[Congressional Record Volume 153, Number 1 (Thursday, January 4, 2007)]
[Senate]
[Pages S142-S144]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BUNNING (for himself, Mr. Obama, Mr. Lugar, Mr. Pryor, Ms. 
        Murkowski, Mr. Bond, Mr. Thomas, Mr. Martinez, Mr. Enzi, Ms. 
        Landrieu, and Mr. Craig):
  S. 154. A bill to promote coal-to-liquid fuel activities; to the 
Committee on Energy and Natural Resources.
  Mr. BUNNING. Mr. President, I rise today to introduce the Coal-to-
Liquid Fuel Promotion Act of 2007.
  For too long, America has ignored its energy security. Many of us can 
remember the energy crises of the 1970s. We were held ransom by a 
monopolistic oil cartel and forced to endure shortages, gas lines, and 
high prices. In the early 1980s, just as America began to invest in 
alternative fuels, the oil-producing states of the world crashed prices 
to make new technology uncompetitive.
  During most of the last 25 years, we have enjoyed low prices and 
plentiful supply, but we have paid a price. Today, we find America is 
addicted to oil.
  Since September 11, we have seen the fragile state of our energy 
markets. Domestic disasters and terrorism can send energy prices 
spiraling out of control. Our energy resources are stretched to the 
limits, and small supply disruptions ripple through the entire economy. 
America needs a secure domestic source to ease our dependency on 
imported oil.
  That is why today I am reintroducing my bill, the Coal-to-Liquid Fuel 
Promotion Act with the current Presiding Officer, Senator Obama of 
Illinois. I have worked with the coal and fuel industries, the 
Department of Defense, and environmental groups to identify the needs 
of the coal-to-liquid industry and the best way for the Government to 
support the coal-to-liquid development.
  Coal has long been America's most abundant fuel resource and has 
driven our economic growth since the industrial revolution. In the 
coal-to-liquid process, coal is gasified, the gas is run through the 
FischerTropsch process, and the resulting fuel is refined into jet fuel 
and diesel fuel. The final product is cleaner than conventional fuels 
because nearly all of the sulfur and nitrogen is removed.
  While this technology is just taking root in America, South Africa 
meets 30 percent of its fuel needs with coal. CTL technology lets 
America capitalize on a domestic resource that will fuel economic 
growth and produce the energy security required in today's world. Many 
of my colleagues may ask one question right now: If this technology is 
so great and could replace expensive imports from the Middle East, why 
hasn't it been done already? The answer is simple: costs and market 
uncertainty.
  A typical size CTL plant costs more than $2 billion to construct. 
With complicated plans and environmental permits, a new plant could 
take 5 to 8 years to build. This is a challenge for even the biggest 
risk-takers on Wall Street. Raising the capital needed to develop a new 
technology is always difficult, but the multibillion dollar investment 
scale of a CTL plant has made it nearly impossible.
  On top of this is the uncertainty of the price of oil. America has 
seen oil prices rise dramatically in the last few years. But investors 
are concerned that oil prices could drop to the low levels of the 1980s 
and make CTL plants uncompetitive again. I believe oil prices will stay 
above the price range that keeps CTL profitable, which is estimated to 
be between $40 and $50 per barrel. But even if oil prices were to drop 
that low in the next few decades, I believe CTL would more than pay for 
itself by insulating us from supply shocks and providing a secure 
domestic fuel supply for the military, businesses such as airlines and 
trucking, and the average American's car.

  The Federal Government must act to help industry overcome these 
hurdles. This legislation will provide a combination of incentives to 
create a network of coal-to-liquid production in the United States.
  The Coal-to-Liquid Fuel Promotion Act of 2007 has three parts. First, 
this bill addresses the need to pull together the investors and the 
billions of dollars required to build a CTL plant. It expands and 
enhances the Department of Energy's loan guarantee program included in 
the Energy Policy Act we passed in 2005. It expressly authorizes

[[Page S143]]

