Coal-to-Liquid Fuel Promotion Act of 2006 - Amends the Energy Policy Act of 2005 to add among the projects eligible for Department of Energy (DOE) loan guarantees large-scale coal-to-liquid facilities that use domestic coal resources to produce at least 10,000 barrels a day of liquid transportation fuel.
Sets forth: (1) loan guarantee limitations; and (2) a loan guarantee program for coal-to-liquid facilities.
Directs the Secretary of Energy to promulgate regulations to support the development of coal-to-liquid manufacturing facilities and associated infrastructure on DOE and other federal lands, military bases, and military installations closed or realigned under the defense base closure and realignment.
Amends the Internal Revenue Code to: (1) provide an investment tax credit for coal-to-liquid fuels projects; (2) permit taxpayer election to treat the cost of any qualified coal-to-liquid fuels process property as a deductible expense; and (3) extend the alternative fuel credit for fuel derived from coal through the Fischer-Tropsch process.
Amends the Energy Policy and Conservation Act to instruct the Secretaries of Energy and of Defense to study and report to certain congressional committees on the feasibility and suitability of maintaining coal-to-liquid products in the Strategic Petroleum Reserve.
Authorizes the Secretary Energy to construct storage facilities: (1) in the vicinity of pipeline infrastructure and at least one military base; but (2) outside the boundaries of any state on the coast of the Gulf of Mexico.
Authorizes appropriations for the Air Force Research Laboratory to continue support efforts to test, qualify, and procure synthetic fuels developed from coal for aviation jet use.
Amends federal law governing Armed Forces fuel procurement to authorize the Secretary of Defense to enter into agreements to develop and operate coal-to-liquid facilities on or near military installations.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 3325 Introduced in Senate (IS)]
109th CONGRESS
2d Session
S. 3325
To promote coal-to-liquid fuel activities.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 26, 2006
Mr. Bunning (for himself, Mr. Obama, Mr. Lugar, Mr. Burns, and Mr.
Pryor) introduced the following bill; which was read twice and referred
to the Committee on Finance
_______________________________________________________________________
A BILL
To promote coal-to-liquid fuel activities.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Coal-to-Liquid Fuel Promotion Act of
2006''.
SEC. 2. DEFINITIONS.
In this Act:
(1) Coal-to-liquid.--The term ``coal-to-liquid'' means--
(A) with respect to a process or technology, the
use of the coal resources of the United States, using
the class of chemical reactions known as Fischer-
Tropsch, to produce synthetic fuel suitable for
transportation; and
(B) with respect to a facility, the portion of a
facility related to the Fischer-Tropsch process,
Fischer-Tropsch finished fuel production, or the
capture, transportation, or sequestration of byproducts
of the use of coal at the Fischer-Tropsch facility,
including carbon emissions.
(2) Secretary.--The term ``Secretary'' means the Secretary
of Energy.
SEC. 3. COAL-TO-LIQUID FUEL LOAN GUARANTEE PROGRAM.
(a) Eligible Projects.--Section 1703(b) of the Energy Policy Act of
2005 (42 U.S.C. 16513(b)) is amended by adding at the end the
following:
``(11) Large-scale coal-to-liquid facilities (as defined in
section 2 of the Coal-to-Liquid Fuel Promotion Act of 2006),
that use coal resources of the United States to produce not
less than 10,000 barrels a day of liquid transportation
fuel.''.
(b) Authorization of Appropriations.--Section 1704 of the Energy
Policy Act of 2005 (42 U.S.C. 16514) is amended by adding at the end
the following:
``(c) Coal-to-Liquid Projects.--
``(1) In general.--There are authorized to be appropriated
such sums as are necessary to provide the cost of guarantees
for projects involving large-scale coal-to-liquid facilities
under section 1703(b)(11).
``(2) Limitations.--
``(A) In general.--No loan guarantees shall be
provided under this title for projects described in
paragraph (1) after (as determined by the Secretary)--
``(i) the tenth such loan guarantee is
issued under this title; or
``(ii) production capacity covered by such
loan guarantees reaches 100,000 barrels per day
of coal-to-liquid fuel.
``(B) Individual projects.--
``(i) In general.--A loan guarantee may be
provided under this title for any large-scale
coal-to-liquid facility described in paragraph
(1) that produces no more than 20,000 barrels
of coal-to-liquid fuel per day.
