Coal-based Generation Improvement Act - Directs the Secretary of Energy to provide certain financial incentives for the deployment of advanced coal-based generation technologies. Allows sponsors of projects using advanced coal-based generation technology to elect certain tax benefits, including an investment tax credit and accelerated depreciation.
Amends the Internal Revenue Code to allow a tax credit for investment in clean energy bonds.
Directs the Secretary to designate a federal project coordinator to facilitate federal agency approvals of eligible advanced coal generation projects.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1153 Introduced in Senate (IS)]
1st Session
S. 1153
To provide Federal financial incentives for deployment of advanced
coal-based generation technologies.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 26, 2005
Mr. Bunning (for himself and Mr. Thomas) introduced the following bill;
which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To provide Federal financial incentives for deployment of advanced
coal-based generation technologies.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Coal-based Generation Improvement
Act''.
SEC. 2. PURPOSE.
The purpose of this Act is to provide Federal financial assistance
for projects that will use integrated gasification combined cycle or
other advanced coal-based generation technologies--
(1) in new electric generating units;
(2) to repower existing electric generation units; or
(3) to retrofit existing natural gas combined cycle units
to operate on coal instead of natural gas.
SEC. 3. DEFINITIONS.
In this Act:
(1) Advanced coal-based generation technology.--The term
``advanced coal-based generation technology'' means a
technology that meets the requirements of section 8.
(2) Certified project.--The term ``certified project''
means a qualifying advanced coal project that the Secretary has
certified under section 4 as eligible to receive Federal
financial assistance under this Act.
(3) Electric generation unit.--The term ``electric
generation unit'' means any facility at least 50 percent of the
total annual net output of which is electrical power, including
an otherwise eligible facility that is used in an industrial
application.
(4) Integrated gasification combined cycle.--The term
``integrated gasification combined cycle'' means an electric
generation unit that produces electricity by converting coal to
synthesis gas that is then used to fuel a combined-cycle plant
that produces electricity from both a combustion turbine and a
steam turbine.
(5) Qualifying advanced coal project.--The term
``qualifying advanced coal project'' means a project that meets
the requirements of section 6.
(6) Secretary.--The ``Secretary'' means the Secretary of
Energy.
SEC. 4. DEPLOYMENT INCENTIVE PROGRAM.
(a) Establishment.--Not later than 180 days after the date of
enactment of this Act, the Secretary shall begin carrying out a program
to provide Federal financial incentives for deployment of advanced
coal-based generation technologies.
(b) Certification.--
(1) In general.--The Secretary may certify a qualifying
advanced coal project as eligible to receive 1 of the Federal
financial incentives provided under section 5.
(2) Period of issuance.--A certificate of eligibility under
this subsection may be issued only during the 10 fiscal year
periods beginning on October 1, 2005.
(3) Certification commitments.--The Secretary may issue
certification commitments in accordance with section
6(a)(4)(B).
(4) Aggregate generating capacity.--
(A) In general.--The aggregate generating capacity
of projects certified by the Secretary under paragraph
(1) may not exceed 10,000 megawatts.
(B) Particular projects.--Of the total megawatts of
capacity that the Secretary is authorized to certify--
(i) 5,000 megawatts shall be available only
for use for integrated gasification combined
cycle projects; and
(ii) 5,000 megawatts shall be available
only for use for projects that use other
advanced coal-based generation technologies.
(C) Determination of capacity.--In determining
capacity under this paragraph in the case of a
retrofitted or repowered plant, capacity shall be
determined based on total design capacity after the
retrofit or repowering of the existing facility is
accomplished.
(D) Review and redistribution.--
(i) Review.--Not later than 6 years after
the date of enactment of this Act, the
Secretary shall review the projects certified
and the megawatts allocated under this section
as of that date.
(ii) Redistribution.--The Secretary may
reallocate the remaining megawatts available
under paragraph (4) if the Secretary determines
that--
(I) capacity cannot be used because
there are no qualifying applications
for certification pending for any
available capacity at the time of the
review; or
(II) a certification commitment
made in accordance with paragraph (3)
has not been revoked because the
project subject to the certification
commitment has been delayed as a result
of third party opposition or litigation
with respect to the proposed project.
