[Congressional Record Volume 153, Number 1 (Thursday, January 4, 2007)]
[Senate]
[Pages S144-S148]
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. 155. A bill to promote coal-to-liquid fuel activities; to the 
Committee on Finance.
  Mr. BUNNING. 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. 155

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

[[Page S145]]

     SECTION 1. SHORT TITLE.

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

                TITLE I--COAL-TO-LIQUID FUEL ACTIVITIES

     SEC. 101. DEFINITIONS.

       In this title:
       (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. 102. 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 101 of the Coal-to-Liquid Fuel Promotion 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. 103. 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 
     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. 104. 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. 105. 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 Promotion 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 Promotion Act of 2007, the Secretary may construct 1 or 
     more storage facilities in the vicinity of pipeline 
     infrastructure and at least 1 military base.''.
       (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 101 of 
     the Coal-to-Liquid Fuel Promotion 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. 106. 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

[[Page S146]]

     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. 107. 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 101 of the Coal-to-Liquid Fuel Promotion 
     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. 108. 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.

       TITLE II--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986

     SEC. 201. CREDIT FOR INVESTMENT IN COAL-TO-LIQUID FUELS 
                   PROJECTS.

       (a) In General.--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 coal-to-liquid fuels project 
     credit.''.
       (b) Amount of 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 COAL-TO-LIQUID FUELS PROJECT CREDIT.

       ``(a) In General.--For purposes of section 46, the 
     qualifying coal-to-liquid fuels project credit for any 
     taxable year is an amount equal to 20 percent of the 
     qualified investment for such taxable year.
       ``(b) Qualified Investment.--
       ``(1) In general.--For purposes of subsection (a), the 
     qualified investment for any taxable year is the basis of 
     property placed in service by the taxpayer during such 
     taxable year which is part of a qualifying coal-to-liquid 
     fuels project--
       ``(A)(i) the construction, reconstruction, or erection of 
     which is completed by the taxpayer, or
       ``(ii) which is acquired by the taxpayer if the original 
     use of such property commences with the taxpayer, and
       ``(B) with respect to which depreciation (or amortization 
     in lieu of depreciation) is allowable.
       ``(2) Applicable rules.--For purposes of this section, 
     rules similar to the rules of subsection (a)(4) and (b) of 
     section 48 shall apply.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Qualifying coal-to-liquid fuels project.--The term 
     `qualifying coal-to-liquid fuels project' means any domestic 
     project which--
       ``(A) employs the class of reactions known as Fischer-
     Tropsch to produce at least 10,000 barrels per day of 
     transportation grade liquid fuels from a feedstock that is 
     primarily domestic coal (including any property which allows 
     for the capture, transportation, or sequestration of by-
     products resulting from such process, including carbon 
     emissions), and
       ``(B) any portion of the qualified investment in which is 
     certified under the qualifying coal-to-liquid program as 
     eligible for credit under this section in an amount (not to 
     exceed $200,000,000) determined by the Secretary.
       ``(2) Coal.--The term `coal' means any carbonized or 
     semicarbonized matter, including peat.
       ``(d) Qualifying Coal-to-Liquid Fuels Project Program.--
       ``(1) In general.--The Secretary, in consultation with the 
     Secretary of Energy, shall establish a qualifying coal-to-
     liquid fuels project program to consider and award 
     certifications for qualified investment eligible for credits 
     under this section to 10 qualifying coal-to-liquid fuels 
     project sponsors under this section. The total qualified 
     investment which may be awarded eligibility for credit under 
     the program shall not exceed $2,000,000,000.
       ``(2) Period of issuance.--A certificate of eligibility 
     under paragraph (1) may be issued only during the 10-fiscal 
     year period beginning on October 1, 2007.
       ``(3) Selection criteria.--The Secretary shall not make a 
     competitive certification award for qualified investment for 
     credit eligibility under this section unless the recipient 
     has documented to the satisfaction of the Secretary that--
       ``(A) the proposal of the award recipient is financially 
     viable,
       ``(B) the recipient will provide sufficient information to 
     the Secretary for the Secretary to ensure that the qualified 
     investment is spent efficiently and effectively,
       ``(C) the fuels identified with respect to the gasification 
     technology for such project will comprise at least 90 percent 
     of the fuels required by the project for the production of 
     transportation grade liquid fuels,
       ``(D) the award recipient's project team is competent in 
     the planning and construction of coal gasification facilities 
     and familiar with operation of the Fischer-Tropsch process, 
     with preference given to those recipients with experience 
     which demonstrates successful and reliable operations of such 
     process, and
       ``(E) the award recipient has met other criteria 
     established and published by the Secretary.
       ``(e) Denial of Double Benefit.--No deduction or other 
     credit shall be allowed with respect to the basis of any 
     property taken into account in determining the credit allowed 
     under this section.''.
       (c) Conforming Amendments.--
       (1) Section 49(a)(1)(C) of the Internal Revenue Code of 
     1986 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 after clause (iv) the 
     following new clause:
       ``(v) the basis of any property which is part of a 
     qualifying coal-to-liquid fuels project under section 48C.''.
       (2) The table of sections for subpart E of part IV of 
     subchapter A of chapter 1 of such Code is amended by 
     inserting after the item relating to section 48B the 
     following new item:

