level radioactive waste. The study shall emphasize 
     geological, chemical, and hydrological characterization of, 
     and design of engineered structures for, deep borehole 
     environments. Not later than 1 year after the date of 
     enactment of this Act, the Secretary shall transmit the study 
     to Congress.
                       Subtitle E--Fossil Energy

                       PART I--RESEARCH PROGRAMS

     SEC. 931. 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 part:
       (1) For fiscal year 2004, $530,000,000.
       (2) For fiscal year 2005, $556,000,000.
       (3) For fiscal year 2006, $583,000,000.
       (4) For fiscal year 2007, $611,000,000.
       (5) For fiscal year 2008, $626,000,000.
       (b) Allocations.--From amounts authorized under subsection 
     (a), the following sums are authorized:
       (1) For activities under section 932(b)(2), $28,000,000 for 
     each of the fiscal years 2004 through 2008.
       (2) For activities under section 934--
       (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 935--
       (A) for fiscal year 2004, $259,000,000;
       (B) for fiscal year 2005, $272,000,000;
       (C) for fiscal year 2006, $285,000,000;
       (D) for fiscal year 2007, $298,000,000; and
       (E) for fiscal year 2008, $308,000,000.
       (4) For the Office of Arctic Energy under section 3197 of 
     the Floyd D. Spence National Defense Authorization Act for 
     Fiscal Year 2001 (42 U.S.C. 7144d), $25,000,000 for each of 
     fiscal years 2004 through 2008.
       (5) For activities under section 933, $4,000,000 for fiscal 
     year 2004 and $2,000,000 for each of fiscal years 2005 
     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 (42 U.S.C. 7144d), 
     $25,000,000 for each of fiscal years 2009 through 2012.
       (d) Limits on Use of Funds.--
       (1) No funds for certain programs.--None of the funds 
     authorized under this section may be used for Fossil Energy 
     Environmental Restoration or Import/Export Authorization.
       (2) Institutions of higher education.--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. 932. 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 oil shale;
       (7) related environmental research; and
       (8) compressed natural gas marine transport.
       (b) Fuel Cells.--
       (1) In general.--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) Improved manufacturing production and processes.--The 
     demonstrations under paragraph (1) shall include fuel cell 
     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 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 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) National center or consortium of excellence.--The 
     Secretary shall establish a national center or consortium of 
     excellence in

[[Page H11264]]

     clean 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) Program.--The center or consortium shall conduct a 
     program of research, development, demonstration, and 
     commercial application on integrating the following 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.
       (F) Education on energy and power generation issues.

     SEC. 933. TECHNOLOGY TRANSFER.

       The Secretary shall establish a competitive program to 
     award a contract to a nonprofit entity for the purpose of 
     transferring technologies developed with public funds. The 
     entity selected under this section shall have experience in 
     offshore oil and gas technology research management, in the 
     transfer of technologies developed with public funds to the 
     offshore and maritime industry, and in management of an 
     offshore and maritime industry consortium. The program 
     consortium selected under section 942 shall not be eligible 
     for selection under this section. When appropriate, the 
     Secretary shall consider utilizing the entity selected under 
     this section when implementing the activities authorized by 
     section 975.

     SEC. 934. RESEARCH AND DEVELOPMENT FOR COAL MINING 
                   TECHNOLOGIES.

       (a) Establishment.--The Secretary shall carry out a program 
     of 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 from 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 electromagnetic wave imaging 
     and radar techniques for horizontal drilling in coal beds 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. 935. COAL AND RELATED TECHNOLOGIES PROGRAM.

       (a) In General.--In addition to the programs authorized 
     under title IV, the Secretary shall conduct a program of 
     technology research, development, 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;
       (8) advanced coal-related research;
       (9) advanced separation technologies; and
       (10) a joint project for permeability enhancement in coals 
     for natural gas production and carbon dioxide sequestration.
       (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 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 Act, 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 Act and every 4 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 subtitle A 
     of title IV.

     SEC. 936. COMPLEX WELL TECHNOLOGY TESTING FACILITY.

       The Secretary, 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.

     SEC. 937. FISCHER-TROPSCH DIESEL FUEL LOAN GUARANTEE PROGRAM.

       (a) Definition of Fischer-Tropsch Diesel Fuel.--In this 
     section, the term ``Fischer-Tropsch diesel fuel'' means 
     diesel fuel that--
       (1) contains less than 10 parts per million sulfur; and
       (2) is produced through the Fischer-Tropsch liquification 
     process from coal or waste from coal that was mined in the 
     United States.
       (b) Loan Guarantees.--
       (1) Establishment of program.--The Secretary of Energy 
     shall establish a program to provide guarantees of loans by 
     private lending institutions for the construction of 
     facilities for the production of Fischer-Tropsch diesel fuel 
     and commercial byproducts of that production.
       (2) Requirements.--The Secretary may provide a loan 
     guarantee under paragraph (1) 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.
       (3) Criteria.--In selecting recipients of loan guarantees 
     from among applicants, the Secretary shall give preference to 
     proposals that--
       (A) meet all 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 availability of domestic coal or coal waste for 
     conversion; or
       (ii) a projected high level of demand for Fischer-Tropsch 
     diesel fuel or other commercial byproducts of the facility.
       (4) Maturity.--A loan guaranteed under paragraph (1) shall 
     have a maturity of not more than 25 years.
       (5) Terms and conditions.--The loan agreement for a loan 
     guaranteed under paragraph (1) shall provide that no 
     provision of the loan may be amended or waived without the 
     consent of the Secretary.
       (6) Guarantee fee.--A recipient of a loan guarantee under 
     paragraph (1) shall pay the Secretary an amount to be 
     determined by the Secretary to be sufficient to cover the 
     administrative costs of the Secretary relating to the loan 
     guarantee.
       (7) Full faith and credit.--
       (A) In general.--The full faith and credit of the United 
     States is pledged to payment of loan guarantees made under 
     this section.
       (B) Conclusive evidence.--Any loan guarantee made by the 
     Secretary under this section shall be conclusive evidence of 
     the eligibility of the loan for the guarantee with respect to 
     principal and interest.
       (C) Validity.--The validity of a loan guarantee shall be 
     incontestable in the hands of a holder of the guaranteed 
     loan.
       (8) Reports.--Until each guaranteed loan under this section 
     is repaid in full, the Secretary shall annually submit to 
     Congress a report on the activities of the Secretary under 
     this section.
       (9) Authorization of appropriations.--There are authorized 
     to be appropriated such sums as are necessary to carry out 
     this section.
       (10) Termination of authority.--The authority of the 
     Secretary to issue a new loan guarantee under paragraph (1) 
     terminates on the date that is 5 years after the date of 
     enactment of this Act.

   PART II--ULTRA-DEEPWATER AND UNCONVENTIONAL NATURAL GAS AND OTHER 
                          PETROLEUM RESOURCES

     SEC. 941. PROGRAM AUTHORITY.

       (a) In General.--The Secretary shall carry out a program 
     under this part of research, development, demonstration, and 
     commercial application of technologies for ultra-deepwater 
     and unconventional natural gas and other petroleum resource 
     exploration and production, including addressing the 
     technology challenges for small producers, safe operations, 
     and environmental mitigation (including reduction of 
     greenhouse gas emissions and sequestration of carbon).
       (b) Program Elements.--The program under this part shall 
     address the following areas, including improving safety and 
     minimizing environmental impacts of activities within each 
     area:
       (1) Ultra-deepwater technology, including drilling to 
     formations in the Outer Continental Shelf to depths greater 
     than 15,000 feet.
       (2) Ultra-deepwater architecture.
       (3) Unconventional natural gas and other petroleum resource 
     exploration and production technology, including the 
     technology challenges of small producers.
       (c) Limitation on Location of Field Activities.--Field 
     activities under the program under this part shall be carried 
     out only--
       (1) in--
       (A) areas in the territorial waters of the United States 
     not under any Outer Continental Shelf moratorium as of 
     September 30, 2002;
       (B) areas onshore in the United States on public land 
     administered by the Secretary of the Interior available for 
     oil and gas leasing, where consistent with applicable law and 
     land use plans; and
       (C) areas onshore in the United States on State or private 
     land, subject to applicable law; and

[[Page H11265]]

       (2) with the approval of the appropriate Federal or State 
     land management agency or private land owner.
       (d) Research at National Energy Technology Laboratory.--The 
     Secretary, through the National Energy Technology Laboratory, 
     shall carry out research complementary to research under 
     subsection (b).
       (e) Consultation with Secretary of the Interior.--In 
     carrying out this part, the Secretary shall consult regularly 
     with the Secretary of the Interior.

     SEC. 942. ULTRA-DEEPWATER PROGRAM.

       (a) In general.--The Secretary shall carry out the 
     activities under section 941(a), to maximize the use of the 
     ultra-deepwater natural gas and other petroleum resources of 
     the United States by increasing the supply of such resources, 
     through reducing the cost and increasing the efficiency of 
     exploration for and production of such resources, while 
     improving safety and minimizing environmental impacts.
       (b) Role of the Secretary.--The Secretary shall have 
     ultimate responsibility for, and oversight of, all aspects of 
     the program under this section.
       (c) Role of the Program Consortium.--
       (1) In general.--The Secretary may contract with a 
     consortium to--
       (A) manage awards pursuant to subsection (f)(4);
       (B) make recommendations to the Secretary for project 
     solicitations;
       (C) disburse funds awarded under subsection (f) as directed 
     by the Secretary in accordance with the annual plan under 
     subsection (e); and
       (D) carry out other activities assigned to the program 
     consortium by this section.
       (2) Limitation.--The Secretary may not assign any 
     activities to the program consortium except as specifically 
     authorized under this section.
       (3) Conflict of interest.--
       (A) Procedures.--The Secretary shall establish procedures--
       (i) to ensure that each board member, officer, or employee 
     of the program consortium who is in a decision-making 
     capacity under subsection (f)(3) or (4) shall disclose to the 
     Secretary any financial interests in, or financial 
     relationships with, applicants for or recipients of awards 
     under this section, including those of his or her spouse or 
     minor child, unless such relationships or interests would be 
     considered to be remote or inconsequential; and
       (ii) to require any board member, officer, or employee with 
     a financial relationship or interest disclosed under clause 
     (i) to recuse himself or herself from any review under 
     subsection (f)(3) or oversight under subsection (f)(4) with 
     respect to such applicant or recipient.
       (B) Failure to comply.--The Secretary may disqualify an 
     application or revoke an award under this section if a board 
     member, officer, or employee has failed to comply with 
     procedures required under subparagraph (A)(ii).
       (d) Selection of the Program Consortium.--
       (1) In general.--The Secretary shall select the program 
     consortium through an open, competitive process.
       (2) Members.--The program consortium may include 
     corporations, trade associations, institutions of higher 
     education, National Laboratories, or other research 
     institutions. After submitting a proposal under paragraph 
     (4), the program consortium may not add members without the 
     consent of the Secretary.
       (3) Tax status.--The program consortium shall be an entity 
     that is exempt from tax under section 501(c)(3) of the 
     Internal Revenue Code of 1986.
       (4) Schedule.--Not later than 180 days after the date of 
     enactment of this Act, the Secretary shall solicit proposals 
     from eligible consortia to perform the duties in subsection 
     (c)(1), which shall be submitted not later than 360 days 
     after the date of enactment of this Act. The Secretary shall 
     select the program consortium not later than 18 months after 
     such date of enactment.
       (5) Application.--Applicants shall submit a proposal 
     including such information as the Secretary may require. At a 
     minimum, each proposal shall--
       (A) list all members of the consortium;
       (B) fully describe the structure of the consortium, 
     including any provisions relating to intellectual property; 
     and
       (C) describe how the applicant would carry out the 
     activities of the program consortium under this section.
       (6) Eligibility.--To be eligible to be selected as the 
     program consortium, an applicant must be an entity whose 
     members collectively have demonstrated capabilities in 
     planning and managing research, development, demonstration, 
     and commercial application programs in natural gas or other 
     petroleum exploration or production.
       (7) Criterion.--The Secretary shall consider the amount of 
     the fee an applicant proposes to receive under subsection (g) 
     in selecting a consortium under this section.
       (e) Annual Plan.--
       (1) In general.--The program under this section shall be 
     carried out pursuant to an annual plan prepared by the 
     Secretary in accordance with paragraph (2).
       (2) Development.--
       (A) Solicitation of recommendations.--Before drafting an 
     annual plan under this subsection, the Secretary shall 
     solicit specific written recommendations from the program 
     consortium for each element to be addressed in the plan, 
     including those described in paragraph (4). The Secretary may 
     request that the program consortium submit its 
     recommendations in the form of a draft annual plan.
       (B) Submission of recommendations; other comment.--The 
     Secretary shall submit the recommendations of the program 
     consortium under subparagraph (A) to the Ultra-Deepwater 
     Advisory Committee established under section 945(a) for 
     review, and such Advisory Committee shall provide to the 
     Secretary written comments by a date determined by the 
     Secretary. The Secretary may also solicit comments from any 
     other experts.
       (C) Consultation.--The Secretary shall consult regularly 
     with the program consortium throughout the preparation of the 
     annual plan.
       (3) Publication.--The Secretary shall transmit to Congress 
     and publish in the Federal Register the annual plan, along 
     with any written comments received under paragraph (2)(A) 
     and (B).
       (4) Contents.--The annual plan shall describe the ongoing 
     and prospective activities of the program under this section 
     and shall include--
       (A) a list of any solicitations for awards that the 
     Secretary plans to issue to carry out research, development, 
     demonstration, or commercial application activities, 
     including the topics for such work, who would be eligible to 
     apply, selection criteria, and the duration of awards; and
       (B) a description of the activities expected of the program 
     consortium to carry out subsection (f)(4).
       (5) Estimates of increased royalty receipts.--The 
     Secretary, in consultation with the Secretary of the 
     Interior, shall provide an annual report to Congress with the 
     President's budget on the estimated cumulative increase in 
     Federal royalty receipts (if any) resulting from the 
     implementation of this part. The initial report under this 
     paragraph shall be submitted in the first President's budget 
     following the completion of the first annual plan required 
     under this subsection.
       (f) Awards.--
       (1) In general.--The Secretary shall make awards to carry 
     out research, development, demonstration, and commercial 
     application activities under the program under this section. 
     The program consortium shall not be eligible to receive such 
     awards, but members of the program consortium may receive 
     such awards.
       (2) Proposals.--The Secretary shall solicit proposals for 
     awards under this subsection in such manner and at such time 
     as the Secretary may prescribe, in consultation with the 
     program consortium.
       (3) Review.--The Secretary shall make awards under this 
     subsection through a competitive process, which shall include 
     a review by individuals selected by the Secretary. Such 
     individuals shall include, for each application, Federal 
     officials, the program consortium, and non-Federal experts 
     who are not board members, officers, or employees of the 
     program consortium or of a member of the program consortium.
       (4) Oversight.--
       (A) In general.--The program consortium shall oversee the 
     implementation of awards under this subsection, consistent 
     with the annual plan under subsection (e), including 
     disbursing funds and monitoring activities carried out under 
     such awards for compliance with the terms and conditions of 
     the awards.
       (B) Effect.--Nothing in subparagraph (A) shall limit the 
     authority or responsibility of the Secretary to oversee 
     awards, or limit the authority of the Secretary to review or 
     revoke awards.
       (C) Provision of information.--The Secretary shall provide 
     to the program consortium the information necessary for the 
     program consortium to carry out its responsibilities under 
     this paragraph.
       (g) Administrative Costs.--
       (1) In general.--To compensate the program consortium for 
     carrying out its activities under this section, the Secretary 
     shall provide to the program consortium funds sufficient to 
     administer the program. This compensation may include a 
     management fee consistent with Department of Energy 
     contracting practices and procedures.
       (2) Advance.--The Secretary shall advance funds to the 
     program consortium upon selection of the consortium, which 
     shall be deducted from amounts to be provided under paragraph 
     (1).
       (h) Audit.--The Secretary shall retain an independent, 
     commercial auditor to determine the extent to which funds 
     provided to the program consortium, and funds provided under 
     awards made under subsection (f), have been expended in a 
     manner consistent with the purposes and requirements of this 
     part. The auditor shall transmit a report annually to the 
     Secretary, who shall transmit the report to Congress, along 
     with a plan to remedy any deficiencies cited in the report.

     SEC. 943. UNCONVENTIONAL NATURAL GAS AND OTHER PETROLEUM 
                   RESOURCES PROGRAM.

       (a) In General.--The Secretary shall carry out activities 
     under subsection 941(b)(3), to maximize the use of the 
     onshore unconventional natural gas and other petroleum 
     resources of the United States, by increasing the supply of 
     such resources, through reducing the cost and increasing the 
     efficiency of exploration for and production of such 
     resources, while improving safety and minimizing 
     environmental impacts.
       (b) Awards.--
       (1) In general.--The Secretary shall carry out this section 
     through awards to research consortia made through an open, 
     competitive process. As a condition of award of funds, 
     qualified research consortia shall--
       (A) demonstrate capability and experience in unconventional 
     onshore natural gas or other petroleum research and 
     development;
       (B) provide a research plan that demonstrates how 
     additional natural gas or oil production will be achieved; 
     and
       (C) at the request of the Secretary, provide technical 
     advice to the Secretary for the purposes of developing the 
     annual plan required under subsection (e).
       (2) Production potential.--The Secretary shall seek to 
     ensure that the number and types

[[Page H11266]]

     of awards made under this subsection have reasonable 
     potential to lead to additional oil and natural gas 
     production on Federal lands.
       (3) Schedule.--To carry out this subsection, not later than 
     180 days after the date of enactment of this Act, the 
     Secretary shall solicit proposals from research consortia, 
     which shall be submitted not later than 360 days after the 
     date of enactment of this Act. The Secretary shall select the 
     first group of research consortia to receive awards under 
     this subsection not later than 18 months after such date of 
     enactment.
       (c) Audit.--The Secretary shall retain an independent, 
     commercial auditor to determine the extent to which funds 
     provided under awards made under this section have been 
     expended in a manner consistent with the purposes and 
     requirements of this part. The auditor shall transmit a 
     report annually to the Secretary, who shall transmit the 
     report to Congress, along with a plan to remedy any 
     deficiencies cited in the report.
       (d) Focus Areas for Awards.--
       (1) Unconventional resources.--Awards from allocations 
     under section 949(d)(2) shall focus on areas including 
     advanced coalbed methane, deep drilling, natural gas 
     production from tight sands, natural gas production from gas 
     shales, stranded gas, innovative exploration and production 
     techniques, enhanced recovery techniques, and environmental 
     mitigation of unconventional natural gas and other petroleum 
     resources exploration and production.
       (2) Small producers.--Awards from allocations under section 
     949(d)(3) shall be made to consortia consisting of small 
     producers or organized primarily for the benefit of small 
     producers, and shall focus on areas including complex geology 
     involving rapid changes in the type and quality of the oil 
     and gas reservoirs across the reservoir; low reservoir 
     pressure; unconventional natural gas reservoirs in coalbeds, 
     deep reservoirs, tight sands, or shales; and unconventional 
     oil reservoirs in tar sands and oil shales.
       (e) Annual Plan.--
       (1) In general.--The program under this section shall be 
     carried out pursuant to an annual plan prepared by the 
     Secretary in accordance with paragraph (2).
       (2) Development.--
       (A) Written recommendations.--Before drafting an annual 
     plan under this subsection, the Secretary shall solicit 
     specific written recommendations from the research consortia 
     receiving awards under subsection (b) and the Unconventional 
     Resources Technology Advisory Committee for each element to 
     be addressed in the plan, including those described in 
     subparagraph (D).
       (B) Consultation.--The Secretary shall consult regularly 
     with the research consortia throughout the preparation of the 
     annual plan.
       (C) Publication.--The Secretary shall transmit to Congress 
     and publish in the Federal Register the annual plan, along 
     with any written comments received under subparagraph (A).
       (D) Contents.--The annual plan shall describe the ongoing 
     and prospective activities under this section and shall 
     include a list of any solicitations for awards that the 
     Secretary plans to issue to carry out research, development, 
     demonstration, or commercial application activities, 
     including the topics for such work, who would be eligible to 
     apply, selection criteria, and the duration of awards.
       (3) Estimates of increased royalty receipts.--The 
     Secretary, in consultation with the Secretary of the 
     Interior, shall provide an annual report to Congress with the 
     President's budget on the estimated cumulative increase in 
     Federal royalty receipts (if any) resulting from the 
     implementation of this part. The initial report under this 
     paragraph shall be submitted in the first President's budget 
     following the completion of the first annual plan required 
     under this subsection.
       (f) Activities by the United States Geological Survey.--The 
     Secretary of the Interior, through the United States 
     Geological Survey, shall, where appropriate, carry out 
     programs of long-term research to complement the programs 
     under this section.

     SEC. 944. ADDITIONAL REQUIREMENTS FOR AWARDS.

       (a) Demonstration Projects.--An application for an award 
     under this part for a demonstration project shall describe 
     with specificity the intended commercial use of the 
     technology to be demonstrated.
       (b) Flexibility in Locating Demonstration Projects.--
     Subject to the limitation in section 941(c), a demonstration 
     project under this part relating to an ultra-deepwater 
     technology or an ultra-deepwater architecture may be 
     conducted in deepwater depths.
       (c) Intellectual Property Agreements.--If an award under 
     this part is made to a consortium (other than the program 
     consortium), the consortium shall provide to the Secretary a 
     signed contract agreed to by all members of the consortium 
     describing the rights of each member to intellectual property 
     used or developed under the award.
       (d) Technology Transfer.--2.5 percent of the amount of each 
     award made under this part shall be designated for technology 
     transfer and outreach activities under this title.
       (e) Cost Sharing Reduction for Independent Producers.--In 
     applying the cost sharing requirements under section 972 to 
     an award under this part the Secretary may reduce or 
     eliminate the non-Federal requirement if the Secretary 
     determines that the reduction is necessary and appropriate 
     considering the technological risks involved in the project.

     SEC. 945. ADVISORY COMMITTEES.

       (a) Ultra-Deepwater Advisory Committee.--
       (1) Establishment.--Not later than 270 days after the date 
     of enactment of this Act, the Secretary shall establish an 
     advisory committee to be known as the Ultra-Deepwater 
     Advisory Committee.
       (2) Membership.--The advisory committee under this 
     subsection shall be composed of members appointed by the 
     Secretary including--
       (A) individuals with extensive research experience or 
     operational knowledge of offshore natural gas and other 
     petroleum exploration and production;
       (B) individuals broadly representative of the affected 
     interests in ultra-deepwater natural gas and other petroleum 
     production, including interests in environmental protection 
     and safe operations;
       (C) no individuals who are Federal employees; and
       (D) no individuals who are board members, officers, or 
     employees of the program consortium.
       (3) Duties.--The advisory committee under this subsection 
     shall--
       (A) advise the Secretary on the development and 
     implementation of programs under this part related to ultra-
     deepwater natural gas and other petroleum resources; and
       (B) carry out section 942(e)(2)(B).
       (4) Compensation.--A member of the advisory committee under 
     this subsection shall serve without compensation but shall 
     receive travel expenses in accordance with applicable 
     provisions under subchapter I of chapter 57 of title 5, 
     United States Code.
       (b) Unconventional Resources Technology Advisory 
     Committee.--
       (1) Establishment.--Not later than 270 days after the date 
     of enactment of this Act, the Secretary shall establish an 
     advisory committee to be known as the Unconventional 
     Resources Technology Advisory Committee.
       (2) Membership.--The advisory committee under this 
     subsection shall be composed of members appointed by the 
     Secretary including--
       (A) a majority of members who are employees or 
     representatives of independent producers of natural gas and 
     other petroleum, including small producers;
       (B) individuals with extensive research experience or 
     operational knowledge of unconventional natural gas and other 
     petroleum resource exploration and production;
       (C) individuals broadly representative of the affected 
     interests in unconventional natural gas and other petroleum 
     resource exploration and production, including interests in 
     environmental protection and safe operations; and
       (D) no individuals who are Federal employees.
       (3) Duties.--The advisory committee under this subsection 
     shall advise the Secretary on the development and 
     implementation of activities under this part related to 
     unconventional natural gas and other petroleum resources.
       (4) Compensation.--A member of the advisory committee under 
     this subsection shall serve without compensation but shall 
     receive travel expenses in accordance with applicable 
     provisions under subchapter I of chapter 57 of title 5, 
     United States Code.
       (c) Prohibition.--No advisory committee established under 
     this section shall make recommendations on funding awards to 
     particular consortia or other entities, or for specific 
     projects.

     SEC. 946. LIMITS ON PARTICIPATION.

       An entity shall be eligible to receive an award under this 
     part only if the Secretary finds--
       (1) that the entity's participation in the program under 
     this part would be in the economic interest of the United 
     States; and
       (2) that either--
       (A) the entity is a United States-owned entity organized 
     under the laws of the United States; or
       (B) the entity is organized under the laws of the United 
     States and has a parent entity organized under the laws of a 
     country that affords--
       (i) to United States-owned entities opportunities, 
     comparable to those afforded to any other entity, to 
     participate in any cooperative research venture similar to 
     those authorized under this part;
       (ii) to United States-owned entities local investment 
     opportunities comparable to those afforded to any other 
     entity; and
       (iii) adequate and effective protection for the 
     intellectual property rights of United States-owned entities.

     SEC. 947. SUNSET.

       The authority provided by this part shall terminate on 
     September 30, 2011.

     SEC. 948. DEFINITIONS.

       In this part:
       (1) Deepwater.--The term ``deepwater'' means a water depth 
     that is greater than 200 but less than 1,500 meters.
       (2) Independent producer of oil or gas.--
       (A) In general.--The term ``independent producer of oil or 
     gas'' means any person that produces oil or gas other than a 
     person to whom subsection (c) of section 613A of the Internal 
     Revenue Code of 1986 does not apply by reason of paragraph 
     (2) (relating to certain retailers) or paragraph (4) 
     (relating to certain refiners) of section 613A(d) of such 
     Code.
       (B) Rules for applying paragraphs (2) and (4) of section 
     613a(d).--For purposes of subparagraph (A), paragraphs (2) 
     and (4) of section 613A(d) of the Internal Revenue Code of 
     1986 shall be applied by substituting ``calendar year'' for 
     ``taxable year'' each place it appears in such paragraphs.
       (3) Program consortium.--The term ``program consortium'' 
     means the consortium selected under section 942(d).
       (4) Remote or inconsequential.--The term ``remote or 
     inconsequential'' has the meaning given that term in 
     regulations issued by the Office of Government Ethics under 
     section 208(b)(2) of title 18, United States Code.
       (5) Small producer.--The term ``small producer'' means an 
     entity organized under the laws of the United States with 
     production levels of less than 1,000 barrels per day of oil 
     equivalent.

[[Page H11267]]

       (6) Ultra-deepwater.--The term ``ultra-deepwater'' means a 
     water depth that is equal to or greater than 1,500 meters.
       (7) Ultra-deepwater architecture.--The term ``ultra-
     deepwater architecture'' means the integration of 
     technologies for the exploration for, or production of, 
     natural gas or other petroleum resources located at ultra-
     deepwater depths.
       (8) Ultra-deepwater technology.--The term ``ultra-deepwater 
     technology'' means a discrete technology that is specially 
     suited to address 1 or more challenges associated with the 
     exploration for, or production of, natural gas or other 
     petroleum resources located at ultra-deepwater depths.
       (9) Unconventional natural gas and other petroleum 
     resource.--The term ``unconventional natural gas and other 
     petroleum resource'' means natural gas and other petroleum 
     resource located onshore in an economically inaccessible 
     geological formation, including resources of small producers.

     SEC. 949. FUNDING.

       (a) In General.--
       (1) Oil and gas lease income.--For each of fiscal years 
     2004 through 2013, from any Federal royalties, rents, and 
     bonuses derived from Federal onshore and offshore oil and gas 
     leases issued under the Outer Continental Shelf Lands Act and 
     the Mineral Leasing Act which are deposited in the Treasury, 
     and after distribution of any such funds as described in 
     subsection (c), $150,000,000 shall be deposited into the 
     Ultra-Deepwater and Unconventional Natural Gas and Other 
     Petroleum Research Fund (in this section referred to as the 
     Fund). For purposes of this section, the term ``royalties'' 
     excludes proceeds from the sale of royalty production taken 
     in kind and royalty production that is transferred under 
     section 27(a)(3) of the Outer Continental Shelf Lands Act (43 
     U.S.C. 1353(a)(3)).
       (2) Authorization of appropriations.--In addition to 
     amounts described in paragraph (1), there are authorized to 
     be appropriated to the Secretary, to be deposited in the 
     Fund, $50,000,000 for each of the fiscal years 2004 through 
     2013, to remain available until expended.
       (b) Obligational Authority.--Monies in the Fund shall be 
     available to the Secretary for obligation under this part 
     without fiscal year limitation, to remain available until 
     expended.
       (c) Prior Distributions.--The distributions described in 
     subsection (a) are those required by law--
       (A) to States and to the Reclamation Fund under the Mineral 
     Leasing Act (30 U.S.C. 191(a)); and
       (B) to other funds receiving monies from Federal oil and 
     gas leasing programs, including--
       (i) any recipients pursuant to section 8(g) of the Outer 
     Continental Shelf Lands Act (43 U.S.C. 1337(g));
       (ii) the Land and Water Conservation Fund, pursuant to 
     section 2(c) of the Land and Water Conservation Fund Act of 
     1965 (16 U.S.C. 4601-5(c));
       (iii) the Historic Preservation Fund, pursuant to section 
     108 of the National Historic Preservation Act (16 U.S.C. 
     470h); and
       (iv) the Secure Energy Reinvestment Fund.
       (d) Allocation.--Amounts obligated from the Fund under this 
     section in each fiscal year shall be allocated as follows:
       (1) 50 percent shall be for activities under section 942.
       (2) 35 percent shall be for activities under section 
     943(d)(1).
       (3) 10 percent shall be for activities under section 
     943(d)(2).
       (4) 5 percent shall be for research under section 941(d).
       (e) Fund.--There is hereby established in the Treasury of 
     the United States a separate fund to be known as the ``Ultra-
     Deepwater and Unconventional Natural Gas and Other Petroleum 
     Research Fund''.
                          Subtitle F--Science

     SEC. 951. 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 958(c)(2)(C), and including basic 
     energy sciences, advanced scientific 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, $4,618,000,000.
       (4) For fiscal year 2007, $5,310,000,000.
       (5) For fiscal year 2008, $5,800,000,000.
       (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 sections 952 and 953--
       (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 956--
       (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 957--
       (A) for fiscal year 2004, $270,000,000;
       (B) for fiscal year 2005, $292,000,000;
       (C) for fiscal year 2006, $322,000,000;
       (D) for fiscal year 2007, $355,000,000; and
       (E) for fiscal year 2008, $390,000,000.
       (5) For activities under section 957(c), from the amounts 
     authorized under paragraph (4) of this subsection--
       (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 959--
       (A) for fiscal year 2004, $100,000,000; and
       (B) for fiscal years 2005 through 2008, such sums as may be 
     necessary.
       (7) For activities in the Energy-Water Supply Program under 
     section 961, $30,000,000 for each of fiscal years 2004 
     through 2008.
       (c) ITER Construction.--In addition to the funds authorized 
     under subsection (b)(1), such sums as may be necessary for 
     costs associated with ITER construction, consistent with 
     limitations under section 952.

     SEC. 952. UNITED STATES PARTICIPATION IN ITER.

       (a) In General.--The United States may participate in ITER 
     in accordance with the provisions of this section.
       (b) Agreement.--
       (1) In general.--The Secretary is authorized to negotiate 
     an agreement for United States participation in ITER.
       (2) Contents.--Any agreement for United States 
     participation in ITER shall, at a minimum--
       (A) clearly define the United States financial contribution 
     to construction and operating costs;
       (B) ensure that the share of ITER's high-technology 
     components manufactured in the United States is at least 
     proportionate to the United States financial contribution to 
     ITER;
       (C) ensure that the United States will not be financially 
     responsible for cost overruns in components manufactured in 
     other ITER participating countries;
       (D) guarantee the United States full access to all data 
     generated by ITER;
       (E) enable United States researchers to propose and carry 
     out an equitable share of the experiments at ITER;
       (F) provide the United States with a role in all collective 
     decisionmaking related to ITER; and
       (G) describe the process for discontinuing or 
     decommissioning ITER and any United States role in those 
     processes.
       (c) Plan.--The Secretary, in consultation with the Fusion 
     Energy Sciences Advisory Committee, shall develop a plan for 
     the participation of United States scientists in ITER that 
     shall include the United States research agenda for ITER, 
     methods to evaluate whether ITER is promoting progress toward 
     making fusion a reliable and affordable source of power, and 
     a description of how work at ITER will relate to other 
     elements of the United States fusion program. The Secretary 
     shall request a review of the plan by the National Academy of 
     Sciences.
       (d) Limitation.--No funds shall be expended for the 
     construction of ITER until the Secretary has transmitted to 
     Congress--
       (1) the agreement negotiated pursuant to subsection (b) and 
     120 days have elapsed since that transmission;
       (2) a report describing the management structure of ITER 
     and providing a fixed dollar estimate of the cost of United 
     States participation in the construction of ITER, and 120 
     days have elapsed since that transmission;
       (3) a report describing how United States participation in 
     ITER will be funded without reducing funding for other 
     programs in the Office of Science, including other fusion 
     programs, and 60 days have elapsed since that transmission; 
     and
       (4) the plan required by subsection (c) (but not the 
     National Academy of Sciences review of that plan), and 60 
     days have elapsed since that transmission.
       (e) Alternative to ITER.--If at any time during the 
     negotiations on ITER, the Secretary determines that 
     construction and operation of ITER is unlikely or infeasible, 
     the Secretary shall send to Congress, as part of the budget 
     request for the following year, a plan for implementing the 
     domestic burning plasma experiment known as FIRE, including 
     costs and schedules for such a plan. The Secretary shall 
     refine such plan in full consultation with the Fusion Energy 
     Sciences Advisory Committee and shall also transmit such plan 
     to the National Academy of Sciences for review.
       (f) Definitions.--In this section and sections 951(b)(1) 
     and (c):
       (1) Construction.--The term ``construction'' means the 
     physical construction of the ITER facility, and the physical 
     construction, purchase, or manufacture of equipment or 
     components that are specifically designed for the ITER 
     facility, but does not mean the design of the facility, 
     equipment, or components.
       (2) FIRE.--The term ``FIRE'' means the Fusion Ignition 
     Research Experiment, the fusion research experiment for which 
     design work has been supported by the Department as a 
     possible alternative burning plasma experiment in the event 
     that ITER fails to move forward.
       (3) ITER.--The term ``ITER'' means the international 
     burning plasma fusion research project in which the President 
     announced United States participation on January 30, 2003.

[[Page H11268]]

     SEC. 953. PLAN FOR FUSION ENERGY SCIENCES PROGRAM.

       (a) Declaration of Policy.--It shall be the policy of the 
     United States to conduct research, development, 
     demonstration, and commercial application to provide for the 
     scientific, engineering, and commercial infrastructure 
     necessary to ensure that the United States is competitive 
     with other nations in providing fusion energy for its own 
     needs and the needs of other nations, including by 
     demonstrating electric power or hydrogen production for the 
     United States energy grid utilizing fusion energy at the 
     earliest date possible.
       (b) Planning.--
       (1) In general.--Not later than 180 days after 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 policy described in subsection (a). 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;
       (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) Costs and schedules.--Such plan shall also address the 
     status of and, to the degree possible, costs and schedules 
     for--
       (A) in coordination with the program under section 960, 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. 954. SPALLATION NEUTRON SOURCE.

       (a) Definition.--For the purposes of this section, the term 
     ``Spallation Neutron Source'' means Department Project 99-E-
     334, 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) Limitations.--The total amount obligated by the 
     Department, including prior year appropriations, for the 
     Spallation Neutron Source shall 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. 955. 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) In general.--The Secretary shall prepare and transmit, 
     along with the President's budget request to Congress for 
     fiscal year 2006, a report containing the strategy developed 
     under subsection (a).
       (2) Contents.--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 10-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. 956. CATALYSIS RESEARCH AND DEVELOPMENT 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 subnanometer 
     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 the 
     program under this section, 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 3 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. 957. NANOSCALE SCIENCE AND ENGINEERING RESEARCH, 
                   DEVELOPMENT, DEMONSTRATION, AND COMMERCIAL 
                   APPLICATION.

       (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 that 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;
       (4) coordinate research and development activities with 
     other Department programs, industry, and other Federal 
     agencies;
       (5) ensure that societal and ethical concerns will be 
     addressed as the technology is developed by--
       (A) establishing a research program to identify societal 
     and ethical concerns related to nanotechnology, and ensuring 
     that the results of such research are widely disseminated; 
     and
       (B) integrating, insofar as possible, research on societal 
     and ethical concerns with nanotechnology research and 
     development; and
       (6) ensure that the potential of nanotechnology to produce 
     or facilitate the production of clean, inexpensive energy is 
     realized by supporting nanotechnology energy applications 
     research and development.
       (c) Nanoscience and Nanoengineering Research Centers and 
     Major Instrumentation.--
       (1) In general.--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) Activities.--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.--Facilities under paragraph (1) may include 
     electron microcharacterization facilities, microlithography 
     facilities, scanning probe facilities, and related 
     instrumentation.
       (4) Collaborations.--The Secretary shall encourage 
     collaborations among Department programs, institutions of 
     higher education, laboratories, and industry at facilities 
     under this subsection.

     SEC. 958. 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 Department 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) develop and 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--

[[Page H11269]]

       (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--
       (1) the Advanced Simulation and Computing Program, formerly 
     known as 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.
       (e) Report.--
       (1) In general.--Before undertaking any new initiative to 
     develop any new advanced architecture for high-speed 
     computing, the Secretary, through the Director of the Office 
     of Science, shall transmit a report to Congress describing--
       (A) the expected duration and cost of the initiative;
       (B) the technical milestones the initiative is designed to 
     achieve;
       (C) how institutions of higher education and private firms 
     will participate in the initiative; and
       (D) why the goals of the initiative could not be achieved 
     through existing programs.
       (2) Limitation.--No funds may be expended on any initiative 
     described in paragraph (1) until 30 days after the report 
     required by that paragraph is transmitted to Congress.

     SEC. 959. GENOMES TO LIFE PROGRAM.

       (a) Program.--
       (1) Establishment.--The Secretary shall establish a 
     research, development, and demonstration program in genetics, 
     protein science, and computational biology to support the 
     energy, national security, and environmental mission of the 
     Department.
       (2) Grants.--The program shall support individual 
     investigators and multidisciplinary teams of investigators 
     through competitive, merit-reviewed grants.
       (3) Consultation.--In carrying out the program, the 
     Secretary shall consult with other Federal agencies that 
     conduct genetic and protein research.
       (b) Goals.--The program shall have the goal of developing 
     technologies and methods based on the biological functions of 
     genomes, microbes, and plants that--
       (1) can facilitate the production of fuels, including 
     hydrogen;
       (2) convert carbon dioxide to organic carbon;
       (3) improve national security and combat terrorism;
       (4) detoxify soils and water at Department facilities 
     contaminated with heavy metals and radiological materials; 
     and
       (5) address other Department missions as identified by the 
     Secretary.
       (c) Plan.--
       (1) Development of plan.--Not later than 1 year after the 
     date of enactment of this Act, the Secretary shall prepare 
     and transmit to Congress a research plan describing how the 
     program authorized pursuant to this section will be 
     undertaken to accomplish the program goals established in 
     subsection (b).
       (2) Review of plan.--The Secretary shall contract with the 
     National Academy of Sciences to review the research plan 
     developed under this subsection. The Secretary shall transmit 
     the review to Congress not later than 18 months after 
     transmittal of the research plan under paragraph (1), along 
     with the Secretary's response to the recommendations 
     contained in the review.
       (d) Genomes to Life User Facilities and Ancillary 
     Equipment.--
       (1) In general.--Within the funds authorized to be 
     appropriated pursuant to this Act, the amounts specified 
     under section 951(b)(6) 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) Facilities.--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.
       (3) Collaborations.--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.
       (e) Prohibition on Biomedical and Human Cell and Human 
     Subject Research.--
       (1) No biomedical research.--In carrying out the program 
     under this section, the Secretary shall not conduct 
     biomedical research.
       (2) Limitations.--Nothing in this section shall authorize 
     the Secretary to conduct any research or demonstrations--
       (A) on human cells or human subjects; or
       (B) designed to have direct application with respect to 
     human cells or human subjects.

     SEC. 960. 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. 961. ENERGY-WATER SUPPLY PROGRAM.

       (a) Establishment.--There is established within the 
     Department the Energy-Water Supply Program, to study energy-
     related and certain other issues associated with the supply 
     of drinking water and operation of community water systems 
     and to study water supply issues related to energy.
       (b) Definitions.--For the purposes of this section:
       (1) Administrator.--The term ``Administrator'' means the 
     Administrator of the Environmental Protection Agency.
       (2) Agency.--The term ``Agency'' means the Environmental 
     Protection Agency.
       (3) Foundation.--The term ``Foundation'' means the American 
     Water Works Association Research Foundation.
       (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) Program.--The term ``Program'' means the Energy-Water 
     Supply Program established by this section.
       (c) Program Areas.--The Program shall develop methods, 
     means, procedures, equipment, and improved technologies 
     relating to--
       (1) the arsenic removal program under subsection (d);
       (2) the desalination program under subsection (e); and
       (3) the water and energy sustainability program under 
     subsection (f).
       (d) Arsenic Removal Program.--
       (1) In general.--As soon as practicable after the date of 
     enactment of this Act, the Secretary, in coordination with 
     the Administrator and in partnership with the Foundation, 
     shall utilize the facilities, institutions, and relationships 
     established in the Consolidated Appropriations Resolution, 
     2003 as described in Senate Report 107-220 to carry out a 
     research program to provide innovative methods and means for 
     removal of arsenic.
       (2) Required evaluations.--The program shall, to the 
     maximum extent practicable, evaluate the means of--
       (A) reducing energy costs incurred in using arsenic removal 
     technologies;
       (B) minimizing materials, operating, and maintenance costs; 
     and
       (C) minimizing any quantities of waste (especially 
     hazardous waste) that result from use of arsenic removal 
     technologies.
       (3) Peer review.--Where applicable and reasonably 
     available, projects undertaken under this subsection shall be 
     peer-reviewed.
       (4) Community water systems.--In carrying out the program 
     under this subsection, the Secretary, in coordination with 
     the Administrator, shall--
       (A) select projects involving a geographically and 
     hydrologically diverse group of community water systems (as 
     defined in section 1003 of the Public Health Service Act (42 
     U.S.C. 300)) and water chemistries, that have experienced 
     technical or economic difficulties in providing drinking 
     water with levels of arsenic at 10 parts-per-billion or 
     lower, which projects shall be designed to develop innovative 
     methods and means to deliver drinking water that contains 
     less than 10 parts per billion of arsenic; and
       (B) provide not less than 40 percent of all funds spent 
     pursuant to this subsection to address the needs of, and in 
     collaboration with, rural communities or Indian tribes.
       (5) Cost effectiveness.--The Foundation shall create 
     methods for determining cost effectiveness of arsenic removal 
     technologies used in the program.
       (6) Education, training, and technology.--The Foundation 
     shall include education, training, and technology transfer as 
     part of the program.
       (7) Coordination.--The Secretary shall consult with the 
     Administrator to ensure that all activities conducted under 
     the program are coordinated with the Agency and do not 
     duplicate other programs in the Agency and other Federal 
     agencies, State programs, and academia.
       (8) Reports.--Not later than 1 year after the date of 
     commencement of the program under this subsection, and once 
     every year thereafter, the Secretary shall submit to the 
     Committee on Energy and Commerce of the House of 
     Representatives and the Committee on Environment and Public 
     Works and the Committee on Energy and Natural Resources of 
     the Senate a report on the results of the program under this 
     subsection.
       (e) Desalination Program.--
       (1) In general.--The Secretary, in cooperation with the 
     Commissioner of Reclamation of

[[Page H11270]]

     the Department of the Interior, shall carry out a program to 
     conduct research and develop methods and means for 
     desalination in accordance with the desalination technology 
     progress plan developed under 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) Requirements.--The desalination program shall--
       (A) use the resources of the Department and the Department 
     of the Interior that were involved in the development of the 
     2003 National Desalination and Water Purification Technology 
     Roadmap for next-generation desalination technology;
       (B) focus on technologies that are appropriate for use in 
     desalinating brackish groundwater, drinking water, wastewater 
     and other saline water supplies, or disposal of residual 
     brine or salt; and
       (C) consider the use of renewable energy sources.
       (3) Construction projects.--Funds made available to carry 
     out this subsection may be used for construction projects, 
     including completion of the National Desalination Research 
     Center for brackish groundwater and ongoing operational costs 
     of this facility.
       (4) Steering committee.--The Secretary and the Commissioner 
     of Reclamation of the Department of the Interior shall 
     jointly establish a steering committee for activities 
     conducted under this subsection. The steering committee shall 
     be jointly chaired by 1 representative from the program and 1 
     representative from the Bureau of Reclamation.
       (f) Water and Energy Sustainability Program.--
       (1) In general.--The Secretary shall develop a program to 
     identify methods, means, procedures, equipment, and improved 
     technologies necessary to ensure that sufficient quantities 
     of water are available to meet energy needs and sufficient 
     energy is available to meet water needs.
       (2) Assessments.--In order to acquire information and avoid 
     duplication, the Secretary shall work in collaboration with 
     the Secretary of the Interior, the Army Corps of Engineers, 
     the Administrator, the Secretary of Commerce, the Secretary 
     of Defense, relevant State agencies, nongovernmental 
     organizations, and academia, to assess--
       (A) future water resources needed to support energy 
     development and production within the United States including 
     water used for hydropower, and production of, or electricity 
     generation by, hydrogen, biomass, fossil fuels, and nuclear 
     fuel;
       (B) future energy resources needed to support water 
     purification and wastewater treatment, including desalination 
     and water conveyance;
       (C) use of impaired and nontraditional water supplies for 
     energy production other than oil and gas extraction;
       (D) technology and programs for improving water use 
     efficiency; and
       (E) technologies to reduce water use in energy development 
     and production.
       (3) Roadmap; tools.--The Secretary shall--
       (A) develop a program plan and technology development 
     roadmap for the Water and Energy Sustainability Program to 
     identify scientific and technical requirements and activities 
     that are required to support planning for energy 
     sustainability under current and potential future conditions 
     of water availability, use of impaired water for energy 
     production and other uses, and reduction of water use in 
     energy development and production;
       (B) develop tools for national and local energy and water 
     sustainability planning, including numerical models, decision 
     analysis tools, economic analysis tools, databases, and 
     planning methodologies and strategies;
       (C) implement at least 3 planning projects involving energy 
     development or production that use the tools described in 
     subparagraph (B) and assess the viability of those tools at 
     the scale of river basins with at least 1 demonstration 
     involving an international border; and
       (D) transfer those tools to other Federal agencies, State 
     agencies, nonprofit organizations, industry, and academia.
       (4) Report.--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--
       (A) includes the results of the assessment under paragraph 
     (2) and the program plan and technology development roadmap; 
     and
       (B) identifies policy, legal, and institutional issues 
     related to water and energy sustainability.

     SEC. 962. NITROGEN FIXATION.

       The Secretary, acting through the Office of Science, shall 
     support a program of research, development, demonstration, 
     and commercial application on biological nitrogen fixation, 
     including plant genomics research relevant to the development 
     of commercial crop varieties with enhanced nitrogen fixation 
     efficiency and ability.
                   Subtitle G--Energy and Environment

     SEC. 964. 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 that 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. 965. WESTERN HEMISPHERE ENERGY COOPERATION.

       (a) Program.--The Secretary shall carry out a program to 
     promote cooperation on energy issues with Western Hemisphere 
     countries.
       (b) Activities.--Under the program, the Secretary shall 
     fund activities to work with Western Hemisphere countries 
     to--
       (1) assist the countries in formulating and adopting 
     changes in economic policies and other policies to--
       (A) increase the production of energy supplies; and
       (B) improve energy efficiency; and
       (2) assist in the development and transfer of energy supply 
     and efficiency technologies that would have a beneficial 
     impact on world energy markets.
       (c) University Participation.--To the extent practicable, 
     the Secretary shall carry out the program under this section 
     with the participation of universities so as to take 
     advantage of the acceptance of universities by Western 
     Hemisphere countries as sources of unbiased technical and 
     policy expertise when assisting the Secretary in--
       (1) evaluating new technologies;
       (2) resolving technical issues;
       (3) working with those countries in the development of new 
     policies; and
       (4) training policymakers, particularly in the case of 
     universities that involve the participation of minority 
     students, such as Hispanic-serving institutions and 
     Historically Black Colleges and Universities.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section--
       (1) $8,000,000 for fiscal year 2004;
       (2) $10,000,000 for fiscal year 2005;
       (3) $13,000,000 for fiscal year 2006;
       (4) $16,000,000 for fiscal year 2007; and
       (5) $19,000,000 for fiscal year 2008.

     SEC. 966. WASTE REDUCTION AND USE OF ALTERNATIVES.

       (a) Grant Authority.--The Secretary may make a single grant 
     to a qualified institution to examine and develop the 
     feasibility of burning post-consumer carpet in cement kilns 
     as an alternative energy source. The purposes of the grant 
     shall include determining--
       (1) how post-consumer carpet can be burned without 
     disrupting kiln operations;
       (2) the extent to which overall kiln emissions may be 
     reduced;
       (3) the emissions of air pollutants and other relevant 
     environmental impacts; and
       (4) how this process provides benefits to both cement kiln 
     operations and carpet suppliers.
       (b) Qualified Institution.--For the purposes of subsection 
     (a), a qualified institution is a research-intensive 
     institution of higher education with demonstrated expertise 
     in the fields of fiber recycling and logistical modeling of 
     carpet waste collection and preparation.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary for carrying out this 
     section $500,000.

     SEC. 967. REPORT ON FUEL CELL TEST CENTER.

       (a) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary shall transmit to 
     Congress a report on the results of a study of the 
     establishment of a test center for next-generation fuel cells 
     at an institution of higher education that has available a 
     continuous source of hydrogen and access to the electric 
     transmission grid. Such report shall include a conceptual 
     design for such test center and a projection of the costs of 
     establishing the test center.
       (b) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary for carrying out this 
     section $500,000.

     SEC. 968. ARCTIC ENGINEERING RESEARCH CENTER.

       (a) In General.--The Secretary of Energy (referred to in 
     this section as the ``Secretary'') in consultation with the 
     Secretary of Transportation and the United States Arctic 
     Research Commission shall provide annual grants to a 
     university located adjacent to the Arctic Energy Office of 
     the Department of Energy, to establish and operate a 
     university research center to be headquartered in Fairbanks 
     and to be known as the ``Arctic Engineering Research Center'' 
     (referred to in this section as the ``Center'').
       (b) Purpose.--The purpose of the Center shall be to conduct 
     research on, and develop improved methods of, construction 
     and use of materials to improve the overall performance of 
     roads, bridges, residential, commercial, and industrial 
     structures, and other infrastructure in the Arctic region, 
     with an emphasis on developing--
       (1) new construction techniques for roads, bridges, rail, 
     and related transportation infrastructure and residential, 
     commercial, and industrial infrastructure that are capable of 
     withstanding the Arctic environment and using limited energy 
     resources as efficiently as possible;
       (2) technologies and procedures for increasing road, 
     bridge, rail, and related transportation infrastructure and 
     residential, commercial, and

[[Page H11271]]

     industrial infrastructure safety, reliability, and integrity 
     in the Arctic region;
       (3) new materials and improving the performance and energy 
     efficiency of existing materials for the construction of 
     roads, bridges, rail, and related transportation 
     infrastructure and residential, commercial, and industrial 
     infrastructure in the Arctic region; and
       (4) recommendations for new local, regional, and State 
     permitting and building codes to ensure transportation and 
     building safety and efficient energy use when constructing, 
     using, and occupying such infrastructure in the Arctic 
     region.
       (c) Objectives.--The Center shall carry out--
       (1) basic and applied research in the subjects described in 
     subsection (b), the products of which shall be judged by 
     peers or other experts in the field to advance the body of 
     knowledge in road, bridge, rail, and infrastructure 
     engineering in the Arctic region; and
       (2) an ongoing program of technology transfer that makes 
     research results available to potential users in a form that 
     can be implemented.
       (d) Amount of Grant.--For each of fiscal years 2004 through 
     2009, the Secretary shall provide a grant in the amount of 
     $3,000,000 to the institution specified in subsection (a) to 
     carry out this section.
       (e) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section $3,000,000 for 
     each of fiscal years 2004 through 2009.

     SEC. 969. BARROW GEOPHYSICAL RESEARCH FACILITY.

       (a) Establishment.--The Secretary of Commerce, in 
     consultation with the Secretaries of Energy and the Interior, 
     the Director of the National Science Foundation, and the 
     Administrator of the Environmental Protection Agency, shall 
     establish a joint research facility in Barrow, Alaska, to be 
     known as the ``Barrow Geophysical Research Facility'', to 
     support scientific research activities in the Arctic.
       (b) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretaries of Commerce, Energy, 
     and the Interior, the Director of the National Science 
     Foundation, and the Administrator of the Environmental 
     Protection Agency for the planning, design, construction, and 
     support of the Barrow Geophysical Research Facility 
     $61,000,000.

     SEC. 970. WESTERN MICHIGAN DEMONSTRATION PROJECT.

       The Administrator of the Environmental Protection Agency, 
     in consultation with the State of Michigan and affected local 
     officials, shall conduct a demonstration project to address 
     the effect of transported ozone and ozone precursors in 
     Southwestern Michigan. The demonstration program shall 
     address projected nonattainment areas in Southwestern 
     Michigan that include counties with design values for ozone 
     of less than .095 based on years 2000 to 2002 or the most 
     current 3-year period of air quality data. The Administrator 
     shall assess any difficulties such areas may experience in 
     meeting the 8 hour national ambient air quality standard for 
     ozone due to the effect of transported ozone or ozone 
     precursors into the areas. The Administrator shall work with 
     State and local officials to determine the extent of ozone 
     and ozone precursor transport, to assess alternatives to 
     achieve compliance with the 8 hour standard apart from local 
     controls, and to determine the timeframe in which such 
     compliance could take place. The Administrator shall complete 
     this demonstration project no later than 2 years after the 
     date of enactment of this section and shall not impose any 
     requirement or sanction that might otherwise apply during the 
     pendency of the demonstration project.
                         Subtitle H--Management

     SEC. 971. AVAILABILITY OF FUNDS.

       Funds authorized to be appropriated to the Department under 
     this title shall remain available until expended.

     SEC. 972. 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. The Secretary may reduce or eliminate the 
     non-Federal requirement under this subsection if the 
     Secretary determines that the research and development is of 
     a basic or fundamental nature or involves technical analyses 
     or educational activities.
       (b) Demonstration and Commercial Application.--Except as 
     otherwise provided in this title, the Secretary shall require 
     at least 50 percent of the costs directly and specifically 
     related to any demonstration or commercial application 
     project under this title 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.
       (d) Size of Non-Federal Share.--The Secretary may consider 
     the size of the non-Federal share in selecting projects.

     SEC. 973. 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. 974. EXTERNAL TECHNICAL REVIEW OF DEPARTMENTAL PROGRAMS.

       (a) National Energy Research and Development Advisory 
     Boards.--
       (1) In general.--The Secretary shall establish 1 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) Existing advisory boards.--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) Office of Science Advisory Committees.--
       (1) Utilization of existing committees.--The Secretary 
     shall continue to use the scientific program advisory 
     committees chartered under the Federal Advisory Committee Act 
     (5 U.S.C. App.) by the Office of Science to oversee research 
     and development programs under that Office.
       (2) Science advisory committee.--
       (A) Establishment.--There shall be in the Office of Science 
     a Science Advisory Committee that includes the chairs of each 
     of the advisory committees described in paragraph (1).
       (B) Responsibilities.--The Science Advisory Committee 
     shall--
       (i) serve as the science advisor to the Director of the 
     Office of Science;
       (ii) advise the Director with respect to the well-being and 
     management of the National Laboratories and single-purpose 
     research facilities;
       (iii) advise the Director with respect to education and 
     workforce training activities required for effective short-
     term and long-term basic and applied research activities of 
     the Office of Science; and
       (iv) advise the Director with respect to the well being of 
     the university research programs supported by the Office of 
     Science.
       (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 semiannually 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 901(b), 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 901(b), 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 Congress 
     reports containing the results of all such reviews and 
     assessments.

     SEC. 975. 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--
       (1) coordinate the activities of the Technology Transfer 
     Working Group;
       (2) oversee the expenditure of funds allocated to the 
     Technology Transfer Working Group; and
       (3) 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 (15 U.S.C. 3701 et seq.).

     SEC. 976. FEDERAL LABORATORY EDUCATIONAL PARTNERS.

       (a) Distribution of Royalties Received by Federal 
     Agencies.--Section 14(a)(1)(B)(v) of the Stevenson-Wydler 
     Technology Innovation Act of 1980 (15 U.S.C. 
     3710c(a)(1)(B)(v)), is amended to read as follows:
       ``(v) for scientific research and development and for 
     educational assistance and other purposes consistent with the 
     missions and objectives of the agency and the laboratory.''.
       (b) Cooperative Research and Development Agreements.--
     Section 12(b)(5)(C) of the Stevenson-Wydler Technology 
     Innovation Act of 1980 (15 U.S.C. 3710a(b)(5)(C)) is amended 
     to read as follows:
       ``(C) for scientific research and development and for 
     educational assistance consistent with the missions and 
     objectives of the agency and the laboratory.''.

[[Page H11272]]

     SEC. 977. INTERAGENCY COOPERATION.

       The Secretary shall enter into discussions with the 
     Administrator of the National Aeronautics and Space 
     Administration with the goal of reaching an interagency 
     working agreement between the 2 agencies that would make the 
     National Aeronautics and Space Administration's expertise in 
     energy, gained from its existing and planned programs, more 
     readily available to the relevant research, development, 
     demonstration, and commercial applications programs of the 
     Department. Technologies to be discussed should include the 
     National Aeronautics and Space Administration's modeling, 
     research, development, testing, and evaluation of new energy 
     technologies, including solar, wind, fuel cells, and hydrogen 
     storage and distribution.

     SEC. 978. 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 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 1 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 31.205-18(e) of the Federal 
     Acquisition Regulation 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 toward 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) In general.--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) Criteria.--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.
       (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) Technology cluster.--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) Technology-related business concern.--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. 979. 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 Congress a report 
     explaining how such amounts will be distributed among the 
     authorizations contained in this title.
       (b) Prohibition.--
       (1) In general.--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 Congress a report 
     described in subsection (c) and a period of 30 days has 
     elapsed after such committees receive the report.
       (2) Computation.--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. 980. 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. 2011 
     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. 981. 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.

     SEC. 982. DEPARTMENT OF ENERGY SCIENCE AND TECHNOLOGY 
                   SCHOLARSHIP PROGRAM.

       (a) Establishment of Program.--
       (1) In general.--The Secretary is authorized to establish a 
     Department of Energy Science and Technology Scholarship 
     Program to award scholarships to individuals that is designed 
     to recruit and prepare students for careers in the 
     Department.
       (2) Competitive process.--Individuals shall be selected to 
     receive scholarships under this section through a competitive 
     process primarily on the basis of academic merit, with 
     consideration given to financial need and the goal of 
     promoting the participation of individuals identified in 
     section 33 or 34 of the Science and Engineering Equal 
     Opportunities Act (42 U.S.C. 1885a or 1885b).
       (3) Service agreements.--To carry out the Program the 
     Secretary shall enter into contractual agreements with 
     individuals selected under paragraph (2) under which the 
     individuals agree to serve as full-time employees of the 
     Department, for the period described in subsection (f)(1), in 
     positions needed by the Department and for which the 
     individuals are qualified, in exchange for receiving a 
     scholarship.
       (b) Scholarship Eligibility.--In order to be eligible to 
     participate in the Program, an individual must--
       (1) be enrolled or accepted for enrollment as a full-time 
     student at an institution of higher education in an academic 
     program or field of study

[[Page H11273]]

     described in the list made available under subsection (d);
       (2) be a United States citizen; and
       (3) at the time of the initial scholarship award, not be a 
     Federal employee as defined in section 2105 of title 5 of the 
     United States Code.
       (c) Application Required.--An individual seeking a 
     scholarship under this section shall submit an application to 
     the Secretary at such time, in such manner, and containing 
     such information, agreements, or assurances as the Secretary 
     may require.
       (d) Eligible Academic Programs.--The Secretary shall make 
     publicly available a list of academic programs and fields of 
     study for which scholarships under the Program may be 
     utilized, and shall update the list as necessary.
       (e) Scholarship Requirement.--
       (1) In general.--The Secretary may provide a scholarship 
     under the Program for an academic year if the individual 
     applying for the scholarship has submitted to the Secretary, 
     as part of the application required under subsection (c), a 
     proposed academic program leading to a degree in a program or 
     field of study on the list made available under subsection 
     (d).
       (2) Duration of eligibility.--An individual may not receive 
     a scholarship under this section for more than 4 academic 
     years, unless the Secretary grants a waiver.
       (3) Scholarship amount.--The dollar amount of a scholarship 
     under this section for an academic year shall be determined 
     under regulations issued by the Secretary, but shall in no 
     case exceed the cost of attendance.
       (4) Authorized uses.--A scholarship provided under this 
     section may be expended for tuition, fees, and other 
     authorized expenses as established by the Secretary by 
     regulation.
       (5) Contracts regarding direct payments to institutions.--
     The Secretary may enter into a contractual agreement with an 
     institution of higher education under which the amounts 
     provided for a scholarship under this section for tuition, 
     fees, and other authorized expenses are paid directly to the 
     institution with respect to which the scholarship is 
     provided.
       (f) Period of Obligated Service.--
       (1) Duration of service.--The period of service for which 
     an individual shall be obligated to serve as an employee of 
     the Department is, except as provided in subsection (h)(2), 
     24 months for each academic year for which a scholarship 
     under this section is provided.
       (2) Schedule for service.--
       (A) In general.--Except as provided in subparagraph (B), 
     obligated service under paragraph (1) shall begin not later 
     than 60 days after the individual obtains the educational 
     degree for which the scholarship was provided.
       (B) Deferral.--The Secretary may defer the obligation of an 
     individual to provide a period of service under paragraph (1) 
     if the Secretary determines that such a deferral is 
     appropriate. The Secretary shall prescribe the terms and 
     conditions under which a service obligation may be deferred 
     through regulation.
       (g) Penalties for Breach of Scholarship Agreement.--
       (1) Failure to complete academic training.--Scholarship 
     recipients who fail to maintain a high level of academic 
     standing, as defined by the Secretary by regulation, who are 
     dismissed from their educational institutions for 
     disciplinary reasons, or who voluntarily terminate academic 
     training before graduation from the educational program for 
     which the scholarship was awarded, shall be in breach of 
     their contractual agreement and, in lieu of any service 
     obligation arising under such agreement, shall be liable to 
     the United States for repayment not later than 1 year after 
     the date of default of all scholarship funds paid to them and 
     to the institution of higher education on their behalf under 
     the agreement, except as provided in subsection (h)(2). The 
     repayment period may be extended by the Secretary when 
     determined to be necessary, as established by regulation.
       (2) Failure to begin or complete the service obligation or 
     meet the terms and conditions of deferment.--A scholarship 
     recipient who, for any reason, fails to begin or complete a 
     service obligation under this section after completion of 
     academic training, or fails to comply with the terms and 
     conditions of deferment established by the Secretary pursuant 
     to subsection (f)(2)(B), shall be in breach of the 
     contractual agreement. When a recipient breaches an agreement 
     for the reasons stated in the preceding sentence, the 
     recipient shall be liable to the United States for an amount 
     equal to--
       (A) the total amount of scholarships received by such 
     individual under this section; plus
       (B) the interest on the amounts of such awards which would 
     be payable if at the time the awards were received they were 
     loans bearing interest at the maximum legal prevailing rate, 
     as determined by the Treasurer of the United States,

     multiplied by 3.
       (h) Waiver or Suspension of Obligation.--
       (1) Death of individual.--Any obligation of an individual 
     incurred under the Program (or a contractual agreement 
     thereunder) for service or payment shall be canceled upon the 
     death of the individual.
       (2) Impossibility or extreme hardship.--The Secretary shall 
     by regulation provide for the partial or total waiver or 
     suspension of any obligation of service or payment incurred 
     by an individual under the Program (or a contractual 
     agreement thereunder) whenever compliance by the individual 
     is impossible or would involve extreme hardship to the 
     individual, or if enforcement of such obligation with respect 
     to the individual would be contrary to the best interests of 
     the Government.
       (i) Definitions.--In this section the following definitions 
     apply:
       (1) Cost of attendance.--The term ``cost of attendance'' 
     has the meaning given that term in section 472 of the Higher 
     Education Act of 1965 (20 U.S.C. 1087ll).
       (2) Program.--The term ``Program'' means the Department of 
     Energy Science and Technology Scholarship Program established 
     under this section.
       (j) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary for activities under this 
     section--
       (1) for fiscal year 2004, $800,000;
       (2) for fiscal year 2005, $1,600,000;
       (3) for fiscal year 2006, $2,000,000;
       (4) for fiscal year 2007, $2,000,000; and
       (5) for fiscal year 2008, $2,000,000.

     SEC. 983. REPORT ON EQUAL EMPLOYMENT OPPORTUNITY PRACTICES.

       Not later than 12 months after the date of enactment of 
     this Act, and biennially thereafter, the Secretary shall 
     transmit to Congress a report on the equal employment 
     opportunity practices at National Laboratories. Such report 
     shall include--
       (1) a thorough review of each laboratory contractor's equal 
     employment opportunity policies, including promotion to 
     management and professional positions and pay raises;
       (2) a statistical report on complaints and their 
     disposition in the laboratories;
       (3) a description of how equal employment opportunity 
     practices at the laboratories are treated in the contract and 
     in calculating award fees for each contractor;
       (4) a summary of disciplinary actions and their disposition 
     by either the Department or the relevant contractors for each 
     laboratory;
       (5) a summary of outreach efforts to attract women and 
     minorities to the laboratories;
       (6) a summary of efforts to retain women and minorities in 
     the laboratories; and
       (7) a summary of collaboration efforts with the Office of 
     Federal Contract Compliance Programs to improve equal 
     employment opportunity practices at the laboratories.

     SEC. 984. 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, including socially and 
     economically disadvantaged small business concerns, in 
     procurement, collaborative research, technology licensing, 
     and technology transfer activities 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 concerns' 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) Small business concern.--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) Socially and economically disadvantaged small business 
     concerns.--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 are authorized 
     to be appropriated to the Secretary for activities under this 
     section $5,000,000 for each of fiscal years 2004 through 
     2008.

     SEC. 985. REPORT ON MOBILITY OF SCIENTIFIC AND TECHNICAL 
                   PERSONNEL.

       Not later than 2 years after the date of enactment of this 
     Act, the Secretary shall transmit a report to 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 interlaboratory exchange of scientific and 
     technical personnel.

     SEC. 986. 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 commercial 
     application of energy technology; and

[[Page H11274]]

       (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) transmit a report to Congress on recommendations 
     developed as a result of the study.

     SEC. 987. 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, small businesses, facility 
     planners and managers, State and local governments, and other 
     entities.

     SEC. 988. 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 
     Congress a report notifying Congress of the waiver and 
     setting forth the reasons for the waiver at least 60 days 
     prior to the date of the award of such a contract.

     SEC. 989. EDUCATIONAL PROGRAMS IN SCIENCE AND MATHEMATICS.

       (a) Activities.--Section 3165(a) of the Department of 
     Energy Science Education Enhancement Act (42 U.S.C. 7381b(a)) 
     is amended by adding at the end the following:
       ``(14) Support competitive events for students, under 
     supervision of teachers, designed to encourage student 
     interest and knowledge in science and mathematics.''.
       (b) Authorization of Appropriations.--Section 3169 of the 
     Department of Energy Science Education Enhancement Act (42 
     U.S.C. 7381e), as so redesignated by section 1102(b), is 
     amended by inserting before the period ``; and $40,000,000 
     for each of fiscal years 2004 through 2008''.
                TITLE X--DEPARTMENT OF ENERGY MANAGEMENT

     SEC. 1001. ADDITIONAL ASSISTANT SECRETARY POSITION.

       (a) Additional Assistant Secretary Position to Enable 
     Improved Management of Nuclear Energy Issues.--
       (1) In general.--Section 203(a) of the Department of Energy 
     Organization Act (42 U.S.C. 7133(a)) is amended by striking 
     ``six Assistant Secretaries'' and inserting ``7 Assistant 
     Secretaries''.
       (2) Sense of congress.--It is the sense of Congress that 
     the leadership for departmental missions in nuclear energy 
     should be at the Assistant Secretary level.
       (b) Technical and Conforming Amendments.--
       (1) Title 5.--Section 5315 of title 5, United States Code, 
     is amended by striking ``Assistant Secretaries of Energy 
     (6)'' and inserting ``Assistant Secretaries of Energy (7)''.
       (2) Department of energy organization act.--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. 1002. 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) or section 152 of 
     the Atomic Energy Act of 1954 (42 U.S.C. 2182).
       ``(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 makes a written determination that the use of a 
     standard contract, grant, or cooperative agreement for the 
     project is not feasible or appropriate.
       ``(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 under paragraph (1) to the party submitting the 
     information; 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 subsection, the Secretary shall prescribe guidelines for 
     using other transactions authorized by paragraph (1). 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.
       ``(6)(A) Not later than September 31, 2005, the Comptroller 
     General of the United States shall report to Congress on the 
     Department's use of the authorities granted under this 
     section, including the ability to attract nontraditional 
     government contractors and whether additional safeguards are 
     needed with respect to the use of such authorities.
       ``(B) In this section, the term `nontraditional Government 
     contractor' has the same meaning as the term `nontraditional 
     defense contractor' as defined in section 845(e) of the 
     National Defense Authorization Act for Fiscal Year 1994 
     (Public Law 103-160; 10 U.S.C. 2371 note).''.
                    TITLE XI--PERSONNEL AND TRAINING

     SEC. 1101. TRAINING GUIDELINES FOR ELECTRIC ENERGY INDUSTRY 
                   PERSONNEL.

       The Secretary of Energy, in consultation with the Secretary 
     of Labor 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. 1102. 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 Underrepresented Groups.--
     In carrying out a program under subsection (a), the Secretary 
     shall give priority to activities that are designed to 
     encourage students from underrepresented 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 902 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 902 of the Energy Policy Act of 2003.
       ``(5) Tribal college.--The term `tribal college' has the 
     meaning given the term `Tribal College or University' in 
     section 316(b)(3) of the Higher Education Act of 1965 (20 
     U.S.C. 1059c(b)(3)).
       ``(b) Education Partnership.--The Secretary shall direct 
     the Director of each National Laboratory and, to the extent 
     practicable, 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.

[[Page H11275]]

       ``(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 the Energy Policy Act of 2003, the Secretary 
     shall submit to Congress a report on the activities carried 
     out under this section.''.

     SEC. 1103. 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 nonnuclear electric power generation 
     plants.
       (b) Role.--The Center shall provide both training and 
     continuing education relating to nonnuclear 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 
     onsite as well as Internet-based training.

     SEC. 1104. INTERNATIONAL ENERGY TRAINING.

       (a) In General.--The Secretary of Energy, in consultation 
     with the Secretaries of Commerce, Interior, and State and the 
     Federal Energy Regulatory Commission, shall coordinate 
     training and outreach efforts for international commercial 
     energy markets in countries with developing and restructuring 
     economies.
       (b) Components.--The efforts may address--
       (1) production-related fiscal regimes;
       (2) grid and network issues;
       (3) energy user and demand side response;
       (4) international trade of energy; and
       (5) international transportation of energy.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section $1,500,000 for 
     each of fiscal years 2004 through 2007.
                         TITLE XII--ELECTRICITY

     SEC. 1201. SHORT TITLE.

       This title may be cited as the ``Electric Reliability Act 
     of 2003''.
                   Subtitle A--Reliability Standards

     SEC. 1211. ELECTRIC RELIABILITY STANDARDS.

       (a) In General.--Part II of the Federal Power Act (16 U.S.C 
     824 et seq.) is amended by adding at the end the following:

     ``SEC. 215. ELECTRIC RELIABILITY.

       ``(a) Definitions.--For 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 facilities and the design of planned additions 
     or modifications to such facilities 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 
     facilities or to construct new transmission capacity or 
     generation capacity.
       ``(4) The term `reliable operation' means operating the 
     elements 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 
     elements.
       ``(5) The term `Interconnection' means a geographic area in 
     which the operation of bulk-power system components is 
     synchronized such that the failure of 1 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 facilities within their control.
       ``(6) The term `transmission organization' means a Regional 
     Transmission Organization, Independent System Operator, 
     independent transmission provider, 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) Jurisdiction and Applicability.--(1) 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 but not limited to 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.
       ``(2) 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) Certification.--Following the issuance of a 
     Commission rule under subsection (b)(2), any person may 
     submit an application to the Commission for certification as 
     the Electric Reliability Organization. The Commission may 
     certify 1 such ERO if the Commission determines that such 
     ERO--
       ``(1) has the ability to develop and enforce, subject to 
     subsection (e)(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 bulk-power 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) Reliability Standards.--(1) The Electric Reliability 
     Organization 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 Electric Reliability 
     Organization 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 Electric Reliability Organization 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 Electric 
     Reliability Organization 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 Electric Reliability Organization 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)(2) 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, 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) Enforcement.--(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,

[[Page H11276]]

     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 issue 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--
       ``(i) an independent board;
       ``(ii) a balanced stakeholder board; or
       ``(iii) 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) Changes in Electric Reliability Organization Rules.--
     The Electric Reliability Organization 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) Reliability Reports.--The ERO shall conduct periodic 
     assessments of the reliability and adequacy of the bulk-power 
     system in North America.
       ``(h) Coordination With Canada and Mexico.--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) Savings Provisions.--(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 Electric 
     Reliability Organization 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 and 
     the State taking action, may stay the effectiveness of any 
     State action, pending the Commission's issuance of a final 
     order.
       ``(j) Regional Advisory Bodies.--The Commission shall 
     establish a regional advisory body on the petition of at 
     least \2/3\ of the States within a region that have more than 
     \1/2\ of their electric load served within the region. A 
     regional advisory body shall be composed of 1 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 Electric 
     Reliability Organization, 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) Alaska and Hawaii.--The provisions of this section do 
     not apply to Alaska or Hawaii.''.
       (b) Status of ERO.--The Electric Reliability Organization 
     certified by the Federal Energy Regulatory Commission under 
     section 215(c) of the Federal Power Act and any regional 
     entity delegated enforcement authority pursuant to section 
     215(e)(4) of that Act are not departments, agencies, or 
     instrumentalities of the United States Government.
         Subtitle B--Transmission Infrastructure Modernization

     SEC. 1221. SITING OF INTERSTATE ELECTRIC TRANSMISSION 
                   FACILITIES.

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

     ``SEC. 216. SITING OF INTERSTATE ELECTRIC TRANSMISSION 
                   FACILITIES.

       ``(a) Designation of National Interest Electric 
     Transmission Corridors.--
       ``(1) Transmission congestion study.--Within 1 year after 
     the enactment of this section, and every 3 years thereafter, 
     the Secretary of Energy, in consultation with affected 
     States, shall conduct a study of electric transmission 
     congestion. After considering alternatives and 
     recommendations from interested parties, including an 
     opportunity for comment from affected States, the Secretary 
     shall issue a report, based on such study, which may 
     designate any geographic area experiencing electric energy 
     transmission capacity constraints or congestion that 
     adversely affects consumers as a national interest electric 
     transmission corridor. The Secretary shall conduct the study 
     and issue the report in consultation with any appropriate 
     regional entity referenced in section 215 of this Act.
       ``(2) Considerations.--In determining whether to designate 
     a national interest electric transmission corridor referred 
     to in paragraph (1) under this section, the Secretary may 
     consider whether--
       ``(A) the economic vitality and development of the 
     corridor, or the end markets served by the corridor, may be 
     constrained by lack of adequate or reasonably priced 
     electricity;
       ``(B)(i) economic growth in the corridor, or the end 
     markets served by the corridor, may be jeopardized by 
     reliance on limited sources of energy; and
       ``(ii) a diversification of supply is warranted;
       ``(C) the energy independence of the United States would be 
     served by the designation;
       ``(D) the designation would be in the interest of national 
     energy policy; and
       ``(E) the designation would enhance national defense and 
     homeland security.
       ``(b) Construction Permit.--Except as provided in 
     subsection (i), the Commission is authorized, after notice 
     and an opportunity for hearing, to issue a permit or permits 
     for the construction or modification of electric transmission 
     facilities in a national interest electric transmission 
     corridor designated by the Secretary under subsection (a) if 
     the Commission finds that--
       ``(1)(A) a State in which the transmission facilities are 
     to be constructed or modified is without authority to--
       ``(i) approve the siting of the facilities; or
       ``(ii) consider the interstate benefits expected to be 
     achieved by the proposed construction or modification of 
     transmission facilities in the State;
       ``(B) the applicant for a permit is a transmitting utility 
     under this Act but does not qualify to apply for a permit or 
     siting approval for the proposed project in a State because 
     the applicant does not serve end-use customers in the State; 
     or
       ``(C) a State commission or other entity that has authority 
     to approve the siting of the facilities has--
       ``(i) withheld approval for more than 1 year after the 
     filing of an application pursuant to applicable law seeking 
     approval or 1 year after the designation of the relevant 
     national interest electric transmission corridor, whichever 
     is later; or
       ``(ii) conditioned its approval in such a manner that the 
     proposed construction or modification will not significantly 
     reduce transmission congestion in interstate commerce or is 
     not economically feasible;
       ``(2) the facilities to be authorized by the permit will be 
     used for the transmission of electric energy in interstate 
     commerce;
       ``(3) the proposed construction or modification is 
     consistent with the public interest;
       ``(4) the proposed construction or modification will 
     significantly reduce transmission congestion in interstate 
     commerce and protects or benefits consumers; and
       ``(5) the proposed construction or modification is 
     consistent with sound national energy policy and will enhance 
     energy independence.
       ``(c) Permit Applications.--Permit applications under 
     subsection (b) shall be made in writing to the Commission. 
     The Commission shall issue rules setting forth the form of 
     the application, the information to be contained in the 
     application, and the manner of service of notice of the 
     permit application upon interested persons.
       ``(d) Comments.--In any proceeding before the Commission 
     under subsection (b), the Commission shall afford each State 
     in which a transmission facility covered by the permit is or 
     will be located, each affected Federal agency

[[Page H11277]]

     and Indian tribe, private property owners, and other 
     interested persons, a reasonable opportunity to present their 
     views and recommendations with respect to the need for and 
     impact of a facility covered by the permit.
       ``(e) Rights-of-Way.--In the case of a permit under 
     subsection (b) for electric transmission facilities to be 
     located on property other than property owned by the United 
     States or a State, if the permit holder cannot acquire by 
     contract, or is unable to agree with the owner of the 
     property to the compensation to be paid for, the necessary 
     right-of-way to construct or modify such transmission 
     facilities, the permit holder may acquire the right-of-way by 
     the exercise of the right of eminent domain in the district 
     court of the United States for the district in which the 
     property concerned is located, or in the appropriate court of 
     the State in which the property is located. The practice and 
     procedure in any action or proceeding for that purpose in the 
     district court of the United States shall conform as nearly 
     as may be with the practice and procedure in similar action 
     or proceeding in the courts of the State where the property 
     is situated.
       ``(f) State Law.--Nothing in this section shall preclude 
     any person from constructing or modifying any transmission 
     facility pursuant to State law.
       ``(g) Compensation.--Any exercise of eminent domain 
     authority pursuant to this section shall be considered a 
     taking of private property for which just compensation is 
     due. Just compensation shall be an amount equal to the full 
     fair market value of the property taken on the date of the 
     exercise of eminent domain authority, except that the 
     compensation shall exceed fair market value if necessary to 
     make the landowner whole for decreases in the value of any 
     portion of the land not subject to eminent domain. Any parcel 
     of land acquired by eminent domain under this subsection 
     shall be transferred back to the owner from whom it was 
     acquired (or his heirs or assigns) if the land is not used 
     for the construction or modification of electric transmission 
     facilities within a reasonable period of time after the 
     acquisition. Other than construction, modification, 
     operation, or maintenance of electric transmission facilities 
     and related facilities, property acquired under subsection 
     (e) may not be used for any purpose (including use for any 
     heritage area, recreational trail, or park) without the 
     consent of the owner of the parcel from whom the property was 
     acquired (or the owner's heirs or assigns).
       ``(h) Coordination of Federal Authorizations for 
     Transmission and Distribution Facilities.--
       ``(1) Lead agency.--If an applicant, or prospective 
     applicant, for a Federal authorization related to an electric 
     transmission or distribution facility so requests, the 
     Department of Energy (DOE) shall act as the lead agency for 
     purposes of coordinating all applicable Federal 
     authorizations and related environmental reviews of the 
     facility. For purposes of this subsection, the term `Federal 
     authorization' means any authorization required under Federal 
     law in order to site a transmission or distribution facility, 
     including but not limited to such permits, special use 
     authorizations, certifications, opinions, or other approvals 
     as may be required, whether issued by a Federal or a State 
     agency. To the maximum extent practicable under applicable 
     Federal law, the Secretary of Energy shall coordinate this 
     Federal authorization and review process with any Indian 
     tribes, multi-State entities, and State agencies that are 
     responsible for conducting any separate permitting and 
     environmental reviews of the facility, to ensure timely and 
     efficient review and permit decisions.
       ``(2) Authority to set deadlines.--As lead agency, the 
     Department of Energy, in consultation with agencies 
     responsible for Federal authorizations and, as appropriate, 
     with Indian tribes, multi-State entities, and State agencies 
     that are willing to coordinate their own separate permitting 
     and environmental reviews with the Federal authorization and 
     environmental reviews, shall establish prompt and binding 
     intermediate milestones and ultimate deadlines for the review 
     of, and Federal authorization decisions relating to, the 
     proposed facility. The Secretary of Energy shall ensure that 
     once an application has been submitted with such data as the 
     Secretary considers necessary, all permit decisions and 
     related environmental reviews under all applicable Federal 
     laws shall be completed within 1 year or, if a requirement of 
     another provision of Federal law makes this impossible, as 
     soon thereafter as is practicable. The Secretary of Energy 
     also shall provide an expeditious pre-application mechanism 
     for prospective applicants to confer with the agencies 
     involved to have each such agency determine and communicate 
     to the prospective applicant within 60 days of when the 
     prospective applicant submits a request for such information 
     concerning--
       ``(A) the likelihood of approval for a potential facility; 
     and
       ``(B) key issues of concern to the agencies and public.
       ``(3) Consolidated environmental review and record of 
     decision.--As lead agency head, the Secretary of Energy, in 
     consultation with the affected agencies, shall prepare a 
     single environmental review document, which shall be used as 
     the basis for all decisions on the proposed project under 
     Federal law. The document may be an environmental assessment 
     or environmental impact statement under the National 
     Environmental Policy Act of 1969 if warranted, or such other 
     form of analysis as may be warranted. The Secretary of Energy 
     and the heads of other agencies shall streamline the review 
     and permitting of transmission and distribution facilities 
     within corridors designated under section 503 of the Federal 
     Land Policy and Management Act (43 U.S.C. 1763) by fully 
     taking into account prior analyses and decisions relating to 
     the corridors. Such document shall include consideration by 
     the relevant agencies of any applicable criteria or other 
     matters as required under applicable laws.
       ``(4) Appeals.--In the event that any agency has denied a 
     Federal authorization required for a transmission or 
     distribution facility, or has failed to act by the deadline 
     established by the Secretary pursuant to this section for 
     deciding whether to issue the authorization, the applicant or 
     any State in which the facility would be located may file an 
     appeal with the Secretary, who shall, in consultation with 
     the affected agency, review the denial or take action on the 
     pending application. Based on the overall record and in 
     consultation with the affected agency, the Secretary may then 
     either issue the necessary authorization with any appropriate 
     conditions, or deny the application. The Secretary shall 
     issue a decision within 90 days of the filing of the appeal. 
     In making a decision under this paragraph, the Secretary 
     shall comply with applicable requirements of Federal law, 
     including any requirements of the Endangered Species Act, the 
     Clean Water Act, the National Forest Management Act, the 
     National Environmental Policy Act of 1969, and the Federal 
     Land Policy and Management Act.
       ``(5) Conforming regulations and memoranda of 
     understanding.--Not later than 18 months after the date of 
     enactment of this section, the Secretary of Energy shall 
     issue any regulations necessary to implement this subsection. 
     Not later than 1 year after the date of enactment of this 
     section, the Secretary and the heads of all Federal agencies 
     with authority to issue Federal authorizations shall enter 
     into Memoranda of Understanding to ensure the timely and 
     coordinated review and permitting of electricity transmission 
     and distribution facilities. The head of each Federal agency 
     with authority to issue a Federal authorization shall 
     designate a senior official responsible for, and dedicate 
     sufficient other staff and resources to ensure, full 
     implementation of the DOE regulations and any Memoranda. 
     Interested Indian tribes, multi-State entities, and State 
     agencies may enter such Memoranda of Understanding.
       ``(6) Duration and Renewal.--Each Federal land use 
     authorization for an electricity transmission or distribution 
     facility shall be issued--
       ``(A) for a duration, as determined by the Secretary of 
     Energy, commensurate with the anticipated use of the 
     facility, and
       ``(B) with appropriate authority to manage the right-of-way 
     for reliability and environmental protection.

     Upon the expiration of any such authorization (including an 
     authorization issued prior to enactment of this section), the 
     authorization shall be reviewed for renewal taking fully 
     into account reliance on such electricity infrastructure, 
     recognizing its importance for public health, safety and 
     economic welfare and as a legitimate use of Federal lands.
       ``(7) Maintaining and enhancing the transmission 
     infrastructure.--In exercising the responsibilities under 
     this section, the Secretary of Energy shall consult regularly 
     with the Federal Energy Regulatory Commission (FERC), FERC-
     approved electric reliability organizations (including 
     related regional entities), and FERC-approved Regional 
     Transmission Organizations and Independent System Operators.
       ``(i) Interstate Compacts.--The consent of Congress is 
     hereby given for 3 or more contiguous States to enter into an 
     interstate compact, subject to approval by Congress, 
     establishing regional transmission siting agencies to 
     facilitate siting of future electric energy transmission 
     facilities within such States and to carry out the electric 
     energy transmission siting responsibilities of such States. 
     The Secretary of Energy may provide technical assistance to 
     regional transmission siting agencies established under this 
     subsection. Such regional transmission siting agencies shall 
     have the authority to review, certify, and permit siting of 
     transmission facilities, including facilities in national 
     interest electric transmission corridors (other than 
     facilities on property owned by the United States). The 
     Commission shall have no authority to issue a permit for the 
     construction or modification of electric transmission 
     facilities within a State that is a party to a compact, 
     unless the members of a compact are in disagreement and the 
     Secretary makes, after notice and an opportunity for a 
     hearing, the finding described in section (b)(1)(C).
       ``(j) Savings Clause.--Nothing in this section shall be 
     construed to affect any requirement of the environmental laws 
     of the United States, including, but not limited to, the 
     National Environmental Policy Act of 1969. Subsection (h)(4) 
     of this section shall not apply to any Congressionally-
     designated components of the National Wilderness Preservation 
     System, the National Wild and Scenic Rivers System, or the 
     National Park system (including National Monuments therein).
       ``(k) ERCOT.--This section shall not apply within the area 
     referred to in section 212(k)(2)(A).''.
       (b) Reports to Congress on Corridors and Rights of Way on 
     Federal Lands.--The Secretary of the Interior, the Secretary 
     of Energy, the Secretary of Agriculture, and the Chairman of 
     the Council on Environmental Quality shall, within 90 days of 
     the date of enactment of this subsection, submit a joint 
     report to Congress identifying each of the following:
       (1) All existing designated transmission and distribution 
     corridors on Federal land and the status of work related to 
     proposed transmission and distribution corridor designations 
     under Title V of the Federal Land Policy and Management Act 
     (43 U.S.C. 1761 et. Seq.), the schedule for completing such 
     work, any impediments to completing the work, and steps that 
     Congress could take to expedite the process.
       (2) The number of pending applications to locate 
     transmission and distribution facilities on

[[Page H11278]]

     Federal lands, key information relating to each such 
     facility, how long each application has been pending, the 
     schedule for issuing a timely decision as to each facility, 
     and progress in incorporating existing and new such rights-
     of-way into relevant land use and resource management plans 
     or their equivalent.
       (3) The number of existing transmission and distribution 
     rights-of-way on Federal lands that will come up for renewal 
     within the following 5, 10, and 15 year periods, and a 
     description of how the Secretaries plan to manage such 
     renewals.

