[Congressional Record Volume 153, Number 1 (Thursday, January 4, 2007)]
[Senate]
[Pages S127-S133]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. OBAMA (for himself, Mr. Lugar, and Mr. Harkin):
  S. 133. A bill to promote the national security and stability of the 
economy of the United States by reducing the dependence of the United 
States on oil through the use of alternative fuels and new technology, 
and for other purposes; to the Committee on Finance.
  Mr. OBAMA. Mr. President, in 2005, Congress enacted the Renewable 
Fuels Standard, RFS, as part of the Energy Policy Act. The RFS is a 
commitment by the United States government that, henceforth, ethanol 
must comprise a substantial part of the national vehicle fuel supply, 
with a goal of 7.5 billion gallons of ethanol in our gasoline by 2012.
  Ethanol production has responded vigorously to this national policy. 
In fact, in only two years, ethanol production has boomed to where it 
now far exceeds the RFS target for this year. It is

[[Page S128]]

widely anticipated that ethanol production will surpass the target for 
the year 2012 by the end of this year, five years early.
  Clearly, it is time to increase the RFS targets. I am pleased to be 
an original cosponsor of the bill introduced today by my colleagues, 
Senator Harkin and Senator Lugar, that will increase those targets to 
30 billion gallons by the year 2020 and 60 billion gallons by the year 
2030. I hope my colleagues will support the provisions of that bill.
  But for an expanded RFS to be successful, we must lay further 
groundwork. We cannot meet the targets and deadlines of an expanded RFS 
without a robust package of policies that set the stage for the next 
decade.
  So far, we've met our biofuels goals by producing ethanol made from 
sugars that come from corn. This approach, by itself, has been 
profoundly successful in many rural communities but will eventually 
reach its maximum capacity. While that day is still several years away, 
we must begin preparations now. We must build upon our current path. We 
must continue our pursuit in cracking the code for corn cellulosics. We 
must pour the foundation for the next generation of biofuels made from 
the broadest range of agriculture feedstocks. Our vocabulary must 
expand to cellulosics and biobut- anols, manure and miscanthus.
  The American Fuels Act, which I introduce today, breathes life into 
an expanded RFS. The American Fuels Act is the heart, the centerpiece, 
the key to ensuring that an expanded RFS is successful. That's why I am 
pleased to be joined today by my esteemed colleagues, Senator Lugar and 
Senator Harkin, in the introduction of this bill.
   The premise of the American Fuels Act is to create a ``Biofuels 
Triangle'' that focuses on (1). production, (2). distribution, and (3) 
consumption.
  To expand production, we create an ``Alternative Diesel Standard'' 
for diesels that complements the RFS for gasoline. The Alternative 
Diesel Standard requires 2 billion gallons of alternative diesels into 
the 40 billion gallon domestic diesel supply by the year 2016, 
encouraging greater use of biofuel feedstocks like vegetable oils, 
animal fats, coal-to-liquids, manure, and municipal waste. We call for 
the establishment of a cellulosic biomass fuels credit of an additional 
76.5 cents per gallon so that first-generation cellulosic plants can be 
built to meet the 250 million gallon production goals by 2012.
  To expand distribution, the American Fuels Act provides a tax credit 
for ethanol producers to invest in on-site blending equipment, 
bypassing oil refineries so that E-85 can be transported directly to 
the pump at your local gas station. Our bill also provides freedom for 
fuel franchisers by making it illegal for oil companies to stop their 
branded franchises from selling biofuels should these local businessmen 
wish to respond to their customer's request for biofuels. This bill 
also gives franchisers the power to sue oil companies for imposing any 
restrictions.
  And to expand consumption, the American Fuels Act encourages the 
manufacture of more vehicles that can function on higher ethanol blends 
like E-85 so that more passenger cars to be flexible fuel vehicles. We 
provide a $100 tax credit to automakers for each ethanol-capable 
vehicle produced beyond the CAFE credit or any other government 
requirement. We require that 100 percent of the Federal fleet must be 
ethanol-capable or hybrids in the next 7 years. And we require that any 
public transit agency that uses Federal dollars to upgrade bus fleets 
must purchase an alternative fuel bus, or pledge to use alternative 
fuels in those buses.
  To oversee these efforts, we create a Director of Energy Security in 
the Office of the President to ensure that our massive investment in 
domestically produced fuels get the national security leadership and 
coordination it requires.
  Our dependence on oil is hurting our economy and jeopardizing our 
national security by keeping us tied to the world's most dangerous and 
unstable regimes. It's the fossil fuels we insist on burning--
particularly oil--that are the single greatest cause of climate change 
and the damaging weather patterns that have been its result. Never has 
the failure to take on a single challenge so detrimentally affected 
nearly every aspect of our well-being as Nation. And never have the 
possible solutions had the potential to do so much good for so many 
generations to come.
  That's why I urge my colleagues to join us in cosponsoring the 
American Fuels Act. I ask for their support, and for the swift 
enactment of this bill. I ask unanimous consent that the text of the 
American Fuels Act be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 133

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``American 
     Fuels Act of 2007''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Office of Energy Security.
Sec. 3. Credit for production of qualified flexible fuel motor 
              vehicles.
Sec. 4. Incentives for the retail sale of alternative fuels as motor 
              vehicle fuel.
Sec. 5. Freedom for fuel franchisers.
Sec. 6. Alternative diesel fuel content of diesel.
Sec. 7. Excise tax credit for production of cellulosic biomass ethanol.
Sec. 8. Incentive for Federal and State fleets for medium and heavy 
              duty hybrids.
Sec. 9. Credit for qualifying ethanol blending and processing 
              equipment.
Sec. 10. Public access to Federal alternative refueling stations.
Sec. 11. Purchase of clean fuel buses.
Sec. 12. Domestic fuel production volumes to meet Department of Defense 
              needs.
Sec. 13. Federal fleet energy conservation improvement.

     SEC. 2. OFFICE OF ENERGY SECURITY.

