Analysis by Shirley Neff, Center for Energy Marine Transportation and Public Policy, School of International Public Affairs, Columbia University
The Energy Policy Act of 2005
On July 29, 2005, after a four and a half year odyssey, the Congress finally passed an energy bill and sent it to the President for his signature. (Details on the House and Senate votes are at the end of this document.) A copy of the final conference report of H.R. 6, The Energy Policy Act of 2005, may be found at http://energy.senate.gov/public/. A copy of the final public law will eventually be available at http://thomas.loc.gov/.
[Compilations of the statutes amended by the bill may be downloaded from the House Energy and Commerce Committee website at http://energycommerce.house.gov/publications.htm.
The following is a summary of some of the high profile and less high profile but significant issues addressed during the long debate. (It is not an exhaustive summary and undoubtedly omits some key provisions.) Some of these issues were not included in the final bill, but remain in play in one form or another. The table of contents of the final bill is 19 pages, so this is a very limited effort at touching on some of the highlights. There are no definitive analyses of the bill available yet from the Congressional Research Service (or the exhausted Committee staff.) The tax provisions follow the authorizing provisions.
Several points to bear in mind, first the Department of Energy has unlimited authority under the Department of Energy Organization Act, P.L. 95-91 (Aug. 4, 1977), to carryout energy research, development and demonstration programs. Authorizations for loan guarantees, various mandates for specific actions and the direct spending programs are significant changes to current law. There are billions of dollars of authorizations for federal R&D and other programs included in the 1724 pages of the conference report. However, authorizations are not guarantees of funding. Availability of funding will be determined by the Congress in subsequent annual appropriations. (The current budget deficit and efforts to cut discretionary spending do not bode well for funding.) Only the tax measures in Title XIII and several "direct spending" programs are guaranteed funding. In other words, the great game now proceeds to the next stage - lobbying for appropriations, and extensions of the tax credits....
Arctic National Wildlife Refuge (ANWR): The bill does not open ANWR to oil and gas leasing. Opening ANWR is still a live issue in the pending budget reconciliation bill.
Auto Fuel Efficiency: No new fuel efficiency standards are required; the National Highway Traffic Safety Administration is required to do a one year study on the effects of fuel efficiency standards on the auto industry, gasoline supply, and air quality. (Sec. 773) A provision in the Senate passed bill requiring the President "to develop and implement measures to conserve petroleum in end-uses throughout the economy of the United States sufficient to reduce total demand for petroleum in the United States by 1,000,000 barrels per day from the amount projected for calendar year 2015" was dropped from the final conference report. An array of tax credits are offered for the purchase of certain efficient and vehicles.
MTBE and Oxygen Mandate: The oxygen requirement for reformulated fuels imposed under the Clean Air Act Amendments (CAAA) of 1990 is repealed. (Sec. 1504) After considerable controversy and efforts at a compromise, the final bill does not provide any liability protection from lawsuits by cities and others for MTBE contaminated water supplies. However, parties can seek to move any such lawsuits to federal district court. This is viewed as a significant, although limited, victory for the petroleum sector.
Ethanol: A national renewable fuel standard is established requiring that gasoline sold in the United States contain a specified volume of biofuels (mostly corn ethanol). (Title XV) The annual volume of renewable fuels would increase from 4.0 billion gallons per year in 2006 to 7.5 billion gallons in 2012. The volume would be allocated to all refiners, marketers and importers on a pro rata basis. A credit trading scheme will be established. The liability protection for ethanol that had been in the Senate passed bills since 2002, totally under the press's radar despite the focus on the MTBE provision, was dropped when the MTBE deal fell apart. [Just as in the 1990 CAAA, the air quality issues associated with blending low levels of ethanol in reformulated gasoline were disregarded. See http://www.pirinc.org/download/congressionalactiontomandateMTBE.pdf]
Renewable Portfolio Standard (RPS): The bill did not include a federal requirement that utilities purchase a certain percentage of electricity from renewable sources. An RPS has been included in all Senate passed energy bills since 2002. There is, however, a requirement that the federal government purchase an increasing portion of its power needs from renewable sources - 3% in fiscal year 2007 increasing to 7.5% in 2013. (Sec. 203) A federal purchase requirement should be a catalyst for the federal government to establish a standardized credit trading regime to facilitate a national renewable energy market.
Climate Change: No limits on greenhouse gases, new inventory or credit trading schemes are included. A new cabinet-level advisory committee is established to develop a national policy to address climate change and to promote technologies to reduce greenhouse gas emissions. Various authorizations for research and demonstration projects for climate friendly technologies are included. (Titles XVI and XVII)
CNOOC bid for Unocal: The bill requires the Energy, Defense, and Homeland Security departments to conduct a study into the national security implications of China's increasing energy requirements and to assess its impact on the global market and U.S. foreign policy. This provision was included to slow down the acquisition of Unocal by the Chinese oil company CNOOC. While this was driven by the proposed acquisition, the Congress was reacting at least in part to pent up frustration with the lack of reciprocity in non-tariff matters on the part of the Chinese. (Sec. 1837)
Energy Efficiency
Appliance Standards: The bill includes energy efficiency standards for 15 new products, including commercial refrigeration, commercial heaters, ceiling fans, traffic signals, and other home and business products. (The American Council for an Energy Efficient Economy has done extensive analysis of the impact of the various efficiency provisions. (http://www.aceee.org/)
Daylight Savings Time (DST): Effective in 2007, DST will begin the second Sunday in March (instead of the first Sunday in April) continuing through the first Sunday in November (instead of the last Sunday in October). This was opposed by a number of groups concerned about children going to school in the dark and the lack of synchronization with foreign airlines, for example. In the end, the conferees shortened the original House passed change. (Sec. 110)
Renewable Energy
Hydroelectricity: The bill includes a major reform of the federal licensing procedure for hydroelectric dams. The modifications allow an applicant to propose an alternative to mandatory conditions placed on hydropower licenses by federal resource agencies (Departments of Interior, Commerce and Agriculture). If a proposed alternative meets the statutory environmental and resource protection standards the alternative would be accepted. The bill also includes incentives for improving the efficiency of existing hydroelectric dams and for modifying existing dams to produce electricity. Hydro licensing reform has been a goal of the industry for years, but has been highly controversial with the environmental community. (Subtitle C)
Oil and Gas
Coastal Impact Assistance Program: The measure provides $1 billion - $250 million per year for fiscal years 2007 through 2010 to six coastal energy-producing states: Louisiana, Texas, Mississippi, Alabama, Alaska and California. Each state would be allocated a share based on the oil and gas production off its coast, with Louisiana standing to receive 54 percent, or $135 million per year. This is direct spending not subject to appropriations. The coastal states receive one third of the royalties from federal production in the first three miles beyond the state's seaward boundary. The states with offshore production have argued that the environmental pressures and associated with infrastructure needs warrant a greater share of the federal royalties. Royalties from onshore federal production are shared 50-50, prior to deducting administrative costs, with the state where the production occurs. This has been the top priority of Senator Mary Landrieu (D-LA) since she was elected to the Senate in 1996. (Sec. 384)
Inventory of Offshore Oil and Gas Resources: The bill requires an inventory and analysis of offshore oil and gas resources. (Sec. 357) The inventory covers all areas beneath the U.S. Outer Continental Shelf (OCS) and authorizes acquisition of seismic data. This provision met with strong resistance from many, but not all, coastal state members of Congress. This could be the first real assessment of offshore resources in nearly 20 years using current technology or it could just set off another round of OCS moratoria. The OCS leasing moratoria off the east and west coasts of the U.S. were the result of limitations imposed on the Minerals Management Service during the annual appropriations process until the first President Bush declared a broad moratoria in 1990.
Royalty Relief for Oil and Gas Leases: Various provisions grant Interior Department authority to reduce royalty payments to maintain or stimulate oil and gas development offshore and for marginal wells. (Title III Subtitle E)
Liquified Natural Gas (LNG): The bill contains a clarification of the authority of the Federal Energy Regulatory Commission (FERC), instead of state agencies, to approve the construction, expansion or operation of any facility that imports or processes liquefied natural gas. (Sec. 311) The measure directs the FERC to consult with state governments
about the safety of sites for liquefaction or gasification facilities.
Ultra-Deepwater and Unconventional Onshore Natural Gas and Other Petroleum Research and Development Program: The bill establishes a research program to be managed by a non-profit consortium selected by the Secretary of Energy to manage oil and gas R&D. $50 million of federal oil and gas royalty revenues will be dedicated to the program for fiscal years 2007 to 2017. The funds are direct spending, not subject to appropriation. (Title IX, Subtitle J)
Coal - Title IV
Clean Power Initiative: The bill establishes the parameters of a new clean coal technology program, co-funded by the government and industry. The bill authorizes $200 million annually for fiscal years 2006 through 2014 for the initiative. It specifically requires that 70% of the funds for any project be used for coal gasification or other advanced technologies that produce a concentrated stream of carbon dioxide. $125 million is authorized for an experimental clean-coal plant as well as loan guarantees for
various demonstration projects. (Subtitles A and B) This program is subject to appropriation, but given the support for coal in the Congress and the Administration it will likely be well funded.
Nuclear Energy and Related Issues (Title VI)
Insurance: The Price Anderson Act limiting liability for nuclear power-plant accidents is reauthorized through 2025. The law requires nuclear plant operators to purchase insurance for up to $10 billion in damages with the federal government responsible for any additional damages. (Subtitle A)
Safety, Security and Waste Disposal: The bill includes a number of measures aimed at enhancing the security of commercial nuclear reactors, including greater cooperation between the Nuclear Regulatory Commission (NRC) and the Department of Homeland Security on siting of new facilities. Tighter security and background checks are required for personnel at nuclear facilities; security guards would be allowed to carry firearms at the NRC's discretion. The Department of Energy is directed to report to Congress within one year with a long-term plan for handling greater-than-Class C low-level radioactive waste and a short-term plan on continuing recovery of sealed radioactive sources pending the availability of a permanent disposal facility. (Subtitles B and D)
Enriched Uranium Sales: The sale and export of highly enriched uranium is authorized for medical isotope production to Canada, Belgium, France, Germany, and the Netherlands. (Sec. 630)
Next Generation Nuclear Plant Project: A $1.25 billion fund is authorized for a prototype Next Generation Nuclear Plant project at Idaho National Laboratory to produce both electricity and hydrogen. The bill also authorizes government support to offset the financial impact of delays beyond industry's control during construction and at the start of operations for as many as six new nuclear power reactors. (Subtitle C) Funding is authorized for the Advanced Fuel Cycle Initiative - research and development aimed at developing advanced nuclear power plants, more proliferation-resistant nuclear fuel and improved methods for managing used nuclear fuel. (Sec. 953)
Electricity - Title XII
Changes to federal electricity authorities are the most significant provisions of the bill. The following is an extremely abbreviated listing of a few of the provisions.
Reliability: The bill establishes mandatory electric reliability rules for all market participants and creates a self-regulating reliability organization, subject to oversight by the FERC oversight. The existing North American Electric Reliability Council (NERC) is a voluntary organization.
Transmission siting: FERC is granted limited backstop authority to site electric transmission facilities located in national interest electric transmission corridors if the states cannot or will not act. The bill contains a number of measures to streamline permitting, including establishing DOE as the lead agency for permit processing. (Subtitle B)
PUHCA Repeal: The bill repeals the Public Utility Holding Company Act (PUHCA) and transfers consumer protection authorities from the Securities and Exchange Commission (SEC) to FERC and the states. FERC is given authority on electric utility merger reviews and additional enforcement authorities. (Subtitles F and G)
PURPA Reform: The bill establishes market conditions necessary to eliminate the Public Utility Regulatory Policies Act's (PURPA) mandatory purchase obligation, and revises
the criteria for new qualifying facilities seeking to sell power under the mandatory purchase obligation.
Summary of Key Energy Tax Provisions
The following is a summary of some of the most significant and/or publicized tax measures included in Title XIII of H.R. 6. The net cost of the tax title of the bill is $11.525 billion over ten years, $14.553 billion in tax expenditures and $3.028 billion in revenue raisers. Most, but not all, of the tax incentives do not take affect until January 1, 2006. There are varying expiration periods and means of qualification as well. In order to hold down costs, several provisions, the clean coal and advanced nuclear incentives for example, will only be available for a limited number of facilities.