     SEC. 1222. THIRD-PARTY FINANCE.

       (a) Existing Facilities.--The Secretary of Energy 
     (hereinafter in this section referred to as the 
     ``Secretary''), acting through the Administrator of the 
     Western Area Power Administration (hereinafter in this 
     section referred to as ``WAPA''), or through the 
     Administrator of the Southwestern Power Administration 
     (hereinafter in this section referred to as ``SWPA''), or 
     both, may design, develop, construct, operate, maintain, or 
     own, or participate with other entities in designing, 
     developing, constructing, operating, maintaining, or owning, 
     an electric power transmission facility and related 
     facilities (``Project'') needed to upgrade existing 
     transmission facilities owned by SWPA or WAPA if the 
     Secretary of Energy, in consultation with the applicable 
     Administrator, determines that the proposed Project--
       (1)(A) is located in a national interest electric 
     transmission corridor designated under section 216(a) of the 
     Federal Power Act and will reduce congestion of electric 
     transmission in interstate commerce; or
       (B) is necessary to accommodate an actual or projected 
     increase in demand for electric transmission capacity;
       (2) is consistent with--
       (A) transmission needs identified, in a transmission 
     expansion plan or otherwise, by the appropriate Regional 
     Transmission Organization or Independent System Operator (as 
     defined in the Federal Power Act), if any, or approved 
     regional reliability organization; and
       (B) efficient and reliable operation of the transmission 
     grid; and
       (3) would be operated in conformance with prudent utility 
     practice.
       (b) New Facilities.--The Secretary, acting through WAPA or 
     SWPA, or both, may design, develop, construct, operate, 
     maintain, or own, or participate with other entities in 
     designing, developing, constructing, operating, maintaining, 
     or owning, a new electric power transmission facility and 
     related facilities (``Project'') located within any State in 
     which WAPA or SWPA operates if the Secretary, in consultation 
     with the applicable Administrator, determines that the 
     proposed Project--
       (1)(A) is located in an area designated under section 
     216(a) of the Federal Power Act and will reduce congestion of 
     electric transmission in interstate commerce; or
       (B) is necessary to accommodate an actual or projected 
     increase in demand for electric transmission capacity;
       (2) is consistent with--
       (A) transmission needs identified, in a transmission 
     expansion plan or otherwise, by the appropriate Regional 
     Transmission Organization or Independent System Operator, if 
     any, or approved regional reliability organization; and
       (B) efficient and reliable operation of the transmission 
     grid;
       (3) will be operated in conformance with prudent utility 
     practice;
       (4) will be operated by, or in conformance with the rules 
     of, the appropriate (A) Regional Transmission Organization or 
     Independent System Operator, if any, or (B) if such an 
     organization does not exist, regional reliability 
     organization; and
       (5) will not duplicate the functions of existing 
     transmission facilities or proposed facilities which are the 
     subject of ongoing or approved siting and related permitting 
     proceedings.
       (c) Other Funds.--
       (1) In general.--In carrying out a Project under subsection 
     (a) or (b), the Secretary may accept and use funds 
     contributed by another entity for the purpose of carrying out 
     the Project.
       (2) Availability.--The contributed funds shall be available 
     for expenditure for the purpose of carrying out the Project--
       (A) without fiscal year limitation; and
       (B) as if the funds had been appropriated specifically for 
     that Project.
       (3) Allocation of costs.--In carrying out a Project under 
     subsection (a) or (b), any costs of the Project not paid for 
     by contributions from another entity shall be collected 
     through rates charged to customers using the new transmission 
     capability provided by the Project and allocated equitably 
     among these project beneficiaries using the new transmission 
     capability.
       (d) Relationship to Other Laws.--Nothing in this section 
     affects any requirement of--
       (1) any Federal environmental law, including the National 
     Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.);
       (2) any Federal or State law relating to the siting of 
     energy facilities; or
       (3) any existing authorizing statutes.
       (e) Savings Clause.--Nothing in this section shall 
     constrain or restrict an Administrator in the utilization of 
     other authority delegated to the Administrator of WAPA or 
     SWPA.
       (f) Secretarial Determinations.--Any determination made 
     pursuant to subsections (a) or (b) shall be based on findings 
     by the Secretary using the best available data.
       (g) Maximum Funding Amount.--The Secretary shall not accept 
     and use more than $100,000,000 under subsection (c)(1) for 
     the period encompassing fiscal years 2004 through 2013.

     SEC. 1223. TRANSMISSION SYSTEM MONITORING.

       Within 6 months after the date of enactment of this Act, 
     the Secretary of Energy and the Federal Energy Regulatory 
     Commission shall study and report to Congress on the steps 
     which must be taken to establish a system to make available 
     to all transmission system owners and Regional Transmission 
     Organizations (as defined in the Federal Power Act) within 
     the Eastern and Western Interconnections real-time 
     information on the functional status of all transmission 
     lines within such Interconnections. In such study, the 
     Commission shall assess technical means for implementing such 
     transmission information system and identify the steps the 
     Commission or Congress must take to require the 
     implementation of such system.

     SEC. 1224. ADVANCED TRANSMISSION TECHNOLOGIES.

       (a) Authority.--The Federal Energy Regulatory Commission, 
     in the exercise of its authorities under the Federal Power 
     Act and the Public Utility Regulatory Policies Act of 1978, 
     shall encourage the deployment of advanced transmission 
     technologies.
       (b) Definition.--For the purposes of this section, the term 
     ``advanced transmission technologies'' means technologies 
     that increase the capacity, efficiency, or reliability of 
     existing or new transmission facilities, including, but not 
     limited to--
       (1) high-temperature lines (including superconducting 
     cables);
       (2) underground cables;
       (3) advanced conductor technology (including advanced 
     composite conductors, high-temperature low-sag conductors, 
     and fiber optic temperature sensing conductors);
       (4) high-capacity ceramic electric wire, connectors, and 
     insulators;
       (5) optimized transmission line configurations (including 
     multiple phased transmission lines);
       (6) modular equipment;
       (7) wireless power transmission;
       (8) ultra-high voltage lines;
       (9) high-voltage DC technology;
       (10) flexible AC transmission systems;
       (11) energy storage devices (including pumped hydro, 
     compressed air, superconducting magnetic energy storage, 
     flywheels, and batteries);
       (12) controllable load;
       (13) distributed generation (including PV, fuel cells, 
     microturbines);
       (14) enhanced power device monitoring;
       (15) direct system state sensors;
       (16) fiber optic technologies;
       (17) power electronics and related software (including real 
     time monitoring and analytical software); and
       (18) any other technologies the Commission considers 
     appropriate.
       (c) Obsolete or Impracticable Technologies.--The Commission 
     is authorized to cease encouraging the deployment of any 
     technology described in this section on a finding that such 
     technology has been rendered obsolete or otherwise 
     impracticable to deploy.

     SEC. 1225. ELECTRIC TRANSMISSION AND DISTRIBUTION PROGRAMS.

       (a) Electric Transmission and Distribution Program.--The 
     Secretary of Energy (hereinafter in this section referred to 
     as the ``Secretary'') acting through the Director of the 
     Office of Electric Transmission and Distribution shall 
     establish a comprehensive research, development, 
     demonstration and commercial application program to promote 
     improved reliability and efficiency of electrical 
     transmission and distribution systems. This program shall 
     include--
       (1) advanced energy delivery and storage technologies, 
     materials, and systems, including new transmission 
     technologies, such as flexible alternating current 
     transmission systems, 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 may 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

[[Page H11279]]

     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 
     infrastructure technologies.
       (e) Power Delivery Research Initiative.--
       (1) In general.--The Secretary shall establish a research, 
     development, demonstration, and commercial application 
     initiative specifically focused on power delivery utilizing 
     components incorporating high temperature superconductivity.
       (2) Goals.--The goals of this initiative shall be to--
       (A) establish 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.
       (3) Requirements.--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.
       (4) Authorization of appropriations.--For purposes of 
     carrying out this subsection, there are authorized to be 
     appropriated--
       (A) for fiscal year 2004, $15,000,000;
       (B) for fiscal year 2005, $20,000,000;
       (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.

     SEC. 1226. ADVANCED POWER SYSTEM TECHNOLOGY INCENTIVE 
                   PROGRAM.

       (a) Program.--The Secretary of Energy is authorized to 
     establish an Advanced Power System Technology Incentive 
     Program to support the deployment of certain advanced power 
     system technologies and to improve and protect certain 
     critical governmental, industrial, and commercial processes. 
     Funds provided under this section shall be used by the 
     Secretary to make incentive payments to eligible owners or 
     operators of advanced power system technologies to increase 
     power generation through enhanced operational, economic, and 
     environmental performance. Payments under this section may 
     only be made upon receipt by the Secretary of an incentive 
     payment application establishing an applicant as either--
       (1) a qualifying advanced power system technology facility; 
     or
       (2) a qualifying security and assured power facility.
       (b) Incentives.--Subject to availability of funds, a 
     payment of 1.8 cents per kilowatt-hour shall be paid to the 
     owner or operator of a qualifying advanced power system 
     technology facility under this section for electricity 
     generated at such facility. An additional 0.7 cents per 
     kilowatt-hour shall be paid to the owner or operator of a 
     qualifying security and assured power facility for 
     electricity generated at such facility. Any facility 
     qualifying under this section shall be eligible for an 
     incentive payment for up to, but not more than, the first 
     10,000,000 kilowatt-hours produced in any fiscal year.
       (c) Eligibility.--For purposes of this section:
       (1) Qualifying advanced power system technology facility.--
     The term ``qualifying advanced power system technology 
     facility'' means a facility using an advanced fuel cell, 
     turbine, or hybrid power system or power storage system to 
     generate or store electric energy.
       (2) Qualifying security and assured power facility.--The 
     term ``qualifying security and assured power facility'' means 
     a qualifying advanced power system technology facility 
     determined by the Secretary of Energy, in consultation with 
     the Secretary of Homeland Security, to be in critical need of 
     secure, reliable, rapidly available, high-quality power for 
     critical governmental, industrial, or commercial 
     applications.
       (d) Authorization.--There are authorized to be appropriated 
     to the Secretary of Energy for the purposes of this section, 
     $10,000,000 for each of the fiscal years 2004 through 2010.

     SEC. 1227. 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 (42 U.S.C. 7131 et seq.) (as amended by 
     section 502(a) of this Act) is amended by inserting the 
     following after section 217, as added by title V of this Act:

     ``SEC. 218. OFFICE OF ELECTRIC TRANSMISSION AND DISTRIBUTION.

       ``(a) Establishment.--There is established within the 
     Department an Office of Electric Transmission and 
     Distribution. This Office shall be headed by a Director, 
     subject to the authority of the Secretary. The Director 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) Director.--The Director shall--
       ``(1) coordinate and develop a comprehensive, multi-year 
     strategy to improve the Nation's electricity transmission and 
     distribution;
       ``(2) implement or, where appropriate, coordinate the 
     implementation of, the recommendations made in the 
     Secretary's May 2002 National Transmission Grid Study;
       ``(3) oversee research, development, and demonstration to 
     support Federal energy policy related to electricity 
     transmission and distribution;
       ``(4) grant authorizations for electricity import and 
     export pursuant to section 202(c), (d), (e), and (f) of the 
     Federal Power Act (16 U.S.C. 824a);
       ``(5) perform other functions, assigned by the Secretary, 
     related to electricity transmission and distribution; 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 Organization Act (42 U.S.C. 7101 
     note) is amended by inserting after the item relating to 
     section 217 the following new item:

``Sec. 218. Office of Electric Transmission and Distribution.''.

       (2) Section 5315 of title 5, United States Code, is amended 
     by inserting after the item relating to ``Inspector General, 
     Department of Energy.'' the following:
       ``Director, Office of Electric Transmission and 
     Distribution, Department of Energy.''.
            Subtitle C--Transmission Operation Improvements

     SEC. 1231. OPEN NONDISCRIMINATORY ACCESS.

       Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is 
     amended by inserting after section 211 the following new 
     section:

     ``SEC. 211A. OPEN ACCESS BY UNREGULATED TRANSMITTING 
                   UTILITIES.

       ``(a) Transmission Services.--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) Exemption.--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) Local Distribution Facilities.--The requirements of 
     subsection (a) shall not apply to facilities used in local 
     distribution.
       ``(d) Exemption Termination.--Whenever the Commission, 
     after an evidentiary hearing held upon a complaint and after 
     giving consideration to reliability standards established 
     under section 215, finds on the basis of a preponderance of 
     the evidence that any exemption granted pursuant to 
     subsection (b) unreasonably impairs the continued reliability 
     of an interconnected transmission system, it shall revoke the 
     exemption granted to that transmitting utility.
       ``(e) Application to Unregulated Transmitting Utilities.--
     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) Remand.--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) Other Requests.--The provision of transmission 
     services under subsection (a) does not preclude a request for 
     transmission services under section 211.
       ``(h) Limitation.--The Commission may not require a State 
     or municipality to take action under this section that would 
     violate a private activity bond rule for purposes of section 
     141 of the Internal Revenue Code of 1986 (26 U.S.C. 141).
       ``(i) Transfer of Control of Transmitting Facilities.--
     Nothing in this section 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 independent transmission 
     organization designated to provide nondiscriminatory 
     transmission access.
       ``(j) Definition.--For purposes of this section, the term 
     `unregulated transmitting utility' means an entity that--
       ``(1) owns or operates facilities used for the transmission 
     of electric energy in interstate commerce; and
       ``(2) is an entity described in section 201(f).''.

     SEC. 1232. SENSE OF 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

[[Page H11280]]

     power markets, all transmitting utilities in interstate 
     commerce should voluntarily become members of Regional 
     Transmission Organizations as defined in section 3 of the 
     Federal Power Act.

     SEC. 1233. REGIONAL TRANSMISSION ORGANIZATION APPLICATIONS 
                   PROGRESS REPORT.

       Not later than 120 days after the date of enactment of this 
     section, the Federal Energy Regulatory Commission shall 
     submit to Congress a report containing each of the following:
       (1) A list of all regional transmission organization 
     applications filed at the Commission pursuant to subpart F of 
     part 35 of title 18, Code of Federal Regulations (in this 
     section referred to as ``Order No. 2000''), including an 
     identification of each public utility and other entity 
     included within the proposed membership of the regional 
     transmission organization.
       (2) A brief description of the status of each pending 
     regional transmission organization application, including a 
     precise explanation of how each fails to comply with the 
     minimal requirements of Order No. 2000 and what steps need to 
     be taken to bring each application into such compliance.
       (3) For any application that has not been finally approved 
     by the Commission, a detailed description of every aspect of 
     the application that the Commission has determined does not 
     conform to the requirements of Order No. 2000.
       (4) For any application that has not been finally approved 
     by the Commission, an explanation by the Commission of why 
     the items described pursuant to paragraph (3) constitute 
     material noncompliance with the requirements of the 
     Commission's Order No. 2000 sufficient to justify denial of 
     approval by the Commission.
       (5) For all regional transmission organization applications 
     filed pursuant to the Commission's Order No. 2000, whether 
     finally approved or not--
       (A) a discussion of that regional transmission 
     organization's efforts to minimize rate seams between itself 
     and--
       (i) other regional transmission organizations; and
       (ii) entities not participating in a regional transmission 
     organization;
       (B) a discussion of the impact of such seams on consumers 
     and wholesale competition; and
       (C) a discussion of minimizing cost-shifting on consumers.

     SEC. 1234. FEDERAL UTILITY PARTICIPATION IN REGIONAL 
                   TRANSMISSION ORGANIZATIONS.

       (a) Definitions.--For purposes of this section--
       (1) Appropriate federal regulatory authority.--The term 
     ``appropriate Federal regulatory authority'' means--
       (A) with respect to a Federal power marketing agency (as 
     defined in the Federal Power Act), 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) Federal utility.--The term ``Federal utility'' means a 
     Federal power marketing agency or the Tennessee Valley 
     Authority.
       (3) Transmission system.--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.--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 an RTO or ISO 
     (as defined in the Federal Power Act), approved by the 
     Federal Energy Regulatory Commission. Such contract, 
     agreement or arrangement shall include--
       (1) 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;
       (2) provisions for monitoring and oversight by the Federal 
     utility of the RTO's or ISO's fulfillment of the terms and 
     conditions of the contract, agreement or other arrangement, 
     including a provision for the resolution of disputes through 
     arbitration or other means with the regional transmission 
     organization or with other participants, notwithstanding the 
     obligations and limitations of any other law regarding 
     arbitration; and
       (3) a provision that allows the Federal utility to withdraw 
     from the RTO or ISO and terminate the contract, agreement or 
     other arrangement in accordance with its terms.

     Neither this section, actions taken pursuant to it, nor any 
     other transaction of a Federal utility using an RTO or ISO 
     shall confer upon the Federal Energy Regulatory 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) System operation requirements.--No statutory provision 
     requiring or authorizing a Federal utility to transmit 
     electric power or to construct, operate or maintain its 
     transmission system shall 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) Other obligations.--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.
       (3) Repeal.--Section 311 of title III of Appendix B of the 
     Act of October 27, 2000 (P.L. 106-377, section 1(a)(2); 114 
     Stat. 1441, 1441A-80; 16 U.S.C. 824n) is repealed.

     SEC. 1235. STANDARD MARKET DESIGN.

       (a) Remand.--The Commission's proposed rulemaking entitled 
     ``Remedying Undue Discrimination through Open Access 
     Transmission Service and Standard Electricity Market Design'' 
     (Docket No. RM01-12-000) (``SMD NOPR'') is remanded to the 
     Commission for reconsideration. No final rule mandating a 
     standard electricity market design pursuant to the proposed 
     rulemaking, including any rule or order of general 
     applicability within the scope of the proposed rulemaking, 
     may be issued before October 31, 2006, or take effect before 
     December 31, 2006. Any final rule issued by the Commission 
     pursuant to the proposed rulemaking shall be preceded by a 
     second notice of proposed rulemaking issued after the date of 
     enactment of this Act and an opportunity for public comment.
       (b) Savings Clause.--This section shall not be construed to 
     modify or diminish any authority or obligation the Commission 
     has under this Act, the Federal Power Act, or other 
     applicable law, including, but not limited to, any authority 
     to--
       (1) issue any rule or order (of general or particular 
     applicability) pursuant to any such authority or obligation; 
     or
       (2) act on a filing or filings by 1 or more transmitting 
     utilities for the voluntary formation of a Regional 
     Transmission Organization or Independent System Operator (as 
     defined in the Federal Power Act) (and related market 
     structures or rules) or voluntary modification of an existing 
     Regional Transmission Organization or Independent System 
     Operator (and related market structures or rules).

     SEC. 1236. NATIVE LOAD SERVICE OBLIGATION.

       Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is 
     amended by adding at the end the following:

     ``SEC. 217. NATIVE LOAD SERVICE OBLIGATION.

       ``(a) Meeting Service Obligations.--(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 1 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 
     1 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, 
     equivalent tradable 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 tradable 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 tradable 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) Allocation of Transmission Rights.--Nothing in this 
     section shall affect any methodology approved by the 
     Commission prior to September 15, 2003, for the allocation of 
     transmission rights by an RTO or ISO that has been authorized 
     by the Commission to allocate transmission rights.
       ``(c) Certain Transmission Rights.--The Commission may 
     exercise authority under this Act to make transmission rights 
     not used to meet an obligation covered by subsection (a) 
     available to other entities in a manner determined by the 
     Commission to be just, reasonable, and not unduly 
     discriminatory or preferential.
       ``(d) Obligation To Build.--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.
       ``(e) Contracts.--Nothing in this section shall provide a 
     basis for abrogating any contract or service agreement for 
     firm transmission service or rights in effect as of the date 
     of the enactment of this subsection.
       ``(f) Water Pumping Facilities.--The Commission shall 
     ensure that any entity described in section 201(f) that owns 
     transmission facilities used predominately to support its own 
     water pumping facilities shall have, with respect to such 
     facilities, protections for transmission service comparable 
     to those provided to load-serving entities pursuant to this 
     section.
       ``(g) ERCOT.--This section shall not apply within the area 
     referred to in section 212(k)(2)(A).

[[Page H11281]]

       ``(h) Jurisdiction.--This section does not authorize the 
     Commission to take any action not otherwise within its 
     jurisdiction.
       ``(i) Effect of Exercising Rights.--An entity that lawfully 
     exercises rights granted under subsection (a) shall not be 
     considered by such action as engaging in undue discrimination 
     or preference under this Act.
       ``(j) TVA Area.--For purposes of subsection (a)(1)(B), a 
     load-serving entity that is located within the service area 
     of the Tennessee Valley Authority and that has a firm 
     wholesale power supply contract with the Tennessee Valley 
     Authority shall be deemed to hold firm transmission rights 
     for the transmission of such power.
       ``(k) Definitions.--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 1 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 1 or more of the foregoing, or a 
     corporation which is wholly owned, directly or indirectly, by 
     any 1 or more of the foregoing, competent to carry on the 
     business of developing, transmitting, utilizing or 
     distributing power.''.

     SEC. 1237. STUDY ON THE BENEFITS OF ECONOMIC DISPATCH.

       (a) Study.--The Secretary of Energy, in coordination and 
     consultation with the States, shall conduct a study on--
       (1) the procedures currently used by electric utilities to 
     perform economic dispatch;
       (2) identifying possible revisions to those procedures to 
     improve the ability of nonutility generation resources to 
     offer their output for sale for the purpose of inclusion in 
     economic dispatch; and
       (3) the potential benefits to residential, commercial, and 
     industrial electricity consumers nationally and in each state 
     if economic dispatch procedures were revised to improve the 
     ability of nonutility generation resources to offer their 
     output for inclusion in economic dispatch.
       (b) Definition.--The term ``economic dispatch'' when used 
     in this section means the operation of generation facilities 
     to produce energy at the lowest cost to reliably serve 
     consumers, recognizing any operational limits of generation 
     and transmission facilities.
       (c) Report to Congress and the States.--Not later than 90 
     days after the date of enactment of this Act, and on a yearly 
     basis following, the Secretary of Energy shall submit a 
     report to Congress and the States on the results of the study 
     conducted under subsection (a), including recommendations to 
     Congress and the States for any suggested legislative or 
     regulatory changes.
                  Subtitle D--Transmission Rate Reform

     SEC. 1241. 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:

     ``SEC. 218. TRANSMISSION INFRASTRUCTURE INVESTMENT.

       ``(a) Rulemaking Requirement.--Within 1 year after the 
     enactment of this section, the Commission shall establish, by 
     rule, incentive-based (including, but not limited to 
     performance-based) rate treatments for the transmission of 
     electric energy in interstate commerce by public utilities 
     for the purpose of benefiting consumers by ensuring 
     reliability and reducing the cost of delivered power by 
     reducing transmission congestion. Such rule shall--
       ``(1) promote reliable and economically efficient 
     transmission and generation of electricity by promoting 
     capital investment in the enlargement, improvement, 
     maintenance and operation of facilities for the transmission 
     of electric energy in interstate commerce;
       ``(2) provide a return on equity that attracts new 
     investment in transmission facilities (including related 
     transmission technologies);
       ``(3) encourage deployment of transmission technologies and 
     other measures to increase the capacity and efficiency of 
     existing transmission facilities and improve the operation of 
     such facilities; and
       ``(4) allow recovery of all prudently incurred costs 
     necessary to comply with mandatory reliability standards 
     issued pursuant to section 215 of this Act.

     The Commission may, from time to time, revise such rule.
       ``(b) Additional Incentives for RTO Participation.--In the 
     rule issued under this section, the Commission shall, to the 
     extent within its jurisdiction, provide for incentives to 
     each transmitting utility or electric utility that joins a 
     Regional Transmission Organization or Independent System 
     Operator. Incentives provided by the Commission pursuant to 
     such rule shall include--
       ``(1) recovery of all prudently incurred costs to develop 
     and participate in any proposed or approved RTO, ISO, or 
     independent transmission company;
       ``(2) recovery of all costs previously approved by a State 
     commission which exercised jurisdiction over the transmission 
     facilities prior to the utility's participation in the RTO or 
     ISO, including costs necessary to honor preexisting 
     transmission service contracts, in a manner which does not 
     reduce the revenues the utility receives for transmission 
     services for a reasonable transition period after the utility 
     joins the RTO or ISO;
       ``(3) recovery as an expense in rates of the costs 
     prudently incurred to conduct transmission planning and 
     reliability activities, including the costs of participating 
     in RTO, ISO and other regional planning activities and 
     design, study and other precertification costs involved in 
     seeking permits and approvals for proposed transmission 
     facilities;
       ``(4) a current return in rates for construction work in 
     progress for transmission facilities and full recovery of 
     prudently incurred costs for constructing transmission 
     facilities;
       ``(5) formula transmission rates; and
       ``(6) a maximum 15 year accelerated depreciation on new 
     transmission facilities for rate treatment purposes.

     The Commission shall ensure that any costs recoverable 
     pursuant to this subsection may be recovered by such utility 
     through the transmission rates charged by such utility or 
     through the transmission rates charged by the RTO or ISO that 
     provides transmission service to such utility.
       ``(c) Just and Reasonable Rates.--All rates approved under 
     the rules adopted pursuant to this section, including any 
     revisions to such rules, are subject to the requirement of 
     sections 205 and 206 that all rates, charges, terms, and 
     conditions be just and reasonable and not unduly 
     discriminatory or preferential.''.

     SEC. 1242. VOLUNTARY TRANSMISSION PRICING PLANS.

       Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is 
     amended by adding at the end the following:

     ``SEC. 219. VOLUNTARY TRANSMISSION PRICING PLANS.

       ``(a) In General.--Any transmission provider, including an 
     RTO or ISO, may submit to the Commission a plan or plans 
     under section 205 containing the criteria for determining the 
     person or persons that will be required to pay for any 
     construction of new transmission facilities or expansion, 
     modification or upgrade of transmission facilities (in this 
     section referred to as `transmission service related 
     expansion') or new generator interconnection.
       ``(b) Voluntary Transmission Pricing Plans.--(1) Any plan 
     or plans submitted under subsection (a) shall specify the 
     method or methods by which costs may be allocated or 
     assigned. Such methods may include, but are not limited to:
       ``(A) directly assigned;
       ``(B) participant funded; or
       ``(C) rolled into regional or sub-regional rates.-
       ``(2) FERC shall approve a plan or plans submitted under 
     subparagraph (B) of paragraph (1) if such plan or plans--
       ``(A) result in rates that are just and reasonable and not 
     unduly discriminatory or preferential consistent with section 
     205; and
       ``(B) ensure that the costs of any transmission service 
     related expansion or new generator interconnection not 
     required to meet applicable reliability standards established 
     under section 215 are assigned in a fair manner, meaning that 
     those who benefit from the transmission service related 
     expansion or new generator interconnection pay an appropriate 
     share of the associated costs, provided that--
       ``(i) costs may not be assigned or allocated to an electric 
     utility if the native load customers of that utility would 
     not have required such transmission service related expansion 
     or new generator interconnection absent the request for 
     transmission service related expansion or new generator 
     interconnection that necessitated the investment;
       ``(ii) the party requesting such transmission service 
     related expansion or new generator interconnection shall not 
     be required to pay for both--
       ``(I) the assigned cost of the upgrade; and
       ``(II) the difference between--

       ``(aa) the embedded cost paid for transmission services 
     (including the cost of the requested upgrade); and
       ``(bb) the embedded cost that would have been paid absent 
     the upgrade; and

       ``(iii) the party or parties who pay for facilities 
     necessary for the transmission service related expansion or 
     new generator interconnection receives full compensation for 
     its costs for the participant funded facilities in the form 
     of--
       ``(I) monetary credit equal to the cost of the participant 
     funded facilities (accounting for the time value of money at 
     the Gross Domestic Product deflator), which credit shall be 
     pro-rated in equal installments over a period of not more 
     than 30 years and shall not exceed in total the amount of the 
     initial investment, against the transmission charges that the 
     funding entity or its assignee is otherwise assessed by the 
     transmission provider;
       ``(II) appropriate financial or physical rights; or
       ``(III) any other method of cost recovery or compensation 
     approved by the Commission.
       ``(3) A plan submitted under this section shall apply only 
     to--
       ``(A) a contract or interconnection agreement executed or 
     filed with the Commission after the date of enactment of this 
     section; or
       ``(B) an interconnection agreement pending rehearing as of 
     November 1, 2003.
       ``(4) Nothing in this section diminishes or alters the 
     rights of individual members of an RTO or ISO under this Act.
       ``(5) Nothing in this section shall affect the allocation 
     of costs or the cost methodology employed by an RTO or ISO 
     authorized by the Commission to allocate costs (including 
     costs for transmission service related expansion or new 
     generator interconnection) prior to the date of enactment of 
     this section.

[[Page H11282]]

       ``(6) This section shall not apply within the area referred 
     to in section 212(k)(2)(A).
       ``(7) The term `transmission provider' means a public 
     utility that owns or operates facilities that provide 
     interconnection or transmission service in interstate 
     commerce.''.
                    Subtitle E--Amendments to PURPA

     SEC. 1251. NET METERING AND ADDITIONAL STANDARDS.

       (a) Adoption of Standards.--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.--Each electric utility shall make 
     available upon request net metering service to any electric 
     consumer that the electric utility serves. For purposes of 
     this paragraph, 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.
       ``(12) Fuel sources.--Each electric utility shall develop a 
     plan to minimize dependence on 1 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.
       ``(13) Fossil fuel generation efficiency.--Each electric 
     utility shall develop and implement a 10-year plan to 
     increase the efficiency of its fossil fuel generation.''.
       (b) Compliance.--
       (1) Time limitations.--Section 112(b) of the Public Utility 
     Regulatory Policies Act of 1978 (16 U.S.C. 2622(b)) is 
     amended by adding at the end the following:
       ``(3)(A) Not later than 2 years after the enactment of this 
     paragraph, each State regulatory authority (with respect to 
     each electric utility for which it has ratemaking authority) 
     and each nonregulated electric utility shall commence the 
     consideration referred to in section 111, or set a hearing 
     date for such consideration, with respect to each standard 
     established by paragraphs (11) through (13) of section 
     111(d).
       ``(B) Not later than 3 years after the date of the 
     enactment of this paragraph, each State regulatory authority 
     (with respect to each electric utility for which it has 
     ratemaking authority), and each nonregulated electric 
     utility, shall complete the consideration, and shall make the 
     determination, referred to in section 111 with respect to 
     each standard established by paragraphs (11) through (13) of 
     section 111(d).''.
       (2) Failure to comply.--Section 112(c) of the Public 
     Utility Regulatory Policies Act of 1978 (16 U.S.C. 2622(c)) 
     is amended by adding at the end the following:

     ``In the case of each standard established by paragraphs (11) 
     through (13) of section 111(d), the reference contained in 
     this subsection to the date of enactment of this Act shall be 
     deemed to be a reference to the date of enactment of such 
     paragraphs (11) through (13).''.
       (3) Prior state actions.--
       (A) In general.--Section 112 of the Public Utility 
     Regulatory Policies Act of 1978 (16 U.S.C. 2622) is amended 
     by adding at the end the following:
       ``(d) Prior State Actions.--Subsections (b) and (c) of this 
     section shall not apply to the standards established by 
     paragraphs (11) through (13) of section 111(d) in the case of 
     any electric utility in a State if, before the enactment of 
     this subsection--
       ``(1) the State has implemented for such utility the 
     standard concerned (or a comparable standard);
       ``(2) the State regulatory authority for such State or 
     relevant nonregulated electric utility has conducted a 
     proceeding to consider implementation of the standard 
     concerned (or a comparable standard) for such utility; or
       ``(3) the State legislature has voted on the implementation 
     of such standard (or a comparable standard) for such 
     utility.''.
       (B) Cross reference.--Section 124 of such Act (16 U.S.C. 
     2634) is amended by adding the following at the end thereof: 
     ``In the case of each standard established by paragraphs (11) 
     through (13) of section 111(d), the reference contained in 
     this subsection to the date of enactment of this Act shall be 
     deemed to be a reference to the date of enactment of such 
     paragraphs (11) through (13).''.

     SEC. 1252. 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:
       ``(14) Time-based metering and communications.--
       ``(A) Not later than 18 months after the date of enactment 
     of this paragraph, 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, if any, in the 
     utility's 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, 
     based on the utility's cost of generating and/or purchasing 
     such electricity at the wholesale level for the benefit of 
     the consumer. 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/or 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, reflecting the utility's cost of generating and/or 
     purchasing electricity at the wholesale level, 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 the 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 18 
     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 as follows:
       (1) By inserting in subsection (b) after the phrase ``the 
     standard for time-of-day rates established by section 
     111(d)(3)'' the following: ``and the standard for time-based 
     metering and communications established by section 
     111(d)(14)''.
       (2) By inserting in subsection (b) after the phrase ``are 
     likely to exceed the metering'' the following: ``and 
     communications''.
       (3) By adding the at the end the following:
       ``(i) Time-based metering and communications.--In making a 
     determination with respect to the standard established by 
     section 111(d)(14), the investigation requirement of section 
     111(d)(14)(F) shall be as follows: 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 Policies 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. 2642) 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 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) In general.--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) Technical assistance.--The Secretary of Energy shall 
     provide technical assistance to States and regional 
     organizations formed by 2 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;
       (C) developing plans and programs to use demand response to 
     respond to peak demand or emergency needs; and
       (D) identifying specific measures consumers can take to 
     participate in these demand response programs.
       (3) Report.--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

[[Page H11283]]

     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. It 
     is further the policy of the United States that the benefits 
     of such demand response that accrue to those not deploying 
     such technology and devices, but who are part of the same 
     regional electricity entity, shall be recognized.
       (g) Time Limitations.--Section 112(b) of the Public Utility 
     Regulatory Policies Act of 1978 (16 U.S.C. 2622(b)) is 
     amended by adding at the end the following:
       ``(4)(A) Not later than 1 year after the enactment of this 
     paragraph, each State regulatory authority (with respect to 
     each electric utility for which it has ratemaking authority) 
     and each nonregulated electric utility shall commence the 
     consideration referred to in section 111, or set a hearing 
     date for such consideration, with respect to the standard 
     established by paragraph (14) of section 111(d).
       ``(B) Not later than 2 years after the date of the 
     enactment of this paragraph, each State regulatory authority 
     (with respect to each electric utility for which it has 
     ratemaking authority), and each nonregulated electric 
     utility, shall complete the consideration, and shall make the 
     determination, referred to in section 111 with respect to the 
     standard established by paragraph (14) of section 111(d).''.
       (h) Failure To Comply.--Section 112(c) of the Public 
     Utility Regulatory Policies Act of 1978 (16 U.S.C. 2622(c)) 
     is amended by adding at the end the following:

     ``In the case of the standard established by paragraph (14) 
     of section 111(d), the reference contained in this subsection 
     to the date of enactment of this Act shall be deemed to be a 
     reference to the date of enactment of such paragraph (14).''.
       (i) Prior State Actions Regarding Smart Metering 
     Standards.--
       (1) In general.--Section 112 of the Public Utility 
     Regulatory Policies Act of 1978 (16 U.S.C. 2622) is amended 
     by adding at the end the following:
       ``(e) Prior State Actions.--Subsections (b) and (c) of this 
     section shall not apply to the standard established by 
     paragraph (14) of section 111(d) in the case of any electric 
     utility in a State if, before the enactment of this 
     subsection--
       ``(1) the State has implemented for such utility the 
     standard concerned (or a comparable standard);
       ``(2) the State regulatory authority for such State or 
     relevant nonregulated electric utility has conducted a 
     proceeding to consider implementation of the standard 
     concerned (or a comparable standard) for such utility within 
     the previous 3 years; or
       ``(3) the State legislature has voted on the implementation 
     of such standard (or a comparable standard) for such utility 
     within the previous 3 years.''.
       (2) Cross reference.--Section 124 of such Act (16 U.S.C. 
     2634) is amended by adding the following at the end thereof: 
     ``In the case of the standard established by paragraph (14) 
     of section 111(d), the reference contained in this subsection 
     to the date of enactment of this Act shall be deemed to be a 
     reference to the date of enactment of such paragraph (14).''.

     SEC. 1253. 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 issue 
     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

[[Page H11284]]

     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 issued 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) 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) Qualifying small power production facility.--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) Qualifying cogeneration facility.--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 F--Repeal of PUHCA

     SEC. 1261. SHORT TITLE.

       This subtitle may be cited as the ``Public Utility Holding 
     Company Act of 2003''.

     SEC. 1262. DEFINITIONS.

       For purposes of this subtitle:
       (1) Affiliate.--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.
       (2) Associate company.--The term ``associate company'' of a 
     company means any company in the same holding company system 
     with such company.
       (3) Commission.--The term ``Commission'' means the Federal 
     Energy Regulatory Commission.
       (4) Company.--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) Electric utility company.--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) Exempt wholesale generator and foreign utility 
     company.--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-5a, 79z-5b), as 
     those sections existed on the day before the effective date 
     of this subtitle.
       (7) Gas utility company.--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) Holding company.--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 1 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) Holding company system.--The term ``holding company 
     system'' means a holding company, together with its 
     subsidiary companies.
       (10) Jurisdictional rates.--The term ``jurisdictional 
     rates'' means rates accepted or 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) Natural gas company.--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) Person.--The term ``person'' means an individual or 
     company.
       (13) Public utility.--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) Public-utility company.--The term ``public-utility 
     company'' means an electric utility company or a gas utility 
     company.
       (15) State commission.--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) Subsidiary company.--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 1 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) Voting security.--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. 1263. REPEAL OF THE PUBLIC UTILITY HOLDING COMPANY ACT 
                   OF 1935.

       The Public Utility Holding Company Act of 1935 (15 U.S.C. 
     79 et seq.) is repealed.

     SEC. 1264. 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 shall 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. 1265. 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, the holding company or 
     any associate company or affiliate thereof, other than such 
     public-utility company, 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) Limitation.--Subsection (a) does not apply to any 
     person that is a holding company solely by reason of 
     ownership of 1 or more qualifying facilities under the Public 
     Utility Regulatory Policies Act of 1978 (16 U.S.C. 2601 et 
     seq.).
       (c) Confidentiality of Information.--The production of 
     books, accounts, memoranda, and other records under 
     subsection (a) shall be 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.
       (d) Effect on State Law.--Nothing in this section shall 
     preempt applicable State law concerning the provision of 
     books, accounts, memoranda, and other records, or in any way 
     limit the rights of any State to obtain books, accounts, 
     memoranda, and other records under any other Federal law, 
     contract, or otherwise.
       (e) Court Jurisdiction.--Any United States district court 
     located in the State in which the

[[Page H11285]]

     State commission referred to in subsection (a) is located 
     shall have jurisdiction to enforce compliance with this 
     section.

     SEC. 1266. EXEMPTION AUTHORITY.

       (a) Rulemaking.--Not later than 90 days after the effective 
     date of this subtitle, the Commission shall issue a final 
     rule to exempt from the requirements of section 1264 
     (relating to Federal access to books and records) any person 
     that is a holding company, solely with respect to 1 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.--The Commission shall exempt a person 
     or transaction from the requirements of section 1264 
     (relating to Federal access to books and records) if, upon 
     application or upon the motion of the Commission--
       (1) 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 or natural 
     gas company; or
       (2) the Commission finds that any class of transactions is 
     not relevant to the jurisdictional rates of a public utility 
     or natural gas company.

     SEC. 1267. AFFILIATE TRANSACTIONS.

       (a) Commission Authority Unaffected.--Nothing in this 
     subtitle shall limit the authority of the Commission under 
     the Federal Power Act (16 U.S.C. 791a et seq.) to require 
     that jurisdictional rates are just and reasonable, including 
     the ability to deny or approve the pass through of costs, the 
     prevention of cross-subsidization, and the issuance of such 
     rules and regulations as are necessary or appropriate for the 
     protection of utility consumers.
       (b) Recovery of Costs.--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 from an 
     associate company.

     SEC. 1268. APPLICABILITY.

       Except as otherwise specifically provided in this subtitle, 
     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), (3), or (4) acting as such in the 
     course of his or her official duty.

     SEC. 1269. 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. 1270. 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. 1271. SAVINGS PROVISIONS.

       (a) In General.--Nothing in this subtitle, or otherwise in 
     the Public Utility Holding Company Act of 1935, or rules, 
     regulations, or orders thereunder, 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 of this Act, if that person 
     continues to comply with the terms (other than an expiration 
     date or termination date) 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.) or the Natural Gas 
     Act (15 U.S.C. 717 et seq.).

     SEC. 1272. IMPLEMENTATION.

       Not later than 12 months after the date of enactment of 
     this subtitle, the Commission shall--
       (1) issue such regulations as may be necessary or 
     appropriate to implement this subtitle (other than section 
     1265, relating to State access to books and records); 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. 1273. 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. 1274. EFFECTIVE DATE.

       (a) In General.--Except for section 1272 (relating to 
     implementation), this subtitle shall take effect 12 months 
     after the date of enactment of this subtitle.
       (b) Compliance With Certain Rules.--If the Commission 
     approves and makes effective any final rulemaking modifying 
     the standards of conduct governing entities that own, 
     operate, or control facilities for transmission of 
     electricity in interstate commerce or transportation of 
     natural gas in interstate commerce prior to the effective 
     date of this subtitle, any action taken by a public-utility 
     company or utility holding company to comply with the 
     requirements of such rulemaking shall not subject such 
     public-utility company or utility holding company to any 
     regulatory requirement applicable to a holding company under 
     the Public Utility Holding Company Act of 1935 (15 U.S.C. 79 
     et seq.).

     SEC. 1275. SERVICE ALLOCATION.

       (a) FERC Review.--In the case of non-power goods or 
     administrative or management services provided by an 
     associate company organized specifically for the purpose of 
     providing such goods or services to any public utility in the 
     same holding company system, at the election of the system or 
     a State commission having jurisdiction over the public 
     utility, the Commission, after the effective date of this 
     subtitle, shall review and authorize the allocation of the 
     costs for such goods or services to the extent relevant to 
     that associate company in order to assure that each 
     allocation is appropriate for the protection of investors and 
     consumers of such public utility.
       (b) Cost Allocation.--Nothing in this section shall 
     preclude the Commission or a State commission from exercising 
     its jurisdiction under other applicable law with respect to 
     the review or authorization of any costs allocated to a 
     public utility in a holding company system located in the 
     affected State as a result of the acquisition of non-power 
     goods or administrative and management services by such 
     public utility from an associate company organized 
     specifically for that purpose.
       (c) Rules.--Not later than 6 months after the date of 
     enactment of this Act, the Commission shall issue rules 
     (which rules shall be effective no earlier than the effective 
     date of this subtitle) to exempt from the requirements of 
     this section any company in a holding company system whose 
     public utility operations are confined substantially to a 
     single State and any other class of transactions that the 
     Commission finds is not relevant to the jurisdictional rates 
     of a public utility.
       (d) Public Utility.--As used in this section, the term 
     ``public utility'' has the meaning given that term in section 
     201(e) of the Federal Power Act.

     SEC. 1276. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated such funds as may 
     be necessary to carry out this subtitle.

     SEC. 1277. CONFORMING AMENDMENTS TO THE FEDERAL POWER ACT.

       (a) Conflict of Jurisdiction.--Section 318 of the Federal 
     Power Act (16 U.S.C. 825q) is repealed.
       (b) Definitions.--(1) Section 201(g)(5) of the Federal 
     Power Act (16 U.S.C. 824(g)(5)) is amended by striking 
     ``1935'' and inserting ``2003''.
       (2) Section 214 of the Federal Power Act (16 U.S.C. 824m) 
     is amended by striking ``1935'' and inserting ``2003''.
 Subtitle G--Market Transparency, Enforcement, and Consumer Protection

     SEC. 1281. 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:

     ``SEC. 220. MARKET TRANSPARENCY RULES.

       ``(a) In General.--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 under this Act. 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 on a timely basis. The Commission shall have 
     authority to obtain such information from any electric 
     utility or transmitting utility, including any entity 
     described in section 201(f).
       ``(b) Exemptions.--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 
     transactions for the purchase or sale of wholesale electric 
     energy or 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) Commodity Futures Trading Commission.--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.
       ``(d) Savings Provision.--In exercising its authority under 
     this section, the Commission shall not--
       ``(1) compete with, or displace from the market place, any 
     price publisher; or
       ``(2) regulate price publishers or impose any requirements 
     on the publication of information.''.

     SEC. 1282. 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:

[[Page H11286]]

     ``SEC. 221. PROHIBITION ON FILING FALSE INFORMATION.

       ``No person or other entity (including an entity described 
     in section 201(f)) shall willfully and knowingly 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 a Federal agency with intent 
     to fraudulently affect the data being compiled by such 
     Federal agency.

     ``SEC. 222. PROHIBITION ON ROUND TRIP TRADING.

       ``(a) Prohibition.--No person or other entity (including an 
     entity described in section 201(f)) shall willfully and 
     knowingly enter into any contract or other arrangement to 
     execute a `round trip trade' for the purchase or sale of 
     electric energy at wholesale.
       ``(b) Definition.--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 a 
     specific intent to fraudulently affect reported revenues, 
     trading volumes, or prices.''.

     SEC. 1283. ENFORCEMENT.

       (a) Complaints.--Section 306 of the Federal Power Act (16 
     U.S.C. 825e) is amended as follows:
       (1) By inserting ``electric utility,'' after ``Any 
     person,''.
       (2) By inserting ``, transmitting utility,'' after 
     ``licensee'' each place it appears.
       (b) Review of Commission Orders.--Section 313(a) of the 
     Federal Power Act (16 U.S.C. 8251) is amended by inserting 
     `electric utility,' after `person,' in the first 2 places it 
     appears and by striking `any person unless such person' and 
     inserting `any entity unless such entity'.
       (c) Investigations.--Section 307(a) of the Federal Power 
     Act (16 U.S.C. 825f(a)) is amended as follows:
       (1) By inserting `, electric utility, transmitting utility, 
     or other entity' after `person' each time it appears.
       (2) By striking the period at the end of the first sentence 
     and inserting the following: ``or in obtaining information 
     about the sale of electric energy at wholesale in interstate 
     commerce and the transmission of electric energy in 
     interstate commerce.''.
       (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 
     ``5 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 as follows:
       (1) In subsections (a) and (b), by striking ``section 211, 
     212, 213, or 214'' each place it appears and inserting ``Part 
     II''.
       (2) In subsection (b), by striking ``$10,000'' and 
     inserting ``$1,000,000''.

     SEC. 1284. REFUND EFFECTIVE DATE.

       Section 206(b) of the Federal Power Act (16 U.S.C. 824e(b)) 
     is amended as follows:
       (1) By 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) By striking ``60 days after'' in the third sentence and 
     inserting ``of''.
       (3) By striking ``expiration of such 60-day period'' in the 
     third sentence and inserting ``publication date''.
       (4) By 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.''.

     SEC. 1285. REFUND AUTHORITY.

       Section 206 of the Federal Power Act (16 U.S.C. 824e) is 
     amended by adding the following new subsection at the end 
     thereof:
       ``(e)(1) Except as provided in paragraph (2), if an entity 
     described in section 201(f) voluntarily makes a short-term 
     sale of electric energy and the sale violates Commission 
     rules in effect at the time of the sale, such entity shall be 
     subject to the Commission's refund authority under this 
     section with respect to such violation.
       ``(2) This section shall not apply to--
       ``(A) any entity that sells less than 8,000,000 megawatt 
     hours of electricity per year; or
       ``(B) any electric cooperative.
       ``(3) For purposes of this subsection, the term `short-term 
     sale' means an agreement for the sale of electric energy at 
     wholesale in interstate commerce that is for a period of 31 
     days or less (excluding monthly contracts subject to 
     automatic renewal).
       ``(4) The Commission shall have refund authority under 
     subsection (e)(1) with respect to a voluntary short-term sale 
     of electric energy by the Bonneville Power Administration (in 
     this section `Bonneville') only if the sale is at an unjust 
     and unreasonable rate and, in that event, may order a refund 
     only for short-term sales made by Bonneville at rates that 
     are higher than the highest just and reasonable rate charged 
     by any other entity for a short-term sale of electric energy 
     in the same geographic market for the same, or most nearly 
     comparable, period as the sale by Bonneville.
       ``(5) With respect to any Federal power marketing agency or 
     the Tennessee Valley Authority, the Commission shall not 
     assert or exercise any regulatory authority or powers under 
     subsection (e)(1) other than the ordering of refunds to 
     achieve a just and reasonable rate.''.

     SEC. 1286. SANCTITY OF CONTRACT.

       (a) In General.--The Federal Energy Regulatory Commission 
     (in this section, ``the Commission'') shall have no authority 
     to abrogate or modify any provision of an executed contract 
     or executed contract amendment described in subsection (b) 
     that has been entered into or taken effect, except upon a 
     finding that failure to take such action would be contrary to 
     the public interest.
       (b) Limitation.--Except as provided in subsection (c), this 
     section shall apply only to a contract or contract 
     amendment--
       (1) executed on or after the date of enactment of this Act; 
     and
       (2) entered into--
       (A) for the purchase or sale of electric energy under 
     section 205 of the Federal Power Act (16 U.S.C. 824d) where 
     the seller has been authorized by the Commission to charge 
     market-based rates; or
       (B) under section 4 of the Natural Gas Act (15 U.S.C. 717c) 
     where the natural gas company has been authorized by the 
     Commission to charge market-based rates for the service 
     described in the contract.
       (c) Exclusion.--This section shall not apply to an executed 
     contract or executed contract amendment that expressly 
     provides for a standard of review other than the public 
     interest standard.
       (d) Savings Provision.--With respect to contracts to which 
     this section does not apply, nothing in this section alters 
     existing law regarding the applicable standard of review for 
     a contract subject to the jurisdiction of the Commission.

     SEC. 1287. CONSUMER PRIVACY AND UNFAIR TRADE PRACTICES.

       (a) Privacy.--The Federal Trade Commission may issue rules 
     protecting the privacy of electric consumers from the 
     disclosure of consumer information obtained in connection 
     with the sale or delivery of electric energy to electric 
     consumers.
       (b) Slamming.--The Federal Trade Commission may issue rules 
     prohibiting the change of selection of an electric utility 
     except with the informed consent of the electric consumer or 
     if approved by the appropriate State regulatory authority.
       (c) Cramming.--The Federal Trade Commission may issue rules 
     prohibiting the sale of goods and services to an electric 
     consumer unless expressly authorized by law or the electric 
     consumer.
       (d) Rulemaking.--The Federal Trade Commission shall proceed 
     in accordance with section 553 of title 5, United States 
     Code, when prescribing a rule under this section.
       (e) 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.
       (f) Definitions.--For purposes of this section:
       (1) State regulatory authority.--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) Electric consumer and electric utility.--The terms 
     ``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--Merger Reform

     SEC. 1291. MERGER REVIEW REFORM AND ACCOUNTABILITY.

       (a) Merger Review Reform.--Within 180 days after the date 
     of enactment of this Act, the Secretary of Energy, in 
     consultation with the Federal Energy Regulatory Commission 
     and the Attorney General of the United States, shall prepare, 
     and transmit to Congress each of the following:
       (1) A study of the extent to which the authorities vested 
     in the Federal Energy Regulatory Commission under section 203 
     of the Federal Power Act are duplicative of authorities 
     vested in--
       (A) other agencies of Federal and State Government; and
       (B) the Federal Energy Regulatory Commission, including 
     under sections 205 and 206 of the Federal Power Act.
       (2) Recommendations on reforms to the Federal Power Act 
     that would eliminate any unnecessary duplication in the 
     exercise of regulatory authority or unnecessary delays in the 
     approval (or disapproval) of applications for the sale, 
     lease, or other disposition of public utility facilities.
       (b) Merger Review Accountability.--Not later than 1 year 
     after the date of enactment of this Act and annually 
     thereafter, with respect to all orders issued within the 
     preceding year that impose a condition on a sale, lease, or 
     other disposition of public utility facilities under section 
     203(b) of the Federal Power Act, the Federal Energy 
     Regulatory Commission shall transmit a report to Congress 
     explaining each of the following:
       (1) The condition imposed.
       (2) Whether the Commission could have imposed such 
     condition by exercising its authority under any provision of 
     the Federal Power Act other than under section 203(b).
       (3) If the Commission could not have imposed such condition 
     other than under section 203(b),

[[Page H11287]]

     why the Commission determined that such condition was 
     consistent with the public interest.

     SEC. 1292. ELECTRIC UTILITY MERGERS.

       (a) Amendment.--Section 203(a) of the Federal Power Act (16 
     U.S.C. 824b(a)) 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 
     person, by any means whatsoever; or
       ``(C) purchase, acquire, or take any security with a value 
     in excess of $10,000,000 of any other public utility.
       ``(2) No holding company in a holding company system that 
     includes a public utility shall purchase, acquire, or take 
     any security with a value in excess of $10,000,000 of, or, by 
     any means whatsoever, directly or indirectly, merge or 
     consolidate with, a public utility or a holding company in a 
     holding company system that includes a public utility with a 
     value in excess of $10,000,000 without first having secured 
     an order of the Commission authorizing it to do so.
       ``(3) Upon receipt of an 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 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
       ``(D) 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 not later than 180 
     days after the application is filed. If the Commission does 
     not act within 180 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 an order tolling the time for acting on the 
     application for not more than 180 days, at the end of which 
     additional period the Commission shall grant or deny the 
     application.
       ``(6) For purposes of this subsection, the terms `associate 
     company', `holding company', and `holding company system' 
     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.
                        Subtitle I--Definitions

     SEC. 1295. 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.--The term `electric utility' means 
     any person or Federal or State agency (including any entity 
     described in section 201(f)) that sells electric energy; such 
     term includes the Tennessee Valley Authority and each Federal 
     power marketing administration.''.
       (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.--The term `transmitting 
     utility' means an entity, including any entity described in 
     section 201(f), that owns, operates, or controls 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.--Section 3 of the Federal Power 
     Act (16 U.S.C. 796) is amended by adding at the end the 
     following:
       ``(26) Electric cooperative.--The term `electric 
     cooperative' means a cooperatively owned electric utility.
       ``(27) RTO.--The term `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 
     nondiscriminatory access to such facilities.
       ``(28) ISO.--The term `Independent System Operator' or 
     `ISO' means an entity 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 nondiscriminatory access to such facilities.''.
       (d) Commission.--For the purposes of this title, the term 
     ``Commission'' means the Federal Energy Regulatory 
     Commission.
       (e) Applicability.--Section 201(f) of the Federal Power Act 
     (16 U.S.C. 824(f)) is amended by adding after ``political 
     subdivision of a state,'' the following: ``an electric 
     cooperative that has financing under the Rural 
     Electrification Act of 1936 (7 U.S.C. 901 et seq.) or that 
     sells less than 4,000,000 megawatt hours of electricity per 
     year,''.
            Subtitle J--Technical and Conforming Amendments

     SEC. 1297. CONFORMING AMENDMENTS.

       The Federal Power Act is amended as follows:
       (1) Section 201(b)(2) of such Act (16 U.S.C. 824(b)(2)) is 
     amended as follows:
       (A) In the first sentence by striking ``210, 211, and 212'' 
     and inserting ``203(a)(2), 206(e), 210, 211, 211A, 212, 215, 
     216, 217, 218, 219, 220, 221, and 222''.
       (B) In the second sentence by striking ``210 or 211'' and 
     inserting ``203(a)(2), 206(e), 210, 211, 211A, 212, 215, 216, 
     217, 218, 219, 220, 221, and 222''.
       (C) Section 201(b)(2) of such Act is amended by striking 
     ``The'' in the first place it appears and inserting 
     ``Notwithstanding section 201(f), the'' and in the second 
     sentence after ``any order'' by inserting ``or rule''.
       (2) Section 201(e) of such Act is amended by striking 
     ``210, 211, or 212'' and inserting ``206(e), 206(f), 210, 
     211, 211A, 212, 215, 216, 217, 218, 219, 220, 221, and 222''.
       (3) Section 206 of such Act (16 U.S.C. 824e) is amended as 
     follows:
       (A) In subsection (b), in the seventh sentence, by striking 
     ``the public utility to make''.
       (B) In the first sentence of subsection (a), by striking 
     `hearing had' and inserting ``hearing held''.
       (4) Section 211(c) of such Act (16 U.S.C. 824j(c)) is 
     amended by--
       (A) striking ``(2)'';
       (B) striking ``(A)'' and inserting ``(1)''
       (C) striking ``(B)'' and inserting ``(2)''; and
       (D) striking ``termination of modification'' and inserting 
     ``termination or modification''.
       (5) Section 211(d)(1) of such Act (16 U.S.C. 824j(d)(1)) is 
     amended by striking ``electric utility'' the second time it 
     appears and inserting ``transmitting utility''.
       (6) Section 315 (c) of such Act (16 U.S.C. 825n(c)) is 
     amended by striking ``subsection'' and inserting ``section''.
                   TITLE XIII--ENERGY TAX INCENTIVES

     SEC. 1300. SHORT TITLE; AMENDMENT OF 1986 CODE.

       (a) Short Title.--This title may be cited as the ``Energy 
     Tax Policy Act of 2003''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this title 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.
                        Subtitle A--Conservation

               PART I--RESIDENTIAL AND BUSINESS PROPERTY

     SEC. 1301. 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 solar water heating 
     property expenditures made by the taxpayer during such year,
       ``(2) 15 percent of the qualified photovoltaic property 
     expenditures made by the taxpayer during such year,
       ``(3) 15 percent of the qualified wind energy property 
     expenditures made by the taxpayer during such year, and
       ``(4) 20 percent of the qualified fuel cell property 
     expenditures made by the taxpayer during such year.
       ``(b) Limitations.--
       ``(1) Maximum credit.--
       ``(A) In general.--The credit allowed under subsection (a) 
     shall not exceed--
       ``(i) $2,000 for property described in paragraph (1), (2), 
     or (3) of subsection (c), and
       ``(ii) $500 for each 0.5 kilowatt of capacity of property 
     described in subsection (c)(4).
       ``(B) Prior expenditures by taxpayer on same residence 
     taken into account.--In determining the amount of the credit 
     allowed to a taxpayer with respect to any dwelling unit under 
     this section, the dollar amount under subparagraph (A)(i) 
     with respect to each type of property described in such 
     subparagraph shall be reduced by the credit allowed to the 
     taxpayer under this section with respect to such property for 
     all preceding taxable years with respect to such dwelling 
     unit.
       ``(2) Property standards.--No credit shall be allowed under 
     this section for an item of property unless--
       ``(A) the original use of such property commences with the 
     taxpayer,
       ``(B) such property reasonably can be expected to remain in 
     use for at least 5 years,
       ``(C) such property is installed on or in connection with a 
     dwelling unit located in the United States and used as a 
     residence by the taxpayer,
       ``(D) in the case of solar water heating property, such 
     property is certified for performance by the non-profit Solar 
     Rating and Certification Corporation or a comparable entity 
     endorsed by the government of the State in which such 
     property is installed,
       ``(E) in the case of fuel cell property, such property 
     meets the performance and quality

[[Page H11288]]

     standards (if any) which have been prescribed by the 
     Secretary by regulations (after consultation with the 
     Secretary of Energy), and
       ``(F) in the case of any photovoltaic property, fuel cell 
     property, or wind energy property, such property meets 
     appropriate fire and electric code requirements.
       ``(c) 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 which uses solar energy to 
     heat water for use in a dwelling unit.
       ``(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 and which is not 
     described in paragraph (1).
       ``(3) 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.
       ``(4) Qualified fuel cell property expenditure.--The term 
     `qualified fuel cell property expenditure' means an 
     expenditure for any qualified fuel cell property (as defined 
     in section 48(c)(1)).
       ``(d) Special Rules.--For purposes of this section--
       ``(1) 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) of subsection (c) solely because it 
     constitutes a structural component of the structure on which 
     it is installed.
       ``(2) 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.
       ``(3) 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 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.
       ``(C) Subparagraphs (A) and (B) shall be applied separately 
     with respect to expenditures described in paragraphs (1), 
     (2), (3), and (4) of subsection (c).
       ``(4) 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 the individual's 
     tenant-stockholder's proportionate share (as defined in 
     section 216(b)(3)) of any expenditures of such corporation.
       ``(5) 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.
       ``(6) 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.
       ``(7) 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.
       ``(8) 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)(4)(C)).
       ``(9) Denial of depreciation on wind energy property for 
     which credit allowed.--No deduction shall be allowed under 
     section 167 for property which uses wind energy to generate 
     electricity if the taxpayer is allowed a credit under this 
     section with respect to such property.
       ``(e) 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.
       ``(f) Termination.--The credit allowed under this section 
     shall not apply to taxable years beginning after December 31, 
     2006 (December 31, 2008, with respect to qualified 
     photovoltaic property expenditures).''.
       (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 25C(e), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25C.''.
       (2) 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.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 2003.

     SEC. 1302. 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) open-loop biomass,
       ``(D) geothermal energy,
       ``(E) solar energy,
       ``(F) small irrigation power, and
       ``(G) 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) Open-loop biomass.--
       ``(A) In general.--The term `open-loop 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.

     Such term shall not include closed-loop biomass.
       ``(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 nameplate capacity rating of which is not less 
     than 150 kilowatts but is less than 5 megawatts.
       ``(6) 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

[[Page H11289]]

     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 Policy 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) Open-loop biomass facilities.--
       ``(A) In general.--In the case of a facility using open-
     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--

       ``(I) is originally placed in service after the date of the 
     enactment of the Energy Tax Policy Act of 2003 and before 
     January 1, 2007, and

       ``(II) the nameplate capacity rating of which is not less 
     than 150 kilowatts, and

       ``(ii) in the case of any other facility, is originally 
     placed in service before January 1, 2007.
       ``(B) 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.--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 Policy Act 
     of 2003 and before January 1, 2007. Such term shall not 
     include any property described in section 48(a)(3) the basis 
     of which is taken into account by the taxpayer for purposes 
     of determining the energy credit under section 48.
       ``(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 Policy Act of 2003 and 
     before January 1, 2007.
       ``(6) Landfill gas facilities.--In the case of a facility 
     producing electricity from gas derived from the 
     biodegradation of municipal solid waste, 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 Policy Act of 2003 and before January 1, 
     2007.
       ``(7) Trash combustion facilities.--In the case of a 
     facility which burns municipal solid waste 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 Policy Act 
     of 2003 and before January 1, 2007.''.
       (2) 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) Special Credit Rate and Period for Electricity Produced 
     and Sold After Enactment Date.--Section 45(b) is amended by 
     adding at the end the following new paragraph:
       ``(4) Credit rate and period for electricity produced and 
     sold from certain facilities.--
       ``(A) Credit rate.--In the case of electricity produced and 
     sold in any calendar year after 2003 at any qualified 
     facility described in paragraph (3), (5), (6), or (7) of 
     subsection (d), the amount in effect under subsection (a)(1) 
     for such calendar year (determined before the application of 
     the last sentence of paragraph (2) of this subsection) shall 
     be reduced by one-third.
       ``(B) Credit period.--
       ``(i) In general.--Except as provided in clause (ii), in 
     the case of any facility described in paragraph (3), (4), 
     (5), (6), or (7) of subsection (d), 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).
       ``(ii) Certain open-loop biomass facilities.--In the case 
     of any facility described in subsection (d)(3)(A)(ii) placed 
     in service before the date of the enactment of this 
     paragraph, the 5-year period beginning on January 1, 2004, 
     shall be substituted for the 10-year period in subsection 
     (a)(2)(A)(ii).''.
       (d) Coordination With Other Credits.--Section 45(e), as so 
     redesignated, is amended by adding at the end the following 
     new paragraph:
       ``(8) Coordination with other credits.--The term `qualified 
     facility' shall not include--
       ``(A) any property with respect to which a credit is 
     allowed under section 25C, and
       ``(B) any facility the production from which is allowed as 
     a credit under section 45K,
     for the taxable year or any prior taxable year.''.
       (e) Coordination With Section 48.--Section 48(a)(3) 
     (defining energy property) is amended by adding at the end 
     the following new sentence: ``Such term shall not include any 
     property which is part of a facility the production from 
     which is allowed as a credit under section 45 for the taxable 
     year or any prior taxable year.''.
       (f) Elimination of Certain Credit Reductions.--Section 
     45(b)(3) (relating to credit reduced for grants, tax-exempt 
     bonds, subsidized energy financing, and other credits) is 
     amended--
       (1) by inserting ``the lesser of \1/2\ or'' before ``a 
     fraction'' in the matter preceding subparagraph (A), and
       (2) 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).''.
       (g) 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 and period 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 before January 1, 2004.
       (h) GAO Study.--The Comptroller General of the United 
     States shall conduct a study on the market viability of 
     producing electricity from resources with respect to which 
     credit is allowed under section 45 of the Internal Revenue 
     Code of 1986 but without such credit. In the case of open-
     loop biomass and municipal solid waste resources, the study 
     should take into account savings associated with not having 
     to dispose of such resources. In conducting such study, the 
     Comptroller shall estimate the dollar value of the 
     environmental impact of producing electricity from such 
     resources relative to producing electricity from fossil fuels 
     using the latest generation of technology. Not later than 
     June 30, 2006, the Comptroller shall report on such study to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate.

     SEC. 1303. CREDIT FOR BUSINESS INSTALLATION OF QUALIFIED FUEL 
                   CELLS.

       (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,''.
       (b) Qualified Fuel Cell Property.--Section 48 (relating to 
     energy credit; reforestation credit) is amended by adding at 
     the end the following new subsection:
       ``(c) Qualified Fuel Cell Property.--For purposes of 
     subsection (a)(3)(A)(iii)--
       ``(1) In general.--The term `qualified fuel cell property' 
     means a fuel cell power plant which generates at least 0.5 
     kilowatt of electricity using an electrochemical process.
       ``(2) Limitation.--The energy credit with respect to any 
     qualified fuel cell property shall not exceed an amount equal 
     to $500 for each 0.5 kilowatt of capacity of such property.
       ``(3) 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.
       ``(4) Termination.--The term `qualified fuel cell property' 
     shall not include any property placed in service after 
     December 31, 2006.''.
       (c) Energy Percentage.--Subparagraph (A) of section 
     48(a)(2) (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, 20 
     percent, and
       ``(ii) in the case of any other energy property, 10 
     percent.''.
       (d) Conforming Amendment.--Section 48(a)(1) is amended by 
     inserting ``except as provided in subsection (c)(2),'' before 
     ``the energy''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to periods after December 31, 2003, 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. 1304. 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 20 
     percent of the amount paid or incurred by the taxpayer for 
     qualified energy efficiency improvements installed during 
     such taxable year.
       ``(b) Limitations.--
       ``(1) Maximum credit.--The credit allowed by this section 
     with respect to a dwelling unit shall not exceed $2,000.
       ``(2) Prior credit amounts for taxpayer on same dwelling 
     taken into account.--If a credit was allowed to the taxpayer 
     under subsection (a) with respect to a dwelling unit in 1 or 
     more prior taxable years, the amount of the credit otherwise 
     allowable for the taxable year with respect to that dwelling 
     unit shall be reduced by the sum of the credits allowed under

[[Page H11290]]

     subsection (a) to the taxpayer with respect to the dwelling 
     unit for all prior taxable years.
       ``(c) Qualified Energy Efficiency Improvements.--For 
     purposes of this section, the term `qualified energy 
     efficiency improvements' means any energy efficient building 
     envelope component which meets the prescriptive criteria for 
     such component established by the 2000 International Energy 
     Conservation Code, as such Code (including supplements) is in 
     effect on the date of the enactment of this section (or, in 
     the case of a metal roof with appropriate pigmented coatings 
     which meet the Energy Star program requirements), if--
       ``(1) such component is installed in or on a dwelling 
     unit--
       ``(A) located in the United States,
       ``(B) owned and used by the taxpayer as the taxpayer's 
     principal residence (within the meaning of section 121), and
       ``(C) which has not been treated as a qualified new energy 
     efficient home for purposes of any credit allowed under 
     section 45G,
       ``(2) the original use of such component commences with the 
     taxpayer, and
       ``(3) such component reasonably can be expected to remain 
     in use for at least 5 years.

     If the aggregate cost of such components with respect to any 
     dwelling unit exceeds $1,000, such components shall be 
     treated as qualified energy efficiency improvements only if 
     such components are also certified in accordance with 
     subsection (d) as meeting such prescriptive criteria.
       ``(d) Certification.--The certification described in 
     subsection (c) shall be--
       ``(1) determined on the basis of the technical 
     specifications or applicable ratings (including product 
     labeling requirements) for the measurement of energy 
     efficiency (based upon energy use or building envelope 
     component performance) for the energy efficient building 
     envelope component,
       ``(2) provided by a local building regulatory authority, a 
     utility, a manufactured home production inspection primary 
     inspection agency (IPIA), or an accredited home energy rating 
     system provider who is accredited by or otherwise authorized 
     to use approved energy performance measurement methods by the 
     Residential Energy Services Network (RESNET), and
       ``(3) made in writing in a manner which specifies in 
     readily verifiable fashion the energy efficient building 
     envelope components installed and their respective energy 
     efficiency levels.
       ``(e) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) 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 dwelling unit when installed in or on such 
     dwelling unit,
       ``(B) exterior windows (including skylights),
       ``(C) exterior doors, and
       ``(D) any metal roof installed on a dwelling unit, but only 
     if such roof has appropriate pigmented coatings which are 
     specifically and primarily designed to reduce the heat gain 
     of such dwelling unit.
       ``(2) Manufactured homes included.--The term `dwelling 
     unit' includes a manufactured home which conforms to Federal 
     Manufactured Home Construction and Safety Standards (section 
     3280 of title 24, Code of Federal Regulations).
       ``(3) Application of rules.--Rules similar to the rules 
     under paragraphs (3), (4), and (5) of section 25C(d) shall 
     apply.
       ``(f) 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.
       ``(g) Application of Section.--This section shall apply to 
     qualified energy efficiency improvements installed after 
     December 31, 2003, and before January 1, 2007.''.
       (b) Conforming Amendments.--
       (1) Subsection (a) of section 1016, 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 25D(f), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25D.''.
       (2) 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.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 2003.

     SEC. 1305. CREDIT FOR CONSTRUCTION OF NEW ENERGY EFFICIENT 
                   HOMES.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits) 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 with respect to a qualified new 
     energy efficient home, the credit determined under this 
     section for the taxable year with respect to such home is an 
     amount equal to the aggregate adjusted bases of all energy 
     efficient property installed in such home during construction 
     of such home.
       ``(b) Limitations.--
       ``(1) Maximum credit.--
       ``(A) In general.--The credit allowed by this section with 
     respect to a dwelling unit shall not exceed--
       ``(i) in the case of a dwelling unit described in clause 
     (i) or (iii) of subsection (c)(3)(D), $1,000, and
       ``(ii) in the case of a dwelling unit described in 
     subsection (c)(3)(D)(ii), $2,000.
       ``(B) Prior credit amounts on same dwelling unit taken into 
     account.--If a credit was allowed under subsection (a) with 
     respect to a dwelling unit in 1 or more prior taxable years, 
     the amount of the credit otherwise allowable for the taxable 
     year with respect to such dwelling unit shall be reduced by 
     the sum of the credits allowed under subsection (a) with 
     respect to the dwelling unit for all prior 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 qualified rehabilitation 
     expenditures (as defined in section 47(c)(2)) or to the 
     energy percentage of energy property (as determined under 
     section 48(a)), and
       ``(B) expenditures taken into account under section 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 qualified new energy 
     efficient home, or
       ``(B) in the case of a qualified new energy efficient 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 qualified new energy efficient 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, result in a dwelling unit 
     meeting the requirements of this section.
       ``(3) Qualified new energy efficient home.--The term 
     `qualified new energy efficient home' means a dwelling unit--
       ``(A) located in the United States,
       ``(B) the construction of which is substantially completed 
     after December 31, 2003,
       ``(C) the original use of which, after such construction, 
     is reasonably expected to be as a residence by the person who 
     acquires such dwelling unit from the eligible contractor,
       ``(D) which is--
       ``(i) certified to have a level of annual heating and 
     cooling energy consumption which is at least 30 percent below 
     the annual level of heating and cooling energy consumption of 
     a comparable dwelling unit constructed in accordance with the 
     standards of chapter 4 of the 2000 International Energy 
     Conservation Code, as such Code (including supplements) is in 
     effect on the date of the enactment of this section, and to 
     have building envelope component improvements account for at 
     least \1/3\ of such 30 percent,
       ``(ii) certified to have a level of annual heating and 
     cooling energy consumption which is at least 50 percent below 
     such annual level and to have building envelope component 
     improvements account for at least \1/5\ of such 50 percent, 
     or
       ``(iii) a manufactured home which--

       ``(I) conforms to Federal Manufactured Home Construction 
     and Safety Standards (section 3280 of title 24, Code of 
     Federal Regulations), and
       ``(II) meets the applicable standards required by the 
     Administrator of the Environmental Protection Agency under 
     the Energy Star Labeled Homes program.

       ``(4) Construction.--The term `construction' includes 
     substantial reconstruction and rehabilitation.
       ``(5) Acquire.--The term `acquire' includes purchase and, 
     in the case of reconstruction and rehabilitation, such term 
     includes a binding written contract for such reconstruction 
     or rehabilitation.
       ``(6) 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 dwelling unit when installed in or on such 
     dwelling unit,
       ``(B) exterior windows (including skylights),
       ``(C) exterior doors, and
       ``(D) any metal roof installed on a dwelling unit, but only 
     if such roof has appropriate pigmented coatings which--
       ``(i) are specifically and primarily designed to reduce the 
     heat gain of such dwelling unit, and
       ``(ii) meet the Energy Star program requirements.
       ``(d) Certification.--
       ``(1) Method of certification.--A certification described 
     in subsection (c)(3)(D) shall be determined in accordance 
     with guidance prescribed by the Secretary. Such guidance 
     shall specify procedures and methods for calculating energy 
     and cost savings.
       ``(2) Form.--A certification described in subsection 
     (c)(3)(D) shall be made in writing--
       ``(A) 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
       ``(B) in the case of a qualified new energy efficient 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.
       ``(e) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is determined 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 determined.

[[Page H11291]]

       ``(f) Application of Section.--Subsection (a) shall apply 
     to qualified new energy efficient homes acquired during the 
     period beginning on January 1, 2004, and ending on December 
     31, 2006.''.
       (b) Credit Made Part of General 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 new energy efficient home credit determined 
     under section 45G(a).''.
       (c) Basis Adjustment.--Subsection (a) of section 1016, 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 45G(e), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 45G.''.
       (d) Limitation on Carryback.--
       (1) In general.--Subsection (d) of section 39 is amended to 
     read as follows:
       ``(d) Transitional Rule.--No portion of the unused business 
     credit for any taxable year which is attributable to a credit 
     specified in section 38(b) or any portion thereof may be 
     carried back to any taxable year before the first taxable 
     year for which such specified credit or such portion is 
     allowable (without regard to subsection (a)).''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply with respect to taxable years ending after 
     December 31, 2002.
       (e) Deduction for Certain Unused Business Credits.--Section 
     196(c) (defining qualified business credits) 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 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 taxable years ending after December 31, 2003.

     SEC. 1306. 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 
     (relating to energy credit; reforestation credit), as amended 
     by this Act, is amended by adding at the end the following 
     new subsection:
       ``(d) Combined Heat and Power System Property.--For 
     purposes of subsection (a)(3)(A)(iv)--
       ``(1) Combined heat and power system property.--The term 
     `combined heat and power system property' means property 
     comprising a system--
       ``(A) 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),
       ``(B) which has an electrical capacity of not more than 15 
     megawatts or a mechanical energy capacity of not more than 
     2,000 horsepower or an equivalent combination of electrical 
     and mechanical energy capacities,
       ``(C) 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),
       ``(D) the energy efficiency percentage of which exceeds 60 
     percent, and
       ``(E) which is placed in service before January 1, 2007.
       ``(2) Special rules.--
       ``(A) Energy efficiency percentage.--For purposes of this 
     subsection, 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 fuel sources for the system.
       ``(B) Determinations made on btu basis.--The energy 
     efficiency percentage and the percentages under paragraph 
     (1)(C) shall be determined on a Btu basis.
       ``(C) 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.
       ``(D) 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 subsection (a) if, with respect 
     to such property, the taxpayer uses a normalization method of 
     accounting.
       ``(ii) Certain exception not to apply.--The matter in 
     subsection (a)(3) which follows subparagraph (D) thereof 
     shall not apply to combined heat and power system property.
       ``(3) Systems using bagasse.--If a system is designed to 
     use bagasse for at least 90 percent of the energy source--
       ``(A) paragraph (1)(D) shall not apply, but
       ``(B) the amount of credit determined under subsection (a) 
     with respect to such system shall not exceed the amount which 
     bears the same ratio to such amount of credit (determined 
     without regard to this paragraph) as the energy efficiency 
     percentage of such system bears to 60 percent.''.
       (c) Effective Date.--The amendments made by this subsection 
     shall apply to periods after December 31, 2003, 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. 1307. 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.--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--
       ``(1) the tier I appliance amount, and
       ``(2) the tier II appliance amount,

     with respect to qualified energy efficient appliances 
     produced by the taxpayer during the calendar year ending with 
     or within the taxable year.
       ``(b) Appliance Amounts.--For purposes of subsection (a)--
       ``(1) Tier i appliance amount.--The tier I appliance amount 
     is equal to--
       ``(A) $100, multiplied by
       ``(B) an amount (rounded to the nearest whole number) equal 
     to the applicable percentage of the eligible production.
       ``(2) Tier ii appliance amount.--The tier II appliance 
     amount is equal to $150, multiplied by an amount equal to the 
     eligible production reduced by the amount determined under 
     paragraph (1)(B).
       ``(3) Applicable percentage.--The applicable percentage is 
     the percentage determined by dividing the tier I appliances 
     produced by the taxpayer during the calendar year by the sum 
     of the tier I and tier II appliances so produced.
       ``(4) Eligible production.--The eligible production of 
     qualified energy efficient appliances by the taxpayer for any 
     calendar year is the excess of--
       ``(A) the number of such appliances which are produced by 
     the taxpayer during such calendar year, over
       ``(B) 110 percent of the average annual number of such 
     appliances which were produced by the taxpayer (or any 
     predecessor) during the preceding 3-calendar year period.
       ``(c) Qualified Energy Efficient Appliance.--For purposes 
     of this section--
       ``(1) In general.--The term `qualified energy efficient 
     appliance' means any tier I appliance or tier II appliance 
     which is produced in the United States.
       ``(2) Tier i appliance.--The term `tier I appliance' 
     means--
       ``(A) a clothes washer which is produced with at least a 
     1.50 MEF, and
       ``(B) a refrigerator which consumes at least 15 percent (20 
     percent in the case of a refrigerator produced after 2006) 
     less kilowatt hours per year than the energy conservation 
     standards for refrigerators promulgated by the Department of 
     Energy and effective on July 1, 2001.
       ``(3) Tier ii appliance.--The term `tier II appliance' 
     means a refrigerator produced before 2007 which consumes at 
     least 20 percent less kilowatt hours per year than the energy 
     conservation standards described in paragraph (2)(B).
       ``(4) Clothes washer.--The term `clothes washer' means a 
     residential clothes washer, including a residential style 
     coin operated washer.
       ``(5) Refrigerator.--The term `refrigerator' means an 
     automatic defrost refrigerator-freezer which has an internal 
     volume of at least 16.5 cubic feet.
       ``(6) MEF.--The term `MEF' means Modified Energy Factor (as 
     determined by the Secretary of Energy).
       ``(7) Produced.--The term `produced' includes manufactured.
       ``(d) Limitation on Maximum Credit.--
       ``(1) In general.--The amount of credit allowed under 
     subsection (a) with respect to a taxpayer for any taxable 
     year shall not exceed $60,000,000, reduced by the amount of 
     the credit allowed under subsection (a) to the taxpayer (or 
     any predecessor) for any prior taxable year.
       ``(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 for 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.
       ``(e) Special Rules.--For purposes of this section--
       ``(1) In general.--Rules similar to the rules of 
     subsections (c), (d), and (e) of section 52 shall apply.
       ``(2) Controlled groups.--
       ``(A) In general.--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 a single 
     manufacturer.
       ``(B) Inclusion of foreign corporations.--For purposes of 
     subparagraph (A), in applying subsections (a) and (b) of 
     section 52 to this section, section 1563 shall be applied 
     without regard to subsection (b)(2)(C) thereof.

[[Page H11292]]

       ``(f) Verification.--The taxpayer shall submit such 
     information or certification as the Secretary, after 
     consultation with the Secretary of Energy, determines 
     necessary to claim the credit amount under subsection (a).
       ``(g) Termination.--This section shall not apply with 
     respect to 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 (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 energy efficient appliance credit determined 
     under section 45H(a).''.
       (c) 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.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to appliances produced after December 31, 2003, 
     in taxable years ending after such date.

     SEC. 1308. 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 an 
     amount equal to the cost of energy efficient commercial 
     building property placed in service during the taxable year.
       ``(b) Maximum Amount of Deduction.--The deduction under 
     subsection (a) with respect to any building for the taxable 
     year and all prior taxable years shall not exceed an amount 
     equal to the product of--
       ``(1) $1.50, and
       ``(2) the square footage of the building.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Energy efficient commercial building property.--The 
     term `energy efficient commercial building property' means 
     property--
       ``(A) which is installed on or in a building--
       ``(i) which is located in the United States, and
       ``(ii) which is the type of structure to which the Standard 
     90.1-2001 is applicable,
       ``(B) which is installed as part of--
       ``(i) the lighting systems,
       ``(ii) the heating, cooling, ventilation, and hot water 
     systems, or
       ``(iii) the building envelope, and
       ``(C) which is certified in accordance with subsection 
     (d)(4) as being installed as part of a plan designed to 
     reduce the total annual energy and power costs with respect 
     to the lighting systems, heating, cooling, ventilation, and 
     hot water systems of the building by 50 percent or more in 
     comparison to a reference building which meets the minimum 
     requirements of Standard 90.1-2001 using methods of 
     calculation under subsection (d)(2).
       ``(2) Standard 90.1-2001.--The term `Standard 90.1-2001' 
     means Standard 90.1-2001 of the American Society of Heating, 
     Refrigerating, and Air Conditioning Engineers and the 
     Illuminating Engineering Society of North America (as in 
     effect on April 2, 2003).
       ``(d) Special Rules.--
       ``(1) Partial allowance.--
       ``(A) In general.--Except as provided in subsection (f), in 
     the case of a building placed in service on or before the 
     date of the enactment of this section, if--
       ``(i) the requirement of subsection (c)(1)(C) is not met, 
     but
       ``(ii) there is a certification in accordance with 
     subsection (d)(4) that any system referred to in subsection 
     (c)(1)(B) satisfies the energy-savings targets established by 
     the Secretary under subparagraph (B) with respect to such 
     system,
     then the requirement of subsection (c)(1)(C) shall be treated 
     as met with respect to such system, and the deduction under 
     subsection (a) shall be allowed with respect to energy 
     efficient commercial building property installed as part of 
     such system and as part of a plan to meet such targets, 
     except that subsection (b) shall be applied to such property 
     by substituting `$.50' for `$1.50'.
       ``(B) Regulations.--The Secretary, after consultation with 
     the Secretary of Energy, shall establish a target for each 
     system described in subsection (c)(1)(B) which, if such 
     targets were met for all such systems, the building would 
     meet the requirements of subsection (c)(1)(C).
       ``(2) Methods of calculation.--The Secretary, after 
     consultation with the Secretary of Energy, shall promulgate 
     regulations which describe in detail methods for calculating 
     and verifying energy and power cost for purposes of this 
     section.
       ``(3) Notice to owner.--Each certification required under 
     this section shall include an explanation to the building 
     owner regarding the energy efficiency features of the 
     building and its projected annual energy costs.
       ``(4) Certification.--
       ``(A) In general.--The Secretary shall prescribe the manner 
     and method for the making of certifications under this 
     section.
       ``(B) Procedures.--The Secretary shall include as part of 
     the certification process procedures for inspection and 
     testing by qualified individuals described in subparagraph 
     (C) to ensure compliance of buildings with energy-savings 
     plans and targets. Such procedures shall be--
       ``(i) comparable, given the difference between commercial 
     and residential buildings, to the requirements in the 
     Mortgage Industry National Accreditation Procedures for Home 
     Energy Rating Systems, and
       ``(ii) fuel neutral such that the same energy efficiency 
     measures allow a building to be eligible for the deduction 
     under this section regardless of whether such building uses a 
     gas or oil furnace or boiler, an electric heat pump, or other 
     fuel source.
       ``(C) 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.
       ``(e) Basis Reduction.--For purposes of this subtitle, if a 
     deduction is allowed under this section with respect to any 
     energy efficient commercial building property, the basis of 
     such property shall be reduced by the amount of the deduction 
     so allowed.
       ``(f) Interim Rules for Lighting Systems.--Until such time 
     as the Secretary issues final regulations under subsection 
     (d)(1)(B) with respect to property which is part of a 
     lighting system--
       ``(1) In general.--The lighting system target under 
     subsection (d)(1)(A)(ii) shall be a reduction in lighting 
     power density of 25 percent (50 percent in the case of a 
     warehouse) of the minimum requirements in Table 9.3.1.1 or 
     Table 9.3.1.2 (not including additional interior lighting 
     power allowances) of Standard 90.1-2001.
       ``(2) Reduction in deduction if reduction less than 40 
     percent.--
       ``(A) In general.--If, with respect to the lighting system 
     of any building other than a warehouse, the reduction in 
     lighting power density of the lighting system is not at least 
     40 percent, only the applicable percentage of the amount of 
     deduction otherwise allowable under this section with respect 
     to such property shall be allowed.
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage is the number of percentage 
     points (not greater than 100) equal to the sum of--
       ``(i) 50, and
       ``(ii) the amount which bears the same ratio to 50 as the 
     excess of the reduction of lighting power density of the 
     lighting system over 25 percentage points bears to 15.
       ``(C) Exceptions.--This subsection shall not apply to any 
     system--
       ``(i) the controls and circuiting of which do not comply 
     fully with the mandatory and prescriptive requirements of 
     Standard 90.1-2001 and which do not include provision for 
     bilevel switching in all occupancies except hotel and motel 
     guest rooms, store rooms, restrooms, and public lobbies, or
       ``(ii) which does not meet the minimum requirements for 
     calculated lighting levels as set forth in the Illuminating 
     Engineering Society of North America Lighting Handbook, 
     Performance and Application, Ninth Edition, 2000.
       ``(g) Regulations.--The Secretary shall promulgate such 
     regulations as necessary--
       ``(1) to take into account new technologies regarding 
     energy efficiency and renewable energy for purposes of 
     determining energy efficiency and savings under this section, 
     and
       ``(2) to provide for a recapture of the deduction allowed 
     under this section if the plan described in subsection 
     (c)(1)(C) or (d)(1)(A) is not fully implemented.
       ``(h) Termination.--This section shall not apply with 
     respect to property placed in service after December 31, 
     2007.''.
       (b) Conforming Amendments.--
       (1) Section 1016(a), as amended by this section, 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(e).''.
       (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 property placed in service after the date of 
     the enactment of this Act in taxable years ending after such 
     date.