SEC. 5. ELECTION OF FEDERAL FINANCIAL INCENTIVES.
(a) Election.--
(1) In general.--The project sponsor of a certified project
may elect to receive the Federal financial incentives described
in either subsection (b) or (c).
(2) Limitation.--A project sponsor may not elect incentives
from more than 1 subsection described in paragraph (1).
(b) Investment Tax Credit and Shortened Recovery Period.--
(1) Eligibility.--The project sponsor of a certified
project may elect to receive the 20 percent investment tax
credit provided under section 48 of the Internal Revenue Code
of 1986 (as amended by paragraph (2) of this subsection) and
the 5-year recovery period provided under section 168
(e)(3)(B)(vi) of such Code.
(2) Amendments to internal revenue code of 1986.--Section
48 of the Internal Revenue Code of 1986 (relating to energy
credit) is amended--
(A) by striking ``10 percent'' in subsection
(a)(2)(A) and inserting ``10 percent for energy
property other than certified coal property, and 20
percent for certified coal property'';
(B) by striking ``or'' at the end of clause (i) of
subsection (a)(3)(A), by inserting ``or'' at the end of
clause (ii) of such subsection, and by inserting after
such clause the following:
``(iii) certified coal property.''; and
(C) by inserting at the end the following new
subsection:
``(c) Certified Coal Property.--For purposes of this section:
``(1) Definition.--The term `certified coal property' means
any property that is part of a qualifying advanced coal project
that the Secretary of Energy has certified under section 4 of
the Coal-based Generation Improvement Act, if the project
sponsor has elected the application of this section for the
project under section 5(b)(1) of such Act.
``(2) Inapplicability of certain provisions.--The following
provisions of this section are inapplicable to certified coal
property:
``(A) Subsection (a)(3)(D) (relating to performance
and quality standards).
``(B) The penultimate sentence of subsection (a)(3)
(relating to public utility property).''.
(c) Tax Credit Bonds.--
(1) Election.--A project sponsor that is a qualified issuer
(as defined in section 54(i)(4) of the Internal Revenue Code of
1986 (as added by paragraph (2)) may elect to issue clean
energy bonds under such section 54 for the purpose of financing
a certified project.
(2) Credit to holders of clean energy bonds.--
(A) In general.--Part IV of subchapter A of chapter
1 of the Internal Revenue Code of 1986 (relating to
credits against tax) is amended by adding at the end
the following new subpart:
``Subpart H--Nonrefundable Credit to Holders of Clean Energy Bonds
``Sec. 54. Credit to holders of clean energy bonds.
``SEC. 54. CREDIT TO HOLDERS OF CLEAN ENERGY BONDS.
``(a) Allowance of Credit.--In the case of a taxpayer who holds a
clean energy bond on a credit allowance date of such bond, which occurs
during the taxable year, there shall be allowed as a credit against the
tax imposed by this chapter for such taxable year an amount equal to
the sum of the credits determined under subsection (b) with respect to
credit allowance dates during such year on which the taxpayer holds
such bond.
``(b) Amount of Credit.--
``(1) In general.--The amount of the credit determined
under this subsection with respect to any credit allowance date
for a clean energy bond is 25 percent of the annual credit
determined with respect to such bond.
``(2) Annual credit.--The annual credit determined with
respect to any clean energy bond is the product of--
``(A) the credit rate determined by the Secretary
under paragraph (3) for the day on which such bond was
sold, multiplied by
``(B) the outstanding face amount of the bond.
``(3) Determination.--For purposes of paragraph (2), with
respect to any clean energy bond, the Secretary shall determine
daily or caused to be determined daily a credit rate which
shall apply to the first day on which there is a binding,
written contract for the sale or exchange of the bond. The
credit rate for any day is the credit rate which the Secretary
or the Secretary's designee estimates will permit the issuance
of clean energy bonds with a specified maturity or redemption
date without discount and without interest cost to the
qualified issuer.
