[Congressional Record Volume 155, Number 122 (Thursday, August 6, 2009)]
[Senate]
[Pages S9041-S9043]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN (for himself, Ms. Snowe, and Mrs. Feinstein):
  S. 1639. A bill to amend the Internal Revenue Code of 1986 to improve 
and extend certain energy-related tax provisions, and for other 
purposes; to the Committee on Finance.
  Mr. BINGAMAN. Mr. President, I rise today to introduce the Expanding 
Industrial Energy Efficiency Incentives Act of 2009. I am pleased to be 
joined by my Finance Committee colleague, Senator Snowe, in introducing 
the Act, which creates the first direct tax-based incentives for 
industrial energy efficiency. As such, the Act helps our industrial 
sector adopt advanced energy technologies and processes, enabling 
American industry to reduce fuel dependency, cut costs, reduce 
greenhouse gas emissions, add jobs, and enhance global competitiveness.
  Even though the industrial sector represents 32 percent of our 
domestic energy consumption, there are currently no significant tax 
credits that directly promote industrial energy efficiency. But as a 
recent study by McKinsey & Company found, the industrial sector 
represents the largest potential for end-use energy efficiency in the 
U.S. and could save $47 billion per year on energy costs through 
efficiency improvements. The time to make this investment is now.
  The act creates incentives in the three critical areas: water reuse, 
advanced motors, and CFC chillers. It also enhances incentives for 
combined heat and power systems. Energy efficiency organizations 
estimate that these incentives together will save over 92 terawatt 
hours of energy--the equivalent of four months' worth of total U.S. 
energy consumption.
  First, the act adds a new investment tax credit for reuse, recycling, 
and/or efficiency measures related to process, sanitary, and cooling 
water, as well as for blowdown from cooling towers and steam systems 
used by utility-scale thermo-electric generators. The U.S. currently 
reuses only 6 percent of its water, and there is significant potential 
for gains in this area. The industrial sector, which is responsible for 
45 percent of domestic freshwater withdrawals, is an ideal place to 
introduce transformative water reuse and water saving technologies. 
Approximately 3 percent of U.S. electricity use is for pumping, 
treating and transporting water. The ``water-watts connection'' is 
well-recognized. For instance, the California Energy Commission 
estimates that 95 percent of the energy savings of proposed energy-
efficiency programs could be achieved through water-efficiency 
programs, at 58 percent of the cost. Water conservation is therefore a 
cost-effective way to achieve significant energy savings.
  Second, the bill establishes a $120-per-horsepower tax credit for 
efficient motor systems with adjustable speed capability. On average, 
motors account for 65 percent of an industrial energy user's 
electricity use, a percentage that is even higher in certain 
industries, such as water supply, mining, and oil and gas extraction. 
In fact, industrial motors are expected to be responsible for 7 percent 
of total global carbon emissions by 2020.
  New advances in power electronics and controls over the past five 
years have advanced the potential for new smart motor technologies to 
provide a significant energy savings potential if these new motors are 
placed widely into service. By reducing the initial design and added 
component costs, this new credit will accelerate the adoption of 
advanced motor technologies into higher volume production, helping to 
make the technology available economy-wide.
  Third, the bill adds a new incentive for replacing CFC chillers. 
Large water-cooled chillers are the engines of air-conditioning systems 
for almost all large buildings. The bill establishes a credit of $150 
per ton, plus an additional incentive of $100 for each ton downsized 
during replacement. The incentive extends only to pre-1993, post-1980 
water-cooled chillers that use the refrigerants CFC-11 and CFC-12. 
While chillers that use CFC-11 and CFC-12 refrigerants have been banned 
for new installations because their refrigerant breakdown products 
attack the ozone layer, some 30,000 chillers that still use these 
refrigerants remain in both public and private facilities across the 
country. Replacing these obsolete systems would allow for the recovery 
of 37 million pounds of ozone depleting CFCs--or 64 million metric tons 
of carbon dioxide equivalents. Additionally, the improvement in new 
chiller efficiency that would be achieved by replacing these old 
systems would save 17.2 million metric tons of carbon dioxide from 
reduced electricity consumption--the equivalent of taking 3.3 million 
cars off the road.
  While CFC chiller replacement is cost-effective over the long-term, 
the high up-front costs mean that many building owners do not make 
these investments. This moderate tax incentive improves the economics 
and reduces the up-front cost, substantially increasing the number of 
systems replaced.
  Collaterally, but just as significantly, this bill is a jobs bill. 
For instance, if all CFC chillers are replaced, we expect that 
approximately 10,500 American jobs can be directly created or preserved 
in the manufacturing, removal and installation of new chillers. 
Additional jobs will be created by the engineering services required to 
take advantage of these incentives, adding up to a potential 60,000 
jobs.
  Finally, the bill improves the combined heat and power incentive, 
which was enacted last October as part of the tax extenders package. 
The package added a 10 percent investment tax credit for combined heat 
and power systems. The expansion of the combined heat and power tax 
credit would increase the credit's applicability from the first 15 
megawatts to the first 25 megawatts of system capacity and remove the 
overall system size cap of 50 megawatts, allowing a greater number