     SEC. 1309. 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

[[Page H11293]]

     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) Alternative System.--The table contained in section 
     168(g)(3)(B) is amended by inserting after the item relating 
     to subparagraph (A)(iii) the following:

``(A)(iv).........................................................20''.

       (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. 1310. CREDIT FOR PRODUCTION FROM ADVANCED NUCLEAR POWER 
                   FACILITIES.

       (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 after section 45K the 
     following new section:

     ``SEC. 45L. CREDIT FOR PRODUCTION FROM ADVANCED NUCLEAR POWER 
                   FACILITIES.

       ``(a) General Rule.--For purposes of section 38, the 
     advanced nuclear power facility production credit of any 
     taxpayer for any taxable year is equal to the product of--
       ``(1) 1.8 cents, multiplied by
       ``(2) the kilowatt hours of electricity--
       ``(A) produced by the taxpayer at an advanced nuclear power 
     facility during the 8-year period beginning on the date the 
     facility was originally placed in service, and
       ``(B) sold by the taxpayer to an unrelated person during 
     the taxable year.
       ``(b) National Limitation.--
       ``(1) In general.--The amount of credit which would (but 
     for this subsection and subsection (c)) be allowed with 
     respect to any facility for any taxable year shall not exceed 
     the amount which bears the same ratio to such amount of 
     credit as--
       ``(A) the national megawatt capacity limitation allocated 
     to the facility, bears to
       ``(B) the total megawatt nameplate capacity of such 
     facility.
       ``(2) Amount of national limitation.--The national megawatt 
     capacity limitation shall be 6,000 megawatts.
       ``(3) Allocation of limitation.--The Secretary shall 
     allocate the national megawatt capacity limitation in such 
     manner as the Secretary may prescribe.
       ``(4) 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 
     to carry out the purposes of this subsection. Such 
     regulations shall provide a certification process under which 
     the Secretary, after consultation with the Secretary of 
     Energy, shall approve and allocate the national megawatt 
     capacity limitation.
       ``(c) Other Limitations.--
       ``(1) Annual limitation.--The amount of the credit 
     allowable under subsection (a) (after the application of 
     subsection (b)) for any taxable year with respect to any 
     facility shall not exceed an amount which bears the same 
     ratio to $125,000,000 as--
       ``(A) the national megawatt capacity limitation allocated 
     under subsection (b) to the facility, bears to
       ``(B) 1,000.
       ``(2) Other limitations.--Rules similar to the rules of 
     section 45(b) shall apply for purposes of this section, 
     except that paragraph (2) thereof shall not apply to the 1.8 
     cents under subsection (a)(1).
       ``(d) Advanced Nuclear Power Facility.--For purposes of 
     this section--
       ``(1) In general.--The term `advanced nuclear power 
     facility' means any advanced nuclear facility--
       ``(A) which is owned by the taxpayer and which uses nuclear 
     energy to produce electricity, and
       ``(B) which is placed in service after the date of the 
     enactment of this paragraph and before January 1, 2021.
       ``(2) Advanced nuclear facility.--For purposes of paragraph 
     (1), the term `advanced nuclear facility' means any nuclear 
     facility the reactor design for which is approved after the 
     date of the enactment of this paragraph by the Nuclear 
     Regulatory Commission (and such design or a substantially 
     similar design of comparable capacity was not approved on or 
     before such date).
       ``(e) Other Rules To Apply.--Rules similar to the rules of 
     paragraphs (1), (2), (3), (4), and (5) of section 45(e) shall 
     apply for purposes of this section.''
       (b) Credit Treated as Business Credit.--Section 38(b), 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:
       ``(22) the advanced nuclear power facility production 
     credit determined under section 45L(a).''.
       (c) 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:

``Sec. 45L. Credit for production from advanced nuclear power 
              facilities.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to production in taxable years beginning after 
     December 31, 2003.

             PART II--FUELS AND ALTERNATIVE MOTOR VEHICLES

     SEC. 1311. 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. 1312. REDUCED MOTOR FUEL EXCISE TAX ON CERTAIN MIXTURES 
                   OF DIESEL FUEL.

       (a) In General.--Paragraph (2) of section 4081(a) is 
     amended by adding at the end the following:
       ``(C) Diesel-water fuel emulsion.--In the case of diesel-
     water fuel emulsion at least 14 percent of which is water and 
     with respect to which the emulsion additive is registered by 
     a United States manufacturer with the Environmental 
     Protection Agency pursuant to section 211 of the Clean Air 
     Act (as in effect on March 31, 2003), subparagraph (A)(iii) 
     shall be applied by substituting `19.7 cents' for `24.3 
     cents'.''.
       (b) Special Rules for Diesel-Water Fuel Emulsions.--
       (1) Refunds for tax-paid purchases.--Section 6427 is 
     amended by redesignating subsections (m) through (p) as 
     subsections (n) through (q), respectively, and by 
     inserting after subsection (l) the following new 
     subsection:
       ``(m) Diesel Fuel Used To Produce Emulsion.--
       ``(1) In general.--Except as provided in subsection (k), if 
     any diesel fuel on which tax was imposed by section 4081 at 
     the regular tax rate is used by any person in producing an 
     emulsion described in section 4081(a)(2)(C) 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 4081 determined 
     without regard to section 4081(a)(2)(C).
       ``(B) Incentive tax rate.--The term `incentive tax rate' 
     means the aggregate rate of tax imposed by section 4081 
     determined with regard to section 4081(a)(2)(C).''.
       (2) Later separation of fuel.--
       (A) In general.--Section 4081 (relating to imposition of 
     tax) is amended by redesignating subsections (d) and (e) as 
     subsections (e) and (f), respectively, and by inserting after 
     subsection (c) the following new subsection:
       ``(d) Later Separation of Fuel From Diesel-Water Fuel 
     Emulsion.--If any person separates the taxable fuel from a 
     diesel-water fuel emulsion on which tax was imposed under 
     subsection (a) at a rate determined under subsection 
     (a)(2)(C) (or with respect to which a credit or payment was 
     allowed or made by reason of section 6427), such person shall 
     be treated as the refiner of such taxable fuel. The amount of 
     tax imposed on any removal of such fuel by such person shall 
     be reduced by the amount of

[[Page H11294]]

     tax imposed (and not credited or refunded) on any prior 
     removal or entry of such fuel.''.
       (B) Conforming amendment.--Subsection (d) of section 6416 
     is amended by striking ``section 4081(e)'' and inserting 
     ``section 4081(f)''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2004.

     SEC. 1313. 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 rule.--If the amount of a credit which has 
     been apportioned to any patron under this paragraph is 
     decreased for any reason--
       ``(i) such amount shall not increase the tax imposed on 
     such patron, and
       ``(ii) the tax imposed by this chapter on such organization 
     shall be increased by such amount.

     The increase under clause (ii) 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) 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''.
       (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 December 31, 
     2003.

     SEC. 1314. INCENTIVES FOR BIODIESEL.

       (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. 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 a taxable 
     fuel (within the meaning of section 4083(a)(1)) 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 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.--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'.
       ``(4) Certification for biodiesel.--No credit shall be 
     allowed under this section unless the taxpayer obtains a 
     certification (in such form and manner as prescribed by the 
     Secretary) from the producer of the biodiesel which 
     identifies the product produced and the percentage of 
     biodiesel and agri-biodiesel in the product.
       ``(c) Coordination With Credit Against Excise Tax.--The 
     amount of the credit determined under this section with 
     respect to any biodiesel shall be properly reduced to take 
     into account any benefit provided with respect to such 
     biodiesel solely by reason of the application of section 
     6426.
       ``(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 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, including esters 
     derived from virgin vegetable oils from corn, soybeans, 
     sunflower seeds, cottonseeds, canola, crambe, rapeseeds, 
     safflowers, flaxseeds, rice bran, and mustard seeds, and from 
     animal fats.
       ``(3) Mixture or biodiesel not used as a fuel, etc.--
       ``(A) Mixtures.--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 the 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 such biodiesel in such mixture.
       ``(B) Biodiesel.--If--
       ``(i) any credit was determined under this section with 
     respect to the retail sale of any biodiesel, and
       ``(ii) any person mixes such biodiesel or uses such 
     biodiesel 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)(2)(A) 
     and the number of gallons of such biodiesel.
       ``(C) 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) or (B) 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 
     sale or use after December 31, 2005.''.
       (b) Credit Treated as Part of General Business Credit.--
     Section 38(b) (relating to current year business credit) 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 biodiesel fuels credit determined under section 
     40A(a).''.
       (c) Conforming Amendments.--
       (1)(A) Section 87 is amended to read as follows:

     ``SEC. 87. ALCOHOL AND BIODIESEL FUELS CREDITS.

       ``Gross income includes--
       ``(1) the amount of the alcohol fuels credit determined 
     with respect to the taxpayer for the taxable year under 
     section 40(a), and
       ``(2) the biodiesel fuels credit determined with respect to 
     the taxpayer for the taxable year under section 40A(a).''.
       (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''.
       (2) Section 196(c), as amended by this Act, is amended by 
     striking ``and'' at the end of paragraph (11), by striking 
     the period at the end of paragraph (12) and inserting ``, 
     and'', and by adding at the end the following new paragraph:
       ``(13) the biodiesel fuels credit determined under section 
     40A(a).''.
       (3) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1 is amended by adding after the item 
     relating to section 40 the following new item:

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

       (d) Effective Date.--The amendments made by this section 
     shall apply to fuel produced, and sold or used, after 
     December 31, 2003, in taxable years ending after such date.

     SEC. 1315. 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 product of the applicable 
     amount and the number of

[[Page H11295]]

     gallons of alcohol used by the taxpayer in producing any 
     alcohol fuel mixture for sale or use in a trade or business 
     of the taxpayer.
       ``(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' means a mixture 
     of alcohol and a taxable fuel which--
       ``(A) is sold by the taxpayer producing such mixture to any 
     person for use as a fuel,
       ``(B) is used as a fuel by the taxpayer producing such 
     mixture, or
       ``(C) is removed from the refinery by a person producing 
     such 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, use, or removal 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 biodiesel mixture for sale or 
     use in a trade or business of the taxpayer.
       ``(2) Applicable amount.--For purposes of this subsection--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the applicable amount is 50 cents.
       ``(B) Amount for agri-biodiesel.--In the case of any 
     biodiesel which is agri-biodiesel, the applicable amount is 
     $1.00.
       ``(3) Biodiesel mixture.--For purposes of this section, the 
     term `biodiesel mixture' means a mixture of biodiesel and a 
     taxable fuel which--
       ``(A) is sold by the taxpayer producing such mixture to any 
     person for use as a fuel,
       ``(B) is used as a fuel by the taxpayer producing such 
     mixture, or
       ``(C) is removed from the refinery by a person producing 
     such mixture.
       ``(4) Certification for biodiesel.--No credit shall be 
     allowed under this section unless the taxpayer obtains a 
     certification (in such form and manner as prescribed by the 
     Secretary) from the producer of the biodiesel which 
     identifies the product produced and the percentage of 
     biodiesel and agri-biodiesel in the product.
       ``(5) Other definitions.--Any term used in this subsection 
     which is also used in section 40A shall have the meaning 
     given such term by section 40A.
       ``(6) Termination.--This subsection shall not apply to any 
     sale, use, or removal 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 biodiesel mixture, respectively, and
       ``(B) any person--
       ``(i) separates the 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.
       ``(e) Coordination With Exemption From Excise Tax.--Rules 
     similar to the rules under section 40(c) shall apply for 
     purposes of this section.''.
       (b) Registration Requirement.--Section 4101(a) (relating to 
     registration) is amended by inserting ``and every person 
     producing biodiesel (as defined in section 40A(d)(1)) or 
     alcohol (as defined in section 6426(b)(4)(A))'' after 
     ``4091''.
       (c) Additional Amendments.--
       (1) Section 40(c) is amended by striking ``or section 
     4091(c)'' and inserting ``section 4091(c), or section 6426''.
       (2) 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''.
       (3) 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''.
       (4)(A) Subpart C of part III of subchapter A of chapter 32 
     is amended by adding at the end the following new section:

     ``SEC. 4104. INFORMATION REPORTING FOR PERSONS CLAIMING 
                   CERTAIN TAX BENEFITS.

       ``(a) In General.--The Secretary shall require any person 
     claiming tax benefits under the provisions of section 34, 40, 
     40A, 4041(b)(2), 4041(k), 4081(c), 6426, or 6427(f) to file a 
     quarterly return (in such manner as the Secretary may 
     prescribe) providing such information relating to such 
     benefits and the coordination of such benefits as the 
     Secretary may require to ensure the proper administration and 
     use of such benefits.
       ``(b) Enforcement.--With respect to any person described in 
     subsection (a) and subject to registration requirements under 
     this title, rules similar to rules of section 4222(c) shall 
     apply with respect to any requirement under this section.''.
       (B) The table of sections for subpart C of part III of 
     subchapter A of chapter 32 is amended by adding at the end 
     the following new item:

``Sec. 4104. Information reporting for persons claiming certain tax 
              benefits.''.

       (5) Section 6427(i)(3) is amended--
       (A) by adding at the end of subparagraph (A) the following 
     new flush sentence:
     ``In the case of an electronic claim, this subparagraph shall 
     be applied without regard to clause (i).'', and
       (B) 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)''.
       (6) 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.''.
       (d) Clerical Amendment.--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.''.

       (e) Effective Dates.--
       (1) In general.--Except as provided in paragraphs (2) and 
     (3), the amendments made by this section shall apply to fuel 
     sold, used, or removed after December 31, 2003.
       (2) Subsection (c)(4).--The amendments made by subsection 
     (c)(4) shall take effect on January 1, 2004.
       (3) Subsection (c)(5).--The amendments made by subsection 
     (c)(5) shall apply to claims filed after December 31, 2004.
       (f) Format for Filing.--The Secretary of the Treasury shall 
     prescribe the electronic format for filing claims described 
     in section 6427(i)(3)(B) of the Internal Revenue Code of 1986 
     (as amended by subsection (c)(5)(A)) not later than December 
     31, 2004.

     SEC. 1316. NONAPPLICATION OF EXPORT EXEMPTION TO DELIVERY OF 
                   FUEL TO MOTOR VEHICLES REMOVED FROM UNITED 
                   STATES.

       (a) In General.--Section 4221(d)(2) (defining export) is 
     amended by adding at the end the following new sentence: 
     ``Such term does not include the delivery of a taxable fuel 
     (as defined in section 4083(a)(1)) into a fuel tank of a 
     motor vehicle which is shipped or driven out of the United 
     States.''.
       (b) Conforming Amendments.--
       (1) Section 4041(g) (relating to other exemptions) is 
     amended by adding at the end the following new sentence: 
     ``Paragraph (3) shall not apply to the sale for delivery of a 
     liquid into a fuel tank of a motor vehicle which is shipped 
     or driven out of the United States.''.
       (2) Clause (iv) of section 4081(a)(1)(A) (relating to tax 
     on removal, entry, or sale) is amended by inserting ``or at a 
     duty-free sales enterprise (as defined in section 555(b)(8) 
     of the Tariff Act of 1930)'' after ``section 4101''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to sales or deliveries made after the date of the 
     enactment of this Act.

     SEC. 1317. REPEAL OF PHASEOUTS FOR QUALIFIED ELECTRIC VEHICLE 
                   CREDIT AND DEDUCTION FOR CLEAN FUEL-VEHICLES.

       (a) Credit for Qualified Electric Vehicles.--Subsection (b) 
     of section 30 (relating to limitations) is amended by 
     striking paragraph (2) and redesignating paragraph (3) as 
     paragraph (2).
       (b) Deduction for Clean-Fuel Vehicles and Certain Refueling 
     Property.--Paragraph (1) of section 179A(b) (relating to 
     qualified clean-fuel vehicle property) is amended to read as 
     follows:
       ``(1) Qualified clean-fuel vehicle property.-- The cost 
     which may be taken into account under subsection (a)(1)(A) 
     with respect to any motor vehicle shall not exceed--
       ``(A) in the case of a motor vehicle not described in 
     subparagraph (B) or (C), $2,000,
       ``(B) in the case of any truck or van with a gross vehicle 
     weight rating greater than 10,000 pounds but not greater than 
     26,000 pounds, $5,000, or
       ``(C) $50,000 in the case of--
       ``(i) a truck or van with a gross vehicle weight rating 
     greater than 26,000 pounds, or
       ``(ii) any bus which has a seating capacity of at least 20 
     adults (not including the driver).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act.

     SEC. 1318. 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:

     ``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--

[[Page H11296]]

       ``(1) the new qualified fuel cell motor vehicle credit 
     determined under subsection (b),
       ``(2) the new advanced lean burn technology motor vehicle 
     credit determined under subsection (c),
       ``(3) the new qualified hybrid motor vehicle credit 
     determined under subsection (d), and
       ``(4) the new qualified alternative fuel motor vehicle 
     credit determined under subsection (e).
       ``(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 shall be determined in accordance with the 
     following table:

``In the case of a vehicle which has a gross vehicle wThe new qualified
                                                        fuel cell motor
                                                    vehicle credit is--
  Not more than 8,500 lbs...................................$4,000 ....

  More than 8,500 lbs but not more than 14,000 lbs.........$10,000 ....

  More than 14,000 lbs but not more than 26,000 lbs........$20,000 ....

  More than 26,000 lbs.....................................$40,000.....

       ``(2) Increase for fuel efficiency.--
       ``(A) In general.--The amount determined under paragraph 
     (1) with respect to a new qualified fuel cell motor vehicle 
     which is a passenger automobile or light truck shall be 
     increased by the additional credit amount.
       ``(B) Additional credit amount.--For purposes of 
     subparagraph (A), the additional credit amount shall be 
     determined in accordance with the following table:

``In the case of a vehicle which achieves a fuel economy (expressed as 
  a percentage of the 2002 model year city fuel economy) The additional
                                                          credit amount
                                                                   is--
  At least 150 percent but less than 175 percent............$1,000 ....

  At least 175 percent but less than 200 percent............$1,500 ....

  At least 200 percent but less than 225 percent............$2,000 ....

  At least 225 percent but less than 250 percent............$2,500 ....

  At least 250 percent but less than 275 percent............$3,000 ....

  At least 275 percent but less than 300 percent............$3,500 ....

  At least 300 percent......................................$4,000.....

       ``(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 one 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, has received--
       ``(i) 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) a certificate that such vehicle meets or exceeds the 
     Bin 5 Tier II emission standard 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 Advanced Lean Burn Technology Motor Vehicle 
     Credit.--
       ``(1) In general.--For purposes of subsection (a), the new 
     advanced lean burn technology motor vehicle credit determined 
     under this subsection with respect to a new advanced lean 
     burn technology motor vehicle placed in service by the 
     taxpayer during the taxable year is the credit amount 
     determined under paragraph (2).
       ``(2) Credit amount.--
       ``(A) Fuel economy.--The credit amount determined under 
     this paragraph shall be determined in accordance with the 
     following table:

``In the case of a vehicle which achieves a fuel economy (expressed as 
  a percentage of the 2002 model year city fuel economy) of--The credit
                                                            amount is--
  At least 125 percent but less than 150 percent..............$400 ....

  At least 150 percent but less than 175 percent..............$800 ....

  At least 175 percent but less than 200 percent............$1,200 ....

  At least 200 percent but less than 225 percent............$1,600 ....

  At least 225 percent but less than 250 percent............$2,000 ....

  At least 250 percent......................................$2,400.....

       ``(B) Conservation credit.--The amount determined under 
     subparagraph (A) with respect to a new advanced lean burn 
     technology motor vehicle shall be increased by the 
     conservation credit amount determined in accordance with the 
     following table:

``In the case of a vehicle which achieves a lifetime fuel savings 
  (expressed in gallons of gasoline) of--              The conservation
                                                          credit amount
                                                                   is--
  At least 1,200 but less than 1,800..........................$250 ....

  At least 1,800 but less than 2,400..........................$500 ....

  At least 2,400 but less than 3,000..........................$750 ....

  At least 3,000............................................$1,000.....

       ``(3) New advanced lean burn technology motor vehicle.--For 
     purposes of this subsection, the term `new advanced lean burn 
     technology motor vehicle' means a passenger automobile or a 
     light truck--
       ``(A) with an internal combustion engine which--
       ``(i) is designed to operate primarily using more air than 
     is necessary for complete combustion of the fuel,
       ``(ii) incorporates direct injection,
       ``(iii) achieves at least 125 percent of the 2002 model 
     year city fuel economy,
       ``(iv) for 2004 and later model vehicles, has received a 
     certificate that such vehicle meets or exceeds--

       ``(I) in the case of a vehicle having a gross vehicle 
     weight rating of 6,000 pounds or less, the Bin 5 Tier II 
     emission standard 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, and
       ``(II) in the case of a vehicle having a gross vehicle 
     weight rating of more than 6,000 pounds but not more than 
     8,500 pounds, the Bin 8 Tier II emission standard which is so 
     established.

       ``(B) the original use of which commences with the 
     taxpayer,
       ``(C) which is acquired for use or lease by the taxpayer 
     and not for resale, and
       ``(D) which is made by a manufacturer.
       ``(4) Lifetime fuel savings.--For purposes of this 
     subsection, the term `lifetime fuel savings' means, in the 
     case of any new advanced lean burn technology motor vehicle, 
     an amount equal to the excess (if any) of--
       ``(A) 120,000 divided by the 2002 model year city fuel 
     economy for the vehicle inertia weight class, over
       ``(B) 120,000 divided by the city fuel economy for such 
     vehicle.
       ``(d) 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) Credit amount for passenger automobiles and light 
     trucks.--In the case of a new qualified hybrid motor vehicle 
     which is a passenger automobile or light truck and which has 
     a gross vehicle weight rating of not more than 8,500 pounds, 
     the amount determined under this paragraph is the sum of the 
     amounts determined under clauses (i) and (ii).
       ``(i) Fuel economy.--The amount determined under this 
     clause is the amount which would be determined under 
     subsection (c)(2)(A) if such vehicle were a vehicle referred 
     to in such subsection.
       ``(ii) Conservation credit.--The amount determined under 
     this clause is the amount which would be determined 
     under subsection (c)(2)(B) if such vehicle were a vehicle 
     referred to in such subsection.
       ``(B) Credit amount for other motor vehicles.--
       ``(i) In general.--In the case of any new qualified hybrid 
     motor vehicle to which subparagraph (A) does not apply, the 
     amount determined under this paragraph is the amount equal to 
     the applicable percentage of the qualified incremental hybrid 
     cost of the vehicle as certified under clause (v).
       ``(ii) Applicable percentage.--For purposes of clause (i), 
     the applicable percentage is--

       ``(I) 20 percent if the vehicle achieves an increase in 
     city fuel economy relative to a comparable vehicle of at 
     least 30 percent but less than 40 percent,
       ``(II) 30 percent if the vehicle achieves such an increase 
     of at least 40 percent but less than 50 percent, and
       ``(III) 40 percent if the vehicle achieves such an increase 
     of at least 50 percent.

       ``(iii) Qualified incremental hybrid cost.--For purposes of 
     this subparagraph, the qualified incremental hybrid cost of 
     any vehicle is equal to the amount of the excess of the 
     manufacturer's suggested retail price for such vehicle over 
     such price for a comparable vehicle, to the extent such 
     amount does not exceed--

       ``(I) $7,500, if such vehicle has a gross vehicle weight 
     rating of not more than 14,000 pounds,
       ``(II) $15,000, if such vehicle has a gross vehicle weight 
     rating of more than 14,000 pounds but not more than 26,000 
     pounds, and
       ``(III) $30,000, if such vehicle has a gross vehicle weight 
     rating of more than 26,000 pounds.

       ``(iv) Comparable vehicle.--For purposes of this 
     subparagraph, the term `comparable vehicle' means, with 
     respect to any new qualified hybrid motor vehicle, any 
     vehicle which is powered solely by a gasoline or diesel 
     internal combustion engine and which is comparable in weight, 
     size, and use to such vehicle.
       ``(v) Certification.--A certification described in clause 
     (i) shall be made by the manufacturer and shall be determined 
     in accordance with guidance prescribed by the Secretary. Such 
     guidance shall specify procedures and methods for calculating 
     fuel economy savings and incremental hybrid costs.
       ``(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 vehicle to which paragraph 
     (2)(A) applies, has received a certificate of conformity 
     under the Clean Air Act and

[[Page H11297]]

     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

       ``(I) in the case of a vehicle having a gross vehicle 
     weight rating of 6,000 pounds or less, the Bin 5 Tier II 
     emission standard 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, and
       ``(II) in the case of a vehicle having a gross vehicle 
     weight rating of more than 6,000 pounds but not more than 
     8,500 pounds, the Bin 8 Tier II emission standard which is so 
     established,

       ``(iii) which has a maximum available power of at least--

       ``(I) 4 percent in the case of a vehicle to which paragraph 
     (2)(A) applies,
       ``(II) 10 percent in the case of a vehicle which has a 
     gross vehicle weight rating or more than 8,500 pounds and not 
     than 14,000 pounds, and
       ``(III) 15 percent in the case of a vehicle in excess of 
     14,000 pounds,

       ``(iv) which, in the case of a vehicle to which paragraph 
     (2)(B) applies, 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,
       ``(v) the original use of which commences with the 
     taxpayer,
       ``(vi) which is acquired for use or lease by the taxpayer 
     and not for resale, and
       ``(vii) which is made by a manufacturer.
     Such term shall not include any vehicle which is not a 
     passenger automobile or light truck if such vehicle has a 
     gross vehicle weight rating of less than 8,500 pounds.
       ``(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.
       ``(C) Maximum available power.--
       ``(i) Certain passenger automobiles and light trucks.--In 
     the case of a vehicle to which paragraph (2)(A) applies, 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) Other motor vehicles.--In the case of a vehicle to 
     which paragraph (2)(B) applies, 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. For purposes of the preceding 
     sentence, 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.
       ``(e) 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 has a 
     gross vehicle weight rating of more than 14,000 pounds, the 
     most stringent standard available shall be such standard 
     available for certification on the date of the enactment of 
     the Energy Tax Policy 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 
     alternative fuel and not more than 10 percent petroleum-based 
     fuel.
       ``(f) Limitation on Number of New Qualified Hybrid and 
     Advanced Lean-Burn Technology Vehicles Eligible for Credit.--
       ``(1) In general.--In the case of a qualified vehicle sold 
     during the phaseout period, only the applicable percentage of 
     the credit otherwise allowable under subsection (c) or (d) 
     shall be allowed.
       ``(2) Phaseout period.--For purposes of this subsection, 
     the phaseout period is the period beginning with the second 
     calendar quarter following the calendar quarter which 
     includes the first date on which the number of qualified 
     vehicles manufactured by the manufacturer of the vehicle 
     referred to in paragraph (1) sold for use in the United 
     States after the date of the enactment of this section is at 
     least 80,000.
       ``(3) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage is--
       ``(A) 50 percent for the first 2 calendar quarters of the 
     phaseout period,
       ``(B) 25 percent for the 3d and 4th calendar quarters of 
     the phaseout period, and
       ``(C) 0 percent for each calendar quarter thereafter.
       ``(4) Controlled groups.--
       ``(A) In general.--For purposes of this subsection, 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 a single manufacturer.
       ``(B) Inclusion of foreign corporations.--For purposes of 
     subparagraph (A), in applying subsections (a) and (b) of 
     section 52 to this section, section 1563 shall be applied 
     without regard to subsection (b)(2)(C) thereof.
       ``(5) Qualified vehicle.--For purposes of this subsection, 
     the term `qualified vehicle' means any new qualified hybrid 
     motor vehicle and any new advanced lean burn technology motor 
     vehicle.
       ``(g) Limitation Based on Amount of Tax.--The credit 
     allowed under subsection (a) for the taxable year shall not 
     exceed the excess of--
       ``(1) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(2) the sum of the credits allowable under subpart A and 
     sections 27 and 30 for the taxable year.
       ``(h) 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) Other terms.--The terms `automobile', `passenger 
     automobile', `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.).
       ``(3) 2002 model year city fuel economy.--
       ``(A) In general.--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:

[[Page H11298]]

``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.

       ``(B) Vehicle inertia weight class.--For purposes of 
     subparagraph (A), 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.).
       ``(4) Fuel economy.--Fuel economy with respect to any 
     vehicle shall be measured under rules similar to the rules 
     under section 4064(c).
       ``(5)  Reduction in basis.--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 paragraph) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(6) No double benefit.--The amount of any deduction or 
     credit allowable under this chapter (other than the credits 
     allowable under this section and section 30) shall be reduced 
     by the amount of credit allowed under subsection (a) for such 
     vehicle for the taxable year.
       ``(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 not to 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) Business carryovers allowed.--If the credit 
     allowable under subsection (a) for a taxable year exceeds the 
     limitation under subsection (g) for such taxable year, such 
     excess (to the extent of the credit allowable with respect to 
     property subject to the allowance for depreciation) shall be 
     allowed as a credit carryback and carryforward under rules 
     similar to the rules of section 39.
       ``(11) Interaction with 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 the motor 
     vehicle safety provisions of sections 30101 through 30169 of 
     title 49, United States Code.
       ``(i) Regulations.--
       ``(1) In general.--The Secretary shall promulgate such 
     regulations as necessary to carry out the provisions of this 
     section.
       ``(2) Determination of motor vehicle eligibility.--The 
     Secretary, after 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.
       ``(j) Termination.--This section shall not apply to any 
     property placed in service after--
       ``(1) in the case of a new qualified alternative fuel motor 
     vehicle, December 31, 2006,
       ``(2) in the case of a new advanced lean burn technology 
     motor vehicle or a new qualified hybrid motor vehicle, 
     December 31, 2008, and
       ``(3) in the case of a new qualified fuel cell motor 
     vehicle, December 31, 2012.''.
       (b) Conforming Amendments.--
       (1) Section 30(d) (relating to special rules) is amended by 
     adding at the end the following new paragraphs:
       ``(5) No double benefit.--No credit shall be allowed under 
     this section for any motor vehicle for which a credit is also 
     allowed under section 30B.''.
       (2) 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:
       ``(33) to the extent provided in section 30B(h)(5).''.
       (3) Section 6501(m) is amended by inserting ``30B(h)(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:

``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.
       (d) Sticker Information Required at Retail Sale.--
       (1) In general.--The Secretary of the Treasury shall issue 
     regulations under which each qualified vehicle sold at retail 
     shall display a notice--
       (A) that such vehicle is a qualified vehicle, and
       (B) that the buyer may not benefit from the credit allowed 
     under section 30B of the Internal Revenue Code of 1986 if 
     such buyer has insufficient tax liability.
       (2) Qualified vehicle.--For purposes of paragraph (1), the 
     term ``qualified vehicle'' means a vehicle with respect to 
     which a credit is allowed under section 30B of the Internal 
     Revenue Code of 1986.

     SEC. 1319. MODIFICATIONS OF DEDUCTION FOR CERTAIN REFUELING 
                   PROPERTY.

       (a) 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, 
     2008.''.
       (b) 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.''.
       (c) Increase in Location Expenditures.--Section 
     179A(b)(2)(A)(i) is amended by striking ``$100,000'' and 
     inserting ``$150,000''.
       (d) Nonbusiness Use of Qualified Clean-Fuel Vehicle 
     Refueling Property.--Section 179A(d) is amended by striking 
     paragraph (1) and by redesignating paragraphs (2) and (3) as 
     paragraphs (1) and (2), respectively.
       (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.
                        Subtitle B--Reliability

     SEC. 1321. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR 
                   PROPERTY.

       (a) In General.--Subparagraph (C) of section 168(e)(3) 
     (relating to classification of certain 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.--Subsection (i) of section 
     168, as amended by this Act, is amended by adding after 
     paragraph (15) the following new paragraph:
       ``(16) Natural gas gathering line.--The term `natural gas 
     gathering line' means--
       ``(A) the pipe, equipment, and appurtenances determined to 
     be a gathering line by the Federal Energy Regulatory 
     Commission, or
       ``(B) 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 for 
     which a certificate as an interstate transmission pipeline 
     has been issued by the Federal Energy Regulatory Commission,
       ``(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.''.
       (c) Alternative System.--The table contained in section 
     168(g)(3)(B) is amended by inserting after the item relating 
     to subparagraph (C)(i) the following:

``(C)(ii).........................................................14''.

       (d) Alternative Minimum Tax Exception.--Subparagraph (B) of 
     section 56(a)(1) is amended

[[Page H11299]]

     by inserting before the period the following: ``, or in 
     section 168(e)(3)(C)(ii)''.
       (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. 1322. NATURAL GAS DISTRIBUTION LINES TREATED AS 15-YEAR 
                   PROPERTY.

       (a) In General.--Subparagraph (E) of section 168(e)(3) 
     (relating to classification of certain 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) is amended by inserting after the item relating 
     to subparagraph (E)(iii) the following:

``(E)(iv).........................................................35''.

       (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. 1323. ELECTRIC TRANSMISSION PROPERTY TREATED AS 15-YEAR 
                   PROPERTY.

       (a) In General.--Subparagraph (E) of section 168(e)(3) 
     (relating to classification of certain 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 by inserting ``, and'', and by adding at the end the 
     following new clause:
       ``(v) any section 1245 property (as defined in section 
     1245(a)(3)) used in the transmission at 69 or more kilovolts 
     of electricity for sale the original use of which commences 
     with the taxpayer after the date of the enactment of this 
     clause.''.
       (b) Alternative System.--The table contained in section 
     168(g)(3)(B) is amended by inserting after the item relating 
     to subparagraph (E)(iv) the following:

``(E)(v)..........................................................30''.

       (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. 1324. 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 Expenses.--A small business refiner (as 
     defined in section 45I(c)(1)) may elect to treat 75 percent 
     of qualified capital costs (as defined in section 45I(c)(2)) 
     which are paid or incurred by the taxpayer during the taxable 
     year as expenses which are not chargeable to capital account. 
     Any cost so treated shall be allowed as a deduction for 
     the taxable year in which paid or incurred.
       ``(b) Reduced Percentage.--In the case of a small business 
     refiner with average daily domestic refinery runs for the 1-
     year period ending on December 31, 2002, in excess of 155,000 
     barrels, the number of percentage points described in 
     subsection (a) shall be reduced (not below zero) by the 
     product of such number (before the application of this 
     subsection) and the ratio of such excess to 50,000 barrels.
       ``(c) Basis Reduction.--
       ``(1) In general.--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).
       ``(2) Ordinary income recapture.--For purposes of section 
     1245, the amount of the deduction allowable under subsection 
     (a) with respect to any property which is of a character 
     subject to the allowance for depreciation shall be treated as 
     a deduction allowed for depreciation under section 167.''.
       ``(d) Coordination With Other Provisions.--Section 280B 
     shall not apply to amounts which are treated as expenses 
     under this section.''.
       (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 adding at the end 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(c).''
       (5) Paragraphs (2)(C) and (3)(C) of section 1245(a), as 
     amended by this Act, are each amended by inserting ``179C,'' 
     after ``179B,''.
       (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. 1325. CREDIT FOR PRODUCTION OF LOW SULFUR DIESEL FUEL.

       (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. 45I. CREDIT FOR PRODUCTION OF LOW SULFUR DIESEL FUEL.

       ``(a) In General.--For purposes of section 38, the amount 
     of the low sulfur diesel fuel production credit determined 
     under this section with respect to any facility of a small 
     business refiner is an amount equal to 5 cents for each 
     gallon of low sulfur diesel fuel produced during the taxable 
     year by such small business refiner at such facility.
       ``(b) Maximum Credit.--
       ``(1) In general.--The aggregate credit determined under 
     subsection (a) for any taxable year with respect to any 
     facility shall not exceed--
       ``(A) 25 percent of the qualified capital costs incurred by 
     the small business refiner with respect to such facility, 
     reduced by
       ``(B) the aggregate credits determined under this section 
     for all prior taxable years with respect to such facility.
       ``(2) Reduced percentage.--In the case of a small business 
     refiner with average daily domestic refinery runs for the 1-
     year period ending on December 31, 2002, in excess of 155,000 
     barrels, the number of percentage points described in 
     paragraph (1) shall be reduced (not below zero) by the 
     product of such number (before the application of this 
     paragraph) and the ratio of such excess to 50,000 barrels.
       ``(c) Definitions and Special Rule.--For purposes of this 
     section--
       ``(1) Small business refiner.--The term `small business 
     refiner' means, with respect to any taxable year, a refiner 
     of crude oil--
       ``(A) with respect to which not more than 1,500 individuals 
     are engaged in the refinery operations of the business on any 
     day during such taxable year, and
       ``(B) the average daily domestic refinery run or average 
     retained production of which for all facilities of the 
     taxpayer for the 1-year period ending on December 31, 2002, 
     did not exceed 205,000 barrels.
       ``(2) Qualified capital costs.--The term `qualified capital 
     costs' means, with respect to any facility, those costs paid 
     or incurred during the applicable period for compliance with 
     the applicable EPA regulations with respect to such facility, 
     including expenditures for the construction of new process 
     operation units or the dismantling and reconstruction of 
     existing process units to be used in the production of low 
     sulfur diesel fuel, associated adjacent or offsite equipment 
     (including tankage, catalyst, and power supply), engineering, 
     construction period interest, and sitework.
       ``(3) Applicable epa regulations.--The term `applicable EPA 
     regulations' means the Highway Diesel Fuel Sulfur Control 
     Requirements of the Environmental Protection Agency.
       ``(4) Applicable period.--The term `applicable period' 
     means, with respect to any facility, the period beginning on 
     January 1, 2003, and ending on the earlier of 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 or December 31, 2009.
       ``(5) Low sulfur diesel fuel.--The term `low sulfur diesel 
     fuel' means diesel fuel with a sulfur content of 15 parts per 
     million or less.
       ``(d) Reduction in Basis.--For purposes of this subtitle, 
     if a credit is determined under this section for any 
     expenditure with respect to any property, the increase in 
     basis of such property which would (but for this subsection) 
     result from such expenditure shall be reduced by the amount 
     of the credit so determined.
       ``(e) Special Rule for Determination of Refinery Runs.--For 
     purposes this section and section 179C(b), in the calculation 
     of average daily domestic refinery run or retained 
     production, only refineries which on April 1, 2003, were 
     refineries of the refiner or a related person (within the 
     meaning of section 613A(d)(3)), shall be taken into account.
       ``(f) Certification.--
       ``(1) Required.--No credit shall be allowed unless, not 
     later than the date which is 30 months after the first day of 
     the first taxable year in which the low sulfur diesel fuel 
     production credit is allowed with respect to a facility, the 
     small business refiner obtains certification from the 
     Secretary, after 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, after 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 review period described in paragraph (3) ends with 
     respect to the taxpayer, and

[[Page H11300]]

       ``(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.
       ``(g) 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 rule.--If the amount of a credit which has 
     been apportioned to any patron under this subsection is 
     decreased for any reason--
       ``(A) such amount shall not increase the tax imposed on 
     such patron, and
       ``(B) the tax imposed by this chapter on such organization 
     shall be increased by such amount.

     The increase under subparagraph (B) 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.--
     Subsection (b) of section 38 (relating to general 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) in the case of a small business refiner, the low 
     sulfur diesel fuel production credit determined under section 
     45I(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) Low Sulfur Diesel Fuel Production 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 45I(a).''.
       (d) Basis Adjustment.--Section 1016(a) (relating to 
     adjustments to basis), as amended by this Act, is amended by 
     striking ``and'' at the end of paragraph (33), by striking 
     the period at the end of paragraph (34) and inserting ``, 
     and'', and by adding at the end the following new paragraph:
       ``(35) in the case of a facility with respect to which a 
     credit was allowed under section 45I, to the extent provided 
     in section 45I(d).''.
       (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 (12), by striking the period at the end of 
     paragraph (13) and inserting ``, and'', and by adding after 
     paragraph (13) the following new paragraph:
       ``(14) the low sulfur diesel fuel production credit 
     determined under section 45I(a).''.
       (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. 45I. Credit for production of low sulfur diesel fuel.''.

       (f) 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. 1326. 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 67,500 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. 1327. 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.--In the case of any qualifying electric 
     transmission transaction for which the taxpayer elects the 
     application of this section, qualified gain from such 
     transaction shall be recognized--
       ``(A) in the taxable year which includes the date of such 
     transaction to the extent the amount realized from such 
     transaction exceeds--
       ``(i) the cost of exempt utility property which is 
     purchased by the taxpayer during the 4-year period beginning 
     on such date, reduced (but not below zero) by
       ``(ii) any portion of such cost previously taken into 
     account under this subsection, and
       ``(B) ratably over the 8-taxable year period beginning with 
     the taxable year which includes the date of such transaction, 
     in the case of any such gain not recognized under 
     subparagraph (A).
       ``(2) Qualified gain.--For purposes of this subsection, the 
     term `qualified gain' means, with respect to any 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 
     the amount described in subparagraph (A) which is required to 
     be included in gross income for such taxable year (determined 
     without regard to this subsection).
       ``(3) Qualifying electric transmission transaction.--For 
     purposes of this subsection, the term `qualifying electric 
     transmission transaction' means any sale or other disposition 
     before January 1, 2007, of--
       ``(A) property used 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.
       ``(4) Independent transmission company.--For purposes of 
     this subsection, the term `independent transmission company' 
     means--
       ``(A) an independent transmission provider 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) or by 
     declaratory order is not a market participant within the 
     meaning of such Commission's rules applicable to independent 
     transmission providers, 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 
     independent transmission provider before the close of the 
     period specified in such authorization, but not later than 
     the close of the period applicable under subsection (a)(2)(B) 
     as extended under paragraph (2), or
       ``(C) in the case of facilities subject to the jurisdiction 
     of the Public Utility Commission of Texas--
       ``(i) a person which is approved by that Commission as 
     consistent with Texas State law regarding an independent 
     transmission provider, or
       ``(ii) a political subdivision or affiliate thereof whose 
     transmission facilities are under the operational control of 
     a person described in clause (i).
       ``(5) Exempt utility property.--For purposes of this 
     subsection--
       ``(A) In general.--The term `exempt utility property' means 
     property used in the trade or business of--
       ``(i) generating, transmitting, distributing, or selling 
     electricity, or
       ``(ii) producing, transmitting, distributing, or selling 
     natural gas.
       ``(B) Nonrecognition of gain by reason of acquisition of 
     stock.--Acquisition of control of a corporation shall be 
     taken into account under this subsection with respect to a 
     qualifying electric transmission transaction only if the 
     principal trade or business of such corporation is a trade or 
     business referred to in subparagraph (A).
       ``(6) Special rule for consolidated groups.--In the case of 
     a corporation which is a member of an affiliated group filing 
     a consolidated return, any exempt utility property purchased 
     by another member of such group shall be treated as purchased 
     by such corporation for purposes of applying paragraph 
     (1)(A).
       ``(7) Time for assessment of deficiencies.--If the taxpayer 
     has made the election under paragraph (1) and any gain is 
     recognized by such taxpayer as provided in paragraph (1)(B), 
     then--
       ``(A) the statutory period for the assessment of any 
     deficiency, for any taxable year in which any part of the 
     gain on the transaction is realized, attributable to such 
     gain shall not expire prior to the expiration of 3 years from 
     the date the Secretary is notified by the taxpayer (in such 
     manner as the Secretary may by regulations prescribe) of the 
     purchase of exempt utility property or of an intention not to 
     purchase such property, and
       ``(B) such deficiency may be assessed before the expiration 
     of such 3-year period notwithstanding any law or rule of law 
     which would otherwise prevent such assessment.
       ``(8) Purchase.--For purposes of this subsection, the 
     taxpayer shall be considered to have purchased any property 
     if the unadjusted basis

[[Page H11301]]

     of such property is its cost within the meaning of section 
     1012.
       ``(9) Election.--An election under paragraph (1) shall be 
     made at such time and in such manner as the Secretary may 
     require and, once made, shall be irrevocable.
       ``(10) 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 amendments made by this section 
     shall apply to transactions occurring after the date of the 
     enactment of this Act, in taxable years ending after such 
     date.

     SEC. 1328. 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.--
       ``(1) In general.--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.
       ``(2) Contributions after funding period.--Notwithstanding 
     any other provision of this section, a taxpayer may pay into 
     the Fund in any taxable year after the last taxable year to 
     which the ruling amount applies. Payments may not be made 
     under the preceding sentence to the extent such payments 
     would cause the assets of the Fund to exceed the nuclear 
     decommissioning costs allocable to the taxpayer's current or 
     former interest in the nuclear power plant to which the Fund 
     relates. The limitation under the preceding sentence shall be 
     determined by taking into account a reasonable rate of 
     inflation for the nuclear decommissioning costs and a 
     reasonable after-tax rate of return on the assets of the Fund 
     until such assets are anticipated to be expended.''.
       (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.--
       ``(A) In general.--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--
       ``(i) the transfer of such Fund shall not cause such Fund 
     to be disqualified from the application of this section, and
       ``(ii) no amount shall be treated as distributed from such 
     Fund, or be includable in gross income, by reason of such 
     transfer.
       ``(B) Special rules if transferor is tax-exempt entity.--
       ``(i) In general.--If--

       ``(I) a person exempt from taxation under this title 
     transfers an interest in a nuclear power plant,
       ``(II) such person has set aside amounts for nuclear 
     decommissioning which are transferred to the transferee of 
     the interest, and
       ``(III) the transferee elects the application of this 
     subparagraph no later than the due date (including 
     extensions) of its return of tax for the taxable year in 
     which the transfer occurs,

     the amounts so set aside shall be treated as if contributed 
     by such person to a Fund immediately before the transfer and 
     then transferred in the Fund to the transferee.
       ``(ii) Limitation.--The amount treated as transferred to a 
     Fund under clause (i) shall not exceed the amount which bears 
     the same ratio to the present value of the nuclear 
     decommissioning costs of the transferor with respect to the 
     nuclear power plant as the number of years the nuclear power 
     plant has been in service bears to the estimated useful life 
     of such power plant.
       ``(iii) Basis.--The transferee's basis in any asset treated 
     as transferred in the Fund shall be the same as the adjusted 
     basis of such asset in the hands of the transferor.
       ``(iv) Ruling amount required.--This subparagraph shall not 
     apply to any transfer unless the transferee requests from the 
     Secretary a schedule of ruling amounts.
       ``(v) Election disregarded.--An election under this 
     subparagraph shall be disregarded in determining the Federal 
     income tax of the transferor.''
       (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 portion of the total nuclear decommissioning costs with 
     respect to such nuclear power plant previously excluded for 
     such nuclear power plant under subsection (d)(2)(A) as in 
     effect immediately before the date of the enactment of the 
     Energy Tax Policy Act of 2003.
       ``(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 to the taxpayer (or a predecessor) or a 
     corresponding amount was not included in gross income of the 
     taxpayer (or a predecessor). 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 transferor for the taxable year which includes such 
     date.
       ``(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 Amendments.--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 December 31, 
     2003.

     SEC. 1329. TREATMENT OF CERTAIN INCOME OF COOPERATIVES.

       (a) Income From Open Access and Nuclear Decommissioning 
     Transactions.--
       (1) In general.--Subparagraph (C) of section 501(c)(12) 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 provision or sale of electric energy 
     transmission services or ancillary services if such services 
     are provided on a nondiscriminatory open access basis under 
     an open access transmission tariff approved or accepted by 
     FERC or under an independent transmission provider agreement 
     approved or accepted by FERC (other than income received or 
     accrued directly or indirectly from a member),
       ``(iii) from the provision or sale of electric energy 
     distribution services or ancillary services if such services 
     are provided on a nondiscriminatory open access basis to 
     distribute electric energy not owned by the mutual or 
     electric cooperative company--

       ``(I) to end-users who are served by distribution 
     facilities not owned by such company or any of its members 
     (other than income received or accrued directly or indirectly 
     from a member), or
       ``(II) generated by a generation facility not owned or 
     leased by such company or any of its members and which is 
     directly connected to distribution facilities owned by such 
     company or any of its members (other than income received or 
     accrued directly or indirectly from a member),

       ``(iv) from any nuclear decommissioning transaction, or
       ``(v) from any asset exchange or conversion transaction.''.
       (2) Definitions and special rules.--Paragraph (12) of 
     section 501(c) is amended by adding at the end the following 
     new subparagraphs:
       ``(E) For purposes of subparagraph (C)(ii), the term `FERC' 
     means the Federal Energy Regulatory Commission and references 
     to such term shall be treated as including 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))).
       ``(F) For purposes of subparagraph (C)(iii), 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) For purposes of subparagraph (C)(iv), 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

[[Page H11302]]

     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, Etc.--
     Paragraph (12) of section 501(c), 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 mutual or cooperative 
     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 first year that the mutual or cooperative 
     electric company offers nondiscriminatory open access or the 
     calendar year which includes the date of the enactment of 
     this subparagraph, if later, at the election of such company.
       ``(viii) A company shall not fail to be treated as a mutual 
     or cooperative electric 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) For purposes of subparagraph (A), in the case of a 
     mutual or cooperative electric company, income 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.--
     Subsection (b) of section 512 (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. 1330. ARBITRAGE RULES NOT TO APPLY TO PREPAYMENTS FOR 
                   NATURAL GAS.

       (a) In General.--Subsection (b) of section 148 (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 a utility owned by a governmental unit if the 
     amount of gas permitted to be acquired under the contract 
     by 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 a business use 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) Lost customers.--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 the 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.--Paragraph (2) of section 141(c) (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) Exception for Qualified Electric and Natural Gas Supply 
     Contracts.--Section 141(d) is amended by adding at the end 
     the following new paragraph:
       ``(7) Exception for qualified electric and natural gas 
     supply contracts.--The term `nongovernmental output property' 
     shall not include any contract for the prepayment of 
     electricity or natural gas which is not investment property 
     under section 148(b)(2).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to obligations issued after the date of the 
     enactment of this Act.
                         Subtitle C--Production

                     PART I--OIL AND GAS PROVISIONS

     SEC. 1341. 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:

     ``SEC. 45J. 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 credit 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

[[Page H11303]]

       ``(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.--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 
     (determined under section 43(b)(3)(B) by substituting `2002' 
     for `1990').
       ``(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 45K(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 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-of-oil 
     equivalents (as defined in section 45K(d)(5)).
       ``(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) 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-of-oil equivalents (as so defined), 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).
       ``(d) Other Rules.--
       ``(1) Production attributable to the taxpayer.--In the case 
     of a qualified marginal well in which there is more than one 
     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 45K for the 
     taxable year, no credit shall be allowable under this section 
     unless the taxpayer elects not to claim the credit under 
     section 45K with respect to the well.''.
       (b) Credit Treated as Business Credit.--Section 38(b), 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:
       ``(20) the marginal oil and gas well production credit 
     determined under section 45J(a).''.
       (c) Carryback.--Subsection (a) of section 39 (relating to 
     carryback and carryforward of unused credits generally) is 
     amended by adding at the end the following:
       ``(3) 5-year carryback for marginal oil and gas well 
     production credit.--Notwithstanding subsection (d), in the 
     case of the marginal oil and gas well production credit--
       ``(A) this section shall be applied separately from the 
     business credit (other than the marginal oil and gas well 
     production credit),
       ``(B) paragraph (1) shall be applied by substituting `5 
     taxable years' for `1 taxable years' in subparagraph (A) 
     thereof, and
       ``(C) paragraph (2) shall be applied--
       ``(i) by substituting `25 taxable years' for `21 taxable 
     years' in subparagraph (A) thereof, and
       ``(ii) by substituting `24 taxable years' for `20 taxable 
     years' in subparagraph (B) thereof.''.
       (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:

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

       (e) Effective Date.--The amendments made by this section 
     shall apply to production in taxable years beginning after 
     December 31, 2003.

     SEC. 1342. TEMPORARY SUSPENSION OF LIMITATION BASED ON 65 
                   PERCENT OF TAXABLE INCOME AND EXTENSION OF 
                   SUSPENSION OF TAXABLE INCOME LIMIT WITH RESPECT 
                   TO MARGINAL PRODUCTION.

       (a) Limitation Based on 65 Percent of Taxable Income.--
     Subsection (d) of section 613A (relating to limitation on 
     percentage depletion in case of oil and gas wells) is amended 
     by adding at the end the following new paragraph:
       ``(6) Temporary suspension of taxable income limit.--
     Paragraph (1) shall not apply to taxable years beginning 
     after December 31, 2003, and before January 1, 2005, 
     including with respect to amounts carried under the second 
     sentence of paragraph (1) to such taxable years.''.
       (b) Extension of Suspension of Taxable Income Limit With 
     Respect to Marginal Production.--Subparagraph (H) of section 
     613A(c)(6) (relating to temporary suspension of taxable 
     income limit with respect to marginal production) is amended 
     by striking ``2004'' and inserting ``2005''.
       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 1343. 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. 1344. 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 amounts paid or incurred in taxable years 
     beginning after the date of the enactment of this Act.

     SEC. 1345. 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.--Notwithstanding 
     subsection (f)--
       ``(1) New oil and gas wells and facilities.--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, this 
     section shall apply with respect to such fuels produced at 
     such well or facility and sold during the period--
       ``(A) beginning on the later of January 1, 2004, or the 
     date that such well is drilled or such facility is placed in 
     service, and

[[Page H11304]]

       ``(B) ending on the earlier of the date which is 4 years 
     after the date such period began or December 31, 2009.
       ``(2) Old oil and gas wells and facilities.--In the case of 
     a well or facility producing qualified fuels described in 
     subparagraph (A) or (B)(i) of subsection (c)(1) or a facility 
     producing natural gas and byproducts by coal gasification 
     from lignite, subsection (f)(2) shall be applied by 
     substituting `2008' for `2003' with respect to wells and 
     facilities described in subsection (f)(1) with respect to 
     such fuels.
       ``(3) Extension for facilities producing qualified fuel 
     from landfill gas.--
       ``(A) In general.--In the case of a facility for producing 
     qualified fuel from landfill gas which was placed in service 
     after June 30, 1998, and before January 1, 2007, this section 
     shall apply to fuel produced at such facility and sold during 
     the period--
       ``(i) beginning on the later of January 1, 2004, or the 
     date that such facility is placed in service, and
       ``(ii) ending on the earlier of the date which is 4 years 
     after the date such period began or December 31, 2009.
       ``(B) Reduction of credit for certain landfill 
     facilities.--In the case of a facility to which subparagraph 
     (A) applies and which is located at a landfill which is 
     required pursuant to section 60.751(b)(2) or section 60.33c 
     of title 40, Code of Federal Regulations (as in effect on 
     April 3, 2003) to install and operate a collection and 
     control system which captures gas generated within the 
     landfill, subsection (a)(1) shall be applied to gas so 
     captured by substituting `$2' for `$3' for the taxable year 
     during which such system is required to be installed and 
     operated.
       ``(4) Facilities producing fuels from agricultural and 
     animal waste.--
       ``(A) In general.--In the case of any facility for 
     producing liquid, gaseous, or solid fuels from qualified 
     agricultural and animal wastes, including such fuels when 
     used as feedstocks, which is 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 and sold during the period--
       ``(i) beginning on the later of January 1, 2004, or the 
     date that such facility is placed in service, and
       ``(ii) ending on the earlier of the date which is 4 years 
     after the date such period began or December 31, 2009.
       ``(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.
       ``(5) Facilities producing refined coal.--
       ``(A) In general.--In the case of a facility described in 
     subparagraph (C) for producing refined coal which is placed 
     in service after the date of the enactment of this subsection 
     and before January 1, 2008, this section shall apply with 
     respect to fuel produced at such facility and sold 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 the taxpayer certifies (in such manner as 
     the Secretary may prescribe) 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) Advanced clean coal technology units excluded.--A 
     facility described in this subparagraph shall not include any 
     advanced clean coal technology unit (as defined in section 
     48A(e)).
       ``(6) Coalmine gas.--
       ``(A) In general.--This section shall apply to coalmine 
     gas--
       ``(i) captured or extracted by the taxpayer during the 
     period beginning on the day after the date of the enactment 
     of this subsection and ending on December 31, 2006, 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 Federal pollution prevention, control, and permit 
     requirements.
       ``(7) Coke and coke gas.--In the case of a facility for 
     producing coke or coke gas which was placed in service before 
     January 1, 1993, or after June 30, 1998, and before January 
     1, 2007, this section shall apply with respect to coke and 
     coke gas produced in such facility and sold during the during 
     the period--
       ``(A) beginning on the later of January 1, 2004, or the 
     date that such facility is placed in service, and
       ``(B) ending on the earlier of the date which is 4 years 
     after the date such period began or December 31, 2009.
       ``(8) 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 (3), (4), (5), or (6) 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 property or 
     facility shall not exceed an average barrel-of-oil equivalent 
     of 200,000 cubic feet of natural gas per day. Days before the 
     date the property or facility is placed in service shall not 
     be taken into account in determining such average.
       ``(C) Extension period to commence with unadjusted credit 
     amount and new phaseout adjustment.--For purposes of applying 
     subsection (b)(2), in the case of fuels sold after 2003--
       ``(i) paragraphs (1)(A) and (2) of subsection (b) shall be 
     applied by substituting `$35.00' for `$23.50', and
       ``(ii) subparagraph (B) of subsection (d)(2) shall be 
     applied by substituting `2002' for `1979'.
       ``(D) Denial of double benefit.--This subsection shall not 
     apply to any facility producing qualified fuels for which a 
     credit was allowed under this section for the taxable year or 
     any preceding taxable year by reason of subsection (g).''.
       (b) Treatment as Business Credit.--
       (1) Credit moved to subpart relating to business related 
     credits.--The Internal Revenue Code of 1986 is amended by 
     redesignating section 29, as amended by this Act, as section 
     45K and by moving section 45K (as so redesignated) from 
     subpart B of part IV of subchapter A of chapter 1 to the end 
     of subpart D of part IV of subchapter A of chapter 1.
       (2) Credit Treated as Business Credit.--Section 38(b) 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:
       ``(21) the nonconventional source production credit 
     determined under section 45K(a).''.
       (3) Conforming Amendments.--
       (A) Section 30(b)(2)(A), as redesignated by section 
     1317(a), is amended by striking ``sections 27 and 29'' and 
     inserting ``section 27''.
       (B) Sections 43(b)(2) and 613A(c)(6)(C) are each amended by 
     striking ``section 29(d)(2)(C)'' and inserting ``section 
     45K(d)(2)(C)''.
       (C) Section 45K(a), as redesignated by paragraph (1), is 
     amended by striking ``At the election of the taxpayer, there 
     shall be allowed as a credit against the tax imposed by this 
     chapter for the taxable year'' and inserting ``For purposes 
     of section 38, if the taxpayer elects to have this section 
     apply, the nonconventional source production credit 
     determined under this section for the taxable year is''.
       (D) Section 45K(b), as so redesignated, is amended by 
     striking paragraph (6).
       (E) Section 53(d)(1)(B)(iii) is amended by striking ``under 
     section 29'' and all that follows through ``or not allowed''.
       (F) Section 55(c)(2) is amended by striking ``29(b)(6),''.
       (G) Subsection (a) of section 772 is amended by inserting 
     ``and'' at the end of paragraph (9), by striking paragraph 
     (10), and by redesignating paragraph (11) as paragraph (10).
       (H) Paragraph (5) of section 772(d) is amended by striking 
     ``the foreign tax credit, and the credit allowable under 
     section 29'' and inserting ``and the foreign tax credit''.
       (I) The table of sections for subpart B of part IV of 
     subchapter A of chapter 1 is amended by striking the item 
     relating to section 29.
       (J) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by this Act, is amended 
     by inserting after the item relating to section 45J the 
     following new item:
``Sec. 45K. Credit for producing fuel from a nonconventional source.''.
       (c) Determinations Under Natural Gas Policy Act of 1978.--
     Subparagraph (A) of section 45K(c)(2), as redesignated by 
     subsection (b)(1), is amended--
       (1) by inserting ``by the Secretary, after consultation 
     with the Federal Energy Regulatory Commission,'' after 
     ``shall be made'', and
       (2) by inserting ``(as in effect before the repeal of such 
     section)'' after ``1978''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to fuel produced 
     and sold after December 31, 2003, in taxable years ending 
     after such date.
       (2) Determinations under natural gas policy act of 1978.--
     The amendments made by subsection (c) shall apply as if 
     included in the provisions repealing section 503 of the 
     Natural Gas Policy Act of 1978.

[[Page H11305]]

              PART II--ALTERNATIVE MINIMUM TAX PROVISIONS

     SEC. 1346. NEW NONREFUNDABLE PERSONAL CREDITS ALLOWED AGAINST 
                   REGULAR AND MINIMUM TAXES.

       (a) In General.--
       (1) Section 25C.--Section 25C(b), as added by section 1301 
     of this Act, 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) Section 25D.--Section 25D(b), as added by section 1304 
     of this Act, 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.''.
       (b) Conforming Amendments.--
       (1) Section 23(b)(4)(B) is amended by inserting ``and 
     sections 25C and 25D'' after ``this section''.
       (2) Section 24(b)(3)(B) is amended by striking ``and 25B'' 
     and inserting ``, 25B, 25C, and 25D''.
       (3) Section 25(e)(1)(C) is amended by inserting ``25C, and 
     25D'' after ``25B,''.
       (4) Section 25B(g)(2) is amended by striking ``section 23'' 
     and inserting ``sections 23, 25C, and 25D''.
       (5) Section 26(a)(1) is amended by striking ``and 25B'' and 
     inserting ``25B, 25C, and 25D''.
       (6) Section 904(h) is amended by striking ``and 25B'' and 
     inserting ``25B, 25C, and 25D''.
       (7) Section 1400C(d) is amended by striking ``and 25B'' and 
     inserting ``25B, 25C, and 25D''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 1347. BUSINESS RELATED ENERGY CREDITS ALLOWED AGAINST 
                   REGULAR 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 specified energy credits.--
       ``(A) In general.--In the case of specified energy 
     credits--
       ``(i) this section and section 39 shall be applied 
     separately with respect to such credits, and
       ``(ii) in applying paragraph (1) to such credits--

       ``(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 specified 
     energy credits).

       ``(B) Specified energy credits.--For purposes of this 
     subsection, the term `specified energy credits' means the 
     credits determined under sections 45G, 45H, 45I, and 45J. For 
     taxable years beginning after December 31, 2003, such term 
     includes the credit determined under section 40. For taxable 
     years beginning after December 31, 2003, and before January 
     1, 2006, such term includes the credit determined under 
     section 43.
       ``(C) Special rule for electricity produced from qualified 
     facilities.--For purposes of this subsection, the term 
     `specified energy credits' shall include the credit 
     determined under section 45 to the extent that such credit is 
     attributable to electricity produced--
       ``(i) at a facility 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.--
       (1) Paragraph (2)(A)(ii)(II) of section 38(c) is amended by 
     striking ``or'' and inserting a comma and by inserting ``, 
     and the specified energy credits'' after ``employee credit''.
       (2) Paragraph (3)(A)(ii)(II) of section 38(c) is amended by 
     inserting ``and the specified energy credits'' after 
     ``employee 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.

     SEC. 1348. TEMPORARY REPEAL OF ALTERNATIVE MINIMUM TAX 
                   PREFERENCE FOR INTANGIBLE DRILLING COSTS.

       (a) In General.--Clause (ii) of section 57(a)(2)(E) is 
     amended by adding at the end the following new sentence: 
     ``The preceding sentence shall not apply to taxable years 
     beginning after December 31, 2003, and before January 1, 
     2006.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

                    PART III--CLEAN COAL INCENTIVES

     SEC. 1351. CREDIT FOR CLEAN COAL TECHNOLOGY UNITS.

       (a) In General.--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. CLEAN COAL TECHNOLOGY CREDIT.

       ``(a) In General.--For purposes of section 46, the clean 
     coal technology credit for any taxable year is an amount 
     equal to the applicable percentage of the basis of qualified 
     clean coal property placed in service during such year.
       ``(b) Applicable Percentage.--For purposes of this section, 
     the applicable percentage is--
       ``(1) 15 percent in the case of property placed in service 
     in connection with any basic clean coal technology unit, and
       ``(2) 17.5 percent in the case of property placed in 
     service in connection with any advanced clean coal technology 
     unit.
       ``(c) Qualified Clean Coal Property.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified clean coal property' 
     means section 1245 property--
       ``(A) which is installed in connection with--
       ``(i) an existing coal-based unit as part of the conversion 
     of such unit to any basic or advanced clean coal technology 
     unit, or
       ``(ii) any new advanced clean coal technology unit,
       ``(B) which is placed in service after December 31, 2003, 
     and before--
       ``(i) in the case of property to which subsection (b)(1) 
     applies, January 1, 2014, and
       ``(ii) in the case of property to which subsection (b)(2) 
     applies, January 1, 2017 (January 1, 2013, in the case of 
     property installed in connection with an eligible advanced 
     pulverized coal or atmospheric fluidized bed combustion 
     technology unit),
       ``(C) the original use of which commences with the 
     taxpayer, and
       ``(D) which has a useful life of not less than 4 years.
       ``(2) Existing coal-based unit.--The term `existing coal-
     based unit' means a coal-based electricity generating steam 
     generator-turbine unit--
       ``(A) which is not a basic or advanced clean coal 
     technology unit, and
       ``(B) which is in operation on or before January 1, 2004.

     In the case of a unit being converted to a basic clean coal 
     technology unit, such term shall not include a unit having a 
     nameplate capacity rating of more than 300 megawatts.
       ``(3) New advanced clean coal technology unit.--The term 
     `new advanced clean coal technology unit' means any advanced 
     clean coal technology unit which is placed in service after 
     December 31, 2003, and the original use of which commences 
     with the taxpayer.
       ``(d) Basic Clean Coal Technology Unit.--For purposes of 
     this section--
       ``(1) In general.--The term `basic 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, and integrated 
     gasification combined cycle) 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 the existing coal-based unit prior to its conversion,
       ``(D) has a maximum design net heat rate of not more than 
     9,500, and
       ``(E) meets the pollution control requirements of paragraph 
     (2).

     Such term shall not include an advanced clean coal technology 
     unit.
       ``(2) 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 conversion 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 conversion of the unit.
       ``(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.
       ``(3) 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 existing coal-based 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

[[Page H11306]]

     which would have resulted without the installation of such 
     controls.
       ``(4) HHV.--The term `HHV' means higher heating value.
       ``(e) Advanced Clean Coal Technology Unit.--For purposes of 
     this section--
       ``(1) In general.--The term `advanced clean coal technology 
     unit' means any electricity generating unit of the taxpayer--
       ``(A) which 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,
       ``(B) which uses an input of at least 75 percent coal to 
     produce at least 50 percent of its thermal output as 
     electricity, and
       ``(C) which 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 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 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--
       ``(A) which 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
       ``(B) 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--
       ``(A) which uses any other technology for the production of 
     electricity, and
       ``(B) which has a design net heat rate which meets the 
     requirement of paragraph (2).
       ``(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.
       ``(f) National Limitations on Credit.--For purposes of this 
     section--
       ``(1) In general.--The amount of credit which would (but 
     for this subsection) be allowed with respect to any property 
     shall not exceed the amount which bears the same ratio to 
     such amount of credit as--
       ``(A) the national megawatt capacity limitation allocated 
     to the taxpayer with respect to the basic or advanced clean 
     coal technology unit to which such property relates, bears to
       ``(B) the total megawatt capacity of such unit.
     The capacity described in subparagraph (B) shall be the 
     reasonably expected capacity after the installation of the 
     property.
       ``(2) Amount of national limitation.--
       ``(A) Advanced units.--The national megawatt capacity 
     limitation for advanced clean coal technology units shall be 
     6,000 megawatts. Of such amount, the national megawatt 
     capacity limitation is--
       ``(i) for advanced clean coal technology units using 
     advanced pulverized coal or atmospheric fluidized bed 
     combustion technology, not more than 1,500 megawatts (not 
     more than 750 megawatts in the case of units placed in 
     service before 2009),
       ``(ii) for such units using pressurized fluidized bed 
     combustion technology, not more than 750 megawatts (not more 
     than 375 megawatts in the case of units placed in service 
     before 2009),
       ``(iii) for such units using integrated gasification 
     combined cycle technology, with or without fuel or chemical 
     co-production, not more than 3,000 megawatts (not more than 
     1,250 megawatts in the case of units placed in service before 
     2009), and
       ``(iv) for such units using other technology for the 
     production of electricity, not more than 750 megawatts (not 
     more than 375 megawatts in the case of units placed in 
     service before 2009).
       ``(B) Basic units.--The national megawatt capacity 
     limitation for basic clean coal technology units shall be 
     4,000 megawatts.
       ``(3) Allocation of limitation.--The Secretary shall 
     allocate the national megawatt capacity limitations in such 
     manner as the Secretary may prescribe, except that the 
     Secretary may not allocate more than 300 megawatts to any 
     basic clean coal technology unit.
       ``(4) 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 
     to carry out the purposes of this subsection. Such 
     regulations shall provide a certification process under which 
     the Secretary, after consultation with the Secretary of 
     Energy, shall approve and allocate the national megawatt 
     capacity limitations--
       ``(A) to encourage that units with the highest thermal 
     efficiencies, when adjusted for the heat content of the 
     design coal and site reference conditions, and environmental 
     performance, be placed in service as soon as possible, and
       ``(B) to allocate capacity to taxpayers which have a 
     definite and credible plan for placing into commercial 
     operation a basic or advanced 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 which the Secretary determines are 
     appropriate.
       ``(g) Special Rules.--For purposes of this section--
       ``(1) Certain progress expenditure rules made applicable.--
     Rules similar to the rules of subsections (c)(4) and (d) of 
     section 46 (as in effect on the day before the date of the 
     enactment of the Revenue Reconciliation Act of 1990) shall 
     apply for purposes of this section.
       ``(2) Property financed by subsidized financing or 
     industrial development bonds.--Rules similar to the rules of 
     section 45(b)(3) shall apply for purposes of this section.
       ``(3) Noncompliance with pollution laws.--The terms `basic 
     clean coal technology unit' and `advanced clean coal 
     technology unit' shall not include any unit which is not 
     in compliance with the applicable Federal pollution 
     prevention, control, and permit requirements at any time 
     during the period applicable under subsection (c)(1)(B).
       ``(4) Denial of credit for units receiving certain other 
     federal assistance.--The terms `basic clean coal technology 
     unit' and `advanced clean coal technology unit' shall not 
     include any unit if, at any time during the period applicable 
     under subsection (c)(1)(B), any funding is provided to such 
     unit under the Clean Coal Technology Program, the Power Plant 
     Improvement Initiative, or the Clean Coal Power Initiative 
     administered by the Secretary of Energy.
       ``(5) Coordination with other credits.--This section shall 
     not apply to any property with respect to which the 
     rehabilitation credit under section 47, the energy credit 
     under section 48, or any credit under section 45 or 45K is 
     allowable unless the taxpayer elects to waive the application 
     of such credit to such property.''.
       (b) Special Recapture Rules.--
       (1) Subsection (a) of section 50 is amended by 
     redesignating paragraph (3), (4), and (5) as paragraphs (4), 
     (5), and (6), respectively, and by inserting after paragraph 
     (2) the following new paragraph:
       ``(3) Special rules for clean coal technology credits.--
       ``(A) Early disposition, etc.--If, during any taxable year, 
     qualified clean coal property is disposed of, or otherwise 
     ceases to be part of a basic or advanced clean coal 
     technology unit with respect to the taxpayer, before the 
     close of the recovery period under section 168 for such unit, 
     then the tax under this chapter for such taxable year shall 
     be increased by--
       ``(i) the aggregate decrease in the credits allowed under 
     section 38 for all prior taxable years which would have 
     resulted solely from reducing to zero any credit determined 
     under section 48A with respect to such property, multiplied 
     by
       ``(ii) a fraction--

       ``(I) the numerator of which is the number of years in the 
     period beginning with the year of such disposition or 
     cessation and ending with the last year of such recovery 
     period, and
       ``(II) the denominator of which is the total number of 
     years in such recovery period.

       ``(B) Property ceases to qualify for progress 
     expenditures.--Rules similar to the rules of this paragraph 
     shall apply in cases where qualified progress expenditures 
     were taken into account under the rules referred to in 
     section 48A(g)(1).
       ``(C) Increased recapture in certain cases.--The fraction 
     in subparagraph (A)(ii) shall be 1 in any case in which the 
     property ceases to be a basic or advanced clean coal 
     technology unit by reason of paragraph (3), (4), or (5) of 
     section 48A(g).
       ``(D) Coordination with other recapture rules.--Paragraphs 
     (1) and (2) shall not apply to qualified clean coal property.
       ``(E) Definitions.--Terms used in this section which are 
     also used in section 48A shall have the meanings given to 
     such terms in section 48A.''.
       (2) Paragraph (4) of section 50(a), as redesignated by 
     paragraph (1), is amended by striking ``or (2)'' and 
     inserting ``, (2), or (3)''.
       (3) Paragraph (5) of section 50(a), as so redesignated, is 
     amended by striking ``and (2)'' and inserting ``, (2), and 
     (3)''.
       (4) Section 1371(d)(1) is amended by striking ``section 
     50(a)(4)'' and inserting ``section 50(a)(5)''.
       (c) Technical Amendments.--
       (1) 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:

[[Page H11307]]

       ``(4) the clean coal technology credit.''.
       (2) 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 qualified clean coal 
     property (as defined by section 48A(c)).''.
       (3) 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. Clean coal technology credit.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to periods after December 31, 2003, 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. 1352. EXPANSION OF AMORTIZATION FOR CERTAIN POLLUTION 
                   CONTROL FACILITIES.

       (a) Eligibility of Post-1975 Pollution Control 
     Facilities.--
       (1) In general.--Paragraph (1) of section 169(d) is amended 
     by striking ``before January 1, 1976,'' and by striking ``a 
     new identifiable'' and inserting ``an identifiable''.
       (2) Identifiable treatment facility.--Paragraph (4) of 
     section 169(d) is amended to read as follows:
       ``(4) Identifiable treatment facility.--For purposes of 
     paragraph (1), the term `identifiable treatment facility' 
     includes only tangible property (not including a building and 
     its structural components, other than a building which is 
     exclusively a treatment facility) which is of a character 
     subject to the allowance for depreciation provided in 
     section 167, which is identifiable as a treatment 
     facility, and which is property--
       ``(A) the construction, reconstruction, or erection of 
     which is completed by the taxpayer, or
       ``(B) the original use of the property commences with the 
     taxpayer.''
       (3) Technical amendment.--Section 169(d)(3) is amended by 
     striking ``Health, Education, and Welfare'' and inserting 
     ``Health and Human Services''.
       (b) Coordination With Section 48A Investment Credit.--
     Section 169 is amended by redesignating subsections (e) 
     though (j) as subsection (f) through (k), respectively, and 
     by inserting after subsection (d) the following new 
     subsection:
       ``(e) Coordination With Section 48A Investment Credit.--
       ``(1) In general.--In the case of any treatment facility 
     used in connection with a plant or other property to which an 
     amount is allocated under section 48A(f), this section shall 
     apply only if such plant or other property was in operation 
     before January 1, 1976.
       ``(2) 36-month amortization with respect to pre-1976 plants 
     not allocated credit.--References in this section to 60 
     months shall be treated as references to 36 months in the 
     case of treatment facilities used in connection with a plant 
     or other property in operation before January 1, 1976, if no 
     allocation is made under section 48A(f) with respect to such 
     plant or property.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to facilities placed in service after the date of 
     the enactment of this Act.

     SEC. 1353. 5-YEAR RECOVERY PERIOD FOR ELIGIBLE INTEGRATED 
                   GASIFICATION COMBINED CYCLE TECHNOLOGY UNIT 
                   ELIGIBLE FOR CREDIT.

       (a) In General.--Subparagraph (B) of section 168(e)(3) 
     (defining 5-year property) is amended by striking ``and'' at 
     the end of clause (v), by striking the period at the end of 
     clause (vi) and inserting ``, and'', and by inserting after 
     clause (vi) the following new clause:
       ``(vii) any section 1245 property which is part of an 
     eligible integrated gasification combined cycle technology 
     unit (as defined in section 48A(e)(4)) for which an 
     allocation is made under section 48A(f).''
       (b) 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 (B)(iii) the following new item:

``(B)(vii)........................................................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.

              PART IV--HIGH VOLUME NATURAL GAS PROVISIONS

     SEC. 1355. HIGH VOLUME NATURAL GAS PIPE 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 high volume natural gas pipe the original use 
     of which commences with the taxpayer after the date of the 
     enactment of this clause, and''.
       (b) High Volume Natural Gas Pipe.--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) High volume natural gas pipe.--The term `high volume 
     natural gas pipe' means--
       ``(A) pipe which has an interior diameter of at least 42 
     inches and which is part of a natural gas pipeline system, 
     and
       ``(B) any related equipment and appurtenances used in 
     connection with such pipe.''.
       (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)........................................................22''.

       (d) Alternative Minimum Tax Exception.--Subparagraph (B) of 
     section 56(a)(1), as amended by this Act, is amended by 
     inserting before the period the following: ``, or in section 
     168(e)(3)(C)(iii)''.
       (e) 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. 1356. EXTENSION OF ENHANCED OIL RECOVERY CREDIT TO HIGH 
                   VOLUME NATURAL GAS 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 in connection with the construction of a gas 
     treatment plant which--
       ``(i) prepares natural gas for transportation through a 
     pipeline with a capacity of at least 1,000,000,000,000 Btu of 
     natural gas per day, and
       ``(ii) 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.
                   Subtitle D--Additional Provisions

     SEC. 1361. EXTENSION OF ACCELERATED DEPRECIATION BENEFIT FOR 
                   ENERGY-RELATED BUSINESSES ON INDIAN 
                   RESERVATIONS.

       Paragraph (8) of section 168(j) (relating to termination) 
     is amended by adding at the end the following new sentence: 
     ``The preceding sentence shall be applied by substituting 
     `December 31, 2005' for `December 31, 2004' in the case of 
     property placed in service as part of a facility for--
       ``(A) the generation or transmission of electricity 
     (including from any qualified energy resource, as defined in 
     section 45(c)),
       ``(B) an oil or gas well,
       ``(C) the transmission or refining of oil or gas, or
       ``(D) the production of any qualified fuel (as defined in 
     section 45K(c)).''.

     SEC. 1362. 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: ``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 ending after 
     the date of the enactment of this Act.

     SEC. 1363. DISTRIBUTIONS FROM PUBLICLY TRADED PARTNERSHIPS 
                   TREATED AS QUALIFYING INCOME OF REGULATED 
                   INVESTMENT COMPANIES.

       (a) In General.--Paragraph (2) of section 851(b) (defining 
     regulated investment company) is amended to read as follows:
       ``(2) at least 90 percent of its gross income is derived 
     from--
       ``(A) dividends, interest, payments with respect to 
     securities loans (as defined in section 512(a)(5)), and gains 
     from the sale or other disposition of stock or securities (as 
     defined in section 2(a)(36) of the Investment Company Act of 
     1940, as amended) or foreign currencies, or other income 
     (including but not limited to gains from options, futures or 
     forward contracts) derived with respect to its business of 
     investing in such stock, securities, or currencies, and
       ``(B) distributions or other income derived from an 
     interest in a qualified publicly traded partnership (as 
     defined in subsection (h)); and''
       (b) Source Flow-Through Rule Not To Apply.--The last 
     sentence of section 851(b) is amended by inserting ``(other 
     than a qualified publicly traded partnership as defined in 
     subsection (h))'' after ``derived from a partnership''.
       (c) Limitation on Ownership.--Subsection (c) of section 851 
     is amended by redesignating paragraph (5) as paragraph (6) 
     and inserting after paragraph (4) the following new 
     paragraph:
       ``(5) The term `outstanding voting securities of such 
     issuer' shall include the equity securities of a qualified 
     publicly traded partnership (as defined in subsection 
     (h)).''.
       (d) Definition of Qualified Publicly Traded Partnership.--
     Section 851 is amended by adding at the end the following new 
     subsection:
       ``(h) Qualified Publicly Traded Partnership.--For purposes 
     of this section, the term `qualified publicly traded 
     partnership' means a publicly traded partnership described in 
     section 7704(b) other than a partnership which would satisfy 
     the gross income requirements of section 7704(c)(2) if 
     qualifying income included only income described in 
     subsection (b)(2)(A).''.
       (e) Definition of Qualifying Income.--Section 7704(d)(4) is 
     amended by striking ``section 851(b)(2)'' and inserting 
     ``section 851(b)(2)(A)''.
       (f) Limitation on Composition of Assets.--Subparagraph (B) 
     of section 851(b)(3) is amended to read as follows:
       ``(B) not more than 25 percent of the value of its total 
     assets is invested in--
       ``(i) the securities (other than Government securities or 
     the securities of other regulated investment companies) of 
     any one issuer,

[[Page H11308]]

       ``(ii) the securities (other than the securities of other 
     regulated investment companies) of two or more issuers which 
     the taxpayer controls and which are determined, under 
     regulations prescribed by the Secretary, to be engaged in the 
     same or similar trades or businesses or related trades or 
     businesses, or
       ``(iii) the securities of one or more qualified publicly 
     traded partnerships (as defined in subsection (h)).''.
       (g) Application of Special Passive Activity Rule to 
     Regulated Investment Companies.--Subsection (k) of section 
     469 (relating to separate application of section in case of 
     publicly traded partnerships) is amended by adding at the end 
     the following new paragraph:
       ``(4) Application to regulated investment companies.--For 
     purposes of this section, a regulated investment company (as 
     defined in section 851) holding an interest in a qualified 
     publicly traded partnership (as defined in section 851(h)) 
     shall be treated as a taxpayer described in subsection (a)(2) 
     with respect to items attributable to such interest.''.
       (h) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 1364. CEILING FANS.

       (a) In General.--Subchapter II of chapter 99 of the 
     Harmonized Tariff Schedule of the United States is amended by 
     inserting in numerical sequence the following new heading:


      9902.84.14     Ceiling fans for   Free           No change      No change     On or before
                      permanent                                                      12/31/2005    .''
                      installation
                      (provided for in
                      subheading
                      8414.51.00).

       (b) Effective Date.--The amendment made by this section 
     applies to goods entered, or withdrawn from warehouse, for 
     consumption on or after the 15th day after the date of 
     enactment of this Act.

     SEC. 1365. CERTAIN STEAM GENERATORS, AND CERTAIN REACTOR 
                   VESSEL HEADS, USED IN NUCLEAR FACILITIES.

       (a) Certain Steam Generators.--Heading 9902.84.02 of the 
     Harmonized Tariff Schedule of the United States is amended by 
     striking ``12/31/2006'' and inserting ``12/31/2008''.
       (b) Certain Reactor Vessel Heads.--Subchapter II of chapter 
     99 of the Harmonized Tariff Schedule of the United States is 
     amended by inserting in numerical sequence the following new 
     heading:
       

      9902.84.03    Reactor vessel    Free              No change         No change         On or before 12/
                     heads for                                                               31/2007
                     nuclear                                                                                  .'
                     reactors                                                                                  '
                     (provided for
                     in subheading
                     8401.40.00).

       (c) Effective Date.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act.
       (2) Subsection (b).--The amendment made by subsection (b) 
     shall apply to goods entered, or withdrawn from warehouse, 
     for consumption on or after the 15th day after the date of 
     the enactment of this Act.

     SEC. 1366. BROWNFIELDS DEMONSTRATION PROGRAM FOR QUALIFIED 
                   GREEN BUILDING AND SUSTAINABLE DESIGN PROJECTS.

       (a) Treatment as Exempt Facility Bond.--Subsection (a) of 
     section 142 (relating to the definition of exempt facility 
     bond) is amended by striking ``or'' at the end of paragraph 
     (12), by striking the period at the end of paragraph (13) and 
     inserting ``, or'', and by inserting at the end the following 
     new paragraph:
       ``(14) qualified green building and sustainable design 
     projects.''.
       (b) Qualified Green Building and Sustainable Design 
     Projects.--Section 142 (relating to exempt facility bonds) is 
     amended by adding at the end thereof the following new 
     subsection:
       ``(l) Qualified Green Building and Sustainable Design 
     Projects.--
       ``(1) In general.--For purposes of subsection (a)(14), the 
     term `qualified green building and sustainable design 
     project' means any project which is designated by the 
     Secretary, after consultation with the Administrator of the 
     Environmental Protection Agency, as a qualified green 
     building and sustainable design project and which meets the 
     requirements of clauses (i), (ii), (iii), and (iv) of 
     paragraph (4)(A).
       ``(2) Designations.--
       ``(A) In general.--Within 60 days after the end of the 
     application period described in paragraph (3)(A), the 
     Secretary, after consultation with the Administrator of the 
     Environmental Protection Agency, shall designate qualified 
     green building and sustainable design projects. At least one 
     of the projects designated shall be located in, or within a 
     10-mile radius of, an empowerment zone as designated pursuant 
     to section 1391, and at least one of the projects designated 
     shall be located in a rural State. No more than one project 
     shall be designated in a State. A project shall not be 
     designated if such project includes a stadium or arena for 
     professional sports exhibitions or games.
       ``(B) Minimum conservation and technology innovation 
     objectives.--The Secretary, after consultation with the 
     Administrator of the Environmental Protection Agency, shall 
     ensure that, in the aggregate, the projects designated 
     shall--
       ``(i) reduce electric consumption by more than 150 
     megawatts annually as compared to conventional construction,
       ``(ii) reduce daily sulfur dioxide emissions by at least 10 
     tons compared to coal generation power,
       ``(iii) expand by 75 percent the domestic solar 
     photovoltaic market in the United States (measured in 
     megawatts) as compared to the expansion of that market from 
     2001 to 2002, and
       ``(iv) use at least 25 megawatts of fuel cell energy 
     generation.
       ``(3) Limited designations.--A project may not be 
     designated under this subsection unless--
       ``(A) the project is nominated by a State or local 
     government within 180 days of the enactment of this 
     subsection, and
       ``(B) such State or local government provides written 
     assurances that the project will satisfy the eligibility 
     criteria described in paragraph (4).
       ``(4) Application.--
       ``(A) In general.--A project may not be designated under 
     this subsection unless the application for such designation 
     includes a project proposal which describes the energy 
     efficiency, renewable energy, and sustainable design features 
     of the project and demonstrates that the project satisfies 
     the following eligibility criteria:
       ``(i) Green building and sustainable design.--At least 75 
     percent of the square footage of commercial buildings which 
     are part of the project is registered for United States Green 
     Building Council's LEED certification and is reasonably 
     expected (at the time of the designation) to receive such 
     certification.
       ``(ii) Brownfield redevelopment.--The project includes a 
     brownfield site as defined by section 101(39) of the 
     Comprehensive Environmental Response, Compensation, and 
     Liability Act of 1980 (42 U.S.C. 9601), including a site 
     described in subparagraph (D)(ii)(II)(aa) thereof.
       ``(iii) State and local support.--The project receives 
     specific State or local government resources which will 
     support the project in an amount equal to at least 
     $5,000,000. For purposes of the preceding sentence, the term 
     `resources' includes tax abatement benefits and contributions 
     in kind.
       ``(iv) Size.--The project includes at least one of the 
     following:

       ``(I) At least 1,000,000 square feet of building.
       ``(II) At least 20 acres.

