[Congressional Record (Bound Edition), Volume 147 (2001), Part 11]
[House]
[Pages 15500-15526]
[From the U.S. Government Publishing Office, www.gpo.gov]



       (3) Effective date.--The amendments made by this subsection 
     shall apply to property placed in service after December 31, 
     2001, 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).
       (b) Nonbusiness Property.--
       (1) In general.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits) is 
     amended by inserting after section 25C the following new 
     section:

     ``SEC. 25D. NONBUSINESS QUALIFIED STATIONARY FUEL CELL 
                   POWERPLANT.

       ``(a) In General.--In the case of an individual, there 
     shall be allowed as a credit against the tax imposed by this 
     chapter for the taxable year an amount equal to 10 percent of 
     the qualified stationary fuel cell powerplant expenditures 
     which are paid or incurred during such year.
       ``(b) Limitations.--
       ``(1) In general.--The credit allowed under subsection (a) 
     for the taxable year and all prior taxable years shall not 
     exceed $1,000 for each kilowatt of capacity.
       ``(2) Limitation based on amount of tax.--The credit 
     allowed under subsection (a) for the taxable year shall not 
     exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under this subpart 
     (other than this section and sections 23 and 25E) and section 
     27 for the taxable year.
       ``(c) Qualified Stationary Fuel Cell Powerplant 
     Expenditures.--For purposes of this section, the term 
     `qualified stationary fuel cell powerplant expenditures' 
     means expenditures by the taxpayer for any qualified 
     stationary fuel cell powerplant (as defined in section 
     48(a)(4))--
       ``(1) which meets the requirements of subparagraphs (B) and 
     (D) of section 48(a)(3), and
       ``(2) which is installed on or in connection with a 
     dwelling unit--
       ``(A) which is located in the United States, and
       ``(B) which is used by the taxpayer as a residence.
     Such term includes expenditures for labor costs properly 
     allocable to the onsite preparation, assembly, or original 
     installation of the property.
       ``(d) Special Rules.--For purposes of this section, rules 
     similar to the rules of section 25C(d) shall apply.
       ``(e) Basis Adjustments.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(f) Termination.--This section shall not apply to any 
     expenditure made after December 31, 2006.''.
       (2) Conforming Amendments.--
       (A) Subsection (a) of section 1016 is amended by striking 
     ``and'' at the end of paragraph (28), by striking the period 
     at the end of paragraph (29) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(30) to the extent provided in section 25D(e), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25D.''.
       (B) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 25C the following new item:

``Sec. 25D. Nonbusiness qualified stationary fuel cell powerplant.''.

       (3) Effective date.--The amendments made by this subsection 
     shall apply to expenditures paid or incurred after December 
     31, 2001.

     SEC. 3104. ALTERNATIVE MOTOR VEHICLE CREDIT.

       (a) In General.--Subpart B of part IV of subchapter A of 
     chapter 1 (relating to foreign tax credit, etc.) is amended 
     by adding at the end the following:

     ``SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT.

       ``(a) Allowance of Credit.--There shall be allowed as a 
     credit against the tax imposed by this chapter for the 
     taxable year an amount equal to the sum of--
       ``(1) the new qualified fuel cell motor vehicle credit 
     determined under subsection (b),
       ``(2) the new qualified hybrid motor vehicle credit 
     determined under subsection (c),
       ``(3) the new qualified alternative fuel motor vehicle 
     credit determined under subsection (d), and
       ``(4) the advanced lean burn technology motor vehicle 
     credit determined under subsection (e).
       ``(b) New Qualified Fuel Cell Motor Vehicle Credit.--
       ``(1) In general.--For purposes of subsection (a), the new 
     qualified fuel cell motor vehicle credit determined under 
     this subsection with respect to a new qualified fuel cell 
     motor vehicle placed in service by the taxpayer during the 
     taxable year is--
       ``(A) $4,000, if such vehicle has a gross vehicle weight 
     rating of not more than 8,500 pounds,
       ``(B) $10,000, if such vehicle has a gross vehicle weight 
     rating of more than 8,500 pounds but not more than 14,000 
     pounds,

[[Page 15501]]

       ``(C) $20,000, if such vehicle has a gross vehicle weight 
     rating of more than 14,000 pounds but not more than 26,000 
     pounds, and
       ``(D) $40,000, if such vehicle has a gross vehicle weight 
     rating of more than 26,000 pounds.
       ``(2) Increase for fuel efficiency.--
       ``(A) In general.--The amount determined under paragraph 
     (1)(A) with respect to a new qualified fuel cell motor 
     vehicle which is a passenger automobile or light truck shall 
     be increased by--
       ``(i) $1,000, if such vehicle achieves at least 150 percent 
     but less than 175 percent of the 2000 model year city fuel 
     economy,
       ``(ii) $1,500, if such vehicle achieves at least 175 
     percent but less than 200 percent of the 2000 model year city 
     fuel economy,
       ``(iii) $2,000, if such vehicle achieves at least 200 
     percent but less than 225 percent of the 2000 model year city 
     fuel economy,
       ``(iv) $2,500, if such vehicle achieves at least 225 
     percent but less than 250 percent of the 2000 model year city 
     fuel economy,
       ``(v) $3,000, if such vehicle achieves at least 250 percent 
     but less than 275 percent of the 2000 model year city fuel 
     economy,
       ``(vi) $3,500, if such vehicle achieves at least 275 
     percent but less than 300 percent of the 2000 model year city 
     fuel economy, and
       ``(vii) $4,000, if such vehicle achieves at least 300 
     percent of the 2000 model year city fuel economy.
       ``(B) 2000 model year city fuel economy.--For purposes of 
     subparagraph (A), the 2000 model year city fuel economy with 
     respect to a vehicle shall be determined in accordance with 
     the following tables:
       ``(i) In the case of a passenger automobile:

``If vehicle inertia weight clThe 2000 model year city fuel economy is:
  1,500 or 1,750 lbs......................................43.7 mpg ....

  2,000 lbs...............................................38.3 mpg ....

  2,250 lbs...............................................34.1 mpg ....

  2,500 lbs...............................................30.7 mpg ....

  2,750 lbs...............................................27.9 mpg ....

  3,000 lbs...............................................25.6 mpg ....

  3,500 lbs...............................................22.0 mpg ....

  4,000 lbs...............................................19.3 mpg ....

  4,500 lbs...............................................17.2 mpg ....

  5,000 lbs...............................................15.5 mpg ....

  5,500 lbs...............................................14.1 mpg ....

  6,000 lbs...............................................12.9 mpg ....

  6,500 lbs...............................................11.9 mpg ....

  7,000 or 8,500 lbs......................................11.1 mpg.....

       ``(ii) In the case of a light truck:

``If vehicle inertia weight clThe 2000 model year city fuel economy is:
  1,500 or 1,750 lbs......................................37.6 mpg ....

  2,000 lbs...............................................33.7 mpg ....

  2,250 lbs...............................................30.6 mpg ....

  2,500 lbs...............................................28.0 mpg ....

  2,750 lbs...............................................25.9 mpg ....

  3,000 lbs...............................................24.1 mpg ....

  3,500 lbs...............................................21.3 mpg ....

  4,000 lbs...............................................19.0 mpg ....

  4,500 lbs...............................................17.3 mpg ....

  5,000 lbs...............................................15.8 mpg ....

  5,500 lbs...............................................14.6 mpg ....

  6,000 lbs...............................................13.6 mpg ....

  6,500 lbs...............................................12.8 mpg ....

  7,000 or 8,500 lbs......................................12.0 mpg.....

       ``(C) Vehicle inertia weight class.--For purposes of 
     subparagraph (B), the term `vehicle inertia weight class' has 
     the same meaning as when defined in regulations prescribed by 
     the Administrator of the Environmental Protection Agency for 
     purposes of the administration of title II of the Clean Air 
     Act (42 U.S.C. 7521 et seq.).
       ``(3) New qualified fuel cell motor vehicle.--For purposes 
     of this subsection, the term `new qualified fuel cell motor 
     vehicle' means a motor vehicle--
       ``(A) which is propelled by power derived from one or more 
     cells which convert chemical energy directly into electricity 
     by combining oxygen with hydrogen fuel which is stored on 
     board the vehicle in any form and may or may not require 
     reformation prior to use,
       ``(B) which, in the case of a passenger automobile or light 
     truck--
       ``(i) for 2002 and later model vehicles, has received a 
     certificate of conformity under the Clean Air Act and meets 
     or exceeds the equivalent qualifying California low emission 
     vehicle standard under section 243(e)(2) of the Clean Air Act 
     for that make and model year, and
       ``(ii) for 2004 and later model vehicles, has received a 
     certificate that such vehicle meets or exceeds the Tier II 
     emission level established in regulations prescribed by the 
     Administrator of the Environmental Protection Agency under 
     section 202(i) of the Clean Air Act for that make and model 
     year vehicle,
       ``(C) the original use of which commences with the 
     taxpayer,
       ``(D) which is acquired for use or lease by the taxpayer 
     and not for resale, and
       ``(E) which is made by a manufacturer.
       ``(c) New Qualified Hybrid Motor Vehicle Credit.--
       ``(1) In general.--For purposes of subsection (a), the new 
     qualified hybrid motor vehicle credit determined under this 
     subsection with respect to a new qualified hybrid motor 
     vehicle placed in service by the taxpayer during the taxable 
     year is the credit amount determined under paragraph (2).
       ``(2) Credit amount.--
       ``(A) In general.--The credit amount determined under this 
     paragraph shall be determined in accordance with the 
     following tables:
       ``(i) In the case of a new qualified hybrid motor vehicle 
     which is a passenger automobile or light truck and which 
     provides the following percentage of the maximum available 
     power:

``If percentage of the maximum available power is:The credit amount is:
  At least 2.5 percent but less than 10 percent...............$250 ....

  At least 10 percent but less than 20 percent................$500 ....

  At least 20 percent but less than 30 percent................$750 ....

  At least 30 percent.......................................$1,000.....

       ``(ii) In the case of a new qualified hybrid motor vehicle 
     which is a heavy duty hybrid motor vehicle and which provides 
     the following percentage of the maximum available power:

       ``(I) If such vehicle has a gross vehicle weight rating of 
     not more than 14,000 pounds:

``If percentage of the maximum available power is:The credit amount is:
  At least 20 percent but less than 30 percent..............$1,500 ....

  At least 30 percent but less than 40 percent..............$1,750 ....

  At least 40 percent but less than 50 percent..............$2,000 ....

  At least 50 percent but less than 60 percent..............$2,250 ....

  At least 60 percent.......................................$2,500.....

       ``(II) If such vehicle has a gross vehicle weight rating of 
     more than 14,000 but not more than 26,000 pounds:

``If percentage of the maximum available power is:The credit amount is:
  At least 20 percent but less than 30 percent..............$4,000 ....

  At least 30 percent but less than 40 percent..............$4,500 ....

  At least 40 percent but less than 50 percent..............$5,000 ....

  At least 50 percent but less than 60 percent..............$5,500 ....

  At least 60 percent.......................................$6,000.....

       ``(III) If such vehicle has a gross vehicle weight rating 
     of more than 26,000 pounds:

``If percentage of the maximum available power is:The credit amount is:
  At least 20 percent but less than 30 percent..............$6,000 ....

  At least 30 percent but less than 40 percent..............$7,000 ....

  At least 40 percent but less than 50 percent..............$8,000 ....

  At least 50 percent but less than 60 percent..............$9,000 ....

  At least 60 percent......................................$10,000.....

       ``(B) Increase for fuel efficiency.--
       ``(i) Amount.--The amount determined under subparagraph 
     (A)(i) with respect to a passenger automobile or light truck 
     shall be increased by--

       ``(I) $1,000, if such vehicle achieves at least 125 percent 
     but less than 150 percent of the 2000 model year city fuel 
     economy,
       ``(II) $1,500, if such vehicle achieves at least 150 
     percent but less than 175 percent of the 2000 model year city 
     fuel economy,

       ``(III) $2,000, if such vehicle achieves at least 175 
     percent but less than 200 percent of the 2000 model year city 
     fuel economy,
       ``(IV) $2,500, if such vehicle achieves at least 200 
     percent but less than 225 percent of the 2000 model year city 
     fuel economy,
       ``(V) $3,000, if such vehicle achieves at least 225 percent 
     but less than 250 percent of the 2000 model year city fuel 
     economy, and
       ``(VI) $3,500, if such vehicle achieves at least 250 
     percent of the 2000 model year city fuel economy.

       ``(ii) 2000 model year city fuel economy.--For purposes of 
     clause (i), the 2000 model year city fuel economy with 
     respect to a vehicle shall be determined using the tables

[[Page 15502]]

     provided in subsection (b)(2)(B) with respect to such 
     vehicle.
       ``(iii) Option to use like vehicle.--For purposes of clause 
     (i), at the option of the vehicle manufacturer, the increase 
     for fuel efficiency may be calculated by comparing the new 
     qualified hybrid motor vehicle to a `like vehicle'.
       ``(C) Increase for accelerated emissions performance.--The 
     amount determined under subparagraph (A)(ii) with respect to 
     an applicable heavy duty hybrid motor vehicle shall be 
     increased by the increase credit amount determined in 
     accordance with the following tables:
       ``(i) In the case of a vehicle which has a gross vehicle 
     weight rating of not more than 14,000 pounds:

``If the model year is:                  The increase credit amount is:
  2002......................................................$3,500 ....

  2003......................................................$3,000 ....

  2004......................................................$2,500 ....

  2005......................................................$2,000 ....

  2006......................................................$1,500.....

       ``(ii) In the case of a vehicle which has a gross vehicle 
     weight rating of more than 14,000 pounds but not more than 
     26,000 pounds:

``If the model year is:                  The increase credit amount is:
  2002......................................................$9,000 ....

  2003......................................................$7,750 ....

  2004......................................................$6,500 ....

  2005......................................................$5,250 ....

  2006......................................................$4,000.....

       ``(iii) In the case of a vehicle which has a gross vehicle 
     weight rating of more than 26,000 pounds:
``If the model year is:                  The increase credit amount is:
  2002.....................................................$14,000 ....

  2003.....................................................$12,000 ....

  2004.....................................................$10,000 ....

  2005......................................................$8,000 ....

  2006......................................................$6,000.....

       ``(D) Conservation credit.--
       ``(i) Amount.--The amount determined under subparagraph 
     (A)(i) with respect to a passenger automobile or light truck 
     shall be increased by--

       ``(I) $250, if such vehicle achieves a lifetime fuel 
     savings of at least 1,500 gallons of gasoline, and
       ``(II) $500, if such vehicle achieves a lifetime fuel 
     savings of at least 2,500 gallons of gasoline.

       ``(ii) Lifetime fuel savings for like vehicle.--For 
     purposes of clause (i), at the option of the vehicle 
     manufacturer, the lifetime fuel savings fuel may be 
     calculated by comparing the new qualified hybrid motor 
     vehicle to a `like vehicle'.
       ``(E) Definitions.--
       ``(i) Applicable heavy duty hybrid motor vehicle.--For 
     purposes of subparagraph (C), the term `applicable heavy duty 
     hybrid motor vehicle' means a heavy duty hybrid motor vehicle 
     which is powered by an internal combustion or heat engine 
     which is certified as meeting the emission standards set in 
     the regulations prescribed by the Administrator of the 
     Environmental Protection Agency for 2007 and later model year 
     diesel heavy duty engines or 2008 and later model year 
     ottocycle heavy duty engines, as applicable.
       ``(ii) Heavy duty hybrid motor vehicle.--For purposes of 
     this paragraph, the term `heavy duty hybrid motor vehicle' 
     means a new qualified hybrid motor vehicle which has a gross 
     vehicle weight rating of more than 10,000 pounds and draws 
     propulsion energy from both of the following onboard sources 
     of stored energy:

       ``(I) An internal combustion or heat engine using 
     consumable fuel which, for 2002 and later model vehicles, has 
     received a certificate of conformity under the Clean Air Act 
     and meets or exceeds a level of not greater than 3.0 grams 
     per brake horsepower-hour of oxides of nitrogen and 0.01 per 
     brake horsepower-hour of particulate matter.
       ``(II) A rechargeable energy storage system.

       ``(iii) Maximum available power.--

       ``(I) Passenger automobile or light truck.--For purposes of 
     subparagraph (A)(i), the term `maximum available power' means 
     the maximum power available from the battery or other 
     electrical storage device, during a standard 10 second pulse 
     power test, divided by the sum of the battery or other 
     electrical storage device and the SAE net power of the heat 
     engine.
       ``(II) Heavy duty hybrid motor vehicle.--For purposes of 
     subparagraph (A)(ii), the term `maximum available power' 
     means the maximum power available from the battery or other 
     electrical storage device, during a standard 10 second pulse 
     power test, divided by the vehicle's total traction power. 
     The term `total traction power' means the sum of the electric 
     motor peak power and the heat engine peak power of the 
     vehicle, except that if the electric motor is the sole means 
     by which the vehicle can be driven, the total traction power 
     is the peak electric motor power.

       ``(iv) Like vehicle.--For purposes of subparagraph 
     (B)(iii), the term `like vehicle' for a new qualified hybrid 
     motor vehicle derived from a conventional production vehicle 
     produced in the same model year means a model that is 
     equivalent in the following areas:

       ``(I) Body style (2-door or 4-door).
       ``(II) Transmission (automatic or manual).
       ``(III) Acceleration performance ( 0.05 seconds).

       ``(IV) Drivetrain (2-wheel drive or 4-wheel drive).
       ``(V) Certification by the Administrator of the 
     Environmental Protection Agency.

       ``(v) Lifetime fuel savings.--For purposes of subsection 
     (c)(2)(D), the term `lifetime fuel savings' shall be 
     calculated by dividing 120,000 by the difference between the 
     2000 model year city fuel economy for the vehicle inertia 
     weight class and the city fuel economy for the new qualified 
     hybrid motor vehicle.
       ``(3) New qualified hybrid motor vehicle.--For purposes of 
     this subsection, the term `new qualified hybrid motor 
     vehicle' means a motor vehicle--
       ``(A) which draws propulsion energy from onboard sources of 
     stored energy which are both--
       ``(i) an internal combustion or heat engine using 
     combustible fuel, and
       ``(ii) a rechargeable energy storage system,
       ``(B) which, in the case of a passenger automobile or light 
     truck, for 2002 and later model vehicles, has received a 
     certificate of conformity under the Clean Air Act and meets 
     or exceeds the equivalent qualifying California low emission 
     vehicle standard under section 243(e)(2) of the Clean Air Act 
     for that make and model year,
       ``(C) the original use of which commences with the 
     taxpayer,
       ``(D) which is acquired for use or lease by the taxpayer 
     and not for resale, and
       ``(E) which is made by a manufacturer.
       ``(d) New Qualified Alternative Fuel Motor Vehicle 
     Credit.--
       ``(1) Allowance of credit.--Except as provided in paragraph 
     (5), the credit determined under this subsection is an amount 
     equal to the applicable percentage of the incremental cost of 
     any new qualified alternative fuel motor vehicle placed in 
     service by the taxpayer during the taxable year.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage with respect to any new 
     qualified alternative fuel motor vehicle is--
       ``(A) 50 percent, plus
       ``(B) 30 percent, if such vehicle--
       ``(i) has received a certificate of conformity under the 
     Clean Air Act and meets or exceeds the most stringent 
     standard available for certification under the Clean Air Act 
     for that make and model year vehicle (other than a zero 
     emission standard), or
       ``(ii) has received an order from an applicable State 
     certifying the vehicle for sale or lease in California and 
     meets or exceeds the most stringent standard available for 
     certification under the State laws of California (enacted in 
     accordance with a waiver granted under section 209(b) of the 
     Clean Air Act) for that make and model year vehicle (other 
     than a zero emission standard).
       ``(3) Incremental cost.--For purposes of this subsection, 
     the incremental cost of any new qualified alternative fuel 
     motor vehicle is equal to the amount of the excess of the 
     manufacturer's suggested retail price for such vehicle over 
     such price for a gasoline or diesel fuel motor vehicle of the 
     same model, to the extent such amount does not exceed--
       ``(A) $5,000, if such vehicle has a gross vehicle weight 
     rating of not more than 8,500 pounds,
       ``(B) $10,000, if such vehicle has a gross vehicle weight 
     rating of more than 8,500 pounds but not more than 14,000 
     pounds,
       ``(C) $25,000, if such vehicle has a gross vehicle weight 
     rating of more than 14,000 pounds but not more than 26,000 
     pounds, and
       ``(D) $40,000, if such vehicle has a gross vehicle weight 
     rating of more than 26,000 pounds.
       ``(4) Qualified alternative fuel motor vehicle defined.--
     For purposes of this subsection--
       ``(A) In general.--The term `qualified alternative fuel 
     motor vehicle' means any motor vehicle--
       ``(i) which is only capable of operating on an alternative 
     fuel,
       ``(ii) the original use of which commences with the 
     taxpayer,
       ``(iii) which is acquired by the taxpayer for use or lease, 
     but not for resale, and
       ``(iv) which is made by a manufacturer.
       ``(B) Alternative fuel.--The term `alternative fuel' means 
     compressed natural gas, liquefied natural gas, liquefied 
     petroleum gas, hydrogen, and any liquid at least 85 percent 
     of the volume of which consists of methanol.
       ``(5) Credit for mixed-fuel vehicles.--
       ``(A) In general.--In the case of a mixed-fuel vehicle 
     placed in service by the taxpayer during the taxable year, 
     the credit determined under this subsection is an amount 
     equal to--
       ``(i) in the case of a 75/25 mixed-fuel vehicle, 70 percent 
     of the credit which would have been allowed under this 
     subsection if such vehicle was a qualified alternative fuel 
     motor vehicle, and
       ``(ii) in the case of a 95/5 mixed-fuel vehicle, 95 percent 
     of the credit which would have been allowed under this 
     subsection if such vehicle was a qualified alternative fuel 
     motor vehicle.
       ``(B) Mixed-fuel vehicle.--For purposes of this subsection, 
     the term `mixed-fuel vehicle' means any motor vehicle 
     described in subparagraph (C) or (D) of paragraph (3), 
     which--

[[Page 15503]]

       ``(i) is certified by the manufacturer as being able to 
     perform efficiently in normal operation on a combination of 
     an alternative fuel and a petroleum-based fuel,
       ``(ii) either--

       ``(I) has received a certificate of conformity under the 
     Clean Air Act, or
       ``(II) has received an order from an applicable State 
     certifying the vehicle for sale or lease in California and 
     meets or exceeds the low emission vehicle standard under 
     section 88.105-94 of title 40, Code of Federal Regulations, 
     for that make and model year vehicle,

       ``(iii) the original use of which commences with the 
     taxpayer,
       ``(iv) which is acquired by the taxpayer for use or lease, 
     but not for resale, and
       ``(v) which is made by a manufacturer.
       ``(C) 75/25 mixed-fuel vehicle.--For purposes of this 
     subsection, the term `75/25 mixed-fuel vehicle' means a 
     mixed-fuel vehicle which operates using at least 75 percent 
     alternative fuel and not more than 25 percent petroleum-based 
     fuel.
       ``(D) 95/5 mixed-fuel vehicle.--For purposes of this 
     subsection, the term `95/5 mixed-fuel vehicle' means a mixed-
     fuel vehicle which operates using at least 95 percent 
     alternative fuel and not more than 5 percent petroleum-based 
     fuel.
       ``(e) Advanced Lean Burn Technology Motor Vehicle Credit.--
       ``(1) In general.--For purposes of subsection (a), the 
     advanced lean burn technology motor vehicle credit determined 
     under this subsection with respect to a new qualified 
     advanced lean burn technology motor vehicle placed in service 
     by the taxpayer during the taxable year is the credit amount 
     determined under paragraph (2).
       ``(2) Credit amount.--
       ``(A) Increase for fuel efficiency.--The credit amount 
     determined under this paragraph shall be--
       ``(i) $1,000, if such vehicle achieves at least 125 percent 
     but less than 150 percent of the 2000 model year city fuel 
     economy,
       ``(ii) $1,500, if such vehicle achieves at least 150 
     percent but less than 175 percent of the 2000 model year city 
     fuel economy,
       ``(iii) $2,000, if such vehicle achieves at least 175 
     percent but less than 200 percent of the 2000 model year city 
     fuel economy,
       ``(iv) $2,500, if such vehicle achieves at least 200 
     percent but less than 225 percent of the 2000 model year city 
     fuel economy,
       ``(v) $3,000, if such vehicle achieves at least 225 percent 
     but less than 250 percent of the 2000 model year city fuel 
     economy, and
       ``(vi) $3,500, if such vehicle achieves at least 250 
     percent of the 2000 model year city fuel economy.
     For purposes of clause (i), the 2000 model year city fuel 
     economy with respect to a vehicle shall be determined using 
     the tables provided in subsection (b)(2)(B) with respect to 
     such vehicle.
       ``(B) Conservation credit.--The amount determined under 
     subparagraph (A) with respect to an advanced lean burn 
     technology motor vehicle shall be increased by--
       ``(i) $250, if such vehicle achieves a lifetime fuel 
     savings of at least 1,500 gallons of gasoline, and
       ``(ii) $500, if such vehicle achieves a lifetime fuel 
     savings of at least 2,500 gallons of gasoline.
       ``(C) Option to use like vehicle.--At the option of the 
     vehicle manufacturer, the increase for fuel efficiency and 
     conservation credit may be calculated by comparing the new 
     advanced lean-burn technology motor vehicle to a like 
     vehicle.
       ``(3) Definitions.--For purposes of this subsection.--
       ``(A) Advanced lean burn technology motor vehicle.--The 
     term `advanced lean burn technology motor vehicle' means a 
     motor vehicle with an internal combustion engine that--
       ``(i) is designed to operate primarily using more air than 
     is necessary for complete combustion of the fuel,
       ``(ii) incorporates direct injection,
       ``(iii) achieves at least 125 percent of the 2000 model 
     year city fuel economy, and
       ``(iv) for 2004 and later model vehicles, has received a 
     certificate that such vehicle meets or exceeds the Bin 5, 
     Tier 2 emission levels (for passenger vehicles) or Bin 8, 
     Tier 2 emission levels (for light trucks) established in 
     regulations prescribed by the Administrator of the 
     Environmental Protection Agency under section 202(i) of the 
     Clean Air Act for that make and model year vehicle.
       ``(B) Like vehicle.--The term `like vehicle' for an 
     advanced lean burn technology motor vehicle derived from a 
     conventional production vehicle produced in the same model 
     year means a model that is equivalent in the following areas:
       ``(i) Body style (2-door or 4-door),
       ``(ii) Transmission (automatic or manual),
       ``(iii) Acceleration performance ( 0.05 seconds).
       ``(iv) Drivetrain (2-wheel drive or 4-wheel drive).
       ``(v) Certification by the Administrator of the 
     Environmental Protection Agency.
       ``(C) Lifetime fuel savings.--The term `lifetime fuel 
     savings' shall be calculated by dividing 120,000 by the 
     difference between the 2000 model year city fuel economy for 
     the vehicle inertia weight class and the city fuel economy 
     for the new qualified hybrid motor vehicle.
       ``(f) Limitation Based on Amount of Tax.--The credit 
     allowed under subsection (a) for the taxable year shall not 
     exceed the excess of--
       ``(1) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(2) the sum of the credits allowable under subpart A and 
     sections 27, 29, and 30A for the taxable year.
       ``(g) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Consumable fuel.--The term `consumable fuel' means 
     any solid, liquid, or gaseous matter which releases energy 
     when consumed by an auxiliary power unit.
       ``(2) Motor vehicle.--The term `motor vehicle' has the 
     meaning given such term by section 30(c)(2).
       ``(3) 2000 model year city fuel economy.--The 2000 model 
     year city fuel economy with respect to any vehicle shall be 
     measured under rules similar to the rules under section 
     4064(c).
       ``(4) Other terms.--The terms `automobile', `passenger 
     automobile', `light truck', and `manufacturer' have the 
     meanings given such terms in regulations prescribed by the 
     Administrator of the Environmental Protection Agency for 
     purposes of the administration of title II of the Clean Air 
     Act (42 U.S.C. 7521 et seq.).
       ``(5)  Reduction in basis.--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.
       ``(6) No double benefit.--The amount of any deduction or 
     credit allowable under this chapter (other than the credit 
     allowable under this section)--
       ``(A) for any incremental cost taken into account in 
     computing the amount of the credit determined under 
     subsection (d) shall be reduced by the amount of such credit 
     attributable to such cost, and
       ``(B) with respect to a vehicle described under subsection 
     (b) or (c), shall be reduced by the amount of credit allowed 
     under subsection (a) for such vehicle for the taxable year.
       ``(7) Property used by tax-exempt entities.--In the case of 
     a credit amount which is allowable with respect to a motor 
     vehicle which is acquired by an entity exempt from tax under 
     this chapter, the person which sells or leases such vehicle 
     to the entity shall be treated as the taxpayer with respect 
     to the vehicle for purposes of this section and the credit 
     shall be allowed to such person, but only if the person 
     clearly discloses to the entity in any sale or lease document 
     the specific amount of any credit otherwise allowable to the 
     entity under this section and reduces the sale or lease price 
     of such vehicle by an equivalent amount of such credit.
       ``(8) Recapture.--The Secretary shall, by regulations, 
     provide for recapturing the benefit of any credit allowable 
     under subsection (a) with respect to any property which 
     ceases to be property eligible for such credit (including 
     recapture in the case of a lease period of less than the 
     economic life of a vehicle).
       ``(9) Property used outside united states, etc., not 
     qualified.--No credit shall be allowed under subsection (a) 
     with respect to any property referred to in section 50(b) or 
     with respect to the portion of the cost of any property taken 
     into account under section 179.
       ``(10) Election to not 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.
       ``(11) Carryforward allowed.--
       ``(A) In general.--If the credit amount allowable under 
     subsection (a) for a taxable year exceeds the amount of the 
     limitation under subsection (f) for such taxable year 
     (referred to as the `unused credit year' in this paragraph), 
     such excess shall be allowed as a credit carryforward for 
     each of the 20 taxable years following the unused credit 
     year.
       ``(B) Rules.--Rules similar to the rules of section 39 
     shall apply with respect to the credit carryforward under 
     subparagraph (A).
       ``(12) Interaction with air quality and motor vehicle 
     safety standards.--Unless otherwise provided in this section, 
     a motor vehicle shall not be considered eligible for a credit 
     under this section unless such vehicle is in compliance 
     with--
       ``(A) the applicable provisions of the Clean Air Act for 
     the applicable make and model year of the vehicle (or 
     applicable air quality provisions of State law in the case of 
     a State which has adopted such provision under a waiver under 
     section 209(b) of the Clean Air Act), and
       ``(B) the motor vehicle safety provisions of sections 30101 
     through 30169 of title 49, United States Code.
       ``(h) Regulations.--
       ``(1) In general.--The Secretary shall promulgate such 
     regulations as necessary to carry out the provisions of this 
     section.
       ``(2) Administrator of environmental protection agency.--
     The Administrator of the Environmental Protection Agency, in 
     coordination with the Secretary of Transportation and the 
     Secretary of the Treasury, shall prescribe such regulations 
     as necessary to determine whether a motor vehicle meets the 
     requirements to be eligible for a credit under this section.