       (a) Definitions.--In this section:
       (1) Director.--The term ``Director'' means the Director of 
     Energy Security appointed under subsection (c)(1).
       (2) Office.--The term ``Office'' means the Office of Energy 
     Security established by subsection (b).
       (b) Establishment.--There is established in the Executive 
     Office of the President the Office of Energy Security.
       (c) Director.--
       (1) In general.--The Office shall be headed by a Director, 
     who shall be appointed by the President, by and with the 
     advice and consent of the Senate.
       (2) Rate of pay.--The Director shall be paid at a rate of 
     pay equal to level I of the Executive Schedule under section 
     5312 of title 5, United States Code.
       (d) Responsibilities.--
       (1) In general.--The Office, acting through the Director, 
     shall be responsible for overseeing all Federal energy 
     security programs, including the coordination of efforts of 
     Federal agencies to assist the United States in achieving 
     full energy independence.
       (2) Specific responsibilities.--In carrying out paragraph 
     (1), the Director shall--
       (A) serve as head of the energy community;
       (B) act as the principal advisor to the President, the 
     National Security Council, the National Economic Council, the 
     Domestic Policy Council, and the Homeland Security Council 
     with respect to intelligence matters relating to energy 
     security;
       (C) with request to budget requests and appropriations for 
     Federal programs relating to energy security--
       (i) consult with the President and the Director of the 
     Office of Management and Budget with respect to each major 
     Federal budgetary decision relating to energy security of the 
     United States;
       (ii) based on priorities established by the President, 
     provide to the heads of departments containing agencies or 
     organizations within the energy community, and to the heads 
     of such agencies and organizations, guidance for use in 
     developing the budget for Federal programs relating to energy 
     security;
       (iii) based on budget proposals provided to the Director by 
     the heads of agencies and organizations described in clause 
     (ii), develop and determine an annual consolidated budget for 
     Federal programs relating to energy security; and
       (iv) present the consolidated budget, together with any 
     recommendations of the Director and any heads of agencies and 
     organizations described in clause (ii), to the President for 
     approval;
       (D) establish and meet regularly with a council of business 
     and labor leaders to develop and provide to the President and 
     Congress recommendations relating to the impact of energy 
     supply and prices on economic growth;
       (E) submit to Congress an annual report that describes the 
     progress of the United States toward the goal of achieving 
     full energy independence; and
       (F) carry out such other responsibilities as the President 
     may assign.
       (e) Staff.--
       (1) In general.--The Director may, without regard to the 
     civil service laws (including regulations), appoint and 
     terminate such personnel as are necessary to enable the 
     Director to carry out the responsibilities of the Director 
     under this section.

[[Page S129]]

       (2) Compensation.--
       (A) In general.--Except as provided in subparagraph (B), 
     the Director may fix the compensation of personnel without 
     regard to the provisions of chapter 51 and subchapter III of 
     chapter 53 of title 5, United States Code, relating to 
     classification of positions and General Schedule pay rates.
       (B) Maximum rate of pay.--The rate of pay for the personnel 
     appointed by the Director shall not exceed the rate payable 
     for level V of the Executive Schedule under section 5316 of 
     title 5, United States Code.
       (f) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as are necessary to carry out 
     this section.

     SEC. 3. CREDIT FOR PRODUCTION OF QUALIFIED FLEXIBLE FUEL 
                   MOTOR VEHICLES.

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

     ``SEC. 45O. PRODUCTION OF QUALIFIED FLEXIBLE FUEL MOTOR 
                   VEHICLES.

       ``(a) Allowance of Credit.--For purposes of section 38, in 
     the case of a manufacturer, the qualified flexible fuel motor 
     vehicle production credit determined under this section for 
     any taxable year is an amount equal to the incremental 
     flexible fuel motor vehicle cost for each qualified flexible 
     fuel motor vehicle produced in the United States by the 
     manufacturer during the taxable year.
       ``(b) Incremental Flexible Fuel Motor Vehicle Cost.--With 
     respect to any qualified flexible fuel motor vehicle, the 
     incremental flexible fuel motor vehicle cost is an amount 
     equal to the lesser of--
       ``(1) the excess of--
       ``(A) the cost of producing such qualified flexible fuel 
     motor vehicle, over
       ``(B) the cost of producing such motor vehicle if such 
     motor vehicle was not a qualified flexible fuel motor 
     vehicle, or
       ``(2) $100.
       ``(c) Qualified Flexible Fuel Motor Vehicle.--For purposes 
     of this section, the term `qualified flexible fuel motor 
     vehicle' means a flexible fuel motor vehicle--
       ``(1) the production of which is not required for the 
     manufacturer to meet--
       ``(A) the maximum credit allowable for vehicles described 
     in paragraph (2) in determining the fleet average fuel 
     economy requirements (as determined under section 32904 of 
     title 49, United States Code) of the manufacturer for the 
     model year ending in the taxable year, or
       ``(B) the requirements of any other provision of Federal 
     law, and
       ``(2) which is designed so that the vehicle is propelled by 
     an engine which can use as a fuel a gasoline mixture of which 
     85 percent (or another percentage of not less than 70 
     percent, as the Secretary may determine, by rule, to provide 
     for requirements relating to cold start, safety, or vehicle 
     functions) of the volume of consists of ethanol.
       ``(d) 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) Manufacturer.--The term `manufacturer' has the 
     meaning given such term 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) 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.
       ``(4) No double benefit.--The amount of any deduction or 
     credit allowable under this chapter (other than the credits 
     allowable under this section and section 30B) shall be 
     reduced by the amount of credit allowed under subsection (a) 
     for such vehicle for the taxable year.
       ``(5) 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.
       ``(6) Termination.--This section shall not apply to any 
     vehicle produced after December 31, 2011.
       ``(7) Cross reference.--For an election to claim certain 
     minimum tax credits in lieu of the credit determined under 
     this section, see section 53(e).''.
       (b) Credit Allowed Against the Alternative Minimum Tax.--
     Section 38(c)(4)(B) of the Internal Revenue Code of 1986 
     (defining specified credits) is amended by striking the 
     period at the end of clause (ii)(II) and inserting ``, and'', 
     and by adding at the end the following new clause:
       ``(iii) the credit determined under section 45O.''.
       (c) Election to Use Additional AMT Credit.--Section 53 of 
     the Internal Revenue Code of 1986 (relating to credit for 
     prior year minimum tax liability) is amended by adding at the 
     end the following new subsection:
       ``(e) Additional Credit in Lieu of Flexible Fuel Motor 
     Vehicle Credit.--
       ``(1) In general.--In the case of a taxpayer making an 
     election under this subsection for a taxable year, the amount 
     otherwise determined under subsection (c) shall be increased 
     by any amount of the credit determined under section 45O for 
     such taxable year which the taxpayer elects not to claim 
     pursuant to such election.
       ``(2) Election.--A taxpayer may make an election for any 
     taxable year not to claim any amount of the credit allowable 
     under section 45O with respect to property produced by the 
     taxpayer during such taxable year. An election under this 
     subsection may only be revoked with the consent of the 
     Secretary.
       ``(3) Credit refundable.--The aggregate increase in the 
     credit allowed by this section for any taxable year by reason 
     of this subsection shall for purposes of this title (other 
     than subsection (b)(2) of this section) be treated as a 
     credit allowed to the taxpayer under subpart C.''.
       (d) Conforming Amendments.--Section 38(b) of the Internal 
     Revenue Code of 1986 is amended by striking ``plus'' at the 
     end of paragraph (30), by striking the period at the end of 
     paragraph (31) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(32) the qualified flexible fuel motor vehicle production 
     credit determined under section 45N, plus''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 of the Internal 
     Revenue Code of 1986 is amended by adding at the end the 
     following new item:

``Sec. 45O. Production of qualified flexible fuel motor vehicles.''.