       ``(v) Use of tax benefit.--The project proposal includes a 
     description of the net benefit of the tax-exempt financing 
     provided under this subsection which will be allocated for 
     financing of one or more of the following:

       ``(I) The purchase, construction, integration, or other use 
     of energy efficiency, renewable energy, and sustainable 
     design features of the project.
       ``(II) Compliance with LEED certification standards.
       ``(III) The purchase, remediation, and foundation 
     construction and preparation of the brownfields site.

       ``(vi) Employment.--The project is projected to provide 
     permanent employment of at least 1,500 full time equivalents 
     (150 full time equivalents in rural States) when completed 
     and construction employment of at least 1,000 full time 
     equivalents (100 full time equivalents in rural States).

     The application shall include an independent analysis which 
     describes the project's economic impact, including the amount 
     of projected employment.
       ``(B) Project description.--Each application described in 
     subparagraph (A) shall contain for each project a description 
     of--
       ``(i) the amount of electric consumption reduced as 
     compared to conventional construction,
       ``(ii) the amount of sulfur dioxide daily emissions reduced 
     compared to coal generation,
       ``(iii) the amount of the gross installed capacity of the 
     project's solar photovoltaic capacity measured in megawatts, 
     and
       ``(iv) the amount, in megawatts, of the project's fuel cell 
     energy generation.
       ``(5) Certification of use of tax benefit.--No later than 
     30 days after the completion of the project, each project 
     must certify to the Secretary that the net benefit of the 
     tax-exempt financing was used for the purposes described in 
     paragraph (4).
       ``(6) Definitions.--For purposes of this subsection--
       ``(A) Rural state.--The term `rural State' means any State 
     which has--
       ``(i) a population of less than 4,500,000 according to the 
     2000 census,
       ``(ii) a population density of less than 150 people per 
     square mile according to the 2000 census, and
       ``(iii) increased in population by less than half the rate 
     of the national increase between the 1990 and 2000 censuses.
       ``(B) Local government.--The term `local government' has 
     the meaning given such term by section 1393(a)(5).
       ``(C) Net benefit of tax-exempt financing.--The term `net 
     benefit of tax-exempt financing' means the present value of 
     the interest savings (determined by a calculation established 
     by the Secretary) which result from the tax-exempt status of 
     the bonds.

[[Page H11309]]

       ``(7) Aggregate face amount of tax-exempt financing.--
       ``(A) In general.--An issue shall not be treated as an 
     issue described in subsection (a)(14) if the aggregate face 
     amount of bonds issued by the State or local government 
     pursuant thereto for a project (when added to the aggregate 
     face amount of bonds previously so issued for such project) 
     exceeds an amount designated by the Secretary as part of the 
     designation.
       ``(B) Limitation on amount of bonds.--The Secretary may not 
     allocate authority to issue qualified green building and 
     sustainable design project bonds in an aggregate face amount 
     exceeding $2,000,000,000.
       ``(8) Termination.--Subsection (a)(14) shall not apply with 
     respect to any bond issued after September 30, 2009.
       ``(9) Treatment of current refunding bonds.--Paragraphs 
     (7)(B) and (8) shall not apply to any bond (or series of 
     bonds) issued to refund a bond issued under subsection 
     (a)(14) before October 1, 2009, if--
       ``(A) the average maturity date of the issue of which the 
     refunding bond is a part is not later than the average 
     maturity date of the bonds to be refunded by such issue,
       ``(B) the amount of the refunding bond does not exceed the 
     outstanding amount of the refunded bond, and
       ``(C) the net proceeds of the refunding bond are used to 
     redeem the refunded bond not later than 90 days after the 
     date of the issuance of the refunding bond.

     For purposes of subparagraph (A), average maturity shall be 
     determined in accordance with section 147(b)(2)(A).''.
       (c) Exemption From General State Volume Caps.--Paragraph 
     (3) of section 146(g) (relating to exception for certain 
     bonds) is amended--
       (1) by striking ``or (13)'' and inserting ``(13), or 
     (14)'', and
       (2) by striking ``and qualified public educational 
     facilities'' and inserting ``qualified public educational 
     facilities, and qualified green building and sustainable 
     design projects''.
       (d) Special Rule for Assets Financed Under This Section and 
     Accountability.--
       (1) Denial of double benefit.--Any asset financed with 
     bonds issued pursuant to this section shall be ineligible for 
     any credit or deduction established under the Energy Tax 
     Policy Act of 2003.
       (2) Accountability.--Each issuer shall maintain, on behalf 
     of each project, an interest bearing reserve account equal to 
     1 percent of the net proceeds of any bond issued under this 
     section for such project. Not later than 5 years after the 
     date of issuance, the Secretary of the Treasury, after 
     consultation with the Administrator of the Environmental 
     Protection Agency, shall determine whether the project 
     financed with such bonds has substantially complied with the 
     terms and conditions described in section 142(l)(4) of the 
     Internal Revenue Code of 1986 (as added by this section). If 
     the Secretary, after such consultation, certifies that the 
     project has substantially complied with such terms and 
     conditions and meets the commitments set forth in the 
     application for such project described in section 142(l)(4) 
     of such Code, amounts in the reserve account, including all 
     interest, shall be released to the project. If the Secretary 
     determines that the project has not substantially complied 
     with such terms and conditions, amounts in the reserve 
     account, including all interest, shall be paid to the United 
     States Treasury.
       (e) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after the date of the enactment 
     of this Act.
                        TITLE XIV--MISCELLANEOUS
         Subtitle A--Rural and Remote Electricity Construction

     SEC. 1401. DENALI COMMISSION PROGRAMS.

       (a) Power Cost Equalization Program.--There are authorized 
     to be appropriated to the Denali Commission established by 
     the Denali Commission Act of 1998 (42 U.S.C. 3121 note) not 
     more than $5,000,000 for each of fiscal years 2005 through 
     2011 for the purposes of funding the power cost equalization 
     program established under section 42.45.100 of the Alaska 
     Statutes.
       (b) Availability of Funds.--
       (1) Purpose.--Amounts described in paragraph (2) shall be 
     available to the Denali Commission to permit energy 
     generation and development (including fuel cells, 
     hydroelectric, solar, wind, wave, and tidal energy, and 
     alternative energy sources), energy transmission (including 
     interties), fuel tank replacement and clean-up, fuel 
     transportation networks and related facilities, power cost 
     equalization programs, and other energy programs, 
     notwithstanding any other provision of law.
       (2) Amounts.--(A) Except as provided in subparagraph (B), 
     the amounts referred to in paragraph (1) shall be any Federal 
     royalties, rents, and bonuses derived from the Federal share 
     of Federal oil and gas leases in the National Petroleum 
     Reserve in Alaska, up to a maximum of $50,000,000, for each 
     of the fiscal years 2004 through 2013.
       (B) If amounts available under subparagraph (A) for one of 
     the fiscal years 2004 through 2013 are less than $50,000,000, 
     the Secretary of Energy shall make available an amount 
     sufficient to ensure that the amount available under this 
     subsection for that fiscal year equals $50,000,000, from 
     amounts remaining after deposits are made under section 
     949(a)(1), from the same source from which those deposits are 
     made.

     SEC. 1402. RURAL AND REMOTE COMMUNITY ASSISTANCE.

       (a) Program.--Section 19 of the Rural Electrification Act 
     of 1936 (7 U.S.C 918a) is amended by striking all that 
     precedes subsection (b) and inserting the following:

     ``SEC. 19. ELECTRIC GENERATION, TRANSMISSION, AND 
                   DISTRIBUTION FACILITIES EFFICIENCY GRANTS AND 
                   LOANS TO RURAL AND REMOTE COMMUNITIES WITH 
                   EXTREMELY HIGH ELECTRICITY COSTS.

       ``(a) In General.--The Secretary, acting through the Rural 
     Utilities Service, may--
       ``(1) in coordination with State rural development 
     initiatives, make grants and loans to persons, States, 
     political subdivisions of States, and other entities 
     organized under the laws of States, to acquire, construct, 
     extend, upgrade, and otherwise improve electric generation, 
     transmission, and distribution facilities serving communities 
     in which the average revenue per kilowatt hour of electricity 
     for all consumers is greater than 150 percent of the average 
     revenue per kilowatt hour of electricity for all consumers in 
     the United States (as determined by the Energy Information 
     Administration using the most recent data available);
       ``(2) make grants and loans to the Denali Commission 
     established by the Denali Commission Act of 1998 (42 U.S.C. 
     3121 note; Public 105-277) to be used for the purpose of 
     providing funds to acquire, construct, extend, upgrade, 
     finance, and otherwise improve electric generation, 
     transmission, and distribution facilities serving communities 
     described in paragraph (1); and
       ``(3) make grants to State entities to establish and 
     support a revolving fund to provide a more cost-effective 
     means of purchasing fuel in areas where the fuel cannot be 
     shipped by means of surface transportation.''.
       (b) Definition of Person.--Section 13 of the Rural 
     Electrification Act of 1936 (7 U.S.C. 913) is amended by 
     striking ``or association'' and inserting ``association, or 
     Indian tribe (as defined in section 4 of the Indian Self-
     Determination and Education Assistance Act)''.
                      Subtitle B--Coastal Programs

     SEC. 1411. ROYALTY PAYMENTS UNDER LEASES UNDER THE OUTER 
                   CONTINENTAL SHELF LANDS ACT.

       (a) Royalty Relief.--
       (1) In general.--For purposes of providing compensation for 
     lessees and a State for which amounts are authorized by 
     section 6004(c) of the Oil Pollution Act of 1990 (Public Law 
     101-380), a lessee may withhold from payment any royalty due 
     and owing to the United States under any leases under the 
     Outer Continental Shelf Lands Act (43 U.S.C. 1301 et seq.) 
     for offshore oil or gas production from a covered lease tract 
     if, on or before the date that the payment is due and payable 
     to the United States, the lessee makes a payment to the 
     Secretary of the Interior of 44 cents for every $1 of royalty 
     withheld.
       (2) Use of amounts paid to secretary.--Within 30 days after 
     the Secretary of the Interior receives payments under 
     paragraph (1), the Secretary of the Interior shall--
       (A) make 47.5 percent of such payments available to the 
     State referred to in section 6004(c) of the Oil Pollution Act 
     of 1990; and
       (B) make 52.5 percent of such payments available equally, 
     only for the programs and purposes identified as number 282 
     at page 1389 of House Report number 108-10 and for a program 
     described at page 1159 of that Report in the State referred 
     to in such section 6004(c).
       (3) Treatment of amounts.--Any royalty withheld by a lessee 
     in accordance with this section (including any portion 
     thereof that is paid to the Secretary of the Interior under 
     paragraph (1)) shall be treated as paid for purposes of 
     satisfaction of the royalty obligations of the lessee to the 
     United States.
       (4) Certification of withheld amounts.--The Secretary of 
     the Treasury shall--
       (A) determine the amount of royalty withheld by a lessee 
     under this section; and
       (B) promptly publish a certification when the total amount 
     of royalty withheld by the lessee under this section is equal 
     to--
       (i) the dollar amount stated at page 47 of Senate Report 
     number 101-534, which is designated therein as the total 
     drainage claim for the West Delta field; plus
       (ii) interest as described at page 47 of that Report.
       (b) Period of Royalty Relief.--Subsection (a) shall apply 
     to royalty amounts that are due and payable in the period 
     beginning on January 1, 2004, and ending on the date on which 
     the Secretary of the Treasury publishes a certification under 
     subsection (a)(4)(B).
       (c) Definitions.--As used in this section:
       (1) Covered lease tract.--The term ``covered lease tract'' 
     means a leased tract (or portion of a leased tract)--
       (A) lying seaward of the zone defined and governed by 
     section 8(g) of the Outer Continental Shelf Lands Act (43 
     U.S.C. 1337(g)); or
       (B) lying within such zone but to which such section does 
     not apply.
       (2) Lessee.--The term ``lessee''--
       (A) means a person or entity that, on the date of the 
     enactment of the Oil Pollution Act of 1990, was a lessee 
     referred to in section 6004(c) of that Act (as in effect on 
     that date of the enactment), but did not hold lease rights in 
     Federal offshore lease OCS-G-5669; and
       (B) includes successors and affiliates of a person or 
     entity described in subparagraph (A).

     SEC. 1412. DOMESTIC OFFSHORE ENERGY REINVESTMENT.

       (a) Domestic Offshore Energy Reinvestment Program.--The 
     Outer Continental Shelf Lands Act (43 U.S.C. 1331 et seq.) is 
     amended by adding at the end the following:

     ``SEC. 32. DOMESTIC OFFSHORE ENERGY REINVESTMENT PROGRAM.

       ``(a) Definitions.--In this section:
       ``(1) Approved plan.--The term `approved plan' means a 
     Secure Energy Reinvestment Plan approved by the Secretary 
     under this section.
       ``(2) Coastal energy state.--The term `Coastal Energy 
     State' means a Coastal State off the coastline of which, 
     within the seaward lateral boundary as determined by the map 
     referenced in subsection (c)(2)(A), outer Continental Shelf 
     bonus bids or royalties are generated, other than bonus bids 
     or royalties from

[[Page H11310]]

     a leased tract within any area of the outer Continental Shelf 
     for which a moratorium on new leasing was in effect as of 
     January 1, 2002, unless the lease was issued before the 
     establishment of the moratorium and was in production on such 
     date.
       ``(3) Coastal political subdivision.--The term `coastal 
     political subdivision' means a county, parish, or other 
     equivalent subdivision of a Coastal Energy State, all or part 
     of which lies within the boundaries of the coastal zone of 
     the State, as identified in the State's approved coastal zone 
     management program under the Coastal Zone Management Act of 
     1972 (16 U.S.C. 1451 et seq.) on the date of the enactment of 
     this section.
       ``(4) Coastal population.--The term `coastal population' 
     means the population of a coastal political subdivision, as 
     determined by the most recent official data of the Census 
     Bureau.
       ``(5) Coastline.--The term `coastline' has the same meaning 
     as the term `coast line' in subsection 2(c) of the Submerged 
     Lands Act (43 U.S.C. 1301(c)).
       ``(6) Fund.--The term `Fund' means the Secure Energy 
     Reinvestment Fund established by this section.
       ``(7) Leased tract.--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.
       ``(8) Qualified outer continental shelf revenues.--(A) 
     Except as provided in subparagraph (B), the term `qualified 
     outer Continental Shelf revenues' means all amounts received 
     by the United States on or after October 1, 2003, from each 
     leased tract or portion of a leased tract lying seaward of 
     the zone defined and governed by section 8(g), or lying 
     within such zone but to which section 8(g) does not apply, 
     including bonus bids, rents, royalties (including payments 
     for royalties taken in kind and sold), net profit share 
     payments, and related interest.
       ``(B) 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 for which a 
     moratorium on new leasing was in effect as of January 1, 
     2002, unless the lease was issued before the establishment of 
     the moratorium and was in production on such date.
       ``(9) Secretary.--The term `Secretary' means the Secretary 
     of the Interior.
       ``(b) Secure Energy Reinvestment Fund.--
       ``(1) Establishment.--There is established in the Treasury 
     of the United States a separate account which shall be known 
     as the `Secure Energy Reinvestment Fund'. The Fund shall 
     consist of amounts deposited under paragraph (2), and such 
     other amounts as may be appropriated to the Fund.
       ``(2) Deposits.--For each fiscal year after fiscal year 
     2003, the Secretary of the Treasury shall deposit into the 
     Fund the following:
       ``(A) Notwithstanding section 9, all qualified outer 
     Continental Shelf revenues attributable to royalties received 
     by the United States in the fiscal year that are in excess of 
     the following amount:
       ``(i) $3,455,000,000 in the case of royalties received in 
     fiscal year 2004.
       ``(ii) $3,726,000,000 in the case of royalties received in 
     fiscal year 2005.
       ``(iii) $4,613,000,000 in the case of royalties received in 
     fiscal year 2006.
       ``(iv) $5,226,000,000 in the case of royalties received in 
     fiscal year 2007.
       ``(v) $5,841,000,000 in the case of royalties received in 
     fiscal year 2008.
       ``(vi) $5,763,000,000 in the case of royalties received in 
     fiscal year 2009.
       ``(vii) $6,276,000,000 in the case of royalties received in 
     fiscal year 2010.
       ``(viii) $6,351,000,000 in the case of royalties received 
     in fiscal year 2011.
       ``(ix) $6,551,000,000 in the case of royalties received in 
     fiscal year 2012.
       ``(x) $5,120,000,000 in the case of royalties received in 
     fiscal year 2013.
       ``(B) Notwithstanding section 9, all qualified outer 
     Continental shelf revenues attributable to bonus bids 
     received by the United States in each of the fiscal years 
     2004 through 2013 that are in excess of $1,000,000,000.
       ``(C) Notwithstanding section 9, in addition to amounts 
     deposited under subparagraphs (A) and (B), $35,000,000 of 
     amounts received by the United States each fiscal year as 
     royalties for oil or gas production on the outer Continental 
     Shelf, except that no amounts shall be deposited under this 
     subparagraph before fiscal year 2004 or after fiscal year 
     2013.
       ``(D) All interest earned under paragraph (4).
       ``(E) All repayments under subsection (f).
       ``(3) Reduction in deposit.--(A) For each fiscal year after 
     fiscal year 2013 in which amounts received by the United 
     States as royalties for oil or gas production on the outer 
     Continental Shelf are less than the sum of the amounts 
     described in subparagraph (B) (before the application of this 
     subparagraph), the Secretary of the Treasury shall reduce 
     each of the amounts described in subparagraph (B) 
     proportionately.
       ``(B) The amounts referred to in subparagraph (A) are the 
     following:
       ``(i) The amount required to be covered into the Historic 
     Preservation Fund under section 108 of the National Historic 
     Preservation Act (16 U.S.C. 470h) on the date of the 
     enactment of this paragraph.
       ``(ii) The amount required to be credited to the Land and 
     Water Conservation Fund under section 2(c)(2) of the Land and 
     Water Conservation Fund Act of 1965 (16 U.S.C. 4601-5(c)(2)) 
     on the date of the enactment of this paragraph.
       ``(iii) The amount required to be deposited under 
     subparagraph (C) of paragraph (2) of this subsection.
       ``(4) Investment.--The Secretary of the Treasury shall 
     invest moneys in the Fund (including interest) in public debt 
     securities with maturities suitable to the needs of the Fund, 
     as determined by the Secretary of the Treasury, and bearing 
     interest at rates determined by the Secretary of the 
     Treasury, taking into consideration current market yields on 
     outstanding marketable obligations of the United States of 
     comparable maturity. Such invested moneys shall remain 
     invested until needed to meet requirements for disbursement 
     under this section.
       ``(5) Review and revision of baseline amounts.--Not later 
     than December 31, 2008, the Secretary of the Interior, in 
     consultation with the Secretary of the Treasury, shall--
       ``(A) determine the amount and composition of outer 
     Continental Shelf revenues that were received by the United 
     States in each of the fiscal years 2004 through 2008;
       ``(B) project the amount and composition of outer 
     Continental Shelf revenues that will be received in the 
     United States in each of the fiscal years 2009 through 2013; 
     and
       ``(C) submit to the Congress a report regarding whether any 
     of the dollar amounts set forth in clauses (v) though (x) of 
     paragraph (2)(A) or paragraph (2)(B) should be modified to 
     reflect those projections.
       ``(6) Authorization of appropriation of additional 
     amounts.--In addition to the amounts deposited into the Fund 
     under paragraph (2) there are authorized to be appropriated 
     to the Fund--
       ``(A) for each of fiscal years 2004 through 2013 up to 
     $500,000,000; and
       ``(B) for each fiscal year after fiscal year 2013 up to 25 
     percent of qualified outer Continental Shelf revenues 
     received by the United States in the preceding fiscal year.
       ``(c) Use of Secure Energy Reinvestment Fund.--
       ``(1) In general.--(A) The Secretary shall use amounts in 
     the Fund remaining after the application of subsections (h) 
     and (i) to pay to each Coastal Energy State that has a Secure 
     Energy Reinvestment Plan approved by the Secretary under this 
     section, and to coastal political subdivisions of such State, 
     the amount allocated to the State or coastal political 
     subdivision, respectively, under this subsection.
       ``(B) The Secretary shall make payments under this 
     paragraph in December of 2004, and of each year thereafter, 
     from revenues received by the United States in the 
     immediately preceding fiscal year.
       ``(2) Allocation.--The Secretary shall allocate amounts 
     deposited into the Fund in a fiscal year, and other amounts 
     determined by the Secretary to be available, among Coastal 
     Energy States that have an approved plan, and to coastal 
     political subdivisions of such States, as follows:
       ``(A)(i) Of the amounts made available for each of the 
     first 10 fiscal years for which amounts are available for 
     allocation under this paragraph, the allocation for each 
     Coastal Energy State shall be calculated based on the ratio 
     of qualified outer Continental Shelf revenues generated off 
     the coastline of the Coastal Energy State to the qualified 
     outer Continental Shelf revenues generated off the coastlines 
     of all Coastal Energy States for the period beginning January 
     1, 1992, and ending December 31, 2001.
       ``(ii) Of the amounts available for a fiscal year in a 
     subsequent 10-fiscal-year period, the allocation for each 
     Coastal Energy State shall be calculated based on such ratio 
     determined by the Secretary with respect to qualified outer 
     Continental Shelf revenues generated in each subsequent 
     corresponding 10-year period.
       ``(iii) For purposes of this subparagraph, qualified outer 
     Continental Shelf revenues shall be considered to be 
     generated off the coastline of a Coastal Energy State if the 
     geographic center of the lease tract from which the revenues 
     are generated is located within the area formed by the 
     extension of the State's seaward lateral boundaries, 
     calculated using the strict and scientifically derived 
     conventions established to delimit international lateral 
     boundaries under the Law of the Sea, as indicated on the map 
     entitled `Calculated Seaward Lateral Boundaries' and dated 
     October 2003, on file in the Office of the Director, Minerals 
     Management Service.
       ``(B) 35 percent of each Coastal Energy State's allocable 
     share as determined under subparagraph (A) shall be allocated 
     among and paid directly to the coastal political subdivisions 
     of the State by the Secretary based on the following formula:
       ``(i) 25 percent shall be allocated based on the ratio of 
     each coastal political subdivision's coastal population to 
     the coastal population of all coastal political subdivisions 
     of the Coastal Energy State.
       ``(ii) 25 percent shall be allocated based on the ratio of 
     each coastal political subdivision's coastline miles to the 
     coastline miles of all coastal political subdivisions of the 
     State. In the case of a coastal political subdivision without 
     a coastline, the coastline of the political subdivision for 
     purposes of this clause shall be one-third the average length 
     of the coastline of the other coastal political subdivisions 
     of the State.
       ``(iii) 50 percent shall be allocated based on a formula 
     that allocates 75 percent of the funds based on such coastal 
     political subdivision's relative distance from any leased 
     tract used to calculate that State's allocation and 25 
     percent of the funds based on the relative level of outer 
     Continental Shelf oil and gas activities in a coastal 
     political subdivision to the level of outer Continental Shelf 
     oil and gas activities in all coastal political subdivisions 
     in such State, as determined by the Secretary, except that in 
     the case of a coastal political subdivision in the State of 
     California that has a coastal shoreline, that is not within 
     200 miles of the geographic center of a leased tract or 
     portion of a leased tract, and in which there is located one 
     or more oil refineries the allocation under this clause shall 
     be determined as if that coastal political subdivision were 
     located within a distance of 50 miles from the geographic 
     center of the closest

[[Page H11311]]

     leased tract with qualified outer Continental Shelf revenues.
       ``(3) Reallocation.--Any amount allocated to a Coastal 
     Energy State or coastal political subdivision of such a State 
     but not disbursed because of a failure of a Coastal Energy 
     State to have an approved plan shall be reallocated by the 
     Secretary among all other Coastal Energy States in a manner 
     consistent with this subsection, except that the Secretary--
       ``(A) shall hold the amount in escrow within the Fund until 
     the earlier of the end of the next fiscal year in which the 
     allocation is made or the final resolution of any appeal 
     regarding the disapproval of a plan submitted by the State 
     under this section; and
       ``(B) shall continue to hold such amount in escrow until 
     the end of the subsequent fiscal year thereafter, if the 
     Secretary determines that such State is making a good faith 
     effort to develop and submit, or update, a Secure Energy 
     Reinvestment Plan under subsection (d).
       ``(4) Minimum share.--Notwithstanding any other provision 
     of this subsection, the amount allocated under this 
     subsection to each Coastal Energy State each fiscal year 
     shall be not less than 5 percent of the total amount 
     available for that fiscal year for allocation under this 
     subsection to Coastal Energy States, except that for any 
     Coastal Energy State determined by the Secretary to have an 
     area formed by the extension of the State's seaward lateral 
     boundary, as designated by the map referenced in paragraph 
     (2)(A)(iii), of less than 490 square statute miles, the 
     amount allocated to such State shall not be less than 10 
     percent of the total amount available for that fiscal year 
     for allocation under this subsection.
       ``(5) Recomputation.--If the allocation to one or more 
     Coastal Energy States under paragraph (4) with respect to a 
     fiscal year is greater than the amount that would be 
     allocated to such States under this subsection if paragraph 
     (4) did not apply, then the allocations under this subsection 
     to all other Coastal Energy States shall be paid from the 
     amount remaining after deduction of the amounts allocated 
     under paragraph (4), but shall be reduced on a pro rata basis 
     by the sum of the allocations under paragraph (4) so that not 
     more than 100 percent of the funds available in the Fund for 
     allocation with respect to that fiscal year is allocated.
       ``(d) Secure Energy Reinvestment Plan.--
       ``(1) Development and submission of state plans.--The 
     Governor of each State seeking to receive funds under this 
     section shall prepare, and submit to the Secretary, a Secure 
     Energy Reinvestment Plan describing planned expenditures of 
     funds received under this section. The Governor shall include 
     in the State plan submitted to the Secretary plans prepared 
     by the coastal political subdivisions of the State. The 
     Governor and the coastal political subdivision shall solicit 
     local input and provide for public participation in the 
     development of the State plan. In describing the planned 
     expenditures, the State and coastal political subdivisions 
     shall include only items that are uses authorized under 
     subsection (e).
       ``(2) Approval or disapproval.--
       ``(A) In general.--The Secretary may not disburse funds to 
     a State or coastal political subdivision of a State under 
     this section before the date the State has an approved plan. 
     The Secretary shall approve a Secure Energy Reinvestment Plan 
     submitted by a State under paragraph (1) if the Secretary 
     determines that the expenditures provided for in the plan are 
     uses authorized under subsection (e), and that the plan 
     contains each of the following:
       ``(i) 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.
       ``(ii) A program for the implementation of the plan, that 
     (I) has as a goal improving the environment, (II) has as a 
     goal addressing the impacts of oil and gas production from 
     the outer Continental Shelf, and (III) includes a description 
     of how the State and coastal political subdivisions of the 
     State will evaluate the effectiveness of the plan.
       ``(iii) Certification by the Governor that ample 
     opportunity has been accorded for public participation in the 
     development and revision of the plan.
       ``(iv) Measures for taking into account other relevant 
     Federal resources and programs. The plan shall be correlated 
     so far as practicable with other State, regional, and local 
     plans.
       ``(v) For any State for which the ratio determined under 
     subsection (c)(2)(A)(i) or (c)(2)(A)(ii), as appropriate, 
     expressed as a percentage, exceeds 25 percent, a plan to 
     spend not less than 30 percent of the total funds provided 
     under this section each fiscal year to that State and 
     appropriate coastal political subdivisions, to address the 
     socioeconomic or environmental impacts identified in the plan 
     that remain significant or progressive after implementation 
     of mitigation measures identified in the most current 
     environmental impact statement (as of the date of the 
     enactment of this clause) required under the National 
     Environmental Protection Act of 1969 for lease sales under 
     this Act.
       ``(vi) A plan to utilize at least one-half of the funds 
     provided pursuant to subsection (c)(2)(B), and a portion of 
     other funds provided to such State under this section, on 
     programs or projects that are coordinated and conducted in 
     partnership between the State and coastal political 
     subdivision.
       ``(B) Procedure and timing.--The Secretary shall approve or 
     disapprove each plan submitted in accordance with this 
     subsection within 90 days after its submission.
       ``(3) Amendment or revision.--Any amendment to or revision 
     of an approved plan shall be prepared and submitted in 
     accordance with the requirements under this paragraph for the 
     submittal of plans, and shall be approved or disapproved by 
     the Secretary in accordance with paragraph (2)(B).
       ``(e) Authorized Uses.--A Coastal Energy State, and a 
     coastal political subdivision of such a State, shall use 
     amounts paid under this section (including any such amounts 
     deposited into a trust fund administered by the State or 
     coastal political subdivision dedicated to uses consistent 
     with this subsection), in compliance with Federal and State 
     law and the approved plan of the State, only for one or more 
     of the following purposes:
       ``(1) Projects and activities, including educational 
     activities, for the conservation, protection, or restoration 
     of coastal areas including wetlands.
       ``(2) Mitigating damage to, or the protection of, fish, 
     wildlife, or natural resources.
       ``(3) To the extent of such sums as are considered 
     reasonable by the Secretary, planning assistance and 
     administrative costs of complying with this section.
       ``(4) Implementation of federally approved plans or 
     programs for marine, coastal, subsidence, or conservation 
     management or for protection of resources from natural 
     disasters.
       ``(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 an expenditure of an amount made by a Coastal 
     Energy State or coastal political subdivision is not in 
     accordance with the approved plan of the State (including the 
     plans of coastal political subdivisions included in such 
     plan), the Secretary shall not disburse any further amounts 
     under this section to that Coastal Energy State or coastal 
     political subdivision until--
       ``(1) the amount is repaid to the Secretary; or
       ``(2) the Secretary approves an amendment to the plan that 
     authorizes the expenditure.
       ``(g) Arbitration of State and Local Disputes.--The 
     Secretary may require, as a condition of any payment under 
     this section, that a State or coastal political subdivision 
     in a State must submit to arbitration--
       ``(1) any dispute between the State or coastal political 
     subdivision (or both) and the Secretary regarding 
     implementation of this section; and
       ``(2) any dispute between the State and political 
     subdivision regarding implementation of this section, 
     including any failure to include, in the plan submitted by 
     the State for purposes of subsection (d), any spending plan 
     of the coastal political subdivision.
       ``(h) Administrative Expenses.--Of amounts in the Fund each 
     fiscal year, the Secretary may use up to one-half of one 
     percent for the administrative costs of implementing this 
     section.
       ``(i) Funding for Consortium.--
       ``(1) In general.--Of amounts deposited into the Fund in 
     each fiscal year 2004 through 2013, 2 percent shall be 
     available to the Secretary of the Interior to provide funding 
     for the Coastal Restoration and Enhancement through Science 
     and Technology program.
       ``(2) Treatment.--Any amount available under this 
     subsection for a fiscal year shall, for purposes of 
     determining the amount appropriated under any other provision 
     of law that authorizes appropriations to carry out the 
     program referred to in paragraph (1), be treated as 
     appropriated under that other provision.
       ``(j) Disposition of Funds.--A Coastal Energy State or 
     coastal political subdivision may use funds provided to such 
     entity under this section, subject to subsection (e), for any 
     payment that is eligible to be made with funds provided to 
     States under section 35 of the Mineral Leasing Act (30 U.S.C. 
     191).
       ``(k) Reports.--Each fiscal year following a fiscal year in 
     which a Coastal Energy State or coastal political subdivision 
     of a Coastal Energy State receives funds under this section, 
     the Governor of the Coastal Energy State, in coordination 
     with such State's coastal political subdivisions, shall 
     account for all funds so received for the previous fiscal 
     year in a written report to the Secretary. The report shall 
     include, in accordance with regulations prescribed by the 
     Secretary, a description of all projects and activities that 
     received such funds. In order to avoid duplication, such 
     report may incorporate, by reference, any other reports 
     required to be submitted under other provisions of law.
       ``(l) Signs.--The Secretary shall require, as a condition 
     of any allocation of funds provided with amounts made 
     available by this section, that each State and coastal 
     political subdivision shall include on any sign otherwise 
     installed at any site at or near an entrance or public use 
     focal point area for which such funds are used, a statement 
     that the existence or development of the site (or both), as 
     appropriate, is a product of such funds.''.
       (b) Additional Amendments.--Section 31 of the Outer 
     Continental Shelf Lands Act (43 U.S.C. 1356a) is amended--
       (1) by striking subsection (a);
       (2) in subsection (c) by striking ``For fiscal year 2001, 
     $150,000,000 is'' and inserting ``Such sums as may be 
     necessary to carry out this section are'';
       (3) in subsection (d)(1)(B) by striking ``, except'' and 
     all that follows through the end of the sentence and 
     inserting a period;
       (4) by redesignating subsections (b) though (g) in order as 
     subsection (a) through (f); and
       (5) by striking ``subsection (f)'' each place it appears 
     and inserting ``subsection (e)''.
       (c) Utilization of Coastal Restoration and Enhancement 
     Through Science and Technology Program.--
       (1) Authorization.--The Secretary of the Interior and the 
     Secretary of Commerce may each use the Coastal Restoration 
     and Enhancement through Science and Technology program for 
     the purposes of--
       (A) assessing the effects of coastal habitat restoration 
     techniques;
       (B) developing improved ecosystem modeling capabilities for 
     improved predictions of coastal

[[Page H11312]]

     conditions and habitat change and for developing new 
     technologies for restoration activities; and
       (C) identifying economic options to address socioeconomic 
     consequences of coastal degradation.
       (2) Condition.--The Secretary of the Interior, in 
     consultation with the Secretary of Commerce, shall ensure 
     that the program--
       (A) establishes procedures designed to avoid duplicative 
     activities among Federal agencies and entities receiving 
     Federal funds;
       (B) coordinates with persons involved in similar 
     activities; and
       (C) establishes a mechanism to collect, organize, and make 
     available information and findings on coastal restoration.
       (3) Report.--Not later than September 30, 2008, the 
     Secretary of the Interior, in consultation with the Secretary 
     of Commerce, shall transmit a report to the Congress on the 
     effectiveness of any Federal and State restoration efforts 
     conducted pursuant to this subsection and make 
     recommendations to improve coordinated coastal restoration 
     efforts.
       (4) Funding.--For each of fiscal years 2004 through 2013, 
     there is authorized to be appropriated to the Secretary 
     $10,000,000 to carry out activities under this subsection.
 Subtitle C--Reforms to the Board of Directors of the Tennessee Valley 
                               Authority

     SEC. 1431. CHANGE IN COMPOSITION, OPERATION, AND DUTIES OF 
                   THE BOARD OF DIRECTORS OF THE TENNESSEE VALLEY 
                   AUTHORITY.

       The Tennessee Valley Authority Act of 1933 (16 U.S.C. 831 
     et seq.) is amended by striking section 2 and inserting the 
     following:

     ``SEC. 2. MEMBERSHIP, OPERATION, AND DUTIES OF THE BOARD OF 
                   DIRECTORS.

       ``(a) Membership.--
       ``(1) Appointment.--The Board of Directors of the 
     Corporation (referred to in this Act as the `Board') shall be 
     composed of 9 members appointed by the President by and with 
     the advice and consent of the Senate, at least 5 of whom 
     shall be a legal resident of a State any part of which is in 
     the service area of the Corporation.
       ``(2) Chairman.--The members of the Board shall select 1 of 
     the members to act as chairman of the Board.
       ``(b) Qualifications.--To be eligible to be appointed as a 
     member of the Board, an individual--
       ``(1) shall be a citizen of the United States;
       ``(2) shall have management expertise relative to a large 
     for-profit or nonprofit corporate, government, or academic 
     structure;
       ``(3) shall not be an employee of the Corporation; and
       ``(4) shall make full disclosure to Congress of any 
     investment or other financial interest that the individual 
     holds in the energy industry.
       ``(c) Recommendations.--In appointing members of the Board, 
     the President shall--
       ``(1) consider recommendations from such public officials 
     as--
       ``(A) the Governors of States in the service area;
       ``(B) individual citizens;
       ``(C) business, industrial, labor, electric power 
     distribution, environmental, civic, and service 
     organizations; and
       ``(D) the congressional delegations of the States in the 
     service area; and
       ``(2) seek qualified members from among persons who reflect 
     the diversity, including the geographical diversity, and 
     needs of the service area of the Corporation.
       ``(d) Terms.--
       ``(1) In general.--A member of the Board shall serve a term 
     of 5 years. A member of the Board whose term has expired may 
     continue to serve after the member's term has expired until 
     the date on which a successor takes office, except that the 
     member shall not serve beyond the end of the session of 
     Congress in which the term of the member expires.
       ``(2) Vacancies.--A member appointed to fill a vacancy on 
     the Board occurring before the expiration of the term for 
     which the predecessor of the member was appointed shall be 
     appointed for the remainder of that term.
       ``(e) Quorum.--
       ``(1) In general.--Five of the members of the Board shall 
     constitute a quorum for the transaction of business.
       ``(2) Vacancies.--A vacancy on the Board shall not impair 
     the power of the Board to act.
       ``(f) Compensation.--
       ``(1) In general.--A member of the Board shall be entitled 
     to receive--
       ``(A) a stipend of--
       ``(i) $45,000 per year; or
       ``(ii)(I) in the case of the chairman of any committee of 
     the Board created by the Board, $46,000 per year; or
       ``(II) in the case of the chairman of the Board, $50,000 
     per year; and
       ``(B) travel expenses, including per diem in lieu of 
     subsistence, in the same manner as persons employed 
     intermittently in Government service under section 5703 of 
     title 5, United States Code.
       ``(2) Adjustments in stipends.--The amount of the stipend 
     under paragraph (1)(A)(i) shall be adjusted by the same 
     percentage, at the same time and manner, and subject to the 
     same limitations as are applicable to adjustments under 
     section 5318 of title 5, United States Code.
       ``(g) Duties.--
       ``(1) In general.--The Board shall--
       ``(A) establish the broad goals, objectives, and policies 
     of the Corporation that are appropriate to carry out this 
     Act;
       ``(B) develop long-range plans to guide the Corporation in 
     achieving the goals, objectives, and policies of the 
     Corporation and provide assistance to the chief executive 
     officer to achieve those goals, objectives, and policies;
       ``(C) ensure that those goals, objectives, and policies are 
     achieved;
       ``(D) approve an annual budget for the Corporation;
       ``(E) adopt and submit to Congress a conflict-of-interest 
     policy applicable to members of the Board and employees of 
     the Corporation;
       ``(F) establish a compensation plan for employees of the 
     Corporation in accordance with subsection (i);
       ``(G) approve all compensation (including salary or any 
     other pay, bonuses, benefits, incentives, and any other form 
     of remuneration) of all managers and technical personnel that 
     report directly to the chief executive officer (including any 
     adjustment to compensation);
       ``(H) ensure that all activities of the Corporation are 
     carried out in compliance with applicable law;
       ``(I) create an audit committee, composed solely of Board 
     members independent of the management of the Corporation, 
     which shall--
       ``(i) in consultation with the inspector general of the 
     Corporation, recommend to the Board an external auditor;
       ``(ii) receive and review reports from the external auditor 
     of the Corporation and inspector general of the Corporation; 
     and
       ``(iii) make such recommendations to the Board as the audit 
     committee considers necessary;
       ``(J) create such other committees of Board members as the 
     Board considers to be appropriate;
       ``(K) conduct such public hearings as it deems appropriate 
     on issues that could have a substantial effect on--
       ``(i) the electric ratepayers in the service area; or
       ``(ii) the economic, environmental, social, or physical 
     well-being of the people of the service area;
       ``(L) establish the electricity rates charged by the 
     Corporation; and
       ``(M) engage the services of an external auditor for the 
     Corporation.
       ``(2) Meetings.--The Board shall meet at least 4 times each 
     year.
       ``(h) Chief Executive Officer.--
       ``(1) Appointment.--The Board shall appoint a person to 
     serve as chief executive officer of the Corporation.
       ``(2) Qualifications.--
       ``(A) In general.--To serve as chief executive officer of 
     the Corporation, a person--
       ``(i) shall have senior executive-level management 
     experience in large, complex organizations;
       ``(ii) shall not be a current member of the Board or have 
     served as a member of the Board within 2 years before being 
     appointed chief executive officer; and
       ``(iii) shall comply with the conflict-of-interest policy 
     adopted by the Board.
       ``(B) Expertise.--In appointing a chief executive officer, 
     the Board shall give particular consideration to appointing 
     an individual with expertise in the electric industry and 
     with strong financial skills.
       ``(3) Tenure.--The chief executive officer shall serve at 
     the pleasure of the Board.
       ``(i) Compensation Plan.--
       ``(1) In general.--The Board shall approve a compensation 
     plan that specifies all compensation (including salary or any 
     other pay, bonuses, benefits, incentives, and any other form 
     of remuneration) for the chief executive officer and 
     employees of the Corporation.
       ``(2) Annual survey.--The compensation plan shall be based 
     on an annual survey of the prevailing compensation for 
     similar positions in private industry, including engineering 
     and electric utility companies, publicly owned electric 
     utilities, and Federal, State, and local governments.
       ``(3) Considerations.--The compensation plan shall provide 
     that education, experience, level of responsibility, 
     geographic differences, and retention and recruitment needs 
     will be taken into account in determining compensation of 
     employees.
       ``(4) Positions at or below level iv.--The chief executive 
     officer shall determine the salary and benefits of employees 
     whose annual salary is not greater than the annual rate 
     payable for positions at level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code.
       ``(5) Positions above level iv.--On the recommendation of 
     the chief executive officer, the Board shall approve the 
     salaries of employees whose annual salaries would be in 
     excess of the annual rate payable for positions at level IV 
     of the Executive Schedule under section 5315 of title 5, 
     United States Code.''.

     SEC. 1432. CHANGE IN MANNER OF APPOINTMENT OF STAFF.

       Section 3 of the Tennessee Valley Authority Act of 1933 (16 
     U.S.C. 831b) is amended--
       (1) by striking the first undesignated paragraph and 
     inserting the following:
       ``(a) Appointment by the Chief Executive Officer.--The 
     chief executive officer shall appoint, with the advice and 
     consent of the Board, and without regard to the provisions of 
     the civil service laws applicable to officers and employees 
     of the United States, such managers, assistant managers, 
     officers, employees, attorneys, and agents as are necessary 
     for the transaction of the business of the Corporation.''; 
     and
       (2) by striking ``All contracts'' and inserting the 
     following:
       ``(b) Wage Rates.--All contracts''.

     SEC. 1433. CONFORMING AMENDMENTS.

       (a) The Tennessee Valley Authority Act of 1933 (16 U.S.C. 
     831 et seq.) is amended--
       (1) by striking ``board of directors'' each place it 
     appears and inserting ``Board of Directors''; and
       (2) by striking ``board'' each place it appears and 
     inserting ``Board''.
       (b) Section 9 of the Tennessee Valley Authority Act of 1933 
     (16 U.S.C. 831h) is amended--
       (1) by striking ``The Comptroller General of the United 
     States shall audit'' and inserting the following:

[[Page H11313]]

       ``(c) Audits.--The Comptroller General of the United States 
     shall audit''; and
       (2) by striking ``The Corporation shall determine'' and 
     inserting the following:
       ``(d) Administrative Accounts and Business Documents.--The 
     Corporation shall determine''.
       (c) Title 5, United States Code, is amended--
       (1) in section 5314, by striking ``Chairman, Board of 
     Directors of the Tennessee Valley Authority.''; and
       (2) in section 5315, by striking ``Members, Board of 
     Directors of the Tennessee Valley Authority.''.

     SEC. 1434. APPOINTMENTS; EFFECTIVE DATE; TRANSITION.

       (a) Appointments.--
       (1) In general.--As soon as practicable after the date of 
     enactment of this Act, the President shall submit to the 
     Senate nominations of 6 persons to serve as members of the 
     Board of Directors of the Tennessee Valley Authority in 
     addition to the members serving on the date of enactment of 
     this Act.
       (2) Initial terms.--Notwithstanding section 2(d) of the 
     Tennessee Valley Authority Act of 1933 (as amended by this 
     subtitle), in making the appointments under paragraph (1), 
     the President shall appoint--
       (A) 2 members for a term to expire on May 18, 2006;
       (B) 2 members for a term to expire on May 18, 2008; and
       (C) 2 members for a term to expire on May 18, 2010.
       (b) Effective Date.--The amendments made by this section 
     and sections 1431, 1432, and 1433 take effect on the later of 
     the date on which at least 3 persons nominated under 
     subsection (a) take office or May 18, 2005.
       (c) Selection of Chairman.--The Board of Directors of the 
     Tennessee Valley Authority shall select 1 of the members to 
     act as chairman of the Board not later than 30 days after the 
     effective date of this section.
       (d) Conflict-of-Interest Policy.--The Board of Directors of 
     the Tennessee Valley Authority shall adopt and submit to 
     Congress a conflict-of-interest policy, as required by 
     section 2(g)(1)(E) of the Tennessee Valley Authority Act of 
     1933 (as amended by this subtitle), as soon as practicable 
     after the effective date of this section.
       (e) Transition.--A person who is serving as a member of the 
     board of directors of the Tennessee Valley Authority on the 
     date of enactment of this Act--
       (1) shall continue to serve until the end of the current 
     term of the member; but
       (2) after the effective date specified in subsection (b), 
     shall serve under the terms of the Tennessee Valley Authority 
     Act of 1933 (as amended by this subtitle); and
       (3) may not be reappointed.
                      Subtitle D--Other Provisions

     SEC. 1441. CONTINUATION OF TRANSMISSION SECURITY ORDER.

       Department of Energy Order No. 202-03-2, issued by the 
     Secretary of Energy on August 28, 2003, shall remain in 
     effect unless rescinded by Federal statute.

     SEC. 1442. REVIEW OF AGENCY DETERMINATIONS.

       Section 7 of the Natural Gas Act (15 U.S.C. 717f) is 
     amended by adding at the end the following:
       ``(i)(1) The United States Court of Appeals for the 
     District of Columbia Circuit shall have original and 
     exclusive jurisdiction over any civil action--
       ``(A) for review of any order or action of any Federal or 
     State administrative agency or officer to issue, condition, 
     or deny any permit, license, concurrence, or approval issued 
     under authority of any Federal law, other than the Coastal 
     Zone Management Act of 1972 (16 U.S.C. 1451 et seq.), 
     required for the construction of a natural gas pipeline for 
     which a certificate of public convenience and necessity is 
     issued by the Commission under this section;
       ``(B) alleging unreasonable delay by any Federal or State 
     administrative agency or officer in entering an order or 
     taking other action described in subparagraph (A); or
       ``(C) challenging any decision made or action taken under 
     this subsection.
       ``(2)(A) If the Court finds that the order, action, or 
     failure to act is not consistent with the public convenience 
     and necessity (as determined by the Commission under this 
     section), or would prevent the construction and operation of 
     natural gas facilities authorized by the certificate of 
     public convenience and necessity, the permit, license, 
     concurrence, or approval that is the subject of the order, 
     action, or failure to act shall be deemed to have been issued 
     subject to any conditions set forth in the reviewed order or 
     action that the Court finds to be consistent with the public 
     convenience and necessity.
       ``(B) For purposes of paragraph (1)(B), the failure of an 
     agency or officer to issue any such permit, license, 
     concurrence, or approval within the later of 1 year after the 
     date of filing of an application for the permit, license, 
     concurrence, or approval or 60 days after the date of 
     issuance of the certificate of public convenience and 
     necessity under this section, shall be considered to be 
     unreasonable delay unless the Court, for good cause shown, 
     determines otherwise.
       ``(C) The Court shall set any action brought under 
     paragraph (1) for expedited consideration.''.

     SEC. 1443. ATTAINMENT DATES FOR DOWNWIND OZONE NONATTAINMENT 
                   AREAS.

       Section 181 of the Clean Air Act (42 U.S.C.7511) is amended 
     by adding the following new subsection at the end thereof:
       ``(d) Extended Attainment Date for Certain Downwind 
     Areas.--
       ``(1) Definitions.--(A) The term `upwind area' means an 
     area that--
       ``(i) significantly contributes to nonattainment in another 
     area, hereinafter referred to as a `downwind area'; and
       ``(ii) is either--
       ``(I) a nonattainment area with a later attainment date 
     than the downwind area, or
       ``(II) an area in another State that the Administrator has 
     found to be significantly contributing to nonattainment in 
     the downwind area in violation of section 110(a)(2)(D) and 
     for which the Administrator has established requirements 
     through notice and comment rulemaking to eliminate the 
     emissions causing such significant contribution.
       ``(B) The term `current classification' means the 
     classification of a downwind area under this section at the 
     time of the determination under paragraph (2).
       ``(2) Extension.--If the Administrator--
       ``(A) determines that any area is a downwind area with 
     respect to a particular national ambient air quality standard 
     for ozone; and
       ``(B) approves a plan revision for such area as provided in 
     paragraph (3) prior to a reclassification under subsection 
     (b)(2)(A),

     the Administrator, in lieu of such reclassification, shall 
     extend the attainment date for such downwind area for such 
     standard in accordance with paragraph (5).
       ``(3) Required approval.--In order to extend the attainment 
     date for a downwind area under this subsection, the 
     Administrator must approve a revision of the applicable 
     implementation plan for the downwind area for such standard 
     that--
       ``(A) complies with all requirements of this Act applicable 
     under the current classification of the downwind area, 
     including any requirements applicable to the area under 
     section 172(c) for such standard; and
       ``(B) includes any additional measures needed to 
     demonstrate attainment by the extended attainment date 
     provided under this subsection.
       ``(4) Prior reclassification determination.--If, no more 
     than 18 months prior to the date of enactment of this 
     subsection, the Administrator made a reclassification 
     determination under subsection (b)(2)(A) for any downwind 
     area, and the Administrator approves the plan revision 
     referred to in paragraph (3) for such area within 12 months 
     after the date of enactment of this subsection, the 
     reclassification shall be withdrawn and the attainment date 
     extended in accordance with paragraph (5) upon such approval. 
     The Administrator shall also withdraw a reclassification 
     determination under subsection (b)(2)(A) made after the date 
     of enactment of this subsection and extend the attainment 
     date in accordance with paragraph (5) if the Administrator 
     approves the plan revision referred to in paragraph (3) 
     within 12 months of the date the reclassification 
     determination under subsection (b)(2)(A) is issued. In such 
     instances the `current classification' used for evaluating 
     the revision of the applicable implementation plan under 
     paragraph (3) shall be the classification of the downwind 
     area under this section immediately prior to such 
     reclassification.
       ``(5) Extended date.--The attainment date extended under 
     this subsection shall provide for attainment of such national 
     ambient air quality standard for ozone in the downwind area 
     as expeditiously as practicable but no later than the date on 
     which the last reductions in pollution transport necessary 
     for attainment in the downwind area are required to be 
     achieved by the upwind area or areas.''.

     SEC. 1444. ENERGY PRODUCTION INCENTIVES

       (a) In General.--A State may provide to any entity--
       (1) a credit against any tax or fee owed to the State under 
     a State law, or
       (2) any other tax incentive,

     determined by the State to be appropriate, in the amount 
     calculated under and in accordance with a formula determined 
     by the State, for production described in subsection (b) in 
     the State by the entity that receives such credit or such 
     incentive.
       (b) Eligible Entities.--Subsection (a) shall apply with 
     respect to the production in the State of--
       (1) electricity from coal mined in the State and used in a 
     facility, if such production meets all applicable Federal and 
     State laws and if such facility uses scrubbers or other forms 
     of clean coal technology,
       (2) electricity from a renewable source such as wind, 
     solar, or biomass, or
       (3) ethanol.
       (c) Effect on Interstate Commerce--Any action taken by a 
     State in accordance with this section with respect to a tax 
     or fee payable, or incentive applicable, for any period 
     beginning after the date of the enactment of this Act shall--
       (1) be considered to be a reasonable regulation of 
     commerce; and
       (2) not be considered to impose an undue burden on 
     interstate commerce or to otherwise impair, restrain, or 
     discriminate, against interstate commerce.

     SEC. 1445. USE OF GRANULAR MINE TAILINGS.

       (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:

     ``SEC. 6006. USE OF GRANULAR MINE TAILINGS.

       ``(a) Mine Tailings.--
       ``(1) In general.--Not later than 180 days after the date 
     of enactment of this section, the Administrator, in 
     consultation with the Secretary of Transportation and heads 
     of other Federal agencies, shall establish criteria 
     (including an evaluation of whether to establish a numerical 
     standard for concentration of lead and other hazardous 
     substances) for the safe and environmentally protective use 
     of granular mine tailings from the Tar Creek, Oklahoma Mining 
     District, known as `chat', for--
       ``(A) cement or concrete projects; and
       ``(B) transportation construction projects (including 
     transportation construction projects involving the use of 
     asphalt) that are carried out, in whole or in part, using 
     Federal funds.

[[Page H11314]]

       ``(2) Requirements.--In establishing criteria under 
     paragraph (1), the Administrator shall consider--
       ``(A) the current and previous uses of granular mine 
     tailings as an aggregate for asphalt; and
       ``(B) any environmental and public health risks and 
     benefits derived from the removal, transportation, and use in 
     transportation projects of granular mine tailings.
       ``(3) Public participation.--In establishing the criteria 
     under paragraph (1), the Administrator shall solicit and 
     consider comments from the public.
       ``(4) Applicability of criteria.--On the establishment of 
     the criteria under paragraph (1), any use of the granular 
     mine tailings described in paragraph (1) in a transportation 
     project that is carried out, in whole or in part, using 
     Federal funds, shall meet the criteria established under 
     paragraph (1).
       ``(b) Effect of Sections.--Nothing in this section or 
     section 6005 affects any requirement of any law (including a 
     regulation) in effect on the date of enactment of this 
     section.''.
       (b) Conforming Amendment.--The table of contents of the 
     Solid Waste Disposal Act (42 U.S.C. prec. 6901) is amended by 
     adding at the end of the items relating to subtitle F the 
     following:

``Sec. 6006. Use of granular mine tailings.''.
                   TITLE XV--ETHANOL AND MOTOR FUELS
                     Subtitle A--General Provisions

     SEC. 1501. RENEWABLE CONTENT OF MOTOR VEHICLE FUEL.

       (a) In General.--Section 211 of the Clean Air Act (42 
     U.S.C. 7545) is amended--
       (1) by redesignating subsection (o) as subsection (q); and
       (2) by inserting after subsection (n) the following:
       ``(o) Renewable Fuel Program.--
       ``(1) Definitions.--In this section:
       ``(A) Ethanol.--(i) 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; and
       ``(VI) fibers.
       ``(ii) The term `waste derived ethanol' means ethanol 
     derived from--
       ``(I) animal wastes, including poultry fats and poultry 
     wastes, and other waste materials; or
       ``(II) 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 
     cellulosic biomass ethanol, waste derived ethanol, and 
     biodiesel (as defined in section 312(f) of the Energy Policy 
     Act of 1992 (42 U.S.C. 13220(f)) and any blending components 
     derived from renewable fuel (provided that only the renewable 
     fuel portion of any such blending component shall be 
     considered part of the applicable volume under the renewable 
     fuel program established by this subsection).
       ``(C) Small refinery.--The term `small refinery' means a 
     refinery for which average aggregate daily crude oil 
     throughput for the 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) In general.--Not later than 1 year after the 
     enactment of this subsection, the Administrator shall 
     promulgate regulations ensuring that motor vehicle fuel sold 
     or dispensed to consumers in the contiguous United States, on 
     an annual average basis, contains the applicable volume of 
     renewable fuel as specified in subparagraph (B). Regardless 
     of the date of promulgation, such regulations shall contain 
     compliance provisions for refiners, blenders, and importers, 
     as appropriate, to ensure that the requirements of this 
     section are met, but shall not restrict where renewable fuel 
     can be used, or impose any per-gallon obligation for the use 
     of renewable fuel. If the Administrator does not promulgate 
     such regulations, the applicable percentage referred to in 
     paragraph (4), on a volume percentage of gasoline basis, 
     shall be 2.2 in 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 renewable fuel

  Calendar year:                               (In billions of gallons)
    2005...........................................................3.1 
    2006...........................................................3.3 
    2007...........................................................3.5 
    2008...........................................................3.8 
    2009...........................................................4.1 
    2010...........................................................4.4 
    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) 5.0 billion gallons of renewable fuels; bears to
       ``(bb) the number of gallons of gasoline sold or introduced 
     into commerce in calendar year 2012.
       ``(3) Non-contiguous State Opt-In.--Upon the petition of a 
     non-contiguous State, the Administrator may allow the 
     renewable fuel program established by subtitle A of title XV 
     of the Energy Policy Act of 2003 to apply in such non-
     contiguous State at the same time or any time after the 
     Administrator promulgates regulations under paragraph (2). 
     The Administrator may promulgate or revise regulations under 
     paragraph (2), establish applicable percentages under 
     paragraph (4), provide for the generation of credits under 
     paragraph (6), and take such other actions as may be 
     necessary to allow for the application of the renewable 
     fuels program in a non-contiguous State.
       ``(4) Applicable percentages.--
       ``(A) Provision of estimate of volumes of gasoline sales.--
     Not later than October 31 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 that will be 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 
     the calendar years 2004 through 2011, based on the estimate 
     provided under subparagraph (A), the Administrator 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 to 
     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 (11).
       ``(5) Equivalency.--For the purpose of paragraph (2), 1 
     gallon of either cellulosic biomass ethanol or waste derived 
     ethanol--
       ``(A) shall be considered to be the equivalent of 1.5 
     gallon of renewable fuel; or
       ``(B) if the cellulostic biomass ethanol or waste derived 
     ethanol is derived from agricultural residue or is an 
     agricultural byproduct (as that term is used in section 919 
     of the Energy Policy Act of 2003), shall be considered to be 
     the equivalent of 2.5 gallons of renewable fuel.
       ``(6) Credit program.--
       ``(A) In general.--The regulations promulgated to carry out 
     this subsection shall provide 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). Such regulations shall provide for the 
     generation of an appropriate amount of credits for biodiesel 
     fuel. If a small refinery notifies the Administrator that it 
     waives the exemption provided paragraph (11), the regulations 
     shall provide for the generation of credits by the small 
     refinery beginning in the year following such notification.
       ``(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) Life of credits.--A credit generated under this 
     paragraph shall be valid to show compliance--
       ``(i) in the calendar year in which the credit was 
     generated or the next calendar year; or
       ``(ii) in the calendar year in which the credit was 
     generated or next two consecutive calendar years if the 
     Administrator promulgates regulations under paragraph (7).
       ``(D) Inability to purchase sufficient credits.--The 
     regulations promulgated to carry out this subsection shall 
     include provisions allowing any person that is unable to 
     generate or purchase sufficient credits to meet the 
     requirements under paragraph (2) to carry forward a renewable 
     fuel deficit provided that, in the calendar year following 
     the year in which the renewable fuel deficit is created, such 
     person shall achieve compliance with the renewable fuel 
     requirement under paragraph (2), and shall generate or 
     purchase additional renewable fuel credits to offset the 
     renewable fuel deficit of the previous year.
       ``(7) Seasonal variations in renewable fuel use.--
       ``(A) Study.--For each of the calendar years 2005 through 
     2012, the Administrator of the Energy Information 
     Administration shall conduct a study of renewable fuels 
     blending to determine whether there are excessive seasonal 
     variations in the use of renewable fuels.
       ``(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 shall promulgate 
     regulations to ensure that 35 percent or

[[Page H11315]]

     more of the quantity of renewable fuels necessary to meet the 
     requirement of paragraph (2) is used during each of the 
     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 
     fuels necessary to meet the requirement of paragraph (2) has 
     been used during one of the periods specified in subparagraph 
     (D) of the calendar year;
       ``(ii) a pattern of excessive seasonal variation described 
     in clause (i) will continue in subsequent calendar years; and
       ``(iii) promulgating regulations or other requirements to 
     impose a 35 percent or more seasonal use of renewable fuels 
     will not prevent or interfere with the attainment of national 
     ambient air quality standards or significantly increase the 
     price of motor fuels to the consumer.
       ``(D) Periods.--The two periods referred to in this 
     paragraph are--
       ``(i) April through September; and
       ``(ii) January through March and October through December.
       ``(E) Exclusions.--Renewable fuels blended or consumed in 
     2005 in a State which has received a waiver under section 
     209(b) shall not be included in the study in subparagraph 
     (A).
       ``(8) Waivers.--
       ``(A) In general.--The Administrator, in consultation with 
     the Secretary of Agriculture and the Secretary of Energy, may 
     waive the requirement of paragraph (2) in whole or in part on 
     petition by one or more States by reducing the national 
     quantity of renewable fuel required under this subsection--
       ``(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 requirement 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.
       ``(9) Study and waiver for initial year of program.--Not 
     later than 180 days after the enactment of this subsection, 
     the Secretary of Energy shall complete for the Administrator 
     a study assessing whether the renewable fuels requirement 
     under paragraph (2) will likely result in significant adverse 
     consumer impacts in 2005, on a national, regional, or State 
     basis. Such study shall evaluate renewable fuel supplies and 
     prices, blendstock supplies, and supply and distribution 
     system capabilities. Based on such study, the Secretary shall 
     make specific recommendations to the Administrator regarding 
     waiver of the requirements of paragraph (2), in whole or in 
     part, to avoid any such adverse impacts. Within 270 days 
     after the enactment of this subsection, the Administrator 
     shall, consistent with the recommendations of the Secretary, 
     waive, in whole or in part, the renewable fuels requirement 
     under paragraph (2) by reducing the national quantity of 
     renewable fuel required under this subsection in 2005. This 
     paragraph shall not be interpreted as limiting the 
     Administrator's authority to waive the requirements of 
     paragraph (2) in whole, or in part, under paragraph (8) or 
     paragraph (10), pertaining to waivers.
       ``(10) Assessment and waiver.--The Administrator, in 
     consultation with the Secretary of Energy and the Secretary 
     of Agriculture, shall evaluate the requirement of paragraph 
     (2) and determine, prior to January 1, 2007, and prior to 
     January 1 of any subsequent year in which the applicable 
     volume of renewable fuel is increased under paragraph (2)(B), 
     whether the requirement of paragraph (2), including the 
     applicable volume of renewable fuel contained in paragraph 
     (2)(B) should remain in effect, in whole or in part, during 
     2007 or any year or years subsequent to 2007. In evaluating 
     the requirement of paragraph (2) and in making any 
     determination under this section, the Administrator shall 
     consider the best available information and data collected by 
     accepted methods or best available means regarding--
       ``(A) the capacity of renewable fuel producers to supply an 
     adequate amount of renewable fuel at competitive prices to 
     fulfill the requirement of paragraph (2);
       ``(B) the potential of the requirement of paragraph (2) to 
     significantly raise the price of gasoline, food (excluding 
     the net price impact on the requirement in paragraph (2) on 
     commodities used in the production of ethanol), or heating 
     oil for consumers in any significant area or region of the 
     country above the price that would otherwise apply to such 
     commodities in the absence of such requirement;
       ``(C) the potential of the requirement of paragraph (2) to 
     interfere with the supply of fuel in any significant gasoline 
     market or region of the country, including interference with 
     the efficient operation of refiners, blenders, importers, 
     wholesale suppliers, and retail vendors of gasoline, and 
     other motor fuels; and
       ``(D) the potential of the requirement of paragraph (2) to 
     cause or promote exceedances of Federal, State, or local air 
     quality standards.

     If the Administrator determines, by clear and convincing 
     information, after public notice and the opportunity for 
     comment, that the requirement of paragraph (2) would have 
     significant and meaningful adverse impact on the supply of 
     fuel and related infrastructure or on the economy, public 
     health, or environment of any significant area or region of 
     the country, the Administrator may waive, in whole or in 
     part, the requirement of paragraph (2) in any one year for 
     which the determination is made for that area or region of 
     the country, except that any such waiver shall not have the 
     effect of reducing the applicable volume of renewable fuel 
     specified in paragraph (2)(B) with respect to any year for 
     which the determination is made. In determining economic 
     impact under this paragraph, the Administrator shall not 
     consider the reduced revenues available from the Highway 
     Trust Fund (section 9503 of the Internal Revenue Code of 
     1986) as a result of the use of ethanol.
       ``(11) Small refineries.--
       ``(A) In general.--The requirement of paragraph (2) shall 
     not apply to small refineries until the first calendar year 
     beginning more than 5 years after the first year set forth in 
     the table in paragraph (2)(B)(i). Not later than December 31, 
     2007, the Secretary of Energy shall complete for the 
     Administrator a study to determine whether the requirement of 
     paragraph (2) would impose a disproportionate economic 
     hardship on small refineries. For any small refinery that the 
     Secretary of Energy determines would experience a 
     disproportionate economic hardship, the Administrator shall 
     extend the small refinery exemption for such small refinery 
     for no less than two additional years.
       ``(B) Economic hardship.--
       ``(i) Extension of exemption.--A small refinery may at any 
     time petition the Administrator for an extension of the 
     exemption from the requirement of paragraph (2) for the 
     reason of disproportionate economic hardship. In evaluating a 
     hardship petition, the Administrator, in consultation with 
     the Secretary of Energy, shall consider the findings of the 
     study in addition to other economic factors.
       ``(ii) 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 receipt 
     of the petition.
       ``(C) Credit program.--If a small refinery notifies the 
     Administrator that it waives the exemption provided by this 
     Act, the regulations shall provide for the generation of 
     credits by the small refinery beginning in the year following 
     such notification.
       ``(D) Opt-in for small refiners.--A small refinery shall be 
     subject to the requirements of this section if it notifies 
     the Administrator that it waives the exemption under 
     subparagraph (A).
       ``(12) Ethanol market concentration analysis.--
       ``(A) Analysis.--
       ``(i) In general.--Not later than 180 days after the date 
     of enactment of this subsection, 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).''.
       (b) Penalties and Enforcement.--Section 211(d) of the Clean 
     Air Act (42 U.S.C. 7545(d)) is amended as follows:
       (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)''.
       (2) In the first sentence of paragraph (2), by striking 
     ``and (n)'' each place it appears and inserting ``(n), and 
     (o)''.
       (c) Survey of Renewable Fuel Market.--
       (1) Survey and report.--Not later than December 1, 2006, 
     and annually thereafter, the Administrator of the 
     Environmental Protection Agency (in consultation with the 
     Secretary of Energy acting through the Administrator of the 
     Energy Information Administration) 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.--The 
     Administrator of the Environmental Protection Agency 
     (hereinafter in this subsection referred to as 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. The Administrator, to avoid duplicative 
     requirements, shall rely, to the extent practicable, on 
     existing reporting and recordkeeping requirements and other 
     information available to the Administrator including gasoline 
     distribution patterns that include multistate use areas.
       (3) Applicable law.--Activities carried out under this 
     subsection shall be conducted in a

[[Page H11316]]

     manner designed to protect confidentiality of individual 
     responses.

     SEC. 1502. FUELS SAFE HARBOR.

       (a) In General.--Notwithstanding any other provision of 
     Federal or State law, no renewable fuel, as defined by 
     section 211(o)(1) of the Clean Air Act, or methyl tertiary 
     butyl ether (hereinafterin this section referred to as 
     ``MTBE''), used or intended to be used as a motor vehicle 
     fuel, nor any motor vehicle fuel containing such renewable 
     fuel or MTBE, shall be deemed a defective product by virtue 
     of the fact that it is, or contains, such a renewable fuel or 
     MTBE, if it does not violate a control or prohibition imposed 
     by the Administrator of the Environmental Protection Agency 
     (hereinafter in this section referred to as the 
     ``Administrator'') under section 211 of such Act, and the 
     manufacturer is in compliance with all requests for 
     information under subsection (b) of such section 211 of such 
     Act. If the safe harbor provided by this section does not 
     apply, the existence of a claim of defective product shall be 
     determined under otherwise applicable law. Nothing in this 
     subsection shall be construed to affect the liability of any 
     person for environmental remediation costs, drinking water 
     contamination, negligence for spills or other reasonably 
     foreseeable events, public or private nuisance, trespass, 
     breach of warranty, breach of contract, or any other 
     liability other than liability based upon a claim of 
     defective product.
       (b) Effective Date.--This section shall be effective as of 
     September 5, 2003, and shall apply with respect to all claims 
     filed on or after that date.

     SEC. 1503. FINDINGS AND MTBE TRANSITION ASSISTANCE.

       (a) Findings.--Congress finds that--
       (1) since 1979, methyl tertiary butyl ether (hereinafter in 
     this section referred to 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 oxygen 
     standard, Congress was aware that significant use of MTBE 
     would result from the adoption of that standard, and that the 
     use of MTBE would likely be important to the cost-effective 
     implementation of that program;
       (4) Congress was aware that gasoline and its component 
     additives can and do leak from storage tanks;
       (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) having previously required oxygenates like MTBE for air 
     quality purposes, Congress has--
       (A) reconsidered the relative value of MTBE in gasoline;
       (B) decided to establish a date certain for action by the 
     Environmental Protection Agency to prohibit the use of MTBE 
     in gasoline; and
       (C) decided to provide for the elimination of the oxygenate 
     requirement for reformulated gasoline and to provide for a 
     renewable fuels content requirement for motor fuel; and
       (7) 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; and
       (B) for the purpose of mitigating any fuel supply problems 
     that may result from the elimination of the oxygenate 
     requirement for reformulated gasoline and from the decision 
     to establish a date certain for action by the Environmental 
     Protection Agency to prohibit the use of MTBE in gasoline.
       (b) Purposes.--The purpose of this section is to provide 
     assistance to merchant producers of MTBE in making the 
     transition from producing MTBE to producing other fuel 
     additives.
       (c) MTBE Merchant Producer Conversion Assistance.--Section 
     211(c) of the Clean Air Act (42 U.S.C. 7545(c)) is amended by 
     adding at the end the following:
       ``(5) 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 (hereinafter in this 
     subsection referred to as `MTBE') in the United States to 
     assist the producers in the conversion of eligible production 
     facilities described in subparagraph (C) to the production of 
     iso-octane, iso-octene, alkylates, or renewable fuels.
       ``(ii) Determination.--The Administrator, in consultation 
     with the Secretary of Energy, may determine that transition 
     assistance for the production of iso-octane, iso-octene, 
     alkylates, or renewable fuels is inconsistent with the 
     provisions of subparagraph (B) and, on that basis, may deny 
     applications for grants authorized by this paragraph.
       ``(B) Further grants.--The Secretary of Energy, in 
     consultation with the Administrator, may also further make 
     grants to merchant producers of MTBE in the United States to 
     assist the producers in the conversion of eligible production 
     facilities described in subparagraph (C) to the production of 
     such other fuel additives (unless the Administrator 
     determines that such fuel additives may reasonably be 
     anticipated to endanger public health or the environment) 
     that, consistent with this subsection--
       ``(i) have been registered and have been tested or are 
     being tested in accordance with the requirements of this 
     section; and
       ``(ii) will contribute to replacing gasoline volumes lost 
     as a result of amendments made to subsection (k) of this 
     section by section 1504(a) and 1506 of the Energy Policy Act 
     of 2003.
       ``(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 MTBE for consumption before April 1, 2003 
     and ceased production at any time after the date of enactment 
     of this paragraph.
       ``(D) Authorization of appropriations.--There are 
     authorized to be appropriated to carry out this paragraph 
     $250,000,000 for each of fiscal years 2005 through 2012, to 
     remain available until expended.''.
       (d) Effect on State Law.--The amendments made to the Clean 
     Air Act by this title have no effect regarding any available 
     authority of States to limit the use of methyl tertiary butyl 
     ether in motor vehicle fuel.

     SEC. 1504. USE OF MTBE.

       (a) In General.--Subject to subsections (e) and (f), not 
     later than December 31, 2014, the use of methyl tertiary 
     butyl ether (hereinafter in this section referred to as 
     ``MTBE'') in motor vehicle fuel in any State other than a 
     State described in subsection (c) is prohibited.
       (b) Regulations.--The Administrator of the Environmental 
     Protection Agency (hereafter referred to in this section as 
     the ``Administrator'') shall promulgate regulations to effect 
     the prohibition in subsection (a).
       (c) States That Authorize Use.--A State described in this 
     subsection is a State in which the Governor of the State 
     submits a notification to the Administrator authorizing the 
     use of MTBE 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 subsection (c).
       (e) Trace Quantities.--In carrying out subsection (a), the 
     Administrator may allow trace quantities of MTBE, not to 
     exceed 0.5 percent by volume, to be present in motor vehicle 
     fuel in cases that the Administrator determines to be 
     appropriate.
       (f) Limitation.--The Administrator, under authority of 
     subsection (a), shall not prohibit or control the production 
     of MTBE for export from the United States or for any other 
     use other than for use in motor vehicle fuel.

     SEC. 1505. NATIONAL ACADEMY OF SCIENCES REVIEW AND 
                   PRESIDENTIAL DETERMINATION.

       (a) NAS Review.--Not later than May 31, 2013, the Secretary 
     shall enter into an arrangement with the National Academy of 
     Sciences to review the use of methyl tertiary butyl ether 
     (hereafter referred to in this section as ``MTBE'') in fuel 
     and fuel additives. The review shall only use the best 
     available scientific information and data collected by 
     accepted methods or the best available means. The review 
     shall examine the use of MTBE in fuel and fuel additives, 
     significant beneficial and detrimental effects of this use on 
     environmental quality or public health or welfare including 
     the costs and benefits of such effects, likely effects of 
     controls or prohibitions on MTBE regarding fuel availability 
     and price, and other appropriate and reasonable actions that 
     are available to protect the environment or public health or 
     welfare from any detrimental effects of the use of MTBE in 
     fuel or fuel additives. The review shall be peer-reviewed 
     prior to publication and all supporting data and analytical 
     models shall be available to the public. The review shall be 
     completed no later than May 31, 2014.
       (b) Presidential Determination.--No later than June 30, 
     2014, the President may make a determination that 
     restrictions on the use of MTBE to be implemented pursuant to 
     section 1504 shall not take place and that the legal 
     authority contained in section 1504 to prohibit the use of 
     MTBE in motor vehicle fuel shall become null and void.

     SEC. 1506. 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 as follows:
       (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).
       (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).
       (II) by redesignating clause (iii) as clause (ii).

       (2) Effective date.--The amendments made by paragraph (1) 
     take effect 270 days after the date of enactment of this Act, 
     except that such amendments shall take effect upon such date 
     of enactment in any State that has received a waiver under 
     section 209(b) of the Clean Air 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 as follows:
       (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,''.
       (2) By adding at the end the following:
       ``(B) Maintenance of toxic air pollutant emissions 
     reductions from reformulated gasoline.--

[[Page H11317]]

       ``(i) Definitions.--In this subparagraph the term `PADD' 
     means a Petroleum Administration for Defense District.
       ``(ii) Regulations regarding emissions of toxic air 
     pollutants.--Not later than 270 days after the date of 
     enactment of this subparagraph the Administrator shall 
     establish, for each refinery or importer, standards for toxic 
     air pollutants from use of the reformulated gasoline produced 
     or distributed by the refinery or importer that maintain the 
     reduction of the average annual aggregate emissions of toxic 
     air pollutants for reformulated gasoline produced or 
     distributed by the refinery or importer during calendar years 
     1999 and 2000, determined on the basis of data collected by 
     the Administrator with respect to the refinery or importer.
       ``(iii) Standards applicable to specific refineries or 
     importers.--

       ``(I) Applicability of standards.--For any calendar year, 
     the standards applicable to a refinery or importer under 
     clause (ii) shall apply to the quantity of gasoline produced 
     or distributed by the refinery 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 refinery 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 
     refinery or importer that is in excess of the quantity 
     subject to subclause (I) shall be subject to standards for 
     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 
     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 
     refinery or importer shall meet the standards applicable 
     under clause (ii) not later than April 1 of the year 
     following the report in subclause (II) and for subsequent 
     years.
       ``(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) 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.
       (d) Savings Clause.--Nothing in this section is intended to 
     affect or prejudice either any legal claims or actions with 
     respect to regulations promulgated by the Administrator of 
     the Environmental Protection Agency (hereinafter in this 
     subsection referred to as the ``Administrator'') prior to 
     the date of enactment of this Act regarding emissions of 
     toxic air pollutants from motor vehicles or the adjustment 
     of standards applicable to a specific refinery or importer 
     made under such prior regulations and the Administrator 
     may apply such adjustments to the standards applicable to 
     such refinery or importer under clause (iii)(I) of section 
     211(k)(1)(B) of the Clean Air Act, except that--
       (1) the Administrator shall revise such adjustments to be 
     based only on calendar years 1999-2000; and
       (2) for adjustments based on toxic air pollutant emissions 
     from reformulated gasoline significantly below the national 
     annual average emissions of toxic air pollutants from all 
     reformulated gasoline, the Administrator may revise such 
     adjustments to take account of the scope of Federal or State 
     prohibitions on the use of methyl tertiary butyl ether 
     imposed after the date of the enactment of this paragraph, 
     except that any such adjustment shall require such refiner or 
     importer, to the greatest extent practicable, to maintain the 
     reduction achieved during calendar years 1999-2000 in the 
     average annual aggregate emissions of toxic air pollutants 
     from reformulated gasoline produced or distributed by the 
     refinery or importer; Provided that, 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 1999-2000.

     SEC. 1507. ANALYSES OF MOTOR VEHICLE FUEL CHANGES.

       Section 211 of the Clean Air Act (42 U.S.C. 7545) is 
     amended by inserting after subsection (o) the following:
       ``(p) 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 subsection, 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 subtitle A of title 
     XV of the Energy Policy Act of 2003.
       ``(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 2005.''.

     SEC. 1508. DATA COLLECTION.

       Section 205 of the Department of Energy Organization Act 
     (42 U.S.C. 7135) is amended by adding at the end the 
     following:
       ``(m) Renewable Fuels Survey.--(1) 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 demand in 
     the motor vehicle fuels market in the United States monthly, 
     and in a manner designed to protect the confidentiality of 
     individual responses. In conducting the survey, the 
     Administrator shall collect information both on a national 
     and regional basis, including each of the following:
       ``(A) The quantity of renewable fuels produced.
       ``(B) The quantity of renewable fuels blended.
       ``(C) The quantity of renewable fuels imported.
       ``(D) The quantity of renewable fuels demanded.
       ``(E) Market price data.
       ``(F) Such other analyses or evaluations as the 
     Administrator finds is necessary to achieve the purposes of 
     this section.
       ``(2) The Administrator shall also collect or estimate 
     information both on a national and regional basis, pursuant 
     to subparagraphs (A) through (F) of paragraph (1), for the 5 
     years prior to implementation of this subsection.
       ``(3) This subsection does not affect the authority of the 
     Administrator to collect data under section 52 of the Federal 
     Energy Administration Act of 1974 (15 U.S.C. 790a).''.

     SEC. 1509. REDUCING THE PROLIFERATION OF STATE FUEL CONTROLS.

       (a) EPA Approval of State Plans with Fuel Controls.--
     Section 211(c)(4)(C) of the Clean Air Act (42 U.S.C. 
     7545(c)(4)(C)) is amended by adding at the end the following: 
     ``The Administrator shall not approve a control or 
     prohibition respecting the use of a fuel or fuel additive 
     under this subparagraph unless the Administrator, after 
     consultation with the Secretary of Energy, publishes in the 
     Federal Register a finding that, in the Administrator's 
     judgment, such control or prohibition will not cause fuel 
     supply or distribution interruptions or have a significant 
     adverse impact on fuel producibility in the affected area or 
     contiguous areas.''.
       (b) Study.--The Administrator of the Environmental 
     Protection Agency (hereinafter in this subsection referred to 
     as the ``Administrator''), in cooperation with the Secretary 
     of Energy, shall undertake a study of the projected effects 
     on air quality, the proliferation of fuel blends, fuel 
     availability, and fuel costs of providing a preference for 
     each of the following:
       (A) Reformulated gasoline referred to in subsection (k) of 
     section 211 of the Clean Air Act.
       (B) A low RVP gasoline blend that has been certified by the 
     Administrator as having a Reid Vapor Pressure of 7.0 pounds 
     per square inch (psi).
       (C) A low RVP gasoline blend that has been certified by the 
     Administrator as having a Reid Vapor Pressure of 7.8 pounds 
     per square inch (psi).
     In carrying out such study, the Administrator shall obtain 
     comments from affected parties. The Administrator shall 
     submit the results of such study to the Congress not later 
     than 18 months after the date of enactment of this Act, 
     together with any recommended legislative changes.

     SEC. 1510. FUEL SYSTEM REQUIREMENTS HARMONIZATION STUDY.

       (a) Study.--
       (1) In general.--The Administrator of the Environmental 
     Protection Agency (hereinafter in this section referred to as 
     the ``Administrator'') 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

[[Page H11318]]

       (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 consumers in various States and 
     localities;
       (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;
       (C) the effect of Federal, State, and local motor vehicle 
     fuel regulations, including multiple motor vehicle fuel 
     requirements, on--
       (i) domestic refineries;
       (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, refineries, and fuel handling 
     facilities;
       (E) the feasibility of developing national or regional 
     motor vehicle fuel slates for the 48 contiguous States that, 
     while improving air quality at the national, regional and 
     local levels consistent with the attainment of national 
     ambient air quality standards, 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;
       (F) the feasibility of providing incentives to promote 
     cleaner burning motor vehicle fuel; and
       (G) the extent to which improvements in air quality and any 
     increases or decreases in the price of motor fuel can be 
     projected to result from the Environmental Protection 
     Agency's Tier II requirements for conventional gasoline and 
     vehicle emission systems, the reformulated gasoline program, 
     the renewable content requirements established by this 
     subtitle, State programs regarding gasoline volatility, and 
     any other requirements imposed by States or localities 
     affecting the composition of motor fuel.
       (b) Report.--
       (1) In general.--Not later than December 31, 2007, the 
     Administrator 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 under this subsection 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 under this 
     subsection, the Administrator and the Secretary of Energy 
     shall consult with--
       (A) the Governors of the States;
       (B) automobile manufacturers;
       (C) motor vehicle fuel producers and distributors; and
       (D) the public.

     SEC. 1511. COMMERCIAL BYPRODUCTS FROM MUNICIPAL SOLID WASTE 
                   AND CELLULOSIC BIOMASS LOAN GUARANTEE PROGRAM.

       (a) Definition of Municipal Solid Waste.--In this section, 
     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).
       (b) Establishment of Program.--The Secretary of Energy 
     (hereinafter in this section referred to as 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 and cellulosic biomass into fuel 
     ethanol and other commercial byproducts.
       (c) Requirements.--The Secretary may provide a loan 
     guarantee under subsection (b) to an applicant if--
       (1) 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 
     subsection (b);
       (2) 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
       (3) 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.
       (d) Criteria.--In selecting recipients of loan guarantees 
     from among applicants, the Secretary shall give preference to 
     proposals that--
       (1) meet all applicable Federal and State permitting 
     requirements;
       (2) are most likely to be successful; and
       (3) are located in local markets that have the greatest 
     need for the facility because of--
       (A) the limited availability of land for waste disposal;
       (B) the availability of sufficient quantities of cellulosic 
     biomass; or
       (C) a high level of demand for fuel ethanol or other 
     commercial byproducts of the facility.
       (e) Maturity.--A loan guaranteed under subsection (b) shall 
     have a maturity of not more than 20 years.
       (f) Terms and Conditions.--The loan agreement for a loan 
     guaranteed under subsection (b) shall provide that no 
     provision of the loan agreement may be amended or waived 
     without the consent of the Secretary.
       (g) Assurance of Repayment.--The Secretary shall require 
     that an applicant for a loan guarantee under subsection (b) 
     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.
       (h) Guarantee Fee.--The recipient of a loan guarantee under 
     subsection (b) 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.
       (i) Full Faith and Credit.--The full faith and credit of 
     the United States is pledged to the payment of all guarantees 
     made under this section. Any such guarantee made by the 
     Secretary shall be conclusive evidence of the eligibility of 
     the loan for the guarantee with respect to principal and 
     interest. The validity of the guarantee shall be 
     incontestable in the hands of a holder of the guaranteed 
     loan.
       (j) Reports.--Until each guaranteed loan under this section 
     has been repaid in full, the Secretary shall annually submit 
     to Congress a report on the activities of the Secretary under 
     this section.
       (k) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as are necessary to carry out 
     this section.
       (l) Termination of Authority.--The authority of the 
     Secretary to issue a loan guarantee under subsection (b) 
     terminates on the date that is 10 years after the date of 
     enactment of this Act.

     SEC. 1512. RESOURCE CENTER.

       (a) Definition.--In this section, the term ``RFG State'' 
     means a State in which is located one or more covered areas 
     (as defined in section 211(k)(10)(D) of the Clean Air Act (42 
     U.S.C. 7545(k)(10)(D)).
       (b) Authorization of Appropriations for Resource Center.--
     There are 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.
       (c) Renewable Fuel Production Research and Development 
     Grants.--
       (1) In general.--The Administrator of the Environmental 
     Protection Agency 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.
       (3) Authorization of appropriations.--There are authorized 
     to be appropriated to carry out this subsection $25,000,000 
     for each of fiscal years 2004 through 2008.

     SEC. 1513. CELLULOSIC BIOMASS AND WASTE-DERIVED ETHANOL 
                   CONVERSION ASSISTANCE.

       Section 211 of the Clean Air Act (42 U.S.C. 7545) is 
     amended by adding at the end the following:
       ``(r) Cellulosic Biomass and Waste-Derived Ethanol 
     Conversion Assistance.--
       ``(1) In general.--The Secretary of Energy may provide 
     grants to merchant producers of cellulosic biomass ethanol 
     and waste-derived ethanol in the United States to assist the 
     producers in building eligible production facilities 
     described in paragraph (2) for the production of 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 or waste-derived feedstocks 
     derived from agricultural residues, municipal solid waste, or 
     agricultural byproducts as that term is used in section 919 
     of the Energy Policy Act of 2003.
       ``(3) Authorization of appropriations.--There are 
     authorized to be appropriated the following amounts to carry 
     out this subsection:
       ``(A) $100,000,000 for fiscal year 2004.
       ``(B) $250,000,000 for fiscal year 2005.
       ``(C) $400,000,000 for fiscal year 2006.''.

     SEC. 1514. BLENDING OF COMPLIANT REFORMULATED GASOLINES.

       Section 211 of the Clean Air Act (42 U.S.C. 7545) is 
     amended by adding at the end the following:
       ``(s) Blending of Compliant Reformulated Gasolines.--
       ``(1) In general.--Notwithstanding subsections (h) and (k) 
     and subject to the limitations in paragraph (2) of this 
     subsection, it shall not be a violation of this subtitle for 
     a gasoline retailer, during any month of the year, to blend 
     at a retail location batches of ethanol-blended and non-
     ethanol-blended reformulated gasoline, provided that--
       ``(A) each batch of gasoline to be blended has been 
     individually certified as in compliance with subsections (h) 
     and (k) prior to being blended;

[[Page H11319]]

       ``(B) the retailer notifies the Administrator prior to such 
     blending, and identifies the exact location of the retail 
     station and the specific tank in which such blending will 
     take place;
       ``(C) the retailer retains and, as requested by the 
     Administrator or the Administrator's designee, makes 
     available for inspection such certifications accounting for 
     all gasoline at the retail outlet; and
       ``(D) the retailer does not, between June 1 and September 
     15 of each year, blend a batch of VOC-controlled, or 
     `summer', gasoline with a batch of non-VOC-controlled, or 
     `winter', gasoline (as these terms are defined under 
     subsections (h) and (k)).
       ``(2) Limitations.--
       ``(A) Frequency limitation.--A retailer shall only be 
     permitted to blend batches of compliant reformulated gasoline 
     under this subsection a maximum of two blending periods 
     between May 1 and September 15 of each calendar year.
       ``(B) Duration of blending period.--Each blending period 
     authorized under subparagraph (A) shall extend for a period 
     of no more than 10 consecutive calendar days.
       ``(3) Surveys.--A sample of gasoline taken from a retail 
     location that has blended gasoline within the past 30 days 
     and is in compliance with subparagraphs (A), (B), (C), and 
     (D) of paragraph (1) shall not be used in a VOC survey 
     mandated by 40 C.F.R. Part 80.
       ``(4) State implementation plans.--A State shall be held 
     harmless and shall not be required to revise its State 
     implementation plan under section 110 to account for the 
     emissions from blended gasoline authorized under paragraph 
     (1).
       ``(5) Preservation of state law.--Nothing in this 
     subsection shall--
       ``(A) preempt existing State laws or regulations regulating 
     the blending of compliant gasolines; or
       ``(B) prohibit a State from adopting such restrictions in 
     the future.
       ``(6) Regulations.--The Administrator shall promulgate, 
     after notice and comment, regulations implementing this 
     subsection within one year after the date of enactment of 
     this subsection.
       ``(7) Effective date.--This subsection shall become 
     effective 15 months after the date of its enactment and shall 
     apply to blended batches of reformulated gasoline on or after 
     that date, regardless of whether the implementing regulations 
     required by paragraph (6) have been promulgated by the 
     Administrator by that date.
       ``(8) Liability.--No person other than the person 
     responsible for blending under this subsection shall be 
     subject to an enforcement action or penalties under 
     subsection (d) solely arising from the blending of compliant 
     reformulated gasolines by the retailers.
       ``(9) Formulation of gasoline.--This subsection does not 
     grant authority to the Administrator or any State (or any 
     subdivision thereof) to require reformulation of gasoline at 
     the refinery to adjust for potential or actual emissions 
     increases due to the blending authorized by this 
     subsection.''.
            Subtitle B--Underground Storage Tank Compliance

     SEC. 1521. SHORT TITLE.