For more detail on the complete tax title including a description of current law see the "Description and Technical Explanation of the Conference Agreement" prepared by the staff of the Joint Committee on Taxation (JCT) at http://www.house.gov/jct/x-60-05.pdf. For cost estimates of the various tax provisions see http://www.house.gov/jct/x-59-05.pdf. Refer also to Title XIII of H.R. 6 for the actual text of the amendments to the code.
The costs associated with the various tax provisions are estimated over five and ten years. There are some provisions involving changes to depreciation schedules, for example, that reduce federal revenues in the early years but increase revenues in the out years. Only the revenue effect during the budget window of 10 years is by the JCT. The documents prepared by the JCT can be a little confusing since the cost estimates for various line items are sometimes lumped together in one cost estimate. Adding to the confusion, the JCT line items do not necessarily line up with the separate provisions in the amendment to the code as found in the actual bill text of H.R. 6.
Oil and Gas Production and Distribution and Refining
Upstream. Geological and geophysical expenditures for exploration in the U.S. may be amortized over two years. ($974 mil.) Natural gas gathering lines treated can be depreciated over seven years. ($16 mil.) Both of these changes have generally been supported by the Department of the Treasury since the Clinton Administration.
Refinery upgrades. Allows expensing of 50% of refinery investments which increase the capacity of an existing refinery by at least 5 percent or increase the throughput of qualified fuels (oil shale and tar sands) by at least 25 percent. ($406 mil.) This is a significant expansion over previous versions of the energy bill which only included incentives for small refiners.
Natural gas distribution lines. Tax depreciation of natural gas distribution lines has been reduced from 20 to 15 years for property placed in service between April 11, 2005 and April 11, 2011. ($1.019 bil.)
Electricity Transmission
Transmission expansion. Shortens depreciation schedule for 69 kVa and higher transmission property to 15 years from 20 years. ($1.239) Extends a recent tax change that modifies the 15% limitation on asset investments by electric cooperatives for open access transmission of electricity. ($277 mil.)
Transco incentive. Reduces the tax penalty associated with transferring transmission assets to an independent transmission company through 2007 by allowing an 8 year delay in tax payments. (Raises $19 mil. since this provision is expected to result in sales and thereby tax revenues that would not otherwise occur.)
Coal
Clean coal incentives. Three new investment tax credits are created for clean coal facilities: a 15 percent and 20 percent investment tax credit for clean coal facilities producing electricity; and a 20 percent credit for industrial gasification projects. Integrated gasification combined cycle (IGCC) projects get a 20 percent investment tax credit and other advanced coal-based projects that produce electricity get a 15 percent credit. There is a limit of $800 million for IGCC projects and up to $500 million for other advanced coal-based technologies and up to $350 million for industrial gasification. Unlike other generation incentives, projects have to apply and be granted the credits in order to keep the cost of the program under the absolute caps. ($1.612 bil.)
Air pollution control equipment. This provision provides a seven year recovery period (currently 15 years) for the cost of air pollution control equipment installed at a coal fired power plant which was not in operation before January 1, 1976. ($1.147 bil.)
Nuclear
Treatment of decommissioning costs. Modifies an outdated rule that required nuclear decommissioning funds to be collected under cost of service rates. ($1.293 bil.) This penalized nuclear plants that sell power under competitive contracts today.
New nuclear plant incentive. Establishes a tax credit of 1.8 cents per kwh for the first 8 years of production from new nuclear power facilities. Facilities in service prior after the date of enactment and prior to January 1, 2021. To receive the credit, a facility has to apply for and receive an allocation of the total national cap of 6000 MW. ($278 mil.)
Renewable and Distributed Electricity Generation
Sec. 45 renewable generation credit. The renewable electricity production credit (Sec. 45) is extended for two years to cover facilities placed-in-service through December 31, 2007. Facilities include wind, biomass, geothermal, landfill gas, and small irrigation power facilities and municipal solid waste (MSW) which includes trash combustion and landfill gas facilities. Incremental generation from efficiency improvements at existing hydroelectric facilities and electrification of nonhydroelectric dams and coal produced on Indian lands are added as new qualifying energy resources. The credit applies to the first ten years of production; for most technologies the credit is 1.9 cents per kwh generated. (Open loop biomass (biomass not specifically grown as an energy crop), small irrigation, MSW and hydro receive .9 cents per kwh.) Rural Electric Cooperatives also become eligible for the credit. Indian coal receives a credit of $1.50 per ton for the first four years of production and $2.00 per ton for the last three years of the seven year period. ($2.747 bil.) The credits are indexed for inflation.
Clean Renewable Energy Bonds ("CREBs"). A new category of bonds are authorized for facilities qualifying for tax credit under Section 45. Qualified issuers include governmental bodies (including Indian tribal governments) and mutual or cooperative electric companies. ($411 mil.)
Residential incentives. A new 30% income tax credit is available for residential investments in fuel cells, photovoltaic systems and solar water heating property (not for used swimming pools and hot tubs). The credit is capped at $2000. ($31 mil.)
Business incentives. The credit for commercial installation of solar systems is increased to 30%, from the current 10%, for two years. A new 30% credit for business installation of qualified fuel cells and 10% credit for stationary microturbine power plants is available for two years. ($222 mil.)
Energy Efficiency
Residential incentives. Various investment tax credits for improvements to existing building efficiency and for purchase of efficient equipment, including furnaces, water heaters and other property. ($556 mil.) See bill text or tax summary referenced above for details.
Energy efficient commercial building deduction. The provision allows a deduction for investments in equipment to improve energy efficiency at commercial buildings to reduce annual energy and power consumption by 50 percent. ($243 mil.)
Credit for manufacture of efficient appliances. A set of tax credits for manufacturers of energy efficient dishwashers, clothes washers, and refrigerators is also included. ($180 mil.) (This provision was the result of a compromise between the manufacturers and the efficiency advocates during a rulemaking on new efficiency standards.)
Business credit for new efficient home construction. Provides contractor credits for new home construction meeting specific standards. ($28 mil.)
Vehicles and Alternative Fuels
Vehicle incentives. There are a complex set of incentives for purchases of fuel cell, hybrid and lean-burn and alternative fuel vehicles, including medium and heavy duty trucks. The incentives are not effective until 2006. ($874 mil.)
Alternative vehicle fuels. There is a 30% credit for installation of alternative fuel refueling property at businesses or homes. This includes E85 (85% ethanol/15% gasoline blend), compressed natural gas, liquefied natural gas, liquefied petroleum gas, and hydrogen and any mixture of diesel at least 20% biodiesel. ($71 mil.) Small producers of biodiesel and ethanol receive a supplemental tax credit of 10 cents per gallon. ($181 mil.) Extension through 2008 of the income tax credit, excise tax credit and payment provisions for biodiesel. ($194 mil.)
Taxes on the Oil Sector to Raise Revenues
The tax for the Oil Spill Liability Trust Fund is reinstated. (Raises 2.508 bil.)
The tax for the Leaking Underground Storage Tank Trust (LUST ) Fund is extended through September 30, 2011. (Raises $349 mil.)
Analysis by the Republican Policy Committee
NOTEWORTHY July 28, 2005 Highlights of the Conference Report to Accompany H.R. 6 S Energy Policy Act of 2005 On July 27, the Conference Report to Accompany H.R. 6, H.R. Rept. 109-190 was filed. C On July 28, the House passed the Conference Report to accompany H.R. 6, the Energy Policy Act of 2005, by a vote of 275-156. C The Energy Policy Act intends to provide a comprehensive national energy policy that balances domestic energy production with conservation and efficiency efforts to enhance the security of the United States and decrease its dependence on foreign sources of oil. • The bill contains numerous production incentives for oil and gas exploration, and establishes programs to maintain the nation’s coal production capacity. • The bill fully funds President Bush’s Clean Coal Power Initiative and extends Price- Anderson Act liability protections for Nuclear Regulatory Commission licensees, Department of Energy contractors, and non-profit educational institutions for 20 years, and mandates the sell of 7.5 billion gallons of ethanol per year by 2012. • The bill includes an electricity title, which terminates the Federal Energy Regulatory Commission's (FERC) standard market design rulemaking, amends the Public Utility Regulatory Policies Act of 1978; repeals the Public Utility Holding Company Act of 1935; and includes utility merger and acquisition oversight authority for FERC. 2 Highlights H.R. 6 contains 1724 pages and is divided into 18 titles. In addition to the points mentioned on page 1 of this Notice, highlights of key provisions are as follows: • Includes an Electricity Title that would reduce regulatory uncertainty, promote transmission infrastructure development and security, and increase consumer protections. It protects transmission access for native load customers and authorizes Federal Energy Regulatory Commission (FERC) to exercise limited jurisdiction over unregulated transmitting utilities (like municipals and cooperatives) to ensure open access to the transmission grid. • Authorizes a 20-year extension of the Price-Anderson Act; increases the maximum annual assessment under the standard deferred premium on Nuclear Regulatory Commission (NRC) licensees from $10 million to $15 million; increases the overall cap from $63 million to $95.8 million; and adjusts for inflation in the future. It sets the total amount of indemnification for Department of Energy (DOE) contractors at $10 billion, and increases indemnification for DOE contractors engaged in nuclear activities outside the U.S. from $100 million to $500 million. • Authorizes the President’s Clean Coal Power Initiative, which provides $200 million annually to be applied to clean coal research in coal-based gasification technologies. • Assists Indian Tribes in the development of Indian energy resources by increasing the Tribes’ internal capacity to develop their own resources by providing grants and technical assistance and streamlining the Tribal leasing process so that outside parties have more incentive to partner with Tribes in developing energy resources. • Authorizes basic research, development, and demonstration activities related to hydrogen energy, fuel cells, and related infrastructure. • The bill includes a Renewable Fuel Standard and a climate provision, but does not include a Renewable Portfolio Standard and does not impose additional fuel efficiency standards on passenger vehicles, light trucks, sport utility vehicles, or minivans. 3 Bill Provisions Title I – Energy Efficiency Subtitle A – Federal Programs The conference report establishes requirements to reduce energy use in Federal buildings and energy and water use in Congressional buildings. Requires Federal buildings to improve energy efficiency by 20 percent over 2004 levels by 2015. Requires Federal buildings to install advanced metering devices to measure energy use and to assist in devising plans to reduce energy costs and consumption, and mandates procurement of energy efficient products. Extends daylight savings time by two months and expresses the sense of Congress that Federal agencies should enhance the use of energy efficient technologies in the management of natural resources. Subtitle B – Energy Assistance and State Programs The conference report authorizes the expenditure of $5.1 billion for the Low Income Home Energy Assistance Program for fiscal years 2005 through 2007. Authorizes the expenditure of $1.23 billion for Weatherization assistance for fiscal years 2006 through 2008. Provides energy conservation and efficiency assistance to States, rebates to consumers who purchase Energy Star products (EPA’s seal of approval for energy-efficient products), and grants to energy efficiency pilot programs in low-income communities. Subtitle C – Energy Efficient Products The conference report establishes a program to identify and promote energy efficient products and buildings, and various education programs on energy efficiency. Establishes energy-conservation standards for numerous consumer and commercial products. Seeks to improve energy efficiency labeling requirements and establishes a national replacement tire fuel efficiency education program. Directs a study to be conducted on State and regional policies that promotes cost-effective programs to reduce energy consumption, and authorizes $5 million for each fiscal year from 2006 to 2010 to establish energy efficiency pilot programs. Subtitle D – Public Housing The conference report encourages energy efficiency improvements in public housing. Title II – Renewable Energy Subtitle A – General Provisions The conference report directs Secretary of Energy to publish a detailed inventory of renewable energy resources in the United States. Extends funding authorization for renewable power production incentive programs. Requires the Federal Government to purchase no less 4 than 3 percent renewable electric power in fiscal years 2007 through 2009, no less than 5 percent in fiscal years 2010 through 2012, and no less than 7.5 percent in fiscal year 2013 and thereafter. Establishes photovoltaic energy commercialization program for the procurement and installation of photovoltaic solar electric systems for electric production in new and existing public buildings. Directs the Secretary to establish criteria governing renewable energy systems installed under the Weatherization Assistance Program. Provides rebates for consumers for expenditures made for the installation of a renewable energy system in a dwelling unit or small business. Authorizes appropriations to instal of a photovoltaic system for the DOE headquarters building. Establishes in DOE a Sugar Cane Ethanol Pilot Program. Subtitle B – Geothermal Energy The conference report contains various provisions dealing with leasing and permitting of federal lands for geothermal energy production, royalty payments, assessment of geothermal resources, and so on. Subtitle C – Hydroelectric The conference report addresses hydroelectric licensing and other hydropower provisions. Directs federal resource agencies (Departments of Interior, Commerce, and Agriculture) to establish procedures for on the record “trial-type” hearing on disputed issues of material fact, once mandatory conditions on hydroelectric licenses have been set. Any party to the FERC licensing proceeding can initiate the hearing but, once initiated, all disputed issues must be considered in a single hearing, lasting no more than 90 days. Provides that any party to the FERC proceedings may propose alternative conditions and prescriptions, which must be accepted if it is determined by the relevant resource agency that the alternative would reduce costs or improve the operation of the project. The natural resource agencies must document that equal consideration was given to economic, environmental, and other public impacts before imposing mandatory conditions. Should FERC determine that the mandatory conditions are inconsistent with requirements under applicable law, FERC can refer the dispute to its own dispute resolution service for a non-binding advisory. Subtitle D – Insular Energy The conference report directs the Secretaries of Energy and of the Interior to assess the potential to reduce dependence on fossil fuels for electricity generation and to promote distributed energy in the U.S.-affiliated insular areas. Title III – Oil and Gas Subtitle A – Petroleum Reserve and Home Heating Oil The conference report permanently authorizes the Strategic Petroleum Reserve – authorizing the Secretary of Energy to fill it to its one-billion-barrel capacity – and other energy reserve programs, such as the Northeast Home Heating Oil Reserves. 