[[Page 15504]]

       ``(i) Termination.--This section shall not apply to any 
     property placed in service after--
       ``(1) in the case of a new qualified fuel cell motor 
     vehicle (as described in subsection (b)), December 31, 2011, 
     and
       ``(2) in the case of any other property, December 31, 
     2007.''.
       (b) Conforming Amendments.--
       (1) Section 1016(a) is amended by striking ``and'' at the 
     end of paragraph (29), by striking the period at the end of 
     paragraph (30) and inserting ``, and'', and by adding at the 
     end the following:
       ``(31) to the extent provided in section 30B(g)(5).''.
       (2) Section 6501(m) is amended by inserting ``30B(g)(10),'' 
     after ``30(d)(4),''.
       (3) The table of sections for subpart B of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 30A the following:

``Sec. 30B. Alternative motor vehicle credit.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2001, in taxable years ending after such date.

     SEC. 3105. EXTENSION OF DEDUCTION FOR CERTAIN REFUELING 
                   PROPERTY.

       (a) In General.--Section 179A(f) (relating to termination) 
     is amended by striking ``2004'' and inserting ``2007''.
       (b) Modification of Phaseout.--Subparagraph (B) of section 
     179A(b)(1) is amended--
       (1) in clause (i), by striking ``2002'' and inserting 
     ``2005'',
       (2) in clause (ii), by striking ``2003'' and inserting 
     ``2006'', and
       (3) in clause (iii), by striking ``2004'' and inserting 
     ``2007''.

     SEC. 3106. MODIFICATION OF CREDIT FOR QUALIFIED ELECTRIC 
                   VEHICLES.

       (a) Amount of Credit.--
       (1) In general.--Section 30(a) (relating to allowance of 
     credit) is amended by striking ``10 percent of''.
       (2) Limitation of credit according to type of vehicle.--
     Section 30(b) (relating to limitations) is amended--
       (A) by striking paragraphs (1) and (2) and inserting the 
     following:
       ``(1) Limitation according to type of vehicle.--The amount 
     of the credit allowed under subsection (a) for any vehicle 
     shall not exceed the greatest of the following amounts 
     applicable to such vehicle:
       ``(A) In the case of a vehicle which conforms to the Motor 
     Vehicle Safety Standard 500 prescribed by the Secretary of 
     Transportation, the lesser of--
       ``(i) 10 percent of the manufacturer's suggested retail 
     price of the vehicle, or
       ``(ii) $4,000.
       ``(B) In the case of a vehicle not described in 
     subparagraph (A) with a gross vehicle weight rating not 
     exceeding 8,500 pounds--
       ``(i) $4,000, or
       ``(ii) $5,000, if such vehicle is--

       ``(I) capable of a driving range of at least 70 miles on a 
     single charge of the vehicle's rechargeable batteries and 
     measured pursuant to the urban dynamometer schedules under 
     appendix I to part 86 of title 40, Code of Federal 
     Regulations, or
       ``(II) capable of a payload capacity of at least 1,000 
     pounds.

       ``(C) In the case of a vehicle with a gross vehicle weight 
     rating exceeding 8,500 pounds but not exceeding 14,000 
     pounds, $10,000.
       ``(D) In the case of a vehicle with a gross vehicle weight 
     rating exceeding 14,000 pounds but not exceeding 26,000 
     pounds, $20,000.
       ``(E) In the case of a vehicle with a gross vehicle weight 
     rating exceeding 26,000 pounds, $40,000.'', and
       (B) by redesignating paragraph (3) as paragraph (2).
       (3) Conforming amendments.--
       (A) Section 53(d)(1)(B)(iii) is amended by striking 
     ``section 30(b)(3)(B)'' and inserting ``section 
     30(b)(2)(B)''.
       (B) Section 55(c)(2) is amended by striking ``30(b)(3)'' 
     and inserting ``30(b)(2)''.
       (b) Qualified Battery Electric Vehicle.--
       (1) In general.--Section 30(c)(1)(A) (defining qualified 
     electric vehicle) is amended to read as follows:
       ``(A) which is--
       ``(i) operated solely by use of a battery or battery pack, 
     or
       ``(ii) powered primarily through the use of an electric 
     battery or battery pack using a flywheel or capacitor which 
     stores energy produced by an electric motor through 
     regenerative braking to assist in vehicle operation,''.
       (2) Leased vehicles.--Section 30(c)(1)(C) is amended by 
     inserting ``or lease'' after ``use''.
       (3) Conforming amendments.--
       (A) Subsections (a), and (c) of section 30 are each amended 
     by inserting ``battery'' after ``qualified'' each place it 
     appears.
       (B) The heading of subsection (c) of section 30 is amended 
     by inserting ``Battery'' after ``Qualified''.
       (C) The heading of section 30 is amended by inserting 
     ``battery'' after ``qualified''.
       (D) The item relating to section 30 in the table of 
     sections for subpart B of part IV of subchapter A of chapter 
     1 is amended by inserting ``battery'' after ``qualified''.
       (E) Section 179A(c)(3) is amended by inserting ``battery'' 
     before ``electric''.
       (F) The heading of paragraph (3) of section 179A(c) is 
     amended by inserting ``battery'' before ``electric''.
       (c) Additional Special Rules.--Section 30(d) (relating to 
     special rules) is amended by adding at the end the following:
       ``(5) No double benefit.--The amount of any deduction or 
     credit allowable under this chapter for any cost taken into 
     account in computing the amount of the credit determined 
     under subsection (a) shall be reduced by the amount of such 
     credit attributable to such cost.
       ``(6) Property used by tax-exempt entities.--In the case of 
     a credit amount which is allowable with respect to a vehicle 
     which is acquired by an entity exempt from tax under this 
     chapter, the person which sells or leases such vehicle to the 
     entity shall be treated as the taxpayer with respect to the 
     vehicle for purposes of this section and the credit shall be 
     allowed to such person, but only if the person clearly 
     discloses to the entity in any sale or lease contract the 
     specific amount of any credit otherwise allowable to the 
     entity under this section and reduces the sale or lease price 
     of such vehicle by an equivalent amount of such credit.
       ``(7) Carryforward allowed.--
       ``(A) In general.--If the credit amount allowable under 
     subsection (a) for a taxable year exceeds the amount of the 
     limitation under subsection (b)(3) for such taxable year, 
     such excess shall be allowed as a credit carryforward for 
     each of the 20 taxable years following such taxable year.
       ``(B) Rules.--Rules similar to the rules of section 39 
     shall apply with respect to the credit carryforward under 
     subparagraph (A).''
       (d) Extension.--Section 30(e) (relating to termination) is 
     amended by striking ``2004'' and inserting ``2007''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2001, in taxable years ending after such date.

     SEC. 3107. TAX CREDIT FOR ENERGY EFFICIENT APPLIANCES.

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

     ``SEC. 45G. ENERGY EFFICIENT APPLIANCE CREDIT.

       ``(a) General Rule.--For purposes of section 38, the energy 
     efficient appliance credit determined under this section for 
     the taxable year is an amount equal to the applicable amount 
     determined under subsection (b) with respect to the eligible 
     production of qualified energy efficient appliances produced 
     by the taxpayer during the calendar year ending with or 
     within the taxable year.
       ``(b) Applicable Amount; Eligible Production.--For purposes 
     of subsection (a)--
       ``(1) Applicable amount.--The applicable amount is--
       ``(A) $50 in the case of an energy efficient clothes washer 
     described in subsection (d)(2)(A) or an energy efficient 
     refrigerator described in subsection (d)(3)(B)(i), and
       ``(B) $100 in the case of any other energy efficient 
     clothes washer or energy efficient refrigerator.
       ``(2) Eligible production.--
       ``(A) In general.--The eligible production of each category 
     of qualified energy efficient appliances is the excess of--
       ``(i) the number of appliances in such category which are 
     produced by the taxpayer during such calendar year, over
       ``(ii) the average number of appliances in such category 
     which were produced by the taxpayer during calendar years 
     1998, 1999, and 2000.
       ``(B) Categories.--For purposes of subparagraph (A), the 
     categories are--
       ``(i) energy efficient clothes washers described in 
     subsection (d)(2)(A),
       ``(ii) energy efficient clothes washers described in 
     subsection (d)(2)(B),
       ``(iii) energy efficient refrigerators described in 
     subsection (d)(3)(B)(i), and
       ``(iv) energy efficient refrigerators described in 
     subsection (d)(3)(B)(ii).
       ``(C) Special rule for 2001 production.--For purposes of 
     determining eligible production for calendar year 2001--
       ``(i) only production after the date of the enactment of 
     this section shall be taken into account under subparagraph 
     (A)(i), and
       ``(ii) the amount taken into account under subparagraph 
     (A)(ii) shall be an amount which bears the same ratio to the 
     amount which would (but for this subparagraph) be taken into 
     account under subparagraph (A)(ii) as--

       ``(I) the number of days in calendar year 2001 after the 
     date of the enactment of this section, bears to
       ``(II) 365.

       ``(c) Limitation on Maximum Credit.--
       ``(1) In general.--The maximum amount of credit allowed 
     under subsection (a) with respect to a taxpayer for all 
     taxable years shall be--
       ``(A) $30,000,000 with respect to the credit determined 
     under subsection (b)(1)(A), and
       ``(B) $30,000,000 with respect to the credit determined 
     under subsection (b)(1)(B).
       ``(2) Limitation based on gross receipts.--The credit 
     allowed under subsection (a) with respect to a taxpayer for 
     the taxable year shall not exceed an amount equal to 2 
     percent of the average annual gross receipts

[[Page 15505]]

     of the taxpayer for the 3 taxable years preceding the taxable 
     year in which the credit is determined.
       ``(3) Gross receipts.--For purposes of this subsection, the 
     rules of paragraphs (2) and (3) of section 448(c) shall 
     apply.
       ``(d) Qualified Energy Efficient Appliance.--For purposes 
     of this section:
       ``(1) In general.--The term `qualified energy efficient 
     appliance' means--
       ``(A) an energy efficient clothes washer, or
       ``(B) an energy efficient refrigerator.
       ``(2) Energy efficient clothes washer.--The term `energy 
     efficient clothes washer' means a residential clothes washer, 
     including a residential style coin operated washer, which is 
     manufactured with--
       ``(A) a 1.26 MEF or greater, or
       ``(B) a 1.42 MEF (1.5 MEF for washers produced after 2004) 
     or greater.
       ``(3) Energy efficient refrigerator.--The term `energy 
     efficient refrigerator' means an automatic defrost 
     refrigerator-freezer which--
       ``(A) has an internal volume of at least 16.5 cubic feet, 
     and
       ``(B) consumes--
       ``(i) 10 percent less kw/hr/yr than the energy conservation 
     standards promulgated by the Department of Energy for 
     refrigerators produced during 2001, and
       ``(ii) 15 percent less kw/hr/yr than such energy 
     conservation standards for refrigerators produced after 2001.
       ``(4) MEF.--The term `MEF' means Modified Energy Factor (as 
     determined by the Secretary of Energy).
       ``(e) Special Rules.--
       ``(1) In general.--Rules similar to the rules of 
     subsections (c), (d), and (e) of section 52 shall apply for 
     purposes of this section.
       ``(2) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52 or 
     subsection (m) or (o) of section 414 shall be treated as 1 
     person for purposes of subsection (a).
       ``(f) Verification.--The taxpayer shall submit such 
     information or certification as the Secretary, in 
     consultation with the Secretary of Energy, determines 
     necessary to claim the credit amount under subsection (a).
       ``(g) Termination.--This section shall not apply--
       ``(1) with respect to energy efficient refrigerators 
     described in subsection (d)(3)(B)(i) produced after 2004, and
       ``(2) with respect to all other qualified energy efficient 
     appliances produced after 2006.''.
       (b) Limitation on Carryback.--Section 39(d) (relating to 
     transition rules) is amended by adding at the end the 
     following new paragraph:
       ``(11) No carryback of energy efficient appliance credit 
     before effective date.--No portion of the unused business 
     credit for any taxable year which is attributable to the 
     energy efficient appliance credit determined under section 
     45G may be carried to a taxable year ending before the date 
     of the enactment of section 45G.''.
       (c) Conforming Amendment.--Section 38(b) (relating to 
     general business credit) is amended by striking ``plus'' at 
     the end of paragraph (14), by striking the period at the end 
     of paragraph (15) and inserting ``, plus'', and by adding at 
     the end the following new paragraph:
       ``(16) the energy efficient appliance credit determined 
     under section 45G(a).''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 is amended by 
     inserting after the item relating to section 45F the 
     following new item:

``Sec. 45G. Energy efficient appliance credit.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 3108. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS TO 
                   EXISTING HOMES.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits) is 
     amended by inserting after section 25D the following new 
     section:

     ``SEC. 25E. ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to 20 
     percent of the amount paid or incurred by the taxpayer for 
     qualified energy efficiency improvements installed during 
     such taxable year.
       ``(b) Limitations.--
       ``(1) Maximum credit.--The credit allowed by this section 
     with respect to a dwelling shall not exceed $2,000.
       ``(2) Prior credit amounts for taxpayer on same dwelling 
     taken into account.--If a credit was allowed to the taxpayer 
     under subsection (a) with respect to a dwelling in 1 or more 
     prior taxable years, the amount of the credit otherwise 
     allowable for the taxable year with respect to that dwelling 
     shall not exceed the amount of $2,000 reduced by the sum of 
     the credits allowed under subsection (a) to the taxpayer with 
     respect to the dwelling for all prior taxable years.
       ``(3) Limitation based on amount of tax.--The credit 
     allowed under subsection (a) for the taxable year shall not 
     exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under this subpart 
     (other than this section and section 23) and section 27 for 
     the taxable year.
       ``(c) Carryforward of Unused Credit.--If the credit 
     allowable under subsection (a) exceeds the limitation imposed 
     by subsection (b)(3) for such taxable year, such excess shall 
     be carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such succeeding 
     taxable year.
       ``(d) Qualified Energy Efficiency Improvements.--For 
     purposes of this section, the term `qualified energy 
     efficiency improvements' means any energy efficient building 
     envelope component which meets the prescriptive criteria for 
     such component established by the 1998 International Energy 
     Conservation Code, if--
       ``(1) such component is installed in or on a dwelling--
       ``(A) located in the United States, and
       ``(B) owned and used by the taxpayer as the taxpayer's 
     principal residence (within the meaning of section 121),
       ``(2) the original use of such component commences with the 
     taxpayer, and
       ``(3) such component reasonably can be expected to remain 
     in use for at least 5 years.
     If the aggregate cost of such components with respect to any 
     dwelling exceeds $1,000, such components shall be treated as 
     qualified energy efficiency improvements only if such 
     components are also certified in accordance with subsection 
     (e) as meeting such criteria.
       ``(e) Certification.--The certification described in 
     subsection (d) shall be--
       ``(1) determined on the basis of the technical 
     specifications or applicable ratings (including product 
     labeling requirements) for the measurement of energy 
     efficiency, based upon energy use or building envelope 
     component performance, for the energy efficient building 
     envelope component,
       ``(2) provided by a local building regulatory authority, a 
     utility, a manufactured home production inspection primary 
     inspection agency (IPIA), or an accredited home energy rating 
     system provider who is accredited by or otherwise authorized 
     to use approved energy performance measurement methods by the 
     Home Energy Ratings Systems Council or the National 
     Association of State Energy Officials, and
       ``(3) made in writing in a manner that specifies in readily 
     verifiable fashion the energy efficient building envelope 
     components installed and their respective energy efficiency 
     levels.
       ``(f) Definitions and Special Rules.--
       ``(1) Tenant-stockholder in cooperative housing 
     corporation.--In the case of an individual who is a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     individual shall be treated as having paid his tenant-
     stockholder's proportionate share (as defined in section 
     216(b)(3)) of the cost of qualified energy efficiency 
     improvements made by such corporation.
       ``(2) Condominiums.--
       ``(A) In general.--In the case of an individual who is a 
     member of a condominium management association with respect 
     to a condominium which he owns, such individual shall be 
     treated as having paid his proportionate share of the cost of 
     qualified energy efficiency improvements made by such 
     association.
       ``(B) Condominium management association.--For purposes of 
     this paragraph, the term `condominium management association' 
     means an organization which meets the requirements of 
     paragraph (1) of section 528(c) (other than subparagraph (E) 
     thereof) with respect to a condominium project substantially 
     all of the units of which are used as residences.
       ``(3) Building envelope component.--The term `building 
     envelope component' means insulation material or system which 
     is specifically and primarily designed to reduce the heat 
     loss or gain of a dwelling when installed in or on such 
     dwelling, exterior windows (including skylights) and doors, 
     and metal roofs with appropriate pigmented coatings which are 
     specifically and primarily designed to reduce the heat gain 
     of a dwelling when installed in or on such dwelling.
       ``(4) Manufactured homes included.--For purposes of this 
     section, the term `dwelling' includes a manufactured home 
     which conforms to Federal Manufactured Home Construction and 
     Safety Standards (24 C.F.R. 3280).
       ``(g) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(h) Application of Section.--This section shall apply to 
     qualified energy efficiency improvements installed after 
     December 31, 2001 and before January 1, 2007.''.
       (b) Conforming Amendments.--
       (1) Subsection (a) of section 1016 is amended by striking 
     ``and'' at the end of paragraph (30), by striking the period 
     at the end of

[[Page 15506]]

     paragraph (31) and inserting ``, and'', and by adding at the 
     end the following new paragraph:
       ``(32) to the extent provided in section 25E(g), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25E.''.
       (2) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 25D the following new item:

``Sec. 25E. Energy efficiency improvements to existing homes.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 2001.

     SEC. 3109. BUSINESS CREDIT FOR CONSTRUCTION OF NEW ENERGY 
                   EFFICIENT HOME.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits) is amended 
     by inserting after section 45G the following new section:

     ``SEC. 45H. NEW ENERGY EFFICIENT HOME CREDIT.

       ``(a) In General.--For purposes of section 38, in the case 
     of an eligible contractor, the credit determined under this 
     section for the taxable year is an amount equal to the 
     aggregate adjusted bases of all energy efficient property 
     installed in a qualified new energy efficient home during 
     construction of such home.
       ``(b) Limitations.--
       ``(1) Maximum credit.--
       ``(A) In general.--The credit allowed by this section with 
     respect to a dwelling shall not exceed $2,000.
       ``(B) Prior credit amounts on same dwelling taken into 
     account.--If a credit was allowed under subsection (a) with 
     respect to a dwelling in 1 or more prior taxable years, the 
     amount of the credit otherwise allowable for the taxable year 
     with respect to that dwelling shall not exceed the amount of 
     $2,000 reduced by the sum of the credits allowed under 
     subsection (a) with respect to the dwelling for all prior 
     taxable years.
       ``(2) Coordination with rehabilitation and energy 
     credits.--For purposes of this section--
       ``(A) the basis of any property referred to in subsection 
     (a) shall be reduced by that portion of the basis of any 
     property which is attributable to qualified rehabilitation 
     expenditures (as defined in section 47(c)(2)) or to the 
     energy percentage of energy property (as determined under 
     section 48(a)), and
       ``(B) expenditures taken into account under either section 
     47 or 48(a) shall not be taken into account under this 
     section.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Eligible contractor.--The term `eligible contractor' 
     means the person who constructed the new energy efficient 
     home, or in the case of a manufactured home which conforms to 
     Federal Manufactured Home Construction and Safety Standards 
     (24 C.F.R. 3280), the manufactured home producer of such 
     home.
       ``(2) Energy efficient property.--The term `energy 
     efficient property' means any energy efficient building 
     envelope component, and any energy efficient heating or 
     cooling appliance.
       ``(3) Qualified new energy efficient home.--The term 
     `qualified new energy efficient home' means a dwelling--
       ``(A) located in the United States,
       ``(B) the construction of which is substantially completed 
     after December 31, 2001,
       ``(C) the original use of which is as a principal residence 
     (within the meaning of section 121) which commences with the 
     person who acquires such dwelling from the eligible 
     contractor, and
       ``(D) which is certified to have a level of annual heating 
     and cooling energy consumption that is at least 30 percent 
     below the annual level of heating and cooling energy 
     consumption of a comparable dwelling constructed in 
     accordance with the standards of the 1998 International 
     Energy Conservation Code.
       ``(4) Construction.--The term `construction' includes 
     reconstruction and rehabilitation.
       ``(5) Acquire.--The term `acquire' includes purchase and, 
     in the case of reconstruction and rehabilitation, such term 
     includes a binding written contract for such reconstruction 
     or rehabilitation.
       ``(6) Building envelope component.--The term `building 
     envelope component' means insulation material or system which 
     is specifically and primarily designed to reduce the heat 
     loss or gain of a dwelling when installed in or on such 
     dwelling, exterior windows (including skylights) and doors, 
     and metal roofs with appropriate pigmented coatings which are 
     specifically and primarily designed to reduce the heat gain 
     of a dwelling when installed in or on such dwelling.
       ``(7) Manufactured home included.--The term `dwelling' 
     includes a manufactured home conforming to Federal 
     Manufactured Home Construction and Safety Standards (24 
     C.F.R. 3280).
       ``(d) Certification.--
       ``(1) Method.--A certification described in subsection 
     (c)(3)(D) shall be determined on the basis of one of the 
     following methods:
       ``(A) The technical specifications or applicable ratings 
     (including product labeling requirements) for the measurement 
     of energy efficiency for the energy efficient building 
     envelope component or energy efficient heating or cooling 
     appliance, based upon energy use or building envelope 
     component performance.
       ``(B) An energy performance measurement method that 
     utilizes computer software approved by organizations 
     designated by the Secretary.
       ``(2) Provider.--Such certification shall be provided by--
       ``(A) in the case of a method described in paragraph 
     (1)(A), a local building regulatory authority, a utility, a 
     manufactured home production inspection primary inspection 
     agency (IPIA), or an accredited home energy rating systems 
     provider who is accredited by, or otherwise authorized to 
     use, approved energy performance measurement methods by the 
     Home Energy Ratings Systems Council or the National 
     Association of State Energy Officials, or
       ``(B) in the case of a method described in paragraph 
     (1)(B), an individual recognized by an organization 
     designated by the Secretary for such purposes.
       ``(3) Form.--Such certification shall be made in writing in 
     a manner that specifies in readily verifiable fashion the 
     energy efficient building envelope components and energy 
     efficient heating or cooling appliances installed and their 
     respective energy efficiency levels, and in the case of a 
     method described in subparagraph (B) of paragraph (1), 
     accompanied by written analysis documenting the proper 
     application of a permissible energy performance measurement 
     method to the specific circumstances of such dwelling.
       ``(4) Regulations.--
       ``(A) In general.--In prescribing regulations under this 
     subsection for energy performance measurement methods, the 
     Secretary shall prescribe procedures for calculating annual 
     energy costs for heating and cooling and cost savings and for 
     the reporting of the results. Such regulations shall--
       ``(i) be based on the National Home Energy Rating Technical 
     Guidelines of the National Association of State Energy 
     Officials, the Home Energy Rating Guidelines of the Home 
     Energy Rating Systems Council, or the modified 1998 
     California Residential ACM manual,
       ``(ii) provide that any calculation procedures be developed 
     such that the same energy efficiency measures allow a home to 
     qualify for the credit under this section regardless of 
     whether the house uses a gas or oil furnace or boiler or an 
     electric heat pump, and
       ``(iii) require that any computer software allow for the 
     printing of the Federal tax forms necessary for the credit 
     under this section and explanations for the homebuyer of the 
     energy efficient features that were used to comply with the 
     requirements of this section.
       ``(B) Providers.--For purposes of paragraph (2)(B), the 
     Secretary shall establish requirements for the designation of 
     individuals based on the requirements for energy consultants 
     and home energy raters specified by the National Association 
     of State Energy Officials.
       ``(e) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.
       ``(f) Application of Section.--Subsection (a) shall apply 
     to dwellings purchased during the period beginning on January 
     1, 2002, and ending on December 31, 2006.''.
       (b) Credit Made Part of General Business Credit.--
     Subsection (b) of section 38 (relating to current year 
     business credit) is amended by striking ``plus'' at the end 
     of paragraph (15), by striking the period at the end of 
     paragraph (16) and inserting ``, plus'', and by adding at the 
     end thereof the following new paragraph:
       ``(17) the new energy efficient home credit determined 
     under section 45H.''.
       (c) Denial of Double Benefit.--Section 280C (relating to 
     certain expenses for which credits are allowable) is amended 
     by adding at the end thereof the following new subsection:
       ``(d) New Energy Efficient Home Expenses.--No deduction 
     shall be allowed for that portion of expenses for a new 
     energy efficient home otherwise allowable as a deduction for 
     the taxable year which is equal to the amount of the credit 
     determined for such taxable year under section 45H.''.
       (d) Limitation on Carryback.--Subsection (d) of section 39 
     is amended by adding at the end the following new paragraph:
       ``(12) No carryback of new energy efficient home credit 
     before effective date.--No portion of the unused business 
     credit for any taxable year which is attributable to the 
     credit determined under section 45H may be carried back to 
     any taxable year ending before January 1, 2002.''.
       (e) Deduction for Certain Unused Business Credits.--
     Subsection (c) of section 196 is amended by striking ``and'' 
     at the end of paragraph (9), by striking the period at the 
     end of paragraph (10) and inserting ``, and'', and by adding 
     after paragraph (10) the following new paragraph:

[[Page 15507]]

       ``(11) the new energy efficient home credit determined 
     under section 45H.''.
       (f) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 is amended by 
     inserting after the item relating to section 45G the 
     following new item:

``Sec. 45H. New energy efficient home credit.''.