       This subtitle may be cited as the ``Underground Storage 
     Tank Compliance Act of 2003''.

     SEC. 1522. LEAKING UNDERGROUND STORAGE TANKS.

       (a) In General.--Section 9004 of the Solid Waste Disposal 
     Act (42 U.S.C. 6991c) is amended by adding at the end the 
     following:
       ``(f) Trust Fund Distribution.--
       ``(1) In general.--
       ``(A) Amount and permitted uses of distribution.--The 
     Administrator shall distribute to States not less than 80 
     percent of the funds from the Trust Fund that are made 
     available to the Administrator under section 9014(2)(A) for 
     each fiscal year for use in paying the reasonable costs, 
     incurred under a cooperative agreement with any State for--
       ``(i) actions taken by the State under section 
     9003(h)(7)(A);
       ``(ii) necessary administrative expenses, as determined by 
     the Administrator, that are directly related to State fund or 
     State assurance programs under subsection (c)(1);
       ``(iii) any State fund or State assurance program carried 
     out under subsection (c)(1) for a release from an underground 
     storage tank regulated under this subtitle to the extent 
     that, as determined by the State in accordance with 
     guidelines developed jointly by the Administrator and the 
     States, the financial resources of the owner and operator of 
     the underground storage tank (including resources provided by 
     a program in accordance with subsection (c)(1)) are not 
     adequate to pay the cost of a corrective action without 
     significantly impairing the ability of the owner or operator 
     to continue in business; or
       ``(iv) enforcement, by a State or a local government, of 
     State or local regulations pertaining to underground storage 
     tanks regulated under this subtitle.
       ``(B) Use of funds for enforcement.--In addition to the 
     uses of funds authorized under subparagraph (A), the 
     Administrator may use funds from the Trust Fund that are not 
     distributed to States under subparagraph (A) for enforcement 
     of any regulation promulgated by the Administrator under this 
     subtitle.
       ``(C) Prohibited uses.--Funds provided to a State by the 
     Administrator under subparagraph (A) shall not be used by the 
     State to provide financial assistance to an owner or operator 
     to meet any requirement relating to underground storage tanks 
     under subparts B, C, D, H, and G of part 280 of title 40, 
     Code of Federal Regulations (as in effect on the date of 
     enactment of this subsection).
       ``(2) Allocation.--
       ``(A) Process.--Subject to subparagraphs (B) and (C), in 
     the case of a State with which the Administrator has entered 
     into a cooperative agreement under section 9003(h)(7)(A), the 
     Administrator shall distribute funds from the Trust Fund to 
     the State using an allocation process developed by the 
     Administrator.
       ``(B) Diversion of State funds.--The Administrator shall 
     not distribute funds under subparagraph (A)(iii) of 
     subsection (f)(1) to any State that has diverted funds from a 
     State fund or State assurance program for purposes other than 
     those related to the regulation of underground storage tanks 
     covered by this subtitle, with the exception of those 
     transfers that had been completed earlier than the date of 
     enactment of this subsection.
       ``(C) Revisions to process.--The Administrator may revise 
     the allocation process referred to in subparagraph (A) 
     after--
       ``(i) consulting with State agencies responsible for 
     overseeing corrective action for releases from underground 
     storage tanks; and
       ``(ii) taking into consideration, at a minimum, each of the 
     following:

       ``(I) The number of confirmed releases from federally 
     regulated leaking underground storage tanks in the States.
       ``(II) The number of federally regulated underground 
     storage tanks in the States.
       ``(III) The performance of the States in implementing and 
     enforcing the program.
       ``(IV) The financial needs of the States.

       ``(V) The ability of the States to use the funds referred 
     to in subparagraph (A) in any year.

       ``(3) Distributions to state agencies.--Distributions from 
     the Trust Fund under this subsection shall be made directly 
     to a State agency that--
       ``(A) enters into a cooperative agreement referred to in 
     paragraph (2)(A); or
       ``(B) is enforcing a State program approved under this 
     section.
       ``(4) Cost recovery prohibition.--Funds from the Trust Fund 
     provided by States to owners or operators under paragraph 
     (1)(A)(iii) shall not be subject to cost recovery by the 
     Administrator under section 9003(h)(6).''.
       (b) Withdrawal of Approval of State Funds.--Section 9004(c) 
     of the Solid Waste Disposal Act (42 U.S.C. 6991c(c)) is 
     amended by inserting the following new paragraph at the end 
     thereof:
       ``(6) Withdrawal of Approval.--After an opportunity for 
     good faith, collaborative efforts to correct financial 
     deficiencies with a State fund, the Administrator may 
     withdraw approval of any State fund or State assurance 
     program to be used as a financial responsibility mechanism 
     without withdrawing approval of a State underground storage 
     tank program under section 9004(a).''.

     SEC. 1523. INSPECTION OF UNDERGROUND STORAGE TANKS.

       (a) Inspection Requirements.--Section 9005 of the Solid 
     Waste Disposal Act (42 U.S.C. 6991d) is amended by inserting 
     the following new subsection at the end thereof:
       ``(c) Inspection Requirements.--
       ``(1) Uninspected tanks.--In the case of underground 
     storage tanks regulated under this subtitle that have not 
     undergone an inspection since December 22, 1998, not later 
     than 2 years after the date of enactment of this subsection, 
     the Administrator or a State that receives funding under this 
     subtitle, as appropriate, shall conduct on-site inspections 
     of all such tanks to determine compliance with this subtitle 
     and the regulations under this subtitle (40 C.F.R. 280) or a 
     requirement or standard of a State program developed under 
     section 9004.
       ``(2) Periodic inspections.--After completion of all 
     inspections required under paragraph (1), the Administrator 
     or a State that receives funding under this subtitle, as 
     appropriate, shall conduct on-site inspections of each 
     underground storage tank regulated under this subtitle at 
     least once every 3 years to determine compliance with this 
     subtitle and the regulations under this subtitle (40 C.F.R. 
     280) or a requirement or standard of a State program 
     developed under section 9004. The Administrator may extend 
     for up to one additional year the first 3-year inspection 
     interval under this paragraph if the State demonstrates that 
     it has insufficient resources to complete all such 
     inspections within the first 3-year period.
       ``(3) Inspection authority.--Nothing in this section shall 
     be construed to diminish the Administrator's or a State's 
     authorities under section 9005(a).''.
       (b) Study of Alternative Inspection Programs.--The 
     Administrator of the Environmental Protection Agency, in 
     coordination with a State, shall gather information on 
     compliance assurance programs that could serve as an 
     alternative to the inspection programs under section 9005(c) 
     of the Solid Waste Disposal Act (42 U.S.C. 6991d(c)) and 
     shall, within 4 years after the date of enactment of this 
     Act, submit a report to the Congress containing the results 
     of such study.

     SEC. 1524. OPERATOR TRAINING.

       (a) In General.--Section 9010 of the Solid Waste Disposal 
     Act (42 U.S.C. 6991i) is amended to read as follows:

     ``SEC. 9010. OPERATOR TRAINING.

       ``(a) Guidelines.--
       ``(1) In general.--Not later than 2 years after the date of 
     enactment of the Underground Storage Tank Compliance Act of 
     2003, in consultation and cooperation with States and after 
     public notice and opportunity for comment, the Administrator 
     shall publish guidelines that specify training requirements 
     for persons having primary daily on-site management 
     responsibility for the operation and maintenance of 
     underground storage tanks.
       ``(2) Considerations.--The guidelines described in 
     paragraph (1) shall take into account--
       ``(A) State training programs in existence as of the date 
     of publication of the guidelines;

[[Page H11320]]

       ``(B) training programs that are being employed by tank 
     owners and tank operators as of the date of enactment of the 
     Underground Storage Tank Compliance Act of 2003;
       ``(C) the high turnover rate of tank operators and other 
     personnel;
       ``(D) the frequency of improvement in underground storage 
     tank equipment technology;
       ``(E) the nature of the businesses in which the tank 
     operators are engaged; and
       ``(F) such other factors as the Administrator determines to 
     be necessary to carry out this section.
       ``(b) State Programs.--
       ``(1) In general.--Not later than 2 years after the date on 
     which the Administrator publishes the guidelines under 
     subsection (a)(1), each State that receives funding under 
     this subtitle shall develop State-specific training 
     requirements that are consistent with the guidelines 
     developed under subsection (a)(1).
       ``(2) Requirements.--State requirements described in 
     paragraph (1) shall--
       ``(A) be consistent with subsection (a);
       ``(B) be developed in cooperation with tank owners and tank 
     operators;
       ``(C) take into consideration training programs implemented 
     by tank owners and tank operators as of the date of enactment 
     of this section; and
       ``(D) be appropriately communicated to tank owners and 
     operators.
       ``(3) Financial incentive.--The Administrator may award to 
     a State that develops and implements requirements described 
     in paragraph (1), in addition to any funds that the State is 
     entitled to receive under this subtitle, not more than 
     $200,000, to be used to carry out the requirements.
       ``(c) Operators.--All persons having primary daily on-site 
     management responsibility for the operation and maintenance 
     of any underground storage tank shall--
       ``(1) meet the training requirements developed under 
     subsection (b); and
       ``(2) repeat the applicable requirements developed under 
     subsection (b), if the tank for which they have primary daily 
     on-site management responsibilities is determined to be out 
     of compliance with--
       ``(A) a requirement or standard promulgated by the 
     Administrator under section 9003; or
       ``(B) a requirement or standard of a State program approved 
     under section 9004.''.
       (b) State Program Requirement.--Section 9004(a) of the 
     Solid Waste Disposal Act (42 U.S.C. 6991c(a)) is amended by 
     striking ``and'' at the end of paragraph (7), by striking the 
     period at the end of paragraph (8) and inserting ``; and'', 
     and by adding the following new paragraph at the end thereof:
       ``(9) State-specific training requirements as required by 
     section 9010.''.
       (c) Enforcement.--Section 9006(d)(2) of such Act (42 U.S.C. 
     6991e) is amended as follows:
       (1) By striking ``or'' at the end of subparagraph (B).
       (2) By adding the following new subparagraph after 
     subparagraph (C):
       ``(D) the training requirements established by States 
     pursuant to section 9010 (relating to operator training); 
     or''.
       (d) Table of Contents.--The item relating to section 9010 
     in table of contents for the Solid Waste Disposal Act is 
     amended to read as follows:

``Sec. 9010. Operator training.''.

     SEC. 1525. REMEDIATION FROM OXYGENATED FUEL ADDITIVES.

       Section 9003(h) of the Solid Waste Disposal Act (42 U.S.C. 
     6991b(h)) is amended as follows:
       (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 striking ``and including the authorities of 
     paragraphs (4), (6), and (8) of this subsection'' and 
     inserting ``and the authority under sections 9011 and 9012 
     and paragraphs (4), (6), and (8),''.
       (2) By adding at the end the following:
       ``(12) Remediation of oxygenated fuel contamination.--
       ``(A) In general.--The Administrator and the States may use 
     funds made available under section 9014(2)(B) to carry out 
     corrective actions with respect to a release of a fuel 
     containing an oxygenated fuel additive that presents a threat 
     to human health or welfare or the environment.
       ``(B) Applicable authority.--The Administrator or a State 
     shall carry out subparagraph (A) in accordance with paragraph 
     (2), and in the case of a State, in accordance with a 
     cooperative agreement entered into by the Administrator and 
     the State under paragraph (7).''.

     SEC. 1526. RELEASE PREVENTION, COMPLIANCE, AND ENFORCEMENT.

       (a) Release Prevention and Compliance.--Subtitle I of the 
     Solid Waste Disposal Act (42 U.S.C. 6991 et seq.) is amended 
     by adding at the end the following:

     ``SEC. 9011. USE OF FUNDS FOR RELEASE PREVENTION AND 
                   COMPLIANCE.

       ``Funds made available under section 9014(2)(D) from the 
     Trust Fund may be used to conduct inspections, issue orders, 
     or bring actions under this subtitle--
       ``(1) by a State, in accordance with a grant or cooperative 
     agreement with the Administrator, of State regulations 
     pertaining to underground storage tanks regulated under this 
     subtitle; and
       ``(2) by the Administrator, for tanks regulated under this 
     subtitle (including under a State program approved under 
     section 9004).''.
       (b) Government-Owned Tanks.--Section 9003 of the Solid 
     Waste Disposal Act (42 U.S.C. 6991b) is amended by adding at 
     the end the following:
       ``(i) Government-Owned Tanks.--
       ``(1) State compliance report.--(A) Not later than 2 years 
     after the date of enactment of this subsection, each State 
     that receives funding under this subtitle shall submit to the 
     Administrator a State compliance report that--
       ``(i) lists the location and owner of each underground 
     storage tank described in subparagraph (B) in the State that, 
     as of the date of submission of the report, is not in 
     compliance with section 9003; and
       ``(ii) specifies the date of the last inspection and 
     describes the actions that have been and will be taken to 
     ensure compliance of the underground storage tank listed 
     under clause (i) with this subtitle.
       ``(B) An underground storage tank described in this 
     subparagraph is an underground storage tank that is--
       ``(i) regulated under this subtitle; and
       ``(ii) owned or operated by the Federal, State, or local 
     government.
       ``(C) The Administrator shall make each report, received 
     under subparagraph (A), available to the public through an 
     appropriate media.
       ``(2) Financial incentive.--The Administrator may award to 
     a State that develops a report described in paragraph (1), in 
     addition to any other funds that the State is entitled to 
     receive under this subtitle, not more than $50,000, to be 
     used to carry out the report.
       ``(3) Not a safe harbor.--This subsection does not relieve 
     any person from any obligation or requirement under this 
     subtitle.''.
       (c) Public Record.--Section 9002 of the Solid Waste 
     Disposal Act (42 U.S.C. 6991a) is amended by adding at the 
     end the following:
       ``(d) Public Record.--
       ``(1) In general.--The Administrator shall require each 
     State that receives Federal funds to carry out this subtitle 
     to maintain, update at least annually, and make available to 
     the public, in such manner and form as the Administrator 
     shall prescribe (after consultation with States), a record of 
     underground storage tanks regulated under this subtitle.
       ``(2) Considerations.--To the maximum extent practicable, 
     the public record of a State, respectively, shall include, 
     for each year--
       ``(A) the number, sources, and causes of underground 
     storage tank releases in the State;
       ``(B) the record of compliance by underground storage tanks 
     in the State with--
       ``(i) this subtitle; or
       ``(ii) an applicable State program approved under section 
     9004; and
       ``(C) data on the number of underground storage tank 
     equipment failures in the State.''.
       (d) Incentive for Performance.--Section 9006 of the Solid 
     Waste Disposal Act (42 U.S.C. 6991e) is amended by adding at 
     the end the following:
       ``(e) Incentive for Performance.--Both of the following may 
     be taken into account in determining the terms of a civil 
     penalty under subsection (d):
       ``(1) The compliance history of an owner or operator in 
     accordance with this subtitle or a program approved under 
     section 9004.
       ``(2) Any other factor the Administrator considers 
     appropriate.''.
       (e) Table of Contents.--The table of contents for such 
     subtitle I is amended by adding the following new item at the 
     end thereof:

``Sec. 9011. Use of funds for release prevention and compliance.''.

     SEC. 1527. DELIVERY PROHIBITION.

       (a) In General.--Subtitle I of the Solid Waste Disposal Act 
     (42 U.S.C. 6991 et seq.) is amended by adding at the end the 
     following:

     ``SEC. 9012. DELIVERY PROHIBITION.

       ``(a) Requirements.--
       ``(1) Prohibition of delivery or deposit.--Beginning 2 
     years after the date of enactment of this section, it shall 
     be unlawful to deliver to, deposit into, or accept a 
     regulated substance into an underground storage tank at a 
     facility which has been identified by the Administrator or a 
     State implementing agency to be ineligible for fuel delivery 
     or deposit.
       ``(2) Guidance.--Within 1 year after the date of enactment 
     of this section, the Administrator and States that receive 
     funding under this subtitle shall, in consultation with the 
     underground storage tank owner and product delivery 
     industries, for territory for which they are the primary 
     implementing agencies, publish guidelines detailing the 
     specific processes and procedures they will use to implement 
     the provisions of this section. The processes and procedures 
     include, at a minimum--
       ``(A) the criteria for determining which underground 
     storage tank facilities are ineligible for delivery or 
     deposit;
       ``(B) the mechanisms for identifying which facilities are 
     ineligible for delivery or deposit to the underground storage 
     tank owning and fuel delivery industries;
       ``(C) the process for reclassifying ineligible facilities 
     as eligible for delivery or deposit; and
       ``(D) a delineation of, or a process for determining, the 
     specified geographic areas subject to paragraph (4).
       ``(3) Delivery prohibition notice.--
       ``(A) Roster.--The Administrator and each State 
     implementing agency that receives funding under this subtitle 
     shall establish within 24 months after the date of enactment 
     of this section a Delivery Prohibition Roster listing 
     underground storage tanks under the Administrator's or the 
     State's jurisdiction that are determined to be ineligible for 
     delivery or deposit pursuant to paragraph (2).
       ``(B) Notification.--The Administrator and each State, as 
     appropriate, shall make readily known, to underground storage 
     tank owners and operators and to product delivery industries, 
     the underground storage tanks listed on a Delivery 
     Prohibition Roster by:
       ``(i) posting such Rosters, including the physical location 
     and street address of each listed underground storage tank, 
     on official web sites and, if the Administrator or the State 
     so chooses, other electronic means;

[[Page H11321]]

       ``(ii) updating these Rosters periodically; and
       ``(iii) installing a tamper-proof tag, seal, or other 
     device blocking the fill pipes of such underground storage 
     tanks to prevent the delivery of product into such 
     underground storage tanks.
       ``(C) Roster updates.--The Administrator and the State 
     shall update the Delivery Prohibition Rosters as appropriate, 
     but not less than once a month on the first day of the month.
       ``(D) Tampering with device.--
       ``(i) Prohibition.--It shall be unlawful for any person, 
     other than an authorized representative of the Administrator 
     or a State, as appropriate, to remove, tamper with, destroy, 
     or damage a device installed by the Administrator or a State, 
     as appropriate, under subparagraph (B)(iii) of this 
     subsection.
       ``(ii) Civil penalties.--Any person violating clause (i) of 
     this subparagraph shall be subject to a civil penalty not to 
     exceed $10,000 for each violation.
       ``(4) Limitation.--
       ``(A) Rural and remote areas.--Subject to subparagraph (B), 
     the Administrator or a State shall not include an underground 
     storage tank on a Delivery Prohibition Roster under paragraph 
     (3) if an urgent threat to public health, as determined by 
     the Administrator, does not exist and if such a delivery 
     prohibition would jeopardize the availability of, or access 
     to, fuel in any rural and remote areas.
       ``(B) Applicability of limitation.--The limitation under 
     subparagraph (A) shall apply only during the 180-day period 
     following the date of a determination by the Administrator or 
     the appropriate State that exercising the authority of 
     paragraph (3) is limited by subparagraph (A).
       ``(b) Effect on state authority.--Nothing in this section 
     shall affect the authority of a State to prohibit the 
     delivery of a regulated substance to an underground storage 
     tank.
       ``(c) Defense to violation.--A person shall not be in 
     violation of subsection (a)(1) if the underground storage 
     tank into which a regulated substance is delivered is not 
     listed on the Administrator's or the appropriate State's 
     Prohibited Delivery Roster 7 calendar days prior to the 
     delivery being made.''.
       (b) Enforcement.--Section 9006(d)(2) of such Act (42 U.S.C. 
     6991e(d)(2)) is amended as follows:
       (1) By adding the following new subparagraph after 
     subparagraph (D):
       ``(E) the delivery prohibition requirement established by 
     section 9012,''.
       (2) By adding the following new sentence at the end 
     thereof: ``Any person making or accepting a delivery or 
     deposit of a regulated substance to an underground storage 
     tank at an ineligible facility in violation of section 9012 
     shall also be subject to the same civil penalty for each day 
     of such violation.''.
       (c) Table of Contents.--The table of contents for such 
     subtitle I is amended by adding the following new item at the 
     end thereof:

``Sec. 9012. Delivery prohibition.''.

     SEC. 1528. FEDERAL FACILITIES.

       Section 9007 of the Solid Waste Disposal Act (42 U.S.C. 
     6991f) is amended to read as follows:

     ``SEC. 9007. FEDERAL FACILITIES.

       ``(a) In General.--Each department, agency, and 
     instrumentality of the executive, legislative, and judicial 
     branches of the Federal Government (1) having jurisdiction 
     over any underground storage tank or underground storage tank 
     system, or (2) engaged in any activity resulting, or which 
     may result, in the installation, operation, management, or 
     closure of any underground storage tank, release response 
     activities related thereto, or in the delivery, acceptance, 
     or deposit of any regulated substance to an underground 
     storage tank or underground storage tank system shall be 
     subject to, and comply with, all Federal, State, interstate, 
     and local requirements, both substantive and procedural 
     (including any requirement for permits or reporting or any 
     provisions for injunctive relief and such sanctions as may be 
     imposed by a court to enforce such relief), respecting 
     underground storage tanks in the same manner, and to the same 
     extent, as any person is subject to such requirements, 
     including the payment of reasonable service charges. The 
     Federal, State, interstate, and local substantive and 
     procedural requirements referred to in this subsection 
     include, but are not limited to, all administrative orders 
     and all civil and administrative penalties and fines, 
     regardless of whether such penalties or fines are punitive or 
     coercive in nature or are imposed for isolated, intermittent, 
     or continuing violations. The United States hereby expressly 
     waives any immunity otherwise applicable to the United States 
     with respect to any such substantive or procedural 
     requirement (including, but not limited to, any injunctive 
     relief, administrative order or civil or administrative 
     penalty or fine referred to in the preceding sentence, or 
     reasonable service charge). The reasonable service charges 
     referred to in this subsection include, but are not limited 
     to, fees or charges assessed in connection with the 
     processing and issuance of permits, renewal of permits, 
     amendments to permits, review of plans, studies, and other 
     documents, and inspection and monitoring of facilities, as 
     well as any other nondiscriminatory charges that are assessed 
     in connection with a Federal, State, interstate, or local 
     underground storage tank regulatory program. Neither the 
     United States, nor any agent, employee, or officer thereof, 
     shall be immune or exempt from any process or sanction of any 
     State or Federal Court with respect to the enforcement of any 
     such injunctive relief. No agent, employee, or officer of the 
     United States shall be personally liable for any civil 
     penalty under any Federal, State, interstate, or local law 
     concerning underground storage tanks with respect to any act 
     or omission within the scope of the official duties of the 
     agent, employee, or officer. An agent, employee, or officer 
     of the United States shall be subject to any criminal 
     sanction (including, but not limited to, any fine or 
     imprisonment) under any Federal or State law concerning 
     underground storage tanks, but no department, agency, or 
     instrumentality of the executive, legislative, or judicial 
     branch of the Federal Government shall be subject to any such 
     sanction. The President may exempt any underground storage 
     tank of any department, agency, or instrumentality in the 
     executive branch from compliance with such a requirement if 
     he determines it to be in the paramount interest of the 
     United States to do so. No such exemption shall be granted 
     due to lack of appropriation unless the President shall have 
     specifically requested such appropriation as a part of the 
     budgetary process and the Congress shall have failed to make 
     available such requested appropriation. Any exemption shall 
     be for a period not in excess of one year, but additional 
     exemptions may be granted for periods not to exceed one year 
     upon the President's making a new determination. The 
     President shall report each January to the Congress all 
     exemptions from the requirements of this section granted 
     during the preceding calendar year, together with his reason 
     for granting each such exemption.
       ``(b) Review of and Report on Federal Underground Storage 
     Tanks.--
       ``(1) Review.--Not later than 12 months after the date of 
     enactment of the Underground Storage Tank Compliance Act of 
     2003, each Federal agency that owns or operates 1 or more 
     underground storage tanks, or that manages land on which 1 or 
     more underground storage tanks are located, shall submit to 
     the Administrator, the Committee on Energy and Commerce of 
     the United States House of Representatives, and the Committee 
     on the Environment and Public Works of the United States 
     Senate a compliance strategy report that--
       ``(A) lists the location and owner of each underground 
     storage tank described in this paragraph;
       ``(B) lists all tanks that are not in compliance with this 
     subtitle that are owned or operated by the Federal agency;
       ``(C) specifies the date of the last inspection by a State 
     or Federal inspector of each underground storage tank owned 
     or operated by the agency;
       ``(D) lists each violation of this subtitle respecting any 
     underground storage tank owned or operated by the agency;
       ``(E) describes the operator training that has been 
     provided to the operator and other persons having primary 
     daily on-site management responsibility for the operation and 
     maintenance of underground storage tanks owned or operated by 
     the agency; and
       ``(F) describes the actions that have been and will be 
     taken to ensure compliance for each underground storage tank 
     identified under subparagraph (B).
       ``(2) Not a safe harbor.--This subsection does not relieve 
     any person from any obligation or requirement under this 
     subtitle.''.

     SEC. 1529. TANKS ON TRIBAL LANDS.

       (a) In General.--Subtitle I of the Solid Waste Disposal Act 
     (42 U.S.C. 6991 et seq.) is amended by adding the following 
     at the end thereof:

     ``SEC. 9013. TANKS ON TRIBAL LANDS.

       ``(a) Strategy.--The Administrator, in coordination with 
     Indian tribes, shall, not later than 1 year after the date of 
     enactment of this section, develop and implement a strategy--
       ``(1) giving priority to releases that present the greatest 
     threat to human health or the environment, to take necessary 
     corrective action in response to releases from leaking 
     underground storage tanks located wholly within the 
     boundaries of--
       ``(A) an Indian reservation; or
       ``(B) any other area under the jurisdiction of an Indian 
     tribe; and
       ``(2) to implement and enforce requirements concerning 
     underground storage tanks located wholly within the 
     boundaries of--
       ``(A) an Indian reservation; or
       ``(B) any other area under the jurisdiction of an Indian 
     tribe.

       ``(b) Report.--Not later than 2 years after the date of 
     enactment of this section, the Administrator shall submit to 
     Congress a report that summarizes the status of 
     implementation and enforcement of this subtitle in areas 
     located wholly within--
       ``(1) the boundaries of Indian reservations; and
       ``(2) any other areas under the jurisdiction of an Indian 
     tribe.
     The Administrator shall make the report under this subsection 
     available to the public.
       ``(c) Not a Safe Harbor.--This section does not relieve any 
     person from any obligation or requirement under this 
     subtitle.
       ``(d) State Authority.--Nothing in this section applies to 
     any underground storage tank that is located in an area under 
     the jurisdiction of a State, or that is subject to regulation 
     by a State, as of the date of enactment of this section.''.
       (b) Table of Contents.--The table of contents for such 
     subtitle I is amended by adding the following new item at the 
     end thereof:

``Sec. 9013. Tanks on Tribal lands.''.

     SEC. 1530. FUTURE RELEASE CONTAINMENT TECHNOLOGY.

       Not later than 2 years after the date of enactment of this 
     Act, the Administrator of the Environmental Protection 
     Agency, after consultation with States, shall make available 
     to the public and to the Committee on Energy and Commerce of 
     the House of Representatives and the Committee on Environment 
     and Public Works of the Senate information on the 
     effectiveness of alternative possible methods and means for 
     containing releases from underground storage tanks systems.

     SEC. 1531. AUTHORIZATION OF APPROPRIATIONS.

       (a) In General.--Subtitle I of the Solid Waste Disposal Act 
     (42 U.S.C. 6991 et seq.) is amended by adding at the end the 
     following:

[[Page H11322]]

     ``SEC. 9014. AUTHORIZATION OF APPROPRIATIONS.

       ``There are authorized to be appropriated to the 
     Administrator the following amounts:
       ``(1) To carry out subtitle I (except sections 9003(h), 
     9005(c), 9011 and 9012) $50,000,000 for each of fiscal years 
     2004 through 2008.
       ``(2) From the Trust Fund, notwithstanding section 
     9508(c)(1) of the Internal Revenue Code of 1986:
       ``(A) to carry out section 9003(h) (except section 
     9003(h)(12)) $200,000,000 for each of fiscal years 2004 
     through 2008;
       ``(B) to carry out section 9003(h)(12), $200,000,000 for 
     each of fiscal years 2004 through 2008;
       ``(C) to carry out sections 9004(f) and 9005(c) 
     $100,000,000 for each of fiscal years 2004 through 2008; and
       ``(D) to carry out sections 9011 and 9012 $55,000,000 for 
     each of fiscal years 2004 through 2008.''.
       (b) Table of Contents.--The table of contents for such 
     subtitle I is amended by adding the following new item at the 
     end thereof:

``Sec. 9014. Authorization of appropriations.''.

     SEC. 1532. CONFORMING AMENDMENTS.

       (a) In General.--Section 9001 of the Solid Waste Disposal 
     Act (42 U.S.C. 6991) is amended as follows:
       (1) By striking ``For the purposes of this subtitle--'' and 
     inserting ``In this subtitle:''.
       (2) By redesignating paragraphs (1), (2), (3), (4), (5), 
     (6), (7), and (8) as paragraphs (10), (7), (4), (3), (8), 
     (5), (2), and (6), respectively.
       (3) By inserting before paragraph (2) (as redesignated by 
     paragraph (2) of this subsection) the following:
       ``(1) Indian tribe.--
       ``(A) In general.-- The term `Indian tribe' means any 
     Indian tribe, band, nation, or other organized group or 
     community that is recognized as being eligible for special 
     programs and services provided by the United States to 
     Indians because of their status as Indians.
       ``(B) Inclusions.--The term `Indian tribe' includes an 
     Alaska Native village, as defined in or established under the 
     Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.); 
     and''.
       (4) By inserting after paragraph (8) (as redesignated by 
     paragraph (2) of this subsection) the following:
       ``(9) Trust fund.-- The term `Trust Fund' means the Leaking 
     Underground Storage Tank Trust Fund established by section 
     9508 of the Internal Revenue Code of 1986.''.
       (b) Conforming Amendments.--The Solid Waste Disposal Act 
     (42 U.S.C. 6901 and following) is amended as follows:
       (1) Section 9003(f) (42 U.S.C. 6991b(f)) is amended--
       (A) in paragraph (1), by striking ``9001(2)(B)'' and 
     inserting ``9001(7)(B)''; and
       (B) in paragraphs (2) and (3), by striking ``9001(2)(A)'' 
     each place it appears and inserting ``9001(7)(A)''.
       (2) Section 9003(h) (42 U.S.C. 6991b(h)) is amended in 
     paragraphs (1), (2)(C), (7)(A), and (11) by striking 
     ``Leaking Underground Storage Tank Trust Fund'' each place it 
     appears and inserting ``Trust Fund''.
       (3) Section 9009 (42 U.S.C. 6991h) is amended--
       (A) in subsection (a), by striking ``9001(2)(B)'' and 
     inserting ``9001(7)(B)''; and
       (B) in subsection (d), by striking ``section 9001(1) (A) 
     and (B)'' and inserting ``subparagraphs (A) and (B) of 
     section 9001(10)''.

     SEC. 1533. TECHNICAL AMENDMENTS.

       The Solid Waste Disposal Act is amended as follows:
       (1) Section 9001(4)(A) (42 U.S.C. 6991(4)(A)) is amended by 
     striking ``sustances'' and inserting ``substances''.
       (2) Section 9003(f)(1) (42 U.S.C. 6991b(f)(1)) is amended 
     by striking ``subsection (c) and (d) of this section'' and 
     inserting ``subsections (c) and (d)''.
       (3) Section 9004(a) (42 U.S.C. 6991c(a)) is amended by 
     striking ``in 9001(2) (A) or (B) or both'' and inserting ``in 
     subparagraph (A) or (B) of section 9001(7)''.
       (4) Section 9005 (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''.
                           TITLE XVI--STUDIES

     SEC. 1601. 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 United States demand 
     for petroleum and natural gas without shortages or price 
     spikes, when inventory levels are below normal ranges.
       (d) Report to Congress.--Not later than 1 year after the 
     date of 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. 1602. NATURAL GAS SUPPLY SHORTAGE REPORT.

       (a) Report.--Not later than 6 months after the date of 
     enactment of this Act, the Secretary of Energy shall submit 
     to Congress a report on natural gas supplies and demand. In 
     preparing the report, the Secretary shall consult with 
     experts in natural gas supply and demand as well as 
     representatives of State and local units of government, 
     tribal organizations, and consumer and other organizations. 
     As the Secretary deems advisable, the Secretary may hold 
     public hearings and provide other opportunities for public 
     comment. The report shall contain recommendations for Federal 
     actions that, if implemented, will result in a balance 
     between natural gas supply and demand at a level that will 
     ensure, to the maximum extent practicable, achievement of the 
     objectives established in subsection (b).
       (b) Objectives of Report.--In preparing the report, the 
     Secretary shall seek to develop a series of recommendations 
     that will result in a balance between natural gas supply and 
     demand adequate to--
       (1) provide residential consumers with natural gas at 
     reasonable and stable prices;
       (2) accommodate long-term maintenance and growth of 
     domestic natural gas-dependent industrial, manufacturing, and 
     commercial enterprises;
       (3) facilitate the attainment of national ambient air 
     quality standards under the Clean Air Act;
       (4) permit continued progress in reducing emissions 
     associated with electric power generation; and
       (5) support development of the preliminary phases of 
     hydrogen-based energy technologies.
       (c) Contents of Report.--The report shall provide a 
     comprehensive analysis of natural gas supply and demand in 
     the United States for the period from 2004 to 2015. The 
     analysis shall include, at a minimum--
       (1) estimates of annual domestic demand for natural gas 
     that take into account the effect of Federal policies and 
     actions that are likely to increase and decrease demand for 
     natural gas;
       (2) projections of annual natural gas supplies, from 
     domestic and foreign sources, under existing Federal 
     policies;
       (3) an identification of estimated natural gas supplies 
     that are not available under existing Federal policies;
       (4) scenarios for decreasing natural gas demand and 
     increasing natural gas supplies comparing relative economic 
     and environmental impacts of Federal policies that--
       (A) encourage or require the use of natural gas to meet air 
     quality, carbon dioxide emission reduction, or energy 
     security goals;
       (B) encourage or require the use of energy sources other 
     than natural gas, including coal, nuclear, and renewable 
     sources;
       (C) support technologies to develop alternative sources of 
     natural gas and synthetic gas, including coal gasification 
     technologies;
       (D) encourage or require the use of energy conservation and 
     demand side management practices; and
       (E) affect access to domestic natural gas supplies; and
       (5) recommendations for Federal actions to achieve the 
     objectives of the report, including recommendations that--
       (A) encourage or require the use of energy sources other 
     than natural gas, including coal, nuclear, and renewable 
     sources;
       (B) encourage or require the use of energy conservation or 
     demand side management practices;
       (C) support technologies for the development of alternative 
     sources of natural gas and synthetic gas, including coal 
     gasification technologies; and
       (D) will improve access to domestic natural gas supplies.

     SEC. 1603. 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 
     of 1977 (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 Congress not later than 180 days 
     after the date of enactment of this Act.

     SEC. 1604. 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 date of enactment of 
     this Act, report to 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.

[[Page H11323]]

     SEC. 1605. STUDY OF ENERGY EFFICIENCY STANDARDS.

       The Secretary of Energy shall contract with the National 
     Academy of Sciences for a study, to be completed within 1 
     year after the date of enactment of this Act, 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 
     to Congress.

     SEC. 1606. TELECOMMUTING STUDY.

       (a) Study Required.--The Secretary, in consultation with 
     the Commission, the Director of the Office of Personnel 
     Management, the Administrator of General Services, and the 
     Administrator of NTIA, shall conduct a study of the energy 
     conservation implications of the widespread adoption of 
     telecommuting by Federal employees in the United States.
       (b) Required Subjects of Study.--The study required by 
     subsection (a) shall analyze the following subjects in 
     relation to the energy saving potential of telecommuting by 
     Federal employees:
       (1) Reductions of energy use and energy costs in commuting 
     and regular office heating, cooling, and other operations.
       (2) Other energy reductions accomplished by telecommuting.
       (3) Existing regulatory barriers that hamper telecommuting, 
     including barriers to broadband telecommunications services 
     deployment.
       (4) Collateral benefits to the environment, family life, 
     and other values.
       (c) Report Required.--The Secretary shall submit to the 
     President and Congress a report on the study required by this 
     section not later than 6 months after the date of enactment 
     of this Act. Such report shall include a description of the 
     results of the analysis of each of the subject described in 
     subsection (b).
       (d) Definitions.--As used in this section:
       (1) Secretary.--The term ``Secretary'' means the Secretary 
     of Energy.
       (2) Commission.--The term ``Commission'' means the Federal 
     Communications Commission.
       (3) NTIA.--The term ``NTIA'' means the National 
     Telecommunications and Information Administration of the 
     Department of Commerce.
       (4) Telecommuting.--The term ``telecommuting'' means the 
     performance of work functions using communications 
     technologies, thereby eliminating or substantially reducing 
     the need to commute to and from traditional worksites.
       (5) Federal employee.--The term ``Federal employee'' has 
     the meaning provided the term ``employee'' by section 2105 of 
     title 5, United States Code.

     SEC. 1607. LIHEAP REPORT.

       Not later than 1 year after the date of enactment of this 
     Act, the Secretary of Health and Human Services shall 
     transmit to Congress a report on how the Low-Income Home 
     Energy Assistance Program could be used more effectively to 
     prevent loss of life from extreme temperatures. In preparing 
     such report, the Secretary shall consult with appropriate 
     officials in all 50 States and the District of Columbia.

     SEC. 1608. OIL BYPASS FILTRATION TECHNOLOGY.

       The Secretary of Energy and the Administrator of the 
     Environmental Protection Agency shall--
       (1) conduct a joint study of the benefits of oil bypass 
     filtration technology in reducing demand for oil and 
     protecting the environment;
       (2) examine the feasibility of using oil bypass filtration 
     technology in Federal motor vehicle fleets; and
       (3) include in such study, prior to any determination of 
     the feasibility of using oil bypass filtration technology, 
     the evaluation of products and various manufacturers.

     SEC. 1609. TOTAL INTEGRATED THERMAL SYSTEMS.

       The Secretary of Energy shall--
       (1) conduct a study of the benefits of total integrated 
     thermal systems in reducing demand for oil and protecting the 
     environment; and
       (2) examine the feasibility of using total integrated 
     thermal systems in Department of Defense and other Federal 
     motor vehicle fleets.

     SEC. 1610. UNIVERSITY COLLABORATION.

       Not later than 2 years after the date of enactment of this 
     Act, the Secretary of Energy shall transmit to Congress a 
     report that examines the feasibility of promoting 
     collaborations between large institutions of higher education 
     and small institutions of higher education through grants, 
     contracts, and cooperative agreements made by the Secretary 
     for energy projects. The Secretary shall also consider 
     providing incentives for the inclusion of small institutions 
     of higher education, including minority-serving institutions, 
     in energy research grants, contracts, and cooperative 
     agreements.

     SEC. 1611. RELIABILITY AND CONSUMER PROTECTION ASSESSMENT.

       Not later than 5 years after the date of enactment of this 
     Act, and each 5 years thereafter, the Federal Energy 
     Regulatory Commission shall assess the effects of the 
     exemption of electric cooperatives and government-owned 
     utilities from Commission regulation under section 201(f) of 
     the Federal Power Act. The assessment shall include any 
     effects on--
       (1) reliability of interstate electric transmission 
     networks;
       (2) benefit to consumers, and efficiency, of competitive 
     wholesale electricity markets;
       (3) just and reasonable rates for electricity consumers; 
     and
       (4) the ability of the Commission to protect electricity 
     consumers.

     If the Commission finds that the 201(f) exemption results in 
     adverse effects on consumers or electric reliability, the 
     Commission shall make appropriate recommendations to Congress 
     pursuant to section 311 of the Federal Power Act.
       And the Senate agree to the same.

     From the Committee on Energy and Commerce, for consideration 
     of the House bill and the Senate amendment, and modifications 
     committed to conference:
     Billy Tauzin,
     Michael Bilirakis,
     Joe Barton,
     Fred Upton,
     Cliff Stearns,
     Paul Gillmor,
     John Shimkus,
     From the Committee on Agriculture, for consideration of secs. 
     30202, 30208, 30212, Title III of Division C, secs. 30604, 
     30901, and 30903 of the House bill and secs. 265, 301, 604, 
     941-948, 950, 1103, 1221, 1311-1313, and 2008 of the Senate 
     amendment, and modifications committed to conference:
     Bob Goodlatte,
     Frank D. Lucas,
     Charles W. Stenholm,
     From the Committee on Armed Services, for consideration of 
     secs. 11005, 11010, 14001-14007, 14009-14015, 21805 and 21806 
     of the House bill and secs. 301, 501-507, 509, 513, 809, 821, 
     914, 920, 1401, 1407-1409, 1411, 1801, and 1803 of the Senate 
     amendment, and modifications committed to conference:
     Duncan Hunter,
     Curt Weldon,
     From the Committee on Education and the Workforce, for 
     consideration of secs. 11021, 12014, 14033, and 30406 of the 
     House bill and secs. 715, 774, 901, 903, 1505, and 1507 of 
     the Senate amendment, and modifications committed to 
     conference:
     Sam Johnson,
     From the Committee on Financial Services, for consideration 
     of Division G of the House bill and secs. 931-940 and 950 of 
     the Senate amendment and modifications committed to 
     conference:
     Robert W. Ney,
     From the Committee on Government Reform, for consideration of 
     secs. 11002, 11005, 11006, 11010, 11011, 14025, 14033, and 
     22002 of the House bill and secs. 263, 805, 806, 914-916, 
     918, 920, 1406, and 1410 of the Senate amendment, and 
     modifications committed to conference:
     Tom Davis,
     Tim Murphy,
     From the Committee on the Judiciary, for consideration of 
     secs. 12008, 12401, 14014, 14026, 14027, 14028, 14033, 16012, 
     16045, 16084, 30101, 30210, and 30408 of the House bill and 
     secs. 206, 209, 253, 531-532, 708, 767, 783, and 1109 of the 
     Senate amendment, and modifications committed to conference:
     Lamar Smith,
     From the Committee on Resources, for consideration of secs. 
     12005, 12007, 12011, 12101, 13001, 21501, 21521-21530, 
     Division C, and sec. 60009 of the House bill and secs. 201, 
     265, 272, 301, 401-407, 602-606, 609, 612, 705, 707, 712, 
     721, 1234, 1351-1352, 1704, and 1811 of the Senate amendment, 
     and modifications committed to conference:
     Richard Pombo,
     Barbara Cubin,
     Provided that Mr. Kind is appointed in lieu of Mr. Rahall for 
     consideration of Title IV of Division C of the House bill, 
     and modifications committed to conference:
     From the Committee on Science, for consideration of secs. 
     11009, 11025, 12301-12312, 14001-14007, 14009-14015, 14029, 
     15021-15024, 15031-15034, 15041, 15045, Division B, sec. 
     30301, Division E, and Division F of the House bill and secs. 
     501-507, 509, 513-516, 770-772, 807-809, 814-816, 824, 832, 
     1001-1022, Title XI, Title XII, Title XIII, Title XIV, secs. 
     1502, 1504-1505, Title XVI, and secs. 1801-1805 of the Senate 
     amendment, and modifications committed to conference:
     Judy Biggert,
     Ralph M. Hall,
     Provided that Mr. Costello is appointed in lieu of Mr. Hall  
     of Texas for consideration of Division E of the House bill, 
     and modifications committed to conference:
     Jerry Costello,
     Provided that Mr. Lampson is appointed in lieu of Mr. Hall  
     of Texas for consideration of sec. 21708 and Division F of 
     the House bill, and secs. 824 and 1223 of the Senate 
     amendment and modifications committed to conference:
     Nick Lampson,
     From the Committee on Transportation and Infrastructure, for 
     consideration of secs. 11001-11004, 11006, 11009-11011, 
     12001-12012, 12014, 12401, 12403, 13001, 13201, 13202, 15021-
     15024, 15031-15034, 15041, 15043, 15051, 16012, 16021, 16022, 
     16023, 16031, 16081, 16082, 16092, 23001-23004, 30407, 30410, 
     and 30901 of the House bill and secs. 102, 201, 205, 301, 
     701-783, 812, 814, 816, 823, 911-916, 918-920, 949, 1214, 
     1261-1262, and 1351-1352 of the Senate amendment, and 
     modifications committed to conference:
     Don Young,
     Thomas Petri,
     From the Committee on Ways and Means, for consideration of 
     Division D of the House bill and Division H and I of the 
     Senate amendment, and modifications committed to conference:
     William Thomas,
     Jim McCrery,
                                Managers on the Part of the House.
     Pete V. Domenici,
     Don Nickles,
     Larry E. Craig,
     Ben Nighthorse Campbell,
     Craig Thomas,
     Chuck Grassley,
     Trent Lott,

[[Page H11324]]

     Byron L. Dorgan,
                               Managers on the Part of the Senate.

       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

       The managers on the part of the House and the Senate at the 
     conference on the disagreeing votes of the two Houses on the 
     amendment of the Senate to the bill (H.R. 6), to provide for 
     security and diversity in the energy supply for the American 
     people, and for other purposes, submit the following joint 
     statement to the House and the Senate in explanation of the 
     effect of the action agreed upon by the managers and 
     recommended in the accompanying conference report:
       The Senate amendment struck all of the House bill after the 
     enacting clause and inserted a substitute text.
       The House recedes from its disagreement to the amendment of 
     the Senate with an amendment that is a substitute for the 
     House bill and the Senate amendment. The differences between 
     the House bill, the Senate amendment, and the substitute 
     agreed to in conference are noted below, except for clerical 
     corrections, conforming changes made necessary by agreements 
     reached by the conferees, and minor drafting and clarifying 
     changes.

                       TITLE I--ENERGY EFFICIENCY

       Title I of the conference report sets new performance 
     requirements for the operations of Federal agencies and 
     buildings, requires Federal agencies to procure energy 
     efficient products, and mandates metering of energy use in 
     Federal buildings. The title has a permanent authorization 
     for the Energy Savings Performance Contracts (ESPC) program, 
     and establishes a pilot program for ESPC non-building 
     applications. The conference report authorizes funding for 
     new programs to expand State and local energy efficiency 
     programs in low-income communities and in public buildings 
     such as schools, hospitals and government facilities. It 
     provides funding to States and local governments to encourage 
     consumers to replace existing appliances with more energy 
     efficient units. The conference report sets energy efficiency 
     standards for a number of new consumer products, and directs 
     the Department of Energy to initiate rulemakings to set 
     standards for others. It requires the Federal Trade 
     Commission to review and improve energy efficiency labeling 
     programs. The conference report also authorizes funding for 
     the Energy Star program and a consumer education program on 
     HVAC maintenance. Authorization for the Low-Income Home 
     Energy Assistance Program is extended and expanded, and 
     additional funds are provided for state energy and 
     weatherization programs. The report includes a number of 
     changes to public housing law that encourage improved energy 
     efficiency in the construction and maintenance of public 
     housing, improve Federal efficiency standards for public 
     housing facilities, and require public housing agencies to 
     purchase energy efficient products.

                       TITLE II--RENEWABLE ENERGY

       Title II of the conference report provides for an ongoing 
     assessment of renewable energy resources, extends existing 
     authority for incentive programs for production of renewable 
     electricity, requires an update of energy plans for insular 
     areas, and requires the Federal government to purchase a set 
     amount of electric energy from renewable resources. The 
     report authorizes $300 million for solar programs, and sets a 
     goal of installing 20,000 solar roof-top systems in Federal 
     buildings by 2010. The use of biomass from Federal or Indian 
     lands is encouraged by the creation of a grant program to 
     produce electric energy, transportation fuels, or substitutes 
     for petroleum products from biomass. The program encourages 
     removal of hazardous fuels from the highest risk areas on 
     Federal and Indian lands and development of new technologies 
     to use biomass.
       Subtitle B updates the Geothermal Steam Act by amending the 
     leasing provisions to provide for a competitive leasing 
     system. The subtitle also directs other actions that will 
     facilitate new development of geothermal resources. Subtitle 
     C amends the Federal Power Act to streamline the process for 
     issuance of hydroelectric licenses. It also provides 
     production incentives and promotes efficiency improvements at 
     hydroelectric facilities.

                         TITLE III--OIL AND GAS

       Title III of the conference report includes a variety of 
     oil and gas production provisions. It improves the Federal 
     permitting process and expedites the construction of the 
     Alaska Natural Gas Pipeline.
       Subtitle A permanently authorizes the Strategic Petroleum 
     Reserve and extends authorization for the National Oilheat 
     Research Alliance. Subtitle B provides financial incentives 
     to encourage production in deep water and production from 
     deep natural gas wells in the Gulf of Mexico. The subtitle 
     also provides royalty relief to marginal wells located on 
     Federal lands and the Outer Continental Shelf. The Secretary 
     of the Interior is authorized to provide royalty relief to 
     existing, non-producing offshore leases in Alaska. The report 
     addresses natural gas market transparency, and provides 
     additional market reforms.
       Subtitle C authorizes provisions that will improve access 
     to Federal lands and expedite the approval of permits on 
     multiple-use lands. There are also provisions to improve 
     inspection and enforcement of existing permits. The 
     Secretaries of the Interior and Agriculture are instructed to 
     designate energy corridors on western lands that can be used 
     for the deployment of energy transportation and transmission 
     rights-of-way. A regional pilot program is established to 
     develop procedures for the timely processing of applications 
     and permits for Federal lands.
       Subtitle D authorizes expedited certification and 
     permitting of a pipeline to transport natural gas from Alaska 
     to markets in the continental United States to meet the 
     rapidly growing demand for natural gas. The conference report 
     includes loan guarantee authority to support the construction 
     of the pipeline, and establishes an executive-level office to 
     coordinate agency actions related to the pipeline.

                             TITLE IV--COAL

       Title IV of the conference report contains provisions that 
     provide critical research related to the country's most 
     abundant fossil resource: coal: Subtitle A authorizes a Clean 
     Coal Power Initiative, providing $200 million annually for 
     clean coal research in coal-based gasification technologies. 
     The Secretary of Energy is directed to set increasingly 
     restrictive emission targets over the life of the program to 
     develop state-of-the-art technology. Subtitle B provides 
     financial assistance to a variety of clean coal projects 
     around the nation. Subtitle C amends several provisions of 
     the Mineral Leasing Act governing the Federal Coal Leasing 
     Program, including those pertaining to: lease modifications 
     to avoid the bypass of coal; mining requirements for logical 
     mining units; payment of advance royalties; and the deadline 
     for submission of a coal lease operation and reclamation 
     plan.

                         TITLE V--INDIAN ENERGY

       Title V of the conference report, referred to as the Indian 
     Tribal Energy Development and Self-Determination Act of 2003, 
     assists Indian Tribes in the development of Indian energy 
     resources by increasing Tribes' internal capacity to develop 
     their own resources. The title provides grants and technical 
     assistance, and streamlines the approval profess for Tribal 
     leases, agreements, and rights-of-way so that outside parties 
     have more incentive to partner with Tribes in developing 
     energy resources. Included in this title are provisions 
     creating an Office of Indian Energy Policy and Programs 
     within the Department of Energy to support the development of 
     tribal energy resources. Section 5-05 makes Dine Power 
     Authority, a Navajo Nation enterprise, eligible for funding 
     under this title. Section 506 directs the Secretary of 
     Housing and Urban Development to promote energy efficiency 
     for Indian housing.
       The title also provides a complete substitute for title 26 
     of the Energy Policy Act of 1992. Sections 2602 and 2603 
     authorize the Secretary of the Interior to provide grants to 
     tribes to develop and utilize their energy resources and to 
     enhance the legal and administrative ability of tribes to 
     manage their resources. Section 2604 establishes a process by 
     which an Indian tribe, upon demonstrating its technical and 
     financial capacity, could negotiate and execute energy 
     resource development leases, agreements and rights-of-way 
     with third parties without first obtaining the approval of 
     the Secretary of the Interior. Section 2605 authorizes the 
     Secretary of the Interior to review activities authorized 
     under the Indian Mineral Development Act. Section 2606 
     authorizes WAPA to make power allocations to meet the firming 
     and reserve needs of Indian-owned energy projects and acquire 
     power generated by Indian tribes for firming and reserve 
     needs, so long as the rates and terms are competitive. 
     Section 2607 authorizes a study of wind and hydropower 
     potential along the Missouri River.

                       TITLE VI--NUCLEAR MATTERS

       Title VI of the conference report provides for programs to 
     ensure that nuclear energy remains a major component of the 
     Nation's energy supply. Price Anderson liability protection 
     is extended for both NRC licensees and DOE contractors. 
     Coverage is increased and indexed for inflation, and non-
     profit contractors of the Department are made subject to 
     payment of penalties assessed for nuclear safety violations. 
     A research, development, and construction project is 
     authorized for a new test reactor to be constructed at the 
     Idaho National Engineering and Environmental Laboratory. The 
     reactor will serve as a national testbed for advanced reactor 
     technologies that provide improved attributes over existing 
     plants, and for co-generation of hydrogen by nuclear energy. 
     Limits, with several listed exemptions, are imposed on future 
     sales or transfers of government stockpiles of uranium, 
     subject to tests that fair market value is received for 
     sales and that national security is not adversely 
     impacted. Important nuclear security programs are 
     established, along with industry reforms, including 
     whistleblower protection, antitrust review, and legal fee 
     reimbursement.

                     TITLE VII--FUELS AND VEHICLES

       Title VII of the conference report makes a number of 
     changes to the alternative fuel vehicle mandate program 
     applicable to Federal, State, local and fuel provider vehicle 
     fleets pursuant to the Energy Policy Act of 1992. In 
     particular, credits towards compliance with fleet mandates 
     can be accrued for the actual use of alternative fuels, the 
     purchase of neighborhood electric vehicles, investment in 
     alternative fuel infrastructures, or equivalent contributions 
     toward compliance by other fleets with their mandates through 
     the purchase of vehicles or fueling

[[Page H11325]]

     infrastructure. The bill requires a complete review of 
     alternative fuel mandates, and enables States to enact 
     regulations to allow alternative fuel vehicles to use High 
     Occupancy Vehicle lanes regardless of the number of 
     passengers carried. The conference report requires the 
     National Highway Transportation Safety Administration (NHTSA) 
     to additionally consider the effects on passenger safety and 
     employment levels in the U.S. auto industry when setting fuel 
     economy standards, requires an analysis of the fuel economy 
     program, and extends incentives for ``dual-fuel'' vehicles 
     for another four years.

                          TITLE VIII--HYDROGEN

       Title VIII of the conference report provides for basic 
     hydrogen energy research and development programs. The title 
     authorizes new research and development programs for hydrogen 
     vehicle technologies and hydrogen fuel. The title provides 
     authorization for a variety of programs to demonstrate 
     hydrogen and fuel cells for use in light- and heavy-duty 
     vehicle fleets, stationary power applications, and 
     international projects. The title requires Federal agencies 
     to consider methods of incorporating hydrogen and fuel cell 
     technologies into their missions, and establishes an 
     interagency task force to oversee hydrogen initiatives.

                   TITLE IX--RESEARCH AND DEVELOPMENT

       Title IX of the conference report provides the research and 
     development base for the full range of energy-related 
     technologies. Subtitles include those devoted to Energy 
     Efficiency, Distributed Energy and Electric Energy Systems, 
     Renewable Energy, Nuclear Energy, Fossil Energy, Science, 
     Energy and Environment, and Management. Broad goals are 
     established to guide the research and development activities 
     of diversifying energy supplies, increasing energy 
     efficiency, decreasing dependence on foreign energy supplies, 
     improving energy security, and decreasing environmental 
     impact. The Secretary is annually directed to publish 
     specific goals in major program areas consistent with these 
     broad goals.

                TITLE X--DEPARTMENT OF ENERGY MANAGEMENT

       Title X of the conference report creates a new Assistant 
     Secretary position and expresses the sense of the Congress 
     that the position should be used to improve management of 
     Nuclear Energy at the Department of Energy, and grants the 
     Secretary of Energy authority to enter into other 
     transactions as appropriate to further research, development, 
     or demonstration goals of the Department.

                    TITLE XI--PERSONNEL AND TRAINING

       Title XI of the conference report requires establishment of 
     training guidelines for electric energy industry personnel 
     and centers for building technologies and power plant 
     operations training. It also directs increased activity by 
     the Department of Energy to improve recruitment of under-
     represented groups into energy professions. The title directs 
     the Secretary of Energy to support establishment of a 
     National Power Plant Operations Center, and encourages agency 
     coordination for training and outreach efforts for 
     international commercial energy markets in countries with 
     developing and restructuring economies.

                         TITLE XII--ELECTRICITY

       Title XII of the conference report reduces regulatory 
     uncertainty, promotes transmission infrastructure development 
     and security, and increases consumer protections associated 
     with the production and delivery of electricity. Subtitle A 
     requires development of mandatory rules to ensure 
     transmission grid reliability. Subtitle B addresses 
     transmission siting, third-party financing of transmission, 
     and research programs related to transmission upgrades and 
     improvements. Subtitle C protects transmission access for 
     native load customers and authorizes the Federal Energy 
     Regulatory Commission [FERC] to exercise limited jurisdiction 
     over currently unregulated transmitting utilities to ensure 
     open access to the transmission grid. It also remands the 
     proposed rulemaking on Standard Market Design to FERC and 
     prohibits a final rule before December 31, 2006. Subtitle D 
     directs FERC to issue rules on transmission pricing policies 
     and cost allocation for transmission expansion. Subtitle E 
     amends the Public Utility Regulatory Policies Act of 1978 
     (PURPA). It prospectively repeals the requirement for 
     mandatory purchase from qualifying facilities by electric 
     utilities if a competitive market exists and establishes new 
     criteria for qualifying cogeneration facilities. Subtitle F 
     repeals the Public Utility Holding Company Act of 1935 
     (PUHCA). Subtitle G addresses market transparency and 
     manipulation, contract sanctity, and unfair trade practices. 
     It also increases penalties for violations of the Federal 
     Power Act. Subtitle H provides for merger review reform and 
     accountability. Subtitle I defines new terms in the Federal 
     Power Act, and Subtitle J makes technical and conforming 
     amendments.

                        TITLE XIII--ENERGY TAXES

                            I. CONSERVATION

                  A. Residential and Business Property

     1. Residential solar hot water, photovoltaics and other 
         energy efficient property (sec. 41001 of the House bill, 
         sec. 2103 of the Senate amendment, and new sec. 25C of 
         the Code)


                              present law

       A nonrefundable, 10-percent business energy credit is 
     allowed for the cost of new property that is equipment (1) 
     that uses solar energy to generate electricity, to heat or 
     cool a structure, or to provide solar process heat, or (2) 
     used to produce, distribute, or use energy derived from a 
     geothermal deposit, but only, in the case of electricity 
     generated by geothermal power, up to the electric 
     transmission stage.
       The business energy tax credits are components of the 
     general business credit (sec. 38(b)(1)). The business energy 
     tax credits, when combined with all other components of the 
     general business credit, generally may not exceed for any 
     taxable year the excess of the taxpayer's net income tax over 
     the greater of (1) 25 percent of net regular tax liability 
     above $25,000 or (2) the tentative minimum tax. For credits 
     arising in taxable years beginning after December 31, 1997, 
     an unused general business credit generally may be carried 
     back one year and carried forward 20 years (sec. 39).
       A taxpayer may exclude from income the value of any subsidy 
     provided by a public utility for the purchase or installation 
     of an energy conservation measure. An energy conservation 
     measure means any installation or modification primarily 
     designed to reduce consumption of electricity or natural gas 
     or to improve the management of energy demand with respect to 
     a dwelling unit (sec. 136).
       There is no present-law personal tax credit for energy 
     efficient residential property.


                               house bill

       The provision provides a personal tax credit for the 
     purchase of qualified photovoltaic property and qualified 
     solar water heating property that is used exclusively for 
     purposes other than heating swimming pools and hot tubs. The 
     credit is equal to 15 percent of qualified investment up to a 
     maximum credit of $2,000 for solar water heating property and 
     $2,000 for rooftop photovoltaic property. This credit is 
     nonrefundable, and the depreciable basis of the property is 
     reduced by the amount of the credit.
       Qualifying solar water heating property is property that 
     heats water for use in a dwelling unit located in the United 
     States and used as a residence if at least half of the energy 
     used by such property for such purpose is derived from the 
     sun. Qualified photovoltaic property is property that uses 
     solar energy to generate electricity for use in a dwelling 
     unit. Expenditures for labor costs allocable to onsite 
     preparation, assembly, or original installation of property 
     eligible for the credit are eligible expenditures.
       Certain equipment safety requirements need to be met to 
     qualify for the credit. Special proration rules apply in the 
     case of jointly owned property, condominiums, and tenant-
     stockholders in cooperative housing corporations.
       Effective date.--The credit applies to purchases in taxable 
     years ending after December 31, 2003 and before January 1, 
     2007 (January 1, 2009 in the case of qualified photovoltaic 
     property).


                            senate amendment

       The Senate amendment includes the provisions of the House 
     bill. Additionally, the Senate amendment adds a 30-percent 
     credit for qualified wind energy property, up to a maximum 
     credit of $2,000. Qualified wind energy property is property 
     that uses wind energy to generate electricity for use in a 
     dwelling unit.
       The Senate amendment also provides a 100 percent credit, 
     with caps, for the purchase of other qualified energy 
     efficient property, as described below.
       Electric heat pump hot water heaters with an energy factor 
     of at least 1.7. The maximum credit is $75 per unit.
       Electric heat pumps with a heating efficiency of at least 9 
     HSPF (Heating Seasonal Performance Factor) and a cooling 
     efficiency of at least 15 SEER (Seasonal Energy Efficiency 
     Rating) and an energy efficiency ratio (EER) of 12.5 or 
     greater. The maximum credit is $250 per unit.
       Advanced natural gas furnaces that achieve a 95 percent 
     annual fuel utilization efficiency. The maximum credit is 
     $250 per unit.
       Central air conditioners with an efficiency of at least 15 
     SEER and an EER of 12.5 or greater. The maximum credit is 
     $250 per unit.
       Natural gas water heaters with an Energy Factor of at least 
     0.8. The maximum credit is $75 per unit.
       Geothermal heat pumps that have an EER of at least 21. The 
     maximum credit is $250 per unit.
       With the exception of wind energy property, if less than 80 
     percent of the property is used for nonbusiness purposes, 
     only that portion of expenditures that is used for 
     nonbusiness purposes is taken into account.
       Effective date.--The credit applies to purchases after 
     December 31, 2002, and before January 1, 2008.


                          conference agreement

       The conference agreement generally follows the House bill 
     with respect to residential solar and photovoltaic property. 
     With respect to wind energy property, the conference 
     agreement follows the Senate amendment with two 
     modifications. First, the credit rate is reduced to 15 
     percent. Second, with respect to property a portion of which 
     is used in business, the taxpayer may choose either to claim 
     the personal credit, or to claim depreciation for the 
     business use portion of the property, but not both. The 
     conference agreement clarifies that the $2,000 credit cap 
     that applies to solar, photovoltaic, and wind energy property 
     applies

[[Page H11326]]

     across all taxable years. Thus, with respect to a given 
     dwelling, a taxpayer can claim at most $2,000 in credits for 
     solar water heating property, $2,000 for photovoltaic 
     property, and $2,000 for wind energy property. The conference 
     agreement also clarifies that no section 45 credit may be 
     claimed with respect to any electricity produced from 
     property for which a residential energy efficient property 
     credit has been claimed.
       The conference agreement does not follow the Senate 
     amendment with respect to all other energy efficient 
     property.
       It is intended under the conference agreement that 
     availability of the credit for photovoltaic and wind energy 
     property would not be impacted by any net-metering or net-
     billing arrangements under which the taxpayer sells excess 
     electricity back to a utility. It is also intended that 
     expenditures for labor costs properly allocable to the onsite 
     preparation, assembly, or original installation of qualifying 
     property and for piping or wiring to interconnect such 
     property to the dwelling unit can be taken into account for 
     determining the amount of the credit.
       Effective date.--The credit applies to purchases in taxable 
     years ending after December 31, 2003, and before January 1, 
     2007 (January 1, 2009, in the case of qualified photovoltaic 
     property).
     2. Credit for electricity produced from certain sources (sec. 
         41002 of the House bill, secs. 1901, 1902, 1903, 1904, 
         1905, and 1906 of Senate amendment, and sec. 45 of the 
         Code)


                              present law

       An income tax credit is allowed for the production of 
     electricity from either qualified wind energy, qualified 
     ``closed-loop'' biomass, or qualified poultry waste 
     facilities (sec. 45). The amount of the credit is 1.5 cents 
     per kilowatt-hour (indexed for inflation) of electricity 
     produced. The amount of the credit is 1.8 cents per kilowatt-
     hour for 2003. The credit is reduced for grants, tax-exempt 
     bonds, subsidized energy financing, and other credits.
       The credit applies to electricity produced by a wind energy 
     facility placed in service after December 31, 1993, and 
     before January 1, 2004, to electricity produced by a closed-
     loop biomass facility placed in service after December 31, 
     1992, and before January 1, 2004, and to a poultry waste 
     facility placed in service after December 31, 1999, and 
     before January 1, 2004. The credit is allowable for 
     production during the 10-year period after a facility is 
     originally placed in service. In order to claim the credit, a 
     taxpayer must own the facility and sell the electricity 
     produced by the facility to an unrelated party. In the case 
     of a poultry waste facility, the taxpayer may claim the 
     credit as a lessee/operator of a facility owned by a 
     governmental unit.


                               house bill

     Extension of placed in service date for existing facilities
       The House bill extends the placed in service date for wind 
     facilities and closed-loop biomass facilities to facilities 
     placed in service after December 31, 1993 (December 31, 1992, 
     in the case of closed-loop biomass facilities) and before 
     January 1, 2007. The House bill does not extend the placed in 
     service date for poultry waste facilities.
     Additional qualifying facilities
       The House bill also defines three new qualifying 
     facilities: open-loop biomass facilities, landfill gas 
     facilities, and trash combustion facilities. Open-loop 
     biomass is defined as any solid, nonhazardous, cellulosic 
     waste material which is segregated from other waste materials 
     and which is derived from any of forest-related resources, 
     solid wood waste materials, or agricultural sources. Landfill 
     gas is defined as methane gas derived from the biodegradation 
     of municipal solid waste. Trash combustion facilities are 
     facilities that burn municipal solid waste (garbage) to 
     produce steam to drive a turbine for the production of 
     electricity. Qualifying open-loop biomass facilities and 
     qualifying landfill gas facilities include facilities used to 
     produce electricity placed in service before January 1, 2007. 
     Qualifying trash combustion facilities include facilities 
     placed in service after the date of enactment and before 
     January 1, 2007.
       In the case of qualifying open-loop biomass facilities and 
     qualifying landfill gas facilities placed in service on or 
     before the date of enactment, the taxpayer may claim the 
     section 45 production credit for only five years, commencing 
     on the date of enactment. In the case of qualifying open-loop 
     biomass facilities and qualifying landfill gas facilities 
     placed in service on or before the date of enactment, the 
     taxpayer may claim two-thirds of the otherwise allowable 
     credit for electricity produced at the facility.
     Credit claimants and treatment of other subsidies
       In the case of qualifying open-loop biomass facilities 
     originally placed in service on or before the date of 
     enactment, a lessee or operator may claim the credit in lieu 
     of the owner of the qualifying facility. In addition, for 
     such facilities, any reduction in credit by reason of grants, 
     tax-exempt bonds, subsidized energy financing, and other 
     credits cannot exceed 50 percent.
     Alternative minimum tax
       In the case of wind facilities placed in service after the 
     date of enactment, the taxpayer may claim credit for 
     electricity production against both the taxpayer's regular 
     tax and the taxpayer's alternative minimum tax, if any, for 
     electricity produced during the first four years of 
     production measured from the date on which the facility is 
     placed in service.
       No facility that previously claimed or currently claims 
     credit under section 29 of the Code is a qualifying facility 
     for purposes of section 45.
       Effective date.--The provision is effective for electricity 
     sold from qualifying facilities after the date of enactment.


                            senate amendment

     Extension of placed in service date for existing facilities
       The Senate amendment extends the placed in service date for 
     wind facilities, closed-loop biomass facilities, and poultry 
     waste facilities to facilities placed in service after 
     December 31, 1993 (December 31, 1992, in the case of closed-
     loop biomass facilities and December 31, 1999, in the case of 
     poultry waste facilities) and before January 1, 2007.
     Additional qualifying facilities
       The Senate amendment also defines seven new qualifying 
     energy resources: open-loop biomass, swine and bovine waste 
     nutrients, geothermal energy, solar energy, municipal 
     biosolids, recycled sludge, and small irrigation.
       Open-loop biomass is defined as any solid, nonhazardous, 
     cellulosic waste material which is segregated from other 
     waste materials and which is derived from any of forest-
     related resources, solid wood waste materials, or 
     agricultural sources. Eligible forest-related resources are 
     mill residues, precommercial thinnings, slash, and brush, but 
     not including old-growth timber (other than old growth timber 
     that has been permitted or contracted for removal by 
     appropriate Federal authority under the National 
     Environmental Policy Act or appropriate State law authority). 
     Solid wood waste materials include 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. 
     Agricultural sources include orchard tree crops, vineyard, 
     grain, legumes, sugar, and other crop by-products or 
     residues. However, qualifying open-loop biomass does not 
     include municipal solid waste (garbage), gas derived from 
     biodegradation of solid waste, or paper that is commonly 
     recycled.
       Swine and bovine waste nutrients are defined as swine and 
     bovine manure and litter, including bedding material for the 
     disposition of manure.
       Geothermal energy is energy derived from a geothermal 
     deposit which is a geothermal reservoir consisting of natural 
     heat which is stored in rocks or in an aqueous liquid or 
     vapor (whether or not under pressure).
       Municipal biosolids are the residue or solids removed by a 
     municipal wastewater treatment facility.
       Recycled sludge is the recycled residue byproduct created 
     in the treatment of commercial, industrial, municipal, or 
     navigational wastewater, but not including residues from 
     incineration.
       A small irrigation power facility is a facility that 
     generates electric power through an irrigation system canal 
     or ditch without any dam or impoundment of water. The 
     installed capacity of a qualified facility is less than five 
     megawatts.
       Qualifying open-loop biomass facilities are facilities 
     using open-loop biomass to produce electricity that are 
     placed in service prior to January 1, 2005. Qualifying swine 
     and bovine waste nutrient facilities are facilities using 
     swine and bovine waste nutrients to produce electricity that 
     are placed in service after the date of enactment and before 
     January 1, 2007. Qualifying geothermal energy facilities are 
     facilities using geothermal deposits to produce electricity 
     that are placed in service after the date of enactment and 
     before January 1, 2007. Qualifying solar energy facilities 
     are facilities using solar energy to generate electricity 
     that are placed in service after the date of enactment and 
     before January 1, 2007. Qualifying municipal biosolids 
     facilities are facilities using municipal biosolids to 
     generate electricity that are originally placed in service 
     after December 31, 2001, and before January 1, 2007. 
     Qualifying recycled sludge facilities are facilities using 
     recycled sludge to generate electricity that are originally 
     placed in service before January 1, 2007. Qualifying small 
     irrigation power facilities are facilities using small 
     irrigation power systems to generate electricity that are 
     originally placed in service after the date of enactment and 
     before January 1, 2007.
       In the case of qualifying open-loop biomass facilities, 
     taxpayers may claim the otherwise allowable credit for a 
     three-year period. For a facility placed in service after the 
     date of enactment, the three-year period commences when the 
     facility is placed in service. In the case of open-loop 
     biomass facility originally placed in service before the date 
     of enactment, the three-year period commences after December 
     31, 2002, and the otherwise allowable 1.5 cent-per-kilowatt-
     hour credit (adjusted for inflation) is reduced to 1.0 cent-
     per-kilowatt-hour credit (adjusted for inflation). In the 
     case of qualifying geothermal energy and solar energy 
     facilities, taxpayers may claim the otherwise allowable 
     credit for the five-year period commencing when the facility 
     is placed service. In the case of electricity generated from 
     a recycled sludge facility the 10-year credit period shall 
     begin no earlier than the date of enactment.
       In addition, the Senate amendment modifies present law to 
     provide that qualifying

[[Page H11327]]

     closed-loop biomass facilities include any facility 
     originally placed in service before December 31, 1992 and 
     modified to use closed-loop biomass to co-fire with coal 
     before January 1, 2007. The taxpayer may claim credit for all 
     electricity produced at such qualifying facilities with no 
     reduction for the thermal value of the coal.
     Credit claimants and treatment of other subsidies
       In the case of qualifying open-loop biomass facilities and 
     qualifying closed-loop biomass facilities modified to use 
     closed-loop biomass to co-fire with coal, the Senate 
     amendment permits a lessee operator to claim the credit in 
     lieu of the owner of the facilities.
       The Senate amendment provides that certain persons (public 
     utilities, electric cooperatives, rural electric 
     cooperatives, and Indian tribes) may sell, trade, or assign 
     to any taxpayer any credits that would otherwise be allowable 
     to that person, if that person were a taxpayer, for 
     production of electricity from a qualified facility owned by 
     such person. However, any credit sold, traded, or assigned 
     may only be sold, traded, or assigned once. Subsequent trades 
     are not permitted. In addition, any credits that would 
     otherwise be allowable to such person, to the extent provided 
     by the Administrator of the Rural Electrification 
     Administration, may be applied as a prepayment to certain 
     loans or obligations undertaken by such person under the 
     Rural Electrification Act of 1936.
       The Senate amendment repeals the present-law reduction in 
     allowable credit for facilities financed with tax-exempt 
     bonds or with certain loans received under the Rural 
     Electrification Act of 1936.
       Effective date.--The Senate amendment generally is 
     effective for electricity sold from qualifying facilities 
     after the date of enactment. For electricity produced from 
     qualifying open-loop biomass facilities originally placed in 
     service prior to the date of enactment, the provision is 
     effective January 1, 2003.


                          conference agreement

     Extension of placed in service date for existing facilities
       The conference agreement extends the placed in service date 
     for wind facilities and closed-loop biomass facilities to 
     facilities placed in service after December 31, 1993 
     (December 31, 1992, in the case of closed-loop biomass 
     facilities) and before January 1, 2007.
       Under the conference agreement, qualifying closed-loop 
     biomass facilities include any facility originally placed in 
     service before December 31, 1992, and modified to use closed-
     loop biomass to co-fire with coal, to co-fire with other 
     biomass, or to co-fire with coal and other biomass before 
     January 1, 2007. The taxpayer may claim credit for 
     electricity produced at such qualifying facilities with the 
     credit amount equal to the otherwise allowable credit 
     multiplied by the ratio of the thermal content of the closed-
     loop biomass fuel burned in the facility to the thermal 
     content of all fuels burned in the facility.
     Additional qualifying resource and facilities
       The conference agreement also defines five new qualifying 
     resources: open-loop biomass (including agricultural 
     livestock waste nutrients), geothermal energy, solar energy, 
     small irrigation power, and municipal solid waste. Two 
     different qualifying facilities use municipal solid waste as 
     a qualifying resource: landfill gas facilities and trash 
     combustion facilities.
       Qualifying open-loop biomass facilities are facilities 
     using biomass to produce electricity that are placed in 
     service prior to January 1, 2007. Qualifying agricultural 
     livestock waste nutrient facilities are facilities using 
     agricultural livestock waste nutrients to produce electricity 
     that are placed in service after the date of enactment and 
     before January 1, 2007.\1\ The installed capacity of a 
     qualified agricultural livestock waste nutrient facility is 
     not less than 150 kilowatts.
---------------------------------------------------------------------------
     \1\ The provision deletes poultry litter as a separate 
     qualifying facility for facilities placed in service after 
     the effective date. Poultry litter facilities remain 
     qualifying facilities as agricultural waste nutrient 
     facilities. Any poultry litter facility placed in service on 
     or prior to December 31, 2003, is unaffected by the 
     modifications made by this provision. For example, the value 
     of the credit that may be claimed for production from such a 
     facility would not be reduced by one-third as would be the 
     case for other animal waste nutrient facilities.
---------------------------------------------------------------------------
       Qualifying geothermal energy facilities are facilities 
     using geothermal deposits to produce electricity that are 
     placed in service after the date of enactment and before 
     January 1, 2007. Qualifying solar energy facilities are 
     facilities using solar energy to generate electricity that 
     are placed in service after the date of enactment and before 
     January 1, 2007. A qualifying geothermal energy facility or 
     solar energy facility may not have claimed any credit under 
     sec. 48 of the Code.\2\
---------------------------------------------------------------------------
     \2\ If a geothermal facility or solar facility claims credit 
     for any year under section 45 of the Code, the facility is 
     precluded from claiming any investment credit under section 
     48 of the Code in the future.
---------------------------------------------------------------------------
       A qualified small irrigation power facility is a facility 
     originally placed in service after the date of enactment and 
     before January 1, 2007. A small irrigation power facility is 
     a facility that generates electric power through an 
     irrigation system canal or ditch without any dam or 
     impoundment of water. The installed capacity of a qualified 
     facility is not less than 150 kilowatts and less than five 
     megawatts.
       Landfill gas is defined as methane gas derived from the 
     biodegradation of municipal solid waste. Trash combustion 
     facilities are facilities that burn municipal solid waste 
     (garbage) to produce steam to drive a turbine for the 
     production of electricity. Qualifying landfill gas facilities 
     and qualifying trash combustion facilities include facilities 
     used to produce electricity placed in service after the date 
     of enactment and before January 1, 2007.
     Credit period and credit rates
       In general, as under present law, taxpayers may claim the 
     credit at a rate of 1.5 cents per kilowatt-hour (indexed for 
     inflation and currently 1.8 cents per kilowatt-hour) for 10 
     years of production commencing on the date the facility is 
     placed in service. In the case of open-loop biomass 
     facilities (including agricultural livestock waste 
     nutrients), geothermal energy, solar energy, small irrigation 
     power, landfill gas facilities, and trash combustion 
     facilities the 10-year credit period is reduced to five years 
     commencing on the date the facility is placed in service. In 
     general, for facilities placed in service prior to January 1, 
     2004, the credit period commences on January 1, 2004. In the 
     case of closed-loop biomass facilities modified to co-fire 
     with coal, to co-fire with other biomass, or to co-fire with 
     coal and other biomass, the credit period shall begin no 
     earlier than the date of enactment.
       In the case of open-loop biomass facilities (including 
     agricultural livestock waste nutrients), small irrigation 
     power, landfill gas facilities, and trash combustion 
     facilities, the otherwise allowable credit amount is reduced 
     by one-third.
     Credit claimants and treatment of other subsidies
       A lessee or operation may claim the credit in lieu of the 
     owner of the qualifying facility in the case of qualifying 
     open-loop biomass facilities originally placed in service on 
     or before the date of enactment and in the case of closed-
     loop biomass facilities modified to co-fire with coal, to co-
     fire with other biomass, or to co-fire with coal and other 
     biomass.
       In addition, for all qualifying facilities, other than 
     closed-loop biomass facilities modified to co-fire with coal, 
     to co-fire with other biomass, or to co-fire with coal and 
     other biomass, any reduction in credit by reason of grants, 
     tax-exempt bonds, subsidized energy financing, and other 
     credits cannot exceed 50 percent. In the case of closed-loop 
     biomass facilities modified to co-fire with coal, to co-fire 
     with other biomass, or to co-fire with coal and other 
     biomass, there is no reduction in credit by reason of grants, 
     tax-exempt bonds, subsidized energy financing, and other 
     credits.
       No facility that previously claimed or currently claims 
     credit under section 45K of the Code (as amended by the 
     conference agreement) \3\ is a qualifying facility for 
     purposes of section 45.
---------------------------------------------------------------------------
     \3\ The conference agreement modifies present-law section 29 
     as described below and moves present-law section 29 to new 
     Code section 45K.
---------------------------------------------------------------------------
     Alternative minimum tax
       In the case of qualifying facilities placed in service 
     after the date of enactment, the taxpayer may claim credit 
     for electricity production against both the taxpayer's 
     regular tax and the taxpayer's alternative minimum tax, if 
     any, for electricity produced during the first four years of 
     production measured from the date on which the facility is 
     placed in service.
     GAO study
       The conference agreement directs the Comptroller General of 
     the United States to conduct a study of the market viability 
     of producing electricity from resources qualifying for the 
     section 45 production credit (as amended by the conference 
     agreement). The conferees seek a comparison of the cost of 
     producing electricity from the various qualifying resources 
     compared to the cost of producing electricity from fossil 
     fuels (i.e., coal, oil, and natural gas) using the latest 
     generation of production technology currently in service in 
     the United States. The cost of producing electricity should 
     be reported, on a per kilowatt-hour basis, both as the 
     incremental cost of production from a facility and on a 
     fully-amortized cost basis assuming capital costs are 
     amortized over the useful life of the property. In the case 
     of facilities using open-loop biomass and municipal solid 
     waste resources, the measurement of costs should take into 
     account the avoided costs of waste disposal for which 
     taxpayers otherwise would be responsible. The study is to 
     estimate the dollar value of the environmental impact of 
     producing electricity from qualifying resources compared to 
     fossil fuels. The Comptroller General is to report his 
     findings to the Committee on Ways and Means and Committee on 
     Finance not later than June 30, 2006.
       Effective date.--The provision is effective for electricity 
     produced and sold from qualifying facilities after the date 
     of enactment.
     3. Tax incentives for fuel cells (sec. 41003 of the House 
         bill, secs. 2103 and 2104 of the Senate amendment, and 
         sec. 48 and new sec. 25C of the Code)


                              Present Law

       A nonrefundable, 10-percent business energy credit is 
     allowed for the cost of new property that is equipment (1) 
     that uses solar energy to generate electricity, to heat or 
     cool a structure, or to provide solar process heat, or (2) 
     used to produce, distribute, or

[[Page H11328]]

     use energy derived from a geothermal deposit, but only, in 
     the case of electricity generated by geothermal power, up to 
     the electric transmission stage.
       The business energy tax credits are components of the 
     general business credit (sec. 38(b)(1)). The business energy 
     tax credits, when combined with all other components of the 
     general business credit, generally may not exceed for any 
     taxable year the excess of the taxpayer's net income tax over 
     the greater of (1) 25 percent of net regular tax liability 
     above $25,000 or (2) the tentative minimum tax. For credits 
     arising in taxable years beginning after December 31, 1997, 
     an unused general business credit generally may be carried 
     back one year and carried forward 20 years (sec. 39).
       A taxpayer may exclude from income the value of any subsidy 
     provided by a public utility for the purchase or installation 
     of an energy conservation measure. An energy conservation 
     measure means any installation or modification primarily 
     designed to reduce consumption of electricity or natural gas 
     or to improve the management of energy demand with respect to 
     a dwelling unit (sec. 136).
       There is no present-law credit for stationary fuel cell 
     power plant property.


                               House Bill

       The provision provides a 10-percent credit for the purchase 
     of qualified fuel cell power plants for businesses and 
     individuals. A qualified fuel cell power plant is an 
     integrated system comprised of a fuel cell stack assembly and 
     associated balance of plant components that converts a fuel 
     into electricity using electrochemical means, and which has 
     an electricity-only generation efficiency of greater than 30 
     percent. The credit may not exceed $500 for each 0.5 kilowatt 
     of capacity. For individuals, the qualified fuel cell power 
     plant must be installed on or in connection with a dwelling 
     unit located in the United States and used by the taxpayer as 
     a residence. The credit is nonrefundable. The taxpayer's 
     basis in the property is reduced by the amount of the credit 
     claimed.
       Effective date.--The credit for businesses applies to 
     property placed in service after December 31, 2003, and 
     before January 1, 2007, under rules similar to rules of 
     section 48(m) of the Internal Revenue Code of 1986 (as in 
     effect on the day before the date of enactment of the Revenue 
     Reconciliation Act of 1990). The credit for individuals 
     applies to expenditures made after December 31, 2003, and 
     before January 1, 2007.


                            Senate Amendment

       The Senate amendment provides a 30-percent business energy 
     credit for the purchase of qualified fuel cell power plants 
     for businesses. A qualified fuel cell power plant is an 
     integrated system comprised of a fuel cell stack assembly and 
     associated balance of plant components that converts a fuel 
     into electricity using electrochemical means, and which has 
     an electricity-only generation efficiency of greater than 30 
     percent and generates at least 500 watts of electricity. The 
     credit for any fuel cell may not exceed $500 for each 
     kilowatt of capacity. The taxpayer's basis in the property is 
     reduced by the amount of the credit claimed.
       The proposal also provides a 30-percent credit for 
     individuals for the purchase of qualified fuel cell power 
     plants. The credit for any fuel cell may not exceed $1,000 
     for each kilowatt of capacity. The qualified fuel cell power 
     plant must be installed on or in connection with a dwelling 
     unit located in the United States and used by the taxpayer as 
     a principal residence.
       Additionally, the Senate amendment provides a 10-percent 
     credit for the purchase of qualifying stationary microturbine 
     power plants. A qualified stationary microturbine power plant 
     is a system comprising a rotary engine that is actuated by 
     the aerodynamic reaction or impulse or both on radial or 
     axial curved full-circumferential-admission airfoils on a 
     central axial rotating spindle. Such system must have an 
     electricity-only generation efficiency of not less that 26 
     percent at International Standard Organization conditions. 
     The credit is limited to the lesser of 10 percent of the 
     basis of the property or $200 for each kilowatt of capacity.
       Effective date.--The credit for businesses applies to 
     property placed in service after December 31, 2002, and 
     before January 1, 2008 (January 1, 2007, in the case of 
     microturbines), under rules similar to rules of section 48(m) 
     of the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of enactment of the Revenue Reconciliation 
     Act of 1990). The credit for individuals applies to 
     expenditures made after December 31, 2002, and before January 
     1, 2008.


                          Conference Agreement

       The conference agreement follows the House bill with the 
     modification that the credit rate is increased to 20 percent.
       Effective date.--The provision applies to periods after 
     December 31, 2003, under rules similar to rules of section 
     48(m) of the Internal Revenue Code of 1986 (as in effect on 
     the day before the date of enactment of the Revenue 
     Reconciliation Act of 1990), for property placed in service 
     before January 1, 2007. The credit for individuals applies to 
     expenditures made after December 31, 2003, and before January 
     1, 2007.
     4. Energy efficient improvements to existing homes (secs. 
         41004 of the House bill, sec. 2109 of the Senate 
         amendment, and new sec. 25D of the Code)


                              Present Law

       A taxpayer may exclude from income the value of any subsidy 
     provided by a public utility for the purchase or installation 
     of an energy conservation measure. An energy conservation 
     measure means any installation or modification primarily 
     designed to reduce consumption of electricity or natural gas 
     or to improve the management of energy demand with respect to 
     a dwelling unit (sec. 136).
       There is no present law credit for energy efficiency 
     improvements to existing homes.