``(4) Credit allowance date.--For purposes of this section,
the term `credit allowance date' means--
``(A) March 15,
``(B) June 15,
``(C) September 15, and
``(D) December 15.
Such term also includes the last day on which the bond is
outstanding.
``(5) Special rule for issuance and redemption.--In the
case of a bond which is issued during the 3-month period ending
on a credit allowance date, the amount of the credit determined
under this subsection with respect to such credit allowance
date shall be a ratable portion of the credit otherwise
determined based on the portion of the 3-month period during
which the bond is outstanding. A similar rule shall apply when
the bond is redeemed or matures.
``(c) Limitation Based on Amount of Tax.--
``(1) In general.--The credit allowed under subsection (a)
for any 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
part (other than subpart C thereof, relating to
refundable credits).
``(2) Carryover of unused credit.--If the credit allowable
under subsection (a) exceeds the limitation imposed by
paragraph (1) 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 taxable year.
``(d) Clean Energy Bond.--For purposes of this section--
``(1) In general.--The term `clean energy bond' means any
bond issued as part of an issue if--
``(A) the bond is issued by a qualified issuer,
``(B) 95 percent or more of the proceeds from the
sale of such issue are to be used for capital
expenditures incurred by qualified borrowers for 1 or
more qualified projects,
``(C) the qualified issuer designates such bond for
purposes of this section and the bond is in registered
form, and
``(D) the issue meets the requirements of
subsections (e) and (g).
``(2) Qualified project; special use rules.--
``(A) In general.--The term `qualified project'
means any certified coal property as determined under
section 48(c)(1) owned by a qualified borrower.
``(B) Refinancing rules.--For purposes of paragraph
(1)(B), a qualified project may be refinanced with
proceeds of a clean energy bond only if the
indebtedness being refinanced (including any obligation
directly or indirectly refinanced by such indebtedness)
was originally incurred by a qualified borrower after
the date of the enactment of this section.
``(C) Reimbursement.--For purposes of paragraph
(1)(B), a clean energy bond may be issued to reimburse
a qualified borrower for amounts paid after the date of
the enactment of this section with respect to a
qualified project, but only if prior to the payment of
such expenditure, the qualified borrower declared its
intent to reimburse such expenditure with the proceeds
of a clean energy bond.
``(D) Treatment of changes in use.--For purposes of
paragraph (1)(B), the proceeds of an issue shall not be
treated as used for a qualified project to the extent
that a qualified borrower takes any action within its
control which causes such proceeds not to be used for a
qualified project. The Secretary shall prescribe
regulations specifying remedial actions that may be
taken (including conditions to taking such remedial
actions) to prevent an action described in the
preceding sentence from causing a bond to fail to be a
clean energy bond.
``(e) Maturity Limitations.--
``(1) Duration of term.--A bond shall not be treated as a
clean energy bond if such bond is issued as part of an issue
and--
``(A) the average maturity of bonds issued as a
part of such issue, exceeds
``(B) 120 percent of the average reasonable
expected economic life of the facilities being financed
with the proceeds from the sale of such issue.
``(2) Determination of averages.--For purposes of paragraph
(1), the determination of averages of an issue and economic
life of any facility shall be determined in accordance with
section 147(b).
``(3) Ratable principal amortization required.--A bond
shall not be treated as a clean energy bond unless it is part
of an issue which provides for an equal amount of principal to
be paid by the qualified issuer during each calendar year that
the issue is outstanding.
``(f) Credit Included in Gross Income.--Gross income includes the
amount of the credit allowed to the taxpayer under this section
(determined without regard to subsection (c)) and the amount so
included shall be treated as interest income.
``(g) Special Rules Relating to Expenditures.--
``(1) In general.--An issue shall be treated as meeting the
requirements of this subsection if--
``(A) at least 95 percent of the proceeds from the
sale of the issue are to be spent for 1 or more
qualified projects within the 5-year period beginning
on the date of issuance of the clean energy bond,
``(B) a binding commitment with a third party to
spend at least 10 percent of the proceeds from the sale
of the issue will be incurred within the 6-month period
beginning on the date of issuance of the clean energy
bond or, in the case of a clean energy bond, the
proceeds of which are to be loaned to 2 or more
qualified borrowers, such binding commitment will be
incurred within the 6-month period beginning on the
date of the loan of such proceeds to a qualified
borrower, and
``(C) such projects will be completed with due
diligence and the proceeds from the sale of the issue
will be spent with due diligence.