       (g) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 2001.

     SEC. 3110. ALLOWANCE OF DEDUCTION FOR ENERGY EFFICIENT 
                   COMMERCIAL BUILDING PROPERTY.

       (a) In General.--Part VI of subchapter B of chapter 1 
     (relating to itemized deductions for individuals and 
     corporations) is amended by inserting after section 179A the 
     following new section:

     ``SEC. 179B. DEDUCTION FOR ENERGY EFFICIENT COMMERCIAL 
                   BUILDING PROPERTY.

       ``(a) Allowance of Deduction.--
       ``(1) In general.--There shall be allowed as a deduction an 
     amount equal to energy efficient commercial building property 
     expenditures made by a taxpayer for the taxable year.
       ``(2) Maximum amount of deduction.--The amount of energy 
     efficient commercial building property expenditures taken 
     into account under paragraph (1) shall not exceed an amount 
     equal to the product of--
       ``(A) $2.25, and
       ``(B) the square footage of the building with respect to 
     which the expenditures are made.
       ``(3) Year deduction allowed.--The deduction under 
     paragraph (1) shall be allowed for the taxable year in which 
     the building is placed in service.
       ``(b) Energy Efficient Commercial Building Property 
     Expenditures.--For purposes of this section, the term `energy 
     efficient commercial building property expenditures' means an 
     amount paid or incurred for energy efficient commercial 
     building property installed on or in connection with new 
     construction or reconstruction of property--
       ``(1) for which depreciation is allowable under section 
     167,
       ``(2) which is located in the United States, and
       ``(3) the construction or erection of which is completed by 
     the taxpayer.
     Such property includes all residential rental property, 
     including low-rise multifamily structures and single family 
     housing property which is not within the scope of Standard 
     90.1-1999 (described in subsection (c)). Such term includes 
     expenditures for labor costs properly allocable to the onsite 
     preparation, assembly, or original installation of the 
     property.
       ``(c) Energy Efficient Commercial Building Property.--For 
     purposes of subsection (b)--
       ``(1) In general.--The term `energy efficient commercial 
     building property' means any property which reduces total 
     annual energy and power costs with respect to the lighting, 
     heating, cooling, ventilation, and hot water supply systems 
     of the building by 50 percent or more in comparison to a 
     reference building which meets the requirements of Standard 
     90.1-1999 of the American Society of Heating, Refrigerating, 
     and Air Conditioning Engineers and the Illuminating 
     Engineering Society of North America using methods of 
     calculation under paragraph (2) and certified by qualified 
     professionals as provided under subsection (f).
       ``(2) Methods of calculation.--The Secretary, in 
     consultation with the Secretary of Energy, shall promulgate 
     regulations which describe in detail methods for calculating 
     and verifying energy and power consumption and cost, taking 
     into consideration the provisions of the 1998 California 
     Nonresidential ACM Manual. These procedures shall meet the 
     following requirements:
       ``(A) In calculating tradeoffs and energy performance, the 
     regulations shall prescribe the costs per unit of energy and 
     power, such as kilowatt hour, kilowatt, gallon of fuel oil, 
     and cubic foot or Btu of natural gas, which may be dependent 
     on time of usage.
       ``(B) The calculational methodology shall require that 
     compliance be demonstrated for a whole building. If some 
     systems of the building, such as lighting, are designed later 
     than other systems of the building, the method shall provide 
     that either--
       ``(i) the expenses taken into account under subsection (a) 
     shall not occur until the date designs for all energy-using 
     systems of the building are completed,
       ``(ii) the energy performance of all systems and components 
     not yet designed shall be assumed to comply minimally with 
     the requirements of such Standard 90.1-1999, or
       ``(iii) the expenses taken into account under subsection 
     (a) shall be a fraction of such expenses based on the 
     performance of less than all energy-using systems in 
     accordance with subparagraph (C).
       ``(C) The expenditures in connection with the design of 
     subsystems in the building, such as the envelope, the 
     heating, ventilation, air conditioning and water heating 
     system, and the lighting system shall be allocated to the 
     appropriate building subsystem based on system-specific 
     energy cost savings targets in regulations promulgated by the 
     Secretary of Energy which are equivalent, using the 
     calculation methodology, to the whole building requirement of 
     50 percent savings.
       ``(D) The calculational methods under this subparagraph 
     need not comply fully with section 11 of such Standard 90.1-
     1999.
       ``(E) The calculational methods shall be fuel neutral, such 
     that the same energy efficiency features shall qualify a 
     building for the deduction under this subsection regardless 
     of whether the heating source is a gas or oil furnace or an 
     electric heat pump.
       ``(F) The calculational methods shall provide appropriate 
     calculated energy savings for design methods and technologies 
     not otherwise credited in either such Standard 90.1-1999 or 
     in the 1998 California Nonresidential ACM Manual, including 
     the following:
       ``(i) Natural ventilation.
       ``(ii) Evaporative cooling.
       ``(iii) Automatic lighting controls such as occupancy 
     sensors, photocells, and timeclocks.
       ``(iv) Daylighting.
       ``(v) Designs utilizing semi-conditioned spaces that 
     maintain adequate comfort conditions without air conditioning 
     or without heating.
       ``(vi) Improved fan system efficiency, including reductions 
     in static pressure.
       ``(vii) Advanced unloading mechanisms for mechanical 
     cooling, such as multiple or variable speed compressors.
       ``(viii) The calculational methods may take into account 
     the extent of commissioning in the building, and allow the 
     taxpayer to take into account measured performance that 
     exceeds typical performance.
       ``(3) Computer software.--
       ``(A) In general.--Any calculation under this subsection 
     shall be prepared by qualified computer software.
       ``(B) Qualified computer software.--For purposes of this 
     paragraph, the term `qualified computer software' means 
     software--
       ``(i) for which the software designer has certified that 
     the software meets all procedures and detailed methods for 
     calculating energy and power consumption and costs as 
     required by the Secretary,
       ``(ii) which provides such forms as required to be filed by 
     the Secretary in connection with energy efficiency of 
     property and the deduction allowed under this section, and
       ``(iii) which provides a notice form which summarizes the 
     energy efficiency features of the building and its projected 
     annual energy costs.
       ``(d) Allocation of Deduction for Public Property.--In the 
     case of energy efficient commercial building property 
     installed on or in public property, the Secretary shall 
     promulgate a regulation to allow the allocation of the 
     deduction to the person primarily responsible for designing 
     the property in lieu of the public entity which is the owner 
     of such property. Such person shall be treated as the 
     taxpayer for purposes of this section.
       ``(e) Notice to Owner.--The qualified individual shall 
     provide an explanation to the owner of the building regarding 
     the energy efficiency features of the building and its 
     projected annual energy costs as provided in the notice under 
     subsection (c)(3)(B)(iii).
       ``(f) Certification.--The Secretary, in consultation with 
     the Secretary of Energy, shall establish requirements for 
     certification and compliance procedures similar to the 
     procedures under section 45H(d).
       ``(g) Basis Reduction.--For purposes of this title, the 
     basis of any property shall be reduced by the amount of the 
     deduction with respect to such property which is allowed by 
     subsection (a).
       ``(h) Termination.--This section shall not apply to 
     property placed in service after December 31, 2006.''.
       (b) Conforming Amendments.--
       (1) Section 1016(a) is amended by striking ``and'' at the 
     end of paragraph (31), by striking the period at the end of 
     paragraph (32) and inserting ``, and'', and by inserting the 
     following new paragraph:
       ``(33) to the extent provided in section 179B(g).''.
       (2) Section 1245(a) is amended by inserting ``179B,'' after 
     ``179A,'' both places it appears in paragraphs (2)(C) and 
     (3)(C).
       (3) Section 1250(b)(3) is amended by inserting before the 
     period at the end of the first sentence ``or by section 
     179B''.
       (4) Section 263(a)(1) is amended by striking ``or'' at the 
     end of subparagraph (G), by striking the period at the end of 
     subparagraph (H) and inserting ``, or'', and by inserting 
     after subparagraph (H) the following new subparagraph:
       ``(I) expenditures for which a deduction is allowed under 
     section 179B.''.
       (5) Section 312(k)(3)(B) is amended by striking ``or 179A'' 
     each place it appears in the heading and text and inserting 
     ``, 179A, or 179B''.
       (c) Clerical Amendment.--The table of sections for part VI 
     of subchapter B of chapter 1 is amended by adding after 
     section 179A the following new item:

``Sec. 179B. Deduction for energy efficient commercial building 
              property.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

[[Page 15508]]



     SEC. 3111. ALLOWANCE OF DEDUCTION FOR QUALIFIED ENERGY 
                   MANAGEMENT DEVICES AND RETROFITTED QUALIFIED 
                   METERS.

       (a) In General.--Part VI of subchapter B of chapter 1 
     (relating to itemized deductions for individuals and 
     corporations) is amended by inserting after section 179B the 
     following new section:

     ``SEC. 179C. DEDUCTION FOR QUALIFIED ENERGY MANAGEMENT 
                   DEVICES AND RETROFITTED METERS.

       ``(a) Allowance of Deduction.--In the case of a taxpayer 
     who is a supplier of electric energy or natural gas or a 
     provider of electric energy or natural gas services, there 
     shall be allowed as a deduction an amount equal to the cost 
     of each qualified energy management device placed in service 
     during the taxable year.
       ``(b) Maximum Deduction.--The deduction allowed by this 
     section with respect to each qualified energy management 
     device shall not exceed $30.
       ``(c) Qualified Energy Management Device.--The term 
     `qualified energy management device' means any tangible 
     property to which section 168 applies if such property is a 
     meter or metering device--
       ``(1) which is acquired and used by the taxpayer to enable 
     consumers to manage their purchase or use of electricity or 
     natural gas in response to energy price and usage signals, 
     and
       ``(2) which permits reading of energy price and usage 
     signals on at least a daily basis.
       ``(d) Property Used Outside the United States Not 
     Qualified.--No deduction shall be allowed under subsection 
     (a) with respect to property which is used predominantly 
     outside the United States or with respect to the portion of 
     the cost of any property taken into account under section 
     179.
       ``(e) Basis Reduction.--
       ``(1) In general.--For purposes of this title, the basis of 
     any property shall be reduced by the amount of the deduction 
     with respect to such property which is allowed by subsection 
     (a).
       ``(2) Ordinary income recapture.--For purposes of section 
     1245, the amount of the deduction allowable under subsection 
     (a) with respect to any property that is of a character 
     subject to the allowance for depreciation shall be treated as 
     a deduction allowed for depreciation under section 167.''.
       (b) Conforming Amendments.--
       (1) Section 263(a)(1) is amended by striking ``or'' at the 
     end of subparagraph (H), by striking the period at the end of 
     subparagraph (I) and inserting ``, or'', and by inserting 
     after subparagraph (I) the following new subparagraph:
       ``(J) expenditures for which a deduction is allowed under 
     section 179C.''.
       (2) Section 312(k)(3)(B) is amended by striking ``or 179B'' 
     each place it appears in the heading and text and inserting 
     ``, 179B, or 179C''.
       (3) Section 1016(a) is amended by striking ``and'' at the 
     end of paragraph (32), by striking the period at the end of 
     paragraph (33) and inserting ``, and'', and by inserting 
     after paragraph (33) the following new paragraph:
       ``(34) to the extent provided in section 179C(e)(1).''.
       (4) Section 1245(a) is amended by inserting ``179C,'' after 
     ``179B,'' both places it appears in paragraphs (2)(C) and 
     (3)(C).
       (5) The table of contents for subpart B of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 179B the following new item:

``Sec. 179C. Deduction for qualified energy management devices and 
              retrofitted meters.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to qualified energy management devices placed in 
     service after the date of the enactment of this Act.

     SEC. 3112. 3-YEAR APPLICABLE RECOVERY PERIOD FOR DEPRECIATION 
                   OF QUALIFIED ENERGY MANAGEMENT DEVICES.

       (a) In General.--Subparagraph (A) of section 168(e)(3) 
     (relating to classification of property) is amended by 
     striking ``and'' at the end of clause (ii), by striking the 
     period at the end of clause (iii) and inserting ``, and'', 
     and by adding at the end the following new clause:
       ``(iv) any qualified energy management device.''.
       (b) Definition of Qualified Energy Management Device.--
     Section 168(i) (relating to definitions and special rules) is 
     amended by inserting at the end the following new paragraph:
       ``(15) Qualified energy management device.--The term 
     `qualified energy management device' means any qualified 
     energy management device as defined in section 179C(c) which 
     is placed in service by a taxpayer who is a supplier of 
     electric energy or natural gas or a provider of electric 
     energy or natural gas services.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act.

     SEC. 3113. ENERGY CREDIT FOR COMBINED HEAT AND POWER SYSTEM 
                   PROPERTY.

       (a) In General.--Subparagraph (A) of section 48(a)(3) 
     (defining energy property) is amended by striking ``or'' at 
     the end of clause (ii), by adding ``or'' at the end of clause 
     (iii), and by inserting after clause (iii) the following new 
     clause:
       ``(iv) combined heat and power system property,''.
       (b) Combined Heat and Power System Property.--Subsection 
     (a) of section 48 is amended by redesignating paragraphs (5) 
     and (6) as paragraphs (6) and (7), respectively, and by 
     inserting after paragraph (4) the following new paragraph:
       ``(5) Combined heat and power system property.--For 
     purposes of this subsection--
       ``(A) Combined heat and power system property.--The term 
     `combined heat and power system property' means property 
     comprising a system--
       ``(i) which uses the same energy source for the 
     simultaneous or sequential generation of electrical power, 
     mechanical shaft power, or both, in combination with the 
     generation of steam or other forms of useful thermal energy 
     (including heating and cooling applications),
       ``(ii) which has an electrical capacity of more than 50 
     kilowatts or a mechanical energy capacity of more than 67 
     horsepower or an equivalent combination of electrical and 
     mechanical energy capacities,
       ``(iii) which produces--

       ``(I) at least 20 percent of its total useful energy in the 
     form of thermal energy, and
       ``(II) at least 20 percent of its total useful energy in 
     the form of electrical or mechanical power (or combination 
     thereof),

       ``(iv) the energy efficiency percentage of which exceeds 60 
     percent (70 percent in the case of a system with an 
     electrical capacity in excess of 50 megawatts or a mechanical 
     energy capacity in excess of 67,000 horsepower, or an 
     equivalent combination of electrical and mechanical energy 
     capacities), and
       ``(v) which is placed in service after December 31, 2001, 
     and before January 1, 2007.
       ``(B) Special rules.--
       ``(i) Energy efficiency percentage.--For purposes of 
     subparagraph (A)(iv), the energy efficiency percentage of a 
     system is the fraction--

       ``(I) the numerator of which is the total useful 
     electrical, thermal, and mechanical power produced by the 
     system at normal operating rates, and
       ``(II) the denominator of which is the lower heating value 
     of the primary fuel source for the system.

       ``(ii) Determinations made on btu basis.--The energy 
     efficiency percentage and the percentages under subparagraph 
     (A)(iii) shall be determined on a Btu basis.
       ``(iii) Input and output property not included.--The term 
     `combined heat and power system property' does not include 
     property used to transport the energy source to the facility 
     or to distribute energy produced by the facility.
       ``(iv) Public utility property.--

       ``(I) Accounting rule for public utility property.--If the 
     combined heat and power system property is public utility 
     property (as defined in section 168(i)(1)), the taxpayer may 
     only claim the credit under the subsection if, with respect 
     to such property, the taxpayer uses a normalization method of 
     accounting.
       ``(II) Certain exception not to apply.--The matter in 
     paragraph (3) which follows subparagraph (D) shall not apply 
     to combined heat and power system property.

       ``(C) Extension of depreciation recovery period.--If a 
     taxpayer is allowed credit under this section for combined 
     heat and power system property and such property would (but 
     for this subparagraph) have a class life of 15 years or less 
     under section 168, such property shall be treated as having a 
     22-year class life for purposes of section 168.''.
       (c) No Carryback of Energy Credit Before Effective Date.--
     Subsection (d) of section 39 is amended by adding at the end 
     the following new paragraph:
       ``(13) No carryback of energy credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the energy credit with 
     respect to property described in section 48(a)(5) may be 
     carried back to a taxable year ending before January 1, 
     2002.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2001.

     SEC. 3114. NEW NONREFUNDABLE PERSONAL CREDITS ALLOWED AGAINST 
                   REGULAR AND MINIMUM TAXES.

       (a) In General.--Paragraph (1) of section 26(a) is amended 
     by striking ``and 25B'' and inserting ``25B, 25C, 25D, and 
     25E''.
       (b) Conforming Amendments.--
       (1) Section 24(b)(3)(B) is amended by striking ``and 25B'' 
     and inserting ``, 25B, 25C, 25D, and 25E''.
       (2) Section 25(e)(1)(C) is amended by inserting ``25C, 25D, 
     and 25E'' after ``25B,''.
       (3) Section 25B(g)(2) is amended by striking ``section 23'' 
     and inserting ``sections 23, 25C, 25D, and 25E''.
       (4) Section 904(h) is amended by striking ``and 25B'' and 
     inserting ``25B, 25C, 25D, and 25E''.
       (5) Section 1400C(d) is amended by striking ``and 25B'' and 
     inserting ``25B, 25C, 25D, and 25E''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

[[Page 15509]]



     SEC. 3115. PHASEOUT OF 4.3-CENT MOTOR FUEL EXCISE TAXES ON 
                   RAILROADS AND INLAND WATERWAY TRANSPORTATION 
                   WHICH REMAIN IN GENERAL FUND.

       (a) Taxes on Trains.--
       (1) In general.--Clause (ii) of section 4041(a)(1)(C) is 
     amended by striking subclauses (I), (II), and (III) and 
     inserting the following new subclauses:

       ``(I) 3.3 cents per gallon after September 30, 2001, and 
     before January 1, 2005,
       ``(II) 2.3 cents per gallon after December 31, 2004, and 
     before January 1, 2007,
       ``(III) 1.3 cents per gallon after December 31, 2006, and 
     before January 1, 2009,
       ``(IV) 0.3 cent per gallon after December 31, 2008, and 
     before January 1, 2010, and
       ``(V) 0 after December 31, 2009.''.

       (2) Conforming amendments.--
       (A) Subsection (d) of section 4041 is amended by 
     redesignating paragraph (3) as paragraph (4) and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) Diesel fuel used in trains.--In the case of any sale 
     for use (or use) after September 30, 2010, there is hereby 
     imposed a tax of 0.1 cent per gallon on any liquid other than 
     gasoline (as defined in section 4083)--
       ``(A) sold by any person to an owner, lessee, or other 
     operator of a diesel-powered train for use as a fuel in such 
     train, or
       ``(B) used by any person as a fuel in a diesel-powered 
     train unless there was a taxable sale of such fuel under 
     subparagraph (A).

     No tax shall be imposed by this paragraph on the sale or use 
     of any liquid if tax was imposed on such liquid under section 
     4081.''
       (B) Subsection (f) of section 4082 is amended by striking 
     ``section 4041(a)(1)'' and inserting ``subsections (a)(1) and 
     (d)(3) of section 4041''.
       (C) Subparagraph (B) of section 6421(f)(3) is amended to 
     read as follows:
       ``(B) so much of the rate specified in section 
     4081(a)(2)(A) as does not exceed the rate applicable under 
     section 4041(a)(1)(C)(ii).''.
       (D) Subparagraph (B) of section 6427(l)(3) is amended to 
     read as follows:
       ``(B) so much of the rate specified in section 
     4081(a)(2)(A) as does not exceed the rate applicable under 
     section 4041(a)(1)(C)(ii).''.
       (b) Fuel Used on Inland Waterways.--Subparagraph (C) of 
     section 4042(b)(2) is amended to read as follows:
       ``(C) The deficit reduction rate is--
       ``(i) 3.3 cents per gallon after September 30, 2001, and 
     before January 1, 2005,
       ``(ii) 2.3 cents per gallon after December 31, 2004, and 
     before January 1, 2007,
       ``(iii) 1.3 cents per gallon after December 31, 2006, and 
     before January 1, 2009,
       ``(iv) 0.3 cent per gallon after December 31, 2008, and 
     before January 1, 2010, and
       ``(v) 0 after December 31, 2009.''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on October 1, 2001.

     SEC. 3116. REDUCED MOTOR FUEL EXCISE TAX ON CERTAIN MIXTURES 
                   OF DIESEL FUEL.

       (a) In General.--Clause (iii) of section 4081(a)(2)(A) is 
     amended by inserting before the period ``(19.7 cents per 
     gallon in the case of a diesel-water fuel emulsion at least 
     14 percent of which is water)''.
       (b) Refunds for Tax-Paid Purchases.--
       (1) In general.--Section 6427 is amended by redesignating 
     subsections (m) through (p) as subsections (n) through (q), 
     respectively, and by inserting after subsection (l) the 
     following new subsection:
       ``(m) Diesel Fuel Used To Produce Emulsion.--
       ``(1) In general.--Except as provided in subsection (k), if 
     any diesel fuel on which tax was imposed by section 4081 at 
     the regular tax rate is used by any person in producing an 
     emulsion described in section 4081(a)(2)(A) which is sold or 
     used in such person's trade or business, the Secretary shall 
     pay (without interest) to such person an amount equal to the 
     excess of the regular tax rate over the incentive tax rate 
     with respect to such fuel.
       ``(2) Definitions.--For purposes of paragraph (1)--
       ``(A) Regular tax rate.--The term `regular tax rate' means 
     the aggregate rate of tax imposed by section 4081 determined 
     without regard to the parenthetical in section 4081(a)(2)(A).
       ``(B) Incentive tax rate.--The term `incentive tax rate' 
     means the aggregate rate of tax imposed by section 4081 
     determined with regard to the parenthetical in section 
     4081(a)(2)(A).''
       (c) Effective Date.--The amendments made by this section 
     shall take effect on October 1, 2001.

     SEC. 3117. CREDIT FOR INVESTMENT IN QUALIFYING ADVANCED CLEAN 
                   COAL TECHNOLOGY.

       (a) Allowance of Qualifying Advanced Clean Coal Technology 
     Facility Credit.--Section 46 (relating to amount of credit) 
     is amended by striking ``and'' at the end of paragraph (2), 
     by striking the period at the end of paragraph (3) and 
     inserting ``, and'', and by adding at the end the following:
       ``(4) the qualifying advanced clean coal technology 
     facility credit.''.
       (b) Amount of Qualifying Advanced Clean Coal Technology 
     Facility Credit.--Subpart E of part IV of subchapter A of 
     chapter 1 (relating to rules for computing investment credit) 
     is amended by inserting after section 48 the following:

     ``SEC. 48A. QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY 
                   FACILITY CREDIT.

       ``(a) In General.--For purposes of section 46, the 
     qualifying advanced clean coal technology facility credit for 
     any taxable year is an amount equal to 10 percent of the 
     qualified investment in a qualifying advanced clean coal 
     technology facility for such taxable year.
       ``(b) Qualifying Advanced Clean Coal Technology Facility.--
       ``(1) In general.--For purposes of subsection (a), the term 
     `qualifying advanced clean coal technology facility' means a 
     facility of the taxpayer which--
       ``(A)(i)(I) original use of which commences with the 
     taxpayer, or
       ``(II) is a retrofitted or repowered conventional 
     technology facility, the retrofitting or repowering of which 
     is completed by the taxpayer (but only with respect to that 
     portion of the basis which is properly attributable to such 
     retrofitting or repowering), or
       ``(ii) is acquired through purchase (as defined by section 
     179(d)(2)),
       ``(B) is depreciable under section 167,
       ``(C) has a useful life of not less than 4 years,
       ``(D) is located in the United States, and
       ``(E) uses qualifying advanced clean coal technology.
       ``(2) Special rule for sale-leasebacks.--For purposes of 
     subparagraph (A) of paragraph (1), in the case of a facility 
     which--
       ``(A) is originally placed in service by a person, and
       ``(B) is sold and leased back by such person, or is leased 
     to such person, within 3 months after the date such facility 
     was originally placed in service, for a period of not less 
     than 12 years,

     such facility shall be treated as originally placed in 
     service not earlier than the date on which such property is 
     used under the leaseback (or lease) referred to in 
     subparagraph (B). The preceding sentence shall not apply to 
     any property if the lessee and lessor of such property make 
     an election under this sentence. Such an election, once made, 
     may be revoked only with the consent of the Secretary.
       ``(c) Qualifying Advanced Clean Coal Technology.--For 
     purposes of this section--
       ``(1) In general.--The term `qualifying advanced clean coal 
     technology' means, with respect to clean coal technology--
       ``(A) which has--
       ``(i) multiple applications, with a combined capacity of 
     not more than 5,000 megawatts (4,000 megawatts before 2009), 
     of advanced pulverized coal or atmospheric fluidized bed 
     combustion technology--

       ``(I) installed as a new, retrofit, or repowering 
     application,
       ``(II) operated between 2000 and 2012, and
       ``(III) having a design net heat rate of not more than 
     9,500 Btu per kilowatt hour when the design coal has a heat 
     content of more than 9,000 Btu per pound, or a design net 
     heat rate of not more than 9,900 Btu per kilowatt hour when 
     the design coal has a heat content of 9,000 Btu per pound or 
     less,

       ``(ii) multiple applications, with a combined capacity of 
     not more than 1,000 megawatts (500 megawatts before 2009 and 
     750 megawatts before 2013), of pressurized fluidized bed 
     combustion technology--

       ``(I) installed as a new, retrofit, or repowering 
     application,
       ``(II) operated between 2000 and 2016, and
       ``(III) having a design net heat rate of not more than 
     8,400 Btu per kilowatt hour when the design coal has a heat 
     content of more than 9,000 Btu per pound, or a design net 
     heat rate of not more than 9,900 Btu's per kilowatt hour when 
     the design coal has a heat content of 9,000 Btu per pound or 
     less, and

       ``(iii) multiple applications, with a combined capacity of 
     not more than 2,000 megawatts (1,000 megawatts before 2009 
     and 1,500 megawatts before 2013), of integrated gasification 
     combined cycle technology, with or without fuel or chemical 
     co-production--

       ``(I) installed as a new, retrofit, or repowering 
     application,
       ``(II) operated between 2000 and 2016,
       ``(III) having a design net heat rate of not more than 
     8,550 Btu per kilowatt hour when the design coal has a heat 
     content of more than 9,000 Btu per pound, or a design net 
     heat rate of not more than 9,900 Btu per kilowatt hour when 
     the design coal has a heat content of 9,000 Btu per pound or 
     less, and
       ``(IV) having a net thermal efficiency on any fuel or 
     chemical co-production of not less than 39 percent (higher 
     heating value), or

       ``(iv) multiple applications, with a combined capacity of 
     not more than 2,000 megawatts (1,000 megawatts before 2009 
     and 1,500 megawatts before 2013) of technology for the 
     production of electricity--