                               House Bill

       The provision provides a 20-percent nonrefundable credit 
     for the purchase of qualified energy efficiency improvements. 
     The maximum credit for a taxpayer with respect to the same 
     dwelling for all taxable years is $2,000. A qualified energy 
     efficiency improvement is any energy efficiency building 
     envelope component that is certified (in the case of 
     expenditures that exceed $1,000) to meet or exceed the 
     prescriptive criteria for such a component established by the 
     2000 International Energy Conservation Code (or, in the case 
     of metal roofs with appropriate pigmented coatings, meets the 
     Energy Star program requirements), and (1) that is installed 
     in or on a dwelling located in the United States; (2) owned 
     and used by the taxpayer as the taxpayer's principal 
     residence; (3) the original use of which commences with the 
     taxpayer; and (4) such component reasonably can be expected 
     to remain in use for at least five years.
       Building envelope components are: (1) insulation materials 
     or systems which are specifically and primarily designed to 
     reduce the heat loss or gain for a dwelling; (2) exterior 
     windows (including skylights) and doors; and (3) metal roofs 
     with appropriate pigmented coatings which are specifically 
     and primarily designed to reduce the heat loss or gain for a 
     dwelling.
       The taxpayer's basis in the property is reduced by the 
     amount of the credit. Special rules apply in the case of 
     condominiums and tenant-stockholders in cooperative housing 
     corporations.
       Any unused credit may be carried forward to future years.
       Effective date.--The credit is effective for qualified 
     energy efficiency improvements installed after December 31, 
     2003 and before January 1, 2007.


                            Senate Amendment

       The provision provides a 10-percent nonrefundable credit 
     for the purchase of qualified energy efficiency improvements. 
     The maximum credit for a taxpayer with respect to the same 
     dwelling for all taxable years is $300. A qualified energy 
     efficiency improvement is any energy efficiency building 
     envelope component that is certified to meet or exceed the 
     prescriptive criteria for such a component established by the 
     2000 International Energy Conservation Code, or any 
     combination of energy efficiency measures that is certified 
     to achieve at least a 30 percent reduction in heating and 
     cooling energy usage for the dwelling and (1) that is 
     installed in or on a dwelling located in the United 
     States; (2) that is owned and used by the taxpayer as the 
     taxpayer's principal residence; (3) the original use of 
     which commences with the taxpayer; and (4) such component 
     can reasonably be expected to remain in use for at least 
     five years.
       Building envelope components are: (1) insulation materials 
     or systems which are specifically and primarily designed to 
     reduce the heat loss or gain for a dwelling; and (2) exterior 
     windows (including skylights) and doors.
       Homes must be certified according to a component-based 
     method or a performance-based method. The component-based 
     method is based on applicable energy-efficiency ratings, 
     including current product labeling requirements. The 
     performance-based method is based on a comparison of the 
     projected energy consumption of the dwelling in its original 
     condition and after the completion of energy efficiency 
     measures. The performance-based method of certification must 
     be conducted by an individual or organization recognized by 
     the Secretary for such purposes.
       The certification process requires that energy savings to 
     the consumer be measured in terms of energy costs. To ensure 
     consistent and reasonable energy cost analyses, the 
     Department of Energy shall include in its rulemaking related 
     to this bill specific reference data to be used for 
     qualification for the credit.
       The taxpayer's basis in the property is reduced by the 
     amount of the credit. Special rules apply in the case of 
     condominiums and tenant-stockholders in cooperative housing 
     corporations.
       The credit is allowed against the regular and alternative 
     minimum tax.
       Effective date.--The credit is effective for qualified 
     energy efficiency improvements installed on or after the date 
     of enactment and before January 1, 2006.


                          conference agreement

       The conference agreement generally follows the House bill 
     with the modification that the credit may not be carried 
     forward. Additionally, the efficiency is to be measured 
     relative to the 2000 IECC standards as supplemented and as in 
     effect on the date of enactment.
       Effective date.--The credit is effective for qualified 
     energy efficiency improvements installed after December 31, 
     2003, and before January 1, 2007.

[[Page H11329]]

     5. Energy efficient new homes (sec. 41005 of the House bill, 
         sec. 2101 of the Senate amendment, and new sec. 45G of 
         the Code)


                              present law

       A nonrefundable, 10-percent business energy credit is 
     allowed for the cost of new property that is equipment (1) 
     that uses solar energy to generate electricity, to heat or 
     cool a structure, or to provide solar process heat, or (2) 
     used to produce, distribute, or use energy derived from a 
     geothermal deposit, but only, in the case of electricity 
     generated by geothermal power, up to the electric 
     transmission stage.
       The business energy tax credits are components of the 
     general business credit (sec. 38(b)(1)). The business energy 
     tax credits, when combined with all other components of the 
     general business credit, generally may not exceed for any 
     taxable year the excess of the taxpayer's net income tax over 
     the greater of (1) 25 percent of net regular tax liability 
     above $25,000 or (2) the tentative minimum tax. For credits 
     arising in taxable years beginning after December 31, 1997, 
     an unused general business credit generally may be carried 
     back one year and carried forward 20 years (sec. 39).
       A taxpayer may exclude from income the value of any subsidy 
     provided by a public utility for the purchase or installation 
     of an energy conservation measure. An energy conservation 
     measure means any installation or modification primarily 
     designed to reduce consumption of electricity or natural gas 
     or to improve the management of energy demand with respect to 
     a dwelling unit (sec. 136).
       There is no present-law credit for the construction of new 
     energy-efficient homes.


                               house bill

       The provision provides a credit to an eligible contractor 
     (up to $2,000 per dwelling) of an amount equal to the 
     aggregate adjusted bases of all energy-efficient property 
     installed in a qualified new energy-efficient home during 
     construction.
       The eligible contractor is the person who constructs the 
     home, or in the case of a manufactured home, the producer of 
     such home. Energy efficiency property is any energy-efficient 
     building envelope component (insulation materials, exterior 
     windows and doors, metal roofs with appropriate pigmented 
     coatings) and any energy-efficient heating or cooling 
     appliance.
       To qualify as an energy-efficient new home, the home must 
     be: (1) a dwelling located in the United States; (2) the 
     principal residence of the person who acquires the dwelling 
     from the eligible contractor; (3) certified to have a level 
     of annual heating and cooling energy consumption that is at 
     least 30 percent below the annual level of heating and 
     cooling energy consumption of a comparable dwelling 
     constructed in accordance with the standards of the 2000 
     International Energy Conservation Code; and (4) with respect 
     to the building envelope alone, certified to have a level of 
     annual heating and cooling energy consumption that is 10 
     percent below the annual level of heating and cooling energy 
     consumption of a comparable dwelling constructed in 
     accordance with the standards of the 2000 International 
     Energy Conservation Code.
       Effective date.--The credit applies to homes whose 
     construction is substantially completed after December 31, 
     2003, and which are purchased during the period beginning on 
     January 1, 2003, and ending on December 31, 2006.


                            senate amendment

       The proposal provides a credit to an eligible contractor of 
     an amount equal to the aggregate adjusted bases of all 
     energy-efficient property installed in a qualified new 
     energy-efficient home during construction. The credit cannot 
     exceed $1,250 ($2,000) in the case of a new home which has a 
     projected level of annual heating and cooling costs that is 
     30 percent (50 percent) less than a comparable dwelling 
     constructed in accordance with Chapter 4 of the 2000 
     International Energy Conservation Code.
       The eligible contractor is the person who constructed the 
     home, or in the case of a manufactured home, the producer of 
     such home. Energy efficiency property is any energy-efficient 
     building envelope component (insulation materials or system 
     designed to reduce heat loss or gain, and exterior windows, 
     including skylights, and doors) and any energy-efficient 
     heating or cooling appliance that can, individually or in 
     combination with other components, meet the standards for the 
     home.
       To qualify as an energy-efficient new home, the home must 
     be: (1) a dwelling located in the United States; (2) the 
     principal residence of the person who acquires the dwelling 
     from the eligible contractor; and (3) certified to have a 
     projected level of annual heating and cooling energy 
     consumption that is either 30-percent or 50-percent less than 
     a comparable dwelling constructed in accordance with Chapter 
     4 of the 2000 International Energy Conservation Code. The 
     home may be certified according to a component-based method 
     or an energy performance based method. Manufactured homes 
     that meet the standards of the Department of Energy's Energy 
     Star program are deemed to satisfy the 30-percent energy 
     efficiency standard.
       The component-based method of certification will be based 
     on applicable energy-efficiency specifications or ratings, 
     including current product labeling requirements. The 
     Secretary will develop component-based packages that are 
     equivalent in energy performance to properties that qualify 
     for the credit.
       The performance-based method of certification will be based 
     on an evaluation of the home in reference to a home which 
     uses the same energy source and system heating type, and is 
     constructed in accordance with the Chapter 4 of the 2000 
     International Energy Conservation Code. The certification 
     will be provided by an individual recognized by the Secretary 
     for such purposes.
       The certification process requires that energy savings to 
     the consumer be measured in terms of energy costs. To ensure 
     consistent and reasonable energy cost analyses, the 
     Department of Energy will include in its rulemaking related 
     to this bill specific reference data to be used for 
     qualification for the credit.
       The credit will be part of the general business credit. No 
     credits attributable to energy efficient homes may be carried 
     back to any taxable year ending on or before the effective 
     date of the credit.
       Effective date.--The credit applies to homes whose 
     construction is substantially completed after the date of 
     enactment and which are purchased during the period beginning 
     on the date of enactment and ending on December 31, 2007.


                          conference agreement

       The conference agreement generally follows the House bill 
     with modifications. The requirement that the qualified new 
     energy efficient home be used as the principal residence of 
     the person acquiring the home is modified to provide that the 
     contractor reasonably expect such home to be used as a 
     residence of the person who acquires the home from the 
     contractor. The credit amount is limited to $1,000 for new 
     homes that are 30 percent more efficient than the 2000 IECC 
     standards, as supplemented and as in effect on the date of 
     enactment. The credit amount is limited to $2,000 for new 
     homes that are 50 percent more efficient than the 2000 IECC 
     standards, as supplemented and as in effect on the date of 
     enactment. With respect to the building envelope alone, all 
     qualifying new homes must be at least 10 percent more 
     efficient than the 2000 IECC standard as supplemented and as 
     in effect on the date of enactment. Additionally, the 
     conference agreement includes the Senate amendment provision 
     with respect to Energy Star manufactured homes, though the 
     credit is limited to $1,000.
       Certification requirements are to be met in accordance with 
     guidance prescribed by the Secretary of the Treasury. Such 
     guidance shall specify procedures and methods for calculating 
     energy and cost savings. It is expected that such guidance 
     will allow for third-party certification, but will also allow 
     the eligible contractor to meet the certification 
     requirements without necessarily involving a third-party 
     certifier. It is also expected that such guidance will 
     provide sufficient safeguards to ensure that only homes 
     meeting the required standards will obtain certification.
       The certification shall be made in writing in a manner 
     which specifies the energy efficient building envelope 
     components and energy efficient heating or cooling equipment 
     installed and their respective energy efficiency performance. 
     In the case of homes qualifying under the Energy Star 
     program, the certification shall be accompanied by 
     documentation as required by the Administrator of the 
     Environmental Protection Agency under the Energy Star Labeled 
     Homes program.
       The credit is treated as part of the general business 
     credit and, under a special transition rule, may not be 
     carried back to a taxable year ending before or on the 
     effective date of the provision.
       Effective date.--The credit applies to homes whose 
     construction is substantially completed after December 31, 
     2003, and which are purchased during the period beginning on 
     January 1, 2004, and ending on December 31, 2006.
     6. Energy credit for combined heat and power system property 
         (sec. 41006 of the House bill, sec. 2108 of the Senate 
         amendment, and sec. 48 of the Code)


                              present law

       A nonrefundable, 10-percent business energy credit is 
     allowed for the cost of new property that is equipment (1) 
     that uses solar energy to generate electricity, to heat or 
     cool a structure, or to provide solar process heat, or (2) 
     used to produce, distribute, or use energy derived from a 
     geothermal deposit, but only, in the case of electricity 
     generated by geothermal power, up to the electric 
     transmission stage.
       The business energy tax credits are components of the 
     general business credit (sec. 38(b)(1)). The business energy 
     tax credits, when combined with all other components of the 
     general business credit, generally may not exceed for any 
     taxable year the excess of the taxpayer's net income tax over 
     the greater of (1) 25 percent of net regular tax liability 
     above $25,000 or (2) the tentative minimum tax. For credits 
     arising in taxable years beginning after December 31, 1997, 
     an unused general business credit generally may be carried 
     back one year and carried forward 20 years (sec. 39).
       A taxpayer may exclude from income the value of any subsidy 
     provided by a public utility for the purchase or installation 
     of an energy conservation measure. An energy conservation 
     measure means any installation or modification primarily 
     designed to

[[Page H11330]]

     reduce consumption of electricity or natural gas or to 
     improve the management of energy demand with respect to a 
     dwelling unit (sec. 136).
       There is no present-law credit for combined heat and power 
     (``CHP'') property.


                               house bill

       The provision provides a 10-percent credit for the purchase 
     of CHP property.
       CHP property is property: (1) that 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); (2) that 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; (3) that produces at least 
     20 percent of its total useful energy in the form of thermal 
     energy and at least 20 percent in the form of electrical or 
     mechanical power (or a combination thereof); and (4) 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 capacities.)
       CHP property does not include property used to transport 
     the energy source to the generating facility or to distribute 
     energy produced by the facility.
       If a taxpayer is allowed a credit for CHP property, and the 
     property would ordinarily have a depreciation class life of 
     15 years or less, the depreciation period for the property is 
     treated as having a 22-year class life. The present-law carry 
     back rules of the general business credit generally apply 
     except that no credits attributable to combined heat and 
     power property may be carried back before the effective date 
     of this provision.
       Effective date.--The credit applies to property placed in 
     service after December 31, 2003 and before January 1, 2007.


                            senate amendment

       The Senate amendment is similar to the House bill. However, 
     for purposes of determining whether CHP 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 rankine, 
     stirling, or kalina heat engine systems, the energy output 
     requirements related to heat versus power described under 
     (3), above, and the energy efficiency requirements of (4), 
     above, may be disregarded.
       Effective date.--The credit applies to property placed in 
     service after December 31, 2002 and before January 1, 2007.


                          conference agreement

       The conference agreement follows the House bill with 
     modifications. The first modification removes the minimum 
     system size requirement and limits the availability of the 
     credit to systems with capacity less than 15 megawatts or 
     2,000 horsepower. The second modification eliminates the 
     extension of the depreciation period from 15 to 22 years. The 
     third modification is that systems whose fuel source is at 
     least 90 percent bagasse and that would qualify for the 
     credit, but for the failure to meet the efficiency standard, 
     are eligible for a credit that is reduced in proportion to 
     the degree to which the system fails to meet the efficiency 
     standard. For example, a system that would otherwise be 
     required to meet the 60-percent efficiency standard, but 
     which only achieves 30-percent efficiency, would be permitted 
     a credit equal to one-half of the otherwise allowable credit 
     (i.e., a 5-percent credit).
       The credit may not be carried back to a taxable year ending 
     before January 1, 2004.
       Effective date.--The provision applies to periods after 
     December 31, 2003, in taxable years ending after such date, 
     under rules similar to rules of section 48(m) of the Internal 
     Revenue Code of 1986 (as in effect on the day before the date 
     of enactment of the Revenue Reconciliation Act of 1990), for 
     property placed in service before January 1, 2007.
     7. Energy efficient appliances (sec. 2102 of the Senate 
         amendment and new sec. 45H of the Code)


                              present law

       A nonrefundable, 10-percent business energy credit is 
     allowed for the cost of new property that is equipment: (1) 
     that uses solar energy to generate electricity, to heat or 
     cool a structure, or to provide solar process heat; or (2) 
     used to produce, distribute, or use energy derived from a 
     geothermal deposit, but only, in the case of electricity 
     generated by geothermal power, up to the electric 
     transmission stage.
       The business energy tax credits are components of the 
     general business credit (sec. 38(b)(1)). The business energy 
     tax credits, when combined with all other components of the 
     general business credit, generally may not exceed for any 
     taxable year the excess of the taxpayer's net income tax over 
     the greater of: (1) 25 percent of net regular tax liability 
     above $25,000 or (2) the tentative minimum tax. For credits 
     arising in taxable years beginning after December 31, 1997, 
     an unused general business credit generally may be carried 
     back one year and carried forward 20 years (sec. 39).
       A taxpayer may exclude from income the value of any subsidy 
     provided by a public utility for the purchase or installation 
     of an energy conservation measure. An energy conservation 
     measure means any installation or modification primarily 
     designed to reduce consumption of electricity or natural gas 
     or to improve the management of energy demand with respect to 
     a dwelling unit (sec. 136).
       There is no present-law credit for the manufacture of 
     energy-efficient appliances.


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment provides a credit for the production 
     of certain energy-efficient clothes washers and 
     refrigerators. The credit would equal $50 per appliance for 
     energy-efficient clothes washers produced with a modified 
     energy factor (``MEF'') of 1.26 or greater and for 
     refrigerators produced that consume 10 percent less kilowatt-
     hours per year than the energy conservation standards 
     promulgated by the Department of Energy that took effect on 
     July 1, 2001. The credit equals $100 for energy-efficient 
     clothes washers produced with a MEF of 1.42 or greater (1.5 
     or greater for clothes washers produced after 2004) and for 
     refrigerators produced that consume 15 percent less kilowatt-
     hours per year than the energy conservation standards 
     promulgated by the Department of Energy that took effect on 
     July 1, 2001. A refrigerator must be an automatic defrost 
     refrigerator-freezer with an internal volume of at least 16.5 
     cubic feet to qualify for the credit. A clothes washer is any 
     residential clothes washer, including a residential style 
     coin operated washer, that satisfies the relevant efficiency 
     standard.
       For each category of appliances (i.e., clothes washers that 
     meet the lower MEF standard, washers that meet the higher MEF 
     standard, refrigerators that meet the 10 percent standard, 
     refrigerators that meet the 15 percent standard), only 
     production in excess of average production for each such 
     category during calendar years 1999-2001 would be eligible 
     for the credit. The taxpayer may not claim credits in excess 
     of $30 million for all taxable years for appliances that 
     qualify for the $50 credit, and may not claim credits in 
     excess of $30 million for all taxable years for appliances 
     that qualify for the $100 credit. Additionally, the credit 
     allowed for all appliances may not exceed two percent of the 
     average annual gross receipts of the taxpayer for the three 
     taxable years preceding the taxable year in which the credit 
     is determined.
       The credit will be part of the general business credit. No 
     credits attributable to energy-efficient appliances may be 
     carried back to taxable years ending before January 1, 2003.
       Effective date.--The credit applies to appliances produced 
     after December 31, 2002, and prior to (1) January 1, 2005, in 
     the case of refrigerators that only meet the 10 percent 
     credit standard, or (2) January 1, 2007, in the case of all 
     other qualified energy-efficient appliances.


                          Conference Agreement

       The conference agreement generally follows the Senate 
     amendment with modifications. The $50 credit is eliminated 
     for clothes washers and refrigerators. A credit of $100 is 
     allowed for refrigerators that consume 15 percent (20 percent 
     for refrigerators produced after 2006) less kilowatt-hours 
     per year than the energy conservation standards promulgated 
     by the Department of Energy that took effect on July 1, 2001. 
     A credit of $100 is allowed for clothes washers with a MEF of 
     1.5 or greater. A credit of $150 is allowed for refrigerators 
     produced prior to 2007 that consume 20 percent less kilowatt-
     hours per year than the energy conservation standards 
     promulgated by the Department of Energy that took effect on 
     July 1, 2001. The $30 million overall credit limitation for 
     each of two separate categories of appliances is replaced 
     with a cap of $60 million across all appliances combined.
       The three prior years are the base period years for 
     calculation of the credit for any specific year. To qualify 
     for any credit, production must exceed 110 percent of the 
     average annual production in the base period years. 
     Additionally, in order to determine if production has 
     exceeded the baseline, all clothes washers and refrigerators 
     are treated as a single group, rather than separately by 
     their credit-specific efficiency standard. For example, if in 
     the base period a producer produced an average of 1000 
     refrigerators and clothes washers combined that would have 
     met the $100 credit standard, and no refrigerators that would 
     have met the $150 credit standard, such producer would need 
     to produce a combination of at least 1100 (110 percent of 
     base period average) refrigerators or clothes washers that 
     met the efficiency standards in order to receive any tax 
     credit. Thus, even though the base period production of 
     refrigerators meeting the $150 credit standard is zero, a 
     producer would not be eligible to receive a credit for 
     production of such refrigerators unless a combination of at 
     least 1100 refrigerators or clothes washers meeting any of 
     the efficiency standards were produced. The aggregate amount 
     of production eligible for a credit is allocated between the 
     $100 and $150 credit categories in proportion to the total 
     production in each credit category. Only production in the 
     United States is eligible for credit and only U.S. production 
     is considered for the base-period production levels.

[[Page H11331]]

       The credit is treated as part of the general business 
     credit and, under a special transition rule, may not be 
     carried back to a taxable year ending before or on the 
     effective date of the provision.
       Effective date.--The credit applies to appliances produced 
     after December 31, 2003, and before January 1, 2008.
     8. Energy efficient commercial building deduction (sec. 2105 
         of Senate amendment, and new sec. 179B of the Code)


                              Present Law

       No special deduction is currently provided for expenses 
     incurred for energy-efficient commercial building property.


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment provides a deduction equal to energy-
     efficient commercial building property expenditures made by 
     the taxpayer. Energy-efficient commercial building property 
     expenditures are defined as amounts paid or incurred for 
     energy-efficient commercial building property installed in 
     connection with the new construction or reconstruction of 
     property: (1) which is depreciable property, (2) which is 
     located in the United States, and (3) the construction or 
     erection of which is completed by the taxpayer. The deduction 
     is limited to an amount equal to the product of $2.25 and the 
     square footage of the property for which such expenditures 
     were made. The deduction is allowed in the taxable year in 
     which the construction of the building is completed.
       Energy-efficient commercial building property means any 
     property that 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 reference building which meets the 
     requirements of a Standard 90.1-1999 of the American Society 
     of Heating, Refrigerating, and Air Conditioning Engineers and 
     the Illuminating Engineering Society of North America 
     (``ASHRAE/IESNA'').
       Certain certification requirements must be met in order to 
     qualify for the deduction. The Secretary, in consultation 
     with the Secretary of Energy, is directed to promulgate 
     regulations that describe methods of calculating and 
     verifying energy and power costs, taking into consideration 
     the provisions of the 2001 California Nonresidential 
     Alternative Calculation Method Approval Manual. To allow 
     proper calculations of cost, the Secretary shall prescribe 
     the costs per unit of energy and power, such as kilowatt 
     hour, kilowatt, gallon of fuel oil, and cubic foot or Btu of 
     natural gas, which may be dependent on time of usage.
       The Secretary shall promulgate procedures for the 
     inspection and testing for compliance of buildings that are 
     comparable, given the difference between commercial and 
     residential buildings, to the requirements in the Mortgage 
     Industry National Home Energy Rating Standards. Such 
     procedures are to be fuel neutral, such that the same energy 
     efficiency features shall qualify a building for the 
     deduction under this subsection regardless of whether the 
     heating source is a gas or oil furnace or an electric heat 
     pump. Individuals qualified to determine compliance shall 
     only be those recognized by one or more organizations 
     certified by the Secretary for such purposes.
       When final regulations are adopted, such regulations shall, 
     with respect to methods of calculating and verifying energy 
     and power costs, take into consideration appropriate energy 
     savings from design methodologies and technologies not 
     otherwise credited in ASHRAE/IESNA Standard 90.1-1999 or in 
     the 2001 California Nonresidential Alternative Calculation 
     Method Approval Manual.
       For public property, such as schools, the Secretary will 
     issue regulations to allow the deduction to be allocated to 
     the person primarily responsible for designing the property 
     in lieu of the public entity owner.
       The basis of the property is reduced by the amount of the 
     deduction allowed.
       Effective date.--The Senate amendment is effective for 
     taxable years beginning after September 1, 2002, for plans 
     certified prior to December 31, 2007, whose construction is 
     completed on or before December 31, 2009.


                          Conference Agreement

       The conference agreement follows the Senate amendment with 
     modifications. The maximum deduction is limited to $1.50 per 
     square foot, and energy efficiency is to be measured relative 
     to the Standard 90.1-2001 of the American Society of Heating, 
     Refrigerating, and Air Conditioning Engineers and the 
     Illuminating Engineering Society of North America, as in 
     effect on April 2, 2003. Additionally, with respect to public 
     property, no transfer of the deduction to the person 
     primarily responsible for designing the property is allowed.
       In the case of a retrofitted or reconstructed building, but 
     not a new building placed in service after the date of 
     enactment, that does not meet the overall building 
     requirement of a 50-percent energy savings, a partial 
     deduction is allowed with respect to each separate building 
     system that comprises energy efficient property and which is 
     certified by a qualified professional as meeting or exceeding 
     the applicable system-specific savings targets established by 
     the Secretary of the Treasury. The applicable system-specific 
     savings targets to be established by the Secretary are those 
     that would result in a total annual energy savings with 
     respect to the whole building of 50 percent, if each of the 
     separate systems met the system specific target. The separate 
     building systems are (1) the lighting system, (2) the heating 
     cooling and ventilation and hot water systems, and (3) the 
     building envelope. The maximum allowable deduction is $0.50 
     per square foot for each separate system.
       In the case of system-specific partial deductions for 
     retrofitted or reconstructed buildings, in general no 
     deduction is allowed until the Secretary establishes system-
     specific targets. However, in the case of lighting system 
     retrofits, until such time as the Secretary issues final 
     regulations, the system-specific energy savings target for 
     the lighting system is deemed to be met by a reduction in 
     Lighting Power Density of 40 percent (50 percent in the case 
     of a warehouse) of the minimum requirements in Table 9.3.1.1 
     or Table 9.3.1.2 of ASHRAE/IESNA Standard 90.1-2001. Also, in 
     the case of a lighting system that reduces lighting power 
     density by 25 percent, a partial deduction of 25 cents per 
     square foot is allowed. A prorated partial deduction is 
     allowed in the case of a lighting system that reduces 
     lighting power density between 25 percent and 40 percent. 
     Certain lighting level and lighting control requirements must 
     also be met in order to qualify for the partial lighting 
     deductions.
       The conference agreement provides that the Secretary shall 
     establish procedures for certifying eligibility to claim the 
     deduction. The Secretary shall include as part of the 
     certification process procedures for inspection and testing 
     by qualified individuals to ensure compliance of buildings 
     with energy savings plans and targets. Individuals qualified 
     to determine compliance shall only be those individuals who 
     are recognized by an organization certified by the Secretary 
     for such purposes.
       The Secretary, in consultation with the Secretary of 
     Energy, is directed to promulgate regulations that describe 
     methods of calculating and verifying energy and power costs. 
     Additionally, the Secretary is directed to promulgate 
     regulations as necessary to take into account new 
     technologies regarding energy efficiency and renewable 
     energy for purposes of determining energy efficiency and 
     savings. Additionally, the Secretary shall promulgate 
     regulations for recapture of the deduction if the 
     deduction is taken pursuant to a plan to achieve the 
     requisite energy efficiency standard that is subsequently 
     not fully implemented as necessary to achieve such 
     standard.
       Effective date.--The provision is effective for property 
     placed in service after the date of enactment and on or 
     before December 31, 2007.
     9. Three-year applicable recovery period for depreciation of 
         qualified energy management devices and qualified water 
         submetering devices (secs. 2107 and 2111 of the Senate 
         amendment and sec. 168 of the Code)


                              Present Law

       No special recovery period is currently provided for 
     depreciation of energy management devices or water 
     submetering devices.


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment provides a three-year recovery period 
     for qualified new or retrofitted energy management devices 
     placed in service by any taxpayer who is a supplier of 
     electric energy or natural gas or is a provider of electric 
     energy or natural gas services. A qualified energy management 
     device is any tangible property eligible for accelerated 
     depreciation under section 168 and which is acquired and used 
     by the taxpayer to enable consumers or others to manage their 
     purchase, sale, or use of electricity in response to energy 
     price and usage signals and which permits reading of energy 
     price and usage signals on at least a daily basis.
       Additionally, the provision provides a three-year recovery 
     period for qualified new water submetering devices placed in 
     service by any taxpayer who is an eligible resupplier. An 
     eligible resupplier is any taxpayer who purchases and 
     installs qualified water submetering devices in every unit in 
     any multi-unit property. A qualified water submetering device 
     is any tangible property eligible for accelerated 
     depreciation under section 168 that enables consumers to 
     manage their purchase or use of water in response to water 
     price and usage signals and that permits reading of water 
     price and usage signals on at least a daily basis.
       Effective date.--The provision is effective for any 
     qualified energy management device placed in service after 
     the date of enactment of the Act, and for any water 
     submetering device placed in service after the date of 
     enactment of the Act and prior to January 1, 2008.


                          Conference Agreement

       The conference agreement generally follows the Senate 
     amendment with respect to energy management devices, but with 
     modifications. The conference agreement provides a three-year 
     recovery period for qualified new energy management devices 
     placed in service by any taxpayer who is a supplier of 
     electric energy or is a provider of electric energy services. 
     A qualified energy management device is any meter or metering 
     device eligible for accelerated depreciation under section 
     168 and which is used by the taxpayer (1) to measure and 
     record electricity usage data on a time-differentiated basis 
     in at least 4 separate time segments per day, and (2) to 
     provide such data on at least a monthly basis to both 
     consumers and the taxpayer.

[[Page H11332]]

       The conference agreement does not include the Senate 
     amendment provision related to water submetering devices.
       Effective date.--The provision is effective for any 
     qualified energy management device placed in service after 
     the date of enactment and prior to January 1, 2008.
     10. Allowance of deduction for qualified energy management 
         devices and qualified water submetering devices (secs. 
         2106 and 2110 of the Senate amendment)


                              Present Law

       No special deduction is currently provided for expenses 
     incurred for energy management devices or water submetering 
     devices.


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment provides a $30 deduction for each 
     qualified new or retrofitted energy management device placed 
     in service by any taxpayer who is a supplier of electric 
     energy or natural gas or is a provider of electric energy or 
     natural gas services. A qualified energy management device is 
     any tangible property eligible for accelerated depreciation 
     under section 168 and which is acquired and used by the 
     taxpayer to enable consumers or others to manage their 
     purchase, sale, or use of electricity in response to energy 
     price and usage signals and which permits reading of energy 
     price and usage signals on at least a daily basis.
       The deduction is not allowed to property used outside of 
     the United States. The taxpayer would have basis reduction 
     for such property equal to the deduction. Other rules apply.
       In addition, the Senate amendment provides a $30 deduction 
     for qualified water submetering devices. A qualified water 
     submetering device is any tangible property eligible for 
     accelerated depreciation under section 168 that enables 
     consumers to manage their purchase or use of water in 
     response to water price and usage signals and that permits 
     reading of water price and usage signals on at least a daily 
     basis.
       Effective date.--The provision is effective for any 
     qualified energy management device placed in service after 
     the date of enactment of the Act, and for any water 
     submetering device placed in service after the date of 
     enactment of the Act and prior to January 1, 2008.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment.
     11. Credit for electricity produced from advanced nuclear 
         power facilities (new sec. 45L of the Code)


                              Present Law

       An income tax credit is allowed for the production of 
     electricity from either qualified wind energy, qualified 
     ``closed-loop'' biomass, or qualified poultry waste 
     facilities (sec. 45). The amount of the credit is 1.5 cents 
     per kilowatt-hour (indexed for inflation) of electricity 
     produced. The amount of the credit is 1.8 cents per kilowatt-
     hour for 2003. The credit is reduced for grants, tax-exempt 
     bonds, subsidized energy financing, and other credits.


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement that a taxpayer producing 
     electricity at a qualifying advanced nuclear power facility 
     may claim a credit equal to 1.8 cents per kilowatt-hour of 
     electricity produced for the eight year period starting when 
     the facility is placed in service.\4\ The aggregate amount of 
     credit that a taxpayer may claim in any year during the 
     eight-year period is subject to limitation based on allocated 
     capacity and an annual limitation as described below.
---------------------------------------------------------------------------
     \4\ The 1.8-cents credit amount is reduced, but not below 
     zero, if the annual average contract price per kilowatt-hour 
     of electricity generated from advanced nuclear power 
     facilities in the preceding year exceeds eight cents per 
     kilowatt-hour. The eight-cent price comparison level is 
     indexed for inflation after 1992.
---------------------------------------------------------------------------
       A qualifying advanced nuclear facility is an advanced 
     nuclear facility for which the taxpayer has received an 
     allocation of megawatt capacity from the Secretary and is 
     placed in service before January 1, 2021. The taxpayer may 
     only claim credit for production of electricity equal to the 
     ratio of the allocated capacity that the taxpayer receives 
     from the Secretary to the rated nameplate capacity of the 
     taxpayer's facility. For example, if the taxpayer receives an 
     allocation of 750 megawatts of capacity from the Secretary 
     and the taxpayer's facility has a rated nameplate capacity of 
     1,000 megawatts, then the taxpayer may claim three-quarters 
     of the otherwise allowable credit, or 1.35 cents per 
     kilowatt-hour, for each kilowatt-hour of electricity produced 
     at the facility (subject to the annual limitation described 
     below). The Secretary may allocate up to 6,000 megawatts of 
     capacity.
       A taxpayer operating a qualified facility may claim no more 
     than $125 million in tax credits per 1,000 megawatts of 
     allocated capacity in any one year of the eight-year credit 
     period. If the taxpayer operates a 1,350 megawatt rated 
     nameplate capacity system and has received an allocation from 
     the Secretary for 1,350 megawatts of capacity eligible for 
     the credit, the taxpayer's annual limitation on credits that 
     may be claimed is equal to 1.35 time $125 million, or $168.75 
     million. If the taxpayer operates a facility with a nameplate 
     rated capacity of 1,350 megawatts, but has received an 
     allocation from the Secretary for 750 megawatts of credit 
     eligible capacity, then the two limitations apply such that 
     the taxpayer may claim a credit equal to 1.35 cents per 
     kilowatt-hour of electricity produced (as described above) 
     subject to an annual credit limitation of $93.75 million in 
     credits (three-quarters of $125 million).
       An advanced nuclear facility is any nuclear facility for 
     the production of electricity, the reactor design for which 
     is approved after the date of enactment. For this purpose, a 
     qualifying advanced nuclear facility is not any facility for 
     which a substantial similar design for a facility of 
     comparable capacity was approved on or before the date of 
     enactment.
       In addition, the credit allowable to the taxpayer is 
     reduced by reason of grants, tax-exempt bonds, subsidized 
     energy financing, and other credits, but such reduction 
     cannot exceed 50 percent of the otherwise allowable credit. 
     The credit is treated as part of the general business credit 
     and, under a special transition rule may not be carried back 
     to a taxable year ending before or on the effective date of 
     the provision.
       Effective date.--The provision is effective for production 
     in taxable years beginning after December 31, 2003.

                B. Fuels and Alternative Motor Vehicles

     1. Repeal certain excise taxes on rail diesel fuel and inland 
         waterway barge fuels (sec. 41008 of the House bill and 
         secs. 4041, 4042, 6421, and 6427 of the Code)


                              Present Law

       Under present law, diesel fuel used in trains is subject to 
     a 4.4-cents-per gallon excise tax. Revenues from 4.3 cents 
     per gallon of this excise tax are retained in the General 
     Fund of the Treasury. The remaining 0.1 cent per gallon is 
     deposited in the Leaking Underground Storage Tank (``LUST'') 
     Trust Fund.
       Similarly, fuels used in barges operating on the designated 
     inland waterways system are subject to a 4.3-cents-per-gallon 
     General Fund excise tax. This tax is in addition to the 20.1-
     cents-per-gallon tax rates that are imposed on fuels used in 
     these barges to fund the Inland Waterways Trust Fund and the 
     Leaking Underground Storage Tank Trust Fund.
       In both cases, the 4.3-cents-per-gallon excise tax rates 
     are permanent. The LUST tax is scheduled to expire after 
     March 31, 2005.


                               House Bill

       The 4.3-cents-per-gallon General Fund excise tax rate on 
     diesel fuel used in trains and fuels used in barges operating 
     on the designated inland waterways system is repealed. The 
     0.1 cent per gallon for the Leaking Underground Storage Tank 
     (``LUST'') Trust Fund is unchanged by the provision.
       Effective date.--The provision is effective on January 1, 
     2004.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the House bill.
     2. Btu-based rate for diesel/water emulsion fuel (sec. 41009 
         of the House bill and secs. 4081 and 6427 of the Code)


                              Present Law

       A 24.3 cents per gallon excise tax is imposed on diesel 
     fuel to finance the Highway Trust Fund. Gasoline and most 
     special motor fuels are subject to tax at 18.3 cents per 
     gallon for the Trust Fund. The statutory rate for certain 
     special motor fuels is determined on an energy equivalent 
     basis, as follows:

 
 
 
Liquefied petroleum gas (propane).........        13.6 cents per gallon.
Liquefied natural gas.....................        11.9 cents per gallon.
Methanol derived from petroleum or natural        9.15 cents per gallon.
 gas......................................
Compressed natural gas....................          48.54 cents per MCF.
 

       No special tax rate is provided for diesel fuel blended in 
     a water emulsion fuel.


                               House Bill

       A special tax rate of 19.7 cents per gallon is provided for 
     diesel fuel blended with water into a diesel/water emulsion 
     fuel to reflect the reduced Btu content per gallon resulting 
     from the water. Emulsion fuels eligible for the special rate 
     must consist of not more than 86 percent diesel fuel (and 
     other minor chemical additives to enhance combustion) and at 
     least 14 percent water. Anyone who separates the diesel fuel 
     from the diesel-water fuel emulsion on which a reduced rate 
     of tax was imposed is treated as a refiner of the fuel and is 
     liable for the difference between the amount of tax on the 
     latest removal of the separated fuel and the amount of tax 
     that was imposed on any prior removal or entry of such fuel.
       Effective date.--The provision applies to fuels removed 
     after September 30, 2003.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the House bill except as 
     to the effective date.
       Effective date.--The provision is effective January 1, 
     2004.

[[Page H11333]]

     3. Modifications to small producer ethanol credit (sec. 2005 
         of the Senate amendment and sec. 40 of the Code)


                              Present Law

     Small producer credit
       Present law provides several tax benefits for ethanol and 
     methanol produced from renewable sources (e.g., biomass) that 
     are used as a motor fuel or that are blended with other fuels 
     (e.g., gasoline) for such a use. In the case of ethanol, a 
     separate 10-cents-per-gallon credit is provided for small 
     producers, defined generally as persons whose production does 
     not exceed 15 million gallons per year and whose production 
     capacity does not exceed 30 million gallons per year. The 
     small producer credit is part of the alcohol fuels tax credit 
     under section 40 of the Code. The alcohol fuels tax credits 
     are includible in income. This credit, like tax credits 
     generally, may not be used to offset alternative minimum tax 
     liability. The credit is treated as a general business 
     credit, subject to the ordering rules and carryforward/
     carryback rules that apply to business credits generally. 
     The alcohol fuels tax credit is scheduled to expire after 
     December 31, 2007.
     Taxation of cooperatives and their patrons
       Under present law, cooperatives in essence are treated as 
     pass-through entities in that the cooperative is not subject 
     to corporate income tax to the extent the cooperative timely 
     pays patronage dividends. Under present law (sec. 38(d)(4)), 
     the only excess credits that may be passed through to 
     cooperative patrons are the rehabilitation credit (sec. 47), 
     the energy property credit (sec. 48(a)), and the 
     reforestation credit (sec. 48(b)).


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment makes several modifications to the 
     rules governing the small producer ethanol credit. First, the 
     provision liberalizes the definition of an eligible small 
     producer to include persons whose production capacity does 
     not exceed 60 million gallons. Second, the provision allows 
     cooperatives to elect to pass through the small ethanol 
     producer credits to its patrons. The credit is apportioned 
     pro rata among patrons of the cooperative on the basis of the 
     quantity or value of the business done with or for such 
     patrons for the taxable year. An election to pass through the 
     credit is made on a timely filed return for the taxable year 
     and is irrevocable for such taxable year.
       Third, the provision repeals the rule that includes the 
     small producer credit in income of taxpayers claiming it. 
     Fourth, the provision allows the small producer credit to be 
     claimed against the alternative minimum tax. Finally, the 
     provision provides that the small producer ethanol credit is 
     not treated as derived from a passive activity under the Code 
     rules restricting credits and deductions attributable to such 
     activities.
       Effective date.--The provision is effective for taxable 
     years beginning after date of enactment.


                          Conference Agreement

       The conference agreement generally follows the Senate 
     amendment except the small producer credit will continue to 
     be included in the income of taxpayers claiming it and no 
     exemption from the passive activity rules under the Code is 
     provided. With respect to the alternative minimum tax, the 
     conference agreement provides the same treatment given other 
     business related energy credits that are the subject of the 
     agreement as described below (see sec. 1347 of the Act).
       Effective date.--The provision is effective for taxable 
     years beginning after December 31, 2003.
     4. Transfer full amount of excise tax imposed on gasohol to 
         the highway trust fund (sec. 2006 of the Senate 
         amendment)


                              Present Law

       An 18.4 cents-per-gallon excise tax is imposed on gasoline. 
     The tax is imposed when the fuel is removed from a refinery 
     unless the removal is to a bulk transportation facility 
     (e.g., removal by pipeline or barge to a registered 
     terminal). In the case of gasoline removed in bulk by 
     registered parties, tax is imposed when the gasoline is 
     removed from the terminal facility, typically by truck (i.e., 
     ``breaks bulk''). If gasoline is sold to an unregistered 
     party before it is removed from a terminal, tax is imposed on 
     that sale. When the gasoline subsequently breaks bulk, a 
     second tax is imposed. The payor of the second tax may file a 
     refund claim if it can prove payment of the first tax. The 
     party liable for payment of the gasoline excise tax is called 
     a ``position holder,'' defined as the owner of record inside 
     the refinery or terminal facility.
       A 52-cents-per-gallon income tax credit is allowed for 
     ethanol used as a motor fuel (the ``alcohol fuels credit''). 
     The benefit of the alcohol fuels tax credit may be claimed as 
     a reduction in excise tax payments when the ethanol is 
     blended with gasoline (``gasohol''). The reduction is based 
     on the amount of ethanol contained in the gasohol. The excise 
     tax benefits apply to gasohol blends of 90 percent gasoline/
     10 percent ethanol, 92.3 percent gasoline/7.7 percent 
     ethanol, or 94.3 percent gasoline/5.7 percent ethanol. The 
     income tax credit is based on the amount of alcohol contained 
     in the blended fuel.
       In general, 18.3 cents per gallon of the gasoline excise 
     tax is deposited in the Highway Trust Fund and 0.1 cent per 
     gallon is deposited in the Leaking Underground Storage Tank 
     Trust Fund (the ``LUST'' rate). In the case of gasohol with 
     respect to which a reduced excise tax is paid, 2.5 cents per 
     gallon of the reduced tax is retained in the General Fund. 
     The balance of the reduced rate (less the LUST rate) is 
     deposited in the Highway Trust Fund.


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment transfers the 2.5 cents per gallon of 
     excise tax on gasohol that currently is retained in the 
     General Fund to the Highway Trust Fund.
       Effective date.--The Senate amendment would be effective 
     for taxes imposed after September 30, 2003.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment provision.
     5. Incentives for biodiesel (sec. 2008 of the Senate 
         amendment and new sec. 40A of the Code)


                              Present Law

       No income tax credit or excise tax rate reduction is 
     provided for biodiesel fuels under present law.
       However, a 52-cents-per-gallon income tax credit (the 
     ``alcohol fuels credit'') is allowed for ethanol and methanol 
     (derived from renewable sources) when the alcohol is used as 
     a highway motor fuel. The 52-cents-per-gallon rate is 
     scheduled to decline to 51 cents per gallon beginning in 
     calendar year 2005. The benefit of this income tax credit may 
     be claimed through reductions in excise taxes paid on alcohol 
     fuels. In the case of alcohol blended with other fuels (e.g., 
     gasoline), the excise tax rate reductions are allowable only 
     for blends of 90 percent gasoline/10 percent alcohol, 92.3 
     percent gasoline/7.7 percent alcohol, or 94.3 percent 
     gasoline/5.7 percent alcohol. These present-law provisions 
     are scheduled to expire after 2007.


                               House Bill

       No provision.


                            Senate Amendment

       A new income tax credit is provided for biodiesel fuel 
     mixtures (``biodiesel V'' and ``biodiesel NV''). The 
     structure of the new credit is similar to structure of the 
     present-law alcohol fuels credit. Biodiesel V is derived from 
     virgin vegetable oils from corn, soybeans, sunflower seeds, 
     cottonseeds, canola, crambe, rapeseeds, safflowers, 
     flaxseeds, rice bran, or mustard seeds, for use in diesel 
     engines. Biodiesel NV is derived from nonvirgin vegetable 
     oils or animal fats for use in diesel engines. Both biodiesel 
     V and biodiesel NV must meet the requirements of the 
     Environmental Protection Agency under section 211 of the 
     Clean Air Act (42 USC 7545) and the American Society of 
     Testing and Materials D6751.
       The per gallon biodiesel mixture credit rate for biodiesel 
     V equals one cent for each percentage point of biodiesel in 
     the fuels mixture, subject to a maximum credit of 20 cents 
     per blended gallon of fuel. The per gallon biodiesel mixture 
     credit rate for biodiesel NV equals .5 cent for each 
     percentage point of biodiesel in the fuels mixture, subject 
     to a maximum credit of 20 cents per blended gallon of fuel. 
     The amount of the biodiesel fuel mixture credit is includible 
     in income. The credit cannot be carried back to a taxable 
     year beginning before January 1, 2003.
       Mixtures of biodiesel V are subject to a reduced rate of 
     excise tax, which is coordinated with the income tax credit. 
     An excise tax reduction is not available for biodiesel NV.
       The provision further provides for transfers to the Highway 
     Trust Fund from the funds of the Commodity Credit Corporation 
     of amounts equivalent to the reduction in receipts to the 
     Trust Fund resulting from the excise tax rate reduction 
     allowed under the provision.
       Effective date.--The income tax provision is effective for 
     taxable years beginning after December 31, 2002, for fuel 
     sold before January 1, 2006. The excise tax provision is 
     effective for fuel sold after December 31, 2002, and before 
     January 1, 2006.


                          Conference Agreement

       The conference agreement generally follows S. 1548 as 
     ordered reported by the Committee on Finance on September 17, 
     2003, with respect to the income tax credit for biodiesel and 
     biodiesel mixtures. The conference agreement does not provide 
     for any reduced excise tax rate for mixtures of biodiesel, 
     including virgin biodiesel.
       The provision provides a new income tax credit for 
     biodiesel and qualified biodiesel mixtures, the biodiesel 
     fuels credit. The biodiesel fuels credit is the sum of the 
     biodiesel mixture credit plus the biodiesel credit and is 
     treated as a general business credit. The amount of the 
     biodiesel fuels credit is includable in gross income. The 
     biodiesel fuels credit is coordinated to take into account 
     benefits from the excise tax credit for qualified biodiesel 
     mixtures. The credit is treated as part of the general 
     business credit and, under a special transition rule, may not 
     be carried back to a taxable year ending before or on the 
     effective date of the provision. The provision does not apply 
     to fuel used or sold after December 31, 2005.
       Biodiesel may be taken into account for purposes of the 
     credit only if the taxpayer obtains a certification (in such 
     form and manner as prescribed by the Secretary) from the 
     producer of the biodiesel that identifies the product 
     produced and the percentage of biodiesel and agri-biodiesel 
     in the product. Biodiesel is monoalkyl esters of long chain

[[Page H11334]]

     fatty acids derived from plant or animal matter that meet (1) 
     the registration requirements established by the 
     Environmental Protection Agency under section 211 of the 
     Clean Air Act, and (2) the requirements of the American 
     Society of Testing and Materials D6751. Agri-biodiesel is 
     biodiesel derived from virgin oils including esters derived 
     from corn, soybeans, sunflower seeds, cottonseeds, canola, 
     crambe, rapeseeds, safflowers, flaxseeds, rice bran, mustard 
     seeds, or animal fats.
       Biodiesel mixture credit
       The biodiesel mixture credit is 50 cents for each gallon of 
     biodiesel used by the taxpayer in the production of a 
     qualified biodiesel mixture. For agri-biodiesel, the credit 
     is $1.00 per gallon. A qualified biodiesel mixture is a 
     mixture of biodiesel and a taxable fuel that is (1) sold by 
     the taxpayer producing such mixture to any person for use as 
     a fuel, or (2) is used as a fuel by the taxpayer producing 
     such mixture. The sale or use must be in the trade or 
     business of the taxpayer and must be taken into account for 
     the taxable year in which such sale or use occurs. No credit 
     is allowed with respect to any casual off-farm production of 
     a qualified biodiesel mixture.
       Biodiesel credit
       The biodiesel credit is 50 cents for each gallon of 100 
     percent biodiesel that is not in a mixture and which during 
     the taxable year is (1) used by the taxpayer as a fuel in a 
     trade or business or (2) sold by the taxpayer at retail to a 
     person and placed in the fuel tank of such person's vehicle. 
     The first condition is not satisfied by a person who 
     acquires the biodiesel in a sale that satisfies the second 
     condition. For agri-biodiesel, the credit is $1.00 per 
     gallon.
       Later separation or failure to use as fuel
       In a manner similar to the treatment of alcohol fuels, a 
     tax is imposed if a biodiesel fuels credit is claimed with 
     respect to biodiesel that is subsequently used for a purpose 
     for which the credit is not allowed or that is changed into a 
     substance that does not qualify for the credit. The first tax 
     applies if two conditions are satisfied. First, a biodiesel 
     mixture credit must have been allowed with respect to 
     biodiesel used in the production of a qualified mixture. 
     Second, any person either separates the biodiesel from the 
     mixture or, without separation, uses the mixture other than 
     as a fuel. The tax equals the applicable amount ($1.00 in the 
     case of agri-biodiesel or 50 cents in the case of other 
     biodiesel) multiplied by the number of gallons of biodiesel 
     in such mixture. The second tax applies if two conditions are 
     satisfied. First, a biodiesel credit must have been allowed 
     with respect to the retail sale of any biodiesel. Second, any 
     person mixes that biodiesel or uses it other than as a fuel. 
     The tax equals the applicable amount multiplied by the number 
     of gallons of biodiesel.
       Effective date.--The biodiesel fuel income tax credit 
     provision is effective for fuel produced, and sold or used, 
     after December 31, 2003, in taxable years ending after such 
     date.
     6. Alcohol and biodiesel excise tax credit and extension of 
         alcohol fuels income tax credit (secs. 40, 4101, 6427, 
         9503 and new secs. 4104, and 6426 of the Code)


                              Present Law

     Alcohol fuels income tax credit
       The alcohol fuels credit is the sum of three credits: the 
     alcohol mixture credit, the alcohol credit, and the small 
     ethanol producer credit. Generally, the alcohol fuels credit 
     expires after December 31, 2007.\5\
---------------------------------------------------------------------------
     \5\ The alcohol fuels credit is unavailable when, for any 
     period before January 1, 2008, the tax rates for gasoline and 
     diesel fuels drop to 4.3 cents per gallon.
---------------------------------------------------------------------------
       A taxpayer (generally a petroleum refiner, distributor, or 
     marketer) who mixes ethanol with gasoline (or a special fuel) 
     \6\ is an ``ethanol blender.'' Ethanol blenders are eligible 
     for an income tax credit of 52 cents per gallon of ethanol 
     used in the production of a qualified mixture (the ``alcohol 
     mixture credit''). A qualified mixture means a mixture of 
     alcohol and gasoline, (or of alcohol and a special fuel) sold 
     by the blender as fuel, or used as fuel by the blender in 
     producing the mixture. The term alcohol includes methanol and 
     ethanol but does not include (1) alcohol produced from 
     petroleum, natural gas, or coal (including peat), or (2) 
     alcohol with a proof of less than 150. Businesses also may 
     reduce their income taxes by 52 cents for each gallon of 
     ethanol (not mixed with gasoline or other special fuel) that 
     they sell at the retail level as vehicle fuel or use 
     themselves as a fuel in their trade or business (``the 
     alcohol credit''). The 52-cents-per-gallon income tax credit 
     rate is scheduled to decline to 51 cents per gallon during 
     the period 2005 through 2007. For blenders using an alcohol 
     other than ethanol, the rate is 60 cents per gallon.\7\
---------------------------------------------------------------------------
     \6\ A special fuel includes any liquid (other than gasoline) 
     that is suitable for use in an internal combustion engine.
     \7\ In the case of any alcohol (other than ethanol) with a 
     proof that is at least 150 but less than 190, the credit is 
     45 cents per gallon (the ``low-proof blender amount''). For 
     ethanol with a proof that is at least 150 but less than 190, 
     the low-proof blender amount is 38.52 cents for sales or uses 
     during calendar year 2003 and 2004, and 37.78 cents for 
     calendar years 2005, 2006, and 2007.
---------------------------------------------------------------------------
       A separate income tax credit is available for small ethanol 
     producers (the ``small ethanol producer credit''). A small 
     ethanol producer is defined as a person whose ethanol 
     production capacity does not exceed 30 million gallons per 
     year. The small ethanol producer credit is 10 cents per 
     gallon of ethanol produced during the taxable year for up to 
     a maximum of 15 million gallons.
       The credits that comprise the alcohol fuels tax credit are 
     includible in income. The credit may not be used to offset 
     alternative minimum tax liability. The credit is treated as a 
     general business credit, subject to the ordering rules and 
     carryforward/carryback rules that apply to business credits 
     generally.
     Excise tax reductions for alcohol mixture fuels
       Generally, motor fuels tax rates are as follows:\8\
---------------------------------------------------------------------------
     \8\ These rates include an additional 0.1 cent-per-gallon 
     excise tax to fund the Leaking Underground Storage Tank Trust 
     Fund. See secs. 4041(d) and 4081(a)(2)(B). In addition, the 
     basic fuel tax rate will drop to 4.3 cents per gallon 
     beginning on October 1, 2005.

 
 
 
Gasoline..................................        18.4 cents per gallon.
Diesel fuel and kerosene..................        24.4 cents per gallon.
Special motor fuels.......................         18.4 cents per gallon
                                                              generally.
 

       Alcohol-blended fuels are subject to a reduced rate of tax. 
     The benefits provided by the alcohol fuels income tax credit 
     and the excise tax reduction are integrated such that the 
     alcohol fuels credit is reduced to take into account the 
     benefit of any excise tax reduction.
       Gasohol
       Registered ethanol blenders may forgo the full income tax 
     credit and instead pay reduced rates of excise tax on 
     gasoline that they purchase for blending with ethanol. Most 
     of the benefit of the alcohol fuels credit is claimed through 
     the excise tax system.
       The reduced excise tax rates apply to gasohol upon its 
     removal or entry. Gasohol is defined as a gasoline/ethanol 
     blend that contains 5.7 percent ethanol, 7.7 percent ethanol, 
     or 10 percent ethanol. For the calendar year 2003, the 
     following reduced rates apply to gasohol:\9\
---------------------------------------------------------------------------
     \9\ These rates include the additional 0.1 cent-per-gallon 
     excise tax to fund the Leaking Underground Storage Tank Trust 
     Fund. These special rates will terminate after September 30, 
     2007 (sec. 4081(c)(8)).

 
 
 
5.7 percent ethanol.......................      15.436 cents per gallon.
7.7 percent ethanol.......................      14.396 cents per gallon.
10.0 percent ethanol......................      13.200 cents per gallon.
 

       Reduced excise tax rates also apply when gasoline is being 
     purchased for the production of ``gasohol.'' When gasoline is 
     purchased for blending into gasohol, the rates above are 
     multiplied by a fraction (e.g., 10/9 for 10-percent gasohol) 
     so that the increased volume of motor fuel will be subject to 
     tax. The reduced tax rates apply if the person liable for the 
     tax is registered with the IRS and (1) produces gasohol with 
     gasoline within 24 hours of removing or entering the gasoline 
     or (2) gasoline is sold upon its removal or entry and such 
     person has an unexpired certificate from the buyer and has no 
     reason to believe the certificate is false.\10\
---------------------------------------------------------------------------
     \10\ Treas. Reg. sec. 48.4081-6(c). A certificate from the 
     buyer assures that the gasoline will be used to produce 
     gasohol within 24 hours after purchase. A copy of the 
     registrant's letter of registration cannot be used as a 
     gasohol blender's certificate.
---------------------------------------------------------------------------
       Qualified methanol and ethanol fuels
       Qualified methanol or ethanol fuel is any liquid that 
     contains at least 85 percent methanol or ethanol or other 
     alcohol produced from a substance other than petroleum or 
     natural gas. These fuels are taxed at reduced rates.\11\ The 
     rate of tax on qualified methanol is 12.35 cents per gallon. 
     The rate on qualified ethanol in 2003 and 2004 is 13.15 
     cents. From January 1, 2005, through September 30, 2007, the 
     rate of tax on qualified ethanol is 13.25 cents.\12\
---------------------------------------------------------------------------
     \11\ A 0.05-cent-per-gallon Leaking Underground Storage Tank 
     Trust Fund tax is imposed on such fuel. This provision 
     expires on October 1, 2007 (sec. 4041(b)(2)).
     \12\ These reduced rates terminate after September 30, 2007.
---------------------------------------------------------------------------
       Alcohol produced from natural gas
       A mixture of methanol, ethanol, or other alcohol produced 
     from natural gas that consists of at least 85 percent alcohol 
     is also taxed at reduced rates.\13\ For mixtures not 
     containing ethanol, the applicable rate of tax is 9.25 cents 
     per gallon before October 1, 2005. In all other cases, the 
     rate is 11.4 cents per gallon. After September 31, 2005, the 
     rate is reduced to 2.15 cents per gallon when the mixture 
     does not contain ethanol and 4.3 cents per gallon in all 
     other cases.
---------------------------------------------------------------------------
     \13\ These rates include the additional 0.1 cent-per-gallon 
     excise tax to fund the Leaking Underground Storage Tank Trust 
     Fund (sec. 4041(d)(1)).
---------------------------------------------------------------------------
       Blends of alcohol and diesel fuel or special motor fuels
       A reduced rate of tax applies to diesel fuel or kerosene 
     that is combined with alcohol as long as at least 10 percent 
     of the finished mixture is alcohol. If none of the alcohol in 
     the mixture is ethanol, the rate of tax is 18.4 cents per 
     gallon. For alcohol mixtures containing ethanol, the rate of 
     tax in 2003 and 2004 is 19.2 cents per gallon and for 2005 
     through September 30, 2007, the rate for ethanol mixtures is 
     19.3 cents per gallon. Fuel removed or entered for use in 
     producing a 10 percent diesel-alcohol fuel mixture (without 
     ethanol), is subject to a tax of 20.44 cents. The rate of tax 
     for fuel removed or entered to produce a 10 percent diesel-
     ethanol fuel mixture is 21.333 cents per gallon for 2003 and 
     2004 and 21.444 cents per gallon for the period January 1, 
     2005, through September 30, 2007.

[[Page H11335]]

       Special motor fuel (nongasoline) mixtures with alcohol also 
     are taxed at reduced rates.
       Aviation fuel
       Noncommercial aviation fuel is subject to a tax of 21.9 
     cents per gallon.\14\ Fuel mixtures containing at least 10 
     percent alcohol are taxed at lower rates.\15\ In the case of 
     10 percent ethanol mixtures, any sale or use during 2003 and 
     2004, the 21.9 cents is reduced by 13.2 cents (for a tax of 
     8.7 cents per gallon), for 2005, 2006, and 2007 the reduction 
     is 13.1 cents (for a tax of 8.8 cents per gallon) and is 
     reduced by 13.4 cents in the case of any sale during 2008 or 
     thereafter. For mixtures not containing ethanol, the 21.9 
     cents is reduced by 14 cents for a tax of 7.9 cents. These 
     reduced rates expire after September 30, 2007.\16\
---------------------------------------------------------------------------
     \14\ This rate includes the additional 0.1 cent-per-gallon 
     tax for the Leaking Underground Storage Tank Trust fund.
     \15\ Sec. 4041(k)(1) and 4091(c).
     \16\ Sec. 4091(c)(1).
---------------------------------------------------------------------------
       When aviation fuel is purchased for blending with alcohol, 
     the rates above are multiplied by a fraction (10/9) so that 
     the increased volume of aviation fuel will be subject to tax.
     Refunds and payments
       If fully taxed gasoline (or other taxable fuel) is used to 
     produce a qualified alcohol mixture, the Code permits the 
     blender to file a claim for a quick excise tax refund. The 
     refund is equal to the difference between the gasoline (or 
     other taxable fuel) excise tax that was paid and the tax that 
     would have been paid by a registered blender on the alcohol 
     fuel mixture being produced. Generally, the IRS pays these 
     quick refunds within 20 days. Interest accrues if the refund 
     is paid more than 20 days after filing. A claim may be filed 
     by any person with respect to gasoline, diesel fuel, or 
     kerosene used to produce a qualified alcohol fuel mixture 
     for any period for which $200 or more is payable and which 
     is not less than one week.
     Ethyl tertiary butyl ether (ETBE)
       Ethyl tertiary butyl ether (``ETBE'') is an ether that is 
     manufactured using ethanol. Unlike ethanol, ETBE can be 
     blended with gasoline before the gasoline enters a pipeline 
     because ETBE does not result in contamination of fuel with 
     water while in transport. Treasury regulations provide that 
     gasohol blenders may claim the income tax credit and excise 
     tax rate reductions for ethanol used in the production of 
     ETBE. The regulations also provide a special election 
     allowing refiners to claim the benefit of the excise tax rate 
     reduction even though the fuel being removed from terminals 
     does not contain the requisite percentages of ethanol for 
     claiming the excise tax rate reduction.
     Highway Trust Fund
       With certain exceptions, the taxes imposed by section 4041 
     (relating to retail taxes on diesel fuels and special motor 
     fuels) and section 4081 (relating to tax on gasoline, diesel 
     fuel and kerosene) are credited to the Highway Trust Fund. In 
     the case of alcohol fuels, 2.5 cents per gallon of the tax 
     imposed is retained in the General Fund.\17\ In the case of a 
     taxable fuel taxed at a reduced rate upon removal or entry 
     prior to mixing with alcohol, 2.8 cents of the reduced rate 
     is retained in the General Fund.\18\
---------------------------------------------------------------------------
     \17\ Sec. 9503(b)(4)(E).
     \18\ Sec. 9503(b)(4)(F).
---------------------------------------------------------------------------
     Biodiesel
       If biodiesel is used in the production of blended taxable 
     fuel, the Code imposes tax on the removal or sale of the 
     blended taxable fuel.\19\ In addition, the Code imposes tax 
     on any liquid other than gasoline sold for use or used as a 
     fuel in a diesel-powered highway vehicle or diesel-powered 
     train unless tax was previously imposed and not refunded or 
     credited.\20\ If biodiesel that was not previously taxed or 
     exempt is sold for use or used as a fuel in a diesel-powered 
     highway vehicle or a diesel-powered train, tax is 
     imposed.\21\ There are no reduced excise tax rates for 
     biodiesel.
---------------------------------------------------------------------------
     \19\ Sec. 4081(b); Rev. Rul. 2002-76, 2002-46 I.R.B. 841 
     (2002). ``Taxable fuels'' are gasoline, diesel and kerosene 
     (sec. 4083). Biodiesel, although suitable for use as a fuel 
     in a diesel-powered highway vehicle or diesel-powered train, 
     contains less than four percent normal paraffins and, 
     therefore, is not treated as diesel fuel under the applicable 
     Treasury regulations. Treas. Reg. secs. 48.4081-1(c)(2)(i) 
     and (ii), and 48.4081-1(b); Rev. Rul. 2002-76, 2002-46 I.R.B. 
     841 (2002). As a result, biodiesel alone is not a taxable 
     fuel for purposes of section 4081. As noted above, however, 
     tax is imposed upon the removal or entry of blended taxable 
     fuel made with biodiesel.
     \20\ Sec. 4041. The tax imposed under section 4041 also will 
     not apply if an exemption from tax applies.
     \21\ Rev. Rul. 2002-76, 2002-46 I.R.B. 841 (2002).
---------------------------------------------------------------------------


                               House bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement creates two new excise tax 
     credits, the alcohol fuel mixture excise tax credit and the 
     biodiesel fuel mixture excise tax credit. The sum of these 
     credits may be taken against the tax imposed on taxable fuels 
     (by section 4081). The amount of fuel taxes transferred to 
     the Highway Trust Fund is not reduced by any excise tax 
     credits claimed. The conference agreement also extends the 
     alcohol fuels income tax credit (sec. 40) through December 
     31, 2010.\22\
---------------------------------------------------------------------------
     \22\ The conference agreement contains several provisions 
     found in S. 1548 as ordered reported by the Committee on 
     Finance on September 17, 2003. While similar to S. 1548, the 
     conference agreement differs from S. 1548 in several 
     respects. Unlike S. 1548, the conference agreement leaves in 
     place the present-law reduced rate excise tax structure. 
     Also, the conference agreement does not eliminate the 
     requirement that 2.5 and 2.8 cents per gallon of the reduced 
     rate of excise tax be retained in the General Fund. In 
     addition, the conference agreement does not contain any 
     provisions regarding payments with respect to qualified 
     alcohol and biodiesel fuel mixtures nor with respect to 
     alcohol and biodiesel used as a fuel.
---------------------------------------------------------------------------
     Alcohol fuel mixture excise tax credit
       The conference agreement provides for an excise tax credit, 
     the alcohol fuel mixture credit. The alcohol fuel mixture 
     credit is 52 cents for each gallon of alcohol used by a 
     person in producing an alcohol fuel mixture for sale or use 
     in a trade or business of the taxpayer. The credit declines 
     to 51 cents per gallon after calendar year 2004. For mixtures 
     not containing ethanol (renewable source methanol), the 
     credit is 60 cents per gallon.
       For purposes of the alcohol fuel mixture credit, an 
     ``alcohol fuel mixture'' is a mixture of alcohol and a 
     taxable fuel that is (1) sold for use or used as a fuel by 
     the taxpayer producing the mixture or (2) removed from the 
     refinery by a person producing the mixture. Alcohol for this 
     purpose includes methanol, ethanol, and alcohol gallon 
     equivalents of ETBE or other ethers produced from such 
     alcohol. It does not include alcohol produced from petroleum, 
     natural gas, or coal (including peat), or alcohol with a 
     proof of less than 190 (determined without regard to any 
     added denaturants). Taxable fuel is gasoline, diesel, and 
     kerosene.\23\
---------------------------------------------------------------------------
     \23\ Sec. 4083(a)(1). As under present law, dyed fuels are 
     taxable fuels that have been exempted from tax.
---------------------------------------------------------------------------
       The excise tax credit is coordinated with the alcohol fuels 
     income tax credit and is available through December 31, 2010. 
     In addition, any excise tax exemption for alcohol fuels 
     reduces the amount of the alcohol fuel excise tax credit.\24\
---------------------------------------------------------------------------
     \24\ Rules similar to those found in section 40(c) regarding 
     the income tax credit for alcohol fuels apply.
---------------------------------------------------------------------------
     Biodiesel mixture excise tax credit
       The provision provides an excise tax credit for biodiesel 
     mixtures.\25\ The credit is 50 cents for each gallon of 
     biodiesel used by the taxpayer in producing a qualified 
     biodiesel mixture for sale or use in a trade or business of 
     the taxpayer. A qualified biodiesel mixture is a mixture of 
     biodiesel and taxable fuel that is (1) sold for use or used 
     by the taxpayer producing such mixture as a fuel, or (2) 
     removed from the refinery by a person producing the mixture. 
     In the case of agri-biodiesel, the amount of the credit is 
     $1.00 per gallon. The credit applies only if the taxpayer 
     obtains a certification (in such form and manner as 
     prescribed by the Secretary) from the producer of the 
     biodiesel which identifies the product produced and the 
     percentage of biodiesel and agri-biodiesel in the product.
---------------------------------------------------------------------------
     \25\ The excise tax credit uses the same definitions as the 
     biodiesel fuels income tax credit.
---------------------------------------------------------------------------
       The credit is not available for any sale, use or removal 
     for any period after December 31, 2005. This excise tax 
     credit is coordinated with the income tax credit for 
     biodiesel such that the credit for the same biodiesel cannot 
     be claimed for both income and excise tax purposes.
     Later separation or mixture not used as fuel
       Under certain circumstances, a tax is imposed if an alcohol 
     fuel mixture credit or biodiesel fuel mixture credit is 
     claimed with respect to alcohol or biodiesel used in the 
     production of any alcohol or biodiesel mixture, that is 
     subsequently used for a purpose for which the credit is not 
     allowed or changed into a substance that does not qualify for 
     the credit. The tax applies if two conditions are satisfied. 
     First, a credit must have been allowed with respect to 
     alcohol or biodiesel used in the production of a qualified 
     mixture. Second, any person either separates the alcohol or 
     biodiesel from the mixture or, without separation, uses the 
     mixture other than as a fuel. The tax equals the applicable 
     amount multiplied by the number of gallons of such alcohol or 
     biodiesel.
     Registration requirements
       Under the provision, the Secretary shall require 
     registration of every person that produces biodiesel or 
     alcohol.
     Information reporting for persons claiming certain tax 
         benefits
       The Secretary shall require any person claiming tax 
     benefits under certain sections relating to alcohol and 
     biodiesel fuels \26\ to file a quarterly return (in such 
     manner as the Secretary may prescribe) providing such 
     information relating to such benefits and the coordination of 
     such benefits as the Secretary may require to ensure the 
     proper administration and use of such benefits. With respect 
     to persons required to register with the Secretary, failure 
     to comply with these information-reporting requirements could 
     subject such a person to the denial, revocation or suspension 
     of registration.
---------------------------------------------------------------------------
     \26\ These sections are sections 34, 40, 40A, 4041(b)(2), 
     4041(k), 4081(c), 6426, and 6427(f).
---------------------------------------------------------------------------
     Refund claims
       If fully taxed gasoline (or other taxable fuel) is used to 
     produce a qualified alcohol mixture, the Code permits the 
     blender to file a claim for a quick excise tax refund. For 
     claims filed after December 31, 2004, if such claims are not 
     paid within 45 days, the claim is to be paid with interest. 
     In the case of an electronic claim, if such claim is not paid 
     within 20 days, the claim is to be paid with interest. If 
     claims are filed electronically, the claimant may make a 
     claim for less than $200. The Secretary is to prescribe the 
     electronic format for filing claims not later than December 
     31, 2004.

[[Page H11336]]

     Highway Trust Fund
       The provision provides that the amount of fuel taxes to be 
     appropriated to the Highway Trust Fund shall be determined 
     without reduction for amounts equivalent to the excise tax 
     credits allowed for alcohol fuel mixtures and biodiesel 
     mixtures.
       Effective date.--In general, the provisions are effective 
     for fuel sold, used, or removed after December 31, 2003. The 
     provisions relating to refund claims are effective for claims 
     filed after December 31, 2004.
     7. Nonapplication of export exemption to delivery of fuel to 
         motor vehicles removed from United States (sec. 2504 of 
         the Senate amendment and secs. 4221, 4041, and 4081 of 
         the Code)


                              Present Law

       A manufacturer's excise tax is imposed upon
       (1) The removal of any taxable fuel from a refinery or 
     terminal;
       (2) The entry of any taxable fuel into the United States 
     for consumption, use or warehousing; or
       (3) The sale of any taxable fuel to any person who is not 
     registered, unless there was a prior taxable removal or 
     entry.\27\
---------------------------------------------------------------------------
     \27\ Sec. 4081(a)(1).
---------------------------------------------------------------------------
       The term ``taxable fuel'' means gasoline, diesel fuel and 
     kerosene.
       Special provisions under the Code provide for a refund of 
     tax to any person who sells gasoline to another for 
     exportation.\28\ Section 6421(c) provides ``If gasoline is 
     sold to any person for any purpose described in paragraph 
     (2), (3), (4), or (5) of section 4221(a), the Secretary shall 
     pay (without interest) to such person an amount equal to the 
     product of the number of gallons so sold multiplied by the 
     rate at which tax was imposed on such gasoline by section 
     4081.'' Section 4221 provides, in pertinent part, ``Under 
     regulations prescribed by the Secretary, no tax shall be 
     imposed under this chapter * * * on the sale by the 
     manufacturer * * * of an article-- * * * for export, or for 
     resale by the purchaser to a second purchaser for export * * 
     * but only if such exportation or use is to occur before any 
     other use. * * *''
---------------------------------------------------------------------------
     \28\ Secs. 6421(c) and 4221(a)(2).
---------------------------------------------------------------------------
       It is the IRS administrative position that the exemption 
     from manufacturers excise tax by reason of exportation does 
     not apply to the sale of motor fuel pumped into a fuel tank 
     of a vehicle that is to be driven, or shipped, directly out 
     of the United States.\29\
---------------------------------------------------------------------------
     \29\ Rev. Rul. 69-150.
---------------------------------------------------------------------------
       A duty-free sales facility that meets certain conditions 
     may sell and deliver for export from the customs territory of 
     the United States duty-free merchandise. Duty-free 
     merchandise is merchandise sold by a duty-free sales facility 
     on which neither Federal duty nor Federal tax has been 
     assessed pending exportation from the customs territory of 
     the United States. The statutes covering duty-free facilities 
     do not contain any limitation on what goods may qualify for 
     duty-free treatment.
       The United States Court of Federal Claims (``Claims 
     Court'') and a District Court in Michigan have taken 
     different positions on whether fuel sold from a duty-free 
     facility and placed into the tank of an automobile that is 
     then driven out of the country is exported fuel.\30\ Both 
     cases involved the same duty-free facility, which is near the 
     Canadian border and is configured in such a way that anyone 
     leaving the facility must depart the United States and enter 
     into Canada. The District Court agreed with the IRS position 
     that such fuel is not exported, while the Claims Court 
     reached the opposite conclusion. The Claims Court concluded 
     that the act of exportation began with the consumer's 
     purchase and that the fuel necessarily enters into the stream 
     of exportation at the moment it is placed into the fuel 
     supply tank and the customer drives into Canada.
---------------------------------------------------------------------------
     \30\ See, Ammex Inc. v. United States, 52 Fed. Cl. 303 (2002) 
     (on cross-motions for summary judgment, the court found that 
     plaintiff established standing to proceed to trial pursuant 
     to sec. 6421(c) respecting its gasoline purchases only); and 
     Ammex Inc. v. United States, 2002 U.S. Dist. LEXIS 25771 
     (E.D. Mich. July 31, 2002) (granting defendant's motion for 
     summary judgment), reconsideration denied, Ammex, Inc. v. 
     United States, 2002 U.S. Dist. LEXIS 22893 (E.D. Mich. Oct. 
     22, 2002). Although the Claims Court ruled that Ammex had 
     standing to challenge the excise tax on gasoline, it 
     subsequently held that Ammex was not entitled to a payment 
     pursuant to sec. 6421(c) because it failed to prove at trial 
     that it did not pass the tax on to its customers. Ammex Inc. 
     v. United States, 2003 U.S. Claims LEXIS 63 (Fed. Cl. Mar. 
     26, 2003).
---------------------------------------------------------------------------


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment amends section 555(b) of the Tariff 
     Act of 1930 (19 U.S.C. 1555(b)) to provide that gasoline or 
     diesel fuel sold at duty-free facilities are considered to be 
     entered for consumption into the United States and thus 
     ineligible for classification as duty-free merchandise.
       Effective date.--The provision is effective on the date of 
     enactment.


                          Conference Agreement

       The conference agreement reaffirms the long-standing IRS 
     position taken in Rev. Rul. 69-150 and restates present law 
     by amending the Code definition of export to exclude the 
     delivery of a taxable fuel into a fuel tank of a motor 
     vehicle that is shipped or driven out of the United States. 
     It also imposes a tax on the sale of taxable fuel at a duty-
     free sales enterprise unless there was a prior taxable 
     removal, or entry of such fuel.
       Effective date.--The provision applies to sales or 
     deliveries made after the date of enactment.
     8. Modification of credit for electric vehicles (sec. 41010 
         of the House bill, sec. 2002 of Senate amendment, and 
         sec. 30 of the Code)


                              Present Law

       A 10-percent tax credit is provided for the cost of a 
     qualified electric vehicle, up to a maximum credit of $4,000 
     (sec. 30). A qualified electric vehicle is a motor vehicle 
     that is powered primarily by an electric motor drawing 
     current from rechargeable batteries, fuel cells, or other 
     portable sources of electrical current, the original use of 
     which commences with the taxpayer, and that is acquired for 
     the use by the taxpayer and not for resale. The full amount 
     of the credit is available for purchases prior to 2002. The 
     credit phases down in the years 2004 through 2006, and is 
     unavailable for purchases after December 31, 2006. There is 
     no carry forward or carryback of the credit for electric 
     vehicles.


                               House Bill

       The House bill repeals the phased-down reduction in the 
     credit for years 2004, 2005, and 2006. Thus, the House bill 
     provides that a taxpayer may claim the full 10-percent credit 
     (up to a $4,000) maximum for the purchase of qualified 
     electric vehicles before January 1, 2007.
       Effective date.--The House bill provision is effective for 
     property placed in service after the date of enactment.


                            Senate Amendment

       The Senate amendment modifies the present-law credit for 
     electric vehicles to provide that the credit for qualifying 
     vehicles generally ranges between $3,500 and $40,000 
     depending upon the weight of the vehicle and, for certain 
     vehicles, the driving range of the vehicle. In the case of 
     property purchased by tax-exempt persons, the seller may 
     claim the credit. The taxpayer would be ineligible for the 
     deduction allowable under present-law section 179A for a 
     qualified battery electric vehicle on which a credit is 
     allowable. The provision also extends the expiration date of 
     the credit from December 31, 2004, to December 31, 2006, and 
     would repeal the phase-out schedule of present law. The 
     taxpayer would be able to carry forward unused credits for 20 
     years or carry unused credits back for three years (but not 
     carried back to taxable years beginning before October 1, 
     2002).
       Effective date.--The Senate amendment is effective for 
     property placed in service after September 30, 2002.


                          Conference Agreement

       The conference agreement follows the House bill.
     9. Alternative motor vehicle credit (sec. 41011 of the House 
         bill, secs. 2001 and 2010 of Senate amendment, and new 
         sec. 30B of the Code)


                              Present Law

       Certain costs of qualified clean-fuel vehicle may be 
     expensed and deducted when such property is placed in service 
     (sec. 179A). Qualified clean-fuel vehicle property includes 
     motor vehicles that use certain clean-burning fuels (natural 
     gas, liquefied natural gas, liquefied petroleum gas, 
     hydrogen, electricity and any other fuel at least 85 percent 
     of which is methanol, ethanol, any other alcohol or 
     ether).\31\ The maximum amount of the deduction is $50,000 
     for a truck or van with a gross vehicle weight over 26,000 
     pounds or a bus with seating capacities of at least 20 
     adults; $5,000 in the case of a truck or van with a gross 
     vehicle weight between 10,000 and 26,000 pounds; and $2,000 
     in the case of any other motor vehicle. Qualified electric 
     vehicles do not qualify for the clean-fuel vehicle deduction. 
     The deduction phases down in the years 2004 through 2006, and 
     is unavailable for purchases after December 31, 2006.
---------------------------------------------------------------------------
     \31\ A hybrid-electric vehicle may qualify as a clean-fuel 
     vehicle under present law.
---------------------------------------------------------------------------


                               House Bill

     Clean-fuel vehicles
       The House bill repeals the phased-down reduction in the 
     allowable deduction for years 2004, 2005, and 2006. Thus, the 
     provision provides that a taxpayer could claim a full 
     deduction for allowable costs of clean-fuel vehicles 
     purchased before January 1, 2007.
     Fuel cell vehicles
       The House bill provides a credit for the purchase of a new 
     qualified fuel cell motor vehicle. A qualifying fuel cell 
     vehicle is a motor vehicle that is propelled by power derived 
     from one or more cells which convert chemical energy directly 
     into electricity by combining oxygen with hydrogen fuel which 
     is stored on board the vehicle and may or may not require 
     reformation prior to use. In general the House bill provides 
     that the buyer claims the credit, unless the buyer is a tax-
     exempt entity in which case the seller or lessor of the 
     vehicle may claim the credit. The provision permits unused 
     credits to be carried forward for up to 20 years. Qualified 
     fuel cell motor vehicles are vehicles placed in service 
     before 2013.
       The amount of credit for the purchase of a fuel cell 
     vehicle is determined by a base credit amount that depends 
     upon the weight class of the vehicle and, in the case of 
     automobiles or light trucks, an additional credit amount that 
     depends upon the rated fuel

[[Page H11337]]

     economy of the vehicle compared to a base fuel economy. For 
     these purposes the base fuel economy is the 2000 model year 
     city fuel economy rating for vehicles of various weight 
     classes (see below). Table 1, below, shows the base credit 
     amounts.

           TABLE 1.--BASE CREDIT AMOUNT FOR FUEL CELL VEHICLES
------------------------------------------------------------------------
        Vehicle gross weight rating in pounds            Credit amount
------------------------------------------------------------------------
Vehicle = 8,500......................................             $4,000
8,500 < vehicle = 14,000.............................             10,000
14,000 < vehicle = 26,000............................             20,000
26,000 < vehicle.....................................             40,000
------------------------------------------------------------------------

       Table 2, below, shows the additional credits for 
     automobiles or light trucks.

           TABLE 2.--CREDIT FOR QUALIFYING FUEL CELL VEHICLES
                     [Percent of base fuel economy]
------------------------------------------------------------------------
                                                     If fuel economy of
                                                        the fuel cell
                                                         vehicle is:
                      Credit                       ---------------------
                                                                But less
                                                     At least     than
------------------------------------------------------------------------
$1,000............................................        150        175
1,500.............................................        175        200
2,000.............................................        200        225
2,500.............................................        225        250
3,000.............................................        250        275
3,500.............................................        275        300
4,000.............................................           300
------------------------------------------------------------------------

     Advanced lean-burn technology motor vehicle
       The House bill provides a credit for the purchase of a new 
     advanced lean burn technology motor vehicle. A qualifying 
     advanced lean burn technology motor vehicle must meet the 
     Environmental Protection Agency's Tier II bin 8 emissions 
     standards. In general the provision provides that the buyer 
     claims the credit, unless the buyer is a tax-exempt entity in 
     which case the seller or lessor of the vehicle may claim the 
     credit. The House bill permits unused credits to be carried 
     forward for up to 20 years. Qualified advanced lean burn 
     technology motor vehicles are vehicles placed in service 
     before 2007. Table 3, below, shows the credits for the 
     purchase of an advanced lean burn technology motor vehicle.

   TABLE 3.--CREDIT FOR QUALIFYING ADVANCED LEAN BURN TECHNOLOGY MOTOR
                                VEHICLES
                     [Percent of base fuel economy]
------------------------------------------------------------------------
                                                     If fuel economy of
                                                       the vehicle is:
                      Credit                       ---------------------
                                                                But less
                                                     At least     than
------------------------------------------------------------------------
$500..............................................        125        150
1,000.............................................        150        175
1,500.............................................        175        200
2,000.............................................        200        225
2,500.............................................        225        250
3,000.............................................           250
------------------------------------------------------------------------

       In addition to the credit amount shown in Table 3, an 
     advanced lean burn technology automobile or light truck may 
     be eligible for an additional credit of $250 if the vehicle 
     achieves an estimated lifetime fuel savings of at least 1,500 
     gallons of fuel and a further additional credit of $500 if 
     the vehicle achieves an estimated lifetime fuel savings of at 
     least 2,500 gallons compared to a like conventional vehicle 
     (using the 2000 model year city fuel economy rating for the 
     like vehicle and assuming 120,000 miles driven).
     Base fuel economy
       The base fuel economy is the 2000 model year city fuel 
     economy for vehicles by inertia weight class by vehicle type. 
     The ``vehicle inertia weight class'' is that defined in 
     regulations prescribed by the Environmental Protection Agency 
     for purposes of Title II of the Clean Air Act.
       Effective date.--The House bill provision is effective for 
     property placed in service after the date of enactment.


                            Senate Amendment

     Section 179A
       The Senate amendment extends the present-law deduction 
     through December 31, 2011, for hydrogen-related property and 
     through December 31, 2007, for all other vehicles. The Senate 
     amendment provides that the otherwise allowable deduction is 
     reduced by 25 percent in 2004 through 2009 for hydrogen-
     related property and in 2004 and 2005 for all other vehicles. 
     The Senate amendment reduces the otherwise allowable 
     deduction by 50 percent and 75 percent in 2010 and 2011 
     respectively in the case of hydrogen-related property and in 
     2006 and 2007 for all other vehicles.
     Fuel cell motor vehicles
       The Senate amendment provides a credit for the purchase of 
     qualified fuel cell motor vehicles. The base credit for the 
     purchase of new qualified fuel cell motor vehicles ranges 
     between $4,000 and $40,000 depending upon the weight class of 
     the vehicle. For automobiles and light trucks, the otherwise 
     allowable credit amount ($4,000) is increased by an amount 
     from $1,000 to $4,000 if the vehicle meets certain fuel 
     economy increases compared to a stated standard. Credit may 
     not be claimed for qualified fuel cell motor vehicles 
     purchased after December 31, 2011.
     Hybrid motor vehicles
       The Senate amendment provides a credit for the purchase of 
     qualified hybrid motor vehicles. The base credit for the 
     purchase of a new qualified hybrid motor vehicle ranges from 
     $250 to $10,000 depending upon the weight of the vehicle and 
     the maximum power available from the vehicle's rechargeable 
     energy storage system. For automobiles and light trucks, the 
     otherwise allowable credit amount ($250 to $1,000) is 
     increased by an amount from $500 to $3,000 if the vehicle 
     meets certain fuel economy increases. For heavy duty hybrid 
     motor vehicles, the otherwise allowable credit ($1,000 to 
     $10,000) is increased depending upon the vehicle's weight and 
     provided the vehicle meets certain 2007 (and beyond) 
     emissions standards. The amount of credit is increased by 
     between $3,500 and $14,000 for vehicles placed in service in 
     2002; is increased by between $3,000 and $12,000 for vehicles 
     placed in service in 2003, is increased by between $2,500 and 
     $10,000 for vehicles placed in service in 2004, is increased 
     by between $2,000 and $8,000 for vehicles placed in service 
     in 2005, and is increased by between $1,500 and $6,000 for 
     vehicles placed in service in 2006. Credit may not be 
     claimed for qualified hybrid motor vehicles purchased 
     after December 31, 2006.
     Alternative fuel motor vehicles
       The Senate amendment provides a credit for the purchase of 
     qualified alternative fuel motor vehicles. The base credit 
     for the purchase of a new alternative fuel motor vehicle 
     equals 40 percent of the incremental cost of such vehicle. 
     The otherwise allowable credit for 40 percent of the 
     incremental cost is increased by an additional 30 percent of 
     the incremental cost of the vehicle if the vehicle meets 
     certain emissions standards. For computation of the credit, 
     the incremental cost of the vehicle may not exceed between 
     $5,000 and $40,000 (resulting in a maximum total credit of 
     between $3,500 and $28,000) depending upon the weight of the 
     vehicle. For this purpose, incremental cost generally is 
     defined as the amount of the increase of the manufacturer's 
     suggested retail price of such a vehicle compared to the 
     manufacturer's suggested retail price of a comparable 
     gasoline or diesel model. Qualifying alternative fuel motor 
     vehicles are vehicles that operate only on qualifying 
     alternative fuels and are incapable of operating on gasoline 
     or diesel (except in the extent gasoline or diesel fuel is 
     part of a qualified mixed fuel). Qualifying alternative fuels 
     are compressed natural gas, liquefied natural gas, liquefied 
     petroleum gas, hydrogen, and any liquid mixture consisting of 
     at least 85 percent methanol.
       Taxpayers purchasing certain mixed-fuel vehicles also may 
     claim the alternative fuel motor vehicle credit, at a reduced 
     rate. A mixed-fuel vehicle is a vehicle with gross weight of 
     seven tons or more and is certified by the manufacturer as 
     being able to operate on a combination of alternative fuel 
     and a petroleum-based fuel. A qualifying mixed-fuel vehicle 
     must use at least 75 percent alternative fuel (a ``75/25 
     mixed-fuel vehicle'') or 90 percent alternative fuel (a ``90/
     10 mixed-fuel vehicle'') and be incapable of operating on a 
     mixture containing less than 75 percent alternative fuel in 
     the case of a 75/25 vehicle (less than 90 percent alternative 
     fuel in the case of a 90/10 vehicle). A taxpayer purchasing a 
     75/25 mixed-fuel vehicle may claim 70 percent of the 
     otherwise allowable credit. A taxpayer purchasing a 90/10 
     mixed-fuel vehicle may claim 90 percent of the otherwise 
     allowable credit.
       Credit may not be claimed for qualified alternative fuel 
     motor vehicles purchased after December 31, 2006. The 
     taxpayer's basis in the property is reduced by the amount of 
     credit claimed.
     Provisions of general application
       The Senate amendment provides that unused credits may be 
     carried forward for 20 years and three years (but not into 
     taxable years beginning before October 1, 2002).
       If a tax-exempt person purchases or leases a qualifying 
     vehicle, the seller or lessor may claim the credit.
     Effective date
       The Senate amendment is effective for property placed in 
     service after September 30, 2002.