[[Page S9042]]

of combined heat and power projects to be financially viable and move 
forward. A recent Department of Energy study estimates that ramping up 
total U.S. combined heat and power to account for twenty percent of 
electricity capacity, a percentage that is within our reach, would 
eliminate over sixty percent of the expected increase in carbon dioxide 
emissions from today to 2030--the equivalent of taking more than half 
of current passenger vehicles in the U.S. off the road.
  Together, these four industrial energy efficiency incentives capture 
a large portion of the energy efficiency potential in the industrial 
sector. These incentives will catalyze the deployment of new 
technologies that will decrease carbon emissions and protect our 
natural resources, all while saving money on energy costs and creating 
jobs.
  I look forward to working with Senator Snowe to see these provisions 
enacted into law.
  Mr. President, I ask unanimous consent that the text of the bill 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. 1639

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

     SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF 
                   CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Expanding 
     Industrial Energy Efficiency Incentives Act of 2009''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.
Sec. 2. Modifications in credit for combined heat and power system 
              property.
Sec. 3. Motor energy efficiency improvement tax credit.
Sec. 4. Credit for replacement of CFC refrigerant chiller.
Sec. 5. Qualifying efficient industrial process water use project 
              credit.

     SEC. 2. MODIFICATIONS IN CREDIT FOR COMBINED HEAT AND POWER 
                   SYSTEM PROPERTY.

       (a) Modification of Certain Capacity Limitations.--Section 
     48(c)(3)(B) is amended--
       (1) by striking ``15 megawatts'' in clause (ii) and 
     inserting ``25 megawatts'',
       (2) by striking ``20,000 horsepower'' in clause (ii) and 
     inserting ``34,000 horsepower'', and
       (3) by striking clause (iii).
       (b) Nonapplication of Certain Rules.--Section 48(c)(3)(C) 
     is amended by adding at the end the following new clause:
       ``(iv) Nonapplication of certain rules.--For purposes of 
     determining if the term `combined heat and power system 
     property' includes technologies which generate electricity or 
     mechanical power using back-pressure steam turbines in place 
     of existing pressure-reducing valves or which make use of 
     waste heat from industrial processes such as by using organic 
     rankine, stirling, or kalina heat engine systems, 
     subparagraph (A) shall be applied without regard to clause 
     (ii).''.
       (c) 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. 3. MOTOR ENERGY EFFICIENCY IMPROVEMENT TAX CREDIT.

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

     ``SEC. 45R. MOTOR ENERGY EFFICIENCY IMPROVEMENT TAX CREDIT.