``(ii) Non-federal funding requirement.--To
be eligible for a loan guarantee under this
title, a large-scale coal-to-liquid facility
described in paragraph (1) that produces more
than 20,000 barrels of coal-to-liquid fuel per
day shall be required to provide non-Federal
funding for the proportional cost of the loan
guarantee for production that exceeds 20,000
barrels of coal-to-liquid fuel per day.''.
SEC. 4. COAL-TO-LIQUID FACILITIES LOAN PROGRAM.
(a) Definition of Eligible Recipient.--In this section, the term
``eligible recipient'' means an individual, organization, or other
entity that owns, operates, or plans to construct a coal-to-liquid
facility that will produce at least 10,000 barrels per day of coal-to-
liquid fuel.
(b) Establishment.--The Secretary shall establish a program under
which the Secretary shall provide loans, in a total amount not to
exceed $20,000,000, for use by eligible recipients to pay the Federal
share of the cost of obtaining any services necessary for the planning,
permitting, and construction of a coal-to-liquid facility.
(c) Application.--To be eligible to receive a loan under subsection
(b), an owner or operator of a coal-to-liquid facility shall submit to
the Secretary an application at such time, in such manner, and
containing such information as the Secretary may require.
(d) Non-Federal Match.--To be eligible to receive a loan under this
section, an eligible recipient shall use non-Federal funds to provide a
dollar-for-dollar match of the amount of the loan.
(e) Repayment of Loan.--
(1) In general.--To be eligible to receive a loan under
this section, an eligible recipient shall agree to repay the
original amount of the loan to the Secretary not later than 5
years after the date of the receipt of the loan.
(2) Source of funds.--Repayment of a loan under paragraph
(1) may be made from any financing or assistance received for
the construction of a coal-to-liquid facility described in
subsection (a), including a loan guarantee provided under
section 1703(b)(11) of the Energy Policy Act of 2005 (42 U.S.C.
16513(b)(11)).
(f) Authorization of Appropriations.--There is authorized to be
appropriated to carry out this section $200,000,000, to remain
available until expended.
SEC. 5. LOCATION OF COAL-TO-LIQUID MANUFACTURING FACILITIES.
The Secretary, in coordination with the head of any affected
agency, shall promulgate such regulations as the Secretary determines
to be necessary to support the development on Federal land (including
land of the Department of Energy, military bases, and military
installations closed or realigned under the defense base closure and
realignment) of coal-to-liquid manufacturing facilities and associated
infrastructure, including the capture, transportation, or sequestration
of carbon dioxide.
SEC. 6. CREDIT FOR INVESTMENT IN COAL-TO-LIQUID FUELS PROJECTS.
(a) In General.--Section 46 of the Internal Revenue Code of 1986
(relating to amount of credit) is amended by striking ``and'' at the
end of paragraph (3), by striking the period at the end of paragraph
(4) and inserting ``, and'', and by adding at the end the following new
paragraph:
``(5) the qualifying coal-to-liquid fuels project
credit.''.
(b) Amount of Credit.--Subpart E of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to rules for
computing investment credit) is amended by inserting after section 48B
the following new section:
``SEC. 48C. QUALIFYING COAL-TO-LIQUID FUELS PROJECT CREDIT.
``(a) In General.--For purposes of section 46, the qualifying coal-
to-liquid fuels project credit for any taxable year is an amount equal
to 20 percent of the qualified investment for such taxable year.
``(b) Qualified Investment.--
``(1) In general.--For purposes of subsection (a), the
qualified investment for any taxable year is the basis of
property placed in service by the taxpayer during such taxable
year which is part of a qualifying coal-to-liquid fuels
project--
``(A)(i) the construction, reconstruction, or
erection of which is completed by the taxpayer, or
``(ii) which is acquired by the taxpayer if the
original use of such property commences with the
taxpayer, and
``(B) with respect to which depreciation (or
amortization in lieu of depreciation) is allowable.
``(2) Applicable rules.--For purposes of this section,
rules similar to the rules of subsection (a)(4) and (b) of
section 48 shall apply.
``(c) Definitions.--For purposes of this section--
``(1) Qualifying coal-to-liquid fuels project.--The term
`qualifying coal-to-liquid fuels project' means any domestic
project which--
``(A) employs the Fischer-Tropsch process to
produce at least 10,000 barrels per day of
transportation grade liquid fuels from coal (including
any property which allows for the capture,
transportation, or sequestration of by-products
resulting from such process, including carbon
emissions), and
``(B) any portion of the qualified investment in
which is certified under the qualifying coal-to-liquid
program as eligible for credit under this section in an
amount (not to exceed $200,000,000) determined by the
Secretary.