``(2) Extension of period.--Upon submission of a request
prior to the expiration of the period described in paragraph
(1)(A), the Secretary may extend such period if the qualified
issuer establishes that the failure to satisfy the 5-year
requirement is due to reasonable cause and the related projects
will continue to proceed with due diligence.
``(3) Failure to spend required amount of bond proceeds
within 5 years.--To the extent that less than 95 percent of the
proceeds of such issue are expended within such 5-year period
(and no extension has been obtained under paragraph (2)), the
qualified issuer shall redeem all of the nonqualified bonds on
the earliest call date subsequent to the expiration of the 5-
year period. If such earliest call date is more than 90 days
subsequent to the expiration of the 5-year period, the
qualified issuer shall establish a yield-restricted defeasance
escrow within such 90 days to retire such nonqualified bonds on
the earlier of the date which is 10 years after the issue date
or the first call date. For purposes of this paragraph, the
term `nonqualified bonds' means the portion of the outstanding
bonds in an amount that, if the remaining bonds were issued on
the fifth anniversary of the date of the issuance of the issue,
at least 95 percent of the proceeds of the remaining bonds
would be used to provide qualified projects.
``(h) Special Rules Relating to Arbitrage.--
``(1) In general.--A bond which is part of an issue shall
not be treated as a clean energy bond unless, with respect to
the issue of which the bond is a part, the qualified issuer
satisfies the arbitrage rebate requirements of section 148 with
respect to gross proceeds of the issue (other than any amounts
applied in accordance with subsection (g)). For purposes of
such requirements, yield over the term of an issue shall be
determined under the principles of section 148 based on the
qualified issuer's payments of principal, interest (if any),
and fees for qualified guarantees on such issue.
``(2) Exception.--Amounts on deposit in a bona fide debt
service fund with regard to any clean energy bond are not
subject to the arbitrage rebate requirements of section 148.
``(i) Cooperative Electric Company; Qualified Energy Tax Credit
Bond Lender; Governmental Body; Qualified Borrower.--For purposes of
this section--
``(1) Cooperative electric company.--The term `cooperative
electric company' means a mutual or cooperative electric
company described in section 501(c)(12) or section
1381(a)(2)(C), or a not-for-profit electric utility which has
received a loan or loan guarantee under the Rural
Electrification Act.
``(2) Clean energy bond lender.--The term `clean energy
bond lender' means a lender which is a cooperative which is
owned by, or has outstanding loans to, 100 or more cooperative
electric companies and is in existence on February 1, 2002, and
shall include any affiliated entity which is controlled by such
lender.
``(3) Governmental body.--The term `governmental body'
means any State, territory, possession of the United States,
the District of Columbia, Indian tribal government, and any
political subdivision thereof.
``(4) Qualified issuer.--The term `qualified issuer'
means--
``(A) a clean energy bond lender,
``(B) a cooperative electric company,
``(C) a governmental body, or
``(D) the Tennessee Valley Authority.
``(5) Qualified borrower.--The term `qualified borrower'
means--
``(A) a cooperative electric company,
``(B) a governmental body, or
``(C) the Tennessee Valley Authority.
``(j) Special Rules Relating to Pool Bonds.--No portion of a pooled
financing bond may be allocable to loan unless the borrower has entered
into a written loan commitment for such portion prior to the issue date
of such issue.
``(k) Other Definitions and Special Rules.--For purposes of this
section--
``(1) Bond.--The term `bond' includes any obligation.
``(2) Pooled financing bond.--The term `pooled financing
bond' shall have the meaning given such term by section
149(f)(4)(A).
``(3) Partnership; s corporation; and other pass-thru
entities.--Under regulations prescribed by the Secretary, in
the case of a partnership, trust, S corporation, or other pass-
thru entity, rules similar to the rules of section 41(g) shall
apply with respect to the credit allowable under subsection
(a).