5 Subtitle B – Natural Gas The conference report clarifies FERC’s exclusive jurisdiction for siting, construction, expansion, and operation of Liquified Natural Gas (LNG) facilities located onshore and in State waters. Does not provide eminent domain powers. Allows owners of proposed LNG terminals to negotiate contracts for terminal services directly with prospective LNG suppliers (no open access requirements) to encourage site development. Makes FERC the lead agency in the National Environmental Policy Act (NEPA) process and establishes a process for coordination, hearings, and rules of procedure. Agencies with jurisdiction over natural gas infrastructure are encouraged to coordinate with FERC. Allows FERC to grant market-based rate treatment for new storage capacity if in the public interest. Bans any “manipulative or deceptive devise or contrivance” in connection with jurisdictional natural gas transactions that are in violation of FERC rules. Directs FERC to facilitate price transparency in natural gas markets by establishing appropriate rules and mechanisms. Subtitle E – Production Incentives The conference report allows royalties for oil and gas leases to be paid in-kind at the request of the Secretary of the Interior. The Secretary may receive oil and gas royalties-in-kind if doing so provides benefits to the United States greater than or equal to royalties taken in value. Sets forth conditions for royalty relief for marginal wells, natural gas production from deep wells in the shallow waters of the Gulf of Mexico, deep water production, and production in the Alaskan frontier. Directs the Secretary of Energy to conduct an expeditious program for competitive oil and gas leasing in the National Petroleum Reserve in Alaska, and to minimize impacts on surface resources. Establishes a program to remediate, reclaim, and close orphaned, abandoned, or idled wells on Federal lands. Provides royalty incentives to promote natural gas production from natural gas hydrates on the Outer Continental Shelf and federal lands in Alaska. Provides royalty incentives to enhance the recovery of oil and natural gas through carbon dioxide injection. Requires the Secretary of the Interior to conduct an inventory and analysis of Outer Continental Shelf oil and gas resources. Subtitle F – Access to Federal Land The conference report provides for an internal review by both the Departments of Agriculture and of the Interior on onshore leasing practices with respect to national forest lands, and to report the results to Congress. Directs the Secretary of the Interior to ensure expeditious compliance with the requirements of the National Environmental Protection Act of 1969, to improve inspection and enforcement of oil and gas activities under the onshore oil and gas leasing program, and to implement best management practices for the onshore oil and gas leasing program. Authorizes additional appropriations for the BLM, Fish and Wildlife Service, and Forest Service for these purposes. Requires the Secretary of the Interior to establish a Federal Permit Streamlining Pilot Project, which will contain seven Western Bureau of Land Management (BLM) offices that will coordinate with the relevant consulting Federal agencies to accelerate the permitting process. Requires the Secretary of the Interior, with respect to public lands, and the Secretary of Agriculture, with respect to National Forest System lands, to 6 designate utility corridors in Western States and to incorporate them into land use and resource management plans. Subtitle G – Miscellaneous The conference report establishes deadlines for the publication of initial notices and the closing of the decision record for decisions on appeals of consistency decisions under the Coastal Zone Management Act. Directs the Department of Energy to disburse for coastal impact assistance $250 million for each of the fiscal years 2007 through 2010 to coastal states near offshore oil and gas leases. Subtitle H – Refinery Revitalization The conference report provides for cooperative agreements between states and the Environmental Protection Agency to streamline the consideration of Federal and State environmental permits for a new refinery. Title IV – Coal Subtitle A – Clean Coal Power Initiative The conference report authorizes $200 million per year for fiscal years 2006 through 2014 to be spent on the development of clean coal technologies such as coal gasification (70%) and other combustion technologies (30 %), and gives priority to projects that include carbon capture and sequestration as part of the project. Allows the Secretary of Energy to grant a direct loan of up to $80 million to build a clean coal technology plant for electricity generation. Subtitle B – Clean Power Projects The conference report allows the Secretary of Energy to provide loans for projects that produce energy from coal of less than 7,000 BTU/lb (heat value) using advanced integrated gasification combined cycle technology, that is combined with renewable sources, minimizes and sequesters carbon dioxide emissions, and provides hydrogen for near-site fuel cell demonstrations. Provides a direct loan of up to $80 million to place into service an Alaska-based clean coal technology facility. Establishes various coal gasification demonstration projects. Subtitle C – Coal and Related Programs The conference report directs the Department of Energy to carry out a program of financial assistance to facilitate the production of coal-based power through the deployment of clean coal electric generating equipment and processes by providing up to 50 percent of total project costs. Authorizes appropriations of $250 million for fiscal year 2007, $350 million for fiscal year 2008, $400 million for fiscal years 2009 through 2012, and $300 million for fiscal year 2013 to carry out the program. 7 Subtitle D – Federal Coal Leases The conference report repeals the 160-acre limitation for modifications to existing coal leases, subject to certain limitations, and allows the Secretary to extend the duration of a coal lease to beyond 40 years. Extends to no more than 20 years the aggregate number of years of any lease for which advanced royalties may be accepted in lieu of the condition of continued operation. Title V – Indian Energy The conference report assists Indian Tribes in the development of Indian energy resources by increasing Tribes’ internal capacity to develop their own resources. It provides grants and technical assistance, and streamlines the approval process for Tribal leases, agreements, and rights-of-way so that outside parties have more incentive to partner with Tribes to develop energy resources. The report creates the Office of Indian Energy Policy and Programs within the Department of Energy (DOE) to support the development of tribal energy resources. The report also provides a complete substitute for Title 26 of the Energy Policy Act of 1992. The substitute authorizes the Secretary of the Interior to provide grants to tribes to develop and utilize their energy resources and to enhance the legal and administrative ability to tribes to manage their resources. It establishes a process by which an Indian tribe, upon demonstrating its technical and financial capacity, could negotiate and execute energy resource development leases, agreements, and right-of-way with third parties without first obtaining approval of the Secretary of the Interior. It allows the Secretary to review activities authorized under the Indian Mineral Development Act, and authorizes the Western Area Power Administration to make power allocations to meet the firming (providing power intended to be available at all times) and reserve needs of Indian-owned energy projects and acquire power generated by Indian tribes for firming and reserve needs, so long as the rates and terms are competitive. Title VI – Nuclear Matters Subtitle A – Price Anderson Act Amendment The conference report extends authorization period for indemnification provisions for nuclear power plants for a period of 20 years. Increases the maximum annual assessment from $10 million to $15 million and increases the overall cap from $63 million to $95.8 million, which is adjusted for inflation in the future. Subtitle B – General Nuclear Matters The conference report provides for the licensing of exports of highly enriched uranium for medical isotope production in Canada, Belgium, France, Germany, and the Netherlands. Requires designation of an entity within DOE to be responsible for the final disposal of greater than Class C Radioactive Waste (low-level waste) and development of a plan for disposal of such waste. Prohibits nuclear exports to countries that support terrorism. Provides a new power plant construction investment incentive to offset the financial impact of delays beyond industry’s 8 control for up to six new nuclear power plants. The incentive would cover 100 percent of the cost of delay for the first two new plants, up to $500 million each, and 50 percent of the delay costs up to $250 million each for the remaining plants. Subtitle C – Next Generation Nuclear Plant Project The conference report establishes a project to construct a next generation nuclear plant and authorizes $1.25 billion for the project for the period 2006 to 2015, as well as sums necessary for each of the fiscal years 2016 through 2021. Subtitle D – Nuclear Security The conference report introduces additional security measures at nuclear power plants, including increasing the reliability of personal identification systems and allowing plant security forces to use more advanced weaponry. Title VII – Vehicles and Fuels Subtitle A – Existing Programs The conference report strengthens existing provisions that require federal vehicle fleets use alternative fuels in the alternative-fuel-capable vehicles. Subtitle B – Hybrid Vehicles, Advanced Vehicles, and Fuel Cell Buses The conference report establishes programs to improve batteries, power electronics, hybrid systems integration, and other hybrid vehicle technologies. Encourages the production and sell of hybrid and advanced vehicles through grants to automobile manufacturers and pilot projects. Establishes a transit bus demonstration program to demonstrate fuel cell buses. Subtitle C – Clean School Buses The conference report establishes a program for awarding grants on a competitive basis for the replacement or retrofit of certain existing school buses. Subtitle D – Miscellaneous The conference report establishes programs to increase railroad locomotive fuel economy, promote bicycle riding, reduce heavy duty engine idling, increase efficiency, and test biodiesel engines. Subtitle E – Automobile Efficiency The conference report authorizes $3.5 million per year for fiscal years 2006 through 2010 for the National Highway Traffic Safety Administration to carry out its obligations with respect to fuel economy standards. 9 Subtitle F – Federal and State Procurement The conference report requires the federal government to adopt hydrogen technologies as soon as practicable. Subtitle G – Diesel Emissions Reduction The conference report establishes national and state grant and loan programs to achieve significant reductions in diesel emissions. Title VIII – Hydrogen The conference report authorizes basic research, development, and demonstration activities related to hydrogen energy, fuel cells, and related infrastructure. Title IX – Research and Development The conference report defines broad research and development goals in the areas of energy efficiency, distributed energy and electric energy systems, renewable energy, nuclear energy, and fossil energy. Subtitle A – Energy Efficiency The conference report authorizes programs to develop advanced solid state lighting options, to address energy conservation in buildings and evaluate secondary use of electric vehicle batteries. Subtitle B – Distributed Energy and Electric Energy Systems The conference report authorizes appropriations for distributed energy and electric energy systems activities, for micro-cogeneration energy technology activities, and for a power delivery research initiative. Establishes a high-power-density industry program; authorizes grants to develop small-scale combined heat and power systems for residential applications, assistance, and demonstration of projects using distributed energy technology and highly energyintensive commercial applications; and establishes programs to ensure reliability and environmental integrity of electrical transmission systems. Subtitle C – Renewable Energy The conference report establishes research and development programs for: bioenergy; low-cost renewable hydrogen and infrastructure for vehicle propulsion; concentrating solar power; and hybrid solar lighting. 10 Subtitle D – Agriculture Biomass Research and Development Programs The conference report encourages the development of biobased fuels through production incentives and grants. Subtitle E – Nuclear Energy The conference report authorizes the Nuclear Energy Research Initiative, Nuclear Energy Plant Optimization, Nuclear Power 2010, Generation IV Nuclear Energy Systems, Reactor Production of Hydrogen, and Nuclear Infrastructure Support Programs. Also authorizes the Advanced Fuel Cycle Initiative to evaluate proliferation-resistant fuel recycling and transmutation technologies. Subtitle F – Fossil Energy The conference report authorizes research programs for oil and gas exploration and production technologies, including those with applications for heavy oil and shale, and reauthorizes methane-hydrate research. Authorizes research programs for coal-mining technologies, coal and power systems, and carbon dioxide-capture technologies. Subtitle G – Science The conference report authorizes funding for several science programs: including burning plasma fusion research; catalysis research; hydrogen research; genomes to life; fission and fusion energy materials research program; energy-water supply technologies program; and spallation neutron source research. Subtitle H – International Cooperation The conference report directs the Department of Energy to carry out a program to promote cooperation on energy issues with countries in the Western Hemisphere. Title X – Department of Energy Management The conference report establishes a technology transfer coordinator within the Department of Energy. Establishes a pilot program to encourage technology clusters in support of departmental mission areas. Promotes small business participation in procurement and research opportunities. Authorizes cash prizes in recognition of break-through achievements in research, development, demonstration, and commercial application that have the potential for application to the performance of the mission of the Department. Title XI – Personnel and Training The conference report requires DOE to monitor workforce trends in the energy industry, and authorizes the Secretary to establish fellowships for postdoctoral and senior researchers in 11 energy research and development fields, and in conjunction with the Secretary of Labor, establishes traineeship grants to address shortages of trained personnel. Requires the Secretary of Labor to develop model personnel training guidelines to support electric system reliability and safety. Requires National Laboratories to increase participation of historically Black colleges and universities, Hispanic-serving institutions, and tribal colleges in activities that improve these institutions’ ability to train students in scientific and technical careers. Establishes a national training center to train certified operators for electric power generation plants. Title XII – Electricity Subtitle A – Reliability Standards The conference report changes the current voluntary rules for operation of the transmission grid to a mandatory rules system under an Electricity Reliability Organization (ERO). Grants the ERO the power to establish mandatory reliability standards and the authority to penalize violators. Subtitle B – Transmission Infrastructure Modernization The conference report authorizes the Secretary to designate national interest electric transmission corridors, and provides eminent domain authority to establish such corridors and just compensation for any rights-of-way acquired by such authority. Authorizes the Western Area Power Administration and the Southwestern Power Administration to enter into publicprivate financial arrangements to build or upgrade transmission facilities. Directs FERC to encourage the deployment of advanced transmission technologies, and establishes an Advanced Power System Technology Incentive Program. Subtitle C – Transmission Operation Improvements The conference report authorizes FERC to require unregulated transmitting utilities to provide open access to their transmission systems at rates that are comparable to those they charge themselves and that are not unduly discriminatory or preferential. Small, unregulated transmitting utilities and unregulated transmitting utilities that do not own or operate significant transmission facilities are exempt. Allows appropriate federal regulatory authorities to transfer control of all or part of a transmission system of a federal utility to a transmission organization. Entitles load-serving entities to exercise firm transmission rights, or equivalent tradable or financial transmission rights, to the extent needed to meet their service obligation. Protects firm transmission rights of entities in the Pacific Northwest by allowing only voluntary conversion of firm transmission rights to financial transmission rights. 