       (f) Effective Date.--The amendments made by this section 
     shall apply to motor vehicles produced in model years ending 
     after the date of the enactment of this Act.

     SEC. 4. INCENTIVES FOR THE RETAIL SALE OF ALTERNATIVE FUELS 
                   AS MOTOR VEHICLE FUEL.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     business related credits) is amended by inserting after 
     section 40A the following new section:

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

       ``(a) General Rule.--The alternative fuel retail sales 
     credit for any taxable year is the applicable amount for each 
     gallon of alternative fuel sold at retail by the taxpayer 
     during such year.
       ``(b) Applicable Amount.--For purposes of this section, the 
     applicable amount shall be determined in accordance with the 
     following table:

``In the case of any sale:                        The applicable amount
                                                   for each gallon is: 
Before 2010...................................................35 cents 
During 2010 or 2011...........................................20 cents 
During 2012...................................................10 cents.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Alternative fuel.--The term `alternative fuel' means 
     any fuel at least 85 percent (or another percentage of not 
     less than 70 percent, as the Secretary may determine, by 
     rule, to provide for requirements relating to cold start, 
     safety, or vehicle functions) of the volume of which consists 
     of ethanol.
       ``(2) Sold at retail.--
       ``(A) In general.--The term `sold at retail' means the 
     sale, for a purpose other than resale, after manufacture, 
     production, or importation.
       ``(B) Use treated as sale.--If any person uses alternative 
     fuel (including any use after importation) as a fuel to 
     propel any qualified alternative fuel motor vehicle (as 
     defined in this section) before such fuel is sold at retail, 
     then such use shall be treated in the same manner as if such 
     fuel were sold at retail as a fuel to propel such a vehicle 
     by such person.
       ``(3) Qualified alternative fuel motor vehicle.--The term 
     `new qualified alternative fuel motor vehicle' means any 
     motor vehicle--
       ``(A) which is capable of operating on an alternative fuel,
       ``(B) the original use of which commences with the 
     taxpayer,
       ``(C) which is acquired by the taxpayer for use or lease, 
     but not for resale, and
       ``(D) which is made by a manufacturer.
       ``(d) Election To Pass Credit.--A person which sells 
     alternative fuel at retail may elect to pass the credit 
     allowable under this section to the purchaser of such fuel 
     or, in the event the purchaser is a tax-exempt entity or 
     otherwise declines to accept such credit, to the person which 
     supplied such fuel, under rules established by the Secretary.
       ``(e) 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.
       ``(f) Termination.--This section shall not apply to any 
     fuel sold at retail after December 31, 2012.''.
       (b) Credit Treated as Business Credit.--Section 38(b) of 
     the Internal Revenue Code of 1986 (relating to current year 
     business credit), as amended by section 4(d), is amended by 
     striking ``plus'' at the end of paragraph (31), by striking 
     the period at the end of paragraph (32) and inserting ``, 
     plus'', and by adding at the end the following new paragraph:
       ``(33) the alternative fuel retail sales credit determined 
     under section 40B(a).''.
       (c) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 of the Internal 
     Revenue Code of 1986 is amended by inserting after the item 
     relating to section 40A the following new item:

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


[[Page S130]]


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

     SEC. 5. FREEDOM FOR FUEL FRANCHISERS.

       (a) Prohibition on Restriction of Installation of 
     Alternative Fuel Pumps.--
       (1) In general.--Title I of the Petroleum Marketing 
     Practices Act (15 U.S.C. 2801 et seq.) is amended by adding 
     at the end the following:

     ``SEC. 107. PROHIBITION ON RESTRICTION OF INSTALLATION OF 
                   ALTERNATIVE FUEL PUMPS.

       ``(a) Definition.--In this section:
       ``(1) Alternative fuel.--The term `alternative fuel' means 
     any fuel--
       ``(A) at least 85 percent of the volume of which consists 
     of ethanol, natural gas, compressed natural gas, liquefied 
     natural gas, liquefied petroleum gas, hydrogen, or any 
     combination of those fuels; or
       ``(B) any mixture of biodiesel (as defined in section 
     40A(d)(1) of the Internal Revenue Code of 1986) and diesel 
     fuel (as defined in section 4083(a)(3) of the Internal 
     Revenue Code of 1986), determined without regard to any use 
     of kerosene and containing at least 20 percent biodiesel.
       ``(2) Franchise-related document.--The term `franchise-
     related document' means--
       ``(A) a franchise under this Act; and
       ``(B) any other contract or directive of a franchisor 
     relating to terms or conditions of the sale of fuel by a 
     franchisee.
       ``(b) Prohibitions.--
       ``(1) In general.--Notwithstanding any provision of a 
     franchise-related document in effect on the date of enactment 
     of this section, no franchisee or affiliate of a franchisee 
     shall be restricted from--
       ``(A) installing on the marketing premises of the 
     franchisee an alternative fuel pump;
       ``(B) converting an existing tank and pump on the marketing 
     premises of the franchisee for alternative fuel use;
       ``(C) advertising (including through the use of signage or 
     logos) the sale of any alternative fuel; or
       ``(D) selling alternative fuel in any specified area on the 
     marketing premises of the franchisee (including any area in 
     which a name or logo of a franchisor or any other entity 
     appears).
       ``(2) Enforcement.--Any restriction described in paragraph 
     (1) that is contained in a franchise-related document and in 
     effect on the date of enactment of this section--
       ``(A) shall be considered to be null and void as of that 
     date; and
       ``(B) shall not be enforced under section 105.
       ``(c) Exception to 3-Grade Requirement.--No franchise-
     related document that requires that 3 grades of gasoline be 
     sold by the applicable franchisee shall prevent the 
     franchisee from selling an alternative fuel in lieu of 1 
     grade of gasoline.''.
       (2) Conforming amendments.--
       (A) In general.--Section 101(13) of the Petroleum Marketing 
     Practices Act (15 U.S.C. 2801(13)) is amended by adjusting 
     the indentation of subparagraph (C) appropriately.
       (B) Table of contents.--The table of contents of the 
     Petroleum Marketing Practices Act (15 U.S.C. 2801 note) is 
     amended--
       (i) by inserting after the item relating to section 106 the 
     following:

``Sec. 107. Prohibition on restriction of installation of alternative 
              fuel pumps.'';

     and
       (ii) by striking the item relating to section 202 and 
     inserting the following:

``Sec. 202. Automotive fuel rating testing and disclosure 
              requirements.''.