                          conference agreement

     Clean-fuel vehicles (section 179A)
       The conference agreement follows the House bill with 
     respect to modifications to present-law section 179A.
     Fuel cell vehicles
       The conference agreement follows the House bill with 
     respect to providing a credit for the purchase of a new 
     qualified fuel cell motor vehicle, except the base-year for 
     fuel economy comparisons is modified as described below.
     Hybrid motor vehicles
       A qualifying hybrid vehicle is a motor vehicle that draws 
     propulsion energy from on-board sources of stored energy 
     which include both an internal combustion engine or heat 
     engine using combustible fuel and a rechargeable energy 
     storage system (e.g., batteries). A qualifying hybrid motor 
     vehicle must be placed in service before January 1, 2009.
       In the case of an automobile or light truck (vehicles 
     weighing 8,500 pounds or less), the amount of credit for the 
     purchase of a hybrid vehicle is the sum of two components: a 
     fuel economy credit amount that varies with the rated fuel 
     economy of the vehicle compared to a 2002 model year standard 
     and a conservation credit based on the estimated lifetime 
     fuel savings of a qualifying vehicle compared to a comparable 
     2002 model year vehicle. A qualifying hybrid automobile or 
     light truck must have a maximum available power from the 
     rechargeable energy storage system of at least four percent. 
     In addition, the vehicle must meet or exceed certain EPA 
     emissions standards. For a vehicle with a

[[Page H11338]]

     gross vehicle weight rating of 6,000 pounds or less the 
     applicable emissions standards are the Bin 5 Tier II 
     emissions standards. For a vehicle with a gross vehicle 
     weight rating greater than 6,000 pounds and less than or 
     equal to 8,500 pounds, the applicable emissions standards are 
     the Bin 8 Tier II emissions standards.
       Table 4, below, shows the fuel economy credit available to 
     a hybrid passenger automobile or light truck whose fuel 
     economy (on a gasoline gallon equivalent basis) exceeds that 
     of a base fuel economy.

                      TABLE 4.--FUEL ECONOMY CREDIT
                     [Percent of base fuel economy]
------------------------------------------------------------------------
                                                     If fuel economy of
                                                     the hybrid vehicle
                                                             is:
                      Credit                       ---------------------
                                                                But less
                                                     At least     than
------------------------------------------------------------------------
$400..............................................        125        150
800...............................................        150        175
1,200.............................................        175        200
1,600.............................................        200        225
2,000.............................................        225        250
2,400.............................................           250
------------------------------------------------------------------------

       Table 5, below, shows the conservation credit.

                      TABLE 5.--CONSERVATION CREDIT
------------------------------------------------------------------------
                                                          Conservation
           Estimated lifetime fuel savings                   amount
------------------------------------------------------------------------
At least 1,200 but less than 1,800...................               $250
At least 1,800 but less than 2,400...................                500
At least 2,400 but less than 3,000...................                750
At least 3,000.......................................              1,000
------------------------------------------------------------------------

       In the case of a qualifying hybrid motor vehicle weighing 
     more than 8,500 pounds, the amount of credit is determined by 
     the estimated increase in fuel economy and the incremental 
     cost of the hybrid vehicle compared to a comparable vehicle 
     powered solely by a gasoline or diesel internal combustion 
     engine and that is comparable in weight, size, and use of the 
     vehicle. For a vehicle that achieves a fuel economy increase 
     of at least 30 percent but less than 40 percent, the credit 
     is equal to 20 percent of the incremental cost of the hybrid 
     vehicle. For a vehicle that achieves a fuel economy increase 
     of at least 40 percent but less than 50 percent, the credit 
     is equal to 30 percent of the incremental cost of the hybrid 
     vehicle. For a vehicle that achieves a fuel economy increase 
     of 50 percent or more, the credit is equal to 40 percent of 
     the incremental cost of the hybrid vehicle.
       The credit is subject to certain maximum applicable 
     incremental cost amounts. For a qualifying hybrid motor 
     vehicle weighing more than 8,500 pounds but not more than 
     14,000 pounds, the maximum allowable incremental cost amount 
     is $7,500. For a qualifying hybrid motor vehicle weighing 
     more than 14,000 pounds but not more than 26,000 pounds, the 
     maximum allowable incremental cost amount is $15,000. For a 
     qualifying hybrid motor vehicle weighing more than 26,000 
     pounds, the maximum allowable incremental cost amount is 
     $30,000.
       A qualifying hybrid motor vehicle weighing more than 8,500 
     pounds but not more than 14,000 pounds must have a maximum 
     available power from the rechargeable energy storage system 
     of at least 10 percent. A qualifying hybrid vehicle weighing 
     more than 14,000 pounds must have a maximum available power 
     from the rechargeable energy storage system of at least 15 
     percent.
       The conferees recognize that these heavier hybrid vehicles 
     generally are trucks and vans. The fuel economy performance 
     of trucks and vans varies by the use of such equipment. For 
     example, used by a plumbing company generally carry more 
     weight than an otherwise identical van used by a florist. 
     Hence, the fuel economy performance of the plumbing vans 
     should be worse than that of the floral vans. In basing 
     the credit for these heavier hybrid vehicles on fuel 
     economy, the conferees do not intend that any fuel economy 
     standards for such heavier vehicles be promogulated. 
     Rather, the conferees intend that the Secretary provide 
     guidance so that fuel economy increases may be assessed on 
     a case-by-case basis accounting for the intended use of 
     the vehicles.
     Advanced lean-burn technology motor vehicles
       The conference agreement a credit for the purchase of a new 
     advanced lean burn technology motor vehicle. The amount of 
     credit for the purchase of an advanced lean burn technology 
     motor vehicle is the sum of two components: a fuel economy 
     credit amount that varies with the rated fuel economy of the 
     vehicle compared to a 2002 model year standard as described 
     in Table 4, above and a conservation credit based on the 
     estimated lifetime fuel savings of a qualifying vehicle 
     compared to a comparable 2002 model year vehicle as described 
     in Table 5 above.
       A qualifying advanced lean burn technology motor vehicle 
     that incorporates direct injection, achieves at least 125 
     percent of the 2002 model year city fuel economy, and 2004 
     and later model vehicles meets or exceeds certain 
     Environmental Protection Agency emissions standards. For a 
     vehicle with a gross vehicle weight rating of 6,000 pounds or 
     less the applicable emissions standards are the Bin 5 Tier II 
     emissions standards. For a vehicle with a gross vehicle 
     weight rating greater than 6,000 pounds and less than or 
     equal to 8,500 pounds, the applicable emissions standards are 
     the Bin 8 Tier II emissions standards. A qualifying advanced 
     lean burn technology motor vehicle must be placed in service 
     before January 1, 2009.
     Limitation on number of qualified hybrid and advanced lean-
         burn technology motor vehicles eligible for the credit
       The conference agreement imposes a limitation on the number 
     of qualified hybrid motor vehicles and advanced lean-burn 
     technology motor vehicles sold by each manufacturer of such 
     vehicles that are eligible for the credit. Taxpayers may 
     claim the full amount of the allowable credit up to the end 
     of the first calendar quarter in which the manufacturer 
     records its sale of the 80,000th hybrid and advanced lean-
     burn technology motor vehicle. Taxpayers may claim one half 
     of the otherwise allowable credit during the two calendar 
     quarters subsequent to the quarter after the manufacturer has 
     recorded its 80,000th such sale. In the third and fourth 
     calendar quarters subsequent to the quarter after the 
     manufacturer has recorded its 80,000th such sale, the 
     taxpayer may claim one quarter of the otherwise allowable 
     credit.
       Thus, summing the sales of qualifying hybrid motor vehicles 
     of all weight classes and all sales of qualifying advanced 
     lean-burn technology motor vehicles, if a manufacturer 
     records the sale of its 80,000th in February of 2006, 
     taxpayers purchasing such vehicles from the manufacturer may 
     claim the full amount of the credit on their purchases of 
     qualifying vehicles through June 20, 2006. For the period 
     July 1, 2006, through December 31, 2006, taxpayers may claim 
     one half of the otherwise allowable credit on purchases of 
     qualifying vehicles of the manufacturer. For the period 
     January 1, 2007, through June 30, 2007, taxpayers may claim 
     one quarter of the otherwise allowable credit on the 
     purchases of qualifying vehicles of the manufacturer. After 
     June 30, 2007, no credit may be claimed for purchases of 
     hybrid motor vehicles or advanced lean-burn technology 
     motor vehicles sold by the manufacturer.
     Alternative fuel motor vehicles
       The credit for the purchase of a new alternative fuel 
     vehicle is 40 percent of the incremental cost of such 
     vehicle, plus an additional 30 percent if the vehicle meets 
     certain emissions standards, but not more than between $5,000 
     and $40,000 depending upon the weight of the vehicle. Table 
     6, below, shows the maximum permitted incremental cost for 
     the purpose of calculating the credit for alternative fuel 
     vehicles by vehicle weight class.

     TABLE 6.--MAXIMUM ALLOWABLE INCREMENTAL COST FOR CALCULATION OF
                     ALTERNATIVE FUEL VEHICLE CREDIT
------------------------------------------------------------------------
                                                       Maximum allowable
        Vehicle gross weight rating in pounds           incremental cost
------------------------------------------------------------------------
Vehicle = 8,500......................................             $5,000
8,500 < vehicle = 14,000.............................             10,000
14,000 < vehicle = 26,000............................             25,000
26,000 < vehicle.....................................             40,000
------------------------------------------------------------------------

       Alternative fuels comprise compressed natural gas, 
     liquefied natural gas, liquefied petroleum gas, hydrogen, and 
     any liquid fuel that is at least 85 percent methanol. 
     Qualifying alternative fuel motor vehicles are vehicles that 
     operate only on qualifying alternative fuels and are 
     incapable of operating on gasoline or diesel (except in the 
     extent gasoline or diesel fuel is part of a qualified mixed 
     fuel, described below).
       Certain mixed fuel vehicles, that is vehicles that use a 
     combination of an alternative fuel and a petroleum-based 
     fuel, are eligible for a reduced credit. If the vehicle 
     operates on a mixed fuel that is at least 75 percent 
     alternative fuel, the vehicle is eligible for 70 percent of 
     the otherwise allowable alternative fuel vehicle credit. If 
     the vehicle operates on a mixed fuel that is at least 90 
     percent alternative fuel, the vehicle is eligible for 90 
     percent of the otherwise allowable alternative fuel vehicle 
     credit.
       A qualifying alternative fuel vehicle (or mixed fuel 
     vehicle) must be placed in service before January 1, 2007.
     Base fuel economy
       The base fuel economy is the 2002 model year city fuel 
     economy for vehicles by inertia weight class by vehicle type. 
     The ``vehicle inertia weight class'' is that defined in 
     regulations prescribed by the Environmental Protection Agency 
     for purposes of Title II of the Clean Air Act.
     Alternative minimum tax and credit carry forward or carry 
         back
       Taxpayers may claim credits with respect to purchases of 
     qualified vehicles against both their regular and alternative 
     minimum tax liabilities.
       The conference agreement provides that credits allowable, 
     but unused in the current year, from the purchase of a 
     qualifying vehicle for business use may be carried back one 
     year and forward 20 years.\32\ Credit allowable with respect 
     to a vehicle purchased for personal use may only be claimed 
     in the year of purchase. The Secretary shall issue 
     regulations under which qualified vehicle sold at retail is 
     display a notice stating that the vehicle is a qualified 
     vehicle and that the buyer may not benefit from the credit 
     allowed if the buyer has insufficient tax liability to be 
     offset by the allowable credit.
---------------------------------------------------------------------------
     \32\ The credit, however, is not made part of the general 
     business credit.
---------------------------------------------------------------------------
       Effective date.--The provision is effective for property 
     placed in service after the date of enactment.

[[Page H11339]]

     10. Modifications of deduction for refueling property (secs. 
         2003 and 2010 of Senate amendment and sec. 179A of the 
         Code)


                              Present Law

       Certain costs of qualified clean-fuel vehicle refueling 
     property may be expensed and deducted when such property is 
     placed in service (sec. 179A). Up to $100,000 of such 
     property at each location owned by the taxpayer may be 
     expensed with respect to that location. Natural gas, 
     liquefied natural gas, liquefied petroleum gas, hydrogen, 
     electricity and any other fuel at least 85 percent of which 
     is methanol, ethanol, or any other alcohol or ether comprise 
     clean-burning fuels.
       The deduction is unavailable for property placed in service 
     after December 31, 2006.


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment extends the present-law deduction to 
     property placed in service before January 1, 2008, and to 
     property placed in service before January 1, 2012, in the 
     case of hydrogen refueling property.
       In addition, the Senate amendment provision permits 
     taxpayers to claim a 50-percent credit for the cost of 
     installing clean-fuel vehicle refueling property to be used 
     in a trade or business of the taxpayer or installed at the 
     principal residence of the taxpayer. In the case of retail 
     clean-fuel vehicle refueling property the allowable credit 
     may not exceed $30,000. In the case of residential clean-fuel 
     vehicle refueling property the allowable credit may not 
     exceed $1,000. The taxpayer's basis in the property is 
     reduced by the amount of the credit and the taxpayer may 
     not claim deductions under section 179A with respect to 
     property for which the credit is claimed.
       In the case of refueling property installed on property 
     owned or used by a tax-exempt person, the taxpayer that 
     installs the property may claim the credit. To be eligible 
     for the credit, the property must be placed in service before 
     January 1, 2007 (before January 1, 2012 in the hydrogen 
     refueling property). The credit allowable in the taxable year 
     cannot exceed the difference between the taxpayer's regular 
     tax (reduced by certain other credits) and the taxpayer's 
     tentative minimum tax. The taxpayer may carry forward unused 
     credits for 20 years.
       Effective date.--The Senate amendment is effective for 
     property placed in service after September 30, 2002.


                          conference agreement

       The conference agreement extends and modifies present-law 
     section 179A with respect to refueling property. The 
     conference agreement increases the present-law limitation of 
     $100,000 of qualifying expenses per refueling location of the 
     taxpayer to $150,000 per location. In addition, the 
     conference agreement modifies the definition of refueling 
     property with respect to hydrogen produced from another 
     clean-burning fuel (i.e., natural gas, liquefied natural gas, 
     liquefied petroleum gas, any fuel at least 85 percent of 
     which is one or more of methanol, ethanol, or other alcohol 
     or ether) such that qualified refueling property included 
     property for the production of hydrogen fuel, in addition to 
     property for the storage and dispensing of hydrogen fuel, if 
     such property is located at the point where hydrogen fuel is 
     delivered into the fuel tank of a motor vehicle.
       The conference agreement extends the placed in service date 
     for qualifying refueling property to property placed in 
     service prior to January 1, 2009 (January 1, 2012, in the 
     case of property related to hydrogen fuel).
       Effective date.--The provision is effective for property 
     placed in service after the date of enactment.
     11. Credit for retail sale of alternative motor vehicle fuels 
         (secs. 2004 and 2010 of Senate amendment)


                              present law

       There is no retail credit for the sale of alternative motor 
     vehicle fuels. However, a 52-cents-per-gallon income tax 
     credit is allowed for alcohol fuels for 2003 and 2004 (51 
     cents for 2005-2007). The alcohol fuels credit may be claimed 
     as a reduction in excise tax payments. Such tax payments 
     generally are made before the retail level. In the case of 
     ethanol, the Code provides a separate 10-cents-per-gallon 
     credit for small producers.


                               house bill

       No provision.


                            senate amendment

       The Senate amendment permits taxpayers to claim a credit 
     equal to the gasoline gallon equivalent of 30 cents per 
     gallon of alternative fuel sold 2002 and in 2003, 40 cents 
     per gallon in 2004, and 50 cents per gallon thereafter. 
     Qualifying alternative fuels are compressed natural gas, 
     liquefied natural gas, liquefied petroleum gas, hydrogen, any 
     liquid mixture consisting of at least 85 percent methanol, 
     and any liquid mixture consisting of at least 85 percent 
     ethanol. The credit may be claimed for sales prior to January 
     1, 2007. Under the provision, the credit is part of the 
     general business credit.
       Effective date.--The Senate amendment is effective for fuel 
     sold at retail after September 30, 2002.


                          conference agreement

       The conference agreement does not include the Senate 
     amendment provision.

                            II. RELIABILITY

     A. Natural Gas Gathering Lines Treated as Seven-Year Property

     (sec. 42001 of the House bill, sec. 2302 of the Senate 
         amendment, and sec. 168 of the Code)


                              present law

       The applicable recovery period for assets placed in service 
     under the Modified Accelerated Cost Recovery System is based 
     on the ``class life of the property.'' The class lives of 
     assets placed in service after 1986 are generally set forth 
     in Revenue Procedure 87-56.\33\ Revenue Procedure 87-56 
     includes two asset classes that could describe natural gas 
     gathering lines owned by nonproducers of natural gas. Asset 
     class 46.0, describing pipeline transportation, provides a 
     class life of 22 years and a recovery period of 15 years. 
     Asset class 13.2, describing assets used in the exploration 
     for and production of petroleum and natural gas deposits, 
     provides a class life of 14 years and a depreciation recovery 
     period of seven years. The uncertainty regarding the 
     appropriate recovery period of natural gas gathering lines 
     has resulted in litigation between taxpayers and the IRS. The 
     10th Circuit Court of Appeals and the 6th Circuit Court of 
     Appeals have held that natural gas gathering lines owned by 
     nonproducers falls within the scope of Asset class 13.2 
     (i.e., seven-year recovery period).\34\ The Tax Court has 
     held that natural gas gathering lines owned by nonproducers 
     falls within the scope of Asset class 46.0 (i.e., 15-year 
     recovery period).\35\
---------------------------------------------------------------------------
     \33\ 1987-2 C.B. 674 (as clarified and modified by Rev. Proc. 
     88-22, 1988-1 C.B. 785).
     \34\ Duke Energy v. Commissioner, 172 F.3d 1255 (10th Cir. 
     1999), rev'g 109 T.C. 416 (1997). Saginaw Bay Pipeline Co. v. 
     United States, 2003 FED App. 0259P (6th Cir.) rev'g 124 F. 
     Supp. 2d 465 (E.D. Mich. 2001). See also True v. United 
     States, 97-2 U.S. Tax Cas. (CCH) par. 50,946 (D. Wyo. 1997).
     \35\ Clajon Gas Co., L.P. v. Commissioner, 119 T.C. 197 
     (2002).
---------------------------------------------------------------------------


                               house bill

       The House bill establishes a statutory 7-year recovery 
     period and a class life of 10 years for natural gas gathering 
     lines. In addition, the House bill provides that there is no 
     adjustment to the allowable amount of depreciation for 
     purposes of computing a taxpayer's alternative minimum 
     taxable income with respect to such property. A natural gas 
     gathering line is defined to include any pipe, equipment, and 
     appurtenance that is (1) determined to be a gathering line by 
     the Federal Energy Regulatory Commission, or (2) used to 
     deliver natural gas from the wellhead or a common point to 
     the point at which such gas first reaches (a) a gas 
     processing plant, (b) an interconnection with an interstate 
     transmission line, (c) an interconnection with an intrastate 
     transmission line, or (d) a direct interconnection with a 
     local distribution company, a gas storage facility, or an 
     industrial consumer.
       Effective date.--The provision is effective for property 
     placed in service after the date of enactment. No inference 
     is intended as to the proper treatment of natural gas 
     gathering lines placed in service before the date of 
     enactment.


                            senate amendment

       The Senate amendment is the same as the House bill, except 
     that it does not include the provision providing that there 
     is no adjustment to the allowable amount of depreciation for 
     purposes of computing a taxpayer's alternative minimum 
     taxable income with respect to natural gas gathering lines.
       Effective date.--The provision is effective for property 
     placed in service after the date of enactment. No inference 
     is intended as to the proper treatment of natural gas 
     gathering lines placed in service before the date of 
     enactment.


                          conference agreement

       The conference agreement follows the House bill with the 
     following modification. The conference agreement provides a 
     class life of 14 years for natural gas gathering lines 
     (instead of 10 years).

   B. Natural Gas Distribution Lines Treated as Fifteen-Year Property

     (sec. 42002 of the House bill, sec. 2311 of the Senate 
         amendment, and sec. 168 of the Code)


                              present law

       The applicable recovery period for assets placed in service 
     under the Modified Accelerated Cost Recovery System is based 
     on the ``class life of the property.'' The class lives of 
     assets placed in service after 1986 are generally set forth 
     in Revenue Procedure 87-56.\36\ Natural gas distribution 
     pipelines are assigned a 20-year recovery period and a class 
     life of 35 years.
---------------------------------------------------------------------------
     \36\ 1987-2 C.B. 674 (as clarified and modified by Rev. Proc. 
     88-22, 1988-1 C.B. 785).
---------------------------------------------------------------------------


                               house bill

       The House bill establishes a statutory 15-year recovery 
     period and a class life of 20 years for natural gas 
     distribution lines. In addition, the House bill provides that 
     there would be no adjustment to the allowable amount of 
     depreciation for purposes of computing a taxpayer's 
     alternative minimum taxable income with respect to such 
     property.
       Effective date.--The provision is effective for property 
     placed in service after the date of enactment.


                            senate amendment

       The Senate amendment establishes a statutory 15-year 
     recovery period and a class life of 20 years for natural gas 
     distribution lines.
       Effective date.--The provision is effective for property 
     placed in service after the date of enactment.


                          conference agreement

       The conference agreement follows the House bill with the 
     following modification.

[[Page H11340]]

     The conference agreement provides a class life of 35 years 
     for natural gas distribution lines (instead of 20 years).

       C. Transmission Property Treated as Fifteen-Year Property

     (sec. 42003 of the House bill and sec. 168 of the Code)


                              present law

       The applicable recovery period for assets placed in service 
     under the Modified Accelerated Cost Recovery System is based 
     on the ``class life of the property.'' The class lives of 
     assets placed in service after 1986 are generally set forth 
     in Revenue Procedure 87-56. Assets used in the transmission 
     and distribution of electricity for sale and related land 
     improvements are assigned a 20-year recovery period and a 
     class life of 30 years.


                               house bill

       The House bill establishes a statutory 15-year recovery 
     period and a class life of 20 years for certain assets used 
     in the transmission of electricity for sale and related land 
     improvements. For purposes of the provision, section 1245 
     property used in the transmission of electricity for sale at 
     69 kilovolts and above will qualify for the new recovery 
     period. In addition, the House bill provides that there would 
     be no adjustment to the allowable amount of depreciation for 
     purposes of computing a taxpayer's alternative minimum 
     taxable income with respect to such property.
       Effective date.--The provision is effective for property 
     placed in service after the date of enactment.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement follows the House bill with the 
     following modifications. The conference agreement limits the 
     provision to property the original use \37\ of which 
     commences after the date of enactment and alters the class 
     life of such property to 30 years (instead of 20 years).
---------------------------------------------------------------------------
     \37\ The term ``original use'' means the first use to which 
     the property is put, whether or not such use corresponds to 
     the use of such property by the taxpayer. It is intended 
     that, when evaluating whether property qualifies as 
     ``original use,'' the factors used to determine whether 
     property qualified as ``new section 38 property'' for 
     purposes of the investment tax credit would apply. See 
     Treasury Regulation 1.48-2. Thus, it is intended that 
     additional capital expenditures incurred to recondition or 
     rebuild acquired property (or owned property) would satisfy 
     the ``original use'' requirement. However, the cost of 
     reconditioned or rebuilt property acquired by the taxpayer 
     would not satisfy the ``original use'' requirement. For 
     example, if on August 11, 2004, a taxpayer buys from RCM for 
     $200,000 transmission lines that have been previously used by 
     RCM. Subsequent to the purchase, the taxpayer makes an 
     expenditure on the property of $50,000 of the type that must 
     be capitalized. Regardless of whether the $50,000 is added to 
     the basis of such property or is capitalized as a separate 
     asset, such amount would be treated as satisfying the 
     ``original use'' requirement and would be eligible for the 
     reduced recovery period. No part of the $200,000 purchase 
     price qualifies for the reduced recovery period.
---------------------------------------------------------------------------

D. Expensing of Capital Costs Incurred for Production in Complying With 
 Environmental Protection Agency Sulfur Regulations for Small Refiners

     (sec. 42004 of the House bill, sec. 2303 of the Senate 
         amendment, and new sec. 179C of the Code)


                              present law

       Taxpayers generally may recover the costs of investments in 
     refinery property through annual depreciation deductions.


                               house bill

       The bill permits small business refiners to claim an 
     immediate deduction (i.e., expensing) for up to 75 percent of 
     the costs paid or incurred for the purpose of complying with 
     the Highway Diesel Fuel Sulfur Control Requirements of the 
     Environmental Protection Agency (``EPA'').
       For these purposes a small business refiner is a taxpayer 
     who is within the business of refining petroleum products 
     employs not more than 1,500 employees directly in refining 
     and has less than 205,000 barrels per day (average) of total 
     refinery capacity. The deduction is reduced, pro rata, for 
     taxpayers with capacity in excess of 155,000 barrels per day.
       Effective date.--The provision is effective for expenses 
     paid or incurred after March 31, 2003.


                            senate amendment

       The Senate amendment generally is the same as the House 
     bill.
       Effective date.--The provision is effective for expenses 
     paid or incurred after the date of enactment.


                          conference agreement

       The conference agreement generally follows the House bill 
     and the Senate amendment except with respect to the effective 
     date. The conference agreement also clarifies that qualifying 
     expenditures are those expenditures paid or incurred with 
     respect to a facility beginning January 1, 2003, and ending 
     the earlier of the date that is one year after the date on 
     which the taxpayer must comply with applicable EPA regulation 
     or December 31, 2009. In addition, with respect to the 
     definition of a small business refiner, the conferees intend 
     that, in any case in which refinery through-put or retained 
     production of the refinery differs substantially from its 
     average daily output of refined product, capacity be measured 
     by reference to the average daily output of refined product.
       Effective date.--The provision is effective for expenses 
     paid or incurred after December 31, 2002.

     E. Credit for Small Refiners for Production of Diesel Fuel in 
Compliance With Environmental Protection Agency Sulfur Regulations for 
                             Small Refiners

     (sec. 42005 of the House bill, sec. 2304 of Senate amendment, 
         and new sec. 45I of the Code)


                              present law

       Present law does not provide a credit for the production of 
     low-sulfur diesel fuel.


                               house bill

       The House bill provides that a small business refiner may 
     claim credit equal to five cents per gallon for each gallon 
     of low sulfur diesel fuel produced during the taxable year 
     that is in compliance with the Highway Diesel Fuel Sulfur 
     Control Requirements of the Environmental Protection Agency 
     (``EPA''). The total production credit claimed by the 
     taxpayer is limited to 25 percent of the capital costs 
     incurred to come into compliance with the EPA diesel fuel 
     requirements. The taxpayer's basis in such property is 
     reduced by the amount of production credit claimed.
       For these purposes a small business refiner is a taxpayer 
     who is within the business of refining petroleum products 
     employs not more than 1,500 employees directly in refining 
     and has less than 205,000 barrels per day (average) of total 
     refinery capacity. The credit is reduced, pro rata, for 
     taxpayers with capacity in excess of 155,000 barrels per day.
       Effective date.--The provision is effective for expenses 
     paid or incurred after March 31, 2003.


                            senate amendment

       The Senate amendment generally is the same as the House. In 
     the case of a qualifying small business refiner that is owned 
     by a cooperative, the cooperative is allowed to elect to pass 
     any production credits to patrons of the organization.
       Effective date.--The Senate amendment is effective on the 
     date of enactment.


                          conference agreement

       The conference agreement follows the House bill and the 
     Senate amendment. The conference agreement provides that a 
     small business refiner may claim credit equal to five cents 
     per gallon for each gallon of low sulfur diesel fuel produced 
     during the taxable year that is in compliance with the 
     Highway Diesel Fuel Sulfur Control Requirements of the 
     Environmental Protection Agency (``EPA''). The total 
     production credit claimed by the taxpayer is limited to 25 
     percent of the capital costs incurred to come into compliance 
     with the EPA diesel fuel requirements. The taxpayer's basis 
     in such property is reduced by the amount of production 
     credit claimed. In the case of a qualifying small business 
     refiner that is owned by a cooperative, the cooperative is 
     allowed to elect to pass any production credits to patrons of 
     the organization.
       In addition, with respect to the definition of a small 
     business refiner, the conferees intend that, in any case 
     where refinery through-put or retained production of the 
     refinery differs substantially from its average daily output 
     of refined product, capacity be measured by reference to the 
     average daily output of refined product.
       The conference agreement also clarifies that qualifying 
     expenditures are those expenditures paid or incurred with 
     respect to a facility beginning January 1, 2003 and ending 
     the earlier of the date that is one year after the date on 
     which the taxpayer must comply with applicable EPA regulation 
     or December 31, 2009.
       Effective date.--The provision is effective for expenses 
     paid or incurred after December 31, 2002.

 F. Determination of Small Refiner Exception To Oil Depletion Deduction

     (sec. 42006 of the House bill, sec. 2305 of the Senate 
         amendment, and sec. 613A of the Code)


                              Present Law

       Present law classifies oil and gas producers as independent 
     producers or integrated companies. The Code provides numerous 
     special tax rules for operations by independent producers. 
     One such rule allows independent producers to claim 
     percentage depletion deductions rather than deducting the 
     costs of their asset, a producing well, based on actual 
     production from the well (i.e., cost depletion).
       A producer is an independent producer only if its refining 
     and retail operations are relatively small. For example, an 
     independent producer may not have refining operations the 
     runs from which exceed 50,000 barrels on any day in the 
     taxable year during which independent producer status is 
     claimed.


                               House Bill

       The provision increases the current 50,000-barrel-per-day 
     limitation to 75,000. In addition, the provision changes the 
     refinery limitation on claiming independent producer status 
     from a limit based on actual daily production to a limit 
     based on average daily production for the taxable year. 
     Accordingly, the average daily refinery run for the taxable 
     year may not exceed 75,000 barrels. For this purpose, the 
     taxpayer calculates average daily production by dividing 
     total production for the taxable year by the total number of 
     days in the taxable year.
       Effective date.--The provision is effective for taxable 
     years beginning after December 31, 2003.

[[Page H11341]]

                            Senate Amendment

       The Senate amendment is similar to the House Bill except 
     the average daily refinery run may not exceed 60,000 barrels.
       Effective date.--The Senate amendment is effective for 
     taxable years beginning after December 31, 2002.


                          Conference Agreement

       The conference agreement follows the House bill, except the 
     average daily refinery run for the taxable year may not 
     exceed 67,500 barrels.
       Effective date.--The provision is effective for taxable 
     years ending after the date of enactment.

    G. Sales or Dispositions to Implement Federal Energy Regulatory 
           Commission or State Electric Restructuring Policy

     (sec. 42007 of the House bill, sec. 2404 of the Senate 
         amendment, and sec. 451 of the Code)


                              Present Law

       Generally, a taxpayer recognizes gain to the extent the 
     sales price (and any other consideration received) exceeds 
     the seller's basis in the property. The recognized gain is 
     subject to current income tax unless the gain is deferred or 
     not recognized under a special tax provision.


                               House Bill

       The House bill permits a taxpayer to elect to recognize 
     gain from a qualifying electric transmission transaction 
     ratably over an eight-year period beginning in the year of 
     sale if the amount realized from such sale is used to 
     purchase exempt utility property within the applicable period 
     \38\ (the ``reinvestment property''). If the amount realized 
     exceeds the amount used to purchase reinvestment property, 
     any realized gain shall be recognized to the extent of such 
     excess in the year of the qualifying electric transmission 
     transaction. Any remaining realized gain is recognized 
     ratably over the eight-year period.
---------------------------------------------------------------------------
     \38\ The applicable period for a taxpayer to reinvest the 
     proceeds is four years after the close of the taxable year in 
     which the qualifying electric transmission transaction 
     occurs.
---------------------------------------------------------------------------
       A qualifying electric transmission transaction is the sale 
     or other disposition of property used by the taxpayer in the 
     trade or business of providing electric transmission 
     services, or an ownership interest in such an entity, to an 
     independent transmission company prior to January 1, 2007. In 
     general, an independent transmission company is defined as: 
     (1) an independent transmission provider \39\ approved by the 
     FERC; (2) a person (i) who the FERC determines under section 
     203 of the Federal Power Act (or by declaratory order) is not 
     a ``market participant'' and (ii) whose transmission 
     facilities are placed under the operational control of a 
     FERC-approved independent transmission provider before the 
     close of the period specified in such authorization, but not 
     later than January 1, 2007; or (3) in the case of facilities 
     subject to the jurisdiction of the Public Utility Commission 
     of Texas, (i) a person which is approved by that Commission 
     as consistent with Texas State law regarding an independent 
     transmission organization, or (ii) a political subdivision, 
     or affiliate thereof, whose transmission facilities are under 
     the operational control of an organization described in (i).
---------------------------------------------------------------------------
     \39\ For example, a regional transmission organization, an 
     independent system operator, or an independent transmission 
     company.
---------------------------------------------------------------------------
       Exempt utility property is defined as: (1) property used in 
     the trade or business of generating, transmitting, 
     distributing, or selling electricity or producing, 
     transmitting, distributing, or selling natural gas, or (2) 
     stock in a controlled corporation whose principal trade or 
     business consists of the activities described in (1).
       If a taxpayer is a member of an affiliated group of 
     corporations filing a consolidated return, the provision 
     permits the reinvestment property to be purchased by any 
     member of the affiliated group (in lieu of the taxpayer).
       If a taxpayer elects the application of the House bill, 
     then the statutory period for the assessment of any 
     deficiency, for any taxable year in which any part of the 
     gain eligible for the provision is realized, attributable to 
     such gain shall not expire prior to the expiration of three 
     years from the date the Secretary of the Treasury is notified 
     by the taxpayer of the reinvestment property or an intention 
     not to reinvest.
       An electing taxpayer is required to attach a statement to 
     that effect in the tax return for the taxable year in which 
     the transaction takes place in the manner as the Secretary 
     shall prescribe. The election shall be binding for that 
     taxable year and all subsequent taxable years.\40\ In 
     addition, an electing taxpayer is required to attach a 
     statement that identifies the reinvestment property in the 
     manner as the Secretary shall prescribe.
---------------------------------------------------------------------------
     \40\ The provision also provides that the installment sale 
     rules shall not apply to any qualifying electric transmission 
     transaction for which a taxpayer elects the application of 
     this provision.
---------------------------------------------------------------------------
       Effective date.--The provision is effective for 
     transactions occurring after the date of enactment.


                            Senate Amendment

       Similar to the House bill, but does not have a reinvestment 
     obligation.
       Effective date.--The provision is effective for 
     transactions occurring after the date of enactment.


                          Conference Agreement

       The conference agreement follows the House bill.

   H. Modification to Special Rules for Nuclear Decommissioning Costs

     (sec. 42008 of the House bill, sec. 2402 of the Senate 
         amendment, and sec. 468A of the Code)


                              Present Law

     Overview
       Special rules dealing with nuclear decommissioning reserve 
     funds were adopted by Congress in the Deficit Reduction Act 
     of 1984 (``1984 Act''), when tax issues regarding the time 
     value of money were addressed generally. Under general tax 
     accounting rules, a deduction for accrual basis taxpayers is 
     deferred until there is economic performance for the item for 
     which the deduction is claimed. However, the 1984 Act 
     contains an exception under which a taxpayer responsible for 
     nuclear powerplant decommissioning may elect to deduct 
     contributions made to a qualified nuclear decommissioning 
     fund for future decommissioning costs. Taxpayers who do not 
     elect this provision are subject to general tax accounting 
     rules.
     Qualified nuclear decommissioning fund
       A qualified nuclear decommissioning fund (a ``qualified 
     fund'') is a segregated fund established by a taxpayer that 
     is used exclusively for the payment of decommissioning costs, 
     taxes on fund income, management costs of the fund, and for 
     making investments. The income of the fund is taxed at a 
     reduced rate of 20 percent for taxable years beginning after 
     December 31, 1995.\41\
---------------------------------------------------------------------------
     \41\ As originally enacted in 1984, a qualified fund paid tax 
     on its earnings at the top corporate rate and, as a result, 
     there was no present-value tax benefit of making deductible 
     contributions to a qualified fund. Also, as originally 
     enacted, the funds in the trust could be invested only in 
     certain low risk investments. Subsequent amendments to the 
     provision have reduced the rate of tax on a qualified fund to 
     20 percent and removed the restrictions on the types of 
     permitted investments that a qualified fund can make.
---------------------------------------------------------------------------
       Contributions to a qualified fund are deductible in the 
     year made to the extent that these amounts were collected as 
     part of the cost of service to ratepayers (the ``cost of 
     service requirement'').\42\ Funds withdrawn by the taxpayer 
     to pay for decommissioning costs are included in the 
     taxpayer's income, but the taxpayer also is entitled to a 
     deduction for decommissioning costs as economic performance 
     for such costs occurs.
---------------------------------------------------------------------------
     \42\ Taxpayers are required to include in gross income 
     customer charges for decommissioning costs (sec. 88).
---------------------------------------------------------------------------
       Accumulations in a qualified fund are limited to the amount 
     required to fund decommissioning costs of a nuclear 
     powerplant for the period during which the qualified fund is 
     in existence (generally post-1984 decommissioning costs of a 
     nuclear powerplant). For this purpose, decommissioning costs 
     are considered to accrue ratably over a nuclear powerplant's 
     estimated useful life. In order to prevent accumulations of 
     funds over the remaining life of a nuclear powerplant in 
     excess of those required to pay future decommissioning costs 
     of such nuclear powerplant and to ensure that contributions 
     to a qualified fund are not deducted more rapidly than level 
     funding (taking into account an appropriate discount rate), 
     taxpayers must obtain a ruling from the IRS to establish the 
     maximum annual contribution that may be made to a qualified 
     fund (the ``ruling amount''). In certain instances (e.g., 
     change in estimates), a taxpayer is required to obtain a new 
     ruling amount to reflect updated information.
       A qualified fund may be transferred in connection with the 
     sale, exchange or other transfer of the nuclear powerplant to 
     which it relates. If the transferee is a regulated public 
     utility and meets certain other requirements, the transfer 
     will be treated as a nontaxable transaction. No gain or loss 
     will be recognized on the transfer of the qualified fund and 
     the transferee will take the transferor's basis in the 
     fund.\43\ The transferee is required to obtain a new ruling 
     amount from the IRS or accept a discretionary determination 
     by the IRS.\44\
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     \43\ Treas. reg. sec. 1.468A-6.
     \44\ Treas. reg. sec. 1.468A-6(f).
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     Nonqualified nuclear decommissioning funds
       Federal and State regulators may require utilities to set 
     aside funds for nuclear decommissioning costs in excess of 
     the amount allowed as a deductible contribution to a 
     qualified fund. In addition, taxpayers may have set aside 
     funds prior to the effective date of the qualified fund 
     rules.\45\ The treatment of amounts set aside for 
     decommissioning costs prior to 1984 varies. Some taxpayers 
     may have received no tax benefit while others may have 
     deducted such amounts or excluded such amounts from income. 
     Since 1984, taxpayers have been required to include in gross 
     income customer charges for decommissioning costs (sec. 88), 
     and a deduction has not been allowed for amounts set aside to 
     pay for decommissioning costs except through the use of a 
     qualified fund. Income earned in a nonqualified fund is 
     taxable to the fund's owner as it is earned.
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     \45\ These funds are generally referred to as ``nonqualified 
     funds.''
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                               House Bill

     Repeal of cost of service requirement
       The House bill repeals the cost of service requirement for 
     deductible contributions to a nuclear decommissioning fund. 
     Thus, all taxpayers, including unregulated taxpayers, are 
     allowed a deduction for amounts contributed to a qualified 
     fund.

[[Page H11342]]

     Permit contributions to a qualified fund for pre-1984 
         decommissioning costs
       The House bill also repeals the limitation that a qualified 
     fund only accumulate an amount sufficient to pay for a 
     nuclear powerplant's decommissioning costs incurred during 
     the period that the qualified fund is in existence (generally 
     post-1984 decommissioning costs). Thus, any taxpayer is 
     permitted to accumulate an amount sufficient to cover the 
     present value of 100 percent of a nuclear powerplant's 
     estimated decommissioning costs in a qualified fund. 
     The House bill does not change the requirement that 
     contributions to a qualified fund not be deducted more 
     rapidly than level funding.
     Exception to ruling amount for certain decommissioning costs
       The House bill permits a taxpayer to make contributions to 
     a qualified fund in excess of the ruling amount in one 
     circumstance. Specifically, a taxpayer is permitted to 
     contribute up to the present value of the amount required to 
     fund a nuclear powerplant's decommissioning costs which under 
     present law section 468A(d)(2)(A) is not permitted to be 
     accumulated in a qualified fund (generally pre-1984 
     decommissioning costs).\46\ It is anticipated that an amount 
     that is permitted to be contributed under this special rule 
     shall be determined using the estimate of total 
     decommissioning costs used for purposes of determining the 
     taxpayer's most recent ruling amount. Any amount transferred 
     to the qualified fund under this special rule that has not 
     previously been deducted or excluded from gross income is 
     allowed as a deduction over the remaining useful life of the 
     nuclear powerplant.\47\ If a qualified fund that has received 
     amounts under this rule is transferred to another person, the 
     transferor will be permitted a deduction for any remaining 
     deductible amounts at the time of transfer.
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     \46\ The ability to transfer property into a qualified fund 
     under this special rule is available only to the extent the 
     taxpayer has not obtained a new ruling amount incorporating 
     the repeal of the limitation that a qualified fund only 
     accumulate an amount sufficient to pay for decommissioning 
     costs of a nuclear powerplant incurred during the period that 
     the fund is in existence (generally post 1984 decommissioning 
     costs).
     \47\ A taxpayer recognizes no gain or loss on the 
     contribution of property to a qualified fund under this 
     special rule. The qualified fund will take a transferred 
     (carryover) basis in such property. Correspondingly, a 
     taxpayer's deduction (over the estimated life of the nuclear 
     powerplant) is to be based on the adjusted tax basis of the 
     property contributed rather than the fair market value of 
     such property.
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     Contributions to a qualified fund after useful life of 
         powerplant
       The House bill also allows deductible contributions to a 
     qualified fund subsequent to the end of a nuclear 
     powerplant's estimated useful life. Such payments are 
     permitted to the extent they do not cause the assets of the 
     qualified fund to exceed the present value of the taxpayer's 
     allocable share (current or former) of the nuclear 
     decommissioning costs of such nuclear powerplant.
     Clarify treatment of transfers of qualified funds
       The House bill clarifies the Federal income tax treatment 
     of the transfer of a qualified fund. No gain or loss would be 
     recognized to the transferor or the transferee as a result of 
     the transfer of a qualified fund in connection with the 
     transfer of the power plant with respect to which such fund 
     was established.
       Effective date.--The provision would be effective for 
     taxable years beginning after December 31, 2003.


                            Senate Amendment

     Repeal of cost of service requirement
       The Senate amendment repeals the cost of service 
     requirement for deductible contributions to a nuclear 
     decommissioning fund. Thus, all taxpayers, including 
     unregulated taxpayers, would be allowed a deduction for 
     amounts contributed to a qualified fund.
     Clarify treatment of transfers of qualified funds and 
         deductibility of decommissioning costs
       The Senate amendment clarifies the Federal income tax 
     treatment of the transfer of a qualified fund. No gain or 
     loss would be recognized to the transferor or the transferee 
     (or the qualified fund) as a result of the transfer of a 
     qualified fund in connection with the transfer of the power 
     plant with respect to which such fund was established. In 
     addition, the Senate amendment provides that all nuclear 
     decommissioning costs are deductible when paid or incurred.
       Effective date.--The provision is effective for taxable 
     years beginning after December 31, 2002.


                          Conference Agreement

       The conference agreement follows the House bill with the 
     following modifications. The conference agreement clarifies 
     that, for purposes of the exception to ruling amount for 
     certain costs (generally pre-1984 decommissioning costs), 
     only the present value of total nuclear decommissioning costs 
     with respect to a nuclear powerplant previously excluded 
     under section 468A(d)(2)(A) may be contributed to a qualified 
     fund. For example, if $100 is the present value of the total 
     decommissioning costs of a nuclear powerplant, and if under 
     present law the qualified fund is only permitted to 
     accumulate (and has in fact accumulated) $75 of 
     decommissioning costs over such plant's estimated useful life 
     (because the qualified fund was not in existence during 25 
     percent of the estimated useful life of the nuclear 
     powerplant), a taxpayer could contribute $25 to the qualified 
     fund under this component of the provision.
       In addition, the Conference agreement provides that a 
     purchaser of an interest in a nuclear powerplant may elect to 
     treat certain amounts previously set aside for nuclear 
     decommissioning by the seller and transferred to the taxpayer 
     as part of the sale as if such amounts had been contributed 
     to a qualified fund immediately prior to the transfer.\48\ 
     The adjusted basis of such assets shall be the same as in the 
     hands of the seller. The election is available only if the 
     seller of the interest in the nuclear powerplant is a tax-
     exempt entity. In addition, the maximum amount eligible for 
     such treatment is limited to the product of the present value 
     of the estimated nuclear decommissioning costs and the 
     applicable percentage. The ``applicable percentage'' is a 
     fraction equal to the number of years the powerplant has been 
     in service over the estimated useful life of such powerplant. 
     A taxpayer shall make the election in the manner prescribed 
     by the Secretary by the due date (including extensions of 
     time) for its return of tax for the year in which the 
     acquisition occurs. In addition, a taxpayer must request a 
     new ruling amount from the IRS to be eligible for this 
     provision.
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     \48\ An election under this special rule shall be disregarded 
     in determining the Federal income tax treatment of the sale 
     to the seller.
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        I. Treatment of Certain Income of Electric Cooperatives

     (sec. 42009 of the House bill, secs. 2403 and 2406 of the 
         Senate amendment, and sec. 501 of the Code)


                              Present Law

     In general
       Under present law, an entity must be operated on a 
     cooperative basis in order to be treated as a cooperative for 
     Federal income tax purposes. Although not defined by statute 
     or regulation, the two principal criteria for determining 
     whether an entity is operating on a cooperative basis are: 
     (1) ownership of the cooperative by persons who patronize the 
     cooperative; and (2) return of earnings to patrons in 
     proportion to their patronage. The Internal Revenue Service 
     requires that cooperatives must operate under the following 
     principles: (1) subordination of capital in control over the 
     cooperative undertaking and in ownership of the financial 
     benefits from ownership; (2) democratic control by the 
     members of the cooperative; (3) vesting in and allocation 
     among the members of all excess of operating revenues over 
     the expenses incurred to generate revenues in proportion to 
     their participation in the cooperative (patronage); and (4) 
     operation at cost (not operating for profit or below 
     cost).\49\
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     \49\ Announcement 96-24, ``Proposed Examination Guidelines 
     Regarding Rural Electric Cooperatives,'' 1996-16 I.R.B. 35.
---------------------------------------------------------------------------
       In general, cooperative members are those who participate 
     in the management of the cooperative and who share in 
     patronage capital. As described below, income from the sale 
     of electric energy by an electric cooperative may be member 
     or non-member income to the cooperative, depending on the 
     membership status of the purchaser. A municipal corporation 
     may be a member of a cooperative.
       For Federal income tax purposes, a cooperative generally 
     computes its income as if it were a taxable corporation, with 
     one exception--the cooperative may exclude from its taxable 
     income distributions of patronage dividends. In general, 
     patronage dividends are the profits of the cooperative that 
     are rebated to its patrons pursuant to a pre-existing 
     obligation of the cooperative to do so. The rebate must be 
     made in some equitable fashion on the basis of the quantity 
     or value of business done with the cooperative.
       Except for tax-exempt farmers' cooperatives, cooperatives 
     that are subject to the cooperative tax rules of subchapter T 
     of the Code (sec. 1381, et seq.) are permitted a deduction 
     for patronage dividends from their taxable income only to the 
     extent of net income that is derived from transactions with 
     patrons who are members of the cooperative (sec. 1382). The 
     availability of such deductions from taxable income has the 
     effect of allowing the cooperative to be treated like a 
     conduit with respect to profits derived from transactions 
     with patrons who are members of the cooperative.
       Cooperatives that qualify as tax-exempt farmers' 
     cooperatives are permitted to exclude patronage dividends 
     from their taxable income to the extent of all net income, 
     including net income that is derived from transactions with 
     patrons who are not members of the cooperative, provided the 
     value of transactions with patrons who are not members of the 
     cooperative does not exceed the value of transactions with 
     patrons who are members of the cooperative (sec. 521).
     Taxation of electric cooperatives exempt from subchapter T
       In general, the cooperative tax rules of subchapter T apply 
     to any corporation operating on a cooperative basis (except 
     mutual savings banks, insurance companies, other tax-exempt 
     organizations, and certain utilities), including tax-exempt 
     farmers' cooperatives (described in sec. 521(b)). However, 
     subchapter T does not apply to an organization that is 
     ``engaged in furnishing electric energy, or providing 
     telephone service, to persons in rural areas'' (sec. 
     1381(a)(2)(C)). Instead, electric cooperatives are taxed 
     under

[[Page H11343]]

     rules that were generally applicable to cooperatives prior to 
     the enactment of subchapter T in 1962. Under these rules, an 
     electric cooperative can exclude patronage dividends from 
     taxable income to the extent of all net income of the 
     cooperative, including net income derived from transactions 
     with patrons who are not members of the cooperative.\50\
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     \50\ See Rev. Rul. 83-135, 1983-2 C.B. 149.
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     Tax exemption of rural electric cooperatives
       Section 501(c)(12) provides an income tax exemption for 
     rural electric cooperatives if at least 85 percent of the 
     cooperative's income consists of amounts collected from 
     members for the sole purpose of meeting losses and expenses 
     of providing service to its members. The IRS takes the 
     position that rural electric cooperatives also must comply 
     with the fundamental cooperative principles described above 
     in order to qualify for tax exemption under section 
     501(c)(12).\51\ The 85-percent test is determined without 
     taking into account any income from qualified pole rentals 
     and cancellation of indebtedness income from the prepayment 
     of a loan under sections 306A, 306B, or 311 of the Rural 
     Electrification Act of 1936 (as in effect on January 1, 
     1987). The exclusion for cancellation of indebtedness income 
     applies to such income arising in 1987, 1988, or 1989 on debt 
     that either originated with, or is guaranteed by, the Federal 
     Government.
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     \51\ Rev. Rul. 72-36, 1972-1 C.B. 151.
---------------------------------------------------------------------------
       The receipt by a rural electric cooperative of 
     contributions in aid of construction and connection charges 
     is taken into account for purposes of applying the 85-percent 
     test.
       Rural electric cooperatives generally are subject to the 
     tax on unrelated trade or business income under section 511.
     Credit for producing fuel from a nonconventional source
       Under present law, an income tax credit is allowed for 
     certain fuels produced from ``non-conventional sources'' and 
     sold to unrelated parties. The amount of the credit is equal 
     to $3 (generally adjusted for inflation) per barrel or BTU 
     oil barrel equivalent (sec. 29), subject to a phaseout. 
     Qualified fuels must be produced within the United States, 
     and include: oil produced from shale and tar sands; gas 
     produced from geopressured brine, Devonian shale, coal 
     seams, tight formations (``tight sands''), or biomass; and 
     liquid, gaseous, or solid synthetic fuels produced from 
     coal (including lignite).
       The credit applies to fuels produced from wells drilled or 
     facilities placed in service after December 31, 1979, and 
     before January 1, 1993. An exception extends the January 1, 
     1993 expiration date for facilities producing gas from 
     biomass and synthetic fuel from coal if the facility 
     producing the fuel is placed in service before July 1, 1998, 
     pursuant to a binding contract entered into before January 1, 
     1997.
       The credit applies to qualified fuels produced and sold 
     before January 1, 2003 (in the case of non-conventional 
     sources subject to the January 1, 1993 expiration date) or 
     January 1, 2008 (in the case of biomass gas and synthetic 
     fuel facilities eligible for the extension period).


                               House Bill

     Treatment of income from open access transactions
       The House bill provides that income received or accrued by 
     a rural electric cooperative (other than income received or 
     accrued directly or indirectly from a member of the 
     cooperative) from the provision or sale of electric energy 
     transmission services or ancillary services on a 
     nondiscriminatory open access basis under an independent 
     transmission provider agreement approved by FERC (including 
     an agreement providing for the transfer of control--but not 
     ownership--of transmission facilities) \52\ is excluded in 
     determining whether a rural electric cooperative satisfies 
     the 85-percent test for tax exemption under section 
     501(c)(12).
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     \52\ Under this provision, references to FERC are treated as 
     including references to the Public Utility Commission of 
     Texas.
---------------------------------------------------------------------------
       For purposes of the 85-percent test, the House bill also 
     provides that income received or accrued by a rural electric 
     cooperative is treated as an amount collected from members 
     for the sole purpose of meeting losses and expenses if the 
     income is received or accrued indirectly from a member of the 
     cooperative, provided that such income is derived from a 
     ``like organization'' activity of the cooperative under 
     present law.\53\ 
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     \53\ See, e.g., Rev. Rul. 2002-54, 2002-37 I.R.B. 527; Rev. 
     Rul. 83-170, 1983-2 C.B. 97; Rev. Rul. 65-201, 1965-2 C.B. 
     170.
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     Treatment of income from nuclear decommissioning transactions
       The House bill provides that income received or accrued by 
     a rural electric cooperative from any ``nuclear 
     decommissioning transaction'' also is excluded in determining 
     whether a rural electric cooperative satisfies the 85-percent 
     test for tax exemption under section 501(c)(12). The term 
     ``nuclear decommissioning transaction'' is defined as--
       (1) 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 
     cooperative's interest in a nuclear powerplant or nuclear 
     powerplant unit;
       (2) Any distribution from a trust, fund, or instrument 
     established to pay any nuclear decommissioning costs; or
       (3) Any earnings from a trust, fund, or instrument 
     established to pay any nuclear decommissioning costs.
     Treatment of income from asset exchange or conversion 
         transactions
       The House bill provides that gain realized by a tax-exempt 
     rural electric cooperative from a voluntary exchange or 
     involuntary conversion of certain property is excluded in 
     determining whether a rural electric cooperative satisfies 
     the 85-percent test for tax exemption under section 
     501(c)(12). This provision only applies to the extent that: 
     (1) the gain would qualify for deferred recognition under 
     section 1031 (relating to exchanges of property held for 
     productive use or investment) or section 1033 (relating to 
     involuntary conversions); and (2) the replacement property 
     that is acquired by the cooperative pursuant to section 1031 
     or section 1033 (as the case may be) constitutes property 
     that is used, or to be used, for the purpose of generating, 
     transmitting, distributing, or selling electricity or 
     methane-based natural gas.
     Treatment of income from load loss transactions
       Tax-exempt rural electric cooperatives.--The House bill 
     provides that income received or accrued by a tax-exempt 
     rural electric cooperative from a ``load loss transaction'' 
     is treated under 501(c)(12) as income collected from members 
     for the sole purpose of meeting losses and expenses of 
     providing service to its members. Therefore, income from load 
     loss transactions is treated as member income in determining 
     whether a rural electric cooperative satisfies the 85-percent 
     test for tax exemption under section 501(c)(12). The House 
     bill also provides that income from load loss transactions 
     does not cause a tax-exempt electric cooperative to fail to 
     be treated for Federal income tax purposes as a mutual or 
     cooperative company under the fundamental cooperative 
     principles described above.
       The term ``load loss transaction'' generally is defined as 
     any wholesale or retail sale of electric energy (other than 
     to a member of the cooperative) to the extent that the 
     aggregate amount of such sales during a seven-year period 
     beginning with the ``start-up year'' does not exceed the 
     reduction in the amount of sales of electric energy during 
     such period by the cooperative to members. The ``start-up 
     year'' is defined as the calendar year which includes the 
     date of enactment of this provision or, if later, at the 
     election of the cooperative: (1) the first year that the 
     cooperative offers nondiscriminatory open access; or (2) the 
     first year in which at least 10 percent of the cooperative's 
     sales of electric energy are to patrons who are not members 
     of the cooperative.
       The House bill also excludes income received or accrued by 
     rural electric cooperatives from load loss transactions from 
     the tax on unrelated trade or business income.
       Taxable electric cooperatives.--The House bill provides 
     that the receipt or accrual of income from load loss 
     transactions by taxable electric cooperatives is treated as 
     income from patrons who are members of the cooperative. Thus, 
     income from a load loss transaction is excludible from the 
     taxable income of a taxable electric cooperative if the 
     cooperative distributes such income pursuant to a pre-
     existing contract to distribute the income to a patron who is 
     not a member of the cooperative. The House bill also provides 
     that income from load loss transactions does not cause a 
     taxable electric cooperative to fail to be treated for 
     Federal income tax purposes as a mutual or cooperative 
     company under the fundamental cooperative principles 
     described above.
     Effective date
       The House bill provision is effective for taxable years 
     beginning after the date of enactment.


                            Senate Amendment

     Treatment of income from open access transactions
       The Senate amendment provides that income received or 
     accrued by a rural electric cooperative from any ``open 
     access transaction'' (other than income received or accrued 
     directly or indirectly from a member of the cooperative) is 
     excluded in determining whether a rural electric cooperative 
     satisfies the 85-percent test for tax exemption under section 
     501(c)(12). The term ``open access transaction'' is defined 
     as--
       (1) The provision or sale of electric energy transmission 
     services or ancillary services on a nondiscriminatory open 
     access basis: (i) pursuant to an open access transmission 
     tariff filed with and approved by the Federal Energy 
     Regulatory Commission (``FERC'') (including acceptable 
     reciprocity tariffs), but only if (in the case of a 
     voluntarily filed tariff) the cooperative files a report with 
     FERC within 90 days of enactment of this provision relating 
     to whether or not the cooperative will join a regional 
     transmission organization (``RTO''); or (ii) under an RTO 
     agreement approved by FERC (including an agreement providing 
     for the transfer of control--but not ownership--of 
     transmission facilities);  \54\
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     \54\ Under this provision, references to FERC are treated as 
     including references to the Public Utility Commission of 
     Texas or the Rural Utilities Service.
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       (2) The provision or sale of electric energy distribution 
     services or ancillary services on a nondiscriminatory open 
     access basis to end-users served by distribution facilities 
     owned by the cooperative or its members; or
       (3) The delivery or sale of electric energy on a 
     nondiscriminatory open access basis, provided that such 
     electric energy is generated by a generation facility that is 
     directly connected to distribution facilities

[[Page H11344]]

     owned by the cooperative (or its members) which owns the 
     generation facility.
       For purposes of the 85-percent test, the Senate amendment 
     also provides that income received or accrued by a rural 
     electric cooperative from any ``open access transaction'' is 
     treated as an amount collected from members for the sole 
     purpose of meeting losses and expenses if the income is 
     received or accrued indirectly from a member of the 
     cooperative.
     Treatment of income from nuclear decommissioning transactions
       The Senate amendment provides that income received or 
     accrued by a rural electric cooperative from any ``nuclear 
     decommissioning transaction'' also is excluded in determining 
     whether a rural electric cooperative satisfies the 85-percent 
     test for tax exemption under section 501(c)(12). The term 
     ``nuclear decommissioning transaction'' is defined as--
       (1) 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 
     cooperative's interest in a nuclear powerplant or nuclear 
     powerplant unit;
       (2) Any distribution from a trust, fund, or instrument 
     established to pay any nuclear decommissioning costs; or
       (3) Any earnings from a trust, fund, or instrument 
     established to pay any nuclear decommissioning costs.
     Treatment of income from asset exchange or conversion 
         transactions
       The Senate amendment provides that gain realized by a tax-
     exempt rural electric cooperative from a voluntary exchange 
     or involuntary conversion of certain property is excluded in 
     determining whether a rural electric cooperative satisfies 
     the 85-percent test for tax exemption under section 
     501(c)(12). This provision only applies to the extent that: 
     (1) the gain would qualify for deferred recognition under 
     section 1031 (relating to exchanges of property held for 
     productive use or investment) or section 1033 (relating to 
     involuntary conversions); and (2) the replacement property 
     that is acquired by the cooperative pursuant to section 1031 
     or section 1033 (as the case may be) constitutes property 
     that is used, or to be used, for the purpose of generating, 
     transmitting, distributing, or selling electricity or natural 
     gas.
     Treatment of cancellation of indebtedness income from 
         prepayment of certain loans
       The Senate amendment provides that income from the 
     prepayment of any loan, debt, or obligation of a tax-exempt 
     rural electric cooperative that is originated, insured, or 
     guaranteed by the Federal Government under the Rural 
     Electrification Act of 1936 is excluded in determining 
     whether the cooperative satisfies the 85-percent test for tax 
     exemption under section 501(c)(12).
     Treatment of income from load loss transactions
       Tax-exempt rural electric cooperatives.--The Senate 
     amendment provides that income received or accrued by a tax-
     exempt rural electric cooperative from a ``load loss 
     transaction'' is treated under 501(c)(12) as income collected 
     from members for the sole purpose of meeting losses and 
     expenses of providing service to its members. Therefore, 
     income from load loss transactions is treated as member 
     income in determining whether a rural electric cooperative 
     satisfies the 85-percent test for tax exemption under section 
     501(c)(12). The bill also provides that income from load loss 
     transactions does not cause a tax-exempt electric cooperative 
     to fail to be treated for Federal income tax purposes as a 
     mutual or cooperative company under the fundamental 
     cooperative principles described above.
       The term ``load loss transaction'' is generally defined as 
     any wholesale or retail sale of electric energy (other than 
     to a member of the cooperative) to the extent that the 
     aggregate amount of such sales during a seven-year period 
     beginning with the ``start-up year'' does not exceed the 
     reduction in the amount of sales of electric energy during 
     such period by the cooperative to members. The ``start-up 
     year'' is defined as the calendar year which includes the 
     date of enactment of this provision or, if later, at the 
     election of the cooperative: (1) the first year that the 
     cooperative offers nondiscriminatory open access; or (2) the 
     first year in which at least 10 percent of the cooperative's 
     sales of electric energy are to patrons who are not members 
     of the cooperative.
       The Senate amendment also excludes income received or 
     accrued by rural electric cooperatives from load loss 
     transactions from the tax on unrelated trade or business 
     income.
       Taxable electric cooperatives.--The Senate amendment 
     provides that the receipt or accrual of income from load loss 
     transactions by taxable electric cooperatives is treated as 
     income from patrons who are members of the cooperative. Thus, 
     income from a load loss transaction is excludible from the 
     taxable income of a taxable electric cooperative if the 
     cooperative distributes such income pursuant to a pre-
     existing contract to distribute the income to a patron who is 
     not a member of the cooperative. The Senate amendment also 
     provides that income from load loss transactions does not 
     cause a taxable electric cooperative to fail to be treated 
     for Federal income tax purposes as a mutual or cooperative 
     company under the fundamental cooperative principles 
     described above.
     Treatment of income from certain contributions in aid of 
         construction
       The Senate amendment excludes from the 85-percent test for 
     tax exemption under section 501(c)(12) the receipt by an 
     electric cooperative, before January 1, 2007, of any 
     contribution in aid of construction or connection charge (in 
     the form of money, property, capital or otherwise) that is 
     intended to facilitate the provision of electric service by 
     the cooperative for the purpose of the development, by the 
     recipient of such electric service, of qualified fuels from 
     nonconventional sources (within the meaning of section 29, as 
     modified elsewhere in the Senate amendment).
     Effective date
       The Senate amendment provision is effective for taxable 
     years beginning after the date of enactment.


                          Conference Agreement

       The conference agreement follows the House bill with the 
     following modifications:
     Treatment of income from open access transactions
       Income received or accrued by a rural electric cooperative 
     (other than income received or accrued directly or indirectly 
     from a member of the cooperative) from the provision or sale 
     of electric energy transmission services or ancillary 
     services on a nondiscriminatory open access basis under an 
     open access transmission tariff approved or accepted by FERC 
     or under an independent transmission provider agreement 
     approved or accepted by FERC (including an agreement 
     providing for the transfer of control--but not ownership--of 
     transmission facilities) \55\ is excluded in determining 
     whether a rural electric cooperative satisfies the 85-percent 
     test for tax exemption under section 501(c)(12).
---------------------------------------------------------------------------
     \55\ Under this provision, references to FERC are treated as 
     including references to the Public Utility Commission of 
     Texas.
---------------------------------------------------------------------------
       In addition, income is excluded for purposes of the 85-
     percent test if it is received or accrued by a rural electric 
     cooperative (other than income received or accrued directly 
     or indirectly from a member of the cooperative) from the 
     provision or sale of electric energy distribution services or 
     ancillary services, provided such services are provided on a 
     nondiscriminatory open access basis to distribute electric 
     energy not owned by the cooperative: (1) to end-users who are 
     served by distribution facilities not owned by the 
     cooperative or any of its members; or (2) generated by a 
     generation facility that is not owned or leased by the 
     cooperative or any of its members and that is directly 
     connected to distribution facilities owned by the cooperative 
     or any of its members.
     Treatment of income from load loss transactions
       For purposes of this provision, the ``start-up year'' is 
     defined as the first year that the cooperative offers 
     nondiscriminatory open access or, if later and at the 
     election of the cooperative, the calendar year that includes 
     the date of enactment of this provision.
     Effective date
       The conference agreement provision is effective for taxable 
     years beginning after the date of enactment.
     1. Exempt certain prepayments for natural gas from tax-exempt 
         bond arbitrage rules (sec. 3213 of the House bill and 
         secs. 141 and 148 of the Code)


                              Present Law

       Interest on bonds issued by States or local governments to 
     finance activities carried out or paid for by those entities 
     generally is exempt from income tax (sec. 103). Restrictions 
     are imposed on the ability of States or local governments to 
     invest the proceeds of these bonds for profit (the 
     ``arbitrage restrictions''). One such restriction limits the 
     use of bond proceeds to acquire ``investment-type property.'' 
     The term investment-type property includes the acquisition of 
     property in a transaction involving a prepayment. A 
     prepayment can produce prohibited arbitrage profits when the 
     discount received for prepaying the costs exceeds the yield 
     on the tax-exempt bonds. In general, prohibited prepayments 
     include all prepayments that are not customary in an industry 
     by both beneficiaries of tax-exempt bonds and other persons 
     using taxable financing for the same transaction.
       On August 4, 2003, the Treasury Department issued final 
     regulations deeming to be customary, and not in violation of 
     the arbitrage rules, certain prepayments for natural gas 
     and electricity. Generally, a qualified prepayment under 
     the regulations requires that 90 percent of the natural 
     gas or electricity purchased with the prepayment be used 
     for a qualifying use. Generally, natural gas is used for a 
     qualifying use if it is to be (1) furnished to retail gas 
     customers of the issuing municipal utility who are located 
     in the natural gas service area of the issuing municipal 
     utility, however, gas used to produce electricity for sale 
     is not included under this provision (2) used by the 
     issuing municipal utility to produce electricity that will 
     be furnished to retail electric service area customers of 
     the issuing utility, (3) used by the issuing municipal 
     utility to produce electricity that will be sold to a 
     utility owned by a governmental person and furnished to 
     the service area retail electric customers of the 
     purchaser, (4) sold to a utility that is owned by a 
     governmental person if the requirements of (1), (2) or (3) 
     are satisfied by the purchasing utility (treating the 
     purchaser as the issuing utility) or (5) used to fuel the 
     pipeline transportation of the prepaid gas supply. 
     Electricity is used for a

[[Page H11345]]

     qualifying use if it is to be (1) furnished to retail 
     service area electric customers of the issuing municipal 
     utility or (2) sold to a municipal utility and furnished 
     to retail electric customers of the purchaser who are 
     located in the electricity service area of the purchaser. 
     Both governmental gas and electric utilities may take 
     advantage of this regulatory provision.


                               House Bill

     In general
       The provision creates a safe harbor exception to the 
     general rule that tax-exempt bond-financed prepayments 
     violate the arbitrage restrictions. The term ``investment 
     type property'' does not include a prepayment under a 
     qualified natural gas supply contract. The provision also 
     provides that such prepayments are not treated as private 
     loans for purposes of the private business tests.
       Under the provision, a prepayment financed with tax-exempt 
     bond proceeds for the purpose of obtaining a supply of 
     natural gas for service area customers of a governmental 
     utility is not treated as the acquisition of investment-type 
     property. A contract is a qualified natural gas contract if 
     the volume of natural gas secured for any year covered by the 
     prepayment does not exceed the sum of (1) the average annual 
     natural gas purchased (other than for resale) by customers of 
     the utility within the service area of the utility (``retail 
     natural gas consumption'') during the testing period, and (2) 
     the amount of natural gas that is needed to fuel 
     transportation of the natural gas to the governmental 
     utility. The testing period is the 5-calendar-year period 
     immediately preceding the calendar year in which the bonds 
     are issued. A retail customer is one who does not purchase 
     natural gas for resale. Natural gas used to generate 
     electricity by a governmental utility is counted as retail 
     natural gas consumption if the electricity was sold to retail 
     customers within the service area of the governmental 
     electric utility.
     Adjustments
       The volume of gas permitted by the general rule is reduced 
     by natural gas otherwise available on the date of issuance. 
     Specifically, the amount of natural gas permitted to be 
     acquired under a qualified natural gas contract for any 
     period is to be reduced by natural gas held by the utility on 
     the date of issuance of the bonds and natural gas that the 
     utility has a right to acquire for the prepayment period 
     (determined as of the date of issuance).\56\ For purposes of 
     the preceding sentence, 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.
---------------------------------------------------------------------------
     \56\ For example, natural gas otherwise available on the date 
     the bonds are issued includes supply covered by other 
     prepayment contracts for the period, and supply held in 
     storage or subject to an option to purchase by such utility 
     that is available for retail natural gas consumption during 
     the period covered by the prepayment. It does not include 
     supply that could be purchased on the open market during the 
     prepayment period.
---------------------------------------------------------------------------
       For purposes of the safe harbor, if after the close of the 
     testing period and before the issue date of the bonds (1) the 
     government utility enters into a contract to supply natural 
     gas (other than for resale) for a commercial person for use 
     at a property within the service area of such utility and (2) 
     the gas consumption for such property was not included in 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 the amount of gas permitted to be 
     purchased may be increased to accommodate the contract.
       The average annual retail natural gas consumption 
     calculation for purposes of the safe harbor, however, is not 
     to 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.
     Intentional acts
       The safe harbor does not apply if the utility engages in 
     intentional acts to render (1) the volume of natural gas 
     covered by the prepayment to be in excess of that needed for 
     retail natural gas consumption, and (2) the amount of natural 
     gas that is needed to fuel transportation of the natural gas 
     to the governmental utility.
     Definition of service area
       Service area is defined as (1) any area throughout which 
     the governmental utility provided (at all times during the 
     testing period) in the case of a natural gas utility, natural 
     gas transmission or distribution service, or in the case of 
     an electric utility, electric distribution service; (2) 
     limited areas contiguous to such areas, and (3) any area 
     recognized as the service area of the governmental utility 
     under State or Federal law. Contiguous areas are limited to 
     any area within a county contiguous to the area described in 
     (1) in which retail customers of the utility are located if 
     such area is not also served by another utility providing the 
     same service.
     Ruling request for higher prepayment amounts
       Upon written request, the Secretary may allow an issuer to 
     prepay for an amount of gas greater than that allowed by the 
     safe harbor based on objective evidence of growth in gas 
     consumption or population that demonstrates that the amount 
     permitted by the exception is insufficient.
     Effective date
       The provision is effective for obligations issued after the 
     date of enactment.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the House bill with a 
     conforming amendment. The conferees understand that a 
     qualified natural gas supply contract as defined in the 
     conference agreement is not nongovernmental output property 
     for purposes of subsection (d) of section 141. The conference 
     agreement provides that subsection (d) of section 141 does 
     not apply to prepayment contracts for natural gas or 
     electricity that either under the Treasury regulations or 
     statutory safe harbor are not investment-type property for 
     purposes of the arbitrage rules under section 148. No 
     inference is intended regarding the application of subsection 
     141(d) to prepayment contracts not covered by the statutory 
     safe harbor or Treasury regulations.
       The conferees also recognize that a number of States have 
     created under State law joint action agencies that can serve 
     as purchasing agents for their member municipal gas 
     utilities. The conferees intend the provision to allow 
     municipal utilities in a State to participate in such buying 
     arrangements as established under State law, subject to the 
     same limitations that would apply if an individual utility 
     were to purchase gas directly. When acting on behalf of its 
     municipal gas utility members, the total amount of gas that 
     can be purchased by a joint action agency under the bill's 
     exception to the arbitrage rules is the aggregate of what 
     each such member could purchase for itself on a direct basis. 
     Thus, with respect to qualified natural gas supply contracts 
     entered into by joint action agencies for or on behalf of one 
     or more member municipal utilities, the requirements of the 
     safe harbor are tested at the individual municipal utility 
     level based on the amount of gas that would be allocated to 
     such member during any year covered by the contract.

                            III. PRODUCTION

                       A. Oil and Gas Provisions

     1. Oil and gas production from marginal wells (sec. 43001 of 
         the House bill, sec. 2301 of the Senate amendment, and 
         secs. 38, 39, and new sec. 45J of the Code)


                              present law

       There is no credit for the production of oil and gas from 
     marginal wells. The costs of such production may be recovered 
     under the Code's depreciation and depletion rules and in 
     other cases as a deduction for ordinary and necessary 
     business expenses.


                               house bill

       The provision would create a new, $3 per barrel credit for 
     the production of crude oil and a $0.50 credit per 1,000 
     cubic feet of qualified natural gas production. The maximum 
     amount of production on which credit could be claimed is 
     1,095 barrels or barrel equivalents. In both cases, the 
     credit is available only for production from a ``qualified 
     marginal well.'' The credit is not available to production 
     occurring if the reference price of oil exceeds $18 ($2.00 
     for natural gas). The credit is reduced proportionately as 
     for reference prices between $15 and $18 ($1.67 and $2.00 for 
     natural gas). Reference prices are determined on a one-year 
     look-back basis.
       A qualified marginal well is defined as: (1) a well 
     production from which was marginal production for purposes of 
     the Code percentage depletion rules; or (2) a well that 
     during the taxable year had average daily production of not 
     more than 25 barrel equivalents and produced water at a rate 
     of not less than 95 percent of total well effluent.
       The credit is treated as part of the general business 
     credit; however, unused credits can be carried back for up to 
     10 years rather than the generally applicable carryback 
     period of one year.
       Effective date.--The provision is effective for production 
     in taxable years beginning after December 31, 2003.


                            senate amendment

       The Senate amendment is similar to the House bill, except 
     it does not permit the credit to be carried back beyond the 
     date of enactment and a marginal well that is not in 
     compliance with the applicable State and Federal pollution 
     prevention, control, and permit requirements for any period 
     of time is not considered a qualified marginal well during 
     such period.
       Effective date.--The Senate amendment is effective for 
     production in taxable years beginning after date of 
     enactment.


                          conference agreement

       The conference agreement generally follows the House bill 
     except unused credits may be carried back only five years.
       Effective date.--The provision is effective for production 
     in taxable years beginning after December 31, 2003.
     2. Temporary suspension of limitation based on 65 percent of 
         taxable income and extension of suspension of taxable 
         income limit with respect to marginal production (sec. 
         43002 of the House bill, sec. 2306 of the Senate 
         amendment, and sec. 613A of the Code)


                              present law

     In general
       Depletion, like depreciation, is a form of capital cost 
     recovery. In both cases, the taxpayer is allowed a deduction 
     in recognition

[[Page H11346]]

     of the fact that an asset--in the case of depletion for oil 
     or gas interests, the mineral reserve itself--is being 
     expended in order to produce income. Certain costs incurred 
     prior to drilling an oil or gas property are recovered 
     through the depletion deduction. These include costs of 
     acquiring the lease or other interest in the property and 
     geological and geophysical costs (in advance of actual 
     drilling).
       Depletion is available to any person having an economic 
     interest in a producing property. An economic interest is 
     possessed in every case in which the taxpayer has acquired by 
     investment any interest in minerals in place, and secures, by 
     any form of legal relationship, income derived from the 
     extraction of the mineral, to which it must look for a return 
     of its capital.\57\ Thus, for example, both working interests 
     and royalty interests in an oil- or gas-producing property 
     constitute economic interests, thereby qualifying the 
     interest holders for depletion deductions with respect to the 
     property. A taxpayer who has no capital investment in the 
     mineral deposit does not possess an economic interest merely 
     because it possesses an economic or pecuniary advantage 
     derived from production through a contractual relation.
---------------------------------------------------------------------------
     \57\ Treas. Reg. sec. 1.611-1(b)(1).
---------------------------------------------------------------------------
       Cost depletion
       Two methods of depletion are currently allowable under the 
     Internal Revenue Code (the ``Code''): (1) the cost depletion 
     method, and (2) the percentage depletion method (secs. 611-
     613). Under the cost depletion method, the taxpayer deducts 
     that portion of the adjusted basis of the depletable property 
     which is equal to the ratio of units sold from that property 
     during the taxable year to the number of units remaining as 
     of the end of taxable year plus the number of units sold 
     during the taxable year. Thus, the amount recovered under 
     cost depletion may never exceed the taxpayer's basis in the 
     property.
       Percentage depletion and related income limitations
       The Code generally limits the percentage depletion method 
     for oil and gas properties to independent producers and 
     royalty owners.\58\ Generally, under the percentage depletion 
     method 15 percent of the taxpayer's gross income from an oil- 
     or gas-producing property is allowed as a deduction in each 
     taxable year (sec. 613A(c)). The amount deducted generally 
     may not exceed 100 percent of the net income from that 
     property in any year (the ``net-income limitation'') (sec. 
     613(a)). The 100-percent net-income limitation for marginal 
     wells is suspended for taxable years beginning after December 
     31, 1997, and before January 1, 2004.
---------------------------------------------------------------------------
     \58\ Sec. 613A.
---------------------------------------------------------------------------
       Additionally, the percentage depletion deduction for all 
     oil and gas properties may not exceed 65 percent of the 
     taxpayer's overall taxable income (determined before such 
     deduction and adjusted for certain loss carrybacks and 
     certain trust distributions) (sec. 613A(d)(1)).\59\ Because 
     percentage depletion, unlike cost depletion, is computed 
     without regard to the taxpayer's basis in the depletable 
     property, cumulative depletion deductions may be greater than 
     the amount expended by the taxpayer to acquire or develop the 
     property.
---------------------------------------------------------------------------
     \59\ Amounts disallowed as a result of this rule may be 
     carried forward and deducted in subsequent taxable years, 
     subject to the 65-percent taxable income limitation for those 
     years.
---------------------------------------------------------------------------
       A taxpayer is required to determine the depletion deduction 
     for each oil or gas property under both the percentage 
     depletion method (if the taxpayer is entitled to use this 
     method) and the cost depletion method. If the cost depletion 
     deduction is larger, the taxpayer must utilize that method 
     for the taxable year in question (sec. 613(a)).
     Limitation of oil and gas percentage depletion to independent 
         producers and royalty owners
       Generally, only independent producers and royalty owners 
     (as contrasted to integrated oil companies) are allowed to 
     claim percentage depletion. Percentage depletion for eligible 
     taxpayers is allowed only with respect to up to 1,000 barrels 
     of average daily production of domestic crude oil or an 
     equivalent amount of domestic natural gas (sec. 613A(c)). For 
     producers of both oil and natural gas, this limitation 
     applies on a combined basis.
       In addition to the independent producer and royalty owner 
     exception, certain sales of natural gas under a fixed 
     contract in effect on February 1, 1975, and certain natural 
     gas from geopressured brine,\60\ are eligible for percentage 
     depletion, at rates of 22 percent and 10 percent, 
     respectively. These exceptions apply without regard to the 
     1,000-barrel-per-day limitation and regardless of whether the 
     producer is an independent producer or an integrated oil 
     company.
---------------------------------------------------------------------------
     \60\ This exception is limited to wells, the drilling of 
     which began between September 30, 1978, and January 1, 1984.
---------------------------------------------------------------------------


                               house bill

       The limit on percentage depletion deductions to no more 
     than 65 percent of the taxpayer's overall taxable income is 
     suspended for taxable years beginning after December 31, 
     2003, and before January 1, 2007. The suspension of the 100-
     percent net-income limitation for marginal wells is extended 
     an additional three years, through taxable years beginning 
     before January 1, 2007.
       Effective date.--The provision is effective for taxable 
     years beginning after December 31, 2003.


                            senate amendment

       The Senate amendment suspends only the 100-percent net-
     income limitation for marginal wells through 2007.
       Effective date.--The Senate amendment is effective on the 
     date of enactment.


                          conference agreement

       The conference agreement suspends the 100-percent net-
     income limitation for marginal wells through December 31, 
     2004. The conference agreement suspends the 65-percent-
     taxable-income limitation through December 31, 2004.
       Effective date.--The provision is effective for taxable 
     years beginning after December 31, 2003.
     3. Delay rental payments (sec. 43003 of the House bill, sec. 
         2308 of the Senate amendment, and sec. 167 of the Code)


                              present law

       Present law generally requires costs associated with 
     inventory and property held for resale to be capitalized 
     rather than currently deducted as they are incurred. (sec. 
     263). Oil and gas producers typically contract for mineral 
     production in exchange for royalty payments. If mineral 
     production is delayed, these contracts provide for ``delay 
     rental payments'' as a condition of their extension. The 
     Treasury Department has taken the position that the uniform 
     capitalization rules of section 263A require delay rental 
     payments to be capitalized.


                               house bill

       The House bill permits delay rental payments incurred in 
     connection with the development of oil or gas to be amortized 
     over two years. In the case of abandoned property, remaining 
     basis may no longer be recovered in the year of abandonment 
     of a property as all basis is recovered over the two-year 
     amortization period.
       Effective date.--The House bill provision is effective for 
     amounts paid or incurred in taxable years after 2003. No 
     inference is intended from the prospective effective date of 
     this proposal as to the proper treatment of pre-effective 
     date delay rental payments.


                            senate amendment

       The Senate amendment provides delay rental payments 
     incurred in connection with the development of oil or gas 
     must be amortized over two years.
       Effective date.--The Senate amendment is effective for 
     amounts paid or incurred in taxable years after 2002.


                          conference agreement

       The conferees adopt a provision nearly identical to a 
     provision in S. 1149 as reported by the Senate Committee on 
     Finance on May 23, 2003. The provision allows delay rental 
     payments incurred in connection with the development of oil 
     or gas within the United States to be amortized over two 
     years. In the case of abandoned property, remaining basis may 
     no longer be recovered in the year of abandonment of a 
     property as all basis is recovered over the two-year 
     amortization period.
       Effective date.--The provision applies to delay rental 
     payments paid or incurred in taxable years beginning after 
     the date of enactment. No inference is intended from the 
     prospective effective date of this proposal as to the proper 
     treatment of pre-effective date delay rental payments.
     4. Geological and geophysical costs (sec. 43004 of the House 
         bill, sec. 2307 of the Senate amendment, and sec. 167 of 
         the Code)


                              present law

       Under present law, geological and geophysical expenditures 
     are costs incurred by a taxpayer for the purpose of obtaining 
     and accumulating data that will serve as the basis for the 
     acquisition and retention of mineral properties by taxpayers 
     exploring for minerals. Capital expenditures are not 
     currently deductible as ordinary and necessary expenses, but 
     are allocated to the cost of the property (sec. 263). Courts 
     have held that geological and geophysical costs are capital, 
     and therefore, are allocable to the cost of property acquired 
     or retained. The costs attributable to such exploration are 
     allocable to the cost of the property acquired or retained.


                               house bill

       The House Bill permits geological and geophysical costs 
     incurred in connection with domestic oil and gas exploration 
     to be amortized over two years. In the case of abandoned 
     property, remaining basis may no longer be recovered in the 
     year of abandonment of a property as all basis is recovered 
     over the two-year amortization period.
       Effective date.--The House bill provision is effective for 
     costs paid or incurred in taxable years after 2003. No 
     inference is intended from the prospective effective date of 
     this proposal as to the proper treatment of pre-effective 
     date geological and geophysical costs.


                            senate amendment

       The Senate Amendment provides that geological and 
     geophysical costs incurred in connection with domestic oil 
     and gas exploration to be amortized over two years.
       Effective date.--The Senate amendment is effective for 
     costs paid or incurred in taxable years after 2002.


                          conference agreement

       The conferees adopt a provision nearly identical to a 
     provision in S. 1149 as reported

[[Page H11347]]

     by the Senate Committee on Finance on May 23, 2003. The 
     provision allows geological and geophysical amounts incurred 
     in connection with oil and gas exploration in the United 
     States to be amortized over two years. In the case of 
     abandoned property, remaining basis may no longer be 
     recovered in the year of abandonment of a property as all 
     basis is recovered over the two-year amortization period.
       Effective date.--The provision is effective for geological 
     and geophysical amounts paid or incurred in taxable years 
     beginning after the date of enactment. No inference is 
     intended from the prospective effective date of this proposal 
     as to the proper treatment of pre-effective date geological 
     and geophysical costs.