12 Subtitle D – Transmission Rate Reform The conference report directs FERC to issues rules on transmission pricing policies that provide a return on equity that attracts capital for investment in grid improvements and advanced transmission technologies. Subtitle E – Amendment to PURPA The conference report amends the Public Utility Regulatory Policy Act to require States to consider adoption of: net metering standards (a requirement that utilities make net metering, regarding on-site energy production, measurement, and billing, available to any electric consumer); fuel diversity (a requirement that utilities reduce dependency on a single fuel source and increase fuel diversity, including the use of renewables); and fossil fuel generation efficiency (a requirement that utilities implement 10 year plans to increase fossil fuel efficiency). Amends PURPA to do the following: require States to consider the implementation of smart metering standards that require electric utilities to offer time based rate schedules (such as time-of-use pricing, critical-peak pricing, and real-time pricing) that enable customers to manage energy use and cost through advanced metering and communications technology; ensure that qualifying facilities meet specific criteria to be eligible for mandatory purchase and sale benefits and that such benefits terminate when a competitive wholesale market exists; and require States to consider best practices for promoting interconnection for distributed generation. Subtitle F – PUHCA Repeal The conference report repeals the Public Utility Holding Company Act of 1935 (PUHCA). Gives FERC authority to request that each holding company, associate company, or affiliate company make available accounts and records that FERC determines are relevant to costs incurred by a public utility or natural gas company and that are necessary and appropriate to protect utility customers with respect to jurisdictional rates. Requires holding companies, associate companies, or affiliate companies to make available to state commissions books, accounts, and records that are determined to be relevant to costs incurred and that are necessary and appropriate to protect utility customers with respect to jurisdictional rates. Requires FERC to promulgate a final rule exempting from Federal books and records requirements any person that is a holding company solely with respect to a qualifying facility; wholesale generators or foreign utility companies are exempted. Preserves the authority of FERC or a state commission to determine if a jurisdictional public utility company can recover, in rates, costs incurred through transactions with affiliates. Provides that PUHCA provisions do not apply to the U.S. government, any state or political subdivision, any foreign government authority not operating in the U.S. or any agency, authority, or instrumentality of any of the above. Preserves the authorities of FERC or state commissions under other applicable law, authorizes FERC to use its enforcement authorities under the FPA to enforce this subtitle, permits FERC to continue activities authorized as of date of enactment, and preserves its authority under FPA and the Natural Gas Act. Authorizes FERC to promulgate 13 regulations to implement this subtitle and submit recommendations to Congress for technical and conforming amendments within four months of enactment. Subtitle G – Market Transparency, Enforcement, and Consumer Protection The conference report requires FERC to establish an electronic system to provide information on the availability and price of wholesale electric energy and transmission services, and prohibits filing of false information. Bans manipulative or deceptive device or contrivance in connection with the purchase or sale of electricity of FERC jurisdictional transmission services in violation of FERC rules. Expands the scope of who can file complaints and against whom complaints can be filed under the Federal Power Act, extends FERC’s investigative authority to transmitting utilities, and increases penalties under the FPA and the Natural Gas Act. Amends FERC’s authority to allow refunds under the FPA as of the date of the filing of a complaint. Requires the Federal Trade Commission to issue rules to protect electric consumers from disclosure of consumer information obtained through the sale or delivery of electricity. Establishes within DOE an Office of Consumer Advocacy to represent energy consumers on matters regarding rates and services of public utilities, and to represent natural gas companies at FERC hearings and in civil proceedings. Expands FERC’s merger review authority and increases transaction value thresholds from $50,000 to $10 million. Requires FERC to make a finding that a transaction is consistent with the public interest and will not result in cross-subsidizations of associate companies to the detriment of the utility. Title XIII – Energy Tax Incentives Act of 2005 The conference report includes a revenue title based on the tax provisions enacted in Senate and House versions of the bill. This title generally provides energy-related tax incentives in five principal areas: oil and gas production and refining; electricity production; renewable and clean energy; clean coal; and energy efficiency and conservation. The revenue title also includes provisions that raise approximately $3 billion in revenues over 10 years. The main provisions in these areas are briefly described below. A complete description of the tax provisions is available at: http://finance.senate.gov/sitepages/leg/072705leg.pdf. Oil and Gas Production and Refining C Depreciation of natural-gas distribution lines: The conference shortens the depreciation period for natural-gas distribution lines from 20 years under current law to 15 years. Cost: $1.019 billion. C Amortization of geological and geophysical expenditures: The conference report provides that geological and geophysical expenditures incurred in connection with oil and gas exploration in the United States may be amortized over two years. Cost: $974 million. 1H.R. 4520, 108th Cong., 2d Session; Public Law 108-357 (October 22, 2004). 14 C Expensing for refinery investments: The conference report allows taxpayers to expense (i.e., depreciate immediately) 50 percent of the cost of refinery investments that increase the capacity of an existing refinery, subject to certain limitations. Cost: $406 million. C Small-refiner exception to oil-depletion deduction: The conference report expands the qualification criteria for the small refinery exception to the oil-depletion deduction under current law. Cost: $158 million. C Depreciation of natural-gas gathering lines: The conference report clarifies that the depreciation recovery period for natural-gas gathering lines is seven years. Cost: $16 million. Electricity Production C Depreciation of transmission property: The conference shortens the depreciation period for property used for the transmission and distribution of electricity from 20 years under current law to 15 years. Cost: $1.239 billion. C Nuclear decommissioning: The conference report modifies the rules for qualified nuclear decommissioning funds, which are funds created by a taxpayer, restricted to certain kinds of investments, and used exclusively for payment of decommissioning costs. Cost: $1.293 billion. C Treatment of electric cooperative income: The conference report makes permanent the provisions enacted in the American Job Creation Act (AJCA) of 2004,1 which modified the so-called 85/15 test for electric cooperatives by excluding certain income related to electricity restructuring from the test. Under AJCA, those changes expire on 12/31/06. Cost: $277 million. C Production tax credit for nuclear power facilities: The conference report establishes a production tax credit for new nuclear-power facilities. Cost: $278 million. C Net-operating-loss carryback for electric transmission equipment: The conference report permits taxpayers to carry back a net operating loss to each of the five years preceding the taxable year of such loss up to 20 percent of the cost of electric transmission capital expenditures and pollution control capital expenditures. The provision applies to losses incurred in 2003, 2004, and 2005. Cost: $52 million. 15 Renewable and Clean Energy C Renewable electricity production tax credit: The conference report extends and modifies the tax credit for the production of electricity from renewable resources – the so-called Section 45 tax credit. Cost: $2.747 billion. C Clean renewable energy bonds: The conference report creates new category of taxcredit bonds, called Clean Renewable Energy Bonds (“CREBs”), which may be used to finance capital expenditures incurred with respect to facilities qualifying for the electricity-production tax credit under Section 45 of the tax code. Cost: $411 million. Clean Coal C Tax credit for investment in clean-coal facilities: The conference report establishes three investment tax credits for clean-coal facilities – a 15-percent and 20-percent investment tax credit for clean-coal facilities producing electricity; and a 20-percent tax credit for industrial-gasification projects. Cost: $1.612 billion. C Amortization of pollution control facilities: The conference report provides a depreciation recovery period of seven years for the cost of certain certified air-pollutioncontrol facilities used in connection with an electric-generation plant that is primarily coal fired and that was not in operation before January 1, 1976. Cost: $1.147 billion. C Tax credit for producing fuel from a non-conventional source: The conference report modifies the tax credit for producing fuel from a non-conventional source, making it part of the general business credit, so that unused credits may be carried back one year and forward 20 years. The conference report also adds a production tax credit for qualified facilities that produce coke or coke gas. Cost: $189 million. Energy Efficiency and Conservation C Tax credits for alternative-technology vehicles: The conference report provides a tax credit for fuel-cell vehicles, which is generally based on the weight class of the vehicle and its rated fuel economy. For alternative-fuel vehicles, the conference report permits the tax credit under current law to offset the excess of the regular tax over the alternative minimum tax. The conference report also provides a tax credit for hybrid vehicles and advanced lean-burn-technology vehicles. The amount of credit is generally based on fuel economy and the estimated lifetime fuel savings of the qualifying vehicle. Cost: $874 million. C Tax credit for small producers of biodiesel and ethanol: The conference report adds to the existing tax credit for biodiesel fuels a new tax credit for small producers of agri-biodiesel. Cost: $181 million. 16 C Tax credit for installing of alternative fuel refueling property: The conference report permits taxpayers to claim a 30-percent tax credit for the cost of installing qualifying property to refuel clean-fuel vehicles. Cost: $71 million. C Tax credit for residential energy-efficient property: The conference report provides a 30-percent tax credit for the purchase of qualified photovoltaic property and solar waterheating property used exclusively for purposes other than heating swimming pools and hot tubs. The conference report also provides a 30-percent tax credit for the purchase of qualified fuel-cell power plants. Cost: $31 million. C Tax credit for business installation of qualifying energy-efficiency property: The conference report provides a 30-percent tax credit for businesses that purchase qualified fuel-cell power plants and a 10-percent tax credit for purchases of qualifying stationary microturbine power plants. Additionally, the conference report provides a 30-percent tax credit for businesses that purchase qualifying solar-energy property. Cost: $222 million. C Tax credit for energy-efficient existing homes: The conference report provides 10- percent investment tax credit for expenditures with respect to certain energy-efficient improvements, including purchases of advanced main-air circulating fans, natural gas, propane, or oil furnaces or hot water boilers, and other qualified energy-efficient property. Cost: $556 million. C Business tax credit of energy-efficient new homes: The conference report provides a tax credit to eligible contractors for the construction of a qualified new energy-efficient homes. Cost: $28 million. C Deduction for energy-efficient commercial buildings: The conference report permits a deduction for energy-efficient property installed during construction of commercial buildings that reduces annual energy and power consumption. Cost: $243 million. C Tax credit for energy-efficient appliances: The conference report establishes a tax credit for the manufacture of energy-efficient dishwashers, clothes washers, and refrigerators. Cost: $180 million. C Research and development tax credit for energy research: The conference report modifies the current 20-percent research and development tax credit, allowing energy-related research by qualified research consortia to be eligible for the credit. Cost: $92 million. Revenue Raisers C Oil Spill Liability Trust Fund: The conference report reinstates the Oil Spill Liability Trust Fund tax. Raises: $2.508 billion. 17 C Leaking Underground Storage Tank Trust (LUST) Fund. The conference report extends the LUST Trust Fund tax at the current rate through September 30, 2011. Under the conference report, dyed fuel is also subject to the LUST tax. Raises: $349 million. Cost of the Revenue Title According to the Joint Committee on Taxation, the tax provisions in the conference report have a cost of approximately $6.9 billion over five years and $11.5 billion over 10 years, net of the revenues raised by other provisions in the title. The revenue estimate prepared by the Joint Committee on Taxation for the revenue title of the conference report is available at: http://www.house.gov/jct/x-59-05.pdf. Title XIV – Miscellaneous The conference report provides guidance on risk assessments of energy technology, state production incentives, oil used in transformers, and petrochemical and oil refinery facility health assessments. Commissions a study of the application of radiation to petroleum at standard temperature to refine petroleum products. Title XV – Ethanol and Motor Fuels Subtitle A – General Provisions The conference report would require that the EPA Administrator to promulgate regulations to ensure that gasoline sold or introduced into commerce in the United States (Hawaii and Alaska exempted) on an annual basis contain 7.5 billion gallons of renewable fuel by 2012, beginning with 4 billion gallons in 2006, and rising incrementally until 2012. Eliminates the oxygen content requirement for reformulated gasoline. Provides loan guarantees for to carry out commercial demonstration projects for celluosic biomass and sucrose derived ethanol. Subtitle B – Underground Storage Tank Compliance The conference report requires that at least 80 percent of all dollars appropriated from the Leaking Underground Storage Tank Trust Fund be sent to the states for operating leaking underground tank programs. It requires onsite inspections of underground storage tanks every three years after a brief period for the state to update its backlog. It establishes operator-training programs where they do not already exist. Subtitle C – Boutique Fuels The conference report seek to limit the proliferation of boutique fuels by allowing the EPA to temporarily waive motor vehicle fuel requirements in the event of extreme or unusual circumstances, such as an Act of God or equipment failure, which prevents the distribution of a mandated fuel or fuel additive to consumers. Prohibits the EPA from increasing the total number 18 of fuels approved and allows it to remove a fuel from the list of approved fuels if it ceases to be included in a state implementation plan or is identical to a federal fuel formulation implemented by EPA. Title XVI – Climate Change Subtitle A – National Climate Change Technology Deployment The conference report promotes the adoption of technologies that reduce greenhouse gas intensity (emissions per dollar of GDP) by providing loan guarantees for up to 25 percent of the total cost of eligible projects that employ advanced climate technologies or systems. Subtitle B – Climate Change Technology Deployment in Developing Countries The conference report promotes the adoption of technologies that reduce greenhouse gas intensity in developing countries by allowing U.S. companies that invest in such technologies overseas to fully deduct the cost of investment. Title XVII – Incentives for Innovative Technologies The conference report provides terms and conditions for loan guarantees made by the Secretary. Cost of loan guarantees must be appropriated or paid by borrower. The guarantee cannot exceed 80 percent of the project cost and a full payment must be made within the lesser of 30 years or 90 percent of the projected useful life of the asset. Provides other criteria regarding eligibility for loan guarantees, emission levels, and so on. Title XVIII – Studies The conference report requires studies on a wide range of topics (see Committee Report).