       (b) Application of Gasohol Competition Act of 1980.--
     Section 26 of the Clayton Act (15 U.S.C. 26a) is amended--
       (1) by redesignating subsection (c) as subsection (d);
       (2) by inserting after subsection (b) the following:
       ``(c) Restriction Prohibited.--For purposes of subsection 
     (a), restricting the right of a franchisee to install on the 
     premises of that franchisee qualified alternative fuel 
     vehicle refueling property (as defined in section 30C(c) of 
     the Internal Revenue Code of 1986) shall be considered an 
     unlawful restriction.''; and
       (3) in subsection (d) (as redesignated by paragraph (1)), 
     by striking ``(d) As used in this section,'' and inserting 
     the following:

     SEC. 6. ALTERNATIVE DIESEL FUEL CONTENT OF DIESEL.

       (a) Findings.--Congress finds that--
       (1) section 211(o) of the Clean Air Act (42 U.S.C. 7535(o)) 
     (as amended by section 1501 of the Energy Policy Act of 2005 
     (Public Law 109-58)) established a renewable fuel program 
     under which entities in the petroleum sector are required to 
     blend renewable fuels into motor vehicle fuel based on the 
     gasoline motor pool;
       (2) the need for energy diversification is greater as of 
     the date of enactment of this Act than it was only months 
     before the date of enactment of the Energy Policy Act (Public 
     Law 109-58; 119 Stat. 594); and
       (3)(A) the renewable fuel program under section 211(o) of 
     the Clean Air Act requires a small percentage of the gasoline 
     motor pool, totaling nearly 140,000,000,000 gallons, to 
     contain a renewable fuel; and
       (B) the small percentage requirement described in 
     subparagraph (A) does not include the 40,000,000,000-gallon 
     diesel motor pool.
       (b) Alternative Diesel Fuel Program for Diesel Motor 
     Pool.--Section 211 of the Clean Air Act (42 U.S.C. 7545) is 
     amended by inserting after subsection (o) the following:
       ``(p) Alternative Diesel Fuel Program for Diesel Motor 
     Pool.--
       ``(1) Definition of alternative diesel fuel.--
       ``(A) In general.--In this subsection, the term 
     `alternative diesel fuel' means 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 
     alternative fuel (provided that only the alternative fuel 
     portion of any such blending component shall be considered to 
     be part of the applicable volume under the alternative diesel 
     fuel program established by this subsection).
       ``(B) Inclusions.--The term `alternative diesel fuel' 
     includes a diesel fuel substitute produced from--
       ``(i) animal fat;
       ``(ii) plant oil;
       ``(iii) recycled yellow grease;
       ``(iv) single-cell or microbial oil;
       ``(v) thermal depolymerization;
       ``(vi) thermochemical conversion;
       ``(vii) a coal-to-liquid process (including the Fischer-
     Tropsch process) that provides for the sequestration of 
     carbon emissions;
       ``(viii) a diesel-ethanol blend of not less than 7 percent 
     ethanol; or
       ``(ix) sugar, starch, or cellulosic biomass.
       ``(2) Alternative diesel fuel program.--
       ``(A) Regulations.--
       ``(i) In general.--Not later than 1 year after the date of 
     enactment of this subsection, the Administrator shall 
     promulgate regulations to ensure that diesel sold or 
     introduced into commerce in the United States (except in 
     noncontiguous States or territories), on an annual average 
     basis, contains the applicable volume of alternative diesel 
     fuel determined in accordance with subparagraph (B).
       ``(ii) Provisions of regulations.--Regardless of the date 
     of promulgation, the regulations promulgated under clause 
     (i)--

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

       ``(aa) restrict geographic areas in which alternative 
     diesel fuel may be used; or
       ``(bb) impose any per-gallon obligation for the use of 
     alternative diesel fuel.
       ``(iii) Requirement in case of failure to promulgate 
     regulations.--If the Administrator fails to promulgate 
     regulations under clause (i), the percentage of alternative 
     diesel fuel in the diesel motor pool sold or dispensed to 
     consumers in the United States, on a volume basis, shall be 
     0.6 percent for calendar year 2009.
       ``(B) Applicable volume.--
       ``(i) Calendar years 2009 through 2016.--For the purpose of 
     subparagraph (A), the applicable volume for any of calendar 
     years 2009 through 2016 shall be determined in accordance 
     with the following table:

``Applicable volume of Alternative diesel fuel in diesel motor pool (in 
  millions of gallons):                                  Calendar year:
  
  250..............................................................2009
  500..............................................................2010
  750..............................................................2011
  1,000............................................................2012
  1,250............................................................2013
  1,500............................................................2014
  1,750............................................................2015
  2,000............................................................2016

       ``(ii) Calendar year 2017 and thereafter.--The applicable 
     volume for calendar year 2017 and each calendar year 
     thereafter shall be determined by the Administrator, in 
     coordination with the Secretary of Agriculture and the 
     Secretary of Energy, based on a review of the implementation 
     of the program during calendar years 2009 through 2016, 
     including a review of--

       ``(I) the impact of the use of alternative diesel fuels on 
     the environment, air quality, energy security, job creation, 
     and rural economic development; and
       ``(II) the expected annual rate of future production of 
     alternative diesel fuels to be used as a blend component or 
     replacement to the diesel motor pool.

       ``(iii) Minimum applicable volume.--For the purpose of 
     subparagraph (A), the applicable volume for calendar year 
     2017 and each calendar year thereafter shall be equal to the 
     product obtained by multiplying--

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

       ``(aa) 2,000,000,000 gallons of alternative diesel fuel; 
     bears to
       ``(bb) the number of gallons of diesel sold or introduced 
     into commerce during calendar year 2016.
       ``(3) Applicable percentages.--
       ``(A) Provision of estimate of volumes of diesel sales.--
     Not later than October 31 of each of calendar years 2008 
     through 2016, the Administrator of the Energy Information 
     Administration shall provide to the Administrator an 
     estimate, with respect to the following calendar year, of the 
     volumes of diesel projected to be sold or introduced into 
     commerce in the United States.
       ``(B) Determination of applicable percentages.--
       ``(i) In general.--Not later than November 30 of each of 
     calendar years 2009 through 2016,

[[Page S131]]

     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 
     alternative diesel fuel obligation that ensures that the 
     requirements of paragraph (2) are met.
       ``(ii) Required elements.--The alternative diesel fuel 
     obligation determined for a calendar year under clause (i) 
     shall--