       ``(a) In General.--For purposes of section 38, the motor 
     energy efficiency improvement tax credit determined under 
     this section for the taxable year is an amount equal to $120 
     multiplied by the motor horsepower of an appliance, machine, 
     or equipment--
       ``(1) manufactured in such taxable year by a manufacturer 
     which incorporates an advanced motor system into a newly 
     designed appliance, machine, or equipment or into a 
     redesigned appliance, machine, or equipment which did not 
     previously make use of the advanced motor system, or
       ``(2) placed back into service in such taxable year by an 
     end user which upgrades an existing appliance, machine, or 
     equipment with an advanced motor system.

     For any advanced motor system with a total horsepower of less 
     than 10, such motor energy efficiency improvement tax credit 
     is an amount which bears the same ratio to $120 as 1 
     horsepower bears to such total horsepower.
       ``(b) Advanced Motor System.--For purposes of this section, 
     the term `advanced motor system' means a motor and any 
     required associated electronic control which--
       ``(1) offers variable or multiple speed operation, and
       ``(2) uses permanent magnet technology, electronically 
     commutated motor technology, switched reluctance motor 
     technology, or such other motor systems technologies as 
     determined by the Secretary of Energy.
       ``(c) Aggregate Per Taxpayer Limitation.--
       ``(1) In general.--The amount of the credit determined 
     under this section for any taxpayer for any taxable year 
     shall not exceed the excess (if any) of $2,000,000 over the 
     aggregate credits allowed under this section with respect to 
     such taxpayer for all prior taxable years.
       ``(2) Aggregation rules.--For purposes of this section, all 
     persons treated as a single employer under subsections (a) 
     and (b) of section 52 shall be treated as 1 taxpayer.
       ``(d) Special Rules.--
       ``(1) Basis reduction.--For purposes of this subtitle, the 
     basis of any property for which a credit is allowable under 
     subsection (a) shall be reduced by the amount of such credit 
     so allowed.
       ``(2) No double benefit.--No other credit shall be 
     allowable under this chapter for property with respect to 
     which a credit is allowed under this section.
       ``(3) Property used outside united states not qualified.--
     No credit shall be allowable under subsection (a) with 
     respect to any property referred to in section 50(b)(1).
       ``(e) Application.--This section shall not apply to 
     property manufactured or placed back into service before the 
     date which is 6 months after the date of the enactment of 
     this section or after December 31, 2013.''.
       (b) Conforming Amendments.--
       (1) Section 38(b) is amended by striking ``plus'' at the 
     end of paragraph (34), by striking the period at the end of 
     paragraph (35) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(36) the motor energy efficiency improvement tax credit 
     determined under section 45R.''.
       (2) Section 1016(a) 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 45R(d)(1).''.
       (3) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1 is amended by adding at the end the 
     following new item:

``Sec. 45R. Motor energy efficiency improvement tax credit.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property manufactured or placed back into 
     service after the date which is 6 months after the date of 
     the enactment of this Act.

     SEC. 4. CREDIT FOR REPLACEMENT OF CFC REFRIGERANT CHILLER.

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

     ``SEC. 45S. CFC CHILLER REPLACEMENT CREDIT.