Analysis by the Senate Energy Committee
ENERGY POLICY ACT OF 2005
Title I: Energy Efficiency
· Establishes requirements for energy and water savings in Congressional Buildings.
· Requires annual reduction in the consumption of energy by federal buildings.
· Strengthens requirements that federal managers procure energy efficient products.
· Extends the Energy Savings Performance Contracts program.
· Encourages business and industry to enter into voluntary programs with the Department of Energy to reduce energy consumption by not less than 2.5% annually.
· Establishes energy efficiency standards for federal buildings.
· Authorizes $1.23 billion for three years for weatherization assistance.
· Encourages States to periodically revise and upgrade their energy conservation plans.
· Authorizes the expenditure of up to $250 million over five years to provide rebates to consumers purchasing energy efficient appliances.
· Creates a grant program to help States and Local governments encourage the construction of energy efficient public buildings.
· Establishes a model building energy code compliance program.
· Establishes educational programs to heighten consumer awareness of the benefits of energy efficiency and energy conservation.
· Establishes energy conservation standards for a number of products including commercial refrigerators, freezers, and refrigerator-freezers, battery chargers, distribution transformers, commercial clothes washers, dehumidifiers, commercial ice makers and commercial package air conditioning and heating equipment.
· Encourages electric and natural gas utilities to reduce energy consumption.
Title II: Renewable Energy
· Provides for an ongoing assessment of renewable energy resources.
· Extends existing authority for incentive programs for production of renewable electricity by nonprofit electric utilities.
· Requires the Federal government to purchase a set amount of electric energy from renewable resources.
· Requires an update of energy plans for insular areas.
· The use of biomass from Federal or Indian lands is encouraged by the creation of two grant programs to produce electric energy or heat from biomass and to improve biomass utilization technology.
· The program encourages removal of hazardous fuels from the highest risk areas on Federal and Indian lands and development of new technologies to use biomass.
· Updates the Geothermal Steam Act by amending the leasing provisions to provide for a competitive leasing system.
· Also directs other actions that will facilitate new development of geothermal resources.
· Reforms the hydropower licensing process of the Federal Power Act.
· Allows a 2-MW hydropower project in Montana to go forward.
· Amends the State of Alaska’s authority over its small hydropower projects.
· Sets a 7.5-billion gallon renewable fuels standard by 2012 and exempts California from this standard during the summer months.
· Addresses the need for protection and improvement of electric power transmission and distribution lines in the insular areas.
· Authorizes projects in the insular areas, on a cost-share basis with local utilities, to reduce dependence on fossil fuels used in the generation of electricity.
· Provides incentives for the increased production of hydropower.
· Provides incentives for hydroelectric efficiency improvements.
· Revives a DOE program to develop small hydropower projects.
Title III: Oil and Gas
· Provides permanent authority to operate the Strategic Petroleum Reserve and other energy programs. Authorizes the Secretary of Energy to fill the SPR to a one billion barrel capacity and provides guidance to the Secretary in choosing appropriate sites to enable the SPR to be filled to this capacity.
· Permanently authorizes the Northeast Home Heating Oil Reserve (NHOR). Established in 2000, the NHOR holds two million barrels of emergency fuel stocks stored at commercial tank farms. Two million barrels would give Northeast consumers adequate supplies for approximately 10 days, the time required for ships to carry heating oil from the Gulf of Mexico to New York Harbor.
· Authorizes the federal government to continue to receive physical quantities of oil and gas royalty-in-kind payments provided the Secretary determines that receiving royalties in-kind provides benefits to the United States greater than or equal to those that it would have received in-value.
· Marginal property production incentives: Requires the Secretary Requires the Secretary of the Interior to issue regulations defining offshore marginal wells and to provide relief. If the Secretary finds this to be impracticable, the Secretary shall report to Congress within 18 months explaining why such a finding was made.
· Provides incentives for natural gas production from deep wells in the shallow waters of the Gulf of Mexico. There is a trigger based on the market price of natural gas determined at the Secretary’s discretion which limits the granting of relief.
· Authorizes that the suspension of royalties for leases in water depths greater than 400 meters in the Planning Areas outlined in section (a) shall be established at volumes and in distances enumerated in subsection (b). This section authorizes that Secretary to have discretion based upon market price in placing limitations upon royalty relief granted.
· Provides Alaska offshore royalty suspension at the Secretary’s discretion in order to promote increased production and encourage production of marginal resources, reduce or eliminate any royalty or net profit share set forth in a lease.
· Amends the leasing provisions for the National Petroleum Reserve-Alaska to provide additional time for bringing oil and gas into production in a manner the protects the harsh but fragile arctic environment. Provides new authority for developing oil and gas facilities as efficient units to minimize surface impacts.
· Establishes a long term effort to improve coordination and collection of scientific information needed by industry and regulatory agencies for developing and conserving public resources on the North Slope of Alaska by directing the Secretary of the Interior to work in cooperation with the State of Alaska, North Slope Borough, Arctic Slope Regional Corporation and other federal agencies.
· Provides a five-year, $20,000,000 annual authorization to the Secretary of the Interior to develop a program to remediate, reclaim, and close, orphaned, abandoned, or idled wells on Federal land. Includes a pilot project to permit a new oil and gas lessee to reclaim and close old abandoned sites and be reimbursed through royalty credits.
· Amends the Naval Petroleum Reserve Production Act by transferring leasing provisions for the National Petroleum Reserve-Alaska from the Interior and Related Agencies Appropriations Act of 1981 to the Naval Petroleum Reserve Production Act.
· Directs the Secretary of the Interior in cooperation with the State of Alaska, North Slope Borough, Arctic Slope Regional Corporation and other federal agencies, to establish a long term effort to improve coordination and collection of scientific information needed by regulatory and land management agencies in managing public resources on the North Slope of Alaska.
· Provides a five-year, $20,000,000 annual authorization to the Secretary of the Interior to develop a program to remediate, reclaim, and close, orphaned, abandoned, or idled wells on Federal land.
· Combined hydrocarbon leasing – This section amends the Mineral Leasing Act to authorize the Secretary of the Interior to issue separately, for the same area, a lease for tar sand and a lease for oil and gas. It also requires a lease for tar sand to be issued using the same bidding process, annual rental, and posting period as a lease issued for oil and gas.
· Alternate energy-related uses on the outer Continental Shelf: This section seeks to protect the economic and land use interests of the United States through the management and oversight of alternate energy-related projects on the Outer Continental Shelf. This section establishes Department of the Interior management and oversight and provides for interagency coordination in the siting and permitting of alternate-energy activities. This section does not override any existing authority, but seeks to fills in a gap in the law with respect to alternate energy projects. This section also provides for a 27% sharing of any royalties, bonuses, and rentals for these projects in distances of three miles seaward of state waters.
· Preservation of geological and geophysical data: This section directs the Secretary of the Interior to develop a data preservation program, working in cooperation with the States to archive geological, geophysical, and engineering data and samples related to oil and gas development.
· Oil and gas lease acreage limitations: Amends the Mineral Leasing Act provision relating to the limitation on the amount of acreage that can be held by a person under lease in any one state.
· Requires the Secretary of the Interior to arrange for the National Academy of Public Administration to perform a review of Federal onshore oil and gas leasing practices and report to Congress within 18 months.
· Directs the Secretaries of the Interior and Agriculture to improve administration of Federal oil and gas leasing programs including the improvement of inspection and enforcement of oil and gas activities. It also requires the development and implementation of best management practices.
· Requires the Secretaries of the Interior and the Secretary of Agriculture to enter into a memorandum of understanding to improve coordination and consultation on oil and gas leasing activities.
· Creates a pilot project to improve Federal permit coordination in six western BLM offices. This section requires the Secretary of the Interior to establish a Federal Permit Streamlining Pilot Project that requires that relevant federal agencies deploy staff to work with BLM land managers as a team on all environmental permits and land use planning documents in order to coordinate and improve Federal decision-making with respect to the permits. The section directs the Secretary of the Interior to assign such additional personnel to the six BLM offices as necessary to ensure effective implementation of the Pilot Program.
· Energy facility rights-of-way and corridors on Federal land: This section requires the Secretary of the Interior, with respect to public lands, and the Secretary of Agriculture, with respect to National Forest System lands, to designate utility corridors in Western States and to incorporate such corridors into land use and resource management plans within 24 months following enactment of the section. The section also requires the Secretary of Energy to develop a memorandum of understanding with the Secretary of the Interior, the Secretary of Agriculture, and the Secretary of Defense to coordinate applicable Federal authorizations and environmental reviews related to a proposed or existing utility facility.
· Oil shale leasing: This section requires the Secretary of the Interior to make lands available, within one year, to lease for the purpose conducting research and development activities that will lead to new technology for producing oil from oil shale. The Secretary is also required to complete a programmatic environmental impact statement within 18 months on leasing public lands for commercial leasing. It also requires a report analyzing a potential program for leasing oil shale for commercial development and to update resource information by conducting a National Oil Shale Assessment.