``(2) Coal.--The term `coal' means any carbonized or
semicarbonized matter, including peat.
``(d) Qualifying Coal-to-Liquid Fuels Project Program.--
``(1) In general.--The Secretary, in consultation with the
Secretary of Energy, shall establish a qualifying coal-to-
liquid fuels project program to consider and award
certifications for qualified investment eligible for credits
under this section to 10 qualifying coal-to-liquid fuels
project sponsors under this section. The total qualified
investment which may be awarded eligibility for credit under
the program shall not exceed $2,000,000,000.
``(2) Period of issuance.--A certificate of eligibility
under paragraph (1) may be issued only during the 10-fiscal
year period beginning on October 1, 2006.
``(3) Selection criteria.--The Secretary shall not make a
competitive certification award for qualified investment for
credit eligibility under this section unless the recipient has
documented to the satisfaction of the Secretary that--
``(A) the award recipient is financially viable
without the receipt of additional Federal funding
associated with the proposed project,
``(B) the recipient will provide sufficient
information to the Secretary for the Secretary to
ensure that the qualified investment is spent
efficiently and effectively,
``(C) a market exists for the products of the
proposed project as evidenced by contracts or written
statements of intent from potential customers,
``(D) the fuels identified with respect to the
gasification technology for such project will comprise
at least 90 percent of the fuels required by the
project for the production of transportation grade
liquid fuels,
``(E) the award recipient's project team is
competent in the construction and operation of the
Fischer-Tropsch process, with preference given to those
recipients with experience which demonstrates
successful and reliable operations of such process, and
``(F) the award recipient has met other criteria
established and published by the Secretary.
``(e) Denial of Double Benefit.--No deduction or other credit shall
be allowed with respect to the basis of any property taken into account
in determining the credit allowed under this section.''.
(c) Conforming Amendments.--
(1) Section 49(a)(1)(C) of the Internal Revenue Code of
1986 is amended by striking ``and'' at the end of clause (iii),
by striking the period at the end of clause (iv) and inserting
``, and'', and by adding after clause (iv) the following new
clause:
``(v) the basis of any property which is
part of a qualifying coal-to-liquid fuels
project under section 48C.''.
(2) The table of sections for subpart E of part IV of
subchapter A of chapter 1 of such Code is amended by inserting
after the item relating to section 48B the following new item:
``48C. Qualifying coal-to-liquid fuels project credit.''.
(d) Effective Date.--The amendments made by this section shall
apply to periods after the date of the enactment of this Act, under
rules similar to the rules of section 48(m) of the Internal Revenue
Code of 1986 (as in effect on the day before the date of the enactment
of the Revenue Reconciliation Act of 1990).
SEC. 7. TEMPORARY EXPENSING FOR EQUIPMENT USED IN COAL-TO-LIQUID FUELS
PROCESS.
(a) In General.--Part VI of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
179D the following new section:
``SEC. 179E. ELECTION TO EXPENSE CERTAIN COAL-TO-LIQUID FUELS
FACILITIES.
``(a) Treatment as Expenses.--A taxpayer may elect to treat the
cost of any qualified coal-to-liquid fuels process property as an
expense which is not chargeable to capital account. Any cost so treated
shall be allowed as a deduction for the taxable year in which the
expense is incurred.
``(b) Election.--
``(1) In general.--An election under this section for any
taxable year shall be made on the taxpayer's return of the tax
imposed by this chapter for the taxable year. Such election
shall be made in such manner as the Secretary may by
regulations prescribe.
``(2) Election irrevocable.--Any election made under this
section may not be revoked except with the consent of the
Secretary.
``(c) Qualified Coal-to-Liquid Fuels Process Property.--The term
`qualified coal-to-liquid fuels process property' means any property
located in the United States--
``(1) which employs the Fischer-Tropsch process to produce
transportation grade liquid fuels from coal (including any
property which allows for the capture, transportation, or
sequestration of by-products resulting from such process,
including carbon emissions),
``(2) the original use of which commences with the
taxpayer,
``(3) the construction of which--
``(A) except as provided in subparagraph (B), is
subject to a binding construction contract entered into
after the date of the enactment of this section and
before January 1, 2011, but only if there was no
written binding construction contract entered into on
or before such date of enactment, or
``(B) in the case of self-constructed property,
began after the date of the enactment of this section
and before January 1, 2011, and
``(4) which is placed in service by the taxpayer after the
date of the enactment of this section and before January 1,
2016.