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

       ``(C) Adjustments.--In determining the applicable 
     percentage for a calendar year, the Administrator shall make 
     adjustments to prevent the imposition of redundant 
     obligations on any person described in subparagraph 
     (B)(ii)(I).
       ``(4) Credit program.--
       ``(A) In general.--The regulations promulgated pursuant to 
     paragraph (2)(A) shall provide for the generation of an 
     appropriate amount of credits by any person that refines, 
     blends, or imports diesel that contains a quantity of 
     alternative diesel fuel that is greater than the quantity 
     required under paragraph (2).
       ``(B) Use of credits.--A person that generates a credit 
     under subparagraph (A) may use the credit, or transfer all or 
     a portion of the credit to another person, for the purpose of 
     complying with regulations promulgated pursuant to paragraph 
     (2).
       ``(C) Duration of credits.--A credit generated under this 
     paragraph shall be valid during the 1-year period beginning 
     on the date on which the credit is generated.
       ``(D) Inability to generate or purchase sufficient 
     credits.--The regulations promulgated pursuant to paragraph 
     (2)(A) shall include provisions allowing any person that is 
     unable to generate or purchase sufficient credits under 
     subparagraph (A) to meet the requirements of paragraph (2) by 
     carrying forward a credit generated during a previous year on 
     the condition that the person, during the calendar year 
     following the year in which the alternative diesel fuel 
     deficit is created--
       ``(i) achieves compliance with the alternative diesel fuel 
     requirement under paragraph (2); and
       ``(ii) generates or purchases additional credits under 
     subparagraph (A) to offset the deficit of the previous year.
       ``(5) Waivers.--
       ``(A) In general.--The Administrator, in consultation with 
     the Secretary of Agriculture and the Secretary of Energy, may 
     waive the requirements of paragraph (2) in whole or in part 
     on receipt of a petition of 1 or more States by reducing the 
     national quantity of alternative diesel fuel for the diesel 
     motor pool required under paragraph (2) based on a 
     determination by the Administrator, after public notice and 
     opportunity for comment, that--
       ``(i) implementation of the requirement would severely harm 
     the economy or environment of a State, a region, or the 
     United States; or
       ``(ii) there is an inadequate domestic supply of 
     alternative diesel fuel.
       ``(B) Petitions for waivers.--Not later than 90 days after 
     the date on which the Administrator receives a petition under 
     subparagraph (A), the Administrator, in consultation with the 
     Secretary of Agriculture and the Secretary of Energy, shall 
     approve or disapprove the petition.
       ``(C) Termination of waivers.--
       ``(i) In general.--Except as provided in clause (ii), a 
     waiver under subparagraph (A) shall terminate on the date 
     that is 1 year after the date on which the waiver is 
     provided.
       ``(ii) Exception.--The Administrator, in consultation with 
     the Secretary of Agriculture and the Secretary of Energy, may 
     extend a waiver under subparagraph (A), as the Administrator 
     determines to be appropriate.''.
       (c) Penalties and Enforcement.--Section 211(d) of the Clean 
     Air Act (42 U.S.C. 7545(d)) is amended--
       (1) in paragraph (1), by striking ``or (o)'' each place it 
     appears and inserting ``(o), or (p)''; and
       (2) in paragraph (2), by striking ``and (o)'' each place it 
     appears and inserting ``(o), and (p)''.
       (d) Technical Amendments.--Section 211 of the Clean Air Act 
     (42 U.S.C. 7545) is amended--
       (1) in subsection (i)(4), by striking ``section 324'' each 
     place it appears and inserting ``section 325'';
       (2) in subsection (k)(10), by indenting subparagraphs (E) 
     and (F) appropriately;
       (3) in subsection (n), by striking ``section 219(2)'' and 
     inserting ``section 216(2)'';
       (4) by redesignating the second subsection (r) and 
     subsection (s) as subsections (s) and (t), respectively; and
       (5) in subsection (t)(1) (as redesignated by paragraph 
     (4)), by striking ``this subtitle'' and inserting ``this 
     part''.

     SEC. 7. EXCISE TAX CREDIT FOR PRODUCTION OF CELLULOSIC 
                   BIOMASS ETHANOL.

       (a) Allowance of Excise Tax Credit.--
       (1) In general.--Section 6426 of the Internal Revenue Code 
     of 1986 (relating to credit for alcohol fuel, biodiesel, and 
     alternative fuel mixtures) 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) Cellulosic Biomass Ethanol Credit.--
       ``(1) In general.--For purposes of this section, in the 
     case of a cellulosic biomass ethanol producer, the cellulosic 
     biomass ethanol credit is the product of--
       ``(A) the product of 51 cents times the equivalent number 
     of gallons of renewable fuel specified in section 211(o)(4) 
     of the Clean Air Act, times
       ``(B) the number of gallons of qualified cellulosic biomass 
     ethanol fuel production of such producer.
       ``(2) Definitions.--
       ``(A) Cellulosic biomass ethanol.--The term `cellulosic 
     biomass ethanol' has the meaning given such term under 
     section 211(o)(1)(A) of the Clean Air Act.
       ``(B) Qualified cellulosic biomass ethanol fuel 
     production.--The term `qualified cellulosic biomass ethanol 
     fuel production' means any alcohol which is cellulosic 
     biomass ethanol which during the taxable year--
       ``(i) is sold by the producer to another person --

       ``(I) for use by such other person in the production of an 
     alcohol fuel mixture in such other person's trade or business 
     (other than casual off-farm production),
       ``(II) for use by such other person as a fuel in a trade or 
     business, or
       ``(III) who sells such cellulosic biomass ethanol at retail 
     to another person and places such ethanol in the fuel tank of 
     such other person, or

       ``(ii) is used or sold by the producer for any purpose 
     described in clause (i).
       ``(3) Denial of double benefit.--No credit shall be allowed 
     under subsection (b) or (c) to any taxpayer with respect to 
     any fuel to the extent that a credit has been allowed with 
     respect to such fuel to any taxpayer under this subsection or 
     a payment has been made with respect to such fuel under 
     section 6427(e).
       ``(4) Termination.--This section shall not apply to any 
     sale or use for any period after December 31, 2008.''.
       (2) Conforming amendments.--
       (A) Section 6426(a) of such Code is amended--
       (i) by striking ``subsection (d)'' in paragraph (2) and 
     inserting ``subsections (d) and (f)'', and
       (ii) by striking ``and (e)'' in the last sentence and 
     inserting ``, (e), and (f)''.
       (B) The heading for section 6426 of such Code is amended to 
     read as follows:

     ``SEC. 6426. CREDIT FOR CERTAIN FUELS AND FUEL MIXTURES.''.

       (C) The table of section for subchapter B of chapter 65 of 
     such Code is amended by striking the item relating to section 
     6426 and inserting the following new item:

``Sec. 6426. Credit for certain fuels and fuel mixtures.''.