       ``(I) installed as a new, retrofit, or repowering 
     application,
       ``(II) operated between 2000 and 2016, and
       ``(III) having a carbon emission rate which is not more 
     than 85 percent of conventional technology, and

       ``(B) which reduces the discharge into the atmosphere of 1 
     or more of the following pollutants to not more than--
       ``(i) 5 percent of the potential combustion concentration 
     sulfur dioxide emissions for a coal with a potential 
     combustion concentration sulfur emission of 1.2 lb/million 
     btu of heat input or greater,

[[Page 15510]]

       ``(ii) 15 percent of the potential combustion concentration 
     sulfur dioxide emissions for a coal with a potential 
     combustion concentration sulfur emission of less than 1.2 lb/
     million btu of heat input,
       ``(iii) nitrogen oxide emissions of 0.1 lb per million btu 
     of heat input from other than cyclone-fired boilers,
       ``(iv) 15 percent of the uncontrolled nitrogen oxide 
     emissions from cyclone-fired boilers,
       ``(v) particulate emissions of 0.02 lb per million btu of 
     heat input, and
       ``(vi) the emission levels specified in the new source 
     performance standards of the Clean Air Act (42 U.S.C. 7411) 
     in effect at the time of retrofitting, repowering, or 
     replacement of the qualifying clean coal technology unit for 
     the category of source if such level is lower than the levels 
     specified in clause (i), (ii), (iii), (iv), or (v).
       ``(2) Exceptions.--Such term shall not include any projects 
     receiving or scheduled to receive funding under the Clean 
     Coal Technology Program, or the Power Plant Improvement 
     administered by the Secretary of the Department of Energy.
       ``(d) Clean Coal Technology.--For purposes of this section, 
     the term `clean coal technology' means advanced technology 
     which uses coal to produce 75 percent or more of its thermal 
     output as electricity including advanced pulverized coal or 
     atmospheric fluidized bed combustion, pressurized fluidized 
     bed combustion, integrated gasification combined cycle with 
     or without fuel or chemical co-production, and any other 
     technology for the production of electricity which exceeds 
     the performance of conventional technology.
       ``(e) Conventional Technology.--The term `conventional 
     technology' means--
       ``(1) coal-fired combustion technology with a design net 
     heat rate of not less than 9,500 Btu per kilowatt hour (HHV) 
     and a carbon equivalents emission rate of not more than 0.54 
     pounds of carbon per kilowatt hour when the design coal has a 
     heat content of more than 9,000 Btu per pound,
       ``(2) coal-fired combustion technology with a design net 
     heat rate of not less than 10,500 Btu per kilowatt hour (HHV) 
     and a carbon equivalents emission rate of not more than 0.60 
     pounds of carbon per kilowatt hour when the design coal has a 
     heat content of 9,000 Btu per pound or less, or
       ``(3) natural gas-fired combustion technology with a design 
     net heat rate of not less than 7,500 Btu per kilowatt hour 
     (HHV) and a carbon equivalents emission rate of not more than 
     0.24 pounds of carbon per kilowatt hour.
       ``(f) Design Net Heat Rate.--The design net heat rate shall 
     be based on the design annual heat input to and the design 
     annual net electrical output from the qualifying advanced 
     clean coal technology (determined without regard to such 
     technology's co-generation of steam).
       ``(g) Selection Criteria.--Selection criteria for 
     qualifying advanced clean coal technology facilities--
       ``(1) shall be established by the Secretary of Energy as 
     part of a competitive solicitation,
       ``(2) shall include primary criteria of minimum design net 
     heat rate, maximum design thermal efficiency, environmental 
     performance, and lowest cost to the government, and
       ``(3) shall include supplemental criteria as determined 
     appropriate by the Secretary of Energy.
       ``(h) Qualified Investment.--For purposes of subsection 
     (a), the term `qualified investment' means, with respect to 
     any taxable year, the basis of a qualifying advanced clean 
     coal technology facility placed in service by the taxpayer 
     during such taxable year.
       ``(i) Qualified Progress Expenditures.--
       ``(1) Increase in qualified investment.--In the case of a 
     taxpayer who has made an election under paragraph (5), the 
     amount of the qualified investment of such taxpayer for the 
     taxable year (determined under subsection (c) without regard 
     to this section) shall be increased by an amount equal to the 
     aggregate of each qualified progress expenditure for the 
     taxable year with respect to progress expenditure property.
       ``(2) Progress expenditure property defined.--For purposes 
     of this subsection, the term `progress expenditure property' 
     means any property being constructed by or for the taxpayer 
     and which it is reasonable to believe will qualify as a 
     qualifying advanced clean coal technology facility which is 
     being constructed by or for the taxpayer when it is placed in 
     service.
       ``(3) Qualified progress expenditures defined.--For 
     purposes of this subsection--
       ``(A) Self-constructed property.--In the case of any self-
     constructed property, the term `qualified progress 
     expenditures' means the amount which, for purposes of this 
     subpart, is properly chargeable (during such taxable year) to 
     capital account with respect to such property.
       ``(B) Nonself-constructed property.--In the case of 
     nonself-constructed property, the term `qualified progress 
     expenditures' means the amount paid during the taxable year 
     to another person for the construction of such property.
       ``(4) Other definitions.--For purposes of this subsection--
       ``(A) Self-constructed property.--The term `self-
     constructed property' means property for which it is 
     reasonable to believe that more than half of the construction 
     expenditures will be made directly by the taxpayer.
       ``(B) Nonself-constructed property.--The term `nonself-
     constructed property' means property which is not self-
     constructed property.
       ``(C) Construction, etc.--The term `construction' includes 
     reconstruction and erection, and the term `constructed' 
     includes reconstructed and erected.
       ``(D) Only construction of qualifying advanced clean coal 
     technology facility to be taken into account.--Construction 
     shall be taken into account only if, for purposes of this 
     subpart, expenditures therefor are properly chargeable to 
     capital account with respect to the property.
       ``(5) Election.--An election under this subsection may be 
     made at such time and in such manner as the Secretary may by 
     regulations prescribe. Such an election shall apply to the 
     taxable year for which made and to all subsequent taxable 
     years. Such an election, once made, may not be revoked except 
     with the consent of the Secretary.
       ``(j) Coordination With Other Credits.--This section shall 
     not apply to any property with respect to which the 
     rehabilitation credit under section 47 or the energy credit 
     under section 48 is allowed unless the taxpayer elects to 
     waive the application of such credit to such property.
       ``(k) Termination.--This section shall not apply with 
     respect to any qualified investment made after December 31, 
     2011.
       ``(l) National Limitation.--
       ``(1) In general.--Notwithstanding any other provision of 
     this section, the term `qualifying advanced clean coal 
     technology facility' shall include such a facility only to 
     the extent that such facility is allocated a portion of the 
     national megawatt limitation under this subsection.
       ``(2) National megawatt limitation.--The national megawatt 
     limitation under this subsection is 7,500 megawatts.
       ``(3) Allocation of limitation.--The national megawatt 
     limitation shall be allocated by the Secretary under rules 
     prescribed by the Secretary. Not later than 6 months after 
     the date of enactment of this subsection, the Secretary shall 
     prescribe such regulations as may be necessary or appropriate 
     to carry out the purposes of this section, including 
     regulations--
       ``(A) to limit which facility qualifies as `qualified 
     advanced clean coal technology' in subsection (c) to 
     particular facilities, a portion of particular facilities, or 
     a portion of the production from particular facilities, so 
     that when all such facilities (or portions thereof) are 
     placed in service over the ten year period in section (k), 
     the combination of facilities approved for tax credits (and/
     or portions of facilities approved for tax credits) will not 
     exceed a combined capacity of 7,500 megawatts;
       ``(B) to provide a certification process in consultation 
     with the Secretary of Energy under subsection (g) that will 
     approve and allocate the 7,500 megawatts of available tax 
     credits authority--
       ``(i) to encourage that facilities with the highest thermal 
     efficiencies and environmental performance be placed in 
     service as soon as possible;
       ``(ii) to allocate credits to taxpayers that have a 
     definite and credible plan for placing into commercial 
     operation a qualifying advanced clean coal technology 
     facility, including--

       ``(I) a site,
       ``(II) contractual commitments for procurement and 
     construction,
       ``(III) filings for all necessary preconstruction 
     approvals,
       ``(IV) a demonstrated record of having successfully 
     completed comparable projects on a timely basis, and
       ``(V) such other factors that the Secretary shall determine 
     are appropriate;

       ``(iii) to allocate credits to a portion of a facility (or 
     a portion of the production from a facility) if the Secretary 
     determines that such an allocation should maximize the amount 
     of efficient production encouraged with the available tax 
     credits;
       ``(C) to set progress requirements and conditional 
     approvals so that credits for approved projects that become 
     unlikely to meet the necessary conditions that can be 
     reallocated by the Secretary to other projects;
       ``(D) to reallocate credits that are not allocated to 1 
     technology described in clauses (i) through (iv) of 
     subsection (c)(1)(A) because an insufficient number of 
     qualifying facilities requested credits for one technology, 
     to another technology described in another subparagraph of 
     subsection (c) in order to maximize the amount of energy 
     efficient production encouraged with the available tax 
     credits; and
       ``(E) to provide taxpayers with opportunities to correct 
     administrative errors and omissions with respect to 
     allocations and recordkeeping within a reasonable period 
     after their discovery, taking into account the availability 
     of regulations and other administrative guidance from the 
     Secretary.''.
       (c) Recapture.--Section 50(a) (relating to other special 
     rules) is amended by adding at the end the following:

[[Page 15511]]

       ``(6) Special rules relating to qualifying advanced clean 
     coal technology facility.--For purposes of applying this 
     subsection in the case of any credit allowable by reason of 
     section 48A, the following shall apply:
       ``(A) General rule.--In lieu of the amount of the increase 
     in tax under paragraph (1), the increase in tax shall be an 
     amount equal to the investment tax credit allowed under 
     section 38 for all prior taxable years with respect to a 
     qualifying advanced clean coal technology facility (as 
     defined by section 48A(b)(1)) multiplied by a fraction whose 
     numerator is the number of years remaining to fully 
     depreciate under this title the qualifying advanced clean 
     coal technology facility disposed of, and whose denominator 
     is the total number of years over which such facility would 
     otherwise have been subject to depreciation. For purposes of 
     the preceding sentence, the year of disposition of the 
     qualifying advanced clean coal technology facility property 
     shall be treated as a year of remaining depreciation.
       ``(B) Property ceases to qualify for progress 
     expenditures.--Rules similar to the rules of paragraph (2) 
     shall apply in the case of qualified progress expenditures 
     for a qualifying advanced clean coal technology facility 
     under section 48A, except that the amount of the increase in 
     tax under subparagraph (A) of this paragraph shall be 
     substituted in lieu of the amount described in such paragraph 
     (2).
       ``(C) Application of paragraph.--This paragraph shall be 
     applied separately with respect to the credit allowed under 
     section 38 regarding a qualifying advanced clean coal 
     technology facility.''.
       (d) Transitional Rule.--Section 39(d) (relating to 
     transitional rules) is amended by adding at the end the 
     following:
       ``(14) No carryback of section 48a credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying advanced 
     clean coal technology facility credit determined under 
     section 48A may be carried back to a taxable year ending 
     before January 1, 2002.''.
       (e) Technical Amendments.--
       (1) Section 49(a)(1)(C) is amended by striking ``and'' at 
     the end of clause (ii), by striking the period at the end of 
     clause (iii) and inserting ``, and'', and by adding at the 
     end the following:
       ``(iv) the portion of the basis of any qualifying advanced 
     clean coal technology facility attributable to any qualified 
     investment (as defined by section 48A(c)).''
       (2) Section 50(a)(4) is amended by striking ``and (2)'' and 
     inserting ``, (2), and (6)''.
       (3) Section 50(c) is amended by adding at the end the 
     following new paragraph:
       ``(6) Special rule for qualifying advanced clean coal 
     technology facilities.--Paragraphs (1) and (2) shall not 
     apply to any property with respect to the credit determined 
     under section 48A.''
       (4) The table of sections for subpart E of part IV of 
     subchapter A of chapter 1 is amended by inserting after the 
     item relating to section 48 the following:

``Sec. 48A. Qualifying advanced clean coal technology facility 
              credit.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to periods after December 31, 2001, 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 
     enactment of the Revenue Reconciliation Act of 1990).

     SEC. 3118. CREDIT FOR PRODUCTION FROM QUALIFYING ADVANCED 
                   CLEAN COAL TECHNOLOGY.

       (a) Credit for Production From Qualifying Advanced Clean 
     Coal Technology.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits) is amended 
     by adding after section 45J the following:

     ``SEC. 45K. CREDIT FOR PRODUCTION FROM QUALIFYING ADVANCED 
                   CLEAN COAL TECHNOLOGY.

       ``(a) General Rule.--For purposes of section 38, the 
     qualifying advanced clean coal technology production credit 
     of any taxpayer for any taxable year is equal to--
       ``(1) the applicable amount of advanced clean coal 
     technology production credit, multiplied by
       ``(2) the sum of--
       ``(A) the kilowatt hours of electricity, plus
       ``(B) each 3,413 Btu of fuels or chemicals,
     produced by the taxpayer during such taxable year at a 
     qualifying advanced clean coal technology facility during the 
     10-year period beginning on the date the facility was 
     originally placed in service.
       ``(b) Applicable Amount.--For purposes of this section, the 
     applicable amount of advanced clean coal technology 
     production credit with respect to production from a 
     qualifying advanced clean coal technology facility shall be 
     determined as follows:
       ``(1) Where the design coal has a heat content of more than 
     9,000 Btu per pound:
       ``(A) In the case of a facility originally placed in 
     service before 2009, if--
       

------------------------------------------------------------------------
                                       The applicable amount is:
  ``The facility design net  -------------------------------------------
 heat rate, Btu/kWh (HHV) is   For 1st 5 years of     For 2d 5 years of
          equal to:               such service          such service
------------------------------------------------------------------------
Not more than 8,400.........         $.0060                $.0038
More than 8,400 but not more         $.0025                $.0010
 than 8,550.
More than 8,550 but not more         $.0010                $.0010.
 than 8,750.
------------------------------------------------------------------------

       ``(B) In the case of a facility originally placed in 
     service after 2008 and before 2013, if--
       

------------------------------------------------------------------------
                                       The applicable amount is:
  ``The facility design net  -------------------------------------------
 heat rate, Btu/kWh (HHV) is   For 1st 5 years of     For 2d 5 years of
          equal to:               such service          such service
------------------------------------------------------------------------
Not more than 7,770.........         $.0105                $.0090
More than 7,770 but not more         $.0085                $.0068
 than 8,125.
More than 8,125 but not more         $.0075                $.0055.
 than 8,350.
------------------------------------------------------------------------

       ``(C) In the case of a facility originally placed in 
     service after 2012 and before 2017, if--
       

------------------------------------------------------------------------
                                       The applicable amount is:
  ``The facility design net  -------------------------------------------
 heat rate, Btu/kWh (HHV) is   For 1st 5 years of     For 2d 5 years of
          equal to:               such service          such service
------------------------------------------------------------------------
Not more than 7,380.........         $.0140                 $.01
More than 7,380 but not more         $.0120                $.0090.
 than 7,720.
------------------------------------------------------------------------


[[Page 15512]]

       ``(2) Where the design coal has a heat content of not more 
     than 9,000 Btu per pound:
       ``(A) In the case of a facility originally placed in 
     service before 2009, if--
       

------------------------------------------------------------------------
                                       The applicable amount is:
  ``The facility design net  -------------------------------------------
 heat rate, Btu/kWh (HHV) is   For 1st 5 years of     For 2d 5 years of
          equal to:               such service          such service
------------------------------------------------------------------------
Not more than 8,500.........         $.0060                $.0038
More than 8,500 but not more         $.0025                $.0010
 than 8,650.
More than 8,650 but not more         $.0010                $.0010.
 than 8,750.
------------------------------------------------------------------------

       ``(B) In the case of a facility originally placed in 
     service after 2008 and before 2013, if--
       

------------------------------------------------------------------------
                                       The applicable amount is:
  ``The facility design net  -------------------------------------------
 heat rate, Btu/kWh (HHV) is   For 1st 5 years of     For 2d 5 years of
          equal to:               such service          such service
------------------------------------------------------------------------
Not more than 8,000.........         $.0105                 $.009
More than 8,000 but not more         $.0085                $.0068
 than 8,250.
More than 8,250 but not more         $.0075                $.0055.
 than 8,400.
------------------------------------------------------------------------

       ``(C) In the case of a facility originally placed in 
     service after 2012 and before 2017, if--
       

------------------------------------------------------------------------
                                       The applicable amount is:
  ``The facility design net  -------------------------------------------
 heat rate, Btu/kWh (HHV) is   For 1st 5 years of     For 2d 5 years of
          equal to:               such service          such service
------------------------------------------------------------------------
Not more than 7,800.........         $.0140                $.0115
More than 7,800 but not more         $.0120                $.0090.
 than 7,950.
------------------------------------------------------------------------

       ``(3) Where the clean coal technology facility is producing 
     fuel or chemicals:
       ``(A) In the case of a facility originally placed in 
     service before 2009, if--
       

------------------------------------------------------------------------
                                       The applicable amount is:
  ``The facility design net  -------------------------------------------
 thermal efficiency (HHV) is   For 1st 5 years of     For 2d 5 years of
          equal to:               such service          such service
------------------------------------------------------------------------
Not less than 40.6 percent..         $.0060                $.0038
Less than 40.6 but not less          $.0025                $.0010
 than 40 percent.
Less than 40 but not less            $.0010                $.0010.
 than 39 percent.
------------------------------------------------------------------------

       ``(B) In the case of a facility originally placed in 
     service after 2008 and before 2013, if--
       

------------------------------------------------------------------------
                                       The applicable amount is:
  ``The facility design net  -------------------------------------------
 thermal efficiency (HHV) is   For 1st 5 years of     For 2d 5 years of
          equal to:               such service          such service
------------------------------------------------------------------------
Not less than 43.9 percent..         $.0105                 $.009
Less than 43.9 but not less          $.0085                $.0068
 than 42 percent.
Less than 42 but not less            $.0075                $.0055.
 than 40.9 percent.
------------------------------------------------------------------------

       ``(C) In the case of a facility originally placed in 
     service after 2012 and before 2017, if--
       

[[Page 15513]]



------------------------------------------------------------------------
                                       The applicable amount is:
  ``The facility design net  -------------------------------------------
 thermal efficiency (HHV) is   For 1st 5 years of     For 2d 5 years of
          equal to:               such service          such service
------------------------------------------------------------------------
Not less than 44.2 percent..         $.0140                $.0115
Less than 44.2 but not less          $.0120                $.0090.
 than 43.6 percent.
------------------------------------------------------------------------

       ``(c) Inflation Adjustment Factor.--For calendar years 
     after 2001, each amount in paragraphs (1), (2), and (3) shall 
     be adjusted by multiplying such amount by the inflation 
     adjustment factor for the calendar year in which the amount 
     is applied. If any amount as increased under the preceding 
     sentence is not a multiple of 0.01 cent, such amount shall be 
     rounded to the nearest multiple of 0.01 cent.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) In general.--Any term used in this section which is 
     also used in section 48A shall have the meaning given such 
     term in section 48A.
       ``(2) Applicable rules.--The rules of paragraphs (3), (4), 
     and (5) of section 45 shall apply.
       ``(3) Inflation adjustment factor.--The term `inflation 
     adjustment factor' means, with respect to a calendar year, a 
     fraction the numerator of which is the GDP implicit price 
     deflator for the preceding calendar year and the denominator 
     of which is the GDP implicit price deflator for the calendar 
     year 2001.
       ``(4) GDP implicit price deflator.--The term `GDP implicit 
     price deflator' means the most recent revision of the 
     implicit price deflator for the gross domestic product as 
     computed by the Department of Commerce before March 15 of the 
     calendar year.''.
       (b) Credit Treated as Business Credit.--Section 38(b) is 
     amended by striking ``plus'' at the end of paragraph (18), by 
     striking the period at the end of paragraph (19) and 
     inserting ``, plus'', and by adding at the end the following:
       ``(20) the qualifying advanced clean coal technology 
     production credit determined under section 45K(a).''.
       (c) Transitional Rule.--Section 39(d) (relating to 
     transitional rules) is amended by adding after paragraph (14) 
     the following:
       ``(15) No carryback of section 45k credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying advanced 
     clean coal technology production credit determined under 
     section 45K may be carried back to a taxable year ending 
     before the date of enactment of section 45K.''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 is amended by 
     adding at the end the following:

``Sec. 45K. Credit for production from qualifying advanced clean coal 
              technology.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to production after the date of enactment of this 
     Act.

                         TITLE II--RELIABILITY

     SEC. 3201. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR 
                   PROPERTY.

       (a) In General.--Subparagraph (C) of section 168(e)(3) 
     (relating to classification of certain property) is amended 
     by striking ``and'' at the end of clause (i), by 
     redesignating clause (ii) as clause (iii), and by inserting 
     after clause (i) the following new clause:
       ``(ii) any natural gas gathering line, and''.
       (b) Natural Gas Gathering Line.--Subsection (i) of section 
     168 is amended by adding after paragraph (15) the following 
     new paragraph:
       ``(16) Natural gas gathering line.--The term `natural gas 
     gathering line' means--
       ``(A) the pipe, equipment, and appurtenances determined to 
     be a gathering line by the Federal Energy Regulatory 
     Commission, or
       ``(B) the pipe, equipment, and appurtenances used to 
     deliver natural gas from the wellhead or a commonpoint to the 
     point at which such gas first reaches--
       ``(i) a gas processing plant,
       ``(ii) an interconnection with a transmission pipeline 
     certificated by the Federal Energy Regulatory Commission as 
     an interstate transmission pipeline,
       ``(iii) an interconnection with an intrastate transmission 
     pipeline, or
       ``(iv) a direct interconnection with a local distribution 
     company, a gas storage facility, or an industrial 
     consumer.''.
       (c) Alternative System.--The table contained in section 
     168(g)(3)(B) is amended by inserting after the item relating 
     to subparagraph (C)(i) the following:

``(C)(ii).........................................................10''.
       (d) Alternative Minimum Tax Exception.--Subparagraph (B) of 
     section 56(a)(1) is amended by inserting before the period 
     the following: ``or in clause (ii) of section 168(e)(3)(C)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act.

     SEC. 3202. NATURAL GAS DISTRIBUTION LINES TREATED AS 10-YEAR 
                   PROPERTY.

       (a) In General.--Subparagraph (D) of section 168(e)(3) 
     (relating to classification of certain property) is amended 
     by striking ``and'' at the end of clause (i), by striking the 
     period at the end of clause (ii) and by inserting ``, and'', 
     and by adding at the end the following new clause:
       ``(iii) any natural gas distribution line.''
       (b) Alternative System.--The table contained in section 
     168(g)(3)(B) is amended by inserting after the item relating 
     to subparagraph (D)(ii) the following:

``(D)(iii)........................................................20''.
       (c) Alternative Minimum Tax Exception.--Subparagraph (B) of 
     section 56(a)(1) is amended by inserting before the period 
     the following: ``or in clause (iii) of section 
     168(e)(3)(D)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act.

     SEC. 3203. PETROLEUM REFINING PROPERTY TREATED AS 7-YEAR 
                   PROPERTY.

       (a) In General.--Subparagraph (C) of section 168(e)(3) 
     (relating to classification of certain property), as amended 
     by section 3201, is amended by striking ``and'' at the end of 
     clause (ii), by redesignating clause (iii) as clause (iv), 
     and by inserting after clause (ii) the following new clause:
       ``(iii) any property used for the distillation, 
     fractionation, and catalytic cracking of crude petroleum into 
     gasoline and its other components, and''.
       (b) Alternative System.--The table contained in section 
     168(g)(3)(B), as amended by section 3201, is amended by 
     inserting after the item relating to subparagraph (C)(ii) the 
     following:

``(C)(iii)........................................................10''.
       (c) Alternative Minimum Tax Exception.--Subparagraph (B) of 
     section 56(a)(1), as amended by section 3201, is amended by 
     inserting ``or (iii)'' after ``clause (ii)''.
       (d) Effective Date.--The amendment made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act.

     SEC. 3204. EXPENSING OF CAPITAL COSTS INCURRED IN COMPLYING 
                   WITH ENVIRONMENTAL PROTECTION AGENCY SULFUR 
                   REGULATIONS.

       (a) In General.--Section 179(b) (relating to election to 
     expense certain depreciable business assets) is amended by 
     adding at the end the following new paragraph:
       ``(5) Limitation for small business refiners.--
       ``(A) In general.--In the case of a small business refiner 
     electing to expense qualified costs, in lieu of the dollar 
     limitations in paragraph (1), the limitation on the aggregate 
     costs which may be taken into account under subsection (a) 
     for any taxable year shall not exceed 75 percent of the 
     qualified costs.
       ``(B) Qualified costs.--For purposes of this paragraph, the 
     term `qualified costs' means costs paid or incurred by a 
     small business refiner for the purpose of complying with the 
     Highway Diesel Fuel Sulfur Control Requirements of the 
     Environmental Protection Agency.
       ``(C) Small business refiner.--For purposes of this 
     paragraph, the term `small business refiner' means, with 
     respect to any taxable year, a refiner which, within the 
     refining operations of the business, employs not more than 
     1,500 employees on business days during such taxable year 
     performing services in the refining operations of such 
     businesses and has an average total capacity of 155,000 
     barrels per day or less.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to expenses paid or incurred after the date of 
     the enactment of this Act.

     SEC. 3205. ENVIRONMENTAL TAX CREDIT.

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

     ``SEC. 45I. ENVIRONMENTAL TAX CREDIT.