       ``(a) In General.--For purposes of section 38, the CFC 
     chiller replacement credit determined under this section for 
     the taxable year is an amount equal to--
       ``(1) $150 multiplied by the tonnage rating of a CFC 
     chiller replaced with a new efficient chiller that is placed 
     in service by the taxpayer during the taxable year, plus
       ``(2) if all chilled water distribution pumps connected to 
     the new efficient chiller include variable frequency drives, 
     $100 multiplied by any tonnage downsizing.
       ``(b) CFC Chiller.--For purposes of this section, the term 
     `CFC chiller' includes property which--
       ``(1) was installed after 1980 and before 1993,
       ``(2) utilizes chlorofluorocarbon refrigerant, and
       ``(3) until replaced by a new efficient chiller, has 
     remained in operation and utilized for cooling a commercial 
     building.
       ``(c) New Efficient Chiller.--For purposes of this section, 
     the term `new efficient chiller' includes a water-cooled 
     chiller which is certified to meet efficiency standards 
     effective on January 1, 2010, as defined in table 6.8.1c in 
     Addendum M to Standard 90.1-2007 of the American Society of 
     Heating, Refrigerating, and Air Conditioning Engineers.
       ``(d) Tonnage Downsizing.--For purposes of this section, 
     the term `tonnage downsizing' means the amount by which the 
     tonnage rating of the CFC chiller exceeds the tonnage rating 
     of the new efficient chiller.
       ``(e) Energy Audit.--As a condition of receiving a tax 
     credit under this section, an energy audit shall be performed 
     on the building prior to installation of the new efficient 
     chiller, identifying cost-effective energy-saving measures, 
     particularly measures that could contribute to chiller 
     downsizing. The audit shall satisfy criteria that shall be 
     issued by the Secretary of Energy.
       ``(f) Property Used by Tax-Exempt Entity.--In the case of a 
     CFC chiller replaced by a new efficient chiller the use of 
     which is described in paragraph (3) or (4) of section 50(b), 
     the person who sold such new efficient chiller to the entity 
     shall be treated as the taxpayer that placed in service the 
     new efficient chiller that replaced the CFC chiller, but only 
     if such person clearly discloses to such entity in a document 
     the amount of any credit allowable under subsection (a) and 
     the

[[Page S9043]]

     person certifies to the Secretary that the person reduced the 
     price the entity paid for such new efficient chiller by the 
     entire amount of such credit.
       ``(g) Termination.--This section shall not apply to 
     replacements made after December 31, 2012.''.
       (b) Conforming Amendments.--
       (1) Section 38(b), as amended by this Act, is amended by 
     striking ``plus'' at the end of paragraph (35), by striking 
     the period at the end of paragraph (36) and inserting ``, 
     plus'', and by adding at the end the following new paragraph:
       ``(37) the CFC chiller replacement credit determined under 
     section 45S.''.
       (2) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by this Act, is amended 
     by adding at the end the following new item:

``Sec. 45S. CFC chiller replacement credit.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to replacements made after the date of the 
     enactment of this Act.

     SEC. 5. QUALIFYING EFFICIENT INDUSTRIAL PROCESS WATER USE 
                   PROJECT CREDIT.

       (a) In General.--Section 46 is amended by striking ``and'' 
     at the end of paragraph (4), by striking the period at the 
     end of paragraph (5), and by adding at the end the following 
     new paragraph:
       ``(6) the qualifying efficient industrial process water use 
     project credit.''.
       (b) Amount of Credit.--Subpart E of part IV of subchapter A 
     of chapter 1 is amended by inserting after section 48C the 
     following new section:

     ``SEC. 48D. QUALIFYING EFFICIENT INDUSTRIAL PROCESS WATER USE 
                   PROJECT CREDIT.