· Coastal impact assistance program: : Provides $250 million per year for fiscal years 2007 through 2010 to six energy-producing states in a formula based upon each states’ proximity to production. These states: Louisiana, Texas, Mississippi, Alabama, Alaska and California shall use this funding for a specific number of coastal restoration, conservation and other uses.
· Clarifies FERC’s exclusive jurisdiction under the Natural Gas Act for siting, construction, expansion and operation of import/export facilities located onshore or in State waters. This section does not provide FERC eminent domain authority over siting LNG facilities.
· Codifies FERC’s Hackberry policy. In Hackberry, FERC allowed for sole propriety ownership of an LNG terminal (eliminating open access requirements) as a way to encourage site development.
· Allows FERC to grant new storage capacity market-based rate treatment, notwithstanding the fact the applicant may have market power, if (1) it is in the public interest, (2) it is needed storage capacity, and (3) customers are adequately protected.
· Establishes FERC as the lead agency for NEPA purposes and provides FERC authority to set schedules for required Federal authorizations. Agencies with jurisdiction over natural gas infrastructure are encouraged to coordinate their proceedings with the timeframe established by FERC. If a schedule deadline is not met, the President may issue a decision.
· Directs FERC to maintain a consolidated record all decisions made related to natural gas infrastructure permitting.
· Provides the D.C. Circuit Court exclusive jurisdiction to review allegations of failure to meet the FERC established schedule for natural gas infrastructure.
· Provides exclusive jurisdiction to a Circuit Court of Appeals where a natural gas infrastructure project is proposed to review an order or action by a Federal or State agency acting pursuant to Federal law required to permit natural gas infrastructure.
· Codifies the pre-NEPA filing process to encourage LNG terminal applicants to cooperate with State and local officials. Allows an affected State to file an advisory report on local and safety considerations to the FERC and requires FERC to respond specifically to the issues raised before authorizing an LNG terminal.
· Allows the State Commission where an LNG terminal is located to perform safety inspections and notify the FERC of any violations. The appropriate agency is directed to take action and report that to the State Commission.
· Directs FERC to enter a memorandum of understanding with the Department of Defense regarding LNG siting near an active military installation and requires DoD concurrence for an LNG terminal sited on an active military installation.
· Increases penalties under the Natural Gas Act and Natural Gas Policy Act, parallel to increases in the Federal Power Act ($5,000 to $1,000,000). This section also creates a civil penalty under Natural Gas Act.
· Amends the Natural Gas Act to ban any “manipulative or deceptive device or contrivance” (as those terms are used in section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78j (b))), in connection with jurisdictional natural gas transactions, that are in violation of FERC rules.
· Authorizes FERC to establish an electronic information system to provide information about the price or transportation costs of natural gas in interstate commerce. This section requires FERC to exempt from disclosure information the disclosure of which would be detrimental to the operation of an effective market or which would jeopardize system security. This section shall not affect the CFTC’s exclusive jurisdiction with respect to commodities under the Commodity Exchange Act. This section provides that FERC shall not compete with private sector publishers of energy prices.
· Amends the CZMA by establishing a 270-day period in which the Secretary of Commerce must close the decision record. The Secretary may stay the 270-day clock for up to 60 days to acquire supplemental information regarding the consistency determination or clarifying information from a party to the proceeding related to information already in the record. The section provides that the Secretary has 90 days after the record is closed (90 days after the 270 to 330 days, if stayed 60 days) to issue a decision or explain why it cannot, in which case the Secretary has an additional 45 days to issue a decision. In total, this section allows for 1 year and 100 days for the Secretary to complete action on an appeal of a consistency determination.
· Directs the Secretary of Energy, in cooperation and consultation with Secretary of Transportation, Secretary of Homeland Security, FERC, and Governors of coastal states, to convene at least 3 forums to discuss LNG siting issues such as siting, safety, and emergency response. The purpose of the forums is to identify and develop best practices related to LNG and to foster cooperative efforts.
· Directs the Department of the Interior to perform a comprehensive inventory of oil and gas resources on the Outer Continental Shelf. This inventory shall be done with available technology, except drilling, but including 3-D seismic technology. This inventory will help the nation better understand the extent of the resources on the Outer Continental Shelf.
· Bans traders convicted of market manipulation from serving as directors or officers of utility companies. Title IV: Coal · Provides funding for the generation of electricity critical research related to the use of the country’s most abundant fossil resource for coal.
· Authorizes a Clean Coal Power Initiative, providing $200 million annually for clean coal research in coal-based gasification and combustion technologies. The Secretary of Energy is directed to set increasingly restrictive emission targets over the life of the program to develop state-of-the-art technology.
· Creates a program of loan guarantees and direct grants to deploy clean coal generating equipment for greater energy efficiency and environmental performance characteristics than current operating technology.
· Amends several provisions of the Mineral Leasing Act governing the Federal Coal Leasing Program, including those pertaining to: lease modifications to avoid the bypass of coal; mining requirements for logical mining units; payment of advance royalties; and the deadline for submission of a coal lease operation and reclamation plan.
Title V: Indian Energy
· This title, referred to as the Indian Tribal Energy Development and Self Determination Act of 2005, assists Indian Tribes in the development of Indian energy resources by increasing Tribes’ internal capacity to develop their own resources.
· Provides grants, low-interest loans, loan guarantees and technical assistance, and streamlines the approval process for Tribal leases, agreements, and rights-of-way so that outside parties have more incentive to partner with Tribes in developing energy resources.
· Included in this title are provisions creating an Office of Indian Energy Policy and Programs within the Department of Energy to support the development of tribal energy resources.
· Makes Dine Power Authority, a Navajo Nation enterprise, eligible for funding under this title.
· Directs the Secretary of Housing and Urban Development to promote energy efficiency for Indian housing.
· The title also provides a complete substitute for title 26 of the Energy Policy Act of 1992.
· Sections 2602 and 2603 instructs the Secretary of Interior to develop an Indian energy resource development program to provide grants and low-interest loans to tribes to develop and utilize their energy resources and to enhance the legal and administrative ability of tribes to manage their resources.
· Section 2602 also directs DOE to develop a program to support and implement research projects that provide tribes with opportunities to participate in carbon sequestration practices.
· Section 2602 creates a DOE loan guarantee program and directs the Energy Secretary to give priority to any project using new technology, such as coal gasification, carbon capture and sequestration or renewable energy-based electricity generation.
· The DOE Secretary shall provide guarantees for no more than $2 billion at any time.
· Section 2604 establishes a process by which an Indian tribe, upon demonstrating its technical and financial capacity and receiving approval of their Tribal Energy Resource Agreement, could negotiate and execute energy resource development leases, agreements and rights-of-way with third parties without first obtaining the approval of the Secretary of the Interior.
· Section 2604 also requires the Department of Interior to conduct a periodic review of tribal activities under the TERA and requires the tribes to monitor the activities of their business partners.
· Section 2606 authorizes WAPA to make power allocations to meet the firming and reserve needs of Indian-owned energy projects and acquire power generated by Indian tribes for firming and reserve needs, so long as the rates and terms are competitive.
· Section 2607 authorizes a study of wind and hydropower potential along the Missouri River.
Title VI: Nuclear Matters
· Provides for programs to ensure that nuclear energy remains a major component of the Nation’s energy supply.
· Price Anderson liability protection is extended through 2025 for both NRC licensees and DOE contractors.
· Coverage is indexed for inflation, and non-profit contractors of the Department are made subject to payment of penalties assessed for nuclear safety violations.
· Nuclear Regulatory Commission scholarship and fellowship programs, including employee retention programs for those individuals with hard to find or critical skills.
· Provides for the export of high enriched uranium to Canada, Belgium, France, Germany or the Netherlands for the sole purpose of producing medical isotopes until a low enriched uranium alternative is commercially viable and available.
· Requires the DOE to propose a permanent disposal facility to Congress for Greater Than Class C waste with one year of enactment.
· Establishes standby support framework through the DOE for new nuclear plant construction against regulatory or judicial delays for six reactors. This standby support would cover the delay before plant is put into operation.
· If NRC determines that a conflict of interest exists when the Commission proposes to enter into an arrangement with a DOE laboratory, NRC will be required to take steps to mitigate the conflict, if feasible.
· A research, development, and construction project is authorized for a new test reactor to be constructed at the Idaho National Laboratory.
· The reactor will serve as a national test bed for advanced reactor technologies that provide improved attributes over existing plants, and for co-generation of hydrogen by nuclear energy.
· Strengthens security of nuclear facilities, including improved federal oversight of plant security and the expansion of federal statutes for sabotage of nuclear facilities.
· The medical isotope provision is narrowly tailored to ensure that the 40,000 procedures a day that are scheduled for patients in the United States who require medical isotopes are not delayed and remain cost effective.
Title VII: Vehicles and Fuels
· Strengthens the requirement that federal vehicle fleets use alternate fuels in those vehicles that are capable of using such fuels and requires the Secretary of Energy report to the congress on the use of alternative fuels.
· Authorizes appropriations for implementation and enforcement of federal fuel economy standards.
· Creates a federal/industry research partnership to improve aircraft engine and locomotive railroad fuel efficiency and environmental performance.
· Directs the Secretary of Energy to develop a program to encourage energy conservation through the use of bicycles as a substitute for vehicular transportation.
· Establishes a program to promote the reduction of engine idling in heavy vehicles (trucks and locomotives) to reduce fuel consumption and air emissions.
· Establishes a program to encourage the purchase of stationary and vehicular hydrogen fuel cell systems.
· Requires “dual-fueled” vehicles acquired under the Energy Policy Act of 1992 (EPAct) to be operated on alternative fuels, includes certain low-speed electric vehicles in EPAct, provides additional credits for medium and heavy duty alternative fuel vehicles, and increases incentives for the purchase and use hybrid vehicles and for investment in alternative fuel infrastructure. Also provides an alternative compliance mechanism based on petroleum displacement and includes new provisions on lease condensates.
· Authorizes $200 million for an advanced vehicle program. This program, operating under the current Department of Energy “Clean Cities” program, would provide grants to state and local governments to acquire alternative fueled and fuel cell vehicles, hybrids and other vehicles, including ultra-low sulfur diesel vehicles.
Title VIII: Hydrogen
· Directs the Secretary to conduct a broad-based research program supporting private sector efforts in hydrogen and fuel cell development, including production, storage, distribution and use of hydrogen; and fuel cell applications for transportation and stationary uses.
· Sets a goal of enabling the private sector to make a commercialization decision on fuel cell vehicle production hydrogen for transportation by 2015.
· Requires enhanced public education and university research in fundamental sciences, application design and systems concepts, including materials, subsystems, manufacturability, maintenance and safety.
· Directs the Secretary to transfer critical hydrogen and fuel cell technologies to the private sector and to foster the exchange of non-proprietary information.
· Establishes demonstration programs for hydrogen technologies and fuel cell vehicles for light-duty and heavy-duty vehicles.
· Supports the timely development of safety codes and standards related to fuel cell vehicles, hydrogen energy systems, and stationary fuel cells.
Title IX: Research and Development
· Creates the Next Generation Lighting Initiative, a public-private partnership to develop advanced solid-state lighting devices. These devices are longer lasting and more energy efficient and cost-effective than incandescent or fluorescent lighting.
· Establishes the National Building Performance Initiative to integrate Federal, State, and voluntary private sector efforts to reduce the costs of construction, operation, maintenance, and renovation of buildings to improve energy efficiency.
· Requires the Secretary to conduct research and development efforts to ensure the reliability, efficiency, and environmental integrity of the nation’s electrical transmission and distribution systems.
· Requires the Secretary to conduct cutting-edge research and development in renewable energy, including bioenergy from celluosic feedstocks, concentrating solar power, ocean energy, and cogeneration of hydrogen and electricity from renewable sources.
· Requires the Secretary to support education in nuclear engineering and nuclear-related technologies through grants to university departments for research and support for facilities.
· Requires the Secretary to investigate new techniques to reduce the volume and toxicity of spent fuel from commercial nuclear reactors.
· Creates a program to study measures to improve the safety and security of nuclear facilities from natural disasters and deliberate attacks.
· Directs the Secretary to survey industrial applications of large radioactive sources and to establish a research program aimed at developing alternatives to these sources that would reduce safety, environmental, and proliferation risks associated with these large sources.
· Establishes a program to research and develop technologies to capture carbon dioxide emissions from coal-fired power plants and to safely store these emissions so that they are permanently isolated from the atmosphere.
· Encourages research and development on methane hydrates, an unconventional form of fossil fuel that exists in potentially huge reserves off shore of U.S. coastal areas.