       ``(a) In General.--For purposes of section 38, the amount 
     of the environmental tax credit determined under this section 
     with respect to any small business refiner for any taxable 
     year is an amount equal to 5 cents for every gallon of 15 
     parts per million or less sulfur diesel produced at a 
     facility by such small business refiner.
       ``(b) Maximum Credit.--For any small business refiner, the 
     aggregate amount allowable as a credit under subsection (a) 
     for any taxable year with respect to any facility

[[Page 15514]]

     shall not exceed 25 percent of the qualified capital costs 
     incurred by such small business refiner with respect to such 
     facility not taken into account in determining the credit 
     under subsection (a) for any preceding taxable year.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Small business refiner.--The term `small business 
     refiner' means, with respect to any taxable year, a refiner 
     which, within the refining operations of the business, 
     employs not more than 1,500 employees on business days during 
     such taxable year performing services in the refining 
     operations of such businesses and has an average total 
     capacity of 155,000 barrels per day or less.
       ``(2) Qualified capital costs.--The term `qualified capital 
     costs' means, with respect to any facility, those costs paid 
     or incurred during the applicable period for compliance with 
     the applicable EPA regulations with respect to such facility, 
     including expenditures for the construction of new process 
     operation units or the dismantling and reconstruction of 
     existing process units to be used in the production of 15 
     parts per million or less sulfur diesel fuel, associated 
     adjacent or offsite equipment (including tankage, catalyst, 
     and power supply), engineering, construction period interest, 
     and sitework.
       ``(3) Applicable epa regulations.--The term `applicable EPA 
     regulations' means the Highway Diesel Fuel Sulfur Control 
     Requirements of the Environmental Protection Agency.
       ``(4) Applicable period.--The term `applicable period' 
     means, with respect to any facility, the period beginning on 
     the day after the date of the enactment of this section and 
     ending with the date which is one year after the date on 
     which the taxpayer must comply with the applicable EPA 
     regulations with respect to such facility.
       ``(d) Reduction in Basis.--For purposes of this subtitle, 
     if a credit is determined under this section with respect to 
     any property by reason of qualified capital costs, the basis 
     of such property shall be reduced by the amount of the credit 
     so determined.
       ``(e) Certification.--
       ``(1) Required.--Not later than the date which is 30 months 
     after the first day of the first taxable year in which the 
     environmental tax credit is allowed with respect to a 
     facility, the small business refiner must obtain 
     certification from the Secretary, in consultation with the 
     Administrator of the Environmental Protection Agency, that 
     the taxpayer's qualified capital costs with respect to such 
     facility will result in compliance with the applicable EPA 
     regulations.
       ``(2) Contents of application.--An application for 
     certification shall include relevant information regarding 
     unit capacities and operating characteristics sufficient for 
     the Secretary, in consultation with the Administrator of the 
     Environmental Protection Agency, to determine that such 
     qualified capital costs are necessary for compliance with the 
     applicable EPA regulations.
       ``(3) Review period.--Any application shall be reviewed and 
     notice of certification, if applicable, shall be made within 
     60 days of receipt of such application.
       ``(4) Recapture.--Notwithstanding subsection (f), failure 
     to obtain certification under paragraph (1) constitutes a 
     recapture event under subsection (f) with an applicable 
     percentage of 100 percent.
       ``(f) Recapture of Environmental Tax Credit.--
       ``(1) In general.--Except as provided in subsection (e), 
     if, as of the close of any taxable year, there is a recapture 
     event with respect to any facility of the small business 
     refiner, then the tax of such refiner under this chapter for 
     such taxable year shall be increased by an amount equal to 
     the product of--
       ``(A) the applicable recapture percentage, and
       ``(B) the aggregate decrease in the credits allowed under 
     section 38 for all prior taxable years which would have 
     resulted if the qualified capital costs of the taxpayer 
     described in subsection (c)(2) with respect to such facility 
     had been zero.
       ``(2) Applicable recapture percentage.--
       ``(A) In general.--For purposes of this subsection, the 
     applicable recapture percentage shall be determined from the 
     following table:

                                                         The applicable
                                                              recapture
                                    ``If the recapture evpercentage is:
    Year 1.......................................................100   
    Year 2........................................................80   
    Year 3........................................................60   
    Year 4........................................................40   
    Year 5........................................................20   
    Years 6 and thereafter.........................................0.  
       ``(B) Years.--For purposes of subparagraph (A), year 1 
     shall begin on the first day of the taxable year in which the 
     qualified capital costs with respect to a facility described 
     in subsection (c)(2) are paid or incurred by the taxpayer.
       ``(3) Recapture event defined.--For purposes of this 
     subsection, the term `recapture event' means--
       ``(A) Failure to comply.--The failure by the small business 
     refiner to meet the applicable EPA regulations within the 
     applicable period with respect to the facility.
       ``(B) Cessation of operation.--The cessation of the 
     operation of the facility as a facility which produces 15 
     parts per million or less sulfur diesel after the applicable 
     period.
       ``(C) Change in ownership.--
       ``(i) In general.--Except as provided in clause (ii), the 
     disposition of a small business refiner's interest in the 
     facility with respect to which the credit described in 
     subsection (a) was allowable.
       ``(ii) Agreement to assume recapture liability.--Clause (i) 
     shall not apply if the person acquiring such interest in the 
     facility agrees in writing to assume the recapture liability 
     of the person disposing of such interest in effect 
     immediately before such disposition. In the event of such an 
     assumption, the person acquiring the interest in the facility 
     shall be treated as the taxpayer for purposes of assessing 
     any recapture liability (computed as if there had been no 
     change in ownership).
       ``(4) Special rules.--
       ``(A) Tax benefit rule.--The tax for the taxable year shall 
     be increased under paragraph (1) only with respect to credits 
     allowed by reason of this section which were used to reduce 
     tax liability. In the case of credits not so used to reduce 
     tax liability, the carryforwards and carrybacks under section 
     39 shall be appropriately adjusted.
       ``(B) No credits against tax.--Any increase in tax under 
     this subsection shall not be treated as a tax imposed by this 
     chapter for purposes of determining the amount of any credit 
     under this chapter or for purposes of section 55.
       ``(C) No recapture by reason of casualty loss.--The 
     increase in tax under this subsection shall not apply to a 
     cessation of operation of the facility by reason of a 
     casualty loss to the extent such loss is restored by 
     reconstruction or replacement within a reasonable period 
     established by the Secretary.
       ``(g) Controlled Groups.--For purposes of this section, all 
     persons treated as a single employer under subsection (b), 
     (c), (m), or (o) of section 414 shall be treated as a single 
     employer.''.
       (b) Credit Made Part of General Business Credit.--
     Subsection (b) of section 38 (relating to general business 
     credit) is amended by striking ``plus'' at the end of 
     paragraph (16), by striking the period at the end of 
     paragraph (17) and inserting ``, plus'', and by adding at the 
     end the following new paragraph:
       ``(18) in the case of a small business refiner, the 
     environmental tax credit determined under section 45I(a).''.
       (c) Denial of Double Benefit.--Section 280C (relating to 
     certain expenses for which credits are allowable) is amended 
     by adding after subsection (d) the following new subsection:
       ``(e) Environmental Tax Credit.--No deduction shall be 
     allowed for that portion of the expenses otherwise allowable 
     as a deduction for the taxable year which is equal to the 
     amount of the credit determined for the taxable year under 
     section 45I(a).''.
       (d) Basis Adjustment.--Section 1016(a) (relating to 
     adjustments to basis) is amended by striking ``and'' at the 
     end of paragraph (33), by striking the period at the end of 
     paragraph (34) and inserting ``, and'', and by adding at the 
     end the following new paragraph:
       ``(35) in the case of a facility with respect to which a 
     credit was allowed under section 45I, to the extent provided 
     in section 45I(d).''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 is amended by 
     adding at the end the following new item:

``Sec. 45I. Environmental tax credit.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to expenses paid or incurred after the date of 
     the enactment of this Act.

     SEC. 3206. DETERMINATION OF SMALL REFINER EXCEPTION TO OIL 
                   DEPLETION DEDUCTION.

       (a) In General.--Paragraph (4) of section 613A(d) (relating 
     to certain refiners excluded) is amended to read as follows:
       ``(4) Certain refiners excluded.--If the taxpayer or a 
     related person engages in the refining of crude oil, 
     subsection (c) shall not apply to the taxpayer for a taxable 
     year if the average daily refinery runs of the taxpayer and 
     the related person for the taxable year exceed 75,000 
     barrels. For purposes of this paragraph, the average daily 
     refinery runs for any taxable year shall be determined by 
     dividing the aggregate refinery runs for the taxable year by 
     the number of days in the taxable year.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 3207. TAX-EXEMPT BOND FINANCING OF CERTAIN ELECTRIC 
                   FACILITIES.

       (a) In General.--Subpart A of part IV of subchapter B of 
     chapter 1 (relating to tax exemption requirements for State 
     and local bonds) is amended by inserting after section 141 
     the following new section:

     ``SEC. 141A. TREATMENT OF GOVERNMENT-OWNED ELECTRIC OUTPUT 
                   FACILITIES.

       ``(a) Exceptions From Private Business Use Limitations 
     Where Open Access Requirements Met.--
       ``(1) General rule.--For purposes of this part, the term 
     `private business use' shall not include--

[[Page 15515]]

       ``(A) any permitted open access activity by a governmental 
     unit with respect to an electric output facility owned by 
     such unit, or
       ``(B) any permitted sale of electricity by a governmental 
     unit which is generated at an existing generation facility 
     owned by such unit.
       ``(2) Permitted open access activity.--For purposes of this 
     section--
       ``(A) In general.--The term `permitted open access 
     activity' means any activity meeting the open access 
     requirements of any of the following clauses with respect to 
     such electric output facility:
       ``(i) Transmission and ancillary facility.--In the case of 
     a transmission facility or a facility providing ancillary 
     services, the provision of transmission service and ancillary 
     services meets the open access requirements of this clause 
     only if such services are provided on a nondiscriminatory 
     open access basis--

       ``(I) pursuant to an open access transmission tariff filed 
     with and approved by FERC, including an acceptable 
     reciprocity tariff, or
       ``(II) under a regional transmission organization agreement 
     approved by FERC.

       ``(ii) Distribution facilities.--In the case of a 
     distribution facility, the delivery of electric energy meets 
     the open access requirements of this clause only if such 
     delivery is made on a nondiscriminatory open access basis.
       ``(iii) Generation facilities.--In the case of a generation 
     facility, the delivery of electric energy generated by such 
     facility meets the open access requirements of this clause 
     only if--

       ``(I) such facility is directly connected to distribution 
     facilities owned by the governmental unit which owns the 
     generation facility, and
       ``(II) such distribution facilities meet the open access 
     requirements of clause (ii).

       ``(B) Special rules.--
       ``(i) Voluntarily filed tariffs.--Subparagraph (A)(i)(I) 
     shall apply in the case of a voluntarily filed tariff only if 
     the governmental unit files a report with FERC within 90 days 
     after the date of the enactment of this section relating to 
     whether or not such governmental unit will join a regional 
     transmission organization.
       ``(ii) Control of transmission facilities by regional 
     transmission organization.--A governmental unit shall be 
     treated as meeting the open access requirements of 
     subparagraph (A)(i) if a regional transmission organization 
     controls the transmission facilities.
       ``(iii) ERCOT utility.--References to FERC in subparagraph 
     (A) shall be treated as references to the Public Utility 
     Commission of Texas with respect to any ERCOT utility (as 
     defined in section 212(k)(2)(B) of the Federal Power Act (16 
     U.S.C. 824k(k)(2)(B))).
       ``(3) Permitted sale.--For purposes of this subsection--
       ``(A) In general.--The term `permitted sale' means--
       ``(i) any sale of electricity to an on-system purchaser if 
     the seller meets the open access requirements of paragraph 
     (2) with respect to all distribution and transmission 
     facilities (if any) owned by such seller, and
       ``(ii) subject to subparagraphs (B) and (C), any sale of 
     electricity to a wholesale native load purchaser, and any 
     load loss sale, if--

       ``(I) the seller meets the open access requirements of 
     paragraph (2) with respect to all transmission facilities (if 
     any) owned by such seller, or
       ``(II) in any case in which the seller does not own any 
     transmission facilities, all persons providing transmission 
     services to the seller's wholesale native load purchasers 
     meet the open access requirements of paragraph (2) with 
     respect to all transmission facilities owned by such persons.

       ``(B) Limitation on sales to wholesale native load 
     purchasers.--A sale to a wholesale native load purchaser 
     shall be treated as a permitted sale only to the extent 
     that--
       ``(i) such purchaser resells the electricity directly at 
     retail to persons within the purchaser's distribution area, 
     or
       ``(ii) such electricity is resold by such purchaser through 
     one or more wholesale purchasers (each of whom as of June 30, 
     2000, was a party to a requirements contract or a firm power 
     contract described in paragraph (5)(B)(ii)) to retail 
     purchasers in the ultimate wholesale purchaser's distribution 
     area.
       ``(C) Load loss sales.--
       ``(i) In general.--The term `load loss sale' means any sale 
     at wholesale to the extent that--

       ``(I) the aggregate sales at wholesale during the recovery 
     period does not exceed the load loss mitigation sales limit 
     for such period, and
       ``(II) the aggregate sales at wholesale during the first 
     calendar year after the recovery period does not exceed the 
     excess carried under clause (iv) to such year.

       ``(ii) Load loss mitigation sales limit.--For purposes of 
     clause (i), the load loss mitigation sales limit for the 
     recovery period is the sum of the annual load losses for each 
     year of such period.
       ``(iii) Annual load loss.--A governmental unit's annual 
     load loss for each year of the recovery period is the amount 
     (if any) by which--

       ``(I) the megawatt hours of electric energy sold during 
     such year to wholesale native load purchasers which do not 
     constitute private business use are less than
       ``(III) the megawatt hours of electric energy sold during 
     the base year to wholesale native load purchasers which do 
     not constitute private business use.

     The annual load loss for any year shall not exceed the 
     portion of the amount determined under the preceding sentence 
     which is attributable to open access requirements.
       ``(iv) Carryovers.--If the limitation under clause (i) for 
     the recovery period exceeds the aggregate sales during such 
     period which are taken into account under clause (i), such 
     excess (but not more than 10 percent of such limitation) may 
     be carried over to the first calendar year following the 
     recovery period.
       ``(v) Recovery period.--The recovery period is the 7-year 
     period beginning with the start-up year.
       ``(vi) Start-up year.--The start-up year is the calendar 
     year which includes the date of the enactment of this section 
     or, if later, at the election of the governmental unit--

       ``(I) the first year that the governmental unit offers 
     nondiscriminatory open transmission access, or
       ``(II) the first year in which at least 10 percent of the 
     governmental unit's wholesale customers' aggregate retail 
     native load is open to retail competition.

       ``(4) On-system purchaser.--For purposes of this section, 
     the term `on-system purchaser' means any person whose 
     electric equipment is directly connected with any 
     transmission or distribution facility owned by the 
     governmental unit owning the existing generation facility 
     if--
       ``(A) such person--
       ``(i) purchases electric energy from such governmental unit 
     at retail, and
       ``(ii)(I) was within such unit's distribution area at the 
     close of the base year or
       ``(II) is a person as to whom the governmental unit has a 
     statutory service obligation, or
       ``(B) is a wholesale native load purchaser from such 
     governmental unit.
       ``(5) Wholesale native load purchaser.--For purposes of 
     this section--
       ``(A) In general.--The term `wholesale native load 
     purchaser' means a wholesale purchaser as to whom the 
     governmental unit had--
       ``(i) a statutory service obligation at wholesale at the 
     close of the base year, or
       ``(ii) an obligation at the close of the base year under a 
     requirements or firm sales contract if, as of June 30, 2000, 
     such contract had been in effect for (or had an initial term 
     of) at least 10 years.
       ``(B) Permitted sales under existing contracts.--A private 
     business use sale during any year to a wholesale native load 
     purchaser (other than a person to whom the governmental unit 
     had a statutory service obligation) under a contract shall be 
     treated as a permitted sale by reason of being a load loss 
     sale only to the extent that the private business use sales 
     under the contract during such year exceed the lesser of--
       ``(i) the private business use sales under the contract 
     during the base year, or
       ``(ii) the maximum private business use sales which would 
     (but for this section) be permitted without causing the bonds 
     to be private activity bonds.

     This subparagraph shall only apply to the extent that the 
     sale is allocable to bonds issued before the date of the 
     enactment of this section (or bonds issued to refund such 
     bonds).
       ``(6) Special rules.--
       ``(A) Time of sale rule.--For purposes of paragraphs 
     (3)(C)(iii) and (5)(B), the determination of whether a sale 
     after the date of the enactment of this section is a private 
     business use shall be made with regard to this section.
       ``(B) Joint action agencies.--To the extent provided in 
     regulations, a joint action agency, or a member of (or a 
     wholesale native load purchaser from) a joint action agency, 
     which is entitled to make a sale described in subparagraph 
     (A) or (B) in a year, may transfer the entitlement to make 
     that sale to the member (or purchaser), or the joint action 
     agency, respectively.
       ``(b) Certain Bonds for Transmission and Distribution 
     Facilities Not Tax Exempt.--
       ``(1) In general.--Section 103 shall not apply to any bond 
     issued on or after the date of the enactment of this section 
     if any portion of the proceeds of the issue of which such 
     bond is a part is used (directly or indirectly) to finance--
       ``(A) any electric transmission facility, or
       ``(B) any start-up electric utility distribution facility.
       ``(2) Exceptions relating to transmission facilities.--
     Paragraph (1)(A) shall not apply to any bond issued to 
     finance--
       ``(A) any repair of a transmission facility in service on 
     the date of the enactment of this section, so long as the 
     repair does not--
       ``(i) increase the voltage level of such facility over its 
     level at the close of the base year, or
       ``(ii) increase the thermal load limit of such facility by 
     more than 3 percent over such limit at the close of the base 
     year,
       ``(B) any qualifying upgrade of an electric transmission 
     facility in service on the date of the enactment of this 
     section, or

[[Page 15516]]

       ``(C) any transmission facility necessary to comply with an 
     obligation under a shared or reciprocal transmission 
     agreement in effect on such date.
       ``(3) Exception for local electric transmission facility.--
     For purposes of this subsection--
       ``(A) In general.--In the case of a governmental unit which 
     owns distribution facilities, paragraph (1)(A) shall not 
     apply to any bond issued to finance an electric transmission 
     facility owned by such governmental unit and located within 
     such governmental unit's distribution area, but only to the 
     extent such facility is, or will be, necessary to supply 
     electricity to serve the retail native load, or wholesale 
     native load, of such governmental unit or of 1 or more other 
     governmental units owning distribution facilities which are 
     directly connected to such electric transmission facility.
       ``(B) Retail load.--The term `retail load' means, with 
     respect to a governmental unit, the electric load of end-
     users in the distribution area of the governmental unit.
       ``(C) Wholesale native load.--The term `wholesale native 
     load' means--
       ``(i) the retail load of such unit's wholesale native load 
     purchasers (or of an ultimate wholesale purchaser described 
     in subsection (a)(3)(B)(ii)), and
       ``(ii) the electric load of purchasers (not described in 
     clause (i)) under wholesale requirements contracts which--

       ``(I) do not constitute private business use (determined 
     without regard to this section), and
       ``(II) were in effect in the base year.

       ``(D) Necessary to serve load.--For purposes of determining 
     whether a transmission facility is, or will be, necessary to 
     supply electricity to retail native load or wholesale native 
     load--
       ``(i) the governmental unit's available transmission rights 
     shall be taken into account,
       ``(ii) electric reliability standards or requirements of 
     national or regional reliability organizations, regional 
     transmission organizations and the Electric Reliability 
     Council of Texas shall be taken into account, and
       ``(iii) transmission, siting and construction decisions of 
     regional transmission organizations and State and Federal 
     regulatory and siting agencies, after a proceeding that 
     provides for public input, shall be presumptive evidence 
     regarding whether transmission facilities are necessary to 
     serve native load.
       ``(E) Qualifying upgrade.--The term `qualifying upgrade' 
     means an improvement or addition to transmission facilities 
     of the governmental unit in service on the date of the 
     enactment of this section which--
       ``(i) is ordered or approved by a regional transmission 
     organization or by a State regulatory or siting agency, after 
     a proceeding that provides for public input, and
       ``(ii) is, or will be, necessary to supply electricity to 
     serve the retail native load, or wholesale native load, of 
     such governmental unit or of one or more governmental units 
     owning distribution facilities which are directly connected 
     to such transmission facility.
       ``(4) Start-up electric utility distribution facility 
     defined.--For purposes of this subsection, the term `start-up 
     electric utility distribution facility' means any 
     distribution facility to provide electric service for sale to 
     the public if such facility is placed in service--
       ``(A) by a governmental unit that did not operate an 
     electric utility on the date of the enactment of this 
     section, and
       ``(B) during the first 10 years after the date such 
     governmental unit begins operating an electric utility.

     A governmental unit is treated as having operated an electric 
     utility on the date of the enactment of this section if it 
     operates electric output facilities which were (on such date) 
     operated by another governmental unit to provide electric 
     service for sale to the public.
       ``(5) Exception for refunding bonds.--
       ``(A) In general.--Paragraph (1) shall not apply to any 
     eligible refunding bond.
       ``(B) Eligible refunding bond.--For purposes of 
     subparagraph (A), the term `eligible refunding bond' means 
     any bond (or series of bonds) issued to refund any bond 
     issued before the date of the enactment of this section if 
     the average maturity date of the issue of which the refunding 
     bond is a part is not later than the average maturity date of 
     the bonds to be refunded by such issue.
       ``(c) Definitions; Special Rules.--For purposes of this 
     section--
       ``(1) Base year.--The term `base year' means--
       ``(A) the calendar year preceding the start-up year, or
       ``(B) at the election of the governmental unit, the second 
     or third calendar years preceding the start-up year.
       ``(2) Distribution area.--The term `distribution area' 
     means the area in which a governmental unit owns distribution 
     facilities.
       ``(3) Electric output facility.--The term `electric output 
     facility' means an output facility that is an electric 
     generation, transmission, or distribution facility.
       ``(4) Distribution facility.--The term `distribution 
     facility' means an electric output facility that is not a 
     generation or transmission facility.
       ``(5) Transmission facility.--The term `transmission 
     facility' means an electric output facility (other than a 
     generation facility) that operates at an electric voltage of 
     69 kV or greater. To the extent provided in regulations, such 
     term includes any output facility that FERC determines is a 
     transmission facility under standards applied by FERC under 
     the Federal Power Act (as in effect on the date of the 
     enactment of this section).
       ``(6) Existing generation facility.--
       ``(A) In general.--The term `existing generation facility' 
     means any electric generation facility if--
       ``(i) such facility is originally placed in service on or 
     before the date of enactment of this Act and is owned by any 
     governmental unit on such date, or
       ``(ii) such facility is originally placed in service after 
     such date if the construction of the facility commenced 
     before June 1, 2000, and such facility is owned by any 
     governmental unit when it is placed in service.
       ``(B) Denial of treatment to expansions.--Such term shall 
     not include any facility to the extent the generating 
     capacity of such facility as of any date is 3 percent above 
     the greater of its nameplate or rated capacity as of the date 
     of the enactment of this section (or, in the case of a 
     facility described in subparagraph (A)(ii), the date that the 
     facility is placed in service).
       ``(7) Regional transmission organization.--The term 
     `regional transmission organization' includes an independent 
     system operator.
       ``(8) FERC.--The term `FERC' means the Federal Energy 
     Regulatory Commission.
       ``(9) Government-owned facility.--An electric transmission 
     facility shall be treated as owned by a governmental unit as 
     of any date to the extent that--
       ``(A) such unit acquired (before the base year) long-term 
     firm transmission capacity (as determined under regulations) 
     of such facility for the purposes of serving customers to 
     which such unit had at the close of the base year--
       ``(i) a statutory service obligation, or
       ``(ii) an obligation under a requirements contract, and
       ``(B) such unit holds such capacity as of such date.
       ``(10) Statutory service obligation.--The term `statutory 
     service obligation' means an obligation under State or 
     Federal law (exclusive of an obligation arising solely under 
     a contract entered into with a person) to provide electric 
     distribution services or electric sales services, as provided 
     in such law.
       ``(11) Contract modifications.--A material modification of 
     a contract shall be treated as a new contract.
       ``(d) Election To Terminate Tax-Exempt Bond Financing for 
     Certain Electric Output Facilities.--
       ``(1) In general.--At the election of a governmental unit, 
     section 103(a) shall not apply to any bond issued by or on 
     behalf of such unit after the date of such election if any 
     portion of the proceeds of the issue of which such bond is a 
     part are used to provide any electric output facilities. Such 
     an election, once made, shall be irrevocable.
       ``(2) Other effects of election.--During the period that 
     the election under paragraph (1) is in effect with respect to 
     a governmental unit, the term `private activity bond' shall 
     not include--
       ``(A) any bond issued by such unit before the date of the 
     enactment of this section to provide an electric output 
     facility if, as of the date of the election, such bond was 
     not a private activity bond, and
       ``(B) any bond to which paragraph (1) does not apply by 
     reason of paragraph (3).
       ``(3) Exceptions for certain property.--
       ``(A) In general.--Paragraph (1) shall not apply to any 
     bond issued to provide property owned by a governmental unit 
     if such property is--
       ``(i) any qualifying transmission facility,
       ``(ii) any qualifying distribution facility,
       ``(iii) any facility necessary to meet Federal or State 
     environmental requirements applicable to an existing 
     generation facility owned by the governmental unit as of the 
     date of the election,
       ``(iv) any property to repair any existing generation 
     facility owned by the governmental unit as of the date of the 
     election,
       ``(v) any qualified facility (as defined in section 
     45(c)(3)) producing electricity from any qualified energy 
     resource (as defined in section 45(c)(1)), and
       ``(vi) any energy property (as defined in section 48(a)(3)) 
     placed in service during a period that the energy percentage 
     under section 48(a) is greater than zero.
       ``(B) Limitation on use by nongovernmental persons.--
     Subparagraph (A) shall not apply to any property constructed, 
     acquired or financed for a principal purpose of providing the 
     facility (or the output thereof) to nongovernmental persons.
       ``(4) Definitions.--For purposes of this subsection--
       ``(A) Qualifying distribution facility.--The term 
     `qualifying distribution facility' means a distribution 
     facility meeting the open access requirements of subsection 
     (a)(2)(A)(ii).
       ``(B) Qualifying transmission facility.--The term 
     `qualifying transmission facility'

[[Page 15517]]

     means a local transmission facility (as defined in subsection 
     (b)(3)) meeting the open access requirements of subsection 
     (a)(2)(A)(i).
       ``(5) Effect of election.--
       ``(A) In general.--An election under paragraph (1) shall be 
     binding on any successor in interest to, or any related party 
     with respect to, the electing governmental unit. For purposes 
     of this paragraph, a governmental unit shall be treated as 
     related to another governmental unit if it is a member of the 
     same controlled group (as determined under regulations).
       ``(B) Treatment of electing governmental unit.--A 
     governmental unit which makes an election under paragraph (1) 
     shall be treated for purposes of section 141 as a person--
       ``(i) which is not a governmental unit, and
       ``(ii) which is engaged in a trade or business,
     with respect to its purchase of electricity generated by an 
     electric output facility placed in service after the date of 
     such election if such purchase is under a contract executed 
     after such date.''
       (b) Waiver of Certain Limitations Not To Apply to 
     Distribution Facilities.--Section 141(d)(5) is amended by 
     inserting ``(except in the case of an electric output 
     facility that is a distribution facility)'' after ``this 
     subsection''.
       (c) Clerical Amendment.--The table of sections for subpart 
     A of part IV of subchapter B of chapter 1 is amended by 
     inserting after the item relating to section 141 the 
     following new item:

``Sec. 141A. Treatment of government-owned electric output 
              facilities.''
       (d) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     take effect on the date of the enactment of this Act, except 
     that a governmental unit may elect to have section 141A(a)(1) 
     of the Internal Revenue Code of 1986, as added by subsection 
     (a), take effect on April 14, 1996.
       (2) Binding contracts.--The amendment made by subsection 
     (b) (relating to waiver of certain limitations not to apply 
     to distribution facilities) shall not apply to facilities 
     acquired pursuant to a contract which was entered into before 
     the date of the enactment of this Act and which was binding 
     on such date and at all times thereafter before such 
     acquisition.
       (3) Comparable treatment to bonds under 1954 code rules.--
     References in the amendments made by this Act to sections of 
     the Internal Revenue Code of 1986 shall be deemed to include 
     references to comparable sections of the Internal Revenue 
     Code of 1954.

     SEC. 3208. SALES OR DISPOSITIONS TO IMPLEMENT FEDERAL ENERGY 
                   REGULATORY COMMISSION OR STATE ELECTRIC 
                   RESTRUCTURING POLICY.