DOE to administer loan guarantees for the Nation's first CTL plants. 
These plants must be large scale, which is a minimum production of 
10,000 barrels a day of liquid fuel. This program is only for the first 
10 commercial plants. By then, we should have proven the economics of 
this technology and no further incentives will be needed.
  It also provides a new program of matching loans. The loans are 
capped at $20 million and must be matched dollar-for-dollar by non-
Federal money. They must be repaid as soon as the plants are financed.
  Second, this legislation would fundamentally alter the economics of 
CTL plants during and after construction. It expands the investment tax 
credits and expensing provisions enacted in the Energy Policy Act of 
2005. It increases the 20-percent tax credit for CTL plants to a 
maximum of $200 million for each of the first 10 CTL plants. It also 
extends the expiring exploration of the fuel excise tax credits for CTL 
from 2009 to 2020. The current provisions will expire long before the 
first CTL plant is even operational. This extension will provide a 
meaningful timeframe for CTL plants to benefit from the same tax 
incentives we offer renewable and hydrogen fuels.
  This bill also provides an incentive for CTL plants to capture carbon 
emissions. We can use CO2 to produce oil in depleted wells 
or extract coalbed methane.
  Third, this bill provides the Department of Defense the funding to 
purchase, test, and integrate CTL fuels into the military. In the last 
few months, the Air Force has successfully tested CTL fuels in B-52 
bombers. These tests are proving to the DOD and to industry that CTL 
fuels are as safe and reliable as the fuels produced today.
  This legislation also instructs the DOD to conduct a study on CTL 
fuel storage and its inclusion in the Strategic Petroleum Reserve.
  It authorizes the construction of storage facilities for CTL fuel and 
allows the Strategic Petroleum Reserve to hold up to 20 percent of its 
stock in the form of CTL-finished fuels.
  By combining the abilities of the Department of Energy and the 
Department of Defense with incentives in the Tax Code, I am confident 
this legislation will help Kentucky, and America, become the world 
leaders in coal-to-liquid fuel promotion. This coal-to-liquid fuel 
legislation made headlines during the summer of 2006 when gas prices 
were at a near record high. Yet when prices fell, the pressure to pass 
this legislation also decreased. We have been very lucky that a mild 
winter has held down demand. We will not always be this lucky.
  No matter what energy prices are, America needs a domestic source of 
fuel. This year alone we will send $250 billion to foreign countries, 
mostly in the Middle East, just to buy oil. Imagine what we could have 
done here at home with trillions of dollars we have spent on oil in the 
last few decades.
  There is no room for politics in energy security. In the 110th 
Congress, Senator Obama and I will work hard with all of our colleagues 
to pass this important legislation. I especially look forward to 
working with my new chairman in the Energy Committee, Senator Bingaman, 
and my ranking member, Senator Domenici, on this important bill.
  I now send to the desk the Coal-to-Liquid Fuel Promotion Act of 2007 
and the related Coal-to-Liquid Fuel Energy Act of 2007. I ask unanimous 
consent these two bills be printed with my remarks in the Record.
  The PRESIDING OFFICER. without objection, the bills will be received 
and appropriately referred.
  Mr. CONRAD. Mr. President, first I commend my colleague from Kentucky 
for his legislation. This is an area in which I have had a continuing 
interest as well. I salute him because one of the great challenges 
facing our Nation is to dramatically reduce our dependence on foreign 
energy. That is in our energy interest, it is in our economic interest, 
it is in our vital security interest. I commend my colleague from 
Kentucky for coming to the floor and offering his proposal on what we 
could do to make progress. I thank the Senator.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 154

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Coal-to-Liquid Fuel Energy 
     Act of 2007''.

     SEC. 2. DEFINITIONS.

       In this Act:
       (1) Coal-to-liquid.--The term ``coal-to-liquid'' means--
       (A) with respect to a process or technology, the use of a 
     feedstock, the majority of which is the coal resources of the 
     United States, using the class of reactions known as Fischer-
     Tropsch, to produce synthetic fuel suitable for 
     transportation; and
       (B) with respect to a facility, the portion of a facility 
     related to producing the inputs to the Fischer-Tropsch 
     process, the Fischer-Tropsch process, finished fuel 
     production, or the capture, transportation, or sequestration 
     of byproducts of the use of a feedstock that is primarily 
     domestic coal at the Fischer-Tropsch facility, including 
     carbon emissions.
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of Energy.

     SEC. 3. COAL-TO-LIQUID FUEL LOAN GUARANTEE PROGRAM.