       (b) Cellulosic Biomass Ethanol Not Used for a Taxable 
     Purpose.--
       (1) In general.--Section 6427(e) of the Internal Revenue 
     Code of 1986 is amended by redesignating paragraphs (3) 
     through (5) as paragraphs (4) through (6), respectively, and 
     by inserting after paragraph (2) the following new paragraph:
       ``(3) Cellulosic biomass ethanol.--If any person sells or 
     uses cellulosic biomass ethanol (as defined in section 
     6426(f)(2)(A)) for a purpose described in section 
     6426(f)(2)(B) in such person's trade or business, the 
     Secretary shall pay (without interest) to such person an 
     amount equal to the cellulosic biomass ethanol credit with 
     respect to such fuel.''.
       (2) Denial of double benefit.--Paragraph (4) of section 
     6427(e) of such Code, as redesignated by paragraph (1), is 
     amended to read as follows:
       ``(4) Coordination with other repayment provisions.--
       ``(A) In general.--No amount shall be payable under 
     paragraph (1), (2), or (3) with respect to any mixture, 
     alternative fuel, or cellulosic biomass ethanol with respect 
     to which an amount is allowed as a credit under section 6426.
       ``(B) Cellulosic biomass ethanol.--No amount shall be 
     payable under paragraph (1) or (2) with respect to any 
     cellulosic biomass ethanol if a payment has been made with 
     respect to such ethanol under paragraph (3).''.
       (3) Termination.--Paragraph (6) of section 6427(e) of such 
     Code, as redesignated by paragraph (1), is amended by 
     striking ``and'' at the end of subparagraph (C), by striking 
     the period at the end of subparagraph (D) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(E) any cellulosic biomass ethanol credit (as defined in 
     section 6426(f)(2)(A)) sold or used after December 31, 
     2008.''.
       (4) Conforming amendment.--Paragraph (5) of section 6427(e) 
     of such Code, as redesignated by paragraph (1), is amended by 
     striking ``or alternative fuel mixture credit'' and inserting 
     ``, alternative fuel mixture credit, or cellulosic biomass 
     ethanol credit''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to fuel sold or used after the date of the 
     enactment of this Act.

     SEC. 8. INCENTIVE FOR FEDERAL AND STATE FLEETS FOR MEDIUM AND 
                   HEAVY DUTY HYBRIDS.

       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 
     medium or heavy duty vehicle that is a hybrid vehicle'';

[[Page S132]]

       (2) by redesignating paragraphs (11), (12), (13), and (14) 
     as paragraphs (12), (14), (15), and (16), respectively;
       (3) by inserting after paragraph (10) the following:
       ``(11) the term `hybrid vehicle' means a vehicle powered 
     both by a diesel or gasoline engine and an electric motor 
     that is recharged as the vehicle operates;''; and
       (4) by inserting after paragraph (12) (as redesignated by 
     paragraph (2)) the following:
       ``(13) the term `medium or heavy duty vehicle' means a 
     vehicle that--
       ``(A) in the case of a medium duty vehicle, has a gross 
     vehicle weight rating of more than 8,500 pounds but not more 
     than 14,000 pounds; and
       ``(B) in the case of a heavy duty vehicle, has a gross 
     vehicle weight rating of more than 14,000 pounds;''.

     SEC. 9. CREDIT FOR QUALIFYING ETHANOL BLENDING AND PROCESSING 
                   EQUIPMENT.

       (a) Allowance of Qualifying Ethanol Blending and Processing 
     Equipment Credit.--Section 46 of the Internal Revenue Code of 
     1986 (relating to amount of credit) is amended by striking 
     ``and'' at the end of paragraph (3), by striking the period 
     at the end of paragraph (4) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(5) the qualifying ethanol blending and processing 
     equipment credit.''.
       (b) Amount of Qualifying Ethanol Blending and Processing 
     Equipment Credit.--Subpart E of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     rules for computing investment credit) is amended by 
     inserting after section 48B the following new section:

     ``SEC. 48C. QUALIFYING ETHANOL BLENDING AND PROCESSING 
                   EQUIPMENT.

       ``(a) In General.--For purposes of section 46, the 
     qualifying ethanol blending and processing equipment credit 
     for any taxable year is an amount equal to 50 percent of the 
     basis of the qualifying ethanol blending and processing 
     equipment placed in service at a qualifying facility during 
     such taxable year.
       ``(b) Limitation.--The credit allowed under subsection (a) 
     for qualifying ethanol blending and processing equipment 
     placed in service at any 1 qualifying facility during any 
     taxable year shall not exceed $2,000,000.
       ``(c) Qualifying Ethanol Blending and Processing 
     Equipment.--For purposes of this section, the term 
     `qualifying ethanol blending and processing equipment' means 
     any technology installed in or on a qualifying facility for 
     blending ethanol with petroleum fuels for the purpose of 
     direct retail sale, including in-line blending equipment, 
     storage tanks, pumps and piping for denaturants, and load-out 
     equipment.
       ``(d) Qualifying Facility.--For purposes of this section, 
     the term `qualifying facility' means any facility which 
     produces not less than 1,000,000 gallons of ethanol during 
     the taxable year.
       ``(e) Special Rule for Certain Subsidized Property.--Rules 
     similar to section 48(a)(4) shall apply for purposes of this 
     section.
       ``(f) Certain Qualified Progress Expenditures 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 
     enactment of the Revenue Reconciliation Act of 1990) shall 
     apply for purposes of this subsection.
       ``(g) Termination.--This section shall not apply to 
     property placed in service after December 31, 2014.''.
       (c) Recapture of Credit Where Emissions Reduction Offset Is 
     Sold.--Paragraph (1) of section 50(a) of the Internal Revenue 
     Code of 1986 is amended by redesignating subparagraph (B) as 
     subparagraph (C) and by inserting after subparagraph (A) the 
     following new subparagraph:
       ``(B) Special rule for qualifying ethanol blending and 
     processing equipment.--For purposes of subparagraph (A), any 
     investment property which is qualifying ethanol blending and 
     processing equipment (as defined in section 48C(c)) shall 
     cease to be investment credit property with respect to a 
     taxpayer if such taxpayer receives a payment in exchange for 
     a credit for emission reductions attributable to such 
     qualifying pollution control equipment for purposes of an 
     offset requirement under part D of title I of the Clean Air 
     Act.''.
       (d) Special Rule for Basis Reduction; Recapture of 
     Credit.--Paragraph (3) of section 50(c) of the Internal 
     Revenue Code of 1986 (relating to basis adjustment to 
     investment credit property) is amended by inserting ``or 
     qualifying ethanol blending and processing equipment credit'' 
     after ``energy credit''.
       (e) Certain Nonrecourse Financing Excluded From Credit 
     Base.--Section 49(a)(1)(C) of the Internal Revenue Code of 
     1986 (defining credit base) is amended by striking ``and'' at 
     the end of clause (iii), by striking the period at the end of 
     clause (iv) and inserting ``, and'', and by adding at the end 
     the following new clause:
       ``(v) the basis of any property which is part of any 
     qualifying ethanol blending and processing equipment under 
     section 48C.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2007, 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. 10. PUBLIC ACCESS TO FEDERAL ALTERNATIVE REFUELING 
                   STATIONS.