       (a) In General.--Section 1033 (relating to involuntary 
     conversions) is amended by redesignating subsection (k) as 
     subsection (l) and by inserting after subsection (j) the 
     following new subsection:
       ``(k) Sales or Dispositions To Implement Federal Energy 
     Regulatory Commission or State Electric Restructuring 
     Policy.--
       ``(1) In general.--For purposes of this subtitle, if a 
     taxpayer elects the application of this subsection to a 
     qualifying electric transmission transaction--
       ``(A) such transaction shall be treated as an involuntary 
     conversion to which this section applies, and
       ``(B) exempt utility property shall be treated as property 
     which is similar or related in service or use to the property 
     disposed of in such transaction.
       ``(2) Extension of replacement period.--In the case of any 
     involuntary conversion described in paragraph (1), subsection 
     (a)(2)(B) shall be applied by substituting `4 years' for `2 
     years' in clause (i) thereof.
       ``(3) Qualifying electric transmission transaction.--For 
     purposes of this subsection, the term `qualifying electric 
     transmission transaction' means any sale or other disposition 
     before January 1, 2009, of--
       ``(A) property used in the trade or business of providing 
     electric transmission services, or
       ``(B) any stock or partnership interest in a corporation or 
     partnership, as the case may be, whose principal trade or 
     business consists of providing electric transmission 
     services,
     but only if such sale or disposition is to an independent 
     transmission company.
       ``(4) Independent transmission company.--For purposes of 
     this subsection, the term `independent transmission company' 
     means--
       ``(A) a regional transmission organization approved by the 
     Federal Energy Regulatory Commission,
       ``(B) a person--
       ``(i) who the Federal Energy Regulatory Commission 
     determines in its authorization of the transaction under 
     section 203 of the Federal Power Act (16 U.S.C. 823b) is not 
     a market participant within the meaning of such Commission's 
     rules applicable to regional transmission organizations, and
       ``(ii) whose transmission facilities to which the election 
     under this subsection applies are under the operational 
     control of a Federal Energy Regulatory Commission-approved 
     regional transmission organization before the close of the 
     period specified in such authorization, but not later than 
     the close of the period applicable under subsection (a)(2)(B) 
     as extended under paragraph (2), or
       ``(C) in the case of facilities subject to the exclusive 
     jurisdiction of the Public Utility Commission of Texas, a 
     person which is approved by that Commission as consistent 
     with Texas State law regarding an independent transmission 
     organization.
       ``(5) Exempt utility property.--For purposes of this 
     subsection--
       ``(A) In general.--The term `exempt utility property' means 
     property used in the trade or business of--
       ``(i) generating, transmitting, distributing, or selling 
     electricity, or
       ``(ii) producing, transmitting, distributing, or selling 
     natural gas.
       ``(B) Nonrecognition of gain by reason of acquisition of 
     stock.--Acquisition of control of a corporation shall be 
     taken into account under this section with respect to a 
     qualifying electric transmission transaction only if the 
     principal trade or business of such corporation is a trade or 
     business referred to in subparagraph (A).
       ``(6) Special rule for consolidated groups.--In the case of 
     a corporation which is a member of an affiliated group filing 
     a consolidated return, such corporation shall be treated as 
     satisfying the purchase requirement of subsection (a)(2) with 
     respect to any qualifying electric transmission transaction 
     engaged in by such corporation to the extent such requirement 
     is satisfied by another member of such group.
       ``(7) Election.--An election under paragraph (1), once 
     made, shall be irrevocable.''
       (b) Exception From Gain Recognition under Section 1245.--
     Subsection (b) of section 1245 is amended by adding at the 
     end the following new paragraph:
       ``(9) Dispositions to implement federal energy regulatory 
     commission or state electric restructuring policy.--At the 
     election of the taxpayer, the amount of gain which would (but 
     for this paragraph) be recognized under this section on any 
     qualified electric transmission transaction (as defined in 
     section 1033(k)) for which an election under section 1033 is 
     made shall be reduced by the aggregate reduction in the basis 
     of section 1245 property held by the taxpayer or, if 
     insufficient, by a member of an affiliated group which 
     includes the taxpayer at any time during the taxable year in 
     which such transaction occurred. The manner and amount of 
     such reduction shall be determined under regulations 
     prescribed by the Secretary.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions occurring after the date of the 
     enactment of this Act.

     SEC. 3209. DISTRIBUTIONS OF STOCK TO IMPLEMENT FEDERAL ENERGY 
                   REGULATORY COMMISSION OR STATE ELECTRIC 
                   RESTRUCTURING POLICY.

       (a) In General.--Subparagraph (A) of section 355(e)(3) 
     (relating to special rules relating to acquisitions) is 
     amended by inserting after clause (iv) the following new 
     clause:
       ``(v) The acquisition of stock in any controlled 
     corporation in a qualifying electric transmission transaction 
     (as defined in section 1033(k)).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to distributions after the date of the enactment 
     of this Act.

     SEC. 3210. MODIFICATIONS TO SPECIAL RULES FOR NUCLEAR 
                   DECOMMISSIONING COSTS.

       (a) Repeal of Limitation on Deposits Into Fund Based on 
     Cost of Service; Contributions After Funding Period.--
     Subsection (b) of section 468A is amended to read as follows:
       ``(b) Limitation on Amounts Paid Into Fund.--
       ``(1) In general.--The amount which a taxpayer may pay into 
     the Fund for any taxable year shall not exceed the ruling 
     amount applicable to such taxable year.
       ``(2) Contributions after funding period.--Notwithstanding 
     any other provision of this section, a taxpayer may pay into 
     the Fund in any taxable year after the last taxable year to 
     which the ruling amount applies. Payments may not be made 
     under the preceding sentence to the extent such payments 
     would cause the assets of the Fund to exceed the nuclear 
     decommissioning costs allocable to the taxpayer's current or 
     former interest in the nuclear powerplant to which the Fund 
     relates. The limitation under the preceding sentence shall be 
     determined by taking into account a reasonable rate of 
     inflation for the nuclear decommissioning costs and a 
     reasonable after-tax rate of return on the assets of the Fund 
     until such assets are anticipated to be expended.''.
       (b) Clarification of Treatment of Fund Transfers.--
     Subsection (e) of section 468A is amended by adding at the 
     end the following new paragraph:
       ``(8) Treatment of fund transfers.--If, in connection with 
     the transfer of the taxpayer's interest in a nuclear 
     powerplant, the taxpayer transfers the Fund with respect to 
     such powerplant to the transferee of such interest and the 
     transferee elects to continue the application of this section 
     to such Fund--
       ``(A) the transfer of such Fund shall not cause such Fund 
     to be disqualified from the application of this section, and

[[Page 15518]]

       ``(B) no amount shall be treated as distributed from such 
     Fund, or be includible in gross income, by reason of such 
     transfer.''.
       (c) Treatment of Certain Decommissioning Costs.--
       (1) In general.--Section 468A is amended by redesignating 
     subsections (f) and (g) as subsections (g) and (h), 
     respectively, and by inserting after subsection (e) the 
     following new subsection:
       ``(f) Transfers Into Qualified Funds.--
       ``(1) In general.--Notwithstanding subsection (b), any 
     taxpayer maintaining a Fund to which this section applies 
     with respect to a nuclear powerplant may transfer into such 
     Fund up to an amount equal to the excess of the total nuclear 
     decommissioning costs with respect to such nuclear powerplant 
     over the portion of such costs taken into account in 
     determining the ruling amount in effect immediately before 
     the transfer.
       ``(2) Deduction for amounts transferred.--
       ``(A) In general.--The deduction allowed by subsection (a) 
     for any transfer permitted by this subsection shall be 
     allowed ratably over the remaining estimated useful life 
     (within the meaning of subsection (d)(2)(A)) of the nuclear 
     powerplant beginning with the taxable year during which the 
     transfer is made.
       ``(B) Denial of deduction for previously deducted 
     amounts.--No deduction shall be allowed for any transfer 
     under this subsection of an amount for which a deduction was 
     previously allowed or a corresponding amount was not included 
     in gross income. For purposes of the preceding sentence, a 
     ratable portion of each transfer shall be treated as being 
     from previously deducted or excluded amounts to the extent 
     thereof.
       ``(C) Transfers of qualified funds.--If--
       ``(i) any transfer permitted by this subsection is made to 
     any Fund to which this section applies, and
       ``(ii) such Fund is transferred thereafter,
     any deduction under this subsection for taxable years ending 
     after the date that such Fund is transferred shall be allowed 
     to the transferee and not to the transferor. The preceding 
     sentence shall not apply if the transferor is an organization 
     exempt from tax imposed by this chapter.
       ``(D) Special rules.--
       ``(i) Gain or loss not recognized.--No gain or loss shall 
     be recognized on any transfer permitted by this subsection.
       ``(ii) Transfers of appreciated property.--If appreciated 
     property is transferred in a transfer permitted by this 
     subsection, the amount of the deduction shall be the adjusted 
     basis of such property.
       ``(3) New ruling amount required.--Paragraph (1) shall not 
     apply to any transfer unless the taxpayer requests from the 
     Secretary a new schedule of ruling amounts in connection with 
     such transfer.
       ``(4) No basis in qualified funds.--Notwithstanding any 
     other provision of law, the taxpayer's basis in any Fund to 
     which this section applies shall not be increased by reason 
     of any transfer permitted by this subsection.''.
       (2) New ruling amount to take into account total costs.--
     Subparagraph (A) of section 468A(d)(2) is amended to read as 
     follows:
       ``(A) fund the total nuclear decommissioning costs with 
     respect to such powerplant over the estimated useful life of 
     such powerplant, and''.
       (d) Deduction for Nuclear Decommissioning Costs When 
     Paid.--Paragraph (2) of section 468A(c) is amended to read as 
     follows:
       ``(2) Deduction of nuclear decommissioning costs.--In 
     addition to any deduction under subsection (a), nuclear 
     decommissioning costs paid or incurred by the taxpayer during 
     any taxable year shall constitute ordinary and necessary 
     expenses in carrying on a trade or business under section 
     162.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 3211. TREATMENT OF CERTAIN INCOME OF COOPERATIVES.

       (a) Income From Open Access and Nuclear Decommissioning 
     Transactions.--
       (1) In general.--Subparagraph (C) of section 501(c)(12) is 
     amended by striking ``or'' at the end of clause (i), by 
     striking the period at the end of clause (ii) and inserting a 
     comma, and by adding at the end the following new clauses:
       ``(iii) from any open access transaction (other than income 
     received or accrued directly or indirectly from a member), or
       ``(iv) from any nuclear decommissioning transaction.''
       (2) Definitions.--Paragraph (12) of section 501(c) is 
     amended by adding at the end the following new subparagraph:
       ``(E) For purposes of subparagraph (C)--
       ``(i) The term `open access transaction' means any activity 
     which would be a permitted open access activity (as defined 
     in section 141A(a)(2)) if the cooperative were a governmental 
     unit.
       ``(ii) The term `nuclear decommissioning transaction' 
     means--

       ``(I) any transfer into a trust, fund, or instrument 
     established to pay any nuclear decommissioning costs if the 
     transfer is in connection with the transfer of the 
     cooperative's interest in a nuclear powerplant or nuclear 
     powerplant unit,
       ``(II) any distribution from such a trust, fund, or 
     instrument, or
       ``(III) any earnings from such a trust, fund, or 
     instrument.''

       (b) Income From Load Loss Transactions Treated as Member 
     Income.--Paragraph (12) of section 501(c) is amended by 
     adding after subparagraph (E) the following new subparagraph:
       ``(F)(i) In the case of a mutual or cooperative electric 
     company, income received or accrued from a load loss 
     transaction shall be treated as an amount collected from 
     members for the sole purpose of meeting losses and expenses.
       ``(ii) For purposes of clause (i), the term `load loss 
     transaction' means any sale (whether at wholesale or at 
     retail) which would be a load loss sale under rules similar 
     to the rules of section 141A(a)(3)(C).
       ``(iii) A company shall not fail to be treated as a mutual 
     cooperative company for purposes of this paragraph by reason 
     of the treatment under clause (i).
       ``(iv) A rule similar to the rule of this subparagraph 
     shall apply to an organization to which section 1381 does not 
     apply by reason of section 1381(a)(2)(C).''
       (c) Exception From Unrelated Business Taxable Income.--
     Subsection (b) of section 512 (relating to modifications) is 
     amended by adding at the end the following new paragraph:
       ``(18) Treatment of load loss sales of mutual or 
     cooperative electric companies.--In the case of a mutual or 
     cooperative electric company described in section 501(c)(12), 
     there shall be excluded income which is treated as member 
     income under subparagraph (F) thereof.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 3212. REPEAL OF REQUIREMENT OF CERTAIN APPROVED 
                   TERMINALS TO OFFER DYED DIESEL FUEL AND 
                   KEROSENE FOR NONTAXABLE PURPOSES.

       Section 4101 (relating to certain approved terminals of 
     registered persons required to offer dyed diesel fuel and 
     kerosene for nontaxable purposes) is amended by striking 
     subsection (e).

     SEC. 3213. ARBITRAGE RULES NOT TO APPLY TO PREPAYMENTS FOR 
                   NATURAL GAS.

       (a) In General.--Subsection (b) of section 148 (defining 
     higher yielding investments) is amended by adding at the end 
     the following new paragraph:
       ``(4) Exception for certain prepayments to ensure natural 
     gas supply.--The term `investment property' shall not include 
     any prepayment for the purpose of obtaining a supply of a 
     natural gas--
       ``(A) at least 85 percent of which is to be used in the 
     State in which the issuer is located, and
       ``(B) which is to be used in a business of one or more 
     utilities each of which is owned and operated by a State or 
     local government, any political subdivision or 
     instrumentality thereof, or any governmental unit acting for 
     or on behalf of such a utility.''.
       (b) Private Loan Financing Test Not To Apply to Prepayments 
     for Natural Gas.--Paragraph (2) of section 141(c) (providing 
     exceptions to the private loan financing test) is amended by 
     striking ``or'' at the end of subparagraph (A), by striking 
     the period at the end of subparagraph (B) and inserting ``, 
     or'', and by adding at the end the following new 
     subparagraph:
       ``(C) arises from a transaction described in section 
     148(b)(4).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to obligations issued after October 22, 1986; 
     except that section 148(b)(4)(A) of the Internal Revenue Code 
     of 1986, as added by this section, shall apply only to 
     obligations issued after the date of the enactment of this 
     Act.

                         TITLE III--PRODUCTION

     SEC. 3301. OIL AND GAS FROM MARGINAL WELLS.

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

     ``SEC. 45J. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL 
                   WELLS.

       ``(a) General Rule.--For purposes of section 38, the 
     marginal well production credit for any taxable year is an 
     amount equal to the product of--
       ``(1) the credit amount, and
       ``(2) the qualified credit oil production and the qualified 
     natural gas production which is attributable to the taxpayer.
       ``(b) Credit Amount.--For purposes of this section--
       ``(1) In general.--The credit amount is--
       ``(A) $3 per barrel of qualified crude oil production, and
       ``(B) 50 cents per 1,000 cubic feet of qualified natural 
     gas production.
       ``(2) Reduction as oil and gas prices increase.--
       ``(A) In general.--The $3 and 50 cents amounts under 
     paragraph (1) shall each be reduced (but not below zero) by 
     an amount which bears the same ratio to such amount 
     (determined without regard to this paragraph) as--
       ``(i) the excess (if any) of the applicable reference price 
     over $15 ($1.67 for qualified natural gas production), bears 
     to

[[Page 15519]]

       ``(ii) $3 ($0.33 for qualified natural gas production).
     The applicable reference price for a taxable year is the 
     reference price of the calendar year preceding the calendar 
     year in which the taxable year begins.
       ``(B) Inflation adjustment.--In the case of any taxable 
     year beginning in a calendar year after 2001, each of the 
     dollar amounts contained in subparagraph (A) shall be 
     increased to an amount equal to such dollar amount multiplied 
     by the inflation adjustment factor for such calendar year 
     (determined under section 43(b)(3)(B) by substituting `2000' 
     for `1990').
       ``(C) Reference price.--For purposes of this paragraph, the 
     term `reference price' means, with respect to any calendar 
     year--
       ``(i) in the case of qualified crude oil production, the 
     reference price determined under section 29(d)(2)(C), and
       ``(ii) in the case of qualified natural gas production, the 
     Secretary's estimate of the annual average wellhead price per 
     1,000 cubic feet for all domestic natural gas.
       ``(c) Qualified Crude Oil and Natural Gas Production.--For 
     purposes of this section--
       ``(1) In general.--The terms `qualified crude oil 
     production' and `qualified natural gas production' mean 
     domestic crude oil or natural gas which is produced from a 
     qualified marginal well.
       ``(2) Limitation on amount of production which may 
     qualify.--
       ``(A) In general.--Crude oil or natural gas produced during 
     any taxable year from any well shall not be treated or 
     qualified crude oil production or qualified natural gas 
     production to the extent production from the well during the 
     taxable year exceeds 1,095 barrels or barrel equivalents.
       ``(B) Proportionate reductions.--
       ``(i) Short taxable years.--In the case of a short taxable 
     year, the limitations under this paragraph shall be 
     proportionately reduced to reflect the ratio which the number 
     of days in such taxable year bears to 365.
       ``(ii) Wells not in production entire year.--In the case of 
     a well which is not capable of production during each day of 
     a taxable year, the limitations under this paragraph 
     applicable to the well shall be proportionately reduced to 
     reflect the ratio which the number of days of production 
     bears to the total number of days in the taxable year.
       ``(3) Definitions.--
       ``(A) Qualified marginal well.--The term `qualified 
     marginal well' means a domestic well--
       ``(i) the production from which during the taxable year is 
     treated as marginal production under section 613A(c)(6), or
       ``(ii) which, during the taxable year--

       ``(I) has average daily production of not more than 25 
     barrel equivalents, and
       ``(II) produces water at a rate not less than 95 percent of 
     total well effluent.

       ``(B) Crude oil, etc.--The terms `crude oil', `natural 
     gas', `domestic', and `barrel' have the meanings given such 
     terms by section 613A(e).
       ``(C) Barrel equivalent.--The term `barrel equivalent' 
     means, with respect to natural gas, a conversation ratio of 
     6,000 cubic feet of natural gas to 1 barrel of crude oil.
       ``(d) Other Rules.--
       ``(1) Production attributable to the taxpayer.--In the case 
     of a qualified marginal well in which there is more than one 
     owner of operating interests in the well and the crude oil or 
     natural gas production exceeds the limitation under 
     subsection (c)(2), qualifying crude oil production or 
     qualifying natural gas production attributable to the 
     taxpayer shall be determined on the basis of the ratio which 
     taxpayer's revenue interest in the production bears to the 
     aggregate of the revenue interests of all operating interest 
     owners in the production.
       ``(2) Operating interest required.--Any credit under this 
     section may be claimed only on production which is 
     attributable to the holder of an operating interest.
       ``(3) Production from nonconventional sources excluded.--In 
     the case of production from a qualified marginal well which 
     is eligible for the credit allowed under section 29 for the 
     taxable year, no credit shall be allowable under this section 
     unless the taxpayer elects not to claim the credit under 
     section 29 with respect to the well.
       ``(4) Noncompliance with pollution laws.--For purposes of 
     subsection (c)(3)(A), a marginal well which is not in 
     compliance with the applicable State and Federal pollution 
     prevention, control, and permit requirements for any period 
     of time shall not be considered to be a qualified marginal 
     well during such period.''.
       (b) Credit Treated as Business Credit.--Section 38(b) is 
     amended by striking ``plus'' at the end of paragraph (17), by 
     striking the period at the end of paragraph (18) and 
     inserting ``, plus'', and by adding at the end the following:
       ``(19) the marginal oil and gas well production credit 
     determined under section 45J(a).''.
       (c) Carryback.--Subsection (a) of section 39 (relating to 
     carryback and carryforward of unused credits generally) is 
     amended by adding at the end the following:
       ``(3) 10-year carryback for marginal oil and gas well 
     production credit.--In the case of the marginal oil and gas 
     well production credit--
       ``(A) this section shall be applied separately from the 
     business credit (other than the marginal oil and gas well 
     production credit),
       ``(B) paragraph (1) shall be applied by substituting `10 
     taxable years' for `1 taxable years' in subparagraph (A) 
     thereof, and
       ``(C) paragraph (2) shall be applied--
       ``(i) by substituting `31 taxable years' for `21 taxable 
     years' in subparagraph (A) thereof, and
       ``(ii) by substituting `30 taxable years' for `20 taxable 
     years' in subparagraph (A) thereof.''.
       (d) Coordination With Section 29.--Section 29(a) is amended 
     by striking ``There'' and inserting ``At the election of the 
     taxpayer, there''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter I is amended by 
     adding at the end the following:

``Sec. 45J. Credit for producing oil and gas from marginal wells.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to production in taxable years beginning after 
     December 31, 2001.

     SEC. 3302. TEMPORARY SUSPENSION OF LIMITATION BASED ON 65 
                   PERCENT OF TAXABLE INCOME AND EXTENSION OF 
                   SUSPENSION OF TAXABLE INCOME LIMIT WITH RESPECT 
                   TO MARGINAL PRODUCTION.

       (a) Limitation Based on 65 Percent of Taxable Income.--
     Subsection (d) of section 613A (relating to limitation on 
     percentage depletion in case of oil and gas wells) is amended 
     by adding at the end the following new paragraph:
       ``(6) Temporary suspension of taxable income limit.--
     Paragraph (1) shall not apply to taxable years beginning 
     after December 31, 2001, and before January 1, 2007, 
     including with respect to amounts carried under the second 
     sentence of paragraph (1) to such taxable years.''.
       (b) Extension of Suspension of Taxable Income Limit With 
     Respect to Marginal Production.--Subparagraph (H) of section 
     613A(c)(6) (relating to temporary suspension of taxable 
     income limit with respect to marginal production) is amended 
     by striking ``2002'' and inserting ``2007''.
       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 3303. DEDUCTION FOR DELAY RENTAL PAYMENTS.

       (a) In General.--Section 263 (relating to capital 
     expenditures) is amended by adding after subsection (i) the 
     following:
       ``(j) Delay Rental Payments for Domestic Oil and Gas 
     Wells.--
       ``(1) In general.--Notwithstanding subsection (a), a 
     taxpayer may elect to treat delay rental payments incurred in 
     connection with the development of oil or gas within the 
     United States (as defined in section 638) as payments which 
     are not chargeable to capital account. Any payments so 
     treated shall be allowed as a deduction in the taxable year 
     in which paid or incurred.
       ``(2) Delay rental payments.--For purposes of paragraph 
     (1), the term `delay rental payment' means an amount paid for 
     the privilege of deferring development of an oil or gas well 
     under an oil or gas lease.''.
       (b) Conforming Amendment.--Section 263A(c)(3) is amended by 
     inserting ``263(j),'' after `263(i),'.
       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred in taxable years 
     beginning after December 31, 2001.

     SEC. 3304. ELECTION TO EXPENSE GEOLOGICAL AND GEOPHYSICAL 
                   EXPENDITURES.

       (a) In General.--Section 263 (relating to capital 
     expenditures) is amended by adding after subsection (j) the 
     following:
       ``(k) Geological and Geophysical Expenditures for Domestic 
     Oil and Gas Wells.--Notwithstanding subsection (a), a 
     taxpayer may elect to treat geological and geophysical 
     expenses incurred in connection with the exploration for, or 
     development of, oil or gas within the United States (as 
     defined in section 638) as expenses which are not chargeable 
     to capital account. Any expenses so treated shall be allowed 
     as a deduction in the taxable year in which paid or 
     incurred.''.
       (b) Conforming Amendment.--Section 263A(c)(3), as amended 
     by section 3303(b), is amended by inserting ``263(k),'' after 
     ``263(j),''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to costs paid or incurred in taxable years 
     beginning after December 31, 2001.

     SEC. 3305. 5-YEAR NET OPERATING LOSS CARRYBACK FOR LOSSES 
                   ATTRIBUTABLE TO OPERATING MINERAL INTERESTS OF 
                   OIL AND GAS PRODUCERS.

       (a) In General.--Paragraph (1) of section 172(b) (relating 
     to years to which loss may be carried) is amended by adding 
     at the end the following new subparagraph:
       ``(H) Losses on operating mineral interests of oil and gas 
     producers.--In the case of a taxpayer which has an eligible 
     oil and gas loss (as defined in subsection (j)) for a taxable 
     year, such eligible oil and gas loss shall be a net operating 
     loss carryback to each of the 5 taxable years preceding the 
     taxable year of such loss.''.

[[Page 15520]]

       (b) Eligible Oil and Gas Loss.--Section 172 is amended by 
     redesignating subsection (j) as subsection (k) and by 
     inserting after subsection (i) the following new subsection:
       ``(j) Eligible Oil and Gas Loss.--For purposes of this 
     section--
       ``(1) In general.--The term `eligible oil and gas loss' 
     means the lesser of--
       ``(A) the amount which would be the net operating loss for 
     the taxable year if only income and deductions attributable 
     to operating mineral interests (as defined in section 614(d)) 
     in oil and gas wells are taken into account, or
       ``(B) the amount of the net operating loss for such taxable 
     year.
       ``(2) Coordination with subsection (b)(2).--For purposes of 
     applying subsection (b)(2), an eligible oil and gas loss for 
     any taxable year shall be treated in a manner similar to the 
     manner in which a specified liability loss is treated.
       ``(3) Election.--Any taxpayer entitled to a 5-year 
     carryback under subsection (b)(1)(H) from any loss year may 
     elect to have the carryback period with respect to such loss 
     year determined without regard to subsection (b)(1)(H).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to net operating losses for taxable years 
     beginning after December 31, 2001.

     SEC. 3306. EXTENSION AND MODIFICATION OF CREDIT FOR PRODUCING 
                   FUEL FROM A NONCONVENTIONAL SOURCE.

       (a) In General.--Section 29 is amended by adding at the end 
     the following new subsection:
       ``(h) Extension for Other Facilities.--
       ``(1) Extension for oil and certain gas.--In the case of a 
     well for producing qualified fuels described in subparagraph 
     (A) or (B)(i) of subsection (c)(1)--
       ``(A) Application of credit for new wells.--Notwithstanding 
     subsection (f), this section shall apply with respect to such 
     fuels--
       ``(i) which are produced from a well drilled after the date 
     of the enactment of this subsection and before January 1, 
     2007, and
       ``(ii) which are sold not later than the close of the 4-
     year period beginning on the date that such well is drilled, 
     or, if earlier, January 1, 2010.
       ``(B) Extension of credit for old wells.--Subsection (f)(2) 
     shall be applied by substituting `2007' for `2003' with 
     respect to wells described in subsection (f)(1)(A) with 
     respect to such fuels.
       ``(2) Extension for facilities producing qualified fuel 
     from landfill gas.--
       ``(A) In general.--In the case of a facility for producing 
     qualified fuel from landfill gas which was placed in service 
     after June 30, 1998, and before January 1, 2007, this section 
     shall apply to fuel produced at such facility during the 5-
     year period beginning on the later of--
       ``(i) the date such facility was placed in service, or
       ``(ii) the date of the enactment of this subsection.
       ``(B) Reduction of credit for certain landfill 
     facilities.--In the case of a facility to which paragraph (1) 
     applies and which is subject to the 1996 New Source 
     Performance Standards/Emmissions Guidelines of the 
     Environmental Protection Agency, subsection (a)(1) shall be 
     applied by substituting `$2' for `$3'.
       ``(3) Special rules.--In determining the amount of credit 
     allowable under this section solely by reason of this 
     subsection--
       ``(A) Daily limit.--The amount of qualified fuels sold 
     during any taxable year which may be taken into account by 
     reason of this subsection with respect to any project shall 
     not exceed an average barrel-of-oil equivalent of 200,000 
     cubic feet of natural gas per day. Days before the date the 
     project is placed in service shall not be taken into account 
     in determining such average.
       ``(B) Extension period to commence with unadjusted credit 
     amount.--In the case of fuels sold during 2001 and 2002, the 
     dollar amount applicable under subsection (a)(1) shall be $3 
     (without regard to subsection (b)(2)). In the case of fuels 
     sold after 2002, subparagraph (B) of subsection (d)(2) shall 
     be applied by substituting `2002' for `1979'.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to fuel sold after the date of the enactment of 
     this Act.

     SEC. 3307. BUSINESS RELATED ENERGY CREDITS ALLOWED AGAINST 
                   REGULAR AND MINIMUM TAX.

       (a) In General.--Subsection (c) of section 38 (relating to 
     limitation based on amount of tax) is amended by 
     redesignating paragraph (3) as paragraph (4) and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) Special rules for specified energy credits.--
       ``(A) In general.--In the case of specified energy 
     credits--
       ``(i) this section and section 39 shall be applied 
     separately with respect to such credits, and
       ``(ii) in applying paragraph (1) to such credits--

       ``(I) the tentative minimum tax shall be treated as being 
     zero, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the specified 
     energy credits).