``(4) Bonds held by regulated investment companies.--If any
clean energy bond is held by a regulated investment company,
the credit determined under subsection (a) shall be allowed to
shareholders of such company under procedures prescribed by the
Secretary.
``(5) Treatment for estimated tax purposes.--Solely for
purposes of sections 6654 and 6655, the credit allowed by this
section to a taxpayer by reason of holding a clean energy bond
on a credit allowance date shall be treated as if it were a
payment of estimated tax made by the taxpayer on such date.
``(6) Reporting.--Issuers of clean energy bonds shall
submit reports similar to the reports required under section
149(e).
``(l) Termination.--This section shall not apply with respect to
any bond issued after December 31, 2008.''.
(B) Reporting.--Subsection (d) of section 6049 of
such Code (relating to returns regarding payments of
interest) is amended by adding at the end the following
new paragraph:
``(8) Reporting of credit on clean energy bonds.--
``(A) In general.--For purposes of subsection (a),
the term `interest' includes amounts includible in
gross income under section 54(f) and such amounts shall
be treated as paid on the credit allowance date (as
defined in section 54(b)(4)).
``(B) Reporting to corporations, etc.--Except as
otherwise provided in regulations, in the case of any
interest described in subparagraph (A), subsection
(b)(4) shall be applied without regard to subparagraphs
(A), (H), (I), (J), (K), and (L)(i) of such subsection.
``(C) Regulatory authority.--The Secretary may
prescribe such regulations as are necessary or
appropriate to carry out the purposes of this
paragraph, including regulations which require more
frequent or more detailed reporting.''.
(C) Clerical amendments.--
(i) The table of subparts for part IV of
subchapter A of chapter 1 of such Code is
amended by adding at the end the following new
item:
``subpart h. nonrefundable credit to holders of clean energy bonds.''.
(ii) Section 6401(b)(1) of such Code is
amended by striking ``and G'' and inserting
``G, and H''.
(D) Issuance of regulations.--The Secretary of
Treasury shall issue regulations required under section
54 of the Internal Revenue Code of 1986 (as added by
this paragraph) not later than 120 days after the date
of the enactment of this Act.
(E) Effective date.--The amendments made by this
paragraph shall apply to bonds issued after the date of
the enactment of this Act.
SEC. 6. QUALIFYING ADVANCED COAL PROJECTS.
(a) Requirements.--For the purpose of section 4(b), a project shall
be considered a qualifying advanced coal project that the Secretary may
certify under section 4(b) if the Secretary determines that, at a
minimum--
(1) the project uses an advanced coal-based generation
technology--
(A) in a new electric generation unit; or
(B) to retrofit or repower an existing electric
generation unit (including an existing natural gas-
fired combined cycle unit);
(2) the fuel input for the project, when completed, is at
least 75 percent coal;
(3) the applicant provides assurance satisfactory to the
Secretary that--
(A) the project is technologically feasible; and
(B) with the Federal financial incentives, the
project is economically feasible, taking into
consideration--
(i) the regulatory approvals or power
purchase contracts referred to in paragraph
(4)(A);
(ii) arrangements for supply of fuel to the
project;
(iii) contracts or other arrangements for
construction of the project facilities;
(iv) any performance guarantees to be
provided by contractors and equipment vendors;
and
(v) evidence of the availability of funds
to develop and construct the project;
(4) the applicant demonstrates that the applicant has
obtained--
(A) approval by the appropriate regulatory
commission of the recovery of the cost of the project;
or
(B) a power purchase agreement (or letter of intent
subject to subsection (b)) that has been approved by
the board of directors of, and executed by, a
creditworthy purchasing party; and
(5) except as provided in subsection (c), the applicant
demonstrates that the applicant has, or will, obtain all
project agreements and approvals.
(b) Letter of Intent.--A letter of intent described in subsection
(a)(4)(B) shall be replaced by a binding contract before a certificate
may be issued.