Title X: Department of Energy Management
· Creates a new Assistant Secretary position and expresses the sense of the Congress that the position should be used to improve management of Nuclear Energy at the Department of Energy, and grants the Secretary of Energy authority to enter into other transactions as appropriate to further research, development, or demonstration goals of the Department.
· Creates a new Undersecretary for Science to advise the Secretary on fundamental science research and basic research needed to support the Department’s missions
Title XI: Personnel and Training
· Requires establishment of training guidelines for electric energy industry personnel and centers for building technologies and power plant operations training.
· Directs increased activity by the Department of Energy to improve recruitment of under-represented groups into energy professions.
· Establishes research fellowships for energy research to encourage and support outstanding young scientists and engineers and outstanding senior researchers.
Title XII: Electricity
· Improves grid reliability, promotes transmission infrastructure development and security, reduces regulatory uncertainty, and increases consumer protections.
· Establishes mandatory reliability rules for the transmission system.
· Authorizes FERC to exercise limited jurisdiction over unregulated transmitting utilities to ensure open access to the transmission grid; protects transmission access for native load customers; and terminates FERC’s proposed rulemaking on Standard Market Design.
· Directs FERC to issue rules on transmission pricing policies and authorizes FERC to approve a participant funding cost allocation plan as long as it results in just and reasonable rates.
· Amends the Public Utility Regulatory Policies Act of 1978 (PURPA). It prospectively repeals the requirement for mandatory purchase from qualifying facilities by electric utilities if a competitive market exists and establishes new criteria for qualifying cogeneration facilities.
· Repeals the Public Utility Holding Company Act of 1935 (PUHCA) to encourage investment in the nation’s electricity infrastructure.
· Bans market manipulation; prohibits false statements; addresses market transparency; increases penalties for violations of the Federal Power Act; changes the refund effective date from 60 days after the date of filing to the date of filing; protects consumers against unfair trade practices; protects utility customers affected by the Enron bankruptcy from unfair contract termination fees by authorizing FERC to review the issue.
· Amends Section 203 of the Federal Power Act by expanding FERC’s jurisdiction to include acquisition of generation facilities that are subject to FERC jurisdiction for ratemaking purposes. Applies to transactions valued in excess of $10,000,000 and requires FERC to consider whether a proposed merger would result in cross-subsidizations of non-utility associate companies to the detriment of the utility consumers. Requires FERC to adopt rules for the expeditious consideration of applications.
· Allows courts to ban traders convicted of market manipulate from holding officer or director positions in electric utility companies.
Title XIII: Energy Policy Tax Incentives
Oil and Gas Production and Enhanced Refining
Natural gas distribution lines treated as 15-year property. Gas distribution lines must be depreciated over 20 years under present law. Provision shortens the depreciation period to 15 years for any gas distribution lines the original use of which occurred after April 11, 2004 and before January 1, 2011. The provision does not apply to any property which the taxpayer or a related party had entered into a binding contract for the construction thereof or self-constructed on or before April 11, 2005. Cost: $1.019 billion
Amortization of geological and geophysical expenditures. The provision allows geological and geophysical amounts incurred in connection with oil and gas exploration in the United States to be amortized over two years. In the case of abandoned property, any remaining basis may no longer be recovered in the year of abandonment of a property as all basis is recovered over the two-year amortization period. The provision is effective for geological and geophysical costs paid or incurred in taxable years beginning after the date of enactment. Cost: $974 million
Expensing for refinery investments. Allows taxpayers to expense (depreciate immediately) 50 percent of the cost of refinery investments which increase the capacity of an existing refinery by at least 5 percent or increase the throughput of qualified fuels by at least 25 percent. Qualified fuels include oil from shale and tar sands. As a condition of eligibility, refineries of liquid fuels must report to the IRS on refinery operations (e.g., production and output). Cost: $406 million
Determination of small refiner exception to oil depletion deduction. Presently, a producer may qualify as an independent producer for this purpose if its refining operations, runs, do not exceed 50,000 barrels on any day in the taxable year during which independent producer status is claimed. The provision increases the current 50,000-barrel-per-day limitation to 75,000. It also changes the refinery limitation on actual daily production to an average daily production for the taxable year.
Cost: $158 million
Arbitrage rules not to apply to prepayment for natural gas. Arbitrage is the profit that results from investing the proceeds of tax-exempt bonds in higher yielding taxable securities. Tax law generally requires a rebate of arbitrage profits to the U.S. This provision would create a safe harbor exception to the general rule that tax-exempt bond-financed prepayments violate the arbitrage restrictions. The exception applies to certain prepaid natural gas contracts, i.e., any contracts to acquire natural gas for resale by a utility owned by a governmental unit where the amount of gas to be purchased under the contract does not exceed the certain limits. The limit is the sum of (1) the average annual natural gas purchased by customers of the utility within the service area during a 5 year testing period, and (2) the amount of natural gas that is needed to fuel transportation of the natural gas to the governmental utility. This provision would apply to all contracts issued after the date of enactment.
Cost: $53 million
Natural gas gathering lines treated as 7-year property. Uncertainty in the current law concerning what the appropriate recovery period is for natural gas gathering lines has lead to litigation. This provision clarifies the law, establishing a statutory seven-year recovery period and a class life of 14 years for natural gas gathering lines the original use of which commences with the taxpayer after April 11, 2005. In addition, no adjustment will be made to the allowable amount of depreciation with respect to this property for purposes of computing a taxpayer’s alternative minimum taxable income. Cost: $16 million
Cooperative pass-through of the expensing related to costs to comply with EPA sulfur regulations for small refiners. The American Job Creation Act of 2004 included a provision to allow taxpayers to expense certain costs for investments to comply with EPA low sulfur diesel regulations. Provision allows the deduction to be passed-through to members of a cooperative if the cooperative makes an election on their tax return. Cost: $7 million
Electricity Reliability
Transmission property treated as fifteen-year property. Assets used in the transmission and distribution of electricity for sale and related land improvements are assigned a 20-year recovery period. This provision shortens the recovery period to 15-years for certain assets used in the transmission of electricity for sale and related land improvements. For purposes of the provision, section 1245 property used in the transmission at 69 or more kilovolts of electricity for sale, the original use of which commences with the taxpayer after April 11, 2005, will qualify for the new recovery period. The provision does not apply to any property which the taxpayer or a related party had entered into a binding contract for the construction thereof or self-constructed on or before April 11, 2005.
Cost: $1.239 billion
Nuclear decommissioning. Modifies the rules for qualified nuclear decommissioning funds, which are funds created by a taxpayer, restricted to certain kinds of investments, and used exclusively for payment of decommissioning costs. The proposal repeals the cost of service requirement for contributions to a qualified fund. The proposal permits the transfer of pre-1984 decommissioning costs to a qualified fund. Finally, it requires that new ruling amount be made in any tax year in which the powerplant is granted a license renewal. Cost: $1.293 billion
Treatment of electric cooperative income (85/15 test). The rules for tax-exempt electric cooperatives require that 85 percent of the cooperative’s income consists of amounts collected from members of the cooperative to meet losses and expenses of providing service to its members (85/15 test). This test has made it difficult for cooperatives to participate in electricity market deregulation and open access transmission of electricity. In the Jobs Bill, the 85/15 test was modified to exclude certain income related to electricity restructuring from the 85/15 test. Those changes expire on 12/31/06. The provision makes the Jobs Bill changes permanent. Cost: $277 million
Sales of electricity transmission property to implement restructuring policy. The Jobs Bill included a provision to allow a longer recognition period for electric utilities that sell their transmission assets to a FERC-approved independent transmission company. Rather than paying tax on any gain from the sale in the year that the sale is completed, utilities will have 8 years to pay the tax on any gain from the sale. The rule expires at the end of 2006. Provision allows sales during 2007 to qualify for the 8-year recognition. Raises: $19 million
Production tax credit for nuclear power facilities. No tax credit for electricity produced at nuclear power facilities under present law. Provision establishes a production tax credit for new nuclear power facilities. Credit amount is 1.8 cents per kWh for electricity produced over an 8-year period. Cost: $278 million
5-year NOL for electric transmission equipment. A taxpayer may claim a net operating loss carryback to each of the 5 years preceding the taxable year of such loss up to 20 percent of the cost of electric transmission capital expenditures and pollution control capital expenditures. Applies to losses incurred in 2003, 2004 and 2005. Cost: $52 million
Renewable and Clean Energy Incentives
Extension and modification of renewable electricity production credit (Section 45). Provision extends placed-in-service date by two years (through December 31, 2007) for qualifying facilities: wind facilities; closed-loop biomass facilities; open-loop biomass facilities; geothermal facilities; small irrigation power facilities; landfill gas facilities; and trash combustion facilities. Placed-in-service dates for solar facilities and refined coal facilities are not altered. Qualifying facilities receive credits per kWh for electricity produced over a 10 year period. Hydropower and Indian coal are added as new qualifying energy resources. Provision is generally effective on date of enactment. Cost: $2.747 billion
Pass through to cooperatives. Section 45 allows eligible cooperatives to elect to pass any portion of the renewable electricity production credit to their patrons. An eligible cooperative is defined as a cooperative organization that is owned more than 50 percent by agricultural producers or entities owned by agricultural producers. (included in Section 45 score)
Clean renewable energy bonds. Provision creates new category of tax credit Bonds Clean Renewable Energy Bonds (“CREBs”). CREBs are defined as bond issued by qualified issuer if, in addition to other requirements, 95 percent of proceeds are used to finance capital expenditures incurred for facilities qualifying for tax credit under section 45. Qualified issuers include governmental bodies (including Indian tribal governments) and mutual or cooperative electric companies. Provision is effective for bonds issued after December 31, 2005. Cost: $411 million
Clean Coal
Credit for investment in clean coal facilities. No tax credit for clean coal facilities under present law. Provision establishes three investment tax credits for clean coal facilities: a 15 percent and 20 percent investment tax credit for clean coal facilities producing electricity; and a 20 percent credit for industrial gasification projects. Integrated gasification combined cycle (IGCC) projects get a 20 percent investment tax credit and other advanced coal-based projects that produce electricity get a 15 percent credit. The Secretary may allocate up to $800 million for IGCC projects and up to $500 million for other advanced coal-based technologies and up to $350 million for industrial gasification. Also clarifies that lignite is a qualifying coal. Cost: $1.612 billion
84-month amortization for pollution control facilities. This provision provides a 7 year recovery period for the cost of certain certified air pollution control facilities used in connection with an electric generation plant which is primarily coal fired and which was not in operation before January 1, 1976. Under present law, plants that were in operation before January 1, 1976 may amortize these costs over 60 months. Cost: $1.147 billion
Modification of credit for producing fuel from a nonconventional source. The provision makes the credit for producing fuel from a non-conventional source part of the general business credit, so that unused credits may be carried back one year and forward 20 years. Cost: $88 million
Extension of credit for producing fuel from a nonconventional source for facilities producing coke or coke gas. Coke is a fuel from the residue of coal left after distillation or other feedstock (such as petroleum). The provision also adds a production credit for qualified facilities that produce coke or coke gas. Qualified facilities must have been placed in service before January 1, 1993, or after June 30, 1998, and before January 1, 2010. The production credit may be claimed beginning on the later of January 1, 2006, or the date such facility is placed in service and ending on the date which is four years after such period began. The credit expires in January 1, 2010 or four years after the facility was placed in service, whichever is later. Cost: $101 million
Energy Efficiency and Conservation Measures
Alternative technology vehicle credits.
Fuel cell vehicles: the amount of credit for the purchase of a fuel cell vehicle is determined by a base credit amount that depends upon the weight class of the vehicle and in the case of automobiles or light trucks, an additional credit amount that depends upon the rated fuel economy of the vehicle compared to a base fuel economy.
Alternative Fuel Vehicles: The provision permits the credit to offset the excess of the regular tax over the alternative minimum tax
Hybrid vehicles and advanced lean-burn technology vehicles: The amount of credit is the sum of two components: a fuel economy credit amount that varies with the rated fuel economy of the vehicle compared to a 2002 model year standard and a conservation credit based on the estimated lifetime fuel savings of a qualifying vehicle compared to a comparable 2002 model year vehicle.