``(d) Election to Allocate Deduction to Cooperative Owner.--If--
``(1) a taxpayer to which subsection (a) applies is an
organization to which part I of subchapter T applies, and
``(2) one or more persons directly holding an ownership
interest in the taxpayer are organizations to which part I of
subchapter T apply,
the taxpayer may elect to allocate all or a portion of the deduction
allowable under subsection (a) to such persons. Such allocation shall
be equal to the person's ratable share of the total amount allocated,
determined on the basis of the person's ownership interest in the
taxpayer. The taxable income of the taxpayer shall not be reduced under
section 1382 by reason of any amount to which the preceding sentence
applies.
``(e) Basis Reduction.--
``(1) In general.--For purposes of this title, if a
deduction is allowed under this section with respect to any
qualified coal-to-liquid fuels process property, the basis of
such property shall be reduced by the amount of the deduction
so allowed.
``(2) Ordinary income recapture.--For purposes of section
1245, the amount of the deduction allowable under subsection
(a) with respect to any property which is of a character
subject to the allowance for depreciation shall be treated as a
deduction allowed for depreciation under section 167.
``(f) Application With Other Deductions and Credits.--
``(1) Other deductions.--No deduction shall be allowed
under any other provision of this chapter with respect to any
expenditure with respect to which a deduction is allowed under
subsection (a) to the taxpayer.
``(2) Credits.--No credit shall be allowed under section 38
with respect to any amount for which a deduction is allowed
under subsection (a).
``(g) Reporting.--No deduction shall be allowed under subsection
(a) to any taxpayer for any taxable year unless such taxpayer files
with the Secretary a report containing such information with respect to
the operation of the property of the taxpayer as the Secretary shall
require.''.
(b) Conforming Amendments.--
(1) Section 1016(a) of the Internal Revenue Code of 1986 is
amended by striking ``and'' at the end of paragraph (36), by
striking the period at the end of paragraph (37) and inserting
``, and'', and by adding at the end the following new
paragraph:
``(38) to the extent provided in section 179E(e)(1).''.
(2) Section 1245(a) of such Code is amended by inserting
``179E,'' after ``179D,'' both places it appears in paragraphs
(2)(C) and (3)(C).
(3) Section 263(a)(1) of such Code is amended by striking
``or'' at the end of subparagraph (J), by striking the period
at the end of subparagraph (K) and inserting ``, or'', and by
inserting after subparagraph (K) the following new
subparagraph:
``(L) expenditures for which a deduction is allowed
under section 179E.''.
(4) Section 312(k)(3)(B) of such Code is amended by
striking ``or 179D'' each place it appears in the heading and
text and inserting ``179D, or 179E''.
(5) The table of sections for part VI of subchapter B of
chapter 1 of such Code is amended by inserting after the item
relating to section 179D the following new item:
``Sec. 179E. Election to expense certain coal-to-liquid fuels
facilities.''.
(c) Effective Date.--The amendments made by this section shall
apply to properties placed in service after the date of the enactment
of this Act.
SEC. 8. EXTENSION OF ALTERNATIVE FUEL CREDIT FOR FUEL DERIVED FROM COAL
THROUGH THE FISCHER-TROPSCH PROCESS.
(a) Alternative Fuel Credit.--Paragraph (4) of section 6426(d) of
the Internal Revenue Code of 1986 is amended to read as follows:
``(4) Termination.--This subsection shall not apply to--
``(A) any sale or use involving liquid fuel derived
from coal (including peat) through the Fischer-Tropsch
process for any period after September 30, 2020,
``(B) any sale or use involving liquified hydrogen
for any period after September 30, 2014, and
``(C) any other sale or use for any period after
September 30, 2009.''.
(b) Payments.--
(1) In general.--Paragraph (5) of section 6427(e) of the
Internal Revenue Code of 1986 is amended by striking ``and''
and the end of subparagraph (C), by striking the period at the
end of subparagraph (D) and inserting ``, and'', and by adding
at the end the following new subparagraph:
``(E) any alternative fuel or alternative fuel
mixture (as so defined) involving liquid fuel derived
from coal (including peat) through the Fischer-Tropsch
process sold or used after September 30, 2020.''.
(2) Conforming amendment.--Section 6427(e)(5)(C) of such
Code is amended by striking ``subparagraph (D)'' and inserting
``subparagraphs (D) and (E)''.