       (a) Definitions.--In this section:
       (1) Alternative fuel refueling station.--The term 
     ``alternative fuel refueling station'' has the meaning given 
     the term ``qualified alternative fuel vehicle refueling 
     property'' in section 30C(c)(1) of the Internal Revenue Code 
     of 1986.
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of Energy.
       (b) Access to Federal Alternative Refueling Stations.--Not 
     later than 18 months after the date of enactment of this 
     Act--
       (1) except as provided in subsection (d)(1), any Federal 
     property that includes at least 1 fuel refueling station 
     shall include at least 1 alternative fuel refueling station; 
     and
       (2) except as provided in subsection (d)(2), any 
     alternative fuel refueling station located on property owned 
     by the Federal government shall permit full public access for 
     the purpose of refueling using alternative fuel.
       (c) Duration.--The requirements described in subsection (b) 
     shall remain in effect until the sooner of--
       (1) the date that is 7 years after the date of enactment of 
     this Act; or
       (2) the date on which the Secretary determines that not 
     less than 5 percent of the commercial refueling 
     infrastructure in the United States offers alternative fuels 
     to the general public.
       (d) Exceptions.--
       (1) Waiver.--Subsection (b)(1) shall not apply to any 
     Federal property under the jurisdiction of a Federal agency 
     if the Secretary determines that alternative fuel is not 
     reasonably available to retail purchasers of the fuel, as 
     certified by the head of the agency to the Secretary.
       (2) National security exemption.--Subsection (b)(2) does 
     not apply to property of the Federal government that the 
     Secretary, in consultation with the Secretary of Defense, has 
     certified must be exempt for national security reasons.
       (e) Report.--Not later than October 31 of each year 
     beginning after the date of enactment of this Act, the 
     President shall submit to Congress a report that describes 
     the progress of the agencies of the Federal Government 
     (including the Executive Office of the President) in 
     complying with--
       (1) the Energy Policy Act of 1992 (42 U.S.C. 13201 et 
     seq.);
       (2) Executive Order 13149 (65 Fed. Reg. 24595; relating to 
     greening the government through Federal fleet and 
     transportation efficiency); and
       (3) the fueling center requirements of this section.

     SEC. 11. PURCHASE OF CLEAN FUEL BUSES.

       (a) In General.--Chapter 53 of title 49, United States 
     Code, is amended by inserting after section 5325 the 
     following:

     ``Sec. 5326. Purchase of clean fuel buses

       ``(a) Definitions.--In this section:
       ``(1) Alternative diesel fuel.--
       ``(A) In general.--The term `alternative diesel fuel' 
     means--
       ``(i) biodiesel (as defined in section 312(f) of the Energy 
     Policy Act of 1992 (42 U.S.C. 13220(f))); and
       ``(ii) any blending components derived from alternative 
     fuel.
       ``(B) Inclusions.--The term `alternative diesel fuel' 
     includes a diesel fuel substitute produced from--
       ``(i) animal fat;
       ``(ii) plant oil;
       ``(iii) recycled yellow grease;
       ``(iv) single-cell or microbial oil;
       ``(v) thermal depolymerization;
       ``(vi) thermochemical conversion;
       ``(vii) a coal-to-liquid process (including the Fischer-
     Tropsch process) that provides for the sequestration of 
     carbon emissions; or
       ``(viii) a diesel-ethanol blend of not less than 7 percent 
     ethanol.
       ``(2) Cellulosic biomass ethanol.--The term `cellulosic 
     biomass ethanol' means ethanol derived from any 
     lignocellulosic or hemicellulosic matter that is available on 
     a renewable or recurring basis, including--
       ``(A) dedicated energy crops and trees;
       ``(B) wood and wood residues;
       ``(C) plants;
       ``(D) grasses;
       ``(E) agricultural residues;
       ``(F) fibers;
       ``(G) animal wastes and other waste materials; and
       ``(H) municipal solid waste.
       ``(3) Clean fuel bus.--The term `clean fuel bus' means a 
     vehicle that--
       ``(A) is capable of being powered by--
       ``(i) compressed natural gas;
       ``(ii) liquefied natural gas;
       ``(iii) 1 or more batteries;
       ``(iv) a fuel that is composed of at least 85 percent 
     ethanol (or another percentage of not less than 70 percent, 
     as the Secretary may determine, by rule, to provide for 
     requirements relating to cold start, safety, or vehicle 
     functions);
       ``(v) electricity (including a hybrid electric or plug-in 
     hybrid electric vehicle);
       ``(vi) a fuel cell;
       ``(vii) a fuel that is composed of at least 22 percent 
     biodiesel (as defined in section 312(f) of the Energy Policy 
     Act of 1992 (42 U.S.C. 13220(f)) (or another percentage of 
     not less than 10 percent, as the Secretary may determine, by 
     rule, to provide for requirements relating to cold start, 
     safety, or vehicle functions);
       ``(viii) ultra-low sulfur diesel; or
       ``(ix) liquid fuel manufactured with a coal feedstock; and
       ``(B) has been certified by the Administrator of the 
     Environmental Protection

[[Page S133]]

     Agency to significantly reduce harmful emissions, 
     particularly in a nonattainment area (as defined in section 
     171 of the Clean Air Act (42 U.S.C. 7501)).
       ``(4) Qualified alternative fuel producer.--The term 
     `qualified alternative fuel producer' means a producer of 
     qualified fuels that, during the applicable taxable year--
       ``(A) are sold by the producer to another person--
       ``(i) for use by the person in the production of a mixture 
     of qualified fuels in the trade or business of the person 
     (other than casual off-farm production);
       ``(ii) for use by the other person as a fuel in a trade or 
     business; or
       ``(iii) that--

       ``(I) sells to another person the qualified fuel at retail; 
     and
       ``(II) places the qualified fuel in the fuel tank of the 
     person that purchased the qualified fuel; or