Effective date – The provision applies to vehicles placed in service after December 31, 2005, in the case of qualified fuel cell motor vehicles, before January 1, 2015; in the case of qualified hybrid motor vehicles that are automobiles and light trucks and in the case of advanced lean-burn technology vehicles, before January 1, 2011; in the case of qualified hybrid motor vehicles that are medium and heavy trucks, before January 1, 2010; and in the case of qualified alternative fuel motor vehicles, before January 1, 2011. Cost: $874 million
Termination of code section 179A: Repeals section 179A sunsets after December 31, 2005. Raises: $2 million
Small producer biodiesel and ethanol credit. Adds to the biodiesel fuels credit a small
agri-biodiesel producer credit of 10-cents-per-gallon for up to 15 million gallons of
agri-biodiesel produced by producers with annual capacity not exceeding 60 million gallons. Effective for taxable years after date of enactment and sunsets December 31, 2008. Limit on production capacity for small ethanol producers increased from 30 million to 60 million gallons, effective for taxable years after date of enactment.
Cost: $181 million
Credit for installing of alternative fuel refueling property. The provision permits taxpayers to claim a 30% credit for the cost of installing clean-fuel vehicle refueling property to be used in a trade or business of the taxpayer or installed at the principal residence of the taxpayer. Under the provision clean fuels are any fuel at least 85% of the volume of which consists of ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, and hydrogen and any mixture of diesel fuel and biodiesel containing at least 20% biodiesel.
Effective date. - The provision is effective for property placed in service December 31, 2005 and before January 1, 2010.
Cost: $71 million
Diesel-water fuel emulsion. A special tax rate of 19.7 cents per gallon is provided for diesel fuel blended with water into a diesel-water fuel emulsion to reflect the reduced Btu content per gallon resulting from the water. The diesel-water emulsion fuels eligible for the special rate must consist of at least 14% water. The person claiming entitlement must be registered with the Secretary. Claims for refunds based on the incentive rate may be filed quarterly if such person can claim at least $750. If the person cannot claim at least $750 at the end of quarter, the amount can be carried over to the next quarter to determine if the person can claim at least $750. If the person cannot claim $750 at the end of the taxable year, the person must claim a credit on the person’s income tax return.
Effective date.-The provision is effective on January 1, 2006
Cost: Negligible
Extend excise tax provisions and income tax credit for biodiesel and create similar incentives for renewable diesel. The conference agreement extends the income tax credit, excise tax credit, and payment provisions through December 31, 2008. The conference agreement also creates a similar income tax credit, excise tax credit and payment system for renewable diesel, however there is no credit for small producers of renewable diesel. Renewable diesel means diesel fuel derived form biomass using thermal depolymerization process.
Effective date. – The extension of incentives is effective on the date of enactment. The renewable diesel provisions are effective for fuel sold or used after December 31, 2005.
Cost: $194 million
Credit for residential energy efficient property purchases. Provides credit, equal to
30 percent of qualifying expenditures, for purchase for qualified photovoltaic property and solar water heating property used exclusively for purposes other than heating swimming pools and hot tubs. Provision also provides a 30 percent credit for the purchase of qualified fuel cell power plants and applies to property placed in service after December 31, 2005 and prior to January 1, 2008. Cost: $31 million
Credit for business installation of qualified fuel cells, stationary microturbine power plants, and solar. Provides a 30 percent business energy credit for purchase of qualified fuel cell power plants for businesses and a 10 percent credit for purchase of qualifying stationary microturbine power plants. Additionally, a 30 percent credit for purchase of qualifying solar energy property is provided. Credits apply to periods after December 31, 2005 and before January 1, 2008. Cost: $222 million
Credit for energy efficient existing homes. Provides 10% investment tax credit for expenditures with respect to improvements to building envelope. Allows credits for purchases of advanced main air circulating fans, natural gas, propane, or oil furnaces or hot water boilers, and other qualified energy efficient property. Credit applies to property placed in service after December 31, 2005 and prior to January 1, 2008.
Cost: $556 million
Business credit of energy efficient new homes. Provides credit to eligible contractor for construction of a qualified new energy-efficient home.
Credit applies to manufactured homes meeting Energy Star Standards and other homes meeting a 50 percent standard. Credit applies to homes which are purchased after December 31, 2005 and prior to January 1, 2008. Cost: $28 million
Energy efficient commercial building deduction. The provision allows a deduction for energy efficient commercial buildings that reduce annual energy and power consumption by 50 percent compared to the American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) standard. The deduction would equal the cost of energy efficient property installed during construction, with a maximum deduction of $1.80 per square foot of the building. In addition, a partial deduction of 60 cents per square foot would be provided for building subsystems.
Cost: $243 million
Energy efficient appliances. Provision establishes tax credit for the manufacture of efficient dishwashers, clothes washers, and refrigerators. Credits vary depending on the efficiency of the unit. Effective for appliances manufactured in 2006 and 2007. Cost: $180 million
Research and development credit for energy research. Provision modifies the 20% research and development tax credit. Taxpayers’ expenditures to qualified research consortia with respect to energy-related research would be eligible for the credit. Other modifications to the credit with respect to energy-related research are included. Cost: $92 million
NAS study. Provision directs the Treasury Secretary to enter into an agreement with the National Academy of Sciences to conduct a study of the health, environmental, security, and infrastructure costs and benefits associated with production and consumption of energy.
Cost: No score.
Recycling study. Provision directs the Treasury Secretary, in consultation with the Secretary of Energy, to conduct a study to determine and quantify the energy savings, achieved through recycling activities, including electronic waste, and to identify tax incentives to carry out this incentive.
Cost: No score.
Oil Spill Liability Trust Fund. Reinstates the Oil Spill Liability Trust Fund tax. The tax applies on April 1, 2006, or later, if the Secretary estimates that, as of the close of that quarter, the unobligated balance in the Oil Spill Liability Trust fund will be less that $2 billion.
Raises: $2.508 billion
Leaking Underground Storage Tank Trust (LUST )Fund. The LUST Trust Fund tax is extended at the current rate through September 30, 2011. Also, dyed fuel is subject to the LUST tax and without refund. Raises: $349 million
Section 197 modification. This provision modifies the recapture rules for amortizable section 197 intangibles. Under the provision, if multiple section 197 intangibles are sold or disposed of in a single transaction or series of transactions, the seller must calculate recapture as if all of the section 197 intangibles were a single asset. Thus, any gain on the sale or disposition of the intangibles is recaptured as ordinary income to the extent of ordinary depreciation deductions previously claimed on any of the section 197 intangibles. Raises: $171 million
Tire excise tax modification and tire study. It clarifies that a super single tire is not designed to steer the vehicle, and is made effective as if included in the JOBS Act. Raises: negligible effect
Title XV: Ethanol and Motor Fuels
· Requires that by 2012, at least 7.5 billion gallons per year of renewable fuel be blended into the nation’s gasoline supply.
· Allows production of renewable fuel from such traditional sources as corn and other crops or from plants, grasses, agricultural residues and waste products. The bill includes incentives for the production of renewable fuel from these “non-traditional” sources, allowing greater credits for ethanol derived from cellulosic biomass or waste.
· Authorizes loan guarantees and grants for the construction of facilities to process and convert municipal solid waste and cellulosic biomass into fuel ethanol and other commercial byproducts.
· Includes increased funding to $6 million over five years (2006-2010) for the Department of Transportation to continue its work on improving Corporate Average Fuel Economy (CAFE) standards.
· Includes a study, to be done by the National Highway Traffic Safety Administration (NHTSA), to look into alternatives to the CAFE program and examine the amount of fuel consumed by automobiles.
· Enhances the federal leaking underground storage tank program to improve tank inspection, remediate spills of oxygenated fuels and prevent future releases of gasoline into ground water.
· Gives the EPA administrator, in the event of an extreme and unusual supply emergency, (i.e., a Gulf of Mexico hurricane impacts refinery production and distribution; unexpected pipeline disruption) the ability to temporarily waive certain requirements thereby avoiding potential supply shortages and price spikes.
Title XVI: Climate Change
· Requires the preparation of a national strategy to promote the deployment and commercialization of greenhouse gas intensity reducing technologies and practices within 18 months of the date of enactment.
· Creates a program to assist deployment of technologies that will help reduce the emission of greenhouse gases in developing countries.
Title XVII: Incentives for Innovative Technologies
· Creates a unified, comprehensive loan guarantee program for encouraging the commercialization of a broad spectrum of new technologies that provide clean, renewable energy at no cost to the taxpayers.
· The technologies have to avoid, reduce or sequester air pollutants or man-made greenhouse gasses, and the technology has to be new or significantly improved over what is available in the marketplace.
· The guarantees can only be for 80 percent of the cost of a project – the developers will share in the risk.
· Constructs the program in accordance with the Federal Credit Reform Act.
· Requires the cost of the guarantee to be paid in advance through appropriations or payment from those seeking the loan guarantee in the amount determined by CBO to reflect the risk of default.
Title XVIII: Studies Sec.1601. Energy and water saving measures in congressional buildings. Sec.1602. Increased hydroelectric generation at existing Federal facilities. Sec.1603. Alaska Natural Gas Pipeline. Sec.1604. Renewable energy on Federal land. Sec.1605. Coal bed methane study. Sec.1606. Backup fuel capability study. Sec.1607. Indian land rights-of-way. Sec.1608. Review of Energy Policy Act of 1992 programs. Sec.1609. Study of feasibility and effects of reducing use of fuel for automobiles. Sec.1610. Hybrid distributed power systems. Sec.1611. Mobility of scientific and technical personnel. Sec.1612. National Academy of Sciences report. Sec.1613. Report on research and development program evaluation methodologies. Sec.1614. Transmission system monitoring study. Sec.1615. Interagency review of competition in the wholesale and retail markets for electric energy. Sec.1616. Study on the benefits of economic dispatch. Sec.1617. Study of rapid electrical grid restoration. Sec.1618. Development of cogeneration. Sec.1619. Study on inventory of petroleum and natural gas storage. Sec.1620. Natural gas supply shortage report. Sec.1621. Split-estate Federal oil and gas leasing and development practices. Sec.1622. Resolution of Federal resource development conflicts in the Powder River Basin. Sec.1623. Study of energy efficiency standards. Sec.1624. Telecommuting study. Sec.1625. Oil bypass filtration technology. Sec.1626. Total integrated thermal systems. Sec.1627. University collaboration. Sec.1628. Reliability and consumer protection assessment. Sec.1801. Study on inventory of petroleum and natural gas storage.
Sec.1802. Study of energy efficiency standards.
Sec.1803. Telecommuting study.
Sec.1804. LIHEAP Report.
Sec.1805. Oil bypass filtration Technology.
Sec.1806. Total integrated thermal systems.
Sec.1807. Report on energy integration with Latin America.
Sec.1808. Low-volume gas reservoir study.
Sec.1809. Investigation of gasoline prices.
Sec.1810. Alaska natural gas pipeline.
Sec.1811. Coal bed methane study.
Sec.1812. Backup fuel capability study
Sec.1813. Indian land rights-of-way.
Sec.1814. Mobility of scientific and technical personnel.
Sec.1815. Interagency review of competition in the wholesale and retail markets for electric energy.
Sec.1816. Study of rapid electrical grid restoration.
Sec.1817. Study of distributed generation.
Sec.1818. Natural gas supply shortage report.
Sec.1819. Hydrogen participation study.
Sec.1820. Overall employment in a hydrogen economy.
Sec.1821. Study of best management practices for energy research and development programs.
Sec.1822. Effect of electrical contaminants on reliability of energy production systems.
Sec.1823. Alternative fuels reports.
Sec.1824. Final action on refunds for excessive charges.
Sec.1825. Fuel cell and hydrogen technology study.
Sec.1826. Passive solar technologies.
Sec.1827. Study of link between energy security and increases in vehicle miles traveled.
Sec.1828. Science study on cumulative impacts of multiple offshore liquefied natural gas facilities.
Sec.1829. Energy and water saving measures in congressional buildings.
Sec.1830. Study of availability of skilled workers.
Sec.1831. Review of Energy Policy Act of 1992 programs.
Sec.1832. Study of feasibility and effects of reducing use of fuel for automobiles.
Sec.1833. Study on the benefits of economic dispatch.
Sec.1834. Renewable energy on Federal land.
Sec.1835. Increased generation at existing Federal facilities.
Sec.1836. Split estate Federal oil and gas leasing and development practices.
Sec.1837. Resolution of Federal resource development conflicts in the Powder River Basin.
Sec.1838. National security review of international energy requirements. Sec. 1835. Increased hydroelectric generation at existing Federal facilities. Sec. 1841. Report identifying and describing the status of potential hydropower facilities.