SEC. 9. STRATEGIC PETROLEUM RESERVE.
(a) Development, Operation, and Maintenance of Reserve.--Section
159 of the Energy Policy and Conservation Act (42 U.S.C. 6239) is
amended--
(1) by redesignating subsections (f), (g), (j), (k), and
(l) as subsections (a), (b), (e), (f), and (g), respectively;
and
(2) by inserting after subsection (b) (as redesignated by
paragraph (1)) the following:
``(c) Study of Maintaining Coal-to-Liquid Products in Reserve.--Not
later than 1 year after the date of enactment of the Coal-to-Liquid
Fuel Promotion Act of 2006, the Secretary and the Secretary of Defense
shall--
``(1) conduct a study of the feasibility and suitability of
maintaining coal-to-liquid products in the Reserve; and
``(2) submit to the Committee on Energy and Natural
Resources and the Committee on Armed Services of the Senate and
the Committee on Energy and Commerce and the Committee on Armed
Services of the House of Representatives a report describing
the results of the study.
``(d) Construction of Storage Facilities.--As soon as practicable
after the date of enactment of the Coal-to-Liquid Fuel Promotion Act of
2006, the Secretary may construct 1 or more storage facilities--
``(1) in the vicinity of pipeline infrastructure and at
least 1 military base; but
``(2) outside the boundaries of any State on the coast of
the Gulf of Mexico.''.
(b) Petroleum Products for Storage in Reserve.--Section 160 of the
Energy Policy and Conservation Act (42 U.S.C. 6240) is amended--
(1) in subsection (a)--
(A) in paragraph (1), by inserting a semicolon at
the end;
(B) in paragraph (2), by striking ``and'' at the
end;
(C) in paragraph (3), by striking the period at the
end and inserting ``; and''; and
(D) by adding at the end the following:
``(4) coal-to-liquid products (as defined in section 2 of
the Coal-to-Liquid Fuel Promotion Act of 2006), as the
Secretary determines to be appropriate, in a quantity not to
exceed 20 percent of the total quantity of petroleum products
in the Reserve.'';
(2) in subsection (b), by redesignating paragraphs (3)
through (5) as paragraphs (2) through (4), respectively; and
(3) by redesignating subsections (f) and (h) as subsections
(d) and (e), respectively.
(c) Conforming Amendments.--Section 167 of the Energy Policy and
Conservation Act (42 U.S.C. 6247) is amended--
(1) in subsection (b)--
(A) by redesignating paragraphs (2) and (3) as
paragraphs (1) and (2), respectively; and
(B) in paragraph (2) (as redesignated by
subparagraph (A)), by striking ``section 160(f)'' and
inserting ``section 160(e)''; and
(2) in subsection (d), in the matter preceding paragraph
(1), by striking ``section 160(f)'' and inserting ``section
160(e)''.
SEC. 10. AUTHORIZATION TO CONDUCT RESEARCH, DEVELOPMENT, TESTING, AND
EVALUATION OF ASSURED DOMESTIC FUELS.
Of the amount authorized to be appropriated for the Air Force for
research, development, testing, and evaluation, $10,000,000 may be made
available for the Air Force Research Laboratory to continue support
efforts to test, qualify, and procure synthetic fuels developed from
coal for aviation jet use.
SEC. 11. PROCUREMENT OF UNCONVENTIONAL FUELS BY THE DEPARTMENT OF
DEFENSE.
Section 2398a of title 10, United States Code, is amended--
(1) in subsection (b)--
(A) by striking ``The Secretary'' and inserting the
following:
``(1) In general.--The Secretary''; and
(B) by adding at the end the following:
``(2) Coal-to-liquid production facilities.--
``(A) In general.--The Secretary of Defense may
enter into contracts or other agreements with private
companies or other entities to develop and operate
coal-to-liquid facilities (as defined in section 2 of
the Coal-to-Liquid Fuel Promotion Act of 2006) on or
near military installations.
``(B) Considerations.--In entering into contracts
and other agreements under subparagraph (A), the
Secretary shall consider land availability, testing
opportunities, and proximity to raw materials.'';
(2) in subsection (d), by striking ``1 or more years'' and
inserting ``up to 25 years''; and
(3) by adding at the end the following:
``(f) Authorization of Appropriations.--There are authorized to be
appropriated such sums as are necessary to carry out this section.''.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S5390-5391)
Read twice and referred to the Committee on Finance.
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