       (a) Eligible Projects.--Section 1703(b) of the Energy 
     Policy Act of 2005 (42 U.S.C. 16513(b)) is amended by adding 
     at the end the following:
       ``(11) Large-scale coal-to-liquid facilities (as defined in 
     section 2 of the Coal-to-Liquid Fuel Energy Act of 2007) that 
     use a feedstock, the majority of which is the coal resources 
     of the United States, to produce not less than 10,000 barrels 
     a day of liquid transportation fuel.''.
       (b) Authorization of Appropriations.--Section 1704 of the 
     Energy Policy Act of 2005 (42 U.S.C. 16514) is amended by 
     adding at the end the following:
       ``(c) Coal-to-Liquid Projects.--
       ``(1) In general.--There are authorized to be appropriated 
     such sums as are necessary to provide the cost of guarantees 
     for projects involving large-scale coal-to-liquid facilities 
     under section 1703(b)(11).
       ``(2) Alternative funding.--If no appropriations are made 
     available under paragraph (1), an eligible applicant may 
     elect to provide payment to the Secretary, to be delivered if 
     and at the time the application is approved, in the amount of 
     the estimated cost of the loan guarantee to the Federal 
     Government, as determined by the Secretary.
       ``(3) Limitations.--
       ``(A) In general.--No loan guarantees shall be provided 
     under this title for projects described in paragraph (1) 
     after (as determined by the Secretary)--
       ``(i) the tenth such loan guarantee is issued under this 
     title; or
       ``(ii) production capacity covered by such loan guarantees 
     reaches 100,000 barrels per day of coal-to-liquid fuel.
       ``(B) Individual projects.--
       ``(i) In general.--A loan guarantee may be provided under 
     this title for any large-scale coal-to-liquid facility 
     described in paragraph (1) that produces no more than 20,000 
     barrels of coal-to-liquid fuel per day.
       ``(ii) Non-federal funding requirement.--To be eligible for 
     a loan guarantee under this title, a large-scale coal-to-
     liquid facility described in paragraph (1) that produces more 
     than 20,000 barrels per day of coal-to-liquid fuel shall be 
     eligible to receive a loan guarantee for the proportion of 
     the cost of the facility that represents 20,000 barrels of 
     coal-to-liquid fuel per day of production.
       ``(4) Requirements.--
       ``(A) Guidelines.--Not later than 180 days after the date 
     of enactment of this subsection, the Secretary shall publish 
     guidelines for the coal-to-liquids loan guarantee application 
     process.
       ``(B) Applications.--Not later than 1 year after the date 
     of enactment of this subsection, the Secretary shall begin to 
     accept applications for coal-to-liquid loan guarantees under 
     this subsection.
       ``(C) Deadline.--Not later than 1 year from the date of 
     acceptance of an application under subparagraph (B), the 
     Secretary shall evaluate the application and make final 
     determinations under this subsection.
       ``(5) Reports to congress.--The Secretary shall submit to 
     the Committee on Energy and Natural Resources of the Senate 
     and the Committee on Energy and Commerce of the House of 
     Representatives a report describing the status of the program 
     under this subsection not later than each of--
       ``(A) 180 days after the date of enactment of this 
     subsection;
       ``(B) 1 year after the date of enactment of this 
     subsection; and
       ``(C) the dates on which the Secretary approves the first 
     and fifth applications for coal-to-liquid loan guarantees 
     under this subsection.''.

     SEC. 4. COAL-TO-LIQUID FACILITIES LOAN PROGRAM.

       (a) Definition of Eligible Recipient.--In this section, the 
     term ``eligible recipient'' means an individual, 
     organization, or other entity that owns, operates, or plans 
     to construct a coal-to-liquid facility that will produce at 
     least 10,000 barrels per day of coal-to-liquid fuel.
       (b) Establishment.--The Secretary shall establish a program 
     under which the Secretary shall provide loans, in a total 
     amount not to exceed $20,000,000, for use by eligible

[[Page S144]]