``48C. Qualifying coal-to-liquid fuels project credit.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to periods after the date of the enactment of 
     this Act, under rules similar to the rules of section 48(m) 
     of the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of the Revenue 
     Reconciliation Act of 1990).

     SEC. 202. TEMPORARY EXPENSING FOR EQUIPMENT USED IN COAL-TO-
                   LIQUID FUELS PROCESS.

       (a) In General.--Part VI of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 is amended by inserting 
     after section 179D the following new section:

     ``SEC. 179E. ELECTION TO EXPENSE CERTAIN COAL-TO-LIQUID FUELS 
                   FACILITIES.

       ``(a) Treatment as Expenses.--A taxpayer may elect to treat 
     the cost of any qualified coal-to-liquid fuels process 
     property as an expense which is not chargeable to capital 
     account. Any cost so treated shall be allowed as a deduction 
     for the taxable year in which the expense is incurred.

[[Page S147]]

       ``(b) Election.--
       ``(1) In general.--An election under this section for any 
     taxable year shall be made on the taxpayer's return of the 
     tax imposed by this chapter for the taxable year. Such 
     election shall be made in such manner as the Secretary may by 
     regulations prescribe.
       ``(2) Election irrevocable.--Any election made under this 
     section may not be revoked except with the consent of the 
     Secretary.
       ``(c) Qualified Coal-to-Liquid Fuels Process Property.--The 
     term `qualified coal-to-liquid fuels process property' means 
     any property located in the United States--
       ``(1) which employs the Fischer-Tropsch process to produce 
     transportation grade liquid fuels from a feedstock that is 
     primarily domestic coal (including any property which allows 
     for the capture, transportation, or sequestration of by-
     products resulting from such process, including carbon 
     emissions),
       ``(2) the original use of which commences with the 
     taxpayer,
       ``(3) the construction of which--
       ``(A) except as provided in subparagraph (B), is subject to 
     a binding construction contract entered into after the date 
     of the enactment of this section and before January 1, 2011, 
     but only if there was no written binding construction 
     contract entered into on or before such date of enactment, or
       ``(B) in the case of self-constructed property, began after 
     the date of the enactment of this section and before January 
     1, 2011, and
       ``(4) which is placed in service by the taxpayer after the 
     date of the enactment of this section and before January 1, 
     2016.
       ``(d) Election to Allocate Deduction to Cooperative 
     Owner.--If--
       ``(1) a taxpayer to which subsection (a) applies is an 
     organization to which part I of subchapter T applies, and
       ``(2) one or more persons directly holding an ownership 
     interest in the taxpayer are organizations to which part I of 
     subchapter T apply,