 B. Extension and Modification of Credit for Producing Fuel From a Non-
                          Conventional Source

     (sec. 43005 of the House bill, secs. 2309 and 2310 of the 
         Senate amendment, and sec. 29 and new section 45K of the 
         Code)


                              present law

       An income tax credit is allowed for certain fuels produced 
     from ``non-conventional sources'' and sold to unrelated 
     parties. The amount of the credit is equal to $3 (generally 
     adjusted for inflation \61\) per barrel or Btu oil barrel 
     equivalent (sec. 29). Qualified fuels must be produced within 
     the United States, and include: oil produced from shale and 
     tar sands; gas produced from geopressured brine, Devonian 
     shale, coal seams, tight formations (``tight sands''), or 
     biomass; and liquid, gaseous, or solid synthetic fuels 
     produced from coal (including lignite).
---------------------------------------------------------------------------
     \61\ The value of the section 29 credit for production in 
     2002 was $6.35 per barrel of oil equivalent.
---------------------------------------------------------------------------
       The credit applies to fuels produced from wells drilled or 
     facilities placed in service after December 31, 1979, and 
     before January 1, 1993. An exception extends the January 1, 
     1993 expiration date for facilities producing gas from 
     biomass and synthetic fuel from coal if the facility 
     producing the fuel is placed in service before July 1, 1998, 
     pursuant to a binding contract entered into before January 1, 
     1997.
       The credit applies to qualified fuels produced and sold 
     before January 1, 2003 (in the case of non-conventional 
     sources subject to the January 1, 1993, expiration date) or 
     January 1, 2008 (in the case of biomass gas and synthetic 
     fuel facilities eligible for the extension period).


                               house bill

       The House bill permits taxpayers to claim the section 29 
     credit for production of certain non-conventional fuels 
     produced at wells placed in service after April 1, 2003, and 
     before January 1, 2007. Qualifying fuels are oil from shale 
     or tar sands, and gas from geopressured brine, Devonian 
     shale, coal seams or a tight formation. The value of the 
     credit is re-based to $3.00 for production in 2003 and is 
     indexed for inflation commencing with the credit amount for 
     2004. The credit may be claimed for production from the well 
     for each of the first four years of production, but not for 
     any production occurring after December 31, 2009.
       The House bill further permits production from certain 
     existing wells (any well drilled after December 31, 1979, and 
     before January 1, 1993) to claim a credit equal to the newly 
     re-indexed value of $3.00 for production in 2003 after date 
     of enactment through 2006.
       The House bill also permits landfill gas sold to a third 
     party from facilities placed in service after June 30, 1998 
     and before January 1, 2007, to be eligible for five years of 
     credit from the later of the date of enactment or the date 
     the facility is placed in service. The amount of credit is 
     $3.00 per barrel equivalent in 2003 and is indexed for 
     inflation commencing with the credit amount for 2004. In the 
     case of a landfill subject to the Environmental Protection 
     Agency's 1996 New Source Performance Standards/Emissions 
     Guidelines, the amount of credit is $2.00 per barrel 
     equivalent in 2003 and is indexed for inflation commencing 
     with the credit amount for 2004.
       Under the House bill, the taxpayer may not claim any credit 
     for production in excess of a daily average \62\ of 200,000 
     cubic feet of gas, or barrel of oil equivalent (200,000 cubic 
     feet is equivalent to 35.4 barrels of oil) from a qualifying 
     well or facility with respect to any production for which 
     credit can be claimed under the modifications described.
---------------------------------------------------------------------------
     \62\ The daily average is computed as total production 
     divided by the total number of days the well or facility was 
     in production during the year.
---------------------------------------------------------------------------
       The House bill adds section 29 to the list of general 
     business credits.
       Effective date.--The House bill provision is effective for 
     fuel sold from qualifying wells and facilities after April 1, 
     2003.


                            senate amendment

     Extension for certain non-conventional fuels
       The Senate amendment provides a credit for production of 
     certain non-conventional fuels produced at wells placed in 
     service after the date of enactment and before January 1, 
     2005. The amount of the credit is $3.00 (unindexed) per 
     barrel or Btu oil equivalent for three years of production 
     commencing when the facility is placed in service. Qualified 
     fuels are oil from, shale or tar sands, and gas from 
     geopressured brine, Devonian shale, coal seams or a tight 
     formation.
     Extension and modification for ``refined coal''
       The Senate amendment provides a credit for production of 
     ``refined coal'' from facilities placed in service after the 
     date of enactment and before January 1, 2007. The amount of 
     the credit is $3.00 (unindexed) per barrel or Btu oil 
     equivalent for five years of production commencing when the 
     facility is placed in service. Refined coal is a qualifying 
     liquid, gaseous, or solid synthetic fuel produced from coal 
     (including lignite) or high-carbon fly ash, including such 
     fuel used as a feedstock. A qualifying fuel is a fuel that 
     when burned emits 20 percent less SO2 and nitrogen 
     oxides than the burning of feedstock coal or comparable coal 
     predominantly available in the marketplace as of January 1, 
     2002, and if the fuel sells at prices at least 50 percent 
     greater than the prices of the feedstock coal or comparable 
     coal. However, no fuel produced at a qualifying advanced 
     clean coal facility (as defined elsewhere) is a qualifying 
     fuel.
     Expansion for ``viscous oil''
       The Senate amendment provides a credit for production of 
     certain viscous oil produced at wells placed in service after 
     the date of enactment and before January 1, 2005. ``Viscous 
     oil'' is domestic crude oil produced from any property if the 
     crude oil has a weighted average gravity of 22 degrees API or 
     less (corrected to 60 degrees Fahrenheit). The amount of the 
     credit for viscous oil is $3.00 per barrel or Btu equivalent 
     for three years of production commencing when the well is 
     placed in service. The Senate amendment provides that 
     qualifying sales to related parties for consumption not in 
     the immediate vicinity of the wellhead qualify for the 
     credit.
     Credit for coalmine methane gas
       The Senate amendment provides a credit for production of 
     ``coalmine methane gas'' captured or extracted from a coal 
     mine and sold after the date of enactment and before January 
     1, 2005. The amount of the credit is $3.00 (unindexed) per 
     barrel or Btu oil equivalent (51.7 cents per million Btu of 
     heat value in the gas) for gas utilized captured or sold, for 
     three years of production commencing when the facility is 
     placed in service. Qualifying coalmine methane gas is any 
     methane gas liberated during qualified mining operations or 
     extracted up to five years in advance of qualified mining 
     operations as part of a specific plan to mine a coal deposit. 
     In the case of coalmine methane gas that is captured in 
     advance of qualified coal mining operations, the credit is 
     allowed only after the date the coal extraction occurs in the 
     immediate area where the coalmine methane gas was removed.
     Expansion for agricultural and animal wastes
       The Senate amendment adds facilities producing liquid, 
     gaseous, or solid fuels, from agricultural and animal waste 
     placed in service after the date of enactment and before 
     January 1, 2005, to the list of qualified facilities for 
     purposes of the non-conventional fuel credit. The amount of 
     the credit is equal to $3.00 (unindexed) per barrel or Btu 
     oil barrel equivalent, for three years of production 
     commencing on the date the facility is placed in service. 
     Agricultural and animal waste includes by-products, 
     packaging, and any materials associated with processing, 
     feeding, selling, transporting, or disposal of agricultural 
     or animal products or wastes, including wood shavings, straw, 
     rice hulls, and other bedding for the disposition of manure.
     Extension of credit for certain existing facilities
       The Senate amendment extends the present-law credit through 
     December 31, 2004, for production from existing facilities 
     producing coke, coke gas, or natural gas and by-products 
     produced by coal gasification from lignite.
     Study of coal bed methane gas
       The Senate amendment provides that the Secretary of the 
     Treasury undertake a study of the effect of section 29 on the 
     production of coal bed methane. The Secretary's study is to 
     be made in conjunction with the study to be undertaken by the 
     Secretary of the Interior on the effects of coal bed methane 
     production on surface and water resources, as provided in 
     section 607 of the Energy Policy Act of 2002 (should that 
     study be required by law). The study should estimate the 
     total amount of credit claimed annually and in aggregate 
     related to the production of coal bed methane since the 
     enactment of section 29. The study should report the annual 
     value of the credit allowable for coal bed methane compared 
     to the average annual wellhead price of natural gas (per 
     thousand cubic feet of natural gas). The study should 
     estimate the incremental increase in production of coal bed 
     methane that has resulted from the enactment of section 29. 
     The study should also estimate the cost to the Federal 
     government, in terms of the net tax benefits claimed, per 
     thousand cubic feet of incremental coal bed methane produced 
     annually and in aggregate since the enactment of section 29.
     Effective date
       The Senate amendment is effective for fuel sold after the 
     date of enactment.


                          Conference Agreement

     In general
       The conferees follow the House bill structure and a related 
     provision in S. 1149 as reported by the Senate Committee on 
     Finance on May 23, 2003. In general, the provision permits 
     taxpayers to claim the section 29 credit for certain new 
     wells or facilities placed in service after date of enactment 
     and before January 1, 2007, and the provision also permits 
     taxpayers to claim the section 29 credit

[[Page H11348]]

     for certain existing wells and facilities. For all qualifying 
     wells and facilities the value of the credit is $3.00 for 
     production in 2003 and is indexed for inflation commencing 
     with the credit amount for 2004. The credit can be claimed 
     for production for each of the first four years of 
     production, but not for any production occurring after 
     December 31, 2009. The amount of the credit a taxpayer may 
     claim with respect to any well or facility is subject to the 
     daily limit.
     Extension of placed in service date for certain new 
         facilities
       For new facilities producing qualifying fuels that are oil 
     from shale or tar sands, and gas from geopressured brine, 
     Devonian shale, coal seams or a tight formation, the credit 
     can be claimed for production from such new facilities placed 
     in service after date of enactment and before January 1, 
     2007. Credit may be claimed for production for each of the 
     first four years of production, but not for any production 
     occurring after December 31, 2009.
     Extension of credit for existing oil and gas wells or 
         facilities
       The provision permits production from certain existing 
     wells (any well drilled after December 31, 1979, and before 
     January 1, 1993) to claim a credit equal to the newly re-
     indexed value of $3.00 for production in 2003 after the date 
     of enactment through 2007.
     Extension of credit for certain other existing wells or 
         facilities
       The provision extends the present-law credit through 2007, 
     for production from existing facilities producing natural gas 
     and by-products produced by coal gasification from lignite.
     Extension for landfill gas facilities
       The provision permits landfill gas sold from facilities 
     placed in service after June 30, 1998, and before January 1, 
     2007, to be eligible for four years of credit from the later 
     of January 1, 2004, or the date such facility is placed in 
     service and ending on the earlier of the date that is four 
     years after the date such period began or December 31, 2009. 
     In the case of a landfill subject to the Environmental 
     Protection Agency's 1996 New Source Performance Standards/
     Emissions Guidelines the amount of credit is $2.00 per barrel 
     equivalent in 2003 and is indexed for inflation commencing 
     with the credit amount for 2004.
     Expansion for coke facilities
       The provision permits a facility for producing coke or coke 
     gas which was placed in service before January 1, 1993, or 
     after June 30, 1998, or after the date of enactment and 
     before January 1, 2007, to claim a credit beginning on the 
     later of January 1, 2004, or the date such facility is placed 
     in service and ending the earlier of the date four years 
     after such period began or December 31, 2009. A facility 
     currently claiming the credit under section 29(g) may not 
     claim any credit at the $3.00 rate in the future.
     Expansion for fuels from agricultural and animal waste
       The provision adds facilities producing liquid, gaseous, or 
     solid fuels, from agricultural and animal waste placed in 
     service after the date of enactment and before January 1, 
     2007, to the list of qualified facilities for purposes of the 
     non-conventional fuel credit. Taxpayers may claim the credit 
     beginning on the later of January 1, 2004, or the date such 
     facility is placed in service and ending the earlier of the 
     date which is four years after such date began or December 
     31, 2009. Agricultural and animal waste includes by-products, 
     packaging, and any materials associated with processing, 
     feeding, selling, transporting, or disposal of agricultural 
     or animal products or wastes. An example of transforming 
     agricultural and animal waste into qualifying fuels is 
     through the use of the thermal depolymerization process.
     Expansion for ``refined coal''
       The provision also expands section 29 to include certain 
     ``refined coal'' as a qualified non-conventional fuel. 
     ``Refined coal'' is a qualifying liquid, gaseous, or solid 
     synthetic fuel produced from coal (including lignite) from 
     facilities placed in service after date of enactment and 
     before January 1, 2008. Taxpayers may claim the credit for 
     fuel produced during the five-year period beginning on the 
     date the facility is placed in service and without being 
     subject to the general rule disallowing credit for production 
     and sale after December 31, 2009. A qualifying fuel is a fuel 
     that when burned emits 20 percent less nitrogen oxide and 
     either sulfur dioxide or mercury than the burning of 
     feedstock coal or comparable coal predominantly available in 
     the marketplace as of January 1, 2003, and if the fuel sells 
     at prices at least 50 percent greater than the prices of the 
     feedstock coal or comparable coal. A facility qualifies if 
     the taxpayer certifies (in such a manner as the Secretary may 
     prescribe) that the refined coal meets these requirements. 
     Refined coal also includes a qualifying fuel derived from 
     high-carbon fly ash. However, no fuel produced at a 
     qualifying advanced clean coal facility (as defined 
     elsewhere) would be a qualifying fuel.
       The conferees intend that fuels made from coal using the 
     Fischer-Tropsch process would qualify as refined fuel 
     provided that such fuels satisfy the environmental and value 
     tests described above. The Fischer-Tropsch process for 
     producing diesel fuel can be separated into three main parts: 
     (1) the production of synthesis gas from the main feedstock; 
     (2) the catalytic reaction which converts the synthesis gas 
     into hydrocarbon components; and (3) the refining of these 
     hydrocarbon components into diesel fuel. Production of 
     synthesis gas is accomplished by reforming the feedstock 
     through partial oxidation reforming, autotherman 
     reforming,\63\ or steam reforming.
---------------------------------------------------------------------------
     \63\ Autotherman reforming can be accomplished with the use 
     of ambient air, enriched air, or pure oxygen.
---------------------------------------------------------------------------
     Expansion for coalmine gas
       In addition, the provision permits taxpayers to claim 
     credit for coalmine gas captured or extracted by the taxpayer 
     during the period beginning on the day after the date of 
     enactment and ending on December 31, 2006, and utilized as a 
     fuel source or sold by or on behalf of the taxpayer to an 
     unrelated person. The term ``coalmine gas'' means any methane 
     gas which is being liberated during qualified coal mining 
     operations or as a result of past qualified coal mining 
     operations, or which is captured 10 years in advance of 
     qualified coal mining operations as part of a specific plan 
     to mine a coal deposit. In the case of coalmine gas that is 
     captured in advance of qualified coal mining operations, the 
     credit is allowed only after the date the coal extraction 
     occurs in the immediate area where the coalmine gas was 
     removed. The capture or extraction of coalmine gas from coal 
     mining operations is required to be in compliance with 
     applicable Federal pollution prevention, control, and permit 
     requirements in order to qualify for the credit.
     Daily limit
       Under the provision, a taxpayer would not be able to claim 
     any credit for production in excess of a daily average \64\ 
     of 200,000 cubic feet of natural gas or barrel of oil 
     equivalent (200,000 cubic feet is equivalent to approximately 
     35.4 barrels of oil) of such gas with respect to any property 
     or facility for which credit can be claimed under the 
     modifications above.\65\ All facilities eligible for the 
     $3.00 credit under the conference agreement are subject to 
     this limitation.
---------------------------------------------------------------------------
     \64\ The daily average is computed as total production 
     divided by the total number of days the well or facility was 
     in production during the year. Days before the date the 
     project is placed in service are not taken into account in 
     determining the daily average.
     \65\ The conferees observe that the daily limit adopted in 
     the conference agreement is identical to the provision in 
     H.R. 6 as passed by the House of Representatives and in S. 
     1149 as reported by the Senate Committee on Finance.
---------------------------------------------------------------------------
     New phaseout adjustment
       In the case of fuels sold after 2003, the dollar amount is 
     $3.00 (without regard to a phaseout adjustment). The new 
     phaseout is increased to $35.00.
     General business credit
       The provision adds section 29 to the list of general 
     business credits and relabels present section 29 of the Code 
     as new Code section 45K.
     Effective date
       The provision is effective for fuel produced and sold from 
     qualifying wells and facilities after December 31, 2003. For 
     application of the general business credit, the provision is 
     effective for taxable years ending after December 31, 2003.

                 C. Alternative Minimum Tax Provisions

     1. Allow personal energy credits against the alternative 
         minimum tax (sec. 41007 of the House bill, secs. 2103(b) 
         and 2109(b) of the Senate amendment, and sec. 26 of the 
         Code)


                              Present Law

       With certain exceptions, for taxable years beginning after 
     December 31, 2003, nonrefundable personal credits may not 
     exceed the excess of the regular tax liability over the 
     tentative minimum tax.
       The tentative minimum tax is an amount equal to specified 
     rates of tax imposed on the excess of the alternative minimum 
     taxable income over an exemption amount. To the extent the 
     tentative minimum tax exceeds the regular tax, a taxpayer is 
     subject to the alternative minimum tax.


                               House Bill

       The House bill allows the personal energy credits added by 
     the bill to offset both the regular tax and the alternative 
     minimum tax. (The credits added by the House bill include the 
     credit for residential solar energy property, the credit for 
     qualified fuel cell power plants, and the credit for energy 
     efficient improvements to existing homes)
       Effective date.--The provision is effective for taxable 
     years beginning after December 31, 2003.


                            Senate Amendment

       The Senate amendment is the same as the House bill. (The 
     credits added by the Senate amendment include the credit for 
     residential energy efficient property and the credit for 
     energy efficient improvements to existing homes.)
       Effective date.--The provision is effective for taxable 
     years beginning after December 31, 2003.


                          Conference Agreement

       The conference agreement follows the House bill and the 
     Senate amendment and allows the personal energy credits added 
     by the conference agreement (credits for residential energy 
     efficient property and energy efficiency improvements to 
     existing homes) to offset both the regular tax and the 
     alternative minimum tax.
       Effective date.--The provision is effective for taxable 
     years beginning after December 31, 2003.

[[Page H11349]]

     2. Increase tax limitation on use of business energy credits 
         (secs. 43006 and 43008 of the House bill, secs. 
         2005(b)(3) and 2503(c) of the Senate amendment, and sec. 
         38 of the Code)


                              Present Law

       Generally, business tax credits may not exceed the excess 
     of the taxpayer's income tax liability over the tentative 
     minimum tax (or, if greater, 25 percent of the regular tax 
     liability). Credits in excess of the limitation may be 
     carried back one year and carried over for up to 20 years.
       The tentative minimum tax is an amount equal to specified 
     rates of tax imposed on the excess of the alternative minimum 
     taxable income over an exemption amount. To the extent the 
     tentative minimum tax exceeds the regular tax, a taxpayer is 
     subject to the alternative minimum tax.


                               House Bill

       The House bill treats the tentative minimum tax as being 
     zero for purposes of determining the tax liability limitation 
     with respect to (1) the business energy credits added by the 
     bill for construction of new energy efficient homes; for 
     production of low sulfur diesel fuel; and for oil and gas 
     production from marginal wells, (2) for taxable years 
     beginning in 2004 and 2005, the enhanced oil recovery credit, 
     and (3) the section 45 credit for electricity produced from a 
     wind facility (placed in service after the date of enactment) 
     during the first four years of production beginning on the 
     date the facility is placed in service.
       Effective date.--The provision is effective for taxable 
     years ending after the date of enactment of the Act.


                            Senate Amendment

       The Senate amendment allows the small ethanol producer 
     credit and the Alaska natural gas credit to be claimed 
     against the entire regular tax and alternative minimum tax; 
     other business energy credits are subject to the present law 
     limitation.
       Effective date.--The provision is effective with effective 
     date of the respective credits.


                          Conference Agreement

       The conference agreement treats the tentative minimum tax 
     as being zero for purposes of determining the tax liability 
     limitation with respect to (1) the business energy credits 
     added by the bill for construction of new energy efficient 
     homes, energy efficient appliances, production of low sulfur 
     diesel fuel, and oil and gas production from marginal wells; 
     (2) for taxable years beginning after December 31, 2003, the 
     section 40 alcohol fuels credit; (3) for taxable years 
     beginning in 2004 and 2005, the section 43 enhanced oil 
     recovery credit; and (4) the section 45 credit for 
     electricity produced from a facility (placed in service after 
     the date of enactment) during the first four years of 
     production beginning on the date the facility is placed in 
     service.
       Effective date.--The provision is effective for taxable 
     years ending after the date of enactment of the Act.
     3. Intangible drilling costs (IDCs) (sec. 43007 of the House 
         bill and sec. 57 of the Code)


                              Present Law

       Taxpayers who pay or incur intangible drilling or 
     development costs (``IDCs'') in the development of domestic 
     oil or gas production may elect to either expense or 
     capitalize these amounts. If an election to expense IDCs is 
     made, the taxpayer deducts the amount of the IDCs as an 
     expense in the taxable year the cost is paid or incurred.
       The difference between the amount of a taxpayer's IDC 
     deduction and the amount which would have been currently 
     deductible had IDCs been capitalized and recovered over a 10-
     year period is an item of tax preference for the alternative 
     minimum tax (``AMT'') to the extent that this amount exceeds 
     65 percent of the taxpayer's net income from oil and gas 
     properties for the taxable year. This preference applies to 
     taxpayers other than integrated oil companies only to the 
     extent that the failure to apply the preference would result 
     in a reduction of the taxpayer's alternative minimum taxable 
     income by more than 40 percent.


                               House Bill

       The bill repeals the AMT preference for intangible drilling 
     costs for oil and gas wells for taxpayers other than 
     integrated oil companies.
       Effective date.--The provision applies to taxable years 
     beginning after December 31, 2003, and beginning before 
     January 1, 2006.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the House bill.

                        D. Clean Coal Incentives

     1. Credit for production from a clean coal technology unit 
         (secs. 2201 and 2221 of Senate amendment)


                              Present Law

       Present law does not provide a production credit for 
     electricity generated at units that use coal as a fuel. 
     However, an income tax credit is allowed for the production 
     of electricity from either qualified wind energy, qualified 
     ``closed-loop'' biomass, or qualified poultry waste units 
     placed in service prior to January 1, 2002 (sec. 45). The 
     credit allowed equals 1.5 cents per kilowatt-hour of 
     electricity sold. The 1.5-cent figure is indexed for 
     inflation and equals 1.8 cents for 2002. The credit is 
     allowable for production during the 10-year period after a 
     unit is originally placed in service. The production tax 
     credit is a component of the general business credit (sec. 
     38(b)(1)).


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment provides a production credit for 
     electricity produced from certain units that have been 
     retrofitted, repowered, or replaced with a clean coal 
     technology within ten years of the date of enactment. The 
     value of the credit is 0.34 cents per kilowatt-hour of 
     electricity produced and is indexed for inflation occurring 
     after 2002 with the first potential adjustment in 2004.
       A qualifying clean coal technology unit must meet certain 
     capacity standards, thermal efficiency standards, and 
     emissions standards for SO2, nitrous oxides, 
     particulate emissions, and source emissions standards as 
     provided in the Clean Air Act. To be a qualified clean coal 
     technology unit, the taxpayer must receive a certificate from 
     the Secretary of the Treasury. The Secretary may grant 
     certificates to units only to the point that 4,000 megawatts 
     of electricity production capacity qualifies for the credit. 
     However, no qualifying unit would be eligible if the unit's 
     capacity exceeded 300 megawatts.
       Certain persons (public utilities, electric cooperatives, 
     Indian tribes, and the Tennessee Valley Authority) are 
     eligible to obtain certifications from the Secretary for 
     these credits and sell, trade, or assign the credit to any 
     taxpayer. However, any credit sold, traded, or assigned may 
     only be sold, traded, or assigned once. Subsequent trades are 
     not permitted.
       Effective date.--The Senate amendment is effective for 
     electricity sold after the date of enactment.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment provision.
     2. Investment credit for clean coal technology units (secs. 
         2211 and 2221 of Senate amendment and new sec. 48A of the 
         Code)


                              Present Law

       Present law does not provide an investment credit for 
     electricity generating units that use coal as a fuel. 
     However, a nonrefundable, 10-percent investment tax credit 
     (``business energy credit'') is allowed for the cost of new 
     property that is equipment (1) that uses solar energy to 
     generate electricity, to heat or cool a structure, or to 
     provide solar process heat, or (2) that is used to produce, 
     distribute, or use energy derived from a geothermal deposit, 
     but only, in the case of electricity generated by geothermal 
     power, up to the electric transmission stage (sec. 48). The 
     business energy tax credit is a component of the general 
     business credit (sec. 38(b)(1)).


                               House Bill

       No provision.


                            Senate Amendment

     In general
       The Senate amendment provides a 10-percent investment tax 
     credit for qualified investments in advanced clean coal 
     technology units. Certain persons (public utilities, electric 
     cooperatives, Indian tribes, and the Tennessee Valley 
     Authority) will be eligible to obtain certifications from the 
     Secretary of the Treasury (as described below) for these 
     credits and sell, trade, or assign the credit to any 
     taxpayer. However, any credit sold, traded, or assigned may 
     only be sold, traded, or assigned once. Subsequent trades are 
     not permitted.
     Qualifying advanced clean coal technology units
       Qualifying advanced clean coal technology units must 
     utilize advanced pulverized coal or atmospheric fluidized bed 
     combustion technology, pressurized fluidized bed combustion 
     technology, integrated gasification combined cycle 
     technology, or some other technology certified by the 
     Secretary of Energy. Any qualifying advanced clean coal 
     technology unit must meet certain capacity standards, thermal 
     efficiency standards, and emissions standards for SO2, 
     nitrous oxides, particulate emissions, and source emissions 
     standards as provided in the Clean Air Act. In addition, a 
     qualifying advanced clean coal technology unit must meet 
     certain carbon emissions requirements.
       If the advanced clean coal technology unit is an advanced 
     pulverized coal or atmospheric fluidized bed combustion 
     technology unit, a pressurized fluidized bed combustion 
     technology unit, or an integrated gasification combined cycle 
     technology unit and if the unit uses a design coal with a 
     heat content of not more than 9,000 Btu per pound, the unit 
     must have a carbon emission rate less than 0.60 pound of 
     carbon per kilowatt hour of electricity produced. If the 
     advanced clean coal technology unit is an advanced pulverized 
     coal or atmospheric fluidized bed combustion technology unit, 
     a pressurized fluidized bed combustion technology unit, or an 
     integrated gasification combined cycle technology unit and if 
     the unit uses a design coal with a heat content greater than 
     9,000 Btu per pound, the unit must have a carbon emission 
     rate less than 0.54 pound of carbon per kilowatt hour of 
     electricity produced. In the case of an advanced clean 
     coal technology unit that uses another eligible technology 
     and if the unit uses a design coal with a heat content of 
     not more than 9,000 Btu per pound, the unit must have a 
     carbon emission rate less than 0.51 pound of carbon per 
     kilowatt hour of electricity produced. In the case of an 
     advanced clean coal technology unit that uses another 
     eligible technology and if

[[Page H11350]]

     the unit uses a design coal with a heat content greater 
     than 9,000 Btu per pound, the unit must have a carbon 
     emission rate less than 0.459 pound of carbon per kilowatt 
     hour of electricity produced.
     Allocation of credits
       To be a qualified investment in advanced clean coal 
     technology, the taxpayer must receive a certificate from the 
     Secretary of the Treasury. The Secretary may grant 
     certificates to investments only to the point that 4,000 
     megawatts of electricity production capacity qualifies for 
     the credit. From the potential pool of 4,000 megawatts of 
     capacity, not more than 1,000 megawatts in total and not more 
     than 500 megawatts in years prior to 2009 shall be allocated 
     to units using advanced pulverized coal or atmospheric 
     fluidized bed combustion technology. From the potential pool 
     of 4,000 megawatts of capacity, not more than 500 megawatts 
     in total and not more than 250 megawatts in years prior to 
     2009 shall be allocated to units using pressurized fluidized 
     bed combustion technology. From the potential pool of 4,000 
     megawatts of capacity, not more than 2,000 megawatts in total 
     and not more than 1,000 megawatts in years prior to 2009 and 
     not more than 1,500 megawatts in year prior to 2013 shall be 
     allocated to units using integrated gasification combined 
     cycle technology, with or without fuel or chemical co-
     production. From the potential pool of 4,000 megawatts of 
     capacity, not more than 500 in total and not more than 250 
     megawatts in years prior to 2009 shall be allocated to any 
     other technology certified by the Secretary of Energy.
     Effective date
       The Senate amendment is effective for property placed in 
     service after the date of enactment.


                          Conference Agreement

     In general
       The conference establishes an investment tax credit for 
     qualified clean coal property. The credit amount is 15 
     percent for property placed in service in connection with any 
     basic clean coal technology unit and 17.5 percent for 
     property placed in service in connection with any advanced 
     clean coal technology unit. Qualifying clean coal property is 
     section 1245 property installed in connection with an 
     existing coal-based unit for the production of electricity as 
     part of a conversion to a basic or advanced clean coal 
     technology unit, or is installed in connection with a new 
     advanced clean coal technology unit. Qualifying property must 
     be placed in service after December 31, 2003, and if part of 
     a basic clean coal technology unit before January 1, 2014. If 
     the qualifying property is placed in service as part of an 
     advanced clean coal technology unit, it must be placed in 
     service prior to January 1, 2017.
       The total amount of clean coal property eligible for the 
     credit is subject to a national megawatt limitation (detailed 
     below). To be eligible to claim the credit, the taxpayer must 
     receive an allocation of megawatt capacity from the 
     Secretary. The amount of credit the taxpayer may claim with 
     respect to clean coal property is the otherwise allowable 
     credit amount multiplied by the ratio of the national 
     megawatt capacity limitation allocated to the taxpayer over 
     the total nameplate capacity of the taxpayer's unit.
       In addition, the credit allowable to the taxpayer is 
     reduced by reason of grants, tax-exempt bonds, subsidized 
     energy financing, and other credits, but such reduction 
     cannot exceed 50 percent of the otherwise allowable credit. 
     The credit is treated as part of the general business credit 
     and, under a special transition rule may not be carried back 
     to a taxable year ending before or on the effective date of 
     the provision.
     Basic clean coal technology units
       A qualifying clean coal technology unit is a unit using 
     clean coal technology (including advanced pulverized coal or 
     atmospheric fluidized bed combustion, pressurized fluidized 
     bed combustion, and integrated gasification combined cycle) 
     for the production of electricity. The unit must use at least 
     75 percent coal to produce at least 50 percent of its thermal 
     output as electricity. In addition, the unit must meet 
     certain capacity standards, thermal efficiency standards, and 
     emissions standards for SO2, nitrous oxides, 
     particulate emissions, and source emissions standards as 
     provided in the Clean Air Act. In addition, a qualifying 
     clean coal technology unit cannot be a unit that is receiving 
     or 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 the Department of Energy. Lastly, to be a 
     qualified clean coal technology unit, the taxpayer must 
     receive a certificate from the Secretary of the Treasury. The 
     Secretary may grant certificates to units only to the point 
     that 4,000 megawatts of electricity production capacity 
     qualifies for the credit. However, no qualifying unit is 
     eligible if the unit's rated nameplate capacity prior to 
     January 1, 2004, exceeded 300 megawatts. The maximum eligible 
     allocation to any qualifying unit may not exceed 300 
     megawatts.
     Advanced clean coal technology units
       A qualifying advanced clean coal technology unit is a unit 
     using: (1) advanced pulverized coal or atmospheric fluidized 
     bed combustion technology; (2) qualifying pressurized 
     fluidized bed combustion technology; (3) integrated 
     gasification combined cycle technology; or (4) other 
     qualifying technology.
       (1) A qualifying advanced pulverized coal or atmospheric 
     fluidized bed combustion technology unit is a unit placed in 
     service after the date of enactment and before 2013 and 
     having a design net heat rate of not more than 8,500 Btu 
     (8,900 Btu if the unit is placed in service before 2009).
       (2) A qualifying pressurized fluidized bed combustion 
     technology unit is a unit placed in service after the date of 
     enactment and before 2017 and having a design net heat rate 
     of not more than 7,720 Btu (8,900 Btu if the unit is placed 
     in service before 2009 and 8,500 Btu if the unit is placed in 
     service after 2008 and before 2013).
       (3) A qualifying integrated gasification combined cycle 
     technology unit, with or without fuel or chemical co-
     production, is a unit placed in service after the date of 
     enactment and before 2017 and having a design net heat rate 
     of not more than 7,720 Btu (8,900 Btu if the unit is placed 
     in service before 2009 and 8,500 Btu if the unit is placed in 
     service after 2008 and before 2013).
       (4) An other qualifying technology unit is a unit that uses 
     any other technology and satisfies the design net heat rates 
     of a qualifying advanced pulverized coal or atmospheric 
     fluidized bed combustion technology unit.
       Any qualifying advanced clean coal technology unit must 
     meet certain capacity standards, thermal efficiency 
     standards, and emissions standards for SO2 nitrous 
     oxides, particulate emissions, and source emissions standards 
     as provided in the Clean Air Act. A qualifying advanced clean 
     coal technology unit must use at least 75 percent coal to 
     produce at least 50 percent of its thermal output as 
     electricity. In addition, a qualifying advanced clean coal 
     technology unit must meet certain carbon emissions 
     requirements. For units using design coal with a heat content 
     of not more than 9,000 Btu per pound, the carbon emission 
     rate must be less than 0.60 pound of carbon per kilowatt hour 
     (0.51 if the unit qualifies as an other technology unit). For 
     units using design coal with a heat content in excess of 
     9,000 Btu per pound, the carbon emission rate must be less 
     than 0.54 pound of carbon per kilowatt hour (0.459 if the 
     unit qualifies as an other technology unit).
       To be a qualified investment in advanced clean coal 
     technology, the taxpayer must receive a certificate from the 
     Secretary of the Treasury. The Secretary may grant 
     certificates to investments only to the point that 6,000 
     megawatts of electricity production capacity qualifies for 
     the credit. From the potential pool of 6,000 megawatts of 
     capacity, not more than 1,500 megawatts in total and not more 
     than 750 megawatts in years prior to 2009 shall be allocated 
     to units using advanced pulverized coal or atmospheric 
     fluidized bed combustion technology. From the potential pool 
     of 6,000 megawatts of capacity, not more than 750 megawatts 
     in total and not more than 375 megawatts in years prior to 
     2009 shall be allocated to units using pressurized fluidized 
     bed combustion technology. From the potential pool of 6,000 
     megawatts of capacity, not more than 3,000 megawatts in total 
     and not more than 1,250 megawatts in years prior to 2009 
     shall be allocated to units using integrated gasification 
     combined cycle technology, with or without fuel or chemical 
     co-production. From the potential pool of 6,000 megawatts of 
     capacity, not more than 750 in total and not more than 375 
     megawatts in years prior to 2009 shall be allocated to any 
     other technology unit.
       Effective date.--The provision is effective for property 
     placed in service after the date of enactment.
     3. Credit for production from advanced clean coal technology 
         (secs. 2212 and 2221 of Senate amendment)


                              Present Law

       Present law does not provide a production credit for 
     electricity generated at units that use coal as a fuel. 
     However, an income tax credit is allowed for the production 
     of electricity from either qualified wind energy, qualified 
     ``closed-loop'' biomass, or qualified poultry waste units 
     placed in service prior to January 1, 2002 (sec. 45). The 
     credit allowed equals 1.5 cents per kilowatt-hour of 
     electricity sold. The 1.5-cent figure is indexed for 
     inflation and equals 1.8 cents for 2002. The credit is 
     allowable for production during the 10-year period after a 
     unit is originally placed in service. The production tax 
     credit is a component of the general business credit (sec. 
     38(b)(1)).


                               House Bill

       No provision.


                            Senate Amendment

     In general
       The Senate amendment creates a production credit for 
     electricity produced from any qualified advanced clean coal 
     technology electricity generation unit that qualifies for the 
     investment credit for qualifying clean coal technology units, 
     as described above. Certain persons (public utilities, 
     electric cooperatives, Indian tribes, and the Tennessee 
     Valley Authority) will be eligible to obtain certifications 
     from the Secretary of the Treasury (as described below) for 
     each of these credits and sell, trade, or assign the credit 
     to any taxpayer. However, any credit sold, traded, or 
     assigned may only be sold, traded, or assigned once. 
     Subsequent trades are not permitted.
     Value of production credit for electricity produced from 
         qualifying advanced clean coal technology
       The taxpayer may claim a production credit on the sum of 
     each kilowatt-hour of electricity produced and the heat value 
     of other

[[Page H11351]]

     fuels or chemicals produced by the taxpayer at the unit.\66\ 
     The taxpayer may claim the production credit for the 10-year 
     period commencing with the date the qualifying unit is placed 
     in service (or the date on which a conventional unit was 
     retrofitted or repowered). The value of the credit varies 
     depending upon the year the unit is placed in service, 
     whether the unit produces solely electricity or electricity 
     and fuels or chemicals, and the rated thermal efficiency of 
     the unit. In addition, the value of the credit is reduced for 
     the second five years of eligible production. The maximum 
     value of the production credit from any qualifying unit 
     during the first five years of production is $0.014 per 
     kilowatt-hour and the minimum value is $0.001. During the 
     second five years of production from a qualifying unit, the 
     maximum value of the production credit is $0.0115 and the 
     minimum value is $0.001. The value of the credit is indexed 
     for inflation occurring after 2002 with the first potential 
     adjustment in 2004.
---------------------------------------------------------------------------
     \66\ Each 3,413 Btu of heat content of the fuel or chemical 
     is treated as equivalent to one kilowatt-hour of electricity.
---------------------------------------------------------------------------
     Effective date
       The Senate amendment is effective for electricity sold 
     after the date of enactment.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment provision.
     4. Amortization of pollution control facilities (sec. 169 of 
         the Code)


                              Present Law

       In general, a taxpayer may elect to recover the cost of any 
     certified pollution control facility over a period of 60 
     months.\67\ A certified pollution control facility is defined 
     as a new, identifiable treatment facility which (1) is used 
     in an existing plant in operation before January 1, 1976, to 
     abate or control water or atmospheric pollution or 
     contamination by removing, altering, disposing, storing, or 
     preventing the creation or emission of pollutants, 
     contaminants, wastes or heat; and (2) which does which does 
     not lead to a significant increase in output or capacity, a 
     significant extension of useful life, or a significant 
     reduction in total operating costs for such plant or other 
     property (or any unit thereof), or a significant alteration 
     in the nature of a manufacturing production process or 
     facility. Certification is required by appropriate State and 
     Federal authorities that the facility comply with appropriate 
     standards.
---------------------------------------------------------------------------
     \67\ Sec. 169. For purposes of the alternative minimum tax, 
     such property is recovered using the straight-line method 
     over its general recovery period (for property placed in 
     service prior to 1999 and after 1986 such property is 
     recovered using the alternative system of depreciation 
     contained in section 168(g)).
---------------------------------------------------------------------------
       For a pollution control facility with a useful life greater 
     than 15 years, only the basis attributable to the first 15 
     years is eligible to be amortized over a 5-year period.\68\ 
     The remaining basis is depreciable under the regular rules 
     for depreciation. In addition, a corporate taxpayer must 
     reduce the amount of basis eligible for the 60-month recovery 
     by 20 percent.\69\ Such reduction is depreciable under the 
     regular rules for depreciation.
---------------------------------------------------------------------------
     \68\ The amount attributable to the first 15 years is equal 
     to an amount which bears the same ratio to the portion of the 
     adjusted basis of such facility, which would be eligible for 
     amortization but for the application of this rule, as 15 
     bears to the number of years of useful life of such facility.
     \69\ Sec. 291(a)(5).
---------------------------------------------------------------------------


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement expands the ability to recover 
     certified pollution control facilities over 60 months by 
     repealing the requirement that only a certified pollution 
     control facility used in connection with a plant in operation 
     before January 1, 1976 qualify. Thus, a certified pollution 
     control facility used in connection with a plant or other 
     property that began operation after January 1, 1976, will 
     generally be eligible for recovery over 60 months.\70\ In 
     addition, the conference agreement shortens the recovery 
     period for a certified pollution control facility used in 
     connection with a plant or other property in operation before 
     January 1, 1976, to 36 months (from 60 months) if no 
     allocation is made under section 48A(f) (as added by another 
     provision of the conference agreement). The conference 
     agreement does not alter the present law limitation on the 
     benefits of the provision for corporate taxpayers and 
     pollution control facilities with a useful life greater than 
     15 years.
---------------------------------------------------------------------------
     \70\ In the case of a facility used in connection with a 
     plant or other property to which an amount is allocated under 
     section 48A(f) (as added by another provision in the 
     conference agreement) the 60-month amortization period only 
     applies if such plant or other property was in operation 
     before January 1, 1976.
---------------------------------------------------------------------------
       Effective date.--The provision applies to facilities placed 
     in service after the date of enactment.
     5. Eligible integrated gasification combined cycle technology 
         unit treated as five-year property (sec. 168 of the Code)


                              Present Law

       The applicable recovery period for assets placed in service 
     under the Modified Accelerated Cost Recovery System is based 
     on the ``class life of the property.'' The class lives of 
     assets placed in service after 1986 are generally set forth 
     in Revenue Procedure 87-56.\71\ Electric utility steam 
     production plant property, which includes combustion turbines 
     operated in a combined cycle with a conventional steam unit, 
     is assigned a 20-year recovery period and a class life of 28 
     years.
---------------------------------------------------------------------------
     \71\ 1987-2 C.B. 674 (as clarified and modified by Rev. Proc. 
     88-22, 1988-1 C.B. 785).
---------------------------------------------------------------------------


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement establishes a statutory 5-year 
     recovery period and a class life of 20 years for an eligible 
     integrated gasification combined cycle technology unit that 
     receives an allocation of the clean coal technology 
     credit.\72\ An eligible integrated gasification combined 
     cycle technology unit is defined as a clean coal technology 
     unit using integrated gasification combined cycle technology, 
     with or without fuel or chemical co-production, which meets a 
     certain design heat rate and net thermal efficiency.\73\
---------------------------------------------------------------------------
     \72\ Section 48A as added by another provision of the 
     conference agreement.
     \74\ The design heat rate and net thermal efficiency 
     standards are defined in section 48A(e)(4)(A) and (B) as 
     added by another provision of the conference agreement.
---------------------------------------------------------------------------
       Effective date.--The provision is effective for property 
     placed in service after the date of enactment.

                 E. High Volume Natural Gas Provisions

     1. High volume natural gas pipe treated as seven-year 
         property (sec. 168 of the Code)


                              Present Law

       The applicable recovery period for assets placed in service 
     under the Modified Accelerated Cost Recovery System is based 
     on the ``class life of the property.'' The class lives of 
     assets placed in service after 1986 are generally set forth 
     in Revenue Procedure 87-56.\74\ Asset class 46.0, describing 
     assets used in the private, commercial, andcontract carrying 
     of petroleum, gas and other products by means of pipes and 
     conveyors, are assigned a class life of 22 years and a 
     recovery period of 15 years.
---------------------------------------------------------------------------
     \74\ 1987-2 C.B. 674 (as clarified and modified by Rev. Proc. 
     88-22, 1988-1 C.B. 785).
---------------------------------------------------------------------------


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement establishes a statutory seven-year 
     recovery period and a class life of 22 years for any high 
     volume natural gas pipe the original use \75\ of which 
     commences after the date of enactment. High volume natural 
     gas pipe is defined as a pipe which has an interior diameter 
     at least 42 inches and which is part of a natural gas 
     pipeline system. Such property includes any related equipment 
     and appurtenances used in connection with such pipe. In 
     addition, the conference agreement provides that there is no 
     adjustment to the allowable amount of depreciation for 
     purposes of computing a taxpayer's alternative minimum 
     taxable income with respect to such property.
---------------------------------------------------------------------------
     \75\ The term ``original use'' means the first use to which 
     the property is put, whether or not such use corresponds to 
     the use of such property by the taxpayer. It is intended 
     that, when evaluating whether property qualifies as 
     ``original use,'' the factors used to determine whether 
     property qualified as ``new section 38 property'' for 
     purposes of the investment tax credit would apply. See 
     Treasury Regulation 1.48-2. Thus, it is intended that 
     additional capital expenditures incurred to recondition or 
     rebuild acquired property (or owned property) would satisfy 
     the ``original use'' requirement. However, the cost of 
     reconditioned or rebuilt property acquired by the taxpayer 
     would not satisfy the ``original use'' requirement. For 
     example, if on April 13, 2004, a taxpayer buys from ACM for 
     $20,000,000 a 42-inch natural gas pipeline that has been 
     previously used by ACM. Subsequent to the purchase, the 
     taxpayer makes an expenditure on the property of $5,000,000 
     for new 42-inch pipe that is required to be capitalized. 
     Regardless of whether the $5,000,000 is added to the basis of 
     such property or is capitalized as a separate asset, such 
     amount would be treated as satisfying the ``original use'' 
     requirement and would be eligible for the reduced recovery 
     period. No part of the $20,000,000 purchase price qualifies 
     for the reduced recovery period.
---------------------------------------------------------------------------
       Effective date.--The provision is effective for property 
     placed in service on or after the date of enactment.
     2. Credit for production of Alaska natural gas (sec. 2503 of 
         Senate amendment)


                              Present Law

       Present law does not provide a credit for conventional 
     production of natural gas or delivery of fuels to a pipeline. 
     However, certain fuels produced from ``non-conventional 
     sources'' and sold to unrelated parties are eligible for an 
     income tax credit equal to $3 (generally adjusted for 
     inflation) per barrel or BTU oil barrel equivalent (sec. 29). 
     Qualified fuels must be produced within the United States.
       Qualified fuels include:
       (1) Gas produced from geopressured brine, Devonian shale, 
     coal seams, tight formations (``tight sands''), or biomass; 
     and
       (2) Liquid, gaseous, or solid synthetic fuels produced from 
     coal (including lignite).
       In general, the credit is available only with respect to 
     fuels produced from wells drilled or facilities placed in 
     service after December 31, 1979, and before January 1, 1993. 
     An exception extends the January 1, 1993 expiration date for 
     facilities producing gas from biomass and synthetic fuel from 
     coal if the facility producing the fuel is placed in service

[[Page H11352]]

     before July 1, 1998, pursuant to a binding contract entered 
     into before January 1, 1997.
       The credit may be claimed for qualified fuels produced and 
     sold before January 1, 2003 (in the case of non-conventional 
     sources subject to the January 1, 1993 expiration date) or 
     January 1, 2008 (in the case of biomass gas and synthetic 
     fuel facilities eligible for the extension period).


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment provides a credit per million British 
     thermal units (Btu) of natural gas for Alaska natural gas 
     entering a pipeline during the 15-year period beginning the 
     later of January 1, 2010 or the initial date for the 
     interstate transportation of Alaska natural gas. Taxpayers 
     may claim the credit against both the regular and minimum 
     tax.
       The credit amount for any month is the excess of $3.25 
     (indexed for inflation) per million Btu of natural gas over 
     the average monthly price for that month for Alaska natural 
     gas at the AECO C Hub in Alberta, Canada. Inflation 
     adjustments in the $3.25 amount will be made by reference 
     to changes in the GDP implicit price deflator for changes 
     occurring after the first year in which the credit may be 
     claimed.
       If in any month commencing three years after the first year 
     in which the credit may be claimed the average monthly price 
     for that month for Alaska natural gas at the AECO C Hub in 
     Alberta, Canada, exceeds $4.875 (indexed for inflation) per 
     million Btu, any prior credits claimed are recaptured by 
     increasing the taxpayer's tax liability by the lesser of the 
     excess of the average monthly price for that month for Alaska 
     natural gas at the AECO C Hub over $4.875 (indexed for 
     inflation) per million Btu or the aggregate amount of credit 
     claimed for Alaska natural gas in all prior years.
       Alaska natural gas is any gas derived from an area of the 
     State of Alaska lying north of 64 degrees North latitude 
     generally from the area known as the ``North Slope of 
     Alaska,'' but not including the Alaska National Wildlife 
     Refuge.
       Effective date.--The provision is effective on the date of 
     enactment.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment provision.
     3. Enhanced oil recovery credit for certain gas processing 
         facilities (sec. 43 of the Code)


                              Present Law

       The taxpayer may claim a credit equal to 15 percent of 
     enhanced oil recovery costs. Qualified enhanced oil recovery 
     costs include costs of depreciable tangible property that is 
     part of an enhanced oil recovery project, intangible drilling 
     and development costs with respect to an enhanced oil 
     recovery project, and tertiary injectant expenses incurred 
     with respect to an enhanced oil recovery project. The credit 
     is phased out when oil prices exceed a threshold amount.


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement provides that expenses in 
     connection with the construction of any qualifying natural 
     gas processing plant capable of processing one trillion 
     British thermal units of natural gas into a natural gas 
     pipeline system on a daily basis are qualified enhanced oil 
     recovery costs eligible for the enhanced oil recovery credit. 
     A qualifying natural gas processing plant also must produce 
     carbon dioxide for re-injection into a producing oil or gas 
     field.
       Effective date.--The provision is effective for costs paid 
     or incurred in taxable years beginning after 2003.

                       IV. ADDITIONAL PROVISIONS

A. Extension of Tax Incentives for Energy-Related Businesses on Indian 
                              Reservations

     (sec. 2501 of the Senate amendment and sec. 168 of the Code)


                              Present Law

       The following tax incentives are available for businesses 
     within Indian reservations.
     Accelerated depreciation
       With respect to certain property used in connection with 
     the conduct of a trade or business within an Indian 
     reservation, depreciation deductions under section 168(j) are 
     determined using shorter recovery periods.
       ``Qualified Indian reservation property'' eligible for 
     accelerated depreciation includes property which is (1) used 
     by the taxpayer predominantly in the active conduct of a 
     trade or business within an Indian reservation, (2) not used 
     or located outside the reservation on a regular basis, (3) 
     not acquired (directly or indirectly) by the taxpayer from a 
     person who is related to the taxpayer, and (4) described in 
     the recovery-period table above. In addition, property is not 
     ``qualified Indian reservation property'' if it is placed in 
     service for purposes of conducting gaming activities. Certain 
     ``qualified infrastructure property'' may be eligible for the 
     accelerated depreciation even if located outside an Indian 
     reservation.
       The depreciation deduction allowed for regular tax purposes 
     is also allowed for purposes of the alternative minimum tax. 
     The accelerated depreciation is available with respect to 
     property placed in service on or after January 1, 1994, and 
     before December 31, 2004.
     Indian employment credit
       In general, a credit against income tax liability is 
     allowed to employers for the first $20,000 of qualified wages 
     and qualified employee health insurance costs paid or 
     incurred by the employer with respect to certain employees 
     (sec. 45A). The credit is equal to 20 percent of the excess 
     of eligible employee qualified wages and health insurance 
     costs during the current year over the amount of such wages 
     and costs incurred by the employer during 1993. The credit is 
     an incremental credit, such that an employer's current-year 
     qualified wages and qualified employee health insurance costs 
     (up to $20,000 per employee) are eligible for the credit only 
     to the extent that the sum of such costs exceeds the sum of 
     comparable costs paid during 1993. No deduction is allowed 
     for the portion of the wages equal to the amount of the 
     credit.
       The wage credit is available for wages paid or incurred on 
     or after January 1, 1994, in taxable years that begin before 
     December 31, 2004.


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment extends the accelerated depreciation 
     incentive to property placed in service before January 1, 
     2006, and the Indian employment credit incentive to taxable 
     years beginning before January 1, 2006.
       Effective date.--The provision is effective on the date of 
     enactment.


                          Conference Agreement

       The conference agreement extends the accelerated 
     depreciation incentive for property placed in service before 
     January 1, 2006, as part of a facility for: (1) the 
     generation or transmission of electricity (including any 
     qualified energy resource as defined in section 45(c) for 
     purposes of the credit for electricity produced from certain 
     renewable resources), (2) an oil or gas well, (3) the 
     transmission or refining of oil or gas, or (4) the production 
     of any qualified fuel (as defined for purposes of the credit 
     for producing fuel from a nonconventional source).
       Effective date.--The provision is effective on the date of 
     enactment.

                              B. GAO Study

     (sec. 2502 of the Senate amendment)


                              Present Law

       Present law does not require study of the present law 
     provisions relating to clean fuel vehicles and electric 
     vehicles.


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment directs the Comptroller General to 
     undertake an ongoing analysis of the effectiveness of the tax 
     credits allowed to alternative motor vehicles and the tax 
     credits allowed to various alternative fuels under Title II 
     of the bill and the tax credits and enhanced deductions 
     allowed for energy conservation and efficiency under Title 
     III of the bill. The studies should estimate the energy 
     savings and reductions in pollutants achieved from taxpayer 
     utilization of these provisions. The studies should estimate 
     the dollar value of the benefits of reduced energy 
     consumption and reduced air pollution in comparison to 
     estimates of the revenue cost of these provisions to the U.S. 
     Treasury. The studies should include an analysis of the 
     distribution of the taxpayers who utilize these provisions by 
     income and other relevant characteristics.
       The bill directs the Comptroller General to submit annual 
     reports to Congress beginning not later than December 31, 
     2002.
       Effective date.--The provision is effective on the date of 
     enactment.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment provision.

  C. Treatment of Certain Dispositions of Dairy Property To Implement 
                Bovine Tuberculosis Eradication Program

     (sec. 2505 of the Senate amendment)


                              Present Law

       Generally, a taxpayer may elect not to recognize gain with 
     respect to property that is involuntarily converted if the 
     taxpayer acquires within an applicable period (generally the 
     period ending two years after the end of the taxable year in 
     which the first gain on the conversion is realized) property 
     similar or related in service or use.


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment extends involuntary conversion 
     treatment to qualified dispositions of dairy property 
     pursuant to the bovine tuberculosis eradication program. 
     Treats any property acquired and held by the taxpayer either 
     for productive use in a trade or business or for investment 
     as property similar or related in use to the converted 
     property. Extend the applicable acquisition period from two 
     to four years and permits replacement property to be acquired 
     from related parties. In addition to deferring gain, the 
     provision also permits an ordinary loss equal to the adjusted 
     basis of the converted property.
       Finally, the provision allows expensing for amounts paid or 
     incurred by the taxpayer to

[[Page H11353]]

     convert any real property into unimproved land pursuant to 
     the bovine tuberculosis eradication program.
       Effective date.--Effective for dispositions made and 
     amounts received in taxable years beginning after May 22, 
     2001, but shall not apply to dispositions made after December 
     31, 2006.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment provision.

    D. Expand Exemption From Aviation Fuels Excise Taxes for Aerial 
                              Applicators

     (sec. 2506 of the Senate amendment)


                              Present Law

       Excise taxes are imposed on aviation gasoline (19.4 cents 
     per gallon) and jet fuel (21.9 cents per gallon) (secs. 4081 
     and 4091). Fuel used on a farm for farming purposes is exempt 
     from tax. Aerial applicators (crop dusters) are allowed to 
     claim the exemption on behalf of farm owners and operators, 
     e.g., in the case of aviation gasoline if the owners or 
     operators give written consent to the aerial applicators. 
     This exemption applies only to fuel consumed in the airplane 
     while operating over the farm, i.e., fuel consumed traveling 
     to and from the farm is not exempt.


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment expands the present-law exception to 
     include fuel used between farms and base airfields, and 
     provides that the aerial applicator is the exclusive party 
     entitled to the refund.
       Effective date.--The provision is effective for fuel use 
     and air transportation after December 31, 2001 and before 
     January 1, 2003.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment provision.

              E. Modification of Rural Airport Definition

     (sec. 2507 of the Senate amendment)


                              Present Law

       Most domestic air passenger transportation is subject to a 
     two-part excise tax. First, an ad valorem tax is imposed at 
     the rate of 7.5 percent of the amount paid for the 
     transportation. Second, a flight segment tax of $3.00 per 
     segment is imposed. The flight segment component of the tax 
     does not apply to segments to or from qualified ``rural 
     airports.'' A rural airport is defined as an airport that (1) 
     in the second preceding calendar year had fewer than 100,000 
     commercial passenger departures, and (2) either (a) is not 
     located within 75 miles of another airport that had more than 
     100,000 such departures in that year, or (b) is eligible for 
     payments under the Federal ``essential air service'' program.


                               House Bill

       No provision.


                            Senate Amendment

       The provision expands the definition of qualified rural 
     airport to include an airport that (1) is not connected by 
     paved roads to another airport and (2) had fewer that 100,000 
     passengers departing by air during the second preceding 
     calendar year.
       Effective date.--The provision is effective for calendar 
     years beginning after 2002.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment provision.

         F. Exempt Transportation by Seaplane From Ticket Taxes

     (sec. 2508 of the Senate amendment)


                              Present Law

       Most domestic air passenger transportation is subject to a 
     two-part excise tax. First, an ad valorem tax is imposed at 
     the rate of 7.5 percent of the amount paid for the 
     transportation. Second, a flight segment tax of $3.00 per 
     segment is imposed. Noncommercial aviation is subject to a 
     higher fuel excise tax, but not the ticket tax.
       Commercial aviation also is subject to a 4.4-cents-per-
     gallon fuels excise tax.


                               House Bill

       No provision.


                            Senate Amendment

       The Senate amendment exempts seaplane flights from the 
     taxes on transportation of persons and property by air.
       Effective date.--The provision is effective for calendar 
     years beginning after 2002.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment provision.

    G. Credit for Taxpayers Owning Commercial Power Takeoff Vehicles

     (sec. 2009 of the Senate amendment)


                              Present Law

       If gasoline is used in an off-highway business use, the 
     ultimate purchaser of the gasoline is entitled to a credit or 
     refund of excise taxes paid in respect of the gasoline.\76\ 
     No credit or payment may be claimed in respect of gasoline 
     used in a commercial highway vehicle solely by reason of the 
     fact that the propulsion motor in the vehicle also is used 
     for a purpose other than to propel the vehicle.\77\ Thus, if 
     the propulsion motor of a highway vehicle also operates 
     special equipment, such as a mixing unit on a concrete mixer 
     or a pump for discharging fuel from a tank truck, by means of 
     a power takeoff or power transfer, no credit or payment may 
     be claimed in respect of the gasoline used to operate the 
     special equipment, even though the special equipment is 
     mounted on the highway vehicle.\78\
---------------------------------------------------------------------------
     \76\ Sec. 6421(a).
     \77\ Treas. Reg. sec. 48.6421-1(d)(2).
     \78\ Id.
---------------------------------------------------------------------------
       If the highway vehicle is equipped with a separate motor to 
     operate the special equipment, credit or refund payment may 
     be claimed in respect of gasoline used in the separate motor. 
     For example, if a separate motor is used to operate a 
     refrigeration unit, pump, generator or mixing unit, the 
     ultimate purchaser could seek a refund with respect to the 
     gasoline used in that separate motor. If the gasoline used in 
     a separate motor is drawn from the same tank as the one which 
     supplies gasoline for the propulsion of the highway vehicle, 
     the determination as to the quantity of gasoline used in the 
     separate motor operating the special equipment is based on 
     operating experience and supported by records.\79\
---------------------------------------------------------------------------
     \79\ Treas. Reg. sec. 48.6421-1(d)(3).
---------------------------------------------------------------------------


                               House Bill

       No provision.


                            Senate Amendment

       The provision provides a yearly $250-per-vehicle income tax 
     credit to business owners of certain highway vehicles that 
     consume fuel for both transportation and in non-
     transportation-related equipment, using a single motor. 
     Specifically, the provision covers vehicles (1) designed to 
     engage in the daily collection of refuse or recyclables from 
     homes or businesses and is equipped with a mechanism under 
     which the vehicles propulsion engine provides the power to 
     operate a load compactor, (``refuse collection trucks'') or 
     (2) designed to deliver ready mixed concrete on a daily basis 
     and is equipped with a mechanism under which the vehicles 
     propulsion engine provides the power to operate a mixer drum 
     to agitate and mix the product en route to the delivery site 
     (``concrete mixers''). Governmental vehicles and those owned 
     by tax-exempt organizations are not eligible for the credit. 
     The credit expires after the calendar year 2004.
       The provision further requires that by January 1, 2005, the 
     Treasury provide by regulation a method for exempting refuse 
     collection trucks and concrete mixers from the fuels excise 
     tax on fuel used to power equipment attached to these 
     vehicles.
       Effective date.--The provision is effective for taxable 
     years beginning after the date of enactment through 2004.


                          Conference Agreement

       The conference agreement does not contain the Senate 
     amendment provision.

   H. Payment of Dividends on Stock of Cooperatives Without Reducing 
                          Patronage Dividends

     (sec. 1388 of the Code)


                              Present Law

       Under present law, cooperatives generally are entitled to 
     deduct or exclude amounts distributed as patronage dividends 
     in accordance with Subchapter T of the Code. In general, 
     patronage dividends are comprised of amounts that are paid to 
     patrons (1) on the basis of the quantity or value of business 
     done with or for patrons, (2) under a valid and enforceable 
     obligation to pay such amounts that was in existence before 
     the cooperative received the amounts paid, and (3) which are 
     determined by reference to the net earnings of the 
     cooperative from business done with or for patrons.
       Treasury Regulations provide that net earnings are reduced 
     by dividends paid on capital stock or other proprietary 
     capital interests (referred to as the ``dividend allocation 
     rule'').\80\ The dividend allocation rule has been 
     interpreted to require that such dividends be allocated 
     between a cooperative's patronage and nonpatronage 
     operations, with the amount allocated to the patronage 
     operations reducing the net earnings available for the 
     payment of patronage dividends.
---------------------------------------------------------------------------
     \80\ Treas. Reg. sec. 1.1388-1(a)(1).
---------------------------------------------------------------------------


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement provides a special rule for 
     dividends on capital stock of a cooperative. To the extent 
     provided in organizational documents of the cooperative, 
     dividends on capital stock do not reduce patronage income and 
     do not prevent the cooperative from being treated as 
     operating on a cooperative basis.
       Effective date.--The conference agreement provision is 
     effective for distributions made in taxable years ending 
     after the date of enactment.

     I. Distributions From Publicly Traded Partnerships Treated as 
           Qualifying Income of Regulated Investment Company

     (secs. 851 and 469(k) of the Code)


                              Present Law

     Treatment of regulated investment companies
       A regulated investment company (``RIC'') generally is 
     treated as a conduit for Federal income tax purposes. In 
     computing its taxable income, a RIC deducts dividends paid to 
     its shareholders to achieve conduit treatment (sec. 852(b)). 
     In order to qualify for conduit treatment, a RIC must be a 
     domestic corporation that, at all times during the taxable 
     year, is registered under the Investment Company Act of 1940 
     as a management company or as a unit investment trust, or has

[[Page H11354]]

     elected to be treated as a business development company under 
     that Act (sec. 851(a)). In addition, the corporation must 
     elect RIC status, and must satisfy certain other requirements 
     (sec. 851(b)).
       One of the RIC qualification requirements is that at least 
     90 percent of the RIC's gross income is derived from 
     dividends, interest, payments with respect to securities 
     loans, and gains from the sale or other disposition of stock 
     or securities or foreign currencies, or other income 
     (including but not limited to gains from options, futures, or 
     forward contracts) derived with respect to its business of 
     investing in such stock, securities, or currencies (sec. 
     851(b)(2)). Income derived from a partnership is treated as 
     meeting this requirement only to the extent such income is 
     attributable to items of income of the partnership that would 
     meet the requirement if realized by the RIC in the same 
     manner as realized by the partnership (the ``look-through'' 
     rule for partnership income) (sec. 851(b)). Under present 
     law, no distinction is made under this rule between a 
     publicly traded partnership (that is treated as a partnership 
     for Federal tax purposes) and any other partnership.
       The RIC qualification rules include limitations on the 
     ownership of assets and on the composition of the RIC's 
     assets (sec. 851(b)(3)). Under the ownership limitation, at 
     least 50 percent of the value of the RIC's total assets must 
     be represented by cash, government securities and securities 
     of other RICs, and other securities; however, in the case of 
     such other securities, the RIC may invest no more than 5 
     percent of the value of the total assets of the RIC in the 
     securities of any one issuer, and may hold no more than 10 
     percent of the outstanding voting securities of any one 
     issuer. Under the limitation on the composition of the RIC's 
     assets, no more than 25 percent of the value of the RIC's 
     total assets may be invested in the securities of any one 
     issuer (other than Government securities), or in securities 
     of two or more controlled issuers in the same or similar 
     trades or businesses. These limitations generally are applied 
     at the end of each quarter (sec. 851(d)).
     Treatment of publicly traded partnerships
       Under present law, a publicly traded partnership is defined 
     as a partnership, interests in which are traded on an 
     established securities market, or are readily tradable on a 
     secondary market (or the substantial equivalent thereof). In 
     general, a publicly traded partnership is treated as a 
     corporation (sec. 7704(a)), but an exception to corporate 
     treatment is provided if 90 percent or more of its gross 
     income is interest, dividends, real property rents, or 
     certain other types of qualifying income (sec. 7704(c) and 
     (d)).
       A special rule for publicly traded partnerships applies 
     under the passive loss rules. The passive loss rules limit 
     deductions and credits from passive trade or business 
     activities (sec. 469). Deductions attributable to passive 
     activities, to the extent they exceed income from passive 
     activities, generally may not be deducted against other 
     income. Deductions and credits that are suspended under these 
     rules are carried forward and treated as deductions and 
     credits from passive activities in the next year. The 
     suspended losses from a passive activity are allowed in full 
     when a taxpayer disposes of his entire interest in the 
     passive activity to an unrelated person. The special rule for 
     publicly traded partnerships provides that the passive loss 
     rules are applied separately with respect to items 
     attributable to each publicly traded partnership (sec. 
     469(k)). Thus, income or loss from the publicly traded 
     partnership is treated as separate from income or loss from 
     other passive activities.


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes a provision that modifies 
     the 90 percent test with respect to income of a RIC to 
     include income derived from an interest in certain publicly 
     traded partnerships. The provision also modifies the 
     lookthrough rule for partnership income of a RIC so that it 
     applies only to income from a partnership other than such 
     publicly traded partnerships.
       The provision provides that the limitation on ownership and 
     the limitation on composition of assets that apply to other 
     investments of a RIC also apply to RIC investments in such 
     publicly traded partnership interests.
       A publicly traded partnership to which the provision 
     applies is a publicly traded partnership described in section 
     7704(b) other than one that would satisfy the 90-percent 
     gross income requirements for publicly traded partnerships if 
     qualifying income included only income that is qualifying 
     income described in section 851(b)(2)(A) for a RIC (i.e., 
     income that is derived from dividends, interest, payments 
     with respect to securities loans, and gains from the sale or 
     other disposition of stock or securities or foreign 
     currencies, or other income (including but not limited to 
     gains from options, futures, or forward contracts) derived 
     with respect to its business of investing in such stock, 
     securities, or currencies).
       The provision provides that the special rule for publicly 
     traded partnerships under the passive loss rules (requiring 
     separate treatment) applies to a RIC holding an interest in 
     such a publicly traded partnership, with respect to items 
     attributable to the interest in the publicly traded 
     partnership.
       The conferees intend that the provision not be used to 
     avoid tax on the partnership's income in the hands of the 
     mutual fund shareholders that would be subject to tax (e.g., 
     unrelated business income tax) or to withholding (e.g., 
     withholding on foreign partners) if they held the partnership 
     interest directly. The conferees expect that guidance issued 
     by the Treasury Department with respect to the provision will 
     provide rules that carry out this intent.
       Effective date.--The provision is effective for taxable 
     years beginning after the date of enactment.

    J. Suspension of Duties on Ceiling Fans (Chapter 99, II of the 
            Harmonized Tariff Schedule of the United States)


                              Present Law

       A 4.7-percent ad valorem customs duty is collected on 
     imported ceiling fans from all sources.


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement suspends the present customs duty 
     applicable to ceiling fans through December 31, 2005.
       Effective date.--The provision is effective on the 
     fifteenth day after the date of enactment.

K. Suspension of Duties on Nuclear Steam Generators (Chapter 99, II of 
          the Harmonized Tariff Schedule of the United States)


                              Present Law

       Nuclear steam generators, as classified under heading 
     9902.84.02 of the Harmonized Tariff Schedule of the United 
     States, enter the United States duty free until December 31, 
     2006. After December 31, 2006, the duty on nuclear steam 
     generators returns to the column 1 rate of 5.2 percent under 
     subheading 8402.11.00 of the Harmonized Tariff Schedule of 
     the United States.


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement extends the present-law suspension 
     of customs duty applicable to nuclear steam generators 
     through December 31, 2008.
       Effective date.--The provision is effective on the 
     fifteenth day after the date of enactment.

L. Suspension of Duties on Nuclear Reactor Vessel Heads (Chapter 99, II 
        of the Harmonized Tariff Schedule of the United States)


                              Present Law

       According to section 5202 of the Trade Act of 2002, nuclear 
     vessel heads are classified under subheading 8401.40.00 of 
     the Harmonized Tariff Schedule of the United States and enter 
     the United States with a column 1 duty rate of 3.3 percent.


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement temporarily suspends the present 
     customs duty applicable to nuclear reactor vessel heads for 
     column 1 countries through December 31, 2007.
       Effective date.--The provision is effective on the date of 
     enactment.

 M. Brownfields Demonstration Program for Qualified Green Building and 
                      Sustainable Design Projects

     (secs. 142 and 146 of the Code)


                              present law

     Tax-exempt bonds
       In general
       Interest on debt incurred by States or local governments is 
     excluded from income if the proceeds of the borrowing are 
     used to carry out governmental functions of those entities or 
     the debt is repaid with governmental funds (section 103). 
     Interest on bonds that nominally are issued by States or 
     local governments, but the proceeds of which are used 
     (directly or indirectly) by a private person and payment of 
     which is derived from funds of such a private person is 
     taxable unless the purpose of the borrowing is approved 
     specifically in the Code or in a non-Code provision of a 
     revenue Act. These bonds are called ``private activity 
     bonds.'' The term ``private person'' includes the Federal 
     Government and all other individuals and entities other than 
     States or local governments.
       Private activities eligible for financing with tax-exempt 
           private activity bonds
       Present law includes several exceptions permitting States 
     or local governments to act as conduits providing tax-exempt 
     financing for private activities. Both capital expenditures 
     and limited working capital expenditures of charitable 
     organizations described in section 501(c)(3) of the Code may 
     be financed with tax-exempt bonds (``qualified 501(c)(3) 
     bonds'').
       States or local governments may issue tax-exempt ``exempt-
     facility bonds'' to finance property for certain private 
     businesses. Business facilities eligible for this financing 
     include transportation (airports, ports, local

[[Page H11355]]

     mass commuting, and high speed intercity rail facilities); 
     privately owned and/or privately operated public works 
     facilities (sewage, solid waste disposal, local district 
     heating or cooling, and hazardous waste disposal facilities); 
     privately owned and/or operated low-income rental 
     housing;\81\ and certain private facilities for the local 
     furnishing of electricity or gas. A further provision allows 
     tax-exempt financing for ``environmental enhancements of 
     hydro-electric generating facilities.'' Tax-exempt financing 
     also is authorized for capital expenditures for small 
     manufacturing facilities and land and equipment for first-
     time farmers (``qualified small-issue bonds''), local 
     redevelopment activities (``qualified redevelopment bonds''), 
     and eligible empowerment zone and enterprise community 
     businesses. Tax-exempt private activity bonds also may be 
     issued to finance limited non-business purposes: certain 
     student loans and mortgage loans for owner-occupied housing 
     (``qualified mortgage bonds'' and ``qualified veterans' 
     mortgage bonds'').
---------------------------------------------------------------------------
     \81\ Residential rental projects must satisfy low-income 
     tenant occupancy requirements for a minimum period of 15 
     years.
---------------------------------------------------------------------------
       With the exception of qualified 501(c)(3) bonds, private 
     activity bonds may not be issued to finance working capital 
     requirements of private businesses. In most cases, the 
     aggregate volume of tax-exempt private activity bonds that 
     may be issued in a State is restricted by annual volume 
     limits.
       Several additional restrictions apply to the issuance of 
     tax-exempt bonds. First, private activity bonds (other than 
     qualified 501(c)(3) bonds) may not be advance refunded. 
     Governmental bonds and qualified 501(c)(3) bonds may be 
     advance refunded one time. An advance refunding occurs when 
     the refunded bonds are not retired within 90 days of issuance 
     of the refunding bonds.
       Issuance of private activity bonds is subject to 
     restrictions on use of proceeds for the acquisition of land 
     and existing property, use of proceeds to finance certain 
     specified facilities (e.g., airplanes, skyboxes, other luxury 
     boxes, health club facilities, gambling facilities, and 
     liquor stores) and use of proceeds to pay costs of issuance 
     (e.g., bond counsel and underwriter fees). Additionally, the 
     term of the bonds generally may not exceed 120 percent of the 
     economic life of the property being financed and certain 
     public approval requirements (similar to requirements that 
     typically apply under State law to issuance of governmental 
     debt) apply under Federal law to issuance of private activity 
     bonds. Present and prior law precludes substantial users of 
     property financed with private activity bonds from owning the 
     bonds to prevent their deducting tax-exempt interest paid to 
     themselves. Finally, owners of most private-activity-bond-
     financed property are subject to special ``change-in-use'' 
     penalties if the use of the bond-financed property changes to 
     a use that is not eligible for tax-exempt financing while the 
     bonds are outstanding.


                               house bill

       No provision.


                            senate amendment

       No provision.


                          conference agreement

       The bill creates a new category of tax-exempt bonds, the 
     qualified green building and sustainable design project bond. 
     A qualified green building and sustainable design project 
     bond is defined as any bond issued as part of an issue that 
     finances a project designated by the Secretary, after 
     consultation with the Administrator of the Environmental 
     Protection Agency (the ``Administrator'') as a green building 
     and sustainable design project that meets the following 
     requirements: (1) at least 75 percent of the square footage 
     of the commercial buildings that are part of the project is 
     registered for the U.S. Green Building Council's LEED 
     certification and is reasonably expected (at the time of 
     designation) to meet such certification;\82\ (2) the project 
     includes a brownfield site;\83\ (3) the project receives at 
     least $5 million dollars in specific State or local 
     resources; and (4) the project includes at least one million 
     square feet of building or 20 acres of land.
---------------------------------------------------------------------------
     \82\ The LEED (``Leadership in Energy and Environmental 
     Design) Green Building Rating System is a voluntary, 
     consensus-based national standard for developing high-
     performance sustainable buildings. Registration is the first 
     step toward LEED certification. Actual certification requires 
     that the applicant project satisfy all prerequisites and 
     receive a minimum number of points to attain a LEED rating 
     level. Commercial buildings, as defined by standard building 
     codes are eligible for certification. Commercial occupancies 
     include, but are not limited to, offices, retail and service 
     establishments, institutional buildings (e.g., libraries, 
     schools, museums, churches, etc.), hotels, and residential 
     buildings of four or more habitable stories. <https://
www.usgbc.org/LEED/Project/certprocess.asp>.
     \83\ For this purpose a brownfield site is defined by section 
     101(39) of the Comprehensive Environmental Response, 
     Compensation, and Liability Act of 1980 (42 U.S.C. 9601), 
     including a site described in subparagraph (D)(ii)(II)(aa) 
     (relating to a site that is contaminated by petroleum or a 
     petroleum product excluded from the definition of ``hazardous 
     substance'' under section 101.)
---------------------------------------------------------------------------
       Each project must be nominated by a State or local 
     government within 180 days of enactment of this Act and such 
     State or local government must provide written assurances 
     that the project will satisfy certain eligibility criteria. 
     Within 60 days after the end of the application period, the 
     Secretary, after consultation with the Administrator, will 
     designate the qualified green building and sustainable design 
     projects. At least one of the projects must be in or within a 
     ten-mile radius of an empowerment zone (as defined under 
     section 1391 of the Code) and at least one must be in a rural 
     State.\84\ A project shall not be designated if such project 
     includes a stadium or arena for professional sports 
     exhibitions or games.
---------------------------------------------------------------------------
     \84\ The term ``rural State'' means any State that has (1) a 
     population of less than 4.5 million according to the 2000 
     census; (2) a population density of less than 150 people per 
     square mile according to the 2000 census; and (3) increased 
     in population by less than half the rate of the national 
     increase between the 1990 and 2000 censuses.
---------------------------------------------------------------------------
       The Secretary, after consultation with the Administrator, 
     shall also ensure that, in the aggregate, the projects 
     designated shall: (1) reduce electric consumption by more 
     than 150 megawatts annually as compared to conventional 
     construction; (2) reduce daily sulfur dioxide emissions by at 
     least 10 tons compared to coal generation power; (3) expand 
     by 75 percent the domestic solar photovoltaic market in the 
     United States (measured in megawatts) as compared to the 
     expansion of that market from 2001 to 2002; and (4) use at 
     least 25 megawatts of fuel cell energy generation.
       Each application shall contain for each project a 
     description of: (1) amount of electric consumption reduced as 
     compared to conventional construction; (2) the amount of 
     sulfur dioxide daily emissions reduced compared to coal 
     generation; (3) the amount of gross installed capacity of the 
     project's solar photovoltaic capacity measured in megawatts; 
     and (4) the amount, measured in megawatts, of the project's 
     fuel cell energy generation. Each project application must 
     also demonstrate that: (1) at least 75 percent of the square 
     footage of the commercial buildings that are part of the 
     project is registered for the U.S. Green Building Council's 
     LEED certification and is reasonably expected (at the time of 
     designation) to meet such certification; (2) the project 
     includes a brownfield site (as defined above); (3) the 
     project receives at least $5 million dollars in specific 
     State or local resources; (4) the project includes at 
     least one million square feet of building or at least 20 
     acres of land; (5) the project is projected to provide 
     permanent employment of at least 1500 full time 
     equivalents (150 full time equivalents in rural States) 
     when completed and construction employment of at least 
     1000 full time equivalents (100 full time equivalents in 
     rural States); \85\ and (6) the net benefit of the 
     qualified green building and sustainable design project 
     tax-exempt financing provided will be allocated for (i) 
     the purchase, construction, integration or other use of 
     energy efficiency, renewable energy and sustainable design 
     features of the project, (ii) compliance with LEED 
     certification standards, and/or (iii) the purchase, 
     remediation, foundation construction, and preparation of 
     the brownfield site. Not later than 30 days after the 
     completion of the project, each project must certify to 
     the Secretary that the net benefit of the tax-exempt 
     financing was used for the purposes described.
---------------------------------------------------------------------------
     \85\ The application is to include an independent analysis 
     that describes the project's economic impact, including the 
     amount of projected employment.
---------------------------------------------------------------------------
       Qualified green building and sustainable design project 
     bonds are not subject to the State bond volume limitations. 
     There is a national limitation of $2 billion of bonds. The 
     Secretary may allocate, in the aggregate, no more than $2 
     billion of bonds to qualified green building and sustainable 
     design projects.
       Any asset financed with qualified green building and 
     sustainable design project bonds is ineligible for any credit 
     or deduction established or extended under the Energy Tax 
     Policy Act of 2003. In addition, each issuer shall maintain, 
     on behalf of each project, an interest bearing reserve 
     account equal to one percent of the net proceeds of any 
     qualified green building and sustainable design project bond 
     issued for such project. Not later than five years after the 
     date of issuance, the Secretary, after consultation with the 
     Administrator, shall determine whether the project financed 
     with such bonds has substantially complied requirements and 
     commitments described in the project application for 
     designation, including certification. If the Secretary, after 
     such consultation, certifies that the project has 
     substantially complied with requirements and commitments, 
     amounts in the reserve account, including all interest, shall 
     be released to the project. If the Secretary determines that 
     the project has not substantially complied with such 
     requirements and commitments, amounts in the reserve account, 
     including all interest, shall be paid to the United States 
     Treasury.
       Qualified green building and sustainable design project 
     bonds may be currently refunded if certain conditions are 
     met, but cannot be advance refunded.
       Effective date.--The provisions are effective for bonds 
     issued after the date of enactment and before October 1, 
     2009.

                       V. TAX COMPLEXITY ANALYSIS

       Section 4022(b) of the Internal Revenue Service Reform and 
     Restructuring Act of 1998 (the ``IRS Reform Act'') requires 
     the Joint Committee on Taxation (in consultation with the 
     Internal Revenue Service and the Department of the Treasury) 
     to provide a tax complexity analysis. The complexity analysis 
     is required for all legislation reported by the Senate 
     Committee on Finance,

[[Page H11356]]

     the House Committee on Ways and Means, or any committee of 
     conference if the legislation includes a provision that 
     directly or indirectly amends the Internal Revenue Code (the 
     ``Code'') and has widespread applicability to individuals or 
     small businesses.
       The staff of the Joint Committee on Taxation has determined 
     that a complexity analysis is not required under section 
     4022(b) of the IRS Reform Act because the bill contains no 
     provisions that amend the Internal Revenue Code and that have 
     ``widespread applicability'' to individuals or small 
     businesses.

                  TITLE XIV--MISCELLANEOUS PROVISIONS

       Title XIV of the conference report provides funding for the 
     power cost equalization program in Alaska, and authorizes 
     assistance to rural communities for electric generation, 
     transmission, and distribution upgrades and improvements. It 
     establishes a coastal reinvestment program to assist coastal 
     states in mitigating the impacts of offshore development, and 
     allows lessees due compensation under the Oil Pollution Act 
     of 1980 to withhold royalty payments for production from a 
     covered lease tract in the outer Continental Shelf under 
     certain circumstances. The report provides for changes in the 
     composition, operation, and duties of the Tennessee Valley 
     Authority board of directors, authorizes the continued 
     operation of certain electric transmission facilities, 
     reinstates a regulation for downwind ozone nonattainment 
     areas, authorizes States to provide energy production 
     incentives, and directs the Administrator of the 
     Environmental Protection Agency to establish criteria for the 
     use of granular mine tailings.

                           TITLE XV--ETHANOL

       Title XV of the conference report establishes a renewable 
     fuels standard requiring that 5.0 billion gallons of 
     renewable fuels be introduced into the marketplace by 2012. 
     It bans the use of MTBE in motor fuels after December 31, 
     2104, and authorizes transition assistance to aid 
     manufacturers in converting production to other fuel 
     additives. The title requires a National Academy of Sciences 
     report on the use of MTBE to be completed by May 31, 2013, 
     and provides opportunity for a Presidential determination 
     concerning restrictions on the use of MTBE by June 30, 2013. 
     It also provides limited liability protection for MTBE, fuels 
     using MTBE, ethanol, and fuels using ethanol, for defective 
     product claims. The title also makes changes to provisions 
     related to leaking underground storage tanks, including 
     requiring at least 80 percent of all dollars appropriated 
     from the LUST Trust Fund to be sent to the States for 
     operating leaking underground tanks programs. It requires 
     onsite inspections of underground storage tanks every 3 years 
     after a brief period for the State to update its backlog. The 
     title also prohibits Federal facilities from exempting 
     themselves from compliance with all federal, State, and local 
     underground tank laws.

                           TITLE XVI--STUDIES

       Title XVI of the conference report authorizes a variety of 
     studies on issues such as petroleum and natural gas supplies, 
     coal bed methane, telecommuting, oil bypass filtration, and 
     the Low-Income Home Energy Assistance Program.

     From the Committee on Energy and Commerce, for consideration 
     of the House bill and the Senate amendment, and modifications 
     committed to conference:
     Billy Tauzin,
     Michael Bilirakis,
     Joe Barton,
     Fred Upton,
     Cliff Stearns,
     Paul Gillmor,
     John Shimkus,
     From the Committee on Agriculture, for consideration of secs. 
     30203, 30308, 30212, Title III of Division C, secs. 30604, 
     30901, and 30903 of the House bill and secs. 265, 301, 604, 
     941-948, 950, 1103, 1221, 1311-1313, and 2008 of the Senate 
     amendment, and modifications committed to conference:
     Bob Goodlatte,
     Frank D. Lucas,
     Charles W. Stenholm,
     From the Committee on Armed Services, for consideration of 
     secs. 11005, 11010, 14001-14007, 14009-14015, 21805 and 21806 
     of the House bill and secs. 301, 501-507, 509, 513, 809, 821, 
     914, 920, 1401, 1407-1409, 1411, 1801, and 1803 of the Senate 
     amendment, and modifications committed to conference:
     Duncan Hunter,
     Curt Weldon,
     From the Committee on Education and the Workforce, for 
     consideration of secs. 11021, 12014, 14033, and 30406 of the 
     House bill and secs. 715, 774, 901, 903, 1505, and 1507 of 
     the Senate amendment, and modifications committed to 
     conference:
     Sam Johnson,
     From the Committee on Financial Services, for consideration 
     of Division G of the House bill and secs. 931-940 and 950 of 
     the Senate amendment and modifications committed to 
     conference:
     Robert W. Ney,
     From the Committee on Government Reform, for consideration of 
     secs. 11002, 11005, 11006, 11010, 11011, 14025, 14033, and 
     22002 of the House bill and secs. 263, 805, 806, 914-916, 
     918, 920, 1406, and 1410 of the Senate amendment, and 
     modifications committed to conference:
     Tom Davis,
     Tim Murphy,
     From the Committee on the Judiciary, for consideration of 
     secs. 12008, 12401, 14014, 14026, 14027, 14028, 14033, 16012, 
     16045, 16084, 30101, 30210, and 30408 of the House bill and 
     secs. 206, 209, 253, 531-532, 708, 767, 783, and 1109 of the 
     Senate amendment, and modifications committed to conference:
     Lamar Smith,
     From the Committee on Resources, for consideration of secs. 
     12005, 12007, 12011, 12101, 13001, 21501, 21521-21530, 
     Division C, and sec. 60009 of the House bill and secs. 201, 
     265, 272, 301, 401-407, 602-606, 609, 612, 705, 707, 712, 
     721, 1234, 1351-1352, 1704, and 1811 of the Senate amendment, 
     and modifications committed to conference:
     Richard Pombo,
     Barbara Cubin,
     Provided that Mr. Kind is appointed in lieu of Mr. Rahall for 
     consideration of Title IV of Division C of the House bill, 
     and modifications committed to conference:

     From the Committee on Science, for consideration of secs. 
     11009, 11025, 12301-12312, 14001-14007, 14009-14015, 14029, 
     15021-15024, 15031-15034, 15041, 15045, Division B, sec 
     30301, Division E, and Division F of the House bill and secs. 
     501-507, 509, 513-516, 770-772, 807-809, 814-816, 824, 832, 
     1001-1022, Title XI, Title XII, Title XIII, Title XIV, secs. 
     1501, 1504-1505, Title XVI, and secs. 1801-1805 of the Senate 
     amendment, and modifications committed to conference:
     Judy Biggert,
     Ralph M. Hall,
     Provided that Mr. Costello is appointed in lieu of Mr. Hall 
     of Texas for consideration of Division E of the House bill, 
     and modifications committed to conference:
     Jerry Costello,
     Provided that Mr. Lampson is appointed in lieu of Mr. Hall of 
     Texas for consideration of sec. 21708 and Division F of the 
     House bill, and secs. 824 and 1223 of the Senate amendment 
     and modifications committed to conference:
     Nick Lampson,
     From the Committee on Transportation and Infrastructure, for 
     consideration of secs. 11001-11004, 11006, 11009-110011, 
     12001-12012, 12014, 12401, 12403, 13001, 13201, 13202, 15021-
     15024, 15031-15034, 15041, 15043, 15051, 16012, 16021, 16022, 
     16023, 16031, 16081, 16082, 16092, 23001-23004, 30407, 30410, 
     and 30901 of the House bill and secs. 102, 201, 205, 301, 
     701-783, 812, 814, 816, 823, 911-916, 918-920, 949, 1214, 
     1261-1262, and 1351-1352 of the Senate amendment, and 
     modifications committed to conference:
     Don Young,
     Thomas Petri,
     From the Committee on Ways and Means, for consideration of 
     Division D of the House bill and Division H and I of the 
     Senate amendment, and modifications committed to conference:
     William Thomas,
     Jim McCrery,
                                Managers on the Part of the House.

     Pete V. Domenici,
     Don Nickles,
     Larry E. Craig,
     Ben Nighthorse Campbell,
     Craig Thomas,
     Chuck Grassley,
     Trent Lott,
     Byron L. Dorgan,
     Managers on the Part of the Senate.

                          ____________________