     recipients to pay the Federal share of the cost of obtaining 
     any services necessary for the planning, permitting, and 
     construction of a coal-to-liquid facility.
       (c) Application.--To be eligible to receive a loan under 
     subsection (b), the eligible recipient shall submit to the 
     Secretary an application at such time, in such manner, and 
     containing such information as the Secretary may require.
       (d) Non-Federal Match.--To be eligible to receive a loan 
     under this section, an eligible recipient shall use non-
     Federal funds to provide a dollar-for-dollar match of the 
     amount of the loan.
       (e) Repayment of Loan.--
       (1) In general.--To be eligible to receive a loan under 
     this section, an eligible recipient shall agree to repay the 
     original amount of the loan to the Secretary not later than 5 
     years after the date of the receipt of the loan.
       (2) Source of funds.--Repayment of a loan under paragraph 
     (1) may be made from any financing or assistance received for 
     the construction of a coal-to-liquid facility described in 
     subsection (a), including a loan guarantee provided under 
     section 1703(b)(11) of the Energy Policy Act of 2005 (42 
     U.S.C. 16513(b)(11)).
       (f) Requirements.--
       (1) Guidelines.--Not later than 180 days after the date of 
     enactment of this Act, the Secretary shall publish guidelines 
     for the coal-to-liquids loan application process.
       (2) Applications.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary shall begin to accept 
     applications for coal-to-liquid loans under this section.
       (g) Reports to Congress.--Not later than each of 180 days 
     and 1 year after the date of enactment of this Act, the 
     Secretary shall submit to the Committee on Energy and Natural 
     Resources of the Senate and the Committee on Energy and 
     Commerce of the House of Representatives a report describing 
     the status of the program under this section.
       (h) Authorization of Appropriations.--There is authorized 
     to be appropriated to carry out this section $200,000,000, to 
     remain available until expended.

     SEC. 5. LOCATION OF COAL-TO-LIQUID MANUFACTURING FACILITIES.

       The Secretary, in coordination with the head of any 
     affected agency, shall promulgate such regulations as the 
     Secretary determines to be necessary to support the 
     development on Federal land (including land of the Department 
     of Energy, military bases, and military installations closed 
     or realigned under the defense base closure and realignment) 
     of coal-to-liquid manufacturing facilities and associated 
     infrastructure, including the capture, transportation, or 
     sequestration of carbon dioxide.

     SEC. 6. STRATEGIC PETROLEUM RESERVE.

       (a) Development, Operation, and Maintenance of Reserve.--
     Section 159 of the Energy Policy and Conservation Act (42 
     U.S.C. 6239) is amended--
       (1) by redesignating subsections (f), (g), (j), (k), and 
     (l) as subsections (a), (b), (e), (f), and (g), respectively; 
     and
       (2) by inserting after subsection (b) (as redesignated by 
     paragraph (1)) the following:
       ``(c) Study of Maintaining Coal-to-Liquid Products in 
     Reserve.--Not later than 1 year after the date of enactment 
     of the Coal-to-Liquid Fuel Energy Act of 2007, the Secretary 
     and the Secretary of Defense shall--
       ``(1) conduct a study of the feasibility and suitability of 
     maintaining coal-to-liquid products in the Reserve; and
       ``(2) submit to the Committee on Energy and Natural 
     Resources and the Committee on Armed Services of the Senate 
     and the Committee on Energy and Commerce and the Committee on 
     Armed Services of the House of Representatives a report 
     describing the results of the study.
       ``(d) Construction of Storage Facilities.--As soon as 
     practicable after the date of enactment of the Coal-to-Liquid 
     Fuel Energy Act of 2007, the Secretary may construct 1 or 
     more storage facilities--
       ``(1) in the vicinity of pipeline infrastructure and at 
     least 1 military base; but
       (b) Petroleum Products for Storage in Reserve.--Section 160 
     of the Energy Policy and Conservation Act (42 U.S.C. 6240) is 
     amended--
       (1) in subsection (a)--
       (A) in paragraph (1), by inserting a semicolon at the end;
       (B) in paragraph (2), by striking ``and'' at the end;
       (C) in paragraph (3), by striking the period at the end and 
     inserting ``; and''; and
       (D) by adding at the end the following:
       ``(4) coal-to-liquid products (as defined in section 2 of 
     the Coal-to-Liquid Fuel Energy Act of 2007), as the Secretary 
     determines to be appropriate, in a quantity not to exceed 20 
     percent of the total quantity of petroleum and petroleum 
     products in the Reserve.'';
       (2) in subsection (b), by redesignating paragraphs (3) 
     through (5) as paragraphs (2) through (4), respectively; and
       (3) by redesignating subsections (f) and (h) as subsections 
     (d) and (e), respectively.
       (c) Conforming Amendments.--Section 167 of the Energy 
     Policy and Conservation Act (42 U.S.C. 6247) is amended--
       (1) in subsection (b)--
       (A) by redesignating paragraphs (2) and (3) as paragraphs 
     (1) and (2), respectively; and
       (B) in paragraph (2) (as redesignated by subparagraph (A)), 
     by striking ``section 160(f)'' and inserting ``section 
     160(e)''; and
       (2) in subsection (d), in the matter preceding paragraph 
     (1), by striking ``section 160(f)'' and inserting ``section 
     160(e)''.