       ``(a) In General.--
       ``(1) Allowance of credit.--For purposes of section 46, the 
     qualifying efficient industrial process water use project 
     credit for any taxable year is an amount equal to the 
     applicable percentage of the qualified investment for such 
     taxable year with respect to any qualifying efficient 
     industrial process water use project of the taxpayer.
       ``(2) Applicable percentage.--For purposes of subsection 
     (a), the applicable percentage is--
       ``(A) 10 percent in the case of a qualifying efficient 
     industrial process water use project which achieves a net 
     energy consumption of less than 3,000 kilowatt hours per 
     million gallons of water, and is placed in service before 
     January 1, 2013,
       ``(B) 20 percent in the case of a qualifying efficient 
     industrial process water use project which achieves a net 
     energy consumption of less than 2,000 kilowatt hours per 
     million gallons of water, and
       ``(C) 30 percent in the case of a qualifying efficient 
     industrial process water use project which achieves a net 
     energy consumption of less than 1,000 kilowatt hours per 
     million gallons of water.
       ``(b) Qualified Investment.--
       ``(1) In general.--For purposes of subsection (a), the 
     qualified investment for any taxable year is the basis of 
     eligible property placed in service by the taxpayer during 
     such taxable year which is part of a qualifying efficient 
     industrial process water use project.
       ``(2) Exceptions.--Such term shall not include any portion 
     of the basis related to--
       ``(A) permitting,
       ``(B) land acquisition, or
       ``(C) infrastructure associated with sourcing or water 
     discharge.
       ``(3) 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 section.
       ``(4) Special rule for subsidized energy financing.--Rules 
     similar to the rules of section 48(a)(4) (without regard to 
     subparagraph (D) thereof) shall apply for purposes of this 
     section.
       ``(5) Limitation.--The amount which is treated for all 
     taxable years with respect to any qualifying efficient 
     industrial process water use project with respect to any site 
     shall not exceed $10,000,000.
       ``(c) Definitions.--
       ``(1) Qualifying efficient industrial process water use 
     project.--The term `qualifying efficient industrial process 
     water use project' means, with respect to any site, a 
     project--
       ``(A) which replaces or modifies a system for the use of 
     water or steam in the production of goods in the trade or 
     business of manufacturing (including any system for the use 
     of water derived from blow-down from cooling towers and steam 
     systems in the generation of electric power at a site also 
     used for the production of goods in the trade or business of 
     manufacturing), and
       ``(B) which is designed to achieve--
       ``(i) a reduction of not less than 20 percent in water 
     withdrawal and a reduction of not less than 10 percent of 
     water discharge when compared to the existing water use at 
     the site, or
       ``(ii) a reduction of not less than 10 percent in water 
     withdrawal and a reduction of not less than 20 percent of 
     water discharge when compared to the existing water use at 
     the site, and
       ``(2) Eligible property.--The term `eligible property' 
     means any property--
       ``(A) which is part of a qualifying efficient industrial 
     process water use project and which is necessary for the 
     reduction in withdrawals or discharge described in paragraph 
     (1)(B),
       ``(B)(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
       ``(C) with respect to which depreciation (or amortization 
     in lieu of depreciation) is allowable.
       ``(3) Net energy consumption.--The term `net energy 
     consumption' means the energy consumed , both on-site and 
     off-site, with respect to the water described in paragraph 
     (1)(A). Net energy consumption shall be normalized per unit 
     of industrial output and measured under rules and procedures 
     established by the Secretary, in consultation with the 
     Administrator of the Environmental Protection Agency.
       ``(4) Water discharge.--The term `water discharge' means 
     all water leaving the site via permitted or unpermitted 
     surface water discharges, discharges to publicly owned 
     treatment works, and shallow- or deep-injection (whether on-
     site or off-site).
       ``(5) Water withdrawal.--The term `water withdrawal' means 
     all water taken for use at the site from on-site ground and 
     surface water sources together with any water supplied to the 
     site by a public water system.
       ``(d) Termination.--This section shall not apply to periods 
     after December 31, 2014, under rules similar to the rules of 
     section 48(m) (as in effect on the day before the date of the 
     enactment of the Revenue Reconciliation Act of 1990).''.
       (c) Conforming Amendments.--
       (1) Section 49(a)(1)(C) is amended by striking ``and'' at 
     the end of clause (iv), by striking the period at the end of 
     clause (v) and inserting ``, and'', and by adding after 
     clause (v) the following new clause:
       ``(vi) the basis of any property which is part of a 
     qualifying efficient industrial use water project under 
     section 48D.''.
       (2) The table of sections for subpart E of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 48B the following new item:

``Sec. 48D. Qualifying efficient industrial process water use project 
              credit.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to periods after January 1, 2011, 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).
                                 ______