       ``(B) Specified energy credits.--For purposes of this 
     subsection, the term `specified energy credits' means the 
     credits determined under sections 45G, 45H, 45I, 45J, and 
     45K.''.
       (b) Conforming Amendment.--Subclause (II) of section 
     38(c)(2)(A)(ii) is amended by inserting ``or the specified 
     energy credits'' after ``employment credit''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of 
     enactment of this Act.

     SEC. 3308. TEMPORARY REPEAL OF ALTERNATIVE MINIMUM TAX 
                   PREFERENCE FOR INTANGIBLE DRILLING COSTS.

       (a) In General.--Clause (ii) of section 57(a)(2)(E) is 
     amended by adding at the end the following new sentence: 
     ``The preceding sentence shall not apply to taxable years 
     beginning after December 31, 2001, and before January 1, 
     2005.''.
       (b) Effective Dates.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 3309. ALLOWANCE OF ENHANCED RECOVERY CREDIT AGAINST THE 
                   ALTERNATIVE MINIMUM TAX.

       (a) In General.--Subparagraph (B) of section 38(c)(3), as 
     amended by section 3307, is amended by adding at the end the 
     following new sentence: ``For taxable years beginning before 
     January 1, 2005, such term includes the credit determined 
     under section 43.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 3310. EXTENSION OF CERTAIN BENEFITS FOR ENERGY-RELATED 
                   BUSINESSES ON INDIAN RESERVATIONS.

       (a) Depreciation for Property on Indian Reservations.--
     Paragraph (8) of section 168(j) (relating to termination) is 
     amended by adding at the end the following new sentence: 
     ``The preceding sentence shall be applied by substituting 
     `December 31, 2006' for `December 31, 2003' in the case of 
     property placed in service as part of a facility for--
       ``(A) the generation or transmission of electricity 
     (including from any qualified energy resource, as defined in 
     section 45(c)),
       ``(B) an oil or gas well,
       ``(C) the transmission or refining of oil or gas, or
       ``(D) the production of any qualified fuel (as defined in 
     section 29(c)).''
       (b) Employment of Indians.--Subsection (f) of section 45A 
     (relating to termination) is amended by adding at the end the 
     following new sentence: ``The preceding sentence shall be 
     applied by substituting `December 31, 2006' for `December 31, 
     2003' in the case of wages paid for services performed at a 
     facility described in section 168(j)(8).''

                               DIVISION D

     SEC. 4101. CAPACITY BUILDING FOR ENERGY-EFFICIENT, AFFORDABLE 
                   HOUSING.

       Section 4(b) of the HUD Demonstration Act of 1993 (42 
     U.S.C. 9816 note) is amended--
       (1) in paragraph (1), by inserting before the semicolon at 
     the end the following: ``, including capabilities regarding 
     the provision of energy efficient, affordable housing and 
     residential energy conservation measures''; and
       (2) in paragraph (2), by inserting before the semicolon the 
     following: ``, including such activities relating to the 
     provision of energy efficient, affordable housing and 
     residential energy conservation measures that benefit low-
     income families''.

     SEC. 4102. INCREASE OF CDBG PUBLIC SERVICES CAP FOR ENERGY 
                   CONSERVATION AND EFFICIENCY ACTIVITIES.

       Section 105(a)(8) of the Housing and Community Development 
     Act of 1974 (42 U.S.C. 5305(a)(8)) is amended--
       (1) by inserting ``or efficiency'' after ``energy 
     conservation'';
       (2) by striking ``, and except that'' and inserting ``; 
     except that''; and
       (3) by inserting before the period at the end the 
     following: ``; and except that each percentage limitation 
     under this paragraph on the amount of assistance provided 
     under this title that may be used for the provision of public 
     services is hereby increased by 10 percent, but such 
     percentage increase may be used only for the provision of 
     public services concerning energy conservation or 
     efficiency''.

     SEC. 4103. FHA MORTGAGE INSURANCE INCENTIVES FOR ENERGY 
                   EFFICIENT HOUSING.

       (a) Single Family Housing Mortgage Insurance.--Section 
     203(b)(2) of the National Housing Act (12 U.S.C. 1709(b)(2)) 
     is amended, in the first undesignated paragraph beginning 
     after subparagraph (B)(iii) (relating to solar energy 
     systems)--
       (1) by inserting ``or paragraph (10)''; and
       (2) by striking ``20 percent'' and inserting ``30 
     percent''.
       (b) Multifamily Housing Mortgage Insurance.--Section 207(c) 
     of the National Housing Act (12 U.S.C. 1713(c)) is amended, 
     in the second undesignated paragraph beginning after 
     paragraph (3) (relating to solar energy systems and 
     residential energy conservation measures), by striking ``20 
     percent'' and inserting ``30 percent''.
       (c) Cooperative Housing Mortgage Insurance.--Section 213(p) 
     of the National Housing Act (12 U.S.C. 1715e(p)) is amended 
     by striking ``20 per centum'' and inserting ``30 percent''.

[[Page 15521]]

       (d) Rehabilitation and Neighborhood Conservation Housing 
     Mortgage Insurance.--Section 220(d)(3)(B)(iii) of the 
     National Housing Act (12 U.S.C. 1715k(d)(3)(B)(iii)) is 
     amended by striking ``20 per centum'' and inserting ``30 
     percent''.
       (e) Low-Income Multifamily Housing Mortgage Insurance.--
     Section 221(k) of the National Housing Act (12 U.S.C. 
     1715l(k)) is amended by striking ``20 per centum'' and 
     inserting ``30 percent''.
       (f) Elderly Housing Mortgage Insurance.--The proviso at the 
     end of section 213(c)(2) of the National Housing Act (12 
     U.S.C. 1715v(c)(2)) is amended by striking ``20 per centum'' 
     and inserting ``30 percent''.
       (g) Condominium Housing Mortgage Insurance.--Section 234(j) 
     of the National Housing Act (12 U.S.C. 1715y(j)) is amended 
     by striking ``20 per centum'' and inserting ``30 percent''.

     SEC. 4104. PUBLIC HOUSING CAPITAL FUND.

       Section 9(d)(1) of the United States Housing Act of 1937 
     (42 U.S.C. 1437g(d)(1)) is amended--
       (1) in subparagraph (I), by striking ``and'' at the end;
       (2) in subparagraph (K), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(L) improvement of energy and water-use efficiency by 
     installing fixtures and fittings that conform to the American 
     Society of Mechanical Engineers/American National Standards 
     Institute standards A112.19.2-1998 and A112.18.1-2000, or any 
     revision thereto, applicable at the time of installation, and 
     by increasing energy efficiency and water conservation by 
     such other means as the Secretary determines are 
     appropriate.''.

     SEC. 4105. GRANTS FOR ENERGY-CONSERVING IMPROVEMENTS FOR 
                   ASSISTED HOUSING.

       Section 251(b)(1) of the National Energy Conservation 
     Policy Act (42 U.S.C. 8231(1)) is amended--
       (1) by striking ``financed with loans'' and inserting 
     ``assisted'';
       (2) by inserting after ``1959,'' the following: ``which are 
     eligible multifamily housing projects (as such term is 
     defined in section 512 of the Multifamily Assisted Housing 
     Reform and Affordability Act of 1997 (42 U.S.C. 1437f note)) 
     and are subject to a mortgage restructuring and rental 
     assistance sufficiency plans under such Act,''; and
       (3) by inserting after the period at the end of the first 
     sentence the following new sentence: ``Such improvements may 
     also include the installation of energy and water conserving 
     fixtures and fittings that conform to the American Society of 
     Mechanical Engineers/American National Standards Institute 
     standards A112.19.2-1998 and A112.18.1-2000, or any revision 
     thereto, applicable at the time of installation.''.

     SEC. 4106. NORTH AMERICAN DEVELOPMENT BANK.

       Part 2 of subtitle D of title V of the North American Free 
     Trade Agreement Implementation Act (22 U.S.C. 290m-290m-3) is 
     amended by adding at the end the following:

     ``SEC. 545. SUPPORT FOR CERTAIN ENERGY POLICIES.

       ``Consistent with the focus of the Bank's Charter on 
     environmental infrastructure projects, the Board members 
     representing the United States should use their voice and 
     vote to encourage the Bank to finance projects related to 
     clean and efficient energy, including energy conservation, 
     that prevent, control, or reduce environmental pollutants or 
     contaminants.''.

                               DIVISION E

     SEC. 5000. SHORT TITLE.

       This division may be cited as the ``Clean Coal Power 
     Initiative Act of 2001''.

     SEC. 5001. FINDINGS.

       Congress finds that--
       (1) reliable, affordable, increasingly clean electricity 
     will continue to power the growing United States economy;
       (2) an increasing use of electrotechnologies, the desire 
     for continuous environmental improvement, a more competitive 
     electricity market, and concerns about rising energy prices 
     add importance to the need for reliable, affordable, 
     increasingly clean electricity;
       (3) coal, which, as of the date of enactment of this Act, 
     accounts for more than \1/2\ of all electricity generated in 
     the United States, is the most abundant fossil energy 
     resource of the United States;
       (4) coal comprises more than 85 percent of all fossil 
     resources in the United States and exists in quantities 
     sufficient to supply the United States for 250 years at 
     current usage rates;
       (5) investments in electricity generating facility 
     emissions control technology over the past 30 years have 
     reduced the aggregate emissions of pollutants from coal-based 
     generating facilities by 21 percent, even as coal use for 
     electricity generation has nearly tripled;
       (6) continuous improvement in efficiency and environmental 
     performance from electricity generating facilities would 
     allow continued use of coal and preserve less abundant energy 
     resources for other energy uses;
       (7) new ways to convert coal into electricity can 
     effectively eliminate health-threatening emissions and 
     improve efficiency by as much as 50 percent, but initial 
     deployment of new coal generation methods and equipment 
     entails significant risk that generators may be unable to 
     accept in a newly competitive electricity market; and
       (8) continued environmental improvement in coal-based 
     generation and increasing the production and supply of power 
     generation facilities with less air emissions, with the 
     ultimate goal of near-zero emissions, is important and 
     desirable.

     SEC. 5002. DEFINITIONS.

       In this division:
       (1) Cost and performance goals.--The term ``cost and 
     performance goals'' means the cost and performance goals 
     established under section 5004.
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of Energy.

     SEC. 5003. CLEAN COAL POWER INITIATIVE.

       (a) In General.--The Secretary shall carry out a program 
     under--
       (1) this division;
       (2) the Federal Nonnuclear Energy Research and Development 
     Act of 1974 (42 U.S.C. 5901 et seq.);
       (3) the Energy Reorganization Act of 1974 (42 U.S.C. 5801 
     et seq.); and
       (4) title XIII of the Energy Policy Act of 1992 (42 U.S.C. 
     13331 et seq.),
     to achieve cost and performance goals established by the 
     Secretary under section 5004.

     SEC. 5004. COST AND PERFORMANCE GOALS.

       (a) Review and Assessment.--The Secretary shall perform an 
     assessment that establishes measurable cost and performance 
     goals for 2005, 2010, 2015, and 2020 for the programs 
     authorized by this division. Such assessment shall be based 
     on the latest scientific, economic, and technical knowledge.
       (b) Consultation.--In establishing the cost and performance 
     goals, the Secretary shall consult with representatives of--
       (1) the United States coal industry;
       (2) State coal development agencies;
       (3) the electric utility industry;
       (4) railroads and other transportation industries;
       (5) manufacturers of advanced coal-based equipment;
       (6) institutions of higher learning, national laboratories, 
     and professional and technical societies;
       (7) organizations representing workers;
       (8) organizations formed to--
       (A) promote the use of coal;
       (B) further the goals of environmental protection; and
       (C) promote the production and generation of coal-based 
     power from advanced facilities; and
       (9) other appropriate Federal and State agencies.
       (c) Timing.--The Secretary shall--
       (1) not later than 120 days after the date of enactment of 
     this Act, issue a set of draft cost and performance goals for 
     public comment; and
       (2) not later than 180 days after the date of enactment of 
     this Act, after taking into consideration any public comments 
     received, submit to the Committee on Energy and Commerce and 
     the Committee on Science of the House of Representatives, and 
     to the Senate, the final cost and performance goals.

     SEC. 5005. AUTHORIZATION OF APPROPRIATIONS.

       (a) Clean Coal Power Initiative.--Except as provided in 
     subsection (c), there are authorized to be appropriated to 
     the Secretary to carry out the Clean Coal Power Initiative 
     under section 5003 $200,000,000 for each of the fiscal years 
     2002 through 2011, to remain available until expended.
       (b) Limit on use of Funds.--Notwithstanding subsection (a), 
     no funds may be used to carry out the activities authorized 
     by this Act after September 30, 2002, unless the Secretary 
     has transmitted to the Committee on Energy and Commerce and 
     the Committee on Science of the House of Representatives, and 
     to the Senate, the report required by this subsection and 1 
     month has elapsed since that transmission. The report shall 
     include, with respect to subsection (a), a 10-year plan 
     containing--
       (1) a detailed assessment of whether the aggregate funding 
     levels provided under subsection (a) are the appropriate 
     funding levels for that program;
       (2) a detailed description of how proposals will be 
     solicited and evaluated, including a list of all activities 
     expected to be undertaken;
       (3) a detailed list of technical milestones for each coal 
     and related technology that will be pursued;
       (4) recommendations for a mechanism for recoupment of 
     Federal funding for successful commercial projects; and
       (5) a detailed description of how the program will avoid 
     problems enumerated in General Accounting Office reports on 
     the Clean Coal Technology Program, including problems that 
     have resulted in unspent funds and projects that failed 
     either financially or scientifically.
       (c) Applicability.--Subsection (b) shall not apply to any 
     project begun before September 30, 2002.

     SEC. 5006. PROJECT CRITERIA.

       (a) In General.--The Secretary shall not provide funding 
     under this division for any project that does not advance 
     efficiency, environmental performance, and cost 
     competitiveness well beyond the level of technologies that 
     are in operation or have been demonstrated as of the date of 
     the enactment of this Act.

[[Page 15522]]

       (b) Technical Criteria for Clean Coal Power Initiative.--
       (1) Gasification.--(A) In allocating the funds authorized 
     under section 5005(a), the Secretary shall ensure that at 
     least 80 percent of the funds are used only for projects on 
     coal-based gasification technologies, including gasification 
     combined cycle, gasification fuel cells, gasification 
     coproduction and hybrid gasification/combustion.
       (B) The Secretary shall set technical milestones specifying 
     emissions levels that coal gasification projects must be 
     designed to and reasonably expected to achieve. The 
     milestones shall get more restrictive through the life of the 
     program. The milestones shall be designed to achieve by 2020 
     coal gasification projects able--
       (i) to remove 99 percent of sulfur dioxide;
       (ii) to emit no more than .05 lbs of NOx per million BTU;
       (iii) to achieve substantial reductions in mercury 
     emissions; and
       (iv) to achieve a thermal efficiency of 60 percent (higher 
     heating value).
       (2) Other projects.--For projects not described in 
     paragraph (1), the Secretary shall set technical milestones 
     specifying emissions levels that the projects must be 
     designed to and reasonably expected to achieve. The 
     milestones shall get more restrictive through the life of the 
     program. The milestones shall be designed to achieve by 2010 
     projects able--
       (A) to remove 97 percent of sulfur dioxide;
       (B) to emit no more than .08 lbs of NOx per million BTU;
       (C) to achieve substantial reductions in mercury emissions; 
     and
       (D) to achieve a thermal efficiency of 45 percent (higher 
     heating value).
       (c) Financial Criteria.--The Secretary shall not provide a 
     funding award under this division unless the recipient has 
     documented to the satisfaction of the Secretary that--
       (1) the award recipient is financially viable without the 
     receipt of additional Federal funding;
       (2) the recipient will provide sufficient information to 
     the Secretary for the Secretary to ensure that the award 
     funds are spent efficiently and effectively; and
       (3) a market exists for the technology being demonstrated 
     or applied, as evidenced by statements of interest in writing 
     from potential purchasers of the technology.
       (d) Federal Share.--The Federal share of the cost of a coal 
     or related technology project funded by the Secretary shall 
     not exceed 50 percent.
       (e) Applicability.--Neither the use of any particular 
     technology, nor the achievement of any emission reduction, by 
     any facility receiving assistance under this title shall be 
     taken into account for purposes of making any determination 
     under the Clean Air Act in applying the provisions of that 
     Act to a facility not receiving assistance under this title, 
     including any determination concerning new source performance 
     standards, lowest achievable emission rate, best available 
     control technology, or any other standard, requirement, or 
     limitation.

     SEC. 5007. STUDY.

       (a) In General.--Not later than 1 year after the date of 
     enactment of this Act, and once every 2 years thereafter 
     through 2016, the Secretary, in cooperation with other 
     appropriate Federal agencies, shall transmit to the Committee 
     on Energy and Commerce and the Committee on Science of the 
     House of Representatives, and to the Senate, a report 
     containing the results of a study to--
       (1) identify efforts (and the costs and periods of time 
     associated with those efforts) that, by themselves or in 
     combination with other efforts, may be capable of achieving 
     the cost and performance goals;
       (2) develop recommendations for the Department of Energy to 
     promote the efforts identified under paragraph (1); and
       (3) develop recommendations for additional authorities 
     required to achieve the cost and performance goals.
       (b) Expert Advice.--In carrying out this section, the 
     Secretary shall give due weight to the expert advice of 
     representatives of the entities described in section 5004(b).

                               DIVISION F

     SEC. 6001. SHORT TITLE.

       This division may be cited as the ``Energy Security Act''.

      TITLE I--GENERAL PROTECTIONS FOR ENERGY SUPPLY AND SECURITY

     SEC. 6101. STUDY OF EXISTING RIGHTS-OF-WAY ON FEDERAL LANDS 
                   TO DETERMINE CAPABILITY TO SUPPORT NEW 
                   PIPELINES OR OTHER TRANSMISSION FACILITIES.

       (a) In General.--Within one year after the date of 
     enactment of this Act, the head of each Federal agency that 
     has authorized a right-of-way across Federal lands for 
     transportation of energy supplies or transmission of 
     electricity shall review each such right-of-way and submit a 
     report to the Secretary of Energy and the Chairman of the 
     Federal Energy Regulatory Commission regarding--
       (1) whether the right-of-way can be used to support new or 
     additional capacity; and
       (2) what modifications or other changes, if any, would be 
     necessary to accommodate such additional capacity.
       (b) Consultations and Considerations.--In performing the 
     review, the head of each agency shall--
       (1) consult with agencies of State, tribal, or local units 
     of government as appropriate; and
       (2) consider whether safety or other concerns related to 
     current uses might preclude the availability of a right-of-
     way for additional or new transportation or transmission 
     facilities, and set forth those considerations in the report.

     SEC. 6102. INVENTORY OF ENERGY PRODUCTION POTENTIAL OF ALL 
                   FEDERAL PUBLIC LANDS.

       (a) Inventory Requirement.--The Secretary of the Interior, 
     in consultation with the Secretary of Agriculture and the 
     Secretary of Energy, shall conduct an inventory of the energy 
     production potential of all Federal public lands other than 
     national park lands and lands in any wilderness area, with 
     respect to wind, solar, coal, and geothermal power 
     production.
       (b) Limitations.--
       (1) In general.--The Secretary shall not include in the 
     inventory under this section the matters to be identified in 
     the inventory under section 604 of the Energy Act of 2000 (42 
     U.S.C. 6217).
       (2) Wind and solar power.--The inventory under this 
     section--
       (A) with respect to wind power production shall be limited 
     to sites having a mean average wind speed--
       (i) exceeding 12.5 miles per hour at a height of 33 feet; 
     and
       (ii) exceeding 15.7 miles per hour at a height of 164 feet; 
     and
       (B) with respect to solar power production shall be limited 
     to areas rated as receiving 450 watts per square meter or 
     greater.
       (c) Examination of Restrictions and Impediments.--The 
     inventory shall identify the extent and nature of any 
     restrictions or impediments to the development of such energy 
     production potential.
       (d) Geothermal Power.--The inventory shall include an 
     update of the 1978 Assessment of Geothermal Resources by the 
     United States Geological Survey.
       (e) Completion and Updating.--The Secretary--
       (1) shall complete the inventory by not later than 2 years 
     after the date of the enactment of this Act; and
       (2) shall update the inventory regularly thereafter.
       (f) Reports.--The Secretary shall submit to the Committee 
     on Resources of the House of Representatives and to the 
     Committee on Energy and Natural Resources of the Senate and 
     make publicly available--
       (1) a report containing the inventory under this section, 
     by not later than 2 years after the effective date of this 
     section; and
       (2) each update of such inventory.

     SEC. 6103. REVIEW OF REGULATIONS TO ELIMINATE BARRIERS TO 
                   EMERGING ENERGY TECHNOLOGY.

       (a) In General.--Each Federal agency shall carry out a 
     review of its regulations and standards to determine those 
     that act as a barrier to market entry for emerging energy-
     efficient technologies, including fuel cells, combined heat 
     and power, and distributed generation (including small-scale 
     renewable energy).
       (b) Report to Congress.--No later than 18 months after date 
     of enactment of this Act, each agency shall provide a report 
     to the Congress and the President detailing all regulatory 
     barriers to emerging energy-efficient technologies, along 
     with actions the agency intends to take, or has taken, to 
     remove such barriers.
       (c) Periodic Review.--Each agency shall subsequently review 
     its regulations and standards in this manner no less 
     frequently than every 5 years, and report their findings to 
     the Congress and the President. Such reviews shall include a 
     detailed analysis of all agency actions taken to remove 
     existing barriers to emerging energy technologies.

     SEC. 6104. INTERAGENCY AGREEMENT ON ENVIRONMENTAL REVIEW OF 
                   INTERSTATE NATURAL GAS PIPELINE PROJECTS.

       (a) In General.--The Secretary of Energy, in coordination 
     with the Federal Energy Regulatory Commission, shall 
     establish an administrative interagency task force to develop 
     an interagency agreement to expedite and facilitate the 
     environmental review and permitting of interstate natural gas 
     pipeline projects.
       (b) Task Force Members.--The task force shall include a 
     representative of each of the Bureau of Land Management, the 
     United States Fish and Wildlife Service, the Army Corps of 
     Engineers, the Forest Service, the Environmental Protection 
     Agency, the Advisory Council on Historic Preservation, and 
     such other agencies as the Secretary of Energy and the 
     Federal Energy Regulatory Commission consider appropriate.
       (c) Terms of Agreement.--The interagency agreement shall 
     require that agencies complete their review of interstate 
     pipeline projects within a specific period of time after 
     referral of the matter by the Federal Energy Regulatory 
     Commission.
       (d) Submittal of Agreement.--The Secretary of Energy shall 
     submit a final interagency agreement under this section to 
     the Congress by not later than 6 months after the effective 
     date of this section.

     SEC. 6105. ENHANCING ENERGY EFFICIENCY IN MANAGEMENT OF 
                   FEDERAL LANDS.

       (a) Sense of the Congress.--It is the sense of Congress 
     that Federal land managing

[[Page 15523]]

     agencies should enhance the use of energy efficient 
     technologies in the management of natural resources.
       (b) Energy Efficient Buildings.--To the extent economically 
     practicable, the Secretary of the Interior and the Secretary 
     of Agriculture shall seek to incorporate energy efficient 
     technologies in public and administrative buildings 
     associated with management of the National Park System, 
     National Wildlife Refuge System, National Forest System, and 
     other public lands and resources managed by such Secretaries.
       (c) Energy Efficient Vehicles.--To the extent economically 
     practicable, the Secretary of the Interior and the Secretary 
     of Agriculture shall seek to use energy efficient motor 
     vehicles, including vehicles equipped with biodiesel or 
     hybrid engine technologies, in the management of the National 
     Park System, National Wildlife Refuge System, and other 
     public lands and managed by the Secretaries.

                   TITLE II--OIL AND GAS DEVELOPMENT

                    Subtitle A--Offshore Oil and Gas

     SEC. 6201. SHORT TITLE.

       This subtitle may be referred to as the ``Royalty Relief 
     Extension Act of 2001''.

     SEC. 6202. LEASE SALES IN WESTERN AND CENTRAL PLANNING AREA 
                   OF THE GULF OF MEXICO.

       (a) In General.--For all tracts located in water depths of 
     greater than 200 meters in the Western and Central Planning 
     Area of the Gulf of Mexico, including that portion of the 
     Eastern Planning Area of the Gulf of Mexico encompassing 
     whole lease blocks lying west of 87 degrees, 30 minutes West 
     longitude, any oil or gas lease sale under the Outer 
     Continental Shelf Lands Act occurring within 2 years after 
     the date of enactment of this Act shall use the bidding 
     system authorized in section 8(a)(1)(H) of the Outer 
     Continental Shelf Lands Act (30 U.S.C. 1337(a)(1)(H)), except 
     that the suspension of royalties shall be set at a volume of 
     not less than the following:
       (1) 5 million barrels of oil equivalent for each lease in 
     water depths of 400 to 800 meters.
       (2) 9 million barrels of oil equivalent for each lease in 
     water depths of 800 to 1,600 meters.
       (3) 12 million barrels of oil equivalent for each lease in 
     water depths greater than 1,600 meters.
       (b) Relationship to Existing Authority.--Except as 
     expressly provided in this section, nothing in this section 
     is intended to limit the authority of the Secretary of the 
     Interior under the Outer Continental Shelf Lands Act (43 
     U.S.C. 1301 et seq.) to provide royalty suspension.

     SEC. 6203. SAVINGS CLAUSE.

       Nothing in this subtitle shall be construed to affect any 
     offshore pre-leasing, leasing, or development moratorium, 
     including any moratorium applicable to the Eastern Planning 
     Area of the Gulf of Mexico located off the Gulf Coast of 
     Florida.

     SEC. 6204. ANALYSIS OF GULF OF MEXICO FIELD SIZE 
                   DISTRIBUTION, INTERNATIONAL COMPETITIVENESS, 
                   AND INCENTIVES FOR DEVELOPMENT.

       (a) In General.--The Secretary of the Interior and the 
     Secretary of Energy shall enter into appropriate arrangements 
     with the National Academy of Sciences to commission the 
     Academy to perform the following:
       (1) Conduct an analysis and review of existing Gulf of 
     Mexico oil and natural gas resource assessments, including--
       (A) analysis and review of assessments recently performed 
     by the Minerals Management Service, the 1999 National 
     Petroleum Council Gas Study, the Department of Energy's 
     Offshore Marginal Property Study, and the Advanced Resources 
     International, Inc. Deepwater Gulf of Mexico model; and
       (B) evaluation and comparison of the accuracy of 
     assumptions of the existing assessments with respect to 
     resource field size distribution, hydrocarbon potential, and 
     scenarios for leasing, exploration, and development.
       (2) Evaluate the lease terms and conditions offered by the 
     Minerals Management Service for Lease Sale 178, and compare 
     the financial incentives offered by such terms and conditions 
     to financial incentives offered by the terms and conditions 
     that apply under leases for other offshore areas that are 
     competing for the same limited offshore oil and gas 
     exploration and development capital, including offshore areas 
     of West Africa and Brazil.
       (3) Recommend what level of incentives for all water depths 
     are appropriate in order to ensure that the United States 
     optimizes the domestic supply of oil and natural gas from the 
     offshore areas of the Gulf of Mexico that are not subject to 
     current leasing moratoria. Recommendations under this 
     paragraph should be made in the context of the importance of 
     the oil and natural gas resources of the Gulf of Mexico to 
     the future energy and economic needs of the United States.
       (b) Report.--Not later than 180 days after the date of 
     enactment of this Act, the Secretary of the Interior shall 
     submit a report to the Committee on Resources in the House of 
     Representatives and the Committee on Energy and Natural 
     Resources in the Senate, summarizing the findings of the 
     National Academy of Sciences pursuant to subsection (a) and 
     providing recommendations of the Secretary for new policies 
     or other actions that could help to further increase oil and 
     natural gas production from the Gulf of Mexico.

       Subtitle B--Improvements to Federal Oil and Gas Management

     SEC. 6221. SHORT TITLE.