     the taxpayer may elect to allocate all or a portion of the 
     deduction allowable under subsection (a) to such persons. 
     Such allocation shall be equal to the person's ratable share 
     of the total amount allocated, determined on the basis of the 
     person's ownership interest in the taxpayer. The taxable 
     income of the taxpayer shall not be reduced under section 
     1382 by reason of any amount to which the preceding sentence 
     applies.
       ``(e) Basis Reduction.--
       ``(1) In general.--For purposes of this title, if a 
     deduction is allowed under this section with respect to any 
     qualified coal-to-liquid fuels process property, the basis of 
     such property shall be reduced by the amount of the deduction 
     so allowed.
       ``(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.
       ``(f) Application With Other Deductions and Credits.--
       ``(1) Other deductions.--No deduction shall be allowed 
     under any other provision of this chapter with respect to any 
     expenditure with respect to which a deduction is allowed 
     under subsection (a) to the taxpayer.
       ``(2) Credits.--No credit shall be allowed under section 38 
     with respect to any amount for which a deduction is allowed 
     under subsection (a).
       ``(g) Reporting.--No deduction shall be allowed under 
     subsection (a) to any taxpayer for any taxable year unless 
     such taxpayer files with the Secretary a report containing 
     such information with respect to the operation of the 
     property of the taxpayer as the Secretary shall require.''.
       (b) Conforming Amendments.--
       (1) Section 1016(a) of the Internal Revenue Code of 1986 is 
     amended by striking ``and'' at the end of paragraph (36), by 
     striking the period at the end of paragraph (37) and 
     inserting ``, and'', and by adding at the end the following 
     new paragraph:
       ``(38) to the extent provided in section 179E(e)(1).''.
       (2) Section 1245(a) of such Code is amended by inserting 
     ``179E,'' after ``179D,'' both places it appears in 
     paragraphs (2)(C) and (3)(C).
       (3) Section 263(a)(1) of such Code is amended by striking 
     ``or'' at the end of subparagraph (J), by striking the period 
     at the end of subparagraph (K) and inserting ``, or'', and by 
     inserting after subparagraph (K) the following new 
     subparagraph:
       ``(L) expenditures for which a deduction is allowed under 
     section 179E.''.
       (4) Section 312(k)(3)(B) of such Code is amended by 
     striking ``or 179D'' each place it appears in the heading and 
     text and inserting ``179D, or 179E''.
       (5) The table of sections for part VI of subchapter B of 
     chapter 1 of such Code is amended by inserting after the item 
     relating to section 179D the following new item:

``Sec. 179E. Election to expense certain coal-to-liquid fuels 
              facilities.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to properties placed in service after the date of 
     the enactment of this Act.

     SEC. 203. EXTENSION OF ALTERNATIVE FUEL CREDIT FOR FUEL 
                   DERIVED FROM COAL THROUGH THE FISCHER-TROPSCH 
                   PROCESS.

       (a) Alternative Fuel Credit.--Paragraph (4) of section 
     6426(d) of the Internal Revenue Code of 1986 is amended to 
     read as follows:
       ``(4) Termination.--This subsection shall not apply to--
       ``(A) any sale or use involving liquid fuel derived from a 
     feedstock that is primarily domestic coal (including peat) 
     through the Fischer-Tropsch process for any period after 
     September 30, 2020,
       ``(B) any sale or use involving liquified hydrogen for any 
     period after September 30, 2014, and
       ``(C) any other sale or use for any period after September 
     30, 2009.''.
       (b) Payments.--
       (1) In general.--Paragraph (5) of section 6427(e) of the 
     Internal Revenue Code of 1986 is amended by striking ``and'' 
     and 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 alternative fuel or alternative fuel mixture (as 
     so defined) involving liquid fuel derived from coal 
     (including peat) through the Fischer-Tropsch process sold or 
     used after September 30, 2020.''.
       (2) Conforming amendment.--Section 6427(e)(5)(C) of such 
     Code is amended by striking ``subparagraph (D)'' and 
     inserting ``subparagraphs (D) and (E)''.

     SEC. 204. MODIFICATIONS TO ENHANCED OIL RECOVERY CREDIT.