     SEC. 7. AUTHORIZATION TO CONDUCT RESEARCH, DEVELOPMENT, 
                   TESTING, AND EVALUATION OF ASSURED DOMESTIC 
                   FUELS.

       Of the amount authorized to be appropriated for the Air 
     Force for research, development, testing, and evaluation, 
     $10,000,000 may be made available for the Air Force Research 
     Laboratory to continue support efforts to test, qualify, and 
     procure synthetic fuels developed from coal for aviation jet 
     use.

     SEC. 8. COAL-TO-LIQUID LONG-TERM FUEL PROCUREMENT AND 
                   DEPARTMENT OF DEFENSE DEVELOPMENT.

       Section 2398a of title 10, United States Code is amended--
       (1) in subsection (b)--
       (A) by striking ``The Secretary'' and inserting the 
     following:
       ``(1) In general.--The Secretary''; and
       (B) by adding at the end the following:
       ``(2) Coal-to-liquid production facilities.--
       ``(A) In general.--The Secretary of Defense may enter into 
     contracts or other agreements with private companies or other 
     entities to develop and operate coal-to-liquid facilities (as 
     defined in section 2 of the Coal-to-Liquid Fuel Energy Act of 
     2007) on or near military installations.
       ``(B) Considerations.--In entering into contracts and other 
     agreements under subparagraph (A), the Secretary shall 
     consider land availability, testing opportunities, and 
     proximity to raw materials.'';
       (2) in subsection (d)--
       (A) by striking ``Subject to applicable provisions of law, 
     any'' and inserting ``Any''; and
       (B) by striking ``1 or more years'' and inserting ``up to 
     25 years''; and
       (3) by adding at the end the following:
       ``(f) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as are necessary to 
     carry out this section.''.

     SEC. 9. REPORT ON EMISSIONS OF FISCHER-TROPSCH PRODUCTS USED 
                   AS TRANSPORTATION FUELS.

       (a) In General.--In cooperation with the Administrator of 
     the Environmental Protection Agency, the Secretary of 
     Defense, the Administrator of the Federal Aviation 
     Administration, and the Secretary of Health and Human 
     Services, the Secretary shall--
       (1) carry out a research and demonstration program to 
     evaluate the emissions of the use of Fischer-Tropsch fuel for 
     transportation, including diesel and jet fuel;
       (2) evaluate the effect of using Fischer-Tropsch 
     transportation fuel on land and air engine exhaust emissions; 
     and
       (3) in accordance with subsection (e), submit to Congress a 
     report on the effect on air quality and public health of 
     using Fischer-Tropsch fuel in the transportation sector.
       (b) Guidance and Technical Support.--The Secretary shall 
     issue any guidance or technical support documents necessary 
     to facilitate the effective use of Fischer-Tropsch fuel and 
     blends under this section.
       (c) Facilities.--For the purpose of evaluating the 
     emissions of Fischer-Tropsch transportation fuels, the 
     Secretary shall--
       (1) support the use and capital modification of existing 
     facilities and the construction of new facilities at the 
     research centers designated in section 417 of the Energy 
     Policy Act of 2005 (42 U.S.C. 15977); and
       (2) engage those research centers in the evaluation and 
     preparation of the report required under subsection (a)(3).
       (d) Requirements.--The program described in subsection 
     (a)(1) shall consider--
       (1) the use of neat (100 percent) Fischer-Tropsch fuel and 
     blends of Fischer-Tropsch fuels with conventional crude oil-
     derived fuel for heavy-duty and light-duty diesel engines and 
     the aviation sector; and
       (2) the production costs associated with domestic 
     production of those fuels and prices for consumers.
       (e) Reports.--The Secretary shall submit to the Committee 
     on Energy and Natural Resources of the Senate and the 
     Committee on Energy and Commerce of the House of 
     Representatives--
       (1) not later than 180 days after the date of enactment of 
     this Act, an interim report on actions taken to carry out 
     this section; and
       (2) not later than 1 year after the date of enactment of 
     this Act, a final report on actions taken to carry out this 
     section.
       (f) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as are necessary to carry out 
     this section.
                                 ______