       This subtitle may be cited as the ``Federal Oil and Gas 
     Lease Management Improvement Demonstration Program Act of 
     2001''.

     SEC. 6222. STUDY OF IMPEDIMENTS TO EFFICIENT LEASE 
                   OPERATIONS.

       (a) In General.--The Secretary of the Interior and the 
     Secretary of Agriculture shall jointly undertake a study of 
     the impediments to efficient oil and gas leasing and 
     operations on Federal onshore lands in order to identify 
     means by which unnecessary impediments to the expeditious 
     exploration and production of oil and natural gas on such 
     lands can be removed.
       (b) Contents.--The study under subsection (a) shall include 
     the following:
       (1) A review of the process by which Federal land managers 
     accept or reject an offer to lease, including the timeframes 
     in which such offers are acted upon, the reasons for any 
     delays in acting upon such offers, and any recommendations 
     for expediting the response to such offers.
       (2) A review of the approval process for applications for 
     permits to drill, including the timeframes in which such 
     applications are approved, the impact of compliance with 
     other Federal laws on such timeframes, any other reasons for 
     delays in making such approvals, and any recommendations for 
     expediting such approvals.
       (3) A review of the approval process for surface use plans 
     of operation, including the timeframes in which such 
     applications are approved, the impact of compliance with 
     other Federal laws on such timeframes, any other reasons for 
     delays in making such approvals, and any recommendations for 
     expediting such approvals.
       (4) A review of the process for administrative appeal of 
     decisions or orders of officers or employees of the Bureau of 
     Land Management with respect to a Federal oil or gas lease, 
     including the timeframes in which such appeals are heard and 
     decided, any reasons for delays in hearing or deciding such 
     appeals, and any recommendations for expediting the appeals 
     process.
       (c) Report.--The Secretaries shall report the findings and 
     recommendations resulting from the study required by this 
     section to the Committee on Resources of the House of 
     Representatives and to the Committee on Energy and Natural 
     Resources of the Senate no later than 6 months after the date 
     of the enactment of this Act.

     SEC. 6223. ELIMINATION OF UNWARRANTED DENIALS AND STAYS.

       (a) In General.--The Secretary shall ensure that 
     unwarranted denials and stays of lease issuance and 
     unwarranted restrictions on lease operations are eliminated 
     from the administration of oil and natural gas leasing on 
     Federal land.
       (b) Land Designated for Multiple Use.--Federal land 
     available for oil and natural gas leasing under any Bureau of 
     Land Management resource management plan or Forest Service 
     leasing analysis shall be available without lease 
     stipulations more stringent than restrictions on surface use 
     and operations imposed under the laws (including regulations) 
     of the oil and natural gas conservation authority of the 
     State in which the lands are located, unless the Secretary 
     includes in the decision approving the management plan or 
     leasing analysis or in the Secretary's acceptance of an offer 
     to lease a written explanation why more stringent 
     stipulations are warranted.
       (c) Rejection of Offer To Lease.--
       (1) In general.--If the Secretary rejects an offer to lease 
     Federal lands for oil or natural gas development on the 
     ground that the land is unavailable for oil and natural gas 
     leasing, the Secretary shall provide a written, detailed 
     explanation of the reasons the land is unavailable for 
     leasing.
       (2) Previous resource management decision.--If the 
     determination of unavailability is based on a previous 
     resource management decision, the explanation shall include a 
     careful assessment of whether the reasons underlying the 
     previous decision are still persuasive.
       (3) Segregation of available land from unavailable land.--
     The Secretary may not reject an offer to lease Federal land 
     for oil and natural gas development that is available for 
     such leasing on the ground that the offer includes land 
     unavailable for leasing. The Secretary shall segregate 
     available land from unavailable land, on the offeror's 
     request following notice by the Secretary, before acting on 
     the offer to lease.
       (d) Disapproval or Required Modification of Surface Use 
     Plans of Operations and Application for Permit To Drill.--The 
     Secretary shall provide a written, detailed explanation of 
     the reasons for disapproving or requiring modifications of 
     any surface use plan of operations or application for permit 
     to drill with respect to oil or natural gas development on 
     Federal lands.

     SEC. 6224. LIMITATION ON COST RECOVERY FOR APPLICATIONS.

       Notwithstanding sections 304 and 504 of the Federal Land 
     Policy and Management Act of

[[Page 15524]]

     1976 (43 U.S.C. 1734, 1764) and section 9701 of title 31, 
     United States Code, the Secretary shall not recover the 
     Secretary's costs with respect to applications and other 
     documents relating to oil and gas leases.

     SEC. 6225. CONSULTATION WITH SECRETARY OF AGRICULTURE.

       Section 17(h) of the Mineral Leasing Act (30 U.S.C. 226(h)) 
     is amended to read as follows:
       ``(h)(1) In issuing any lease on National Forest System 
     lands reserved from the public domain, the Secretary of the 
     Interior shall consult with the Secretary of Agriculture in 
     determining stipulations on surface use under the lease.
       ``(2)(A) A lease on lands referred to in paragraph (1) may 
     not be issued if the Secretary of Agriculture determines, 
     after consultation under paragraph (1), that the terms and 
     conditions of the lease, including any prohibition on surface 
     occupancy for lease operations, will not be sufficient to 
     adequately protect such lands under the National Forest 
     Management Act of 1976 (16 U.S.C. 1600 et seq.).
       ``(B) The authority of the Secretary of Agriculture under 
     this paragraph may be delegated only to the Undersecretary of 
     Agriculture for Natural Resources and Environment.''.

                       Subtitle C--Miscellaneous

     SEC. 6231. OFFSHORE SUBSALT DEVELOPMENT.

       Section 5 of the Outer Continental Shelf Lands Act of 1953 
     (43 U.S.C. 1334) is amended by adding at the end the 
     following:
       ``(k) Suspension of Operations for Subsalt Exploration.--
     Notwithstanding any other provision of law or regulation, to 
     prevent waste caused by the drilling of unnecessary wells and 
     to facilitate the discovery of additional hydrocarbon 
     reserves, the Secretary may grant a request for a suspension 
     of operations under any lease to allow the reprocessing and 
     reinterpretation of geophysical data to identify and define 
     drilling objectives beneath allocthonus salt sheets.''.

     SEC. 6232. PROGRAM ON OIL AND GAS ROYALTIES IN KIND.

       (a) Applicability of Section.--Notwithstanding any other 
     provision of law, the provisions of this section shall apply 
     to all royalty in kind accepted by the Secretary of the 
     Interior under any Federal oil or gas lease or permit under 
     section 36 of the Mineral Leasing Act (30 U.S.C. 192), 
     section 27 of the Outer Continental Shelf Lands Act (43 
     U.S.C. 1353), or any other mineral leasing law, in the period 
     beginning on the date of enactment of this Act through 
     September 30, 2006.
       (b) Terms and Conditions.--All royalty accruing to the 
     United States under any Federal oil or gas lease or permit 
     under the Mineral Leasing Act (30 U.S.C. 181 et seq.) or the 
     Outer Continental Shelf Lands Act (43 U.S.C. 1331 et seq.) 
     shall, on the demand of the Secretary of the Interior, be 
     paid in oil or gas. If the Secretary of the Interior makes 
     such a demand, the following provisions apply to such 
     payment:
       (1) Delivery by, or on behalf of, the lessee of the royalty 
     amount and quality due under the lease satisfies the lessee's 
     royalty obligation for the amount delivered, except that 
     transportation and processing reimbursements paid to, or 
     deductions claimed by, the lessee shall be subject to review 
     and audit.
       (2) Royalty production shall be placed in marketable 
     condition by the lessee at no cost to the United States.
       (3) The Secretary of the Interior may--
       (A) sell or otherwise dispose of any royalty oil or gas 
     taken in kind (other than oil or gas taken under section 
     27(a)(3) of the Outer Continental Shlef Lands Act (43 U.S.C. 
     1353(a)(3)) for not less than the market price; and
       (B) transport or process any oil or gas royalty taken in 
     kind.
       (4) The Secretary of the Interior may, notwithstanding 
     section 3302 of title 31, United States Code, retain and use 
     a portion of the revenues from the sale of oil and gas 
     royalties taken in kind that otherwise would be deposited to 
     miscellaneous receipts, without regard to fiscal year 
     limitation, or may use royalty production, to pay the cost 
     of--
       (A) transporting the oil or gas,
       (B) processing the gas, or
       (C) disposing of the oil or gas.
       (5) The Secretary may not use revenues from the sale of oil 
     and gas royalties taken in kind to pay for personnel, travel, 
     or other administrative costs of the Federal Government.
       (c) Reimbursement of Cost.--If the lessee, pursuant to an 
     agreement with the United States or as provided in the lease, 
     processes the royalty gas or delivers the royalty oil or gas 
     at a point not on or adjacent to the lease area, the 
     Secretary of the Interior shall--
       (1) reimburse the lessee for the reasonable costs of 
     transportation (not including gathering) from the lease to 
     the point of delivery or for processing costs; or
       (2) at the discretion of the Secretary of the Interior, 
     allow the lessee to deduct such transportation or processing 
     costs in reporting and paying royalties in value for other 
     Federal oil and gas leases.
       (d) Benefit to the United States Required.--The Secretary 
     may receive oil or gas royalties in kind only if the 
     Secretary determines that receiving such royalties provides 
     benefits to the United States greater than or equal to those 
     that would be realized under a comparable royalty in value 
     program.
       (e) Report to Congress.--For each of the fiscal years 2002 
     through 2006 in which the United States takes oil or gas 
     royalties in kind from production in any State or from the 
     Outer Continental Shelf, excluding royalties taken in kind 
     and sold to refineries under subsection (h), the Secretary of 
     the Interior shall provide a report to the Congress 
     describing--
       (1) the methodology or methodologies used by the Secretary 
     to determine compliance with subsection (d), including 
     performance standards for comparing amounts received by the 
     United States derived from such royalties in kind to amounts 
     likely to have been received had royalties been taken in 
     value;
       (2) an explanation of the evaluation that led the Secretary 
     to take royalties in kind from a lease or group of leases, 
     including the expected revenue effect of taking royalties in 
     kind;
       (3) actual amounts received by the United States derived 
     from taking royalties in kind, and costs and savings incurred 
     by the United States associated with taking royalties in 
     kind; and
       (4) an evaluation of other relevant public benefits or 
     detriments associated with taking royalties in kind.
       (f) Deduction of Expenses.--
       (1) In general.--Before making payments under section 35 of 
     the Mineral Leasing Act (30 U.S.C. 191) or section 8(g) of 
     the Outer Continental Shelf Lands Act (30 U.S.C. 1337(g)) of 
     revenues derived from the sale of royalty production taken in 
     kind from a lease, the Secretary of the Interior shall deduct 
     amounts paid or deducted under subsections (b)(4) and (c), 
     and shall deposit such amounts to miscellaneous receipts.
       (2) Accounting for deductions.--If the Secretary of the 
     Interior allows the lessee to deduct transportation or 
     processing costs under subsection (c), the Secretary may not 
     reduce any payments to recipients of revenues derived from 
     any other Federal oil and gas lease as a consequence of that 
     deduction.
       (g) Consultation With States.--The Secretary of the 
     Interior--
       (1) shall consult with a State before conducting a royalty 
     in kind program under this title within the State, and may 
     delegate management of any portion of the Federal royalty in 
     kind program to such State except as otherwise prohibited by 
     Federal law; and
       (2) shall consult annually with any State from which 
     Federal oil or gas royalty is being taken in kind to ensure 
     to the maximum extent practicable that the royalty in kind 
     program provides revenues to the State greater than or equal 
     to those which would be realized under a comparable royalty 
     in value program.
       (h) Provisions for Small Refineries.--
       (1) Preference.--If the Secretary of the Interior 
     determines that sufficient supplies of crude oil are not 
     available in the open market to refineries not having their 
     own source of supply for crude oil, the Secretary may grant 
     preference to such refineries in the sale of any royalty oil 
     accruing or reserved to the United States under Federal oil 
     and gas leases issued under any mineral leasing law, for 
     processing or use in such refineries at private sale at not 
     less than the market price.
       (2) Proration among refineries in production area.--In 
     disposing of oil under this subsection, the Secretary of the 
     Interior may, at the discretion of the Secretary, prorate 
     such oil among such refineries in the area in which the oil 
     is produced.
       (i) Disposition to Federal Agencies.--
       (1) Onshore royalty.--Any royalty oil or gas taken by the 
     Secretary in kind from onshore oil and gas leases may be sold 
     at not less than the market price to any department or agency 
     of the United States.
       (2) Offshore royalty.--Any royalty oil or gas taken in kind 
     from Federal oil and gas leases on the Outer Continental 
     Shelf may be disposed of only under section 27 of the Outer 
     Continental Shelf Lands Act (43 U.S.C. 1353).
       (j) Preference for Federal Low-Income Energy Assistance 
     Programs.--In disposing of royalty oil or gas taken in kind 
     under this section, the Secretary may grant a preference to 
     any person, including any State or Federal agency, for the 
     purpose of providing additional resources to any Federal low-
     income energy assistance program.

     SEC. 6233. MARGINAL WELL PRODUCTION INCENTIVES.

       To enhance the economics of marginal oil and gas production 
     by increasing the ultimate recovery from marginal wells when 
     the cash price of West Texas Intermediate crude oil, as 
     posted on the Dow Jones Commodities Index chart, is less than 
     $15 per barrel for 180 consecutive pricing days or when the 
     price of natural gas delivered at Henry Hub, Louisiana, is 
     less than $2.00 per million British thermal units for 180 
     consecutive days, the Secretary shall reduce the royalty rate 
     as production declines for--
       (1) onshore oil wells producing less than 30 barrels per 
     day;
       (2) onshore gas wells producing less than 120 million 
     British thermal units per day;
       (3) offshore oil wells producing less than 300 barrels of 
     oil per day; and
       (4) offshore gas wells producing less than 1,200 million 
     British thermal units per day.

[[Page 15525]]



     SEC. 6234. REIMBURSEMENT FOR COSTS OF NEPA ANALYSES, 
                   DOCUMENTATION, AND STUDIES.

       The Mineral Leasing Act (30 U.S.C. 181 et seq.) is amended 
     by inserting after section 37 the following:


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

       ``Sec. 38. (a) In General.--The Secretary of the Interior 
     may reimburse a person who is a lessee, operator, operating 
     rights owner, or applicant for an oil or gas lease under this 
     Act for costs incurred by the person in preparing any 
     project-level analysis, documentation, or related study 
     required under the National Environmental Policy Act of 1969 
     (42 U.S.C. 4321 et seq.) with respect to the lease, through 
     royalty credits attributable to the lease, unit agreement, or 
     project area for which the analysis, documentation, or 
     related study is prepared.
       ``(b) Conditions.--The Secretary may provide reimbursement 
     under subsection (b) only if--
       ``(1) adequate funding to enable the Secretary to timely 
     prepare the analysis, documentation, or related study is not 
     appropriated;
       ``(2) the person paid the costs voluntarily; and
       ``(3) the person maintains records of its costs in 
     accordance with regulations prescribed by the Secretary.''.
       (c) Application.--The amendments made by this section shall 
     apply with respect to any lease entered into before, on, or 
     after the date of the enactment of this Act.
       (d) Deadline for Regulations.--The Secretary shall issue 
     regulations implementing the amendments made by this section 
     by not later than 90 days after the date of the enactment of 
     this Act.

                TITLE III--GEOTHERMAL ENERGY DEVELOPMENT

     SEC. 6301. ROYALTY REDUCTION AND RELIEF.

       (a) Royalty Reduction.--Section 5(a) of the Geothermal 
     Steam Act of 1970 (30 U.S.C. 1004(a)) is amended by striking 
     ``not less than 10 per centum or more than 15 per centum'' 
     and inserting ``not more than 8 per centum''.
       (b) Royalty Relief.--
       (1) In general.--Notwithstanding section 5 of the 
     Geothermal Steam Act of 1970 (30 U.S.C. 1004(a)) and any 
     provision of any lease under that Act, no royalty is required 
     to be paid--
       (A) under any qualified geothermal energy lease with 
     respect to commercial production of heat or energy from a 
     facility that begins such production in the 5-year period 
     beginning on the date of the enactment of this Act; or
       (B) on qualified expansion geothermal energy.
       (2) 3-year application.--Paragraph (1) applies only to 
     commercial production of heat or energy from a facility in 
     the first 3 years of such production.
       (c) Definitions.--In this section:
       (1) Qualified expansion geothermal energy.--The term 
     ``qualified expansion geothermal energy''--
       (A) subject to subparagraph (B), means geothermal energy 
     produced from a generation facility for which the rated 
     capacity is increased by more than 10 percent as a result of 
     expansion of the facility carried out in the 5-year period 
     beginning on the date of enactment of this Act; and
       (B) does not include the rated capacity of the generation 
     facility on the date of enactment of this Act.
       (2) Qualified geothermal energy lease.--The term 
     ``qualified geothermal energy lease'' means a lease under the 
     Geothermal Steam Act of 1970 (30 U.S.C. 1001 et seq.)--
       (A) that was executed before the end of the 5-year period 
     beginning on the date of the enactment of this Act; and
       (B) under which no commercial production of any form of 
     heat or energy occurred before the date of the enactment of 
     this Act.

     SEC. 6302. EXEMPTION FROM ROYALTIES FOR DIRECT USE OF LOW 
                   TEMPERATURE GEOTHERMAL ENERGY RESOURCES.

       Section 5 of the Geothermal Steam Act of 1970 (30 U.S.C. 
     1004) is amended--
       (1) in paragraph (c) by redesignating subparagraphs (1) and 
     (2) as subparagraphs (A) and (B);
       (2) by redesignating paragraphs (a) through (d) in order as 
     paragraphs (1) through (4);
       (3) by inserting ``(a) In General.--'' after ``Sec. 5.''; 
     and
       (4) by adding at the end the following new subsection:
       ``(b) Exemption for Use of Low Temperature Resources.--
       ``(1) In general.--In lieu of any royalty or rental under 
     subsection (a), a lease for qualified development and direct 
     utilization of low temperature geothermal resources shall 
     provide for payment by the lessee of an annual fee of not 
     less than $100, and not more than $1,000, in accordance with 
     the schedule issued under paragraph (2).
       ``(2) Schedule.--The Secretary shall issue a schedule of 
     fees under this section under which a fee is based on the 
     scale of development and utilization to which the fee 
     applies.
       ``(3) Definitions.--In this subsection:
       ``(A) Low temperature geothermal resources.--The term `low 
     temperature geothermal resources' means geothermal steam and 
     associated geothermal resources having a temperature of less 
     than 195 degrees Fahrenheit.
       ``(B) Qualified development and direct utilization.--The 
     term `qualified development and direct utilization' means 
     development and utilization in which all products of 
     geothermal resources, other than any heat utilized, are 
     returned to the geothermal formation from which they are 
     produced.''.

     SEC. 6303. AMENDMENTS RELATING TO LEASING ON FOREST SERVICE 
                   LANDS.

       The Geothermal Steam Act of 1970 is amended--
       (1) in section 15(b) (30 U.S.C. 1014(b))--
       (A) by inserting ``(1)'' after ``(b)''; and
       (B) in paragraph (1) (as designated by subparagraph (A) of 
     this paragraph) in the first sentence--
       (i) by striking ``with the consent of, and'' and inserting 
     ``after consultation with the Secretary of Agriculture and''; 
     and
       (ii) by striking ``the head of that Department'' and 
     inserting ``the Secretary of Agriculture''; and
       (2) by adding at the end the following:
       ``(2)(A) A geothermal lease for lands withdrawn or acquired 
     in aid of functions of the Department of Agriculture may not 
     be issued if the Secretary of Agriculture, after the 
     consultation required by paragraph (1), determines that no 
     terms or conditions, including a prohibition on surface 
     occupancy for lease operations, would be sufficient to 
     adequately protect such lands under the National Forest 
     Management Act of 1976 (16 U.S.C. 1600 et seq.).
       ``(B) The authority of the Secretary of Agriculture under 
     this paragraph may be delegated only to the Undersecretary of 
     Agriculture for Natural Resources and Environment.''.

     SEC. 6304. DEADLINE FOR DETERMINATION ON PENDING 
                   NONCOMPETITIVE LEASE APPLICATIONS.

       Not later than 90 days after the date of the enactment of 
     this Act, the Secretary of the Interior shall, with respect 
     to each application pending on the date of the enactment of 
     this Act for a lease under the Geothermal Steam Act of 1970 
     (30 U.S.C. 1001 et seq.), issue a final determination of--
       (1) whether or not to conduct a lease sale by competitive 
     bidding; and
       (2) whether or not to award a lease without competitive 
     bidding.

     SEC. 6305. OPENING OF PUBLIC LANDS UNDER MILITARY 
                   JURISDICTION.

       (a) In General.--Except as otherwise provided in the 
     Geothermal Steam Act of 1970 (30 U.S.C. 1001 et seq.) and 
     other provisions of Federal law applicable to development of 
     geothermal energy resources within public lands, all public 
     lands under the jurisdiction of a Secretary of a military 
     department shall be open to the operation of such laws and 
     development and utilization of geothermal steam and 
     associated geothermal resources, as that term is defined in 
     section 2 of the Geothermal Steam Act of 1970 (30 U.S.C. 
     1001), without the necessity for further action by the 
     Secretary or the Congress.
       (b) Conforming Amendment.--Section 2689 of title 10, United 
     States Code, is amended by striking ``including public 
     lands,'' and inserting ``other than public lands,''.
       (c) Treatment of Existing Leases.--Upon the expiration of 
     any lease in effect on the date of the enactment of this Act 
     of public lands under the jurisdiction of a military 
     department for the development of any geothermal resource, 
     such lease may, at the option of the lessee--
       (1) be treated as a lease under the Geothermal Steam Act of 
     1970 (30 U.S.C. 1001 et seq.), and be renewed in accordance 
     with such Act; or
       (2) be renewed in accordance with the terms of the lease, 
     if such renewal is authorized by such terms.
       (d) Regulations.--The Secretary of the Interior, with the 
     advice and concurrence of the Secretary of the military 
     department concerned, shall prescribe such regulations to 
     carry out this section as may be necessary. Such regulations 
     shall contain guidelines to assist in determining how much, 
     if any, of the surface of any lands opened pursuant to this 
     section may be used for purposes incident to geothermal 
     energy resources development and utilization.
       (e) Closure for Purposes of National Defense or Security.--
     In the event of a national emergency or for purposes of 
     national defense or security, the Secretary of the Interior, 
     at the request of the Secretary of the military department 
     concerned, shall close any lands that have been opened to 
     geothermal energy resources leasing pursuant to this section.

     SEC. 6306. APPLICATION OF AMENDMENTS.

       The amendments made by this title apply with respect to any 
     lease executed before, on, or after the date of the enactment 
     of this Act.

     SEC. 6307. REVIEW AND REPORT TO CONGRESS.

       The Secretary of the Interior shall promptly review and 
     report to the Congress regarding the status of all moratoria 
     on and withdrawals from leasing under the Geothermal Steam 
     Act of 1970 (30 U.S.C. 1001 et seq.) of known geothermal 
     resources areas (as that term is defined in section 2 of that 
     Act (30 U.S.C. 1001), specifying for each such area whether 
     the basis for such moratoria or withdrawal still applies.

[[Page 15526]]



     SEC. 6308. REIMBURSEMENT FOR COSTS OF NEPA ANALYSES, 
                   DOCUMENTATION, AND STUDIES.

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


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

       ``Sec. 30. (a) In General.--The Secretary of the Interior 
     may reimburse a person who is a lessee, operator, operating 
     rights owner, or applicant for a lease under this Act for 
     costs incurred by the person in preparing any project-level 
     analysis, documentation, or related study required under the 
     National Environmental Policy Act of 1969 (42 U.S.C. 4321 et 
     seq.) with respect to the lease, through royalty credits 
     attributable to the lease, unit agreement, or project area 
     for which the analysis, documentation, or related study is 
     prepared.
       ``(b) Conditions.--The Secretary shall may provide 
     reimbursement under subsection (a) only if--
       ``(1) adequate funding to enable the Secretary to timely 
     prepare the analysis, documentation, or related study is not 
     appropriated;
       ``(2) the person paid the costs voluntarily; and
       ``(3) the person maintains records of its costs in 
     accordance with regulations prescribed by the Secretary.''.
       (b) Application.--The amendments made by this section shall 
     apply with respect to any lease entered into before, on, or 
     after the date of the enactment of this Act.
       (c) Deadline for Regulations.--The Secretary shall issue 
     regulations implementing the amendments made by this section 
     by not later than 90 days after the date of the enactment of 
     this Act.

                          TITLE IV--HYDROPOWER

     SEC. 6401. STUDY AND REPORT ON INCREASING ELECTRIC POWER 
                   PRODUCTION CAPABILITY OF EXISTING FACILITIES.

       (a) In General.--The Secretary of the Interior shall 
     conduct a study of the potential for increasing electric 
     power production capability at existing facilities under the 
     administrative jurisdiction of the Secretary.
       (b) Content.--The study under this section shall include 
     identification and description in detail of each facility 
     that is capable, with or without modification, of producing 
     additional hydroelectric power, including estimation of the 
     existing potential for the facility to generate hydroelectric 
     power.
       (c) Report.--The Secretary shall submit to the Congress a 
     report on the findings, conclusions, and recommendations of 
     the study under this section by not later than 12 months 
     after the date of enactment of this Act. The Secretary shall 
     include in the report the following:
       (1) The identifications, descriptions, and estimations 
     referred to in subsection (b).
       (2) A description of activities the Secretary is currently 
     conducting or considering, or that could be considered, to 
     produce additional hydroelectric power from each identified 
     facility.
       (3) A summary of action that has already been taken by the 
     Secretary to produce additional hydroelectric power from each 
     identified facility.
       (4) The costs to install, upgrade, or modify equipment or 
     take other actions to produce additional hydroelectric power 
     from each identified facility.
       (5) The benefits that would be achieved by such 
     installation, upgrade, modification, or other action, 
     including quantified estimates of any additional energy or 
     capacity from each facility identified under subsection (b).
       (6) A description of actions that are planned, underway, or 
     might reasonably be considered to increase hydroelectric 
     power production by replacing turbine runners.
       (7) A description of actions that are planned, underway, or 
     might reasonably be considered to increase hydroelectric 
     power production by performing generator uprates and rewinds.
       (8) The impact of increased hydroelectric power production 
     on irrigation, fish, wildlife, Indian tribes, river health, 
     water quality, navigation, recreation, fishing, and flood 
     control.
       (9) Any additional recommendations the Secretary considers 
     advisable to increase hydroelectric power production from, 
     and reduce costs and improve efficiency at, facilities under 
     the jurisdiction of the Secretary.

     SEC. 6402. INSTALLATION OF POWERFORMER AT FOLSOM POWER PLANT, 
                   CALIFORNIA.

       (a) In General.--The Secretary of the Interior may install 
     a powerformer at the Bureau of Reclamation Folsom power plant 
     in Folsom, California, to replace a generator and transformer 
     that are due for replacement due to age.
       (b) Reimbursable Costs.--Costs incurred by the United 
     States for installation of a powerformer under this section 
     shall be treated as reimbursable costs and shall bear 
     interest at current long-term borrowing rates of the United 
     States Treasury at the time of acquisition.
       (c) Local Cost Sharing.--In addition to reimbursable costs 
     under subsection (b), the Secretary shall seek contributions 
     from power users toward the costs of the powerformer and its 
     installation.

     SEC. 6403. STUDY AND IMPLEMENTATION OF INCREASED OPERATIONAL 
                   EFFICIENCIES IN HYDROELECTRIC POWER PROJECTS.

       (a) In General.--The Secretary of Interior shall conduct a 
     study of operational methods and water scheduling techniques 
     at all hydroelectric power plants under the administrative 
     jurisdiction of the Secretary that have an electric power 
     production capacity greater than 50 megawatts, to--