       ``(B) are used or sold by the producer for any purpose 
     described in subparagraph (A).
       ``(5) Qualified fuel.--The term `qualified fuel' includes--
       ``(A) cellulosic biomass ethanol;
       ``(B) ethanol produced in facilities in which animal waste 
     or other waste materials are digested or otherwise used to 
     displace at least 90 percent of the fossil fuels that would 
     otherwise be used in the production of ethanol;
       ``(C) renewable fuels;
       ``(D) alternative diesel fuels;
       ``(E) sugar, starch, or cellulosic biomass; and
       ``(F) any other fuel that is not substantially petroleum.
       ``(6) Renewable fuel.--The term `renewable fuel' means 
     fuel, at least 85 percent of the volume of which--
       ``(A)(i) is produced from grain, starch, oilseeds, 
     vegetable, animal, or fish materials including fats, greases, 
     and oils, sugarcane, sugar beets, sugar components, tobacco, 
     potatoes, or other biomass; or
       ``(ii) is natural gas produced from a biogas source, 
     including a landfill, sewage waste treatment plant, feedlot, 
     or other place in which decaying organic material is found; 
     and
       ``(B) is used to substantially replace or reduce the 
     quantity of fossil fuel present in a fuel mixture used to 
     operate a motor vehicle.
       ``(b) Purchase of Buses.--Subject to subsections (c) and 
     (d), beginning on the date that is 2 years after the date of 
     enactment of this section, a bus purchased using funds made 
     available from the Mass Transit Account of the Highway Trust 
     Fund shall be a clean fuel bus.
       ``(c) Ultra-Low Sulfur Diesel.--
       ``(1) In general.--Except as provided in paragraph (2), not 
     more than 20 percent of the amount of the funds provided to a 
     recipient to purchase buses under this section may be used by 
     the recipient to purchase clean fuel buses that are capable 
     of being powered by a fuel described in clause (iv), (vii), 
     (viii), or (ix) of subsection (a)(3)(A).
       ``(2) Exception.--Paragraph (1) shall not apply if the 
     recipient enters into a 3-year purchase agreement with a 
     qualified alternative fuel producer to acquire qualified 
     fuels in a volume sufficient to power the clean fuel buses 
     purchased using amounts made available under this section.
       ``(d) Use of Certain Alternative Fuels.--
       ``(1) In general.--To be eligible to receive funds under 
     subsection (c)(2) for the purchase of a clean fuel bus that 
     is capable of being powered by a fuel described in clause 
     (iv), (vii), or (ix) of subsection (a)(3)(A), an applicant or 
     recipient shall submit to the Secretary--
       ``(A) a certification that the applicant will operate the 
     clean fuel bus only with the fuel at all times in accordance 
     with the fuel capacity and use of the fuel recommended by the 
     manufacturer of the clean fuel bus; and
       ``(B) not later than 180 days after the purchase of the 
     clean fuel bus and every 180 days thereafter, a report that 
     documents that the fuel was used in accordance with 
     subparagraph (A) during the 180-day period ending on the date 
     of the report.
       ``(2) Noncompliance.--Failure of an applicant or recipient 
     of funds to provide the certification or documentation 
     required under paragraph (1) shall--
       ``(A) be considered a violation of the agreement to receive 
     the funds; and
       ``(B) require the applicant or recipient to reimburse the 
     Secretary the full amount of the funds not later than 90 days 
     after the Secretary has determined that a violation has 
     occurred.''.
       (b) Conforming Amendment.--The analysis for chapter 53 is 
     amended by inserting after the item relating to section 5325 
     the following:

``5326. Clean fuel buses''.

     SEC. 12. DOMESTIC FUEL PRODUCTION VOLUMES TO MEET DEPARTMENT 
                   OF DEFENSE NEEDS.

       Section 2922d of title 10, United States Code is amended--
       (1) in the heading, by striking ``and tar sands'' and 
     inserting ``tar sands, and other sources'';
       (2) in subsection (a), by striking ``fuel produced, in 
     whole or in part, from coal, oil shale, and tar sands 
     (referred to in this section as a `covered fuel') that are 
     extracted by either mining or in-situ methods and refined or 
     otherwise processed in the United States'' and inserting 
     ``fuel produced, in whole or in part, from coal, oil shale, 
     and tar sands that are extracted by either mining or in-situ 
     methods and refined or otherwise processed in the United 
     States and fuel produced in the United States using starch, 
     sugar, cellulosic biomass, plant or animal oils, or thermal 
     chemical conversion, thermal depolymerization, or thermal 
     conversion processes (referred to in this section as a 
     `covered fuel')'';
       (3) in subsection (d), by striking ``1 or more years'' and 
     inserting ``up to 5 years'';
       (4) in subsection (e), by striking the period at the end 
     and inserting the following: ``, with consideration given to 
     military installations closed or realigned under a round of 
     defense base closure and realignment.''; and
       (5) by adding at the end the following new subsection:
       ``(f) Production Facilities for Covered Fuels.--The 
     Secretary of Defense may enter into contracts or other 
     agreements with private companies or other entities to 
     develop and operate production facilities for covered fuels, 
     and may provide for the construction or capital modification 
     of production facilities for covered fuels.''.

     SEC. 13. FEDERAL FLEET ENERGY CONSERVATION IMPROVEMENT.

       (a) Definitions.--Section 301 of the Energy Policy Act of 
     1992 (42 U.S.C. 13211) is amended--
       (1) in paragraph (3), by inserting before the semicolon at 
     the end the following: ``, including a vehicle that is 
     propelled by electric drive transportation technology, engine 
     dominant hybrid electric technology, or plug-in hybrid 
     technology'';
       (2) in paragraph (13), by striking ``and'' after the 
     semicolon at the end;
       (3) in paragraph (14), by striking the period at the end 
     and inserting a semicolon; and
       (4) by adding at the end the following:
       ``(15) the term `electric drive transportation technology' 
     means--
       ``(A) technology that uses an electric motor for all or 
     part of the motive power of a vehicle (regardless of whether 
     off-board electricity is used), including--
       ``(i) a battery electric vehicle;
       ``(ii) a fuel cell vehicle;
       ``(iii) an engine dominant hybrid electric vehicle;
       ``(iv) a plug-in hybrid electric vehicle;
       ``(v) a plug-in hybrid fuel cell vehicle; and
       ``(vi) an electric rail vehicle; or
       ``(B) technology that uses equipment for transportation 
     (including transportation involving any mobile source of air 
     pollution) that uses an electric motor to replace an internal 
     combustion engine for all or part of the work of the 
     equipment, including corded electric equipment that is linked 
     to transportation or a mobile source of air pollution;
       ``(16) the term `engine dominant hybrid electric vehicle' 
     means an on-road or nonroad vehicle that--
       ``(A) is propelled by an internal combustion engine or heat 
     engine using--
       ``(i) any combustible fuel; and
       ``(ii) an on-board, rechargeable storage device; and
       ``(B) has no means of using an off-board source of 
     electricity; and
       ``(17) the term `plug-in hybrid electric vehicle' means an 
     on-road or nonroad vehicle that is propelled by an internal 
     combustion engine or heat engine using--
       ``(A) any combustible fuel;
       ``(B) an on-board, rechargeable storage device; and
       ``(C) a means of using an off-board source of 
     electricity.''.
       (b) Minimum Federal Fleet Requirement.--Section 303(b)(1) 
     of the Energy Policy Act of 1992 (42 U.S.C. 13212(b)(1)) is 
     amended--
       (1) in subparagraph (C), by striking ``and'' after the 
     semicolon;
       (2) in subparagraph (D), by striking ``fiscal year 1999 and 
     thereafter,'' and inserting ``each of fiscal years 1999 
     through 2013; and''; and
       (3) by inserting after subparagraph (D) the following:
       ``(E) 100 percent in fiscal year 2014 and thereafter,''.
                                 ______