(c) Project Agreements and Approvals.--
(1) Definition of project agreements and approvals.--
(A) In general.--In this section, the term
``project agreements and approvals'' means--
(i) all necessary power purchase agreements
and all other contracts that the Secretary
determines are necessary to construct, finance,
and operate a project; and
(ii) all authorizations by Federal, State,
and local agencies that are required in order
to construct, operate, and recover the cost of
the project.
(B) Inclusion.--The term ``project agreements and
approvals'' includes any approvals or contracts
required under subparagraph (A) or (B) of subsection
(a)(4).
(2) Certification commitment.--
(A) In general.--If the applicant has not obtained
all agreements and approvals prior to application, the
Secretary may issue a certification commitment.
(B) Requirements.--
(i) In general.--An applicant that receives
a certification commitment shall obtain any
remaining project agreements and approvals not
later than 4 years after the issuance of the
certification commitment.
(ii) Revocation.--If all project agreements
and approvals are not obtained during the 4-
year period described in clause i), the
certification commitment is terminated without
any other action by the Secretary.
(iii) Final certificate.--No certificate
may be issued until such project agreements and
approvals are obtained.
(b) Incentives.--An application for certification shall specify
which of the incentives under section 5 the project sponsor will elect.
SEC. 7. PROCESS FOR ACTING ON APPLICATIONS.
(a) In General.--The Secretary shall act on applications for
certification under section 3 as the applications are received.
(b) Determination.--In determining whether to certify a qualifying
advanced coal project, the Secretary shall take into account any
written statement from the Governor of the State in which the project
is to be sited that the construction and operation of the project is
consistent with State environmental and energy policy.
SEC. 8. ADVANCED COAL-BASED GENERATION TECHNOLOGY.
(a) In General.--For the purposes of this Act, an electric
generation unit uses advanced coal-based generation technology if--
(1) the unit--
(A) uses integrated gasification combined cycle
technology; or
(B) has a design net heat rate of 8530 Btu/kWh (40
percent efficiency); and
(2) the vendor warrants that the unit is designed to meet
the performance requirements in the following table:
Performance Design level for project:
characteristic
SO2 (% removal)... 99% of such amount
NOx (emissions)... 0.07 lbs/MMBTU
PM* (emissions)... 0.015 lbs/MMBTU
Hg (% removal).... 90%.
(b) Design Net Heat Rate.--For purposes of this section, design net
heat rate with respect to an electric generation unit shall--
(1) be measured in Btu per kilowatt hour (higher heating
value);
(2) be based on the design annual heat input to the design
and the design annual net electrical power, fuels, and
chemicals output from the unit (determined without regard to
the cogeneration of steam by the unit);
(3) be adjusted for the heat content of the design coal to
be used by the unit--
(A) if the heat content is less than 13,500 Btu per
pound but greater than 7,000 Btu per pound, according
to the following formula: unit net heat rate x [1-
{((13,500-design coal heat content, Btu per pound)/
1,000)* 0.013}]; and
(B) if the heat content is less than or equal to
7,000 Btu per pound, according to the following
formula: unit net heat rate x [1-{((13,500-design coal
heat content, Btu per pound)/1,000)* 0.018}]; and
(4) be corrected for the site reference conditions of--
(A) elevation above sea level of 500 feet;
(B) air pressure of 14.4 pounds per square inch
absolute;
(C) temperature, dry bulb of 63 deg.F;
(D) temperature, wet bulb of 54 deg.F; and
(E) relative humidity of 55 percent.
SEC. 9. FEDERAL PROJECT COORDINATOR.
The Secretary shall designate a Federal project coordinator to
facilitate any Federal agency approvals of eligible advanced coal
generation projects.
SEC. 10. APPLICABILITY.
No technology, or level of emission reduction, solely by reason of
the use of the technology, or the achievement of the emission
reduction, by 1 or more facilities receiving assistance under this Act,
shall be considered to indicate that the technology or performance
level is--
(1) adequately demonstrated for purposes of section 111 of
the Clean Air Act (42 U.S.C. 7411);
(2) achievable for purposes of section 169 of that Act (42
U.S.C. 7479); or
(3) achievable in practice for purposes of section 171 of
that Act (42 U.S.C. 7501).
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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