       (a) Enhanced Credit for Carbon Dioxide Injections.--Section 
     43 of the Internal Revenue Code of 1986 is amended by adding 
     at the end the following new subsection:
       ``(f) Enhanced Credit for Projects Using Qualified Carbon 
     Dioxide.--
       ``(1) In general.--For purposes of this section--
       ``(A) the term `qualified project' includes a project 
     described in paragraph (2), and
       ``(B) in the case of a project described in paragraph (2), 
     subsection (a) shall be applied by substituting `50 percent' 
     for `15 percent'.
       ``(2) Projects described.--A project is described in this 
     paragraph if it begins or is substantially expanded after 
     December 31, 2007, and
       ``(A) uses qualified carbon dioxide in an enhanced oil, 
     natural gas, or coalbed methane recovery method, which 
     involves flooding or injection, or
       ``(B) enables the capture or sequestration of qualified 
     carbon dioxide.
       ``(3) Definitions.--For purposes of this subsection--
       ``(A) Enhanced oil recovery.--The term `enhanced oil 
     recovery' means recovery of oil by injecting or flooding with 
     qualified carbon dioxide.
       ``(B) Enhanced natural gas recovery.--The term `enhanced 
     natural gas recovery' means recovery of natural gas by 
     injecting or flooding with qualified carbon dioxide.
       ``(C) Enhanced coalbed methane recovery.--The term 
     `enhanced coalbed methane recovery' means recovery of coalbed 
     methane by injecting or flooding with qualified carbon 
     dioxide.
       ``(D) Qualified carbon dioxide.--The term `qualified carbon 
     dioxide' means carbon dioxide which is produced from the 
     gasification and subsequent refinement of a feedstock which 
     is primarily domestic coal, at a facility which produces 
     coal-to-liquid fuel.
       ``(E) Capture or sequestration.--The term `capture or 
     sequestration' means any equipment or facility necessary to--
       ``(i) capture or separate qualified carbon dioxide from 
     other emissions,
       ``(ii) transport qualified carbon dioxide, or
       ``(iii) process and use qualified carbon dioxide in a 
     qualified project.
       ``(4) Termination.--This subsection shall not apply to 
     costs paid or incurred for any qualified project after 
     December 31, 2020.''.
       (b) Conforming Amendments.--
       (1) Section 43 of the Internal Revenue Code of 1986 is 
     amended--
       (A) by striking ``enhanced oil recovery credit'' in 
     subsection (a) and inserting ``enhanced oil, natural gas, and 
     coalbed methane recovery, and capture and sequestration 
     credit'',
       (B) by striking ``qualified enhanced oil recovery costs'' 
     each place it appears and inserting ``qualified costs'',
       (C) by striking ``qualified enhanced oil recovery project'' 
     each place it appears and inserting ``qualified project'', 
     and
       (D) by striking the heading and inserting:

     ``SEC. 43. ENHANCED OIL, NATURAL GAS, AND COALBED METHANE 
                   RECOVERY, AND CAPTURE AND SEQUESTRATION 
                   CREDIT.''.

       (2) The item in the table of sections for subpart D of part 
     IV of subchapter A of chapter 1 of such Code relating to 
     section 43 is amended to read as follows:

``Sec. 43. Enhanced oil, natural gas, and coalbed methane recovery, and 
              capture and sequestration credit.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to costs paid or incurred in taxable years ending 
     after December 31, 2007.

     SEC. 205. ALLOWANCE OF ENHANCED OIL, NATURAL GAS, AND COALBED 
                   METHANE RECOVERY, AND CAPTURE AND SEQUESTRATION 
                   CREDIT AGAINST THE ALTERNATIVE MINIMUM TAX.

       (a) In General.--Subsection (c) of section 38 of the 
     Internal Revenue Code of 1986 (relating to limitation based 
     on amount of tax) is amended by redesignating paragraphs (4) 
     and (5) as paragraphs (5) and (6), respectively, and by 
     inserting after paragraph (3) the following new paragraph:
       ``(4) Special rules for enhanced oil, natural gas, and 
     coalbed methane recovery, and capture and sequestration 
     credit.--In

[[Page S148]]

     the case of the enhanced oil, natural gas, and coalbed 
     methane recovery, and capture and sequestration credit 
     determined under section 43--
       ``(A) this section and section 39 shall be applied 
     separately with respect to such credit, and
       ``(B) in applying paragraph (1) to such credit--
       ``(i) the tentative minimum tax shall be treated as being 
     zero, and
       ``(ii) the limitation under paragraph (1) (as modified by 
     clause (i)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the enhanced 
     oil, natural gas, and coalbed methane recovery, and capture 
     and sequestration credit and the specified credits).''.
       (b) Conforming Amendments.--
       (1) Section 38(c)(2)(A)(ii)(II) of such Code is amended by 
     inserting ``the enhanced oil, natural gas, and coalbed 
     methane recovery, and capture and sequestration credit,'' 
     after ``employee credit,''.
       (2) Section 38(c)(3)(A)(ii)(II) of such Code is amended by 
     inserting ``, the enhanced oil, natural gas, coalbed methane 
     recovery, capture and sequestration credit,'' after 
     ``employee credit''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